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Previous: PAINEWEBBER RMA MONEY FUND INC, NSAR-A, 1994-03-02 |
Next: DEFINED ASSET FUNDS MUNICIPAL INVT TR FD MON PYMT SER 240, 485BPOS, 1994-03-02 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) February 15, 1994
-------------------------------
Trans Financial Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kentucky 0-13030 61-1048868
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
500 East Main Street, Bowling Green, Kentucky 42101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (502) 781-5000
------------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective February 15, 1994, Kentucky Community Bancorp, Inc.
("Kentucky Community") merged with and into Trans Financial Bancorp, Inc.
("Trans Financial") and each of the outstanding shares of common stock of
Kentucky Community were converted into 5.3 shares of common stock of Trans
Financial for an aggregate issuance of approximately 1,374,985 shares of Trans
Financial common stock. Holders of shares of Kentucky Community common stock
received cash, without interest, in lieu of fractional shares of Trans
Financial common stock.
The transaction was effected pursuant to a an Agreement and Plan of
Reorganizaton and related Plan of Merger (collectively, the "Merger Agreement")
dated November 9, 1993, as amended January 6, 1994, between Trans Financial and
Kentucky Community, and was approved by the shareholders of Kentucky Community
at a special meeting held on February 15, 1994. Kentucky Community, a bank
holding company headquartered in Maysville, Kentucky, owned one hundred
percent (100%) of the outstanding capital stock of State National Bank,
Maysville, Kentucky, Farmers Liberty Bank, Augusta, Kentucky, and Peoples Bank
of Morehead, Morehead, Kentucky. At September 30, 1993, Kentucky Community
reported total consolidated assets of approximately $ 171 million. The
consideration given by Trans Financial for the acquisition of Kentucky
Community was determined in accordance with the Merger Agreement.
The only material relationship between any of Kentucky Community or
its shareholders and Trans Financial or any of its affiliates, any director or
officer of Trans Financial or any associate of any such director or officer was
as follows: Kentucky Community granted Trans Financial concurrently with the
execution of the Merger Agreement the option to purchase 85,840 shares of
Kentucky Community's authorized but unissued shares of common stock at an
exercise price of $84.80 per share.
The assets acquired by Trans Financial in the transaction consisted of
Kentucky Community's three subsidiary banks, State National Bank, Maysville,
Kentucky, Farmers Liberty Bank, Augusta, Kentucky, and Peoples Bank of
Morehead, Morehead, Kentucky. It is anticipated that the physical assets of
the three banking subsidiaries of Kentucky Community will continue to be used
by them for general banking purposes.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
The following consolidated financial statements of Kentucky Community,
notes related thereto and report of independent auditors thereon are filed as a
part of this Report:
(1) Independent Auditor's Report;
(2) Consolidated Balance Sheets as of December
31, 1992 and 1991;
(3) Consolidated Statements of Income for the
years ended December 31, 1992, 1991 and 1990;
(4) Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1992, 1991 and 1990;
(5) Consolidated Statements of Cash Flows for the
years ended December 31, 1992, 1991 and 1990;
(6) Notes to Consolidated Financial Statements;
(7) Condensed Consolidated Balance Sheet as of
September 30 1993 (unaudited);
(8) Condensed Consolidated Income Statements
for the periods ended September 30, 1993 and 1992 (unaudited).
(9) Notes to Condensed Consolidated Financial
Statements (unaudited).
B. Pro Forma Financial Statements
The following pro forma consolidated financial statements of Trans
Financial Bancorp, Inc, and notes related thereto are filed as a part of this
Report:
(1) Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1993 (unaudited);
(2) Pro Forma Condensed Consolidated Income
Statement for the nine months ended September 30, 1993 (unaudited);
(3) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1992 (unaudited);
(4) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1991 (unaudited); and
3
<PAGE> 4
(5) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1990 (unaudited); and
(6) Notes to Pro Forma Condensed Consolidated
Financial Statements (unaudited).
C. Exhibits
The following exhibits are filed as a part of this report:
2(a) Agreement and Plan of Reorganization between Trans Financial
Bancorp, Inc. and Kentucky Community Bancorp, Inc. dated as of November 9,
1993, as amended January 6, 1994, is incorporated by reference to Exhibit (2)
of the Registration Statement on Form S-4 (File No. 33-51575) filed by Trans
Financial with the Commission.
2(b) Plan of Merger between Trans Financial Bancorp, Inc. and
Kentucky Community Bancorp, Inc. dated as of November 9, 1993, as amended
January 6, 1994, is incorporated by reference to Exhibit (2) of the
Registration Statement on Form S-4 (File No. 33-51575) filed by Trans
Financial with the Commission.
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Trans Financial Bancorp, Inc.
By: /s/ Vince Berta
--------------------------
Vince Berta
Title: Executive Vice President and
Chief Financial Officer
Date: March 2, 1994
5
<PAGE> 6
FINANCIAL STATEMENTS
<PAGE> 7
Independent Auditor's Report
The Board of Directors and Stockholders
Kentucky Community Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Kentucky
Community Bancorp, Inc. and subsidiaries as of December 31, 1992 and 1991, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1992.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits 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 audits provide 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 Kentucky Community
Bancorp, Inc. and subsidiaries as of December 31, 1992 and 1991, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1992, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick
Louisville, Kentucky
February 5, 1993
1
<PAGE> 8
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1992 and 1991
<TABLE>
<CAPTION>
(In thousands, except share data)
Assets 1992 1991
------ ---- ----
<S> <C> <C>
Cash and due from banks (note 2) $ 5,533 5,659
Interest bearing deposits with banks 199 199
Federal funds sold and securities purchased
under agreements to resell 9,851 11,485
Other short-term investments - 600
Securities available for sale (approximate market
value $18,944) (note 3) 18,386 -
Investment securities (approximate market value
$26,756 in 1992 and $44,949 in 1991)
(note 3) 26,158 43,408
Loans (note 4) 102,817 99,089
Less:
Allowance for loan losses 1,980 1,791
Unearned income 369 519
-------- -------
Net loans 100,468 96,779
-------- -------
Premises and equipment (note 5) 2,378 2,463
Other assets 4,518 5,545
-------- -------
$ 167,491 166,138
======== =======
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Non-interest bearing $ 22,599 21,101
Interest bearing (note 6) 128,290 127,127
------- -------
Total deposits 150,889 148,228
Federal funds purchased and securities
sold under agreements to repurchase - 1,398
Accrued interest, taxes payable and other
liabilities 1,050 1,371
Notes payable (note 7) 1,241 2,091
Subordinated Debentures (note 8) 2,348 2,348
------- -------
Total liabilities 155,528 155,436
------- -------
Stockholders' equity (notes 10 and 13):
Preferred stock, without par value, $500
stated value; authorized 199,981 shares;
none issued - -
Common stock, without par value, $2.50 and $5.00
stated value, respectively; authorized 300,000
shares; issued used 260,956 shares in 1992 and
130,478 shares in 1991 1,305 1,305
Additional paid-in capital 913 913
Retained earnings 9,800 8,586
Treasury stock, 3,692 and 1,846 common shares
in 1992 and 1991, respectively (55) (55)
Unrealized loss on marketable equity securities - (47)
------- -------
Total stockholders' equity 11,963 10,702
Commitments and contingent liabilities (note 12)
------- -------
$ 167,491 166,138
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 9
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
(In thousands, except share data)
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 9,369 10,365 10,816
Interest bearing deposits with banks 26 28 29
Federal funds sold and securities purchased
under agreements to resell 270 601 790
Other short-term investments 13 51 71
U.S. Treasury and Federal agencies 2,541 2,740 2,461
obligations of states and political subdivisions 596 695 701
Other 108 116 62
-------- -------- --------
Total interest income 12,923 14,596 14,930
-------- -------- --------
Interest expense:
Deposits 5,361 7,606 8,332
Federal funds purchased and securities 17 56 51
sold under agreements to repurchase
Short-term borrowing - - 31
Notes payable 108 217 312
Subordinated debentures 235 235 250
-------- -------- --------
Total interest expense 5,721 8,114 8,976
-------- -------- --------
Net interest income 7,202 6,482 5,954
Provision for loan losses (note 4) 838 772 1,052
-------- -------- --------
Net interest income after provision 6,364 5,710 4,902
-------- -------- --------
for loan losses
Non-interest income: 230 198 202
Trust income
Service charges on deposit accounts 904 881 678
Securities gains (losses) (notes 3 and 9) (8) (16) 15
Other 388 333 343
-------- -------- --------
Total non-interest income 1,514 1,396 1,238
-------- -------- --------
Non-interest expenses:
Salaries and employee benefits (note 11) 2,774 2,638 2,605
Net occupancy expense 294 251 250
Furniture and equipment expense 728 654 653
Deposit insurance 336 302 164
Other 2,025 1,903 1,720
-------- -------- --------
Total non-interest expenses 6,157 5,748 5,392
-------- -------- --------
Income before income taxes 1,721 1,358 748
Income tax expense (note 9) 372 293 120
-------- -------- --------
Net income $ 1,349 1,065 628
======== ======== ========
Net income per share $ 5.24 4.14 2.44
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 10
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
Preferred Common
stock stock
--------- -------
Number Number
of of
Shares Amount Shares Amount
------- ------ ------- ------
<S> <C> <C> <C> <C>
(In thousands, except share data)
Balance at December 31, 1989 17 $ 9 130,478 $ 1,305
Net income - - - -
Dividends; $.50 per common share - - - -
Repurchase of preferred stock (2) (1) - -
Reissuance of treasury stock,
45 common shares - - - -
Decrease in unrealized loss on
marketable equity securities - - - -
----- ---- ------- -----
Balance at December 31, 1990 15 8 130,478 1,305
Net income - - - -
Dividends; $.50 per common share - - - -
Repurchase of preferred stock (7) (4) - -
Reissuance of treasury stock,
50 common shares - - - -
Retirement of treasury stock,
preferred shares (8) (4) - -
Decrease in unrealized loss on
marketable equity securities - - - -
----- ---- ------- -----
Balance at December 31, 1991 - - 130,478 1,305
Net Income - - - -
Dividends; $.525 per common share - - - -
Two-for-one common stock split - - 130,478 -
Decrease in unrealized loss on
marketable equity securities - - - -
----- ---- ------- -----
Balance at December 31, 1992 - $ - 260,956 $ 1,305
===== ==== ======= =====
Unrealized
Loss on
Marketable
Retained Treasury Equity
Surplus Earnings Stock Securities
------- -------- -------- ----------
<S> <C> <C> <C> <C>
(In thousands, except share data)
Balance at December 31, 1989 $ 910 7,150 (62) (99)
Net income - 628 - -
Dividends; $.50 per common share - (128) - -
Repurchase of preferred stock - - - -
Reissuance of treasury stock,
45 common shares 2 - 1 -
Decrease in unrealized loss on
marketable equity securities - - - 8
----- ------ ------- -----
Balance at December 31, 1990 912 7,650 (61) (91)
Net income - 1,065 - -
Dividends; $.50 per common share - (129) - -
Repurchase of preferred stock - - - -
Reissuance of treasury stock,
50 common shares 1 - 2 -
Retirement of treasury stock,
preferred shares - - 4 -
Decrease in unrealized loss on
marketable equity securities - - - 44
----- ------ ------- -----
Balance at December 31, 1991 913 8,586 (55) (47)
Net Income - 1,349 - -
Dividends; $.525 per common share - (135) - -
Two-for-one common stock split
Decrease in unrealized loss on - - - -
marketable equity securities - - - 47
----- ------ ------- -----
Balance at December 31, 1992 $ 913 9,800 (55) -
===== ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 11
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
(In thousands)
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $ 1,349 1,065 628
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 838 772 1,052
Depreciation, amortization and accretion, net 716 483 445
Deferred income tax benefit (25) (40) (91)
Loss (gain) on sale of securities 8 16 (15)
Decrease in other assets 430 213 268
Decrease in other liabilities (321) (259) (36)
------- ------ -------
Net cash provided by operating activities 2,995 2,250 2,251
------- ------ -------
Lending and investing activities:
Net change in interest bearing deposits with banks - 151 (100)
Net change in federal funds sold
and securities purchased under
agreements to resell 1,634 (2,096) 1,116
Net change in other short-term investments 600 191 (210)
Purchases of investment securities (18,792) (14,580) (18,477)
Proceeds from sales of investment securities 4,598 3,727 1,509
Proceeds from maturities of investment securities 12,930 7,917 11,826
Net increase in loans (4,852) (3,025) (1,057)
Proceeds from sales of reacquired assets 810 635 390
Purchases of premises and equipment (327) (105) (357)
------- ------ -------
Net cash used in lending and $ (3,399) (7,185) (5,360)
------- ------ -------
investing activities
</TABLE>
(Continued)
5
<PAGE> 12
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
(In thousands) 1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Deposit and financing activities:
Net increase in deposits $ 2,661 4,745 2,821
Net change in federal funds purchased and
securities sold under agreements to repurchase (1,398) 435 445
Net change in short-term borrowing - - (525)
Advances of notes payable 1,238 - 1,160
Repayment of notes payable (2,088) (781) (579)
Retirement of subordinated debt - - (1,161)
Cash dividends paid (135) (129) (128)
Reissuance of common stock from treasury - 3 3
Repurchase of preferred stock - (4) (1)
------ ------ ------
Net cash provided by deposit and financing activities
278 4,269 2,035
------ ------ ------
Net increase (decrease) in cash and cash equivalents (126) (666) (1,074)
Cash and cash equivalents at beginning of year 5,659 6,325 7,399
------ ------ ------
Cash and cash equivalents at end of year $5,533 5,659 6,325
====== ====== ======
</TABLE>
Income tax payments (refunds) totaled $399,000 in 1992, $321,000 in 1991, and
$(175,000) in 1990.
Interest payments totaled $6,042,000 in 1992, $8,392,000 in 1991, and
$9,165,000 in 1990.
Non-cash transactions were as follows:
<TABLE>
<CAPTION>
(In thousands) 1992 1991 1990
-------- ------- ------
<S> <C> <C> <C>
Exchange of subordinated debentures $ - - 2,348
Transfer of loans to reacquired assets 325 606 1,261
Decrease in unrealized loss
on marketable equity securities 47 44 8
Investment securities transferred to
securities available for sale 18,386 - -
======== ======== ======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 13
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(1) Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Kentucky
Community Bancorp, Inc. (the Corporation) and its wholly-owned
subsidiaries, The State National Bank of Maysville (State
National), Farmers Liberty Bank (Farmers Liberty) and Peoples
First Bank of Morehead (Peoples), collectively (the Banks).
Significant intercompany items have been eliminated in
consolidation. In preparing the consolidated financial
statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates. The accounting policies and methods of applying those
policies which have a significant effect on the financial
statements are summarized below. Certain prior year amounts have
been reclassified for comparability with 1992 presentation.
Securities
----------
Management determines the appropriate classification of securities at the
time of purchase. If management has the intent and the
Corporation has the ability at the time of purchase to hold
securities until maturity or on a long-term basis, they are
classified as investments and carried at amortized historical
cost. Securities to be held for indefinite periods of time and
not intended to be held to maturity or on a long-term basis are
classified as available for sale and carried at the lower of
aggregate cost or market value. Securities held for indefinite
periods of time include securities that management intends to use
as part of its asset/liability management strategy and that may
be sold in response to changes in interest rates, resultant
prepayment risk and other factors related to interest rate and
prepayment risk changes. The specific identification method is
used to determine the cost of securities sold. Amortization of
premiums and accretion of discounts is recorded by a method
approximating level yield. Marketable equity securities are
carried at the lower of cost or market value with unrealized
losses recorded as a reduction of stockholders' equity, unless it
is determined that market declines are other than temporary, in
which case, losses are recognized as securities losses.
(Continued)
7
<PAGE> 14
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
Loans
- -----
Loans are stated at the unpaid principal balance. Interest income on loans is
recorded on the accrual basis except for those loans in a non-accrual
income status. The accrual of interest income is discontinued on
loans, except consumer loans, which become 90 days past due as to
principal or interest unless they are well-secured and in the process
of collection. Such loans remain on a non-accrual status until factors
indicating doubtful collectibility no longer exist. Consumer loans
which become 120 days past due are charged to the allowance for loan
losses unless they are well-secured and in the process of collection.
Unearned income, arising principally from consumer installment loans,
is reflected as a reduction of loans and is recognized as income using
a method which approximates the interest method.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses is maintained at a level adequate to absorb
probable losses in the loan portfolio. Management determines the
adequacy of the allowance based upon reviews of individual credits,
recent loss experience, current economic conditions and such other
factors that, in management's judgment, deserve current recognition in
estimating loan losses. The allowance for loan loses is increased by
the provision for loan losses and reduced by net loan charge-offs.
Premises and Equipment
- ----------------------
Premises and equipment are carried at cost, less accumulated depreciation.
Depreciation of premises and equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Other Assets
- ------------
Included in other assets is real estate acquired in settlement of loans and
loans classified as in-substance foreclosures which are carried at the
lower of fair value minus estimated selling costs or cost. Any
write-downs to fair value at the date of acquisition are charged to the
allowance for loan losses. Expenses incurred in maintaining
(Continued)
8
<PAGE> 15
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
assets, subsequent write-downs to reflect declines in value and
realized gains or losses are reflected in income for the period. Also
included in other assets is accrued interest receivable and the excess
of cost over fair value of net assets acquired in business combinations
(goodwill) which is being amortized on a straight-line basis over
twenty years. Unamortized amounts of goodwill were $1,824,000 and
$1,960,000 at December 31, 1992 and 1991, respectively.
Income Taxes
- ------------
Deferred income taxes are provided for income or expenses recognized in
different periods for financial reporting purposes than for income tax
purposes. The Corporation accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 96, "Accounting
for Income Taxes," which requires the use of an asset and liability
approach. The amounts provided for income taxes are based upon the
amounts of current and deferred taxes payable or refundable at the date
of the financial statements as measured by the provisions of enacted
laws and tax rates.
SFAS No. 109, Accounting for Income Taxes, supersedes SFAS No. 96 and is
required to be adopted in 1993. SFAS No. 109 retains the asset and
liability approach but changes the procedure to measure deferred tax
assets and liabilities. The Corporation plans to adopt SFAS No. 109 on
a prospective basis and expects that the implementation of this new
accounting standard will not be significant to financial condition or
results of operations.
Net Income Per Share
- --------------------
On December 17, 1991, the Corporation's Board of Directors declared a 2-for-1
stock split effected in the form of a 100% stock dividend, payable
January 15, 1992. All per share information in these financial
statements has been restated to give effect to this stock split. The
weighted average number of shares outstanding, after giving effect to
this stock split was 257,264 in 1992, 257,226 in 1991 and 257,113 in
1990.
(Continued)
9
<PAGE> 16
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, the Corporation considers
cash and due from banks to be cash equivalents.
(2) Restrictions on Cash and Due from Banks
---------------------------------------
The Banks are required to maintain average reserve balances relating to
customer deposits either with the Federal Reserve Bank or in
the Banks' vaults. At December 31, 1992, the amount of those
required and maintained reserve balances was approximately
$1,695,000.
THIS PORTION OF PAGE INTENTIONALLY LEFT BLANK
(Continued)
10
<PAGE> 17
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(3) Securities
----------
The book values and approximate market values of investment securities
at December 31, 1992 and 1991 follows:
<TABLE>
<CAPTION>
December 31, 1992 December 31, 1991
----------------------------------------- -------------------------------------------
Unrealized Approximate Unrealized Approximate
Book ------------- Market Book ------------------ Market
(In thousands) Value Gains Losses Value Value Gains Losses Value
----- ----- ------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal agencies $ 10,456 216 61 10,611 25,364 999 4 26,359
Asset-backed securities 6,318 193 2 6,509 7,474 334 5 7,803
Obligations of states and
political subdivisions 8,277 264 29 8,512 9,276 217 33 9,460
Marketable equity securities
and other securities 1,107 17 - 1,124 1,294 34 1 1,327
-------- ----- ---- ------ ------ ----- ----- -------
$ 26,158 690 92 26,756 43,408 1,584 43 44,949
======== ===== ==== ====== ====== ===== ===== =======
</TABLE>
The book values and approximate market values of securities available
for sale at December 31, 1992, follows:
<TABLE>
<CAPTION>
Unrealized Approximate
Book ------------------ Market
(In thousands) Value Gains Losses Value
-------- ----- ------ -----------
<S> <C> <C> <C> <C>
U.S. Treasury $18,386 571 13 18,944
======== ===== ====== ===========
</TABLE>
A summary of debt securities as of December 31, 1992 based on
contractual maturity is presented in the table below. Actual
maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations
with or without prepayment penalties.
<TABLE>
<CAPTION>
Investment Securities Securities available for Sale
---------------------------- ------------------------------
Approximate Approximate
Book Market Book Market
(In thousands) Value Value Value Value
------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Due within one year $ 4,732 4,679 6,473 6,652
Due after one year through five years 11,792 12,170 11,913 12,292
Due after five years through ten years 2,133 2,219 - -
Due after ten years 76 56 - -
--------- ---------- ------- --------
18,733 19,124 18,386 18,944
Asset-backed and other securities 7,068 7,275 - -
--------- ---------- ------- --------
$ 25,801 26,399 18,386 18,944
========= ========== ======= ========
</TABLE>
Gross gains of $49,000, $33,000 and $21,000 and gross losses of
$57,000, $49,000 and $6,000 were realized on sales of
securities in 1992, 1991, and 1990, respectively.
(Continued)
11
<PAGE> 18
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
Securities with a par value of approximately $12,455,000 at December
31, 1992 and $17,734,000 at December 31, 1991 were pledged
to secure public and trust deposits and certain borrowings.
(4) Loans
-----
The composition of loans at December 31, 1992 and 1991 follows:
(In thousands) 1992 1991
------ ------
Commercial $ 11,421 12,329
Real estate mortgage 56,199 55,096
Consumer 19,895 17,946
Agricultural 15,190 13,538
Other 112 180
------- ------
$ 102,817 99,089
======= ======
The amount of non-accrual and restructured loans at December 31, 1992
and 1991 totaled approximately $714,000 and $1.76 million,
respectively. Interest that would have been recorded if all
such loans were on a current status in accordance with their
original terms was approximately $90,000 in 1992 and $139,000
in 1991. The amount of interest income that was recorded for
such loans was approximately $33,000 and $98,000 in 1992 and
1991, respectively.
Loans to directors and their associates, including loans to affiliated
companies of which directors are principal owners, and
executive officers amounted to approximately $898,000 and
$1,006,000 at December 31, 1992 and 1991, respectively. These
loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for other customers, and do not, in the opinion of management,
involve more than normal credit risk.
(Continued)
12
<PAGE> 19
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
Loans outstanding and related unfunded commitments are primarily
concentrated within the Banks' markets which encompass
Northeast Kentucky. The Banks' credit exposure is
diversified, with secured and unsecured loans to consumers,
small businesses, farmers and corporations. Although the
Banks have diversified loan portfolios, a customer's ability
to honor contracts is reliant upon the economic stability of
the geographic region and/or industry in which they do
business. No single industry concentration exceeds 10% of
loans.
An analysis of the changes in the allowance for loan losses for the
years ended December 31, 1992, 1991 and 1990 follows:
<TABLE>
<CAPTION>
(In thousands) 1992 1991 1990
----- ----- -----
<S> <C> <C> <C>
Balance at January 1 $ 1,791 1,641 1,477
Provision for loan losses 838 772 1,052
Loans charged-off (775) (689) (980)
Recoveries 126 67 92
----- ------ -----
Net loan charge-offs (649) (622) (688)
----- ------ -----
Balance at December 31 $ 1,980 1,791 1,641
===== ====== =====
</TABLE>
(5) Premises and Equipment
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
December 31
-----------------
(In thousands) 1992 1991
---- ----
<S> <C> <C>
Land and buildings $ 3,224 3,139
Furniture and equipment 3,428 3,186
----- -----
6,652 6,325
Less accumulated depreciation 4,274 3,862
----- -----
$ 2,378 2,463
===== =====
</TABLE>
(Continued)
13
<PAGE> 20
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(6) Deposits
Time certificates of deposit outstanding in denominations of
$100,000 or more were approximately $12,378,000 and
$12,132,000 at December 31, 1992 and 1991, respectively.
(7) Notes Payable
A summary of notes payable at December 31, 1992 and 1991
follows:
<TABLE>
<CAPTION>
(In Thousands) 1992 1991
---- ----
<S> <C> <C>
Secured note payable to bank; due
September 1995; monthly principal
payments of $ 4,667; interest at
the prime interest rate (6%), due
quarterly $ 139 -
Secured note payable to bank; due
September 1995; annual principal
payments of $220,000 in 1993 and
1994; interest at the prime
interest rate (6%), due quarterly 1,021 -
Secured note payable to bank; due
September 1992 - 813
6-5/8% note; payable in annual
installments of $44,000, including interest, 81 118
through 1994
Unsecured note payable to bank; due September 1992 - 1,160
-------- --------
$ 1,241 2,091
======== ========
</TABLE>
The terms of the Secured notes payable include a number of restrictive
convenants, including maintaining minimum capital to asset
ratios at the Banks and a minimum net worth on a
consolidated basis. If the terms of the restrictive
convenants are not met, the lender may declare these
notes due and payable. The secured notes are collateralized
by all the issued and outstanding common stock of State
National.
Maturities of the notes payable for the years ending December 31, are
$315,000 in 1993, $318,000 in 1994 and $608,000 in 1995.
(Continued)
14
<PAGE> 21
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
State National has entered into an agreement with the Federal Home Loan
Bank of Cincinnati (FHLB) which enables State National to
borrow up to $2,228,000. Advances from the FHLB would be
collateralized by certain first mortgage loans under a
blanket mortgage collateral agreement and stock in the FHLB.
Subordinated debentures (see note 8) and preferred stock of the
Corporation are subordinated to all notes payable.
(8) Subordinated Debentures
-----------------------
On October 30, 1989 the corporation made an offer to exchange one 10%
subordinated debenture due December 31, 2009 (new debenture)
in exchange for each 25-year escalating rate debenture due
December 31, 2007 (old debenture). The purpose of the
exchange was to restructure the Corporation's $3,509,000
subordinated debenture debt and to reduce the Corporation's
total debt service obligations by a reduction in the
interest rate. Effective January 1, 1990, the exchange
occured and debentures which were not exchanged were called
on February 1, 1990. Repayment of these debentures was
financed by the unsecured note payable discussed in note 7.
The new debentures are subordinated to all indebtedness of
the Corporation to financial institutions as were the old
debentures.
THIS PORTION OF PAGE INTENTIONALLY LEFT BLANK
(Continued)
15
<PAGE> 22
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(9) Income Taxes
------------
The components of income tax expense (benefit) follow:
<TABLE>
<CAPTION>
(In thousands)
Years ended December 31
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Current $498 333 211
Alternative minimum tax credit (101) - -
Deferred (25) (40) (91)
----- ---- ----
$372 293 120
==== ==== ====
</TABLE>
Temporary differences in 1992, 1991 and 1990 in the recognition of
income and expense for tax and financial reporting purposes
resulted in deferred incom taxes as follows:
<TABLE>
<CAPTION>
(In thousands)
Years ended December 31
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Depreciation $ (21) (5) 7
Loan loss Provision (64) (55) (43)
Accrual to cash
conversion - - (17)
Accounting differences
for securities 3 (33) (4)
Deferred tax adjustment
for effect of alternative
minimum tax 44 29 21
Other 13 24 (13)
----- ---- -----
$ (25) (40) (91)
====== ==== =====
</TABLE>
The cumulative amounts of deferred income tax assets were $190,000 and
$165,000 at December 31, 1992 and 1991, respectively. Such
amounts are included in other assets.
(Continued)
16
<PAGE> 23
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
An analysis of the difference between the statutory and effective tax rates
(provision for income taxes as a percentage of income before income
taxes) for 1992, 1991 and 1990 follows:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
U.S. Federal income tax rate 34.0% 34.0 34.0
Changes form statutory rate
resulting from:
Tax exempt interest (14.1) (20.1) (37.6)
Amortization of goodwill 2.7 3.4 6.2
Alternative minimum tax (credit) (5.9) - 14.5
Other, net 4.9 4.3 (1.0)
------ ------ ------
21.6% 21.6 16.1
====== ====== ======
</TABLE>
Alternative minimum tax credit carryforwards aggregating approximately $50,000
at December 31, 1992 are available to reduce income tax expense in
future periods. Additionally, the Corporation had $106,000 of future
deductible temporary differences for which tax benefits have not been
recognized.
Income tax expense (benefit) attributable to securities gains and losses in
1992, 1991 and 1990 was $11,000, $(5,000), and $5,000, respectively.
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to the deferred tax
liability (asset) at December 31, 1992 and 1991 related to the
following:
<TABLE>
<CAPTION>
(In thousands)
1992 1991
------ ------
<S> <C> <C>
Premises and equipment $138 159
Securites 21 18
Allowance for loan losses (397) (333)
Effects of alternative minimum tax 39 (5)
Deferred fees on debentures
refinancing (7) (14)
Capital loss carryforward - (14)
Other 16 24
------ ------
Net defferred income tax asset $(190) (165)
====== ======
</TABLE>
(Continued)
17
<PAGE> 24
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(10) Stockholders' Equity
--------------------
Preferred Stock
---------------
Preferred stock was issued to the directors of Farmers Liberty and
Peoples as qualifying shares. Dividends were paid at the
same rate per share as on common stock; however, holders of
the preferred shares waived the right to receive dividends.
In the event of termination or liquidation of the Corporation,
the preferred shares have priority over common shares to the
extent of the stated value of the preferred shares. Each
preferred share carries voting rights equal to one share of
common stock. The preferred stock is not convertible or
redeemable. During 1991, all outstanding preferred stock was
retired.
Dividend Restriction
--------------------
The Corporation's principal source of funds for dividend and interest
payments is dividends received from the Banks. Under
applicable banking laws, bank requlatory authorities must
approve the declaration of dividends in any year in an amount
in excess of the sum of net income of that year, as defined,
and retained earnings of the preceding two years. At December
31, 1992, retained earnings of the Corporation's subsidiary
banks were approximately $7,668,000 of which, at Januay 1,
1993, approximately $879,000 was available for the payment of
dividends without approval by bank regulatory authorities.
(11) Employee Benefit Plans
----------------------
The Corporation has a non-contributory defined benefit pension plan
covering all full-time employees who meet certain requirements
as to age and length of service. During 1991, the plan was
amended to include employees of all subsidiaries of the
Corporation. Prior to the amendment only employees of State
National were included in the plan. The Corporation's funding
policy is to contribute at least the minimum amount required
by the Employee Retirement Income Security Act of 1974.
(Continued)
18
<PAGE> 25
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements - Continued
The following table sets forth the funded status of the plan and amounts
recognized in the consolidated balance sheet at December 31, 1992 and
1991:
<TABLE>
<CAPTION> Years ended Dec. 31
(In thousands)
1992 1991
------- --------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$684,000 in 1992 and $513,000
in 1991 $ (706) (526)
====== =====
Projected benefit obligation
for service rendered to date
(1,092) (903)
Plan assets at fair value 959 953
Plan assets in excess of (less than) ------- -----
projected benefit obligation (133) (50)
Unrecognized net transition asset
being recognized over 17 years (266) (290)
Unrecognized net loss from past
experience different from that assumed 395 291
Unrecognized prior service cost 43 46
Prepaid pension cost included in other ------- -------
assets $ 39 97
======= =======
Net pension cost (income) for 1992, 1991 and 1990 included the following
expense (income) components:
(In thousands)
1992 1991 1990
------ ------- -------
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 69 41 22
Interest cost on projected
benefit obligation 75 53 33
Actual return on plan assets (16) (129) (29)
Amortization of transition asset (24) (24) (24)
Amortization of prior service cost 3 3 -
Gain (loss) deferred (49) 71 (27)
----- ----- ------
$ 58 15 (25)
===== ===== ======
</TABLE>
Plan assets consist of U.S. Treasury Bonds, stocks, corporate bonds and cash
equivalents.
(Continued)
19
<PAGE> 26
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
The assumptions used to develop the projected benefit obligation
included a discount rate of 7.75% for 1992 and 8.0% for 1991,
and an expected rate of increase in compensation levels of
5.5% in 1992 and 4.0% in 1991. The expected long-term rate
of return on assets was 8% in 1992 and 8.5% in 1991.
Effective June 1, 1989, the Corporation established a 401 (k) Plan, in
accordance with the provisions of the Internal Revenue Code,
in which all employees qualify for participation.
Participants may elect to make contributions to the 401(k)
Plan up to 15% of compensation. The Corporation contributes
$1 for each $3 contributed by a participant, up to 6% of each
participant's compensation. The Corporation's contribution
during 1992, 1991 and 1990 totaled approximately $29,000,
$26,000, and $20,000, respectively.
(12) Commitments and Contingent Liabilities
--------------------------------------
As of December 31, 1992, the Banks had outstanding various commitments
and contingent liabilities arising in the normal course of
business, such as standby letters of credit and commitments to
extend credit, which are properly not reflected in the
consolidated financial statements. In management's opinion,
these commitments to extend credit of $12,696,000, including
standby letters of credit totaling approximately $1,058,000,
represent normal banking transactions and no significant
losses are anticipated to result therefrom. The Banks'
exposure to credit loss in the event of nonperformance by the
other party to these commitments is represented by the
contractual amount of these instruments. The Banks use the
same credit and collateral policies in making commitments and
conditional guarantees as they do for on balance sheet
instruments.
(Continued)
20
<PAGE> 27
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
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 many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Banks
evaluate each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary
by the Banks upon extension of credit, is based on
management's credit evaluation of the customer. Collateral
held varies but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial
properties.
Standby letters of credit and financial guarantees written are
conditional commitments issued by the Banks to guarantee a
third party. Those guarantees are primarily issued to support
private borrowing arrangements.
Also as of December 31, 1992, there were various pending legal actions
and proceedings in which claims for damages are asserted.
Management, after discussion with legal counsel and after
consideration of possible recourse to third parties, believes
the ultimate result of these legal actions and proceedings
will not have a material adverse effect upon the consolidated
financial position of the Corporation.
(13) Stock Options
-------------
The Board of Directors adopted an amended stock option plan effective
September 1, 1992. Stock options remaining under the prior
plan expired. Under the amended stock option plan, options
for 2,120 shares of the common stock of the Corporation were
granted to the president of the Corporation and the Banks at
$32.50 per share. The options are currently exercisable and
expire five years from date of grant.
(Continued)
21
<PAGE> 28
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(14) Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The estimated fair value of the Corporation's financial instruments
are as follows:
<TABLE>
<CAPTION>
December 31, 1992
(In thousands)
Carrying Fair
Amount Value
--------------- -------------
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 15,583 15,583
Securities 44,544 45,700
Loans 100,468 101,988
Financial liabilities:
Deposits 150,889 151,230
Notes payable and debentures 3,589 3,589
========= ========
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Short-Term Investments
-------------------------------
For those short-term investments, the carrying amount is a reasonable
estimate of fair value.
Securities
----------
For securities, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is
estimated using quoted market prices for similar
securities or dealer quotes.
(Continued)
22
<PAGE> 29
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
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.
Deposits
--------
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity
certificates of deposit is estimated by discounting the
future cash flows using the rates currently offered for
deposits of similar remaining maturities.
Notes Payable and Debentures
----------------------------
Rates currently available to the Corporation for debt with similar
terms and remaining maturities are used to estimate fair
value of existing debt.
Limitations
-----------
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the
financial instruments. Because no market exists for a
significant portion of the Corporation's financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and such other factors. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly
affect the estimates.
The fair value estimates are based on financial instruments without
attempting to estimate the value of assets and liabilities
that are not financial instruments, such as premises and
equipment and other assets and liabilities. Accordingly,
the fair value estimates do not represent what the
Corporation is worth on a fair value basis.
(Continued)
23
<PAGE> 30
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
(15) Kentucky Community Bancorp, Inc. (Parent Company Only)
<TABLE>
<CAPTION>
Condensed Balance Sheets
December 31, 1992 and 1991
(In thousands)
Assets 1992 1991
-------------------------- --------- -------
<S> <C> <C>
Cash on deposit with subsidiary bank $ 317 279
Investment in subsidiary banks 14,985 14,435
Furniture and equipment 338 371
Due from subsidiaries 107 300
Other assets 90 50
--------- -------
Total assets $ 15,837 15,435
========= =======
Liabilities and Stockholders' Equity
--------------------------------------
Accrued interest, taxes payable and
other liabilities $ 366 412
Notes payable 1,160 1,973
Subordinated debentures 2,348 2,348
-------- -------
Total liabilities 3,874 4,733
Stockholders' equity 11,963 10,702
--------- -------
Total liabilities and
stockholders' equity $ 15,837 15,435
========= =======
</TABLE>
(Continued)
24
<PAGE> 31
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
<TABLE>
<CAPTION>
Condensed Statements of Income
Years ended December 31, 1992, 1991 and 1990
(In thousands)
1992 1991 1990
------- ------- ------
<S> <C> <C> <C>
Income:
Dividends from subsidiary banks $ 1,280 1,451 709
Management fees and other income 930 913 857
------- ----- ------
Total income 2,210 2,364 1,566
------- ----- ------
Expenses:
Interest expense 336 443 551
Other expenses 1,356 1,311 1,255
------- ----- -----
Total expenses 1,692 1,754 1,806
------- ----- -----
Income (loss) before income
tax benefit and equity in
undistributed net income
of subsidiaries 518 610 (240)
Income tax benefit 191 216 278
------- ----- -----
Income before equity in
undistributed net income
of subsidiaries 709 826 38
Equity in undistributed net income
of subsidiaries 640 239 590
------- ----- ----
Net income $ 1,349 1,065 628
======= ===== ====
</TABLE>
(Continued)
25
<PAGE> 32
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
Years ended December 31, 1992, 1991 and 1990
(In thousands)
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Operating activities
Net income $1,349 1,065 628
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 250 243 246
Provision for deferred income taxes 18 25 20
Equity in undistributed net income
of subsidiaries (640) (239) (590)
Increase in other assets (40) (5) (39)
Decrease (increase) in due from subsidiaries 193 (177) (110)
Increase (decrease) in accrued interest payable,
taxes payable and other liabilities (64) 35 232
------ ------ -----
Net cash provided by operating
activities 1,066 947 387
------ ------ -----
Investment activities:
Purchases of furniture and equipment (80) (49) (81)
Net change in other short-term investments - 125 (125)
----- ------ -----
Net cash provided by (used in)
investment activities (80) 76 (206)
------ ------ -----
Financing activities:
Advances of notes payable 1,238 - 1,160
Repayment of notes payable (2,051) (746) (546)
Retirement of subordinated debt - - (1,161)
Cash dividends paid (135) (129) (128)
Reissuance of common stock from treasury - 3 3
Repurchase of preferred stock - (4) (1)
------- ------- ------
Net cash used in financing activities (948) (876) (673)
------- ------ ------
Net increase (decrease) in cash 38 147 (492)
Cash at beginning of year 279 132 624
-------- ------ -----
Cash at end of year $ 317 279 132
======== ====== =====
</TABLE>
Interest payments totaled $336,000 in 1992, $443,000 in 1991, and
$714,000 in 1990.
26
<PAGE> 33
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1993
(in thousands)
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------
<S> <C>
CASH AND DUE FROM BANKS $ 5,016
INTEREST BEARING DEPOSITS WITH BANKS 200
FEDERAL FUNDS SOLD 6,919
SECURITIES AVAILABLE FOR SALE (NOTE 2) 22,741
INVESTMENT SECURITIES (NOTE 2) 27,300
NET LOANS (NOTE 3) 102,602
PREMISES AND EQUIPMENT 2,244
OTHER ASSETS 4,274
--------
$ 171,296
========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------
DEPOSITS $ 154,388
NOTES PAYABLE AND OTHER BORROWED FUNDS 3,110
OTHER LIABILITIES 578
--------
TOTAL LIABILITIES 158,076
--------
STOCKHOLDERS' EQUITY
- --------------------
COMMON STOCK, WITHOUT PAR VALUE, $10
STATED VALUE; AUTHORIZED 300,000
SHARES, ISSUED 260,958 SHARES AS OF
SEPTEMBER 30, 1993 AND DECEMBER 31, 1992 1,305
ADDITIONAL PAID IN CAPITAL 934
RETAINED EARNINGS 11,020
TREASURY STOCK, AT COST;
2,585 SHARES AS OF SEPTEMBER 30, 1993 (39)
--------
TOTAL STOCKHOLDERS' EQUITY 13,220
--------
$ 171,296
========
</TABLE>
27
<PAGE> 34
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Nine Months ended September 30,1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
INTEREST INCOME
LOANS, INCLUDING FEES $ 6,658 $ 7,318
FEDERAL FUNDS SOLD AND SECURITIES
PURCHASED UNDER AGREEMENTS TO RESELL 178 212
INVESTMENT SECURITIES 2,254 2,413
INTEREST BEARING DEPOSITS WITH BANKS 12 20
OTHER 99 108
------- -------
TOTAL INTEREST INCOME $ 9,201 $ 10,071
------- -------
INTEREST EXPENSE
DEPOSITS 3,379 4,196
FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER AGREEMENTS TO REPURCHASE - 13
NOTES PAYABLE AND OTHER BORROWED FUNDS 88 88
SUBORDINATED DEBENTURES 127 176
------- -------
TOTAL INTEREST EXPENSE $ 3,594 4,473
------- -------
NET INTEREST INCOME BEFORE PROVISION
FOR LOAN LOSSES $ 5,607 5,598
PROVISION FOR LOAN LOSSES 338 640
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES $ 5,269 4,958
NON-INTEREST INCOME 989 839
NON-INTEREST EXPENSE 4,469 4,419
------- -------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT PRIOR YEARS OF
THE CHANGE IN ACCOUNTING FOR
INCOME TAXES $ 1,789 1,378
PROVISION FOR INCOME TAXES 481 296
INCOME BEFORE CUMULATIVE EFFECT ON ------- -------
PRIOR YEARS OF THE CHANGE IN
ACCOUNTING FOR INCOME TAXES $ 1,308 1,082
CUMULATIVE EFFECT ON PRIOR YEARS
OF THE CHANGE IN ACCOUNTING FOR
INCOME TAXES (NOTE 4) 81 -
------- -------
NET INCOME $ 1,389 $ 1,082
======= =======
PER COMMON SHARE:
Net Income $ 5.42 $ 4.21
======= =======
Cash dividends declared $ 0.650 $ 0.375
======= =======
Average common shares outstanding 256,204 257,264
======= =======
</TABLE>
28
<PAGE> 35
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME $ 1,388 $ 1,082
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
PROVISION FOR LOAN LOSSES 338 640
DEPRECIATION, AMORTIZATION AND
ACCRETION, NET 513 408
DECREASE (INCREASE) IN OTHER ASSETS 124 (723)
INCREASE (DECREASE) IN OTHER LIABILITIES (472) (485)
NET CASH PROVIDED BY OPERATING ACTIVITES --------- ---------
ACTIVITIES $ 1,891 $ 922
--------- ---------
LENDING AND INVESTING ACTIVITIES
NET CHANGE IN INTEREST BEARING DEPOSITS
WITH BANKS (1) (250)
NET CHANGE IN FEDERAL FUNDS SOLD AND
SECURITIES PURCHASED UNDER AGREEMENTS
TO RESELL 2,932 9,458
NET CHANGE IN SHORT-TERM INVESTMENTS - 600
PURCHASES OF INVESTMENT SECURITIES (20,612) (13,019)
PROCEEDS FROM SALES OF INVESTMENT
SECURITIES 5,364 5,008
PROCEEDS FROM MATURITIES OF INVESTMENT
SECURITIES 9,613 9,836
NET CHANGES IN LOANS (2,825) (6,149)
PURCHASES OF PREMISES AND EQUIPMENT (139) (164)
PROCEEDS FROM SALE OF OTHER REAL
ESTATE OWNED/REACQUIRED ASSETS 371 1,658
--------- ---------
NET CASH USED IN LENDING AND
INVESTING ACTIVITIES $(5,297) $ 6,978
--------- ---------
DEPOSIT AND FINANCING ACTIVITIES
NET CHANGE IN DEPOSITS 3,499 (7,279)
NET CHANGE IN FEDERAL FUNDS PURCHASED
AND SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE - (923)
REPAYMENT OF NOTES PAYABLE 1,869 (772)
CASH DIVIDEND PAID (168) (96)
REISSUANCE OF COMMON STOCK FROM TREASURY 21 -
NET CASH PROVIDED BY DEPOSIT AND --------- ---------
FINANCING ACTIVITIES $ 5,221 $(9,070)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENT 1,815 $(1,170)
CASH AND CASH EQUIVALENT AT BEGINNING
OF YEAR 5,533 5,659
--------- ---------
CASH AND CASH EQUIVALENT AS OF
SEPTEMBER 30 $7,348 $ 4,489
========= =========
Income tax payments totaled $688,303 in 1993
and $399,414 in 1992
Interest payments totaled $3,498,300 in 1993
and $4,207,713 in 1992
(in thousands)
1993 1992
--------- ----------
Noncash transactions were as follows:
Loans charged-off $ - $426
Decease in unrealized loss on marketable
equity securities - $10
Transfer of loans to other real estate
owned/reacquired assets 353 319
========= ===========
</TABLE>
29
<PAGE> 36
Kentucky Community Bancorp, Inc,
Notes to Consolidated Condensed Financial Statements
September 30, 1993
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Kentucky Community Bancorp,
Inc. (Corporation) and its wholly owned subsidiaries, The State
National Bank of Maysville (SNB), Farmers Liberty Bank (FLB), and
Peoples First Bank of Morehead (PFB), collectively, the Banks, conform
to generally accepted accounting principles and general practices
within the banking industry.
The consolidated financial statements include the accounts of the
Corporation and its subsidiaries, SNB, FLB, and PFB. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
A description of other significant accounting policies is presented in
the December 31, 1992 annual report, Form 10-KSB.
(2) Securities
The book values and approximate market values of investment securities
as of September 30, 1993 and December 31, 1992 follows:
<TABLE>
<CAPTION>
(In Thousands) September 30, 1993
-------------------------------------------------------
Unrealized
BOOK MARKET
VALUE GAIN LOSS VALUE
------- ------ ----- --------
<S> <C> <C> <C> <C>
Federal Agencies $ 8,469 $ 248 $ 6 $ 8,711
Asset-backed
Securities 7,556 134 4 7,686
Obligations of State
& Federal Subdivisions 9,027 313 48 9,292
Marketable Equity
Securities & Other
Securities 2,249 18 15 2,252
------- ------ ------ --------
TOTALS $27,301 $ 713 $ 73 $ 27,941
======= ====== ====== ========
</TABLE>
30
<PAGE> 37
Notes to Consolidated Condensed Financial Statements-cont'd
September 30, 1993.
The book values and approximate market values of securities held for
sale as of September 30, 1993 follows:
<TABLE>
<CAPTION>
(in thousands) September 30, 1993
-------------------------------------------------
Unrealized
------------------
Book Market
Value Gain Loss Value
----- ---- ---- -----
<S> <C> <C> <C> <C>
U.S. Treasury $ 22,742 $ 759 $ 3 $ 23,498
======== ===== === ========
</TABLE>
(3) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses for the
period ended September 30, 1993 follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Balance, January 1 $ 1,980
Provision for loan 338
losses
Loans charged-off (415)
Recoveries 60
-------
Net loans
charged-off (355)
-------
Balance, Sept. 30 $ 1,963
=======
Balance,
December 31
</TABLE>
(4) Income Taxes
On March 31, 1993, the Corporation adopted the Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
that created an additional net deferred tax asset aggregating $81,000.
The cumulative effect of the change in accounting principle as of
September 30, 1993 increased net income by $81,000 that is reported
separately in the condensed consolidated statement of income for the
six months ended September 30, 1993.
31
<PAGE> 38
Notes to Consolidated Condensed Financial Statements-cont'd
September 30, 1993
The preceding consolidated condensed financial statements reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary to fairly present the financial position of the
Corporation and its subsidiaries, SNB, FLB and PFB at September 30, 1993 and
the results of operations and the changes in their cash flow position for the
interim periods then ended.
32
<PAGE> 39
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet
as of September 30, 1993, gives effect, as of that date, to the acquisition of
Kentucky Community Bancorp, Inc. (Kentucky Community) through the issuance of
1,374,985 shares of Trans Financial Bancorp, Inc. (Trans Financial) common
stock in exchange for 259,431 shares of Kentucky Community commom stock. The
pro forma condensed consolidated statements of income for the nine months ended
September 30, 1993 and the years ended December 31, 1992, 1991, and 1990 are
in effect a restatement of the historical income statements of each entity as
if the Merger had been consummated for all periods.
The Merger will be accounted for under the pooling of interests method
of accounting. Under the pooling of interests method of accounting, the
historical basis of the assets and liabilities of Trans Financial and Kentucky
Community are combined and carried forward at their previously recorded
amounts, and the shareholders' equity accounts of Trans Financial and Kentucky
Community will be combined on Trans Financial's consolidated balance sheet.
The pro forma statements are not necessarily indicative of the
financial position or the results of operations of the combined entities as
they may be in the future or as they might have been had the transaction been
consummated for all periods presented.
33
<PAGE> 40
TRANS FINANCIAL BANCORP, INC.
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1993
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
TRANS KENTUCKY PRO
FINANCIAL COMMUNITY FORMA PRO
BANCORP (a) BANCORP (a) ADJUSTMENTS FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $ 45,741 $ 5,016 $ $ 50,757
Interest bearing deposits with banks 547 200 747
Federal funds sold and resale agreements 27,100 6,919 34,019
Mortgage loans held for sale 35,129 0 35,129
Securities available for sale 25,523 22,741 48,264
Investment securities 243,451 27,300 270,751
Loans, net of unearned income 752,466 104,565 857,031
Less allowance for loan losses (8,288) (1,963) (10,251)
---------- --------- --------- --------
Net loans 744,178 102,602 846,780
Premises and equipment 26,557 2,244 28,801
Goodwill 5,360 0 5,360
Mortgage servicing rights 4,531 0 4,531
Other assets 20,626 4,274 24,900
---------- --------- --------- --------
Total assets $ 1,178,743 $ 171,296 $ 0 $ 1,350,039
========== ========= ========= ========
Liabilities and Stockholders' Equity
Deposits $ 1,002,462 $ 154,388 $ $ 1,156,850
Federal funds purchased and resale agreements 32,720 32,720
Other liabilities 7,481 578 8,059
Long term debt and other notes payable 61,772 3,110 64,882
---------- --------- --------- --------
Total liabilities 1,104,435 158,076 1,262,511
---------- --------- --------- --------
Preferred stock 0 0 0
Common stock 13,897 1,305 1,273 (b) 16,475
Additional paid-in capital 39,320 934 (1,312)(b) 38,942
Retained earnings 24,991 11,020 36,011
Treasury stock (39) 39 (b) 0
Unrealized loss on marketable equity securities (128) (128)
Employee Stock Ownership Plan borrowings (3,772) (3,772)
---------- --------- --------- ---------
Total stockholders' equity 74,308 13,220 0 87,528
---------- --------- --------- ---------
Total liabilities and stockholders' $ 1,178,743 $ 171,296 $ 0 $ 1,350,039
========== ========= ========= =========
</TABLE>
See accompanying notes to pro forma financial information.
34
<PAGE> 41
TRANS FINANCIAL BANCORP, INC.
Pro Forma Condensed Consolidated Income Statement
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1993
TRANS KENTUCKY
FINANCIAL COMMUNITY
BANCORP (a) BANCORP (a) PRO FORMA
------------ ------------ ----------
<S> <C> <C> <C>
Interest income:
Loans $ 39,525 $ 6,658 $ 46,183
Securities 10,366 2,254 12,620
Other 2,631 289 2,920
------------- ------------ ------------
Total interest income 52,522 9,201 61,723
------------- ------------ ------------
Interest expense:
Deposits 22,118 3,379 25,497
Short-term borrowings 498 0 498
Notes payable 701 215 916
------------- ------------ ------------
Total interest expense 23,317 3,594 26,911
------------- ------------ ------------
Net interest income 29,205 5,607 34,812
Provision for loan losses 1,321 338 1,659
------------- ------------ ------------
Net interest income after
provision for loan losses 27,884 5,269 33,153
------------- ------------ ------------
Non-interest income 9,941 989 10,930
Non-interest expenses 27,904 4,469 32,373
------------- ------------ ------------
Income before income taxes 9,921 1,789 11,710
Income tax expense 2,990 481 3,471
------------- ------------ ------------
Income before cumulative effect
of accounting change $ 6,931 $ 1,308 $ 8,239
============= ============ ============
Income applicable to common stock $ 6,931 $ 1,308 $ 8,239
============= ============ ============
Weighted average shares outstanding:
Primary 7,521 8,896
Fully diluted 7,521 8,896
============= ============
Earnings per common share:
Primary $ 0.92 $ 0.93
Fully diluted 0.92 0.93
============= =============
</TABLE>
35
<PAGE> 42
TRANS FINANCIAL BANCORP, INC.
Pro Forma Condensed Consolidated Income Statement
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1992
TRANS KENTUCKY
FINANCIAL COMMUNITY
BANCORP (a) BANCORP (a) PRO FORMA
----------- ----------- ----------
<S> <C> <C> <C>
Interest income:
Loans $ 46,099 $ 9,369 $ 55,468
Securities 16,694 3,137 19,831
Other 614 417 1,031
---------- ----------- ----------
Total interest income $ 63,407 $ 12,923 $ 76,330
---------- ----------- ----------
Interest expense:
Deposits 30,822 5,361 36,183
Short-term borrowings 902 17 919
Notes payable 287 343 630
---------- ----------- ----------
Total interest expense $ 32,011 $ 5,721 $ 37,732
---------- ----------- ----------
Net interest income $ 31,396 $ 7,202 $ 38,598
Provision for loan losses 1,216 838 2,054
---------- ----------- ----------
Net interest income after
provision for loan losses $ 30,180 $ 6,364 $ 36,544
---------- ----------- ----------
Non-interest income 11,064 1,514 12,578
Non-interest expenses 27,498 6,157 33,655
---------- ----------- ----------
Income before income taxes $ 13,746 $ 1,721 $ 15,467
Income tax expense 4,686 372 5,058
---------- ----------- ----------
Income before cumulative effect
of accounting change $ 9,060 $ 1,349 $ 10,409
========== =========== ==========
Income applicable to common stock $ 9,004 $ 1,349 $ 10,353
========== =========== ==========
Weighted average shares outstanding:
Primary 6,906 8,281
Fully diluted 6,906 8,281
========== ==========
Earnings per common share:
Primary $ 1.30 $ 1.25
Fully diluted 1.30 1.25
========== ==========
</TABLE>
36
<PAGE> 43
TRANS FINANCIAL BANCORP, INC.
Pro Forma Condensed Consolidated Income Statement
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1991
TRANS KENTUCKY
FINANCIAL COMMUNITY
BANCORP (a) BANCORP (a) PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Loans $ 35,858 $ 10,365 $ 46,223
Securities 9,582 3,435 13,017
Other 523 796 1,319
---------- ----------- ----------
Total interest income $ 45,963 $ 14,596 $ 60,559
---------- ----------- ----------
Interest expense:
Deposits 25,561 7,606 33,167
Short-term borrowings 466 56 522
Notes payable 1,203 452 1,655
---------- ----------- ----------
Total interest expense $ 27,230 $ 8,114 $ 35,344
---------- ----------- ----------
Net interest income $ 18,733 $ 6,482 $ 25,215
Provision for loan losses 750 772 1,522
---------- ----------- ----------
Net interest income after
provision for loan losses $ 17,983 $ 5,710 $ 23,693
---------- ----------- ----------
Non-interest income $ 6,542 $ 1,396 7,938
Non-interest expenses 17,957 5,748 23,705
---------- ----------- ----------
Income before income taxes $ 6,568 $ 1,358 $ 7,926
Income tax expense 2,028 293 2,321
---------- ----------- ----------
Income before cumulative effect
of accounting change $ 4,540 $ 1,065 $ 5,605
========== =========== ==========
Income applicable to common stock $ 4,227 $ 1,065 $ 5,292
========== =========== ==========
Weighted average shares outstanding:
Primary 3,277 4,652
Fully diluted 3,921 5,296
========== ==========
Earnings per common share:
Primary $ 1.29 $ 1.14
Fully diluted 1.17 1.07
========== ==========
</TABLE>
37
<PAGE> 44
TRANS FINANCIAL BANCORP, INC.
Pro Forma Condensed Consolidated Income Statement
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1990
TRANS KENTUCKY
FINANCIAL COMMUNITY
BANCORP (a) BANCORP (a) PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
Interest income:
Loans $ 34,463 $ 10,816 $ 45,279
Securities 6,834 3,162 9,996
Other 652 952 1,604
------------- ------------ ------------
Total interest income $ 41,949 $ 14,930 $ 56,879
------------- ------------ ------------
Interest expense:
Deposits 23,207 8,332 31,539
Short-term borrowings 995 82 1,077
Notes payable 1,258 562 1,820
------------- ------------ ------------
Total interest expense $ 25,460 $ 8,976 $ 34,436
------------- ------------ ------------
Net interest income $ 16,489 $ 5,954 $ 22,443
Provision for loan losses 1,529 1,052 2,581
------------- ------------ ------------
Net interest income after
provision for loan losses $ 14,960 $ 4,902 $ 19,862
------------- ----------- ------------
Non-interest income 5,179 1,238 6,417
Non-interest expenses 14,873 5,392 20,265
------------- ------------ ------------
Income before income taxes $ 5,266 $ 748 $ 6,014
Income tax expense 1,412 120 1,532
------------- ------------ ------------
Income before cumulative effect
of accounting change $ 3,854 $ 628 $ 4,482
============= ============ ============
Income applicable to common stock $ 3,536 $ 628 $ 4,164
============= ============ ============
Weighted average shares outstanding:
Primary 2,773 4,148
Fully diluted 3,440 4,815
============= ============
Earnings per common share:
Primary $ 1.28 $ 1.00
Fully diluted 1.14 0.95
============= ============
</TABLE>
38
<PAGE> 45
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBERED PAGE
2(a) Agreement and Plan of Reorganization between Trans
Financial Bancorp, Inc. and Kentucky Community Bancorp,
Inc. dated as of November 9, 1993, as amended January 6,
1994, is incorporated by reference to Exhibit (2) of the
Registration Statement on Form S-4 (File No. 33-51575)
filed by Trans Financial with the Commission.
2(b) Plan of Merger between Trans Financial Bancorp, Inc. and
Kentucky Community Bancorp, Inc. dated as of November 9,
1993, as amended January 6, 1994, is incorporated by
reference to Exhibit (2) of the Registration Statement
on Form S-4 (File No. 33-51575) filed by Trans Financial
with the Commission.
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