UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM lO-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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 1-10602
______________________MID-AMERICA BANCORP____________________
(Exact name of registrant as specified in its charter)
Kentucky 61-1012933
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 West Broadway
Louisville, Kentucky 40202
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code:(502) 589-3351
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock AMEX
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if the disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value of the voting stock held by non-
affiliates (shareholders other than directors, executive officers
and principal shareholders) of the registrant as of February 22,
2000 was approximately $190,271,000.
The number of shares outstanding of the registrant's common stock
as of February 22, 2000 was 10,676,557.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Shareholders for the
year ended December 31, 1999, are incorporated by reference into
Parts I and II.
Portions of Registrant's Proxy Statement for the Annual Meeting
of Shareholders to be held April 25, 2000, are incorporated by
reference into Part III.
TABLE OF CONTENTS
PART I
Item No. Page
1. BUSINESS . . . . . . . . . . . . . . . . . . . 3
2. PROPERTIES . . . . . . . . . . . . . . . . . . 12
3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . 12
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . 12
EXECUTIVE OFFICERS OF REGISTRANT . . . . . . . 12
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS . . . . . . . 15
6. SELECTED FINANCIAL DATA . . . . . . . . . . . 15
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 15
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK . . . . . . . . . . . . . . 15
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . 15
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . 16
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . 17
11. EXECUTIVE COMPENSATION . . . . . . . . . . . . 17
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . 17
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K. . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . 19
PART I
ITEM 1. BUSINESS OF MID-AMERICA BANCORP
Incorporated on May 7, 1982, Mid-America Bancorp (the "Company")
is a Kentucky corporation registered as a bank holding company
pursuant to the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). The Company is registered with, and subject to, the
supervision of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board").
The Company's banking subsidiary, Bank of Louisville (the
"Bank"), is the Company's primary subsidiary. The Bank was
established as a Kentucky banking corporation on October 14,
1925, under the name "Morris Plan Industrial Bank". On July 2,
1946 the Bank's name was changed to "Bank of Louisville". The
Bank merged with "Royal Bank and Trust Company" in 1963 under the
name Bank of Louisville-Royal Bank and Trust Co. The Bank's name
was changed to Bank of Louisville and Trust Company on March 26,
1980. On March 25, 1983, when the Bank became a wholly-owned
subsidiary of the Company, the name was changed to Mid-America
Bank of Louisville and Trust Company. On March 17, 1998, the
name of the Bank was changed to Bank of Louisville.
The Bank is engaged in a wide range of commercial, trust, and
personal banking activities including the usual acceptance of
deposits for checking, savings and time deposit accounts; making
of real estate, construction, commercial, home improvement and
consumer loans; participating in small business loan and student
loan programs; issuance of letters of credit; rental of safe
deposit boxes; providing financial counseling for institutions
and individuals; serving as executor of estates and as trustee
under trusts and under various pension and employee benefit
plans; and serving as escrow agent on bond issues.
The Company also operates a number of other subsidiaries,
including Bank of Louisville, FSB, a federal savings bank
("Savings Bank"), which was organized and chartered during 1993.
The Savings Bank is located in Pewee Valley and LaGrange,
Kentucky, in Oldham County, and competes on the local level with
other commercial banks and financial institutions in Oldham
County, Kentucky for all types of deposits and loans. Another
subsidiary, Mid-America Gift Certificate Company, is engaged in
the issuance and sale of gift certificates throughout the United
States.
Competition
Competition for banking and related financial services is active
in Jefferson County, Kentucky, and other geographic areas served
by the Company's subsidiaries. The Company's subsidiaries
compete with other financial institutions including savings and
loan associations, finance companies, mortgage banking companies,
credit unions, insurance companies, brokerage firms, mutual
funds, and other commercial banks. In addition, large regional
banks continue to increase competition in the Company's trade
territories through the acquisition of local financial
institutions, the establishment of loan production offices and
the solicitation of customers for credit cards and related
services. At present, both price and product range are
critically important in maintaining and expanding financial
relationships.
Employees
As of December 31, 1999, the Company and subsidiaries employed
544 persons on a full-time basis and 83 on a part-time basis.
Supervision And Regulation
The Company and its subsidiaries are subject to an extensive system
of banking laws and regulations that are intended primarily for the
protection of the customers and depositors of the Company's
subsidiaries rather than shareholders of the Company. These laws
and regulations govern such areas as permissible activities,
reserves, loans and investments, and rates of interest and fees
that can be charged on loans. The Company and its subsidiaries
also are subject to general U.S. federal laws and regulations and
to the laws and regulations of the states in which they conduct
their business. This section briefly describes selected laws and
regulations applicable to the Company and its subsidiaries. The
summaries of laws and regulations are not complete and are
qualified in their entirety by reference to the statutes and
regulations. Changes in applicable laws or regulations may have a
material effect on the business of the Company.
The Company is a registered bank holding company under the BHC Act,
and is subject to supervision, regulation and examination by the
Federal Reserve Board. As a registered bank holding company, the
Company is required to file with the Federal Reserve Board annual
reports and other information regarding its business operations and
the business operations of its subsidiaries. It is also subject to
examination by the Federal Reserve Board and is required to obtain
Federal Reserve Board approval before merging with another bank
holding company or acquiring, directly or indirectly, ownership or
control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, five
percent or more of the voting stock of such bank unless it already
owns a majority of the voting stock of such bank.
The Bank is subject to regulation and supervision, of which regular
bank examinations are a part, by the Kentucky Department of
Financial Institutions, Division of Banking. The Federal Deposit
Insurance Corporation ("FDIC") currently insures the deposits of
the Bank to a maximum of $100,000 per depositor. For this
protection, the Bank pays a semi-annual statutory assessment and is
subject to the rules and regulations of the FDIC pertaining to
deposit insurance.
The Savings Bank is subject to regulation and supervision by the
OTS, of which regular examinations are a part. The FDIC currently
insures the deposits of the Savings Bank to a maximum of $100,000
per depositor.
Eton Life Insurance Company, a wholly owned subsidiary of the
Company, is regulated by the Kentucky Department of Insurance and
is subject to Kentucky statutes and regulations governing
domestic underwriters of credit life, accident, and health
insurance.
Federal law imposes certain restrictions on transactions between
the Company and its nonbank subsidiaries, on the one hand, and the
Bank and the Savings Bank, on the other. With certain exceptions,
federal law also imposes limitations on, and requires collateral
for, extensions of credit by the Bank and the Savings Bank to their
non-bank affiliates, including the Company.
In November 1999, the Gramm-Leach-Bliley Act ("Gramm Act"),
broadened permissible bank holding companies activities and
affiliations under the BHC Act. With limited exceptions, bank
holding companies had been prohibited from (i) acquiring direct or
indirect ownership or control of any voting shares of any company
which is not a bank or (ii) engaging in any activity other than
managing or controlling banks.
The Gramm Act expressly permits affiliations among bank holding
companies, depository institutions, securities firms and insurance
companies within a "financial holding company" structure in
specific circumstances, and establishes "functional regulation" for
examination, supervision and licensing of activities by state and
federal financial service regulators. The Federal Reserve Board
may authorize activities that it determines are "complementary" to
financial activities and do not pose a risk to the safety and
soundness of depository institutions. The Gramm Act identifies the
following activities as financial in nature: (a) lending; (b)
insurance activities, including underwriting, agency and brokerage;
(c) providing financial investment advisory services; (d)
underwriting in, and acting as a broker or dealer in, securities;
(e) merchant banking; and (f) insurance company portfolio
investment.
Enacted in August 1989, the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") contains a "cross-guarantee"
provision under which an insured depository institution controlled
by a holding company can be assessed for losses incurred by the
FDIC in connection with assistance provided to, or the failure of,
any other insured depository institution controlled by the same
holding company. Under Federal Reserve Board policy, the Company
is expected to act as a source of financial strength to the Bank
and to commit resources to support the Bank in circumstances when
it might not do so, absent such policy.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(the "FDIC Improvement Act") dealt with the recapitalization of the
Bank Insurance Fund, deposit insurance reform, including requiring
the FDIC to establish a risk-based premium assessment system, and
a number of other regulatory and supervisory matters. Among other
things, federal banking regulators are required to take prompt
corrective action in respect of depository institutions that do not
meet minimum capital requirements. The FDIC Improvement Act
identifies the following capital tiers for financial institutions:
well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.
The FDIC Improvement Act imposes progressively more restrictive
constraints on operations, management and capital distributions,
depending on the capital category in which an institution is
classified. At December 31, 1998, the Bank and the Savings Bank
were "well capitalized" under the applicable
regulatory guidelines. A bank's capital category however, is
determined solely for the purpose of applying the prompt corrective
action rules and may not constitute an accurate representation of
the bank's overall financial condition or prospects.
Now fully phased in, the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Act") removed state law
barriers to interstate bank acquisitions and permits the
consolidation of interstate banking operations. Under the Act,
adequately capitalized and managed bank holding companies may
acquire banks in any state, subject to Community Reinvestment Act
compliance, compliance with federal and state antitrust laws and
deposit concentration limits, and subject to any state laws
restricting the acquisition of a bank that has not been in
existence for a minimum period of up to five years. The Act also
permits any bank that is controlled by a bank holding company to
act as agent for an affiliated financial institution in deposit and
loan transactions, regardless of whether the institutions are
located in the same or different states. The Act's interstate
branching provisions became operative on June 1, 1997, subject to
the right of any state to adopt legislation before that date to
accelerate interstate branching or prohibit it completely. The
Act's interstate branching provisions permit banks to merge across
state lines and, if state laws permit de novo branching, to
establish a new branch as its initial entry into a state.
Kentucky banks are permitted to merge with out-of-state banks to
create interstate branches inside or outside Kentucky. Kentucky
banks are also permitted to acquire a branch in another state if
permitted by law of the other state. Kentucky does not permit de
novo branching by out-of-state banks into Kentucky, and it does not
permit an out-of-state bank to acquire a bank in Kentucky that has
been in existence less than five years. The Savings Bank is
generally permitted to open a de novo branch in any state.
<PAGE>
The following tables set forth selected statistical information with respect to
the Company and should be read in conjunction with the Company's consolidated
financial statements.
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The schedule captioned "Average Balances and Yields/Rates Tax Equivalent
Basis" included on page 16 of the Company's annual report to shareholders for
the year ended December 31, 1999, which is incorporated herein by reference,
shows, for each major category of interest earning asset and interest bearing
liability, the average amount outstanding, the interest earned or expensed on
such amount and the average rate earned or expensed for each of the years in
the three-year period ended December 31, 1999. The schedule also shows the
average rate earned on all interest earning assets and the average rate
expensed on all interest bearing liabilities, the net interest spread and the
net interest margin (net interest income divided by total average interest
earning assets) for each of the years in the three-year period ended December
31, 1999. Nonaccrual loans outstanding were included in calculating the rate
earned on loans. Total interest income includes the effects of taxable
equivalent adjustments using a tax rate of 35%.
The changes in interest income and interest expense resulting from
changes in volume and changes in rates for the years ended December 31, 1999
and 1998 are shown in the schedule captioned "Interest Income and Interest
Expense Volume and Rate Changes for the Years 1999 and 1998 Tax Equivalent
Basis" included on page 17 of the Company's annual report to shareholders for
the year ended December 31, 1999, which is incorporated herein by reference.
<TABLE>
<CAPTION>
SECURITIES PORTFOLIO
BOOK VALUE December 31
(In Thousands) -------------------------------------
1999 1998 1997
Securities Available for Sale ---------- ---------- ---------
<S> <C> <C> <C>
U.S. Treasury and U.S. government agencies $317,106 $160,415 $156,654
Collateralized mortgage obligations 182,730 146,970 185,474
States and political subdivisions 52,918 54,738 53,272
Corporate obligations 13,112 4,652 1,765
Equity securities 20,657 18,992 17,556
---------- ---------- ---------
$586,523 $385,767 $414,721
========== ========== =========
<CAPTION>
December 31
-------------------------------------
1999 1998 1997
Securities Held to Maturity ---------- ---------- ---------
<S> <C> <C> <C>
U.S. Treasury and U.S. government agencies $4,018 $83,998 $108,078
Corporate obligations -- -- 100
---------- ---------- ---------
$4,018 $83,998 $108,178
========== ========== =========
</TABLE>
<PAGE>
SECURITIES
MATURITY DISTRIBUTION AND WEIGHTED AVERAGE YIELDS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
(Dollars In Thousands) Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
------------------ ------------------ ------------------- ------------------
Securities Available for Sale Amount Yield Amount Yield Amount Yield Amount Yield
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
government agencies $293,878 5.87% $23,228 6.09% -- -- -- --
Collateralized mortgage obligations 30,794 6.75% 131,098 6.66% $20,838 6.86% -- --
States and political
subdivisions 696 6.78% 1,212 7.79% 8,664 8.12% $42,346 8.34%
Corporate obligations 13,112 6.79% -- -- -- -- -- --
Equity securities -- -- -- -- -- -- 20,657 6.81%
-------- -------- -------- --------
$338,480 6.00% $155,538 6.58% $29,502 7.22% $63,003 7.84%
======== ======== ======== ========
<CAPTION>
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
------------------ ------------------ ------------------- ------------------
Securities Held to Maturity Amount Yield Amount Yield Amount Yield Amount Yield
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
government agencies $3,517 5.19% $501 5.93% -- -- -- --
======== ======== ======== ========
</TABLE>
The calculation of the weighted average yield is based on the average tax
equivalent yield, weighted by the respective costs of the securities.
Maturity categories and average yields of collateralized mortgage
obligations are based on expected cash flows.
The weighted average yields on obligations of states and political subdivisions
are computed on a tax equivalent basis using a marginal federal tax rate
of 35% adjusted for the impact of disallowed interest expense.
LOAN PORTFOLIO
(In Thousands)
<TABLE>
<CAPTION>
December 31
----------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial and financial $505,963 $457,682 $427,826 $386,647 $345,167
Real estate - construction and development 75,117 77,349 65,513 55,738 61,398
Real estate - residential mortgages 321,568 336,365 329,086 294,746 284,074
Consumer 57,972 62,682 64,491 67,051 57,926
Indirect automobile 103,329 70,943 4,159 -- --
---------- ---------- -------- -------- --------
$1,063,949 $1,005,021 $891,075 $804,182 $748,565
========== ========== ======== ======== ========
</TABLE>
The loan portfolio includes domestic loans only as the Company has no
foreign loans. The Company has no other category of loans whose
concentration exceeds 10% of total loans.
<PAGE>
<TABLE>
<CAPTION>
SELECTED LOAN MATURITIES AND
SENSITIVITY TO INTEREST RATES
DECEMBER 31, 1999
(In Thousands)
Loan Maturities
---------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
---------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and financial $135,431 $144,849 $225,683 $505,963
Real estate - construction and development 23,594 42,391 9,132 75,117
Real estate - residential mortgages 156,293 74,951 90,324 321,568
Consumer 41,535 10,572 5,865 57,972
Indirect - automobile 25,583 77,658 88 103,329
-------- -------- -------- ----------
$382,436 $350,421 $331,092 $1,063,949
======== ======== ======== ==========
Predetermined rates $156,194 $253,343 $282,469 $692,006
Floating rates 226,242 97,078 48,623 371,943
-------- -------- -------- ----------
$382,436 $350,421 $331,092 $1,063,949
======== ======== ======== ==========
</TABLE>
For amortizing loans, scheduled repayments are reported in the
maturity category in which the payment is due. Demand loans and
overdrafts are reported in the within one year category.
NONPERFORMING LOANS
Information with respect to the Company's nonperforming loans is
included in the section captioned "Nonperforming Assets" and
footnote E to the consolidated financial statements included on pages
9 and 31, respectively, of the Company's annual report to
shareholders for the year ended December 31, 1999, which is
incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars In Thousands)
1999 1998 1997 1996 1995
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $9,010 $9,209 $9,167 $9,318 $7,045
Charge-offs:
Commercial and financial 968 646 296 661 569
Real estate - construction
and development -- -- -- -- 2,888
Real estate - residential mortgages 149 289 98 115 305
Consumer 257 206 227 249 283
Indirect automobile 1,656 214 -- -- --
---------- --------- --------- --------- ---------
Total charge-offs 3,030 1,355 621 1,025 4,045
---------- --------- --------- --------- ---------
Recoveries:
Commercial and financial 112 51 53 231 44
Real estate - construction
and development -- -- -- -- --
Real estate - residential mortgages 32 33 225 120 61
Consumer 82 97 85 109 166
Indirect automobile 197 3 -- -- --
---------- --------- --------- --------- ---------
Total recoveries 423 184 363 460 271
---------- --------- --------- --------- ---------
Net charge-offs 2,607 1,171 258 565 3,774
---------- --------- --------- --------- ---------
Provision for loan losses 3,451 972 300 414 6,047
---------- --------- --------- --------- ---------
Balance, end of year $9,854 $9,010 $9,209 $9,167 $9,318
========== ========= ========= ========= =========
Average loans, net
of unearned income $1,019,338 $925,522 $817,262 $767,755 $707,898
========== ========= ========= ========= =========
Net charge-offs
to average loans, net of
unearned income 0.26% 0.13% 0.03% 0.07% 0.53%
========== ========= ========= ========= =========
</TABLE>
The allowance for loan losses is maintained at a level adequate to absorb
estimated probable credit losses. Management determines the adequacy of the
allowance based upon reviews of individual credits, evaluation of the risk
characteristics of the loan portfolio, including the impact of current
economic conditions on the borrowers' ability to repay, past collection and
loss experience and such other factors, which, in management's judgment,
deserve current recognition. The allowance for loan losses is increased by
charges to operating earnings and reduced by charge-offs, net of recoveries.
See "Provision for Loan Losses and Allowance for Loan Losses" included on
pages 5 and 6 of the Company's annual report to shareholders for the year
ended December 31, 1999, incorporated herein by reference, for a discussion
of factors affecting loan loss experience during 1999.
<PAGE>
<TABLE>
<CAPTION>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars In Thousands)
1999 1998 1997 1996 1995
--------------------- --------------------- --------------------- --------------------- ---------------------
% Of % Of % Of % Of % Of
Allocation Loans In Allocation Loans In Allocation Loans In Allocation Loans In Allocation Loans In
Of Each Of Each Of Each Of Each Of Each
Allowance Category Allowance Category Allowance Category Allowance Category Allowance Category
For Loan To Total For Loan To Total For Loan To Total For Loan To Total For Loan To Total
Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
financial............. $4,973 47.56% $5,020 45.53% $5,926 48.01% $6,068 48.08% $5,022 46.11%
Real estate -
construction
and development....... 486 7.06% 588 7.70% 1,343 7.35% 1,576 6.93% 2,932 8.20%
Real estate -
residential mortgages. 328 30.22% 715 33.47% 654 36.93% 498 36.65% 437 37.95%
Consumer............... 966 5.45% 1,123 6.24% 1,286 7.24% 1,025 8.34% 927 7.74%
Indirect automobile.... 3,101 9.71% 1,564 7.06% -- 0.47% ---- ---- ---- ----
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$9,854 100.00% $9,010 100.00% $9,209 100.00% $9,167 100.00% $9,318 100.00%
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
As a result of the increased volume and risks associated with the indirect loan concentration, the allowance for loan
losses allocated to indirect automobile loans increased $1.5 million to $3.1 million at December 31, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MATURITY SCHEDULE OF TIME DEPOSITS OF $100,000 AND OVER
DECEMBER 31, 1999
(In Thousands)
Certificates
Of Deposit Other Total
---------- ---------- ----------
<S> <C> <C> <C>
Three months or less.............................. $40,469 $23,857 $64,326
Over three through six months..................... 17,255 - 17,255
Over six through twelve months.................... 26,007 - 26,007
Over twelve months................................ 22,857 - 22,857
---------- ---------- ----------
$106,588 $23,857 $130,445
========== ========== ==========
</TABLE>
RETURN ON EQUITY AND ASSETS
Selected ratios for the years 1999, 1998 and 1997 are included on the inside
front cover of the Company's annual report to shareholders for the year ended
December 31, 1999 and are incorporated herein by reference.
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
(Dollars In Thousands)
Federal funds purchased and securities sold under agreements
to repurchase generally represent overnight borrowing
transactions. The detail of these short-term borrowings for
the years 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Federal funds purchased:
Balance at year end............................. $42,390 $12,090 $ --
Average during the year......................... 36,515 8,534 1,595
Maximum amount outstanding at any month end..... 43,845 27,735 4,050
Weighted average rate during the year........... 5.11% 5.20% 5.35%
Weighted average rate on December 31............ 5.01% 5.36% --
1999 1998 1997
---------- ---------- ----------
Securities sold under agreements to repurchase:
Balance at year end............................. $319,368 $276,454 $284,500
Average during the year......................... 267,805 246,585 257,149
Maximum amount outstanding at any month end..... 325,404 330,308 346,635
Weighted average rate during the year........... 4.60% 4.99% 5.08%
Weighted average rate on December 31............ 4.50% 4.48% 5.33%
</TABLE>
ITEM 2. PROPERTIES
The Bank maintains a main office, warehouse, operations center
and 28 branches in Jefferson County, Kentucky. The Bank owns 21
branch offices, leases 4 branch offices, its operations center
and the main office, and owns the buildings but leases the land
with regard to 3 branches. The Bank also operates 39 automated
teller machines, at various locations in its traditional customer
base of Jefferson County, Kentucky. The Savings Bank owns its
main office facility and its branch location and operates two
automatic teller machines in Oldham County, Kentucky. See
footnote G to the consolidated financial statements on page 32 of
the Company's annual report to shareholders for the year ended
December 31, 1999, which is incorporated herein by reference, for
additional information on premises, equipment and lease
commitments.
ITEM 3. LEGAL PROCEEDINGS
The information in footnote O to the Company's consolidated
financial statements included on page 40 of the Company's annual
report to shareholders for the year ended December 31, 1999, is
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF REGISTRANT
Listed below are the names and ages as of December 31, 1999, of
the Company's executive officers, positions held, and the year
from which held. The Company's executive officers are elected
annually by the Board of Directors and each, except Bertram W.
Klein and Paul E. Henry, is employed pursuant to an employment
agreement.
Year From
Name Age Position Held Which Held
Bertram W. Klein 69 Chairman of the Board of 1985
the Company and the Bank.
Member of the Bank Executive
Committee.
R. K. Guillaume 56 Vice Chairman, Chief 1995
Executive Officer and
Director of the Company
and the Bank. Member of
the Bank Executive Committee.
Orson Oliver 56 President and Director 1985
of the Company and the Bank.
Member of the Bank Executive
Committee.
David N. Klein 43 Chief Operating Officer, 1998
and Executive Vice President
of the Bank. Member of the
Bank Executive Committee.
President of the Savings Bank.
Steven A. Small 46 Treasurer of the Company 1993
and Executive Vice President,
Chief Financial Officer and
member of the Executive
Committee of the Bank.
Paul E. Henry 64 Executive Vice President 1989
and member of the Executive
Committee of the Bank.
William J. Hornig 50 Executive Vice President 1995
and member of the Executive
Committee of the Bank.
Richard B. Klein 41 Executive Vice President 1991
and member of the Executive
Committee of the Bank.
Donald R. LaMar 49 Executive Vice President and 1995
member of Executive Committee
of the Bank and President of
Mid-America Gift Certificate
Company.
David C. Meece 46 Executive Vice President 1995
and member of Executive
Committee of the Bank.
Gail W. Pohn 61 Executive Vice President 1993
and member of the Executive
Committee of the Bank.
John T. Rippy 38 Executive Vice President 1999
and General Counsel, and
member of the Executive
Committee of the Bank.
Marlyn Y. Smith 63 Executive Vice President 1995
and member of Executive
Committee of the Bank.
Mr. David Klein, Executive Vice President of the Bank since 1991,
was named Chief Operating Officer and Executive Vice President of
the Bank in 1998.
Mr. Guillaume joined the Company and the Company's subsidiary
bank in October 1995. From 1993 to September 1995, Mr. Guillaume
was a Director and the President of Liberty National Bank and
Trust Company of Louisville and Liberty National Bancorp, Inc.
(now Bank One, Kentucky). Prior to 1993, he was Executive Vice
President of these entities.
Mr. Hornig joined the Company's subsidiary bank in April 1995 as
Executive Vice President - Human Resources. From October 1992 to
March 1995, Mr. Hornig was Senior Vice President - Human
Resources of First Colonial Bank Shares Corporation, a non-
affiliate of the Company. Prior to 1992, Mr. Hornig was Director
of Human Resources for Arthur J. Gallagher & Company.
Mr. LaMar joined the Company's bank subsidiary in 1985. He was
elected to his current position in 1995. From 1987 to 1994 he
was Senior Vice President, Operations Support.
Mr. Meece joined the Company's subsidiary bank in 1985. He was
elected to his current position in 1995. From 1992 to 1994 he
was Senior Vice President, Advanced Systems Development. Prior
to 1992, Mr. Meece was Vice President, Information System Support
Services.
Mr. Rippy joined the Company's subsidiary bank in April 1994 as
Senior Vice President, Legal. In October 1998, Mr. Rippy was
appointed General Counsel and in April 1999, Mr. Rippy was
elected to his current position.
Ms. Smith joined the Company's subsidiary bank in 1965. She was
elected to her current position in 1995. From 1987 to 1994 she
was Senior Vice President, Loan Services.
All other executive officers have served the Company or the Bank
in the executive officer capacities identified above for more
than five years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
The information captioned "Market for MidAmerica Bancorp's Stock
and Related Security Holder Matters" included on page 21 of the
Company's annual report to shareholders for the year ended
December 31, 1999, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information captioned "Summary of Financial Data" included on
page 19 of the Company's annual report to shareholders for the
year ended December 31, 1999, is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Financial Condition
and Results of Operations included on pages 4 through 15 of the
Company's annual report to shareholders for the year ended
December 31, 1999, is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information captioned "Interest Rate Sensitivity Management
(Market Risk)" included on pages 11 and 12 of the Company's
annual report to shareholders for the year ended December 31,
1999, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company
and report of independent auditors included on pages 22 through
46 in the Company's annual report to shareholders for the year
ended December 31, 1999, are incorporated herein by reference:
Independent Auditors' Report
Consolidated balance sheets - December 31, 1999 and 1998
Consolidated statements of income -
years ended December 31 1999, 1998 and 1997
Consolidated statements of changes in shareholders' equity -
years ended December 31, 1999, 1998 and 1997
Consolidated statements of comprehensive income -
years ended December 31, 1999, 1998 and 1997
Consolidated statements of cash flows -
years ended December 31, 1999, 1998 and 1997
Notes to consolidated financial statements
The information captioned "Quarterly Financial Data" included on
page 20 of the Company's annual report to shareholders for the
year ended December 31, 1999, is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information appearing under the heading "EXECUTIVE OFFICERS
OF REGISTRANT" appearing in Part I of this Form 10-K and the
information appearing under the headings "PROPOSAL 1 - ELECTION
OF DIRECTORS" and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE" in the Company's definitive Proxy Statement filed
pursuant to Regulation 14A under the Securities Exchange Act of
1934 in connection with the Company's 2000 Annual Meeting of
Shareholders to be held April 25, 2000, are incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the headings "PROPOSAL 1 -
ELECTION OF DIRECTORS - INFORMATION CONCERNING THE BOARD OF
DIRECTORS" and "EXECUTIVE COMPENSATION" in the Company's
definitive Proxy Statement filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 in connection with the
Company's 2000 Annual Meeting of Shareholders to be held April
25, 2000, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing under the headings "PRINCIPAL
SHAREHOLDERS" and "ELECTION OF DIRECTORS" in the Company's
definitive Proxy Statement filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934 in connection with the
Company's 2000 Annual Meeting of Shareholders to be held April
25, 2000, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the headings "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and "OTHER
TRANSACTIONS" in the Company's definitive Proxy Statement filed
pursuant to Regulation 14A under the Securities Exchange Act of
1934 in connection with the Company's 2000 Annual Meeting of
Shareholders to be held April 25, 2000, is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
a-l Financial Statements
See Part II, Item 8 for a listing of all financial
statements and the report of independent auditors
which is incorporated herein by reference.
a-2 Financial Statement Schedules
All schedules normally required by Form lO-K are
omitted since they are either not applicable or
the required information is shown in the financial
statements or the notes thereto.
a-3 Exhibits
The exhibits filed as part of this report on Form
10-K are listed on the Exhibit Index appearing on
pages 25 through 27 of this annual report on Form
10-K, which are incorporated herein by reference.
b Reports on Form 8-K
There were no reports filed on Form 8-K during
the fourth quarter of 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MID-AMERICA BANCORP
March 27, 2000 BY: /s/ Bertram W. Klein
Bertram W. Klein
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated.
/s/ Bertram W. Klein Chairman of the Board March 27, 2000
Bertram W. Klein
/s/ R.K. Guillaume Chief Executive Officer March 27, 2000
R.K. Guillaume and Director
/s/ Orson Oliver President and Director March 27, 2000
Orson Oliver
/s/ Steven A. Small Treasurer March 27, 2000
Steven A. Small (Principal Accounting
Officer)
/s/ Leslie D. Aberson Director March 27, 2000
Leslie D. Aberson
/s/ Robert P. Adelberg Director March 27, 2000
Robert P. Adelberg
/s/ William C. Ballard, Jr. Director March 27, 2000
William C. Ballard, Jr.
/s/ James E. Cain Director March 27, 2000
James E. Cain
/s/ Martha Layne Collins Director March 27, 2000
Martha Layne Collins
/s/ Wendell H. Ford Director March 27, 2000
Wendell H. Ford
/s/ David Jones, Jr. Director March 27, 2000
David Jones, Jr.
/s/ Peggy Ann Markstein Director March 27, 2000
Peggy Ann Markstein
/s/ Donald G. McClinton Director March 27, 2000
Donald G. McClinton
/s/ Jerome J. Pakenham Director March 27, 2000
Jerome J. Pakenham
/s/ John S. Palmore Director March 27, 2000
John S. Palmore
/s/ Woodford R. Porter, Sr. Director March 27, 2000
Woodford R. Porter, Sr.
/s/ Benjamin K. Richmond Director March 27, 2000
Benjamin K. Richmond
/s/ Bruce J. Roth Director March 27, 2000
Bruce J. Roth
/s/ Raymond L. Sales Director March 27, 2000
Raymond L. Sales
/s/ Victor A. Staffieri Director March 27, 2000
Victor A. Staffieri
/s/ Henry C. Wagner Director March 27, 2000
Henry C. Wagner
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
EXHIBITS
filed with
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 1-10602
________________
MIDAMERICA BANCORP
INDEX TO EXHIBITS
3(a) Restated Articles of Incorporation of MidAmerica
Bancorp filed with the Secretary of State of Kentucky
on May 4, 1989; as amended by Articles of Amendment
filed with the Secretary of State of Kentucky on
April 19, 1993, March 13, 1995, March 5, 1998 and
January 11, 1999 are incorporated by reference to Exhibit
(3a)to the Company's annual report on Form 10-K for the
year ended December 31, 1998.
(b) By-Laws of MidAmerica Bancorp are incorporated by
reference to Exhibit 3(b) to the Company's annual
report on Form 10-K for the year ended December 31,
1995.
4. Amended and Restated Articles of Incorporation,
By-Laws, and Shareholder Rights Agreement,
dated February 23, 1998, between MidAmerica
Bancorp and Mid-America Bank of Louisville and
Trust Company are incorporated by reference to
Exhibit 3 (a) to the Company's annual report on Form
10-K for the year ended December 31, 1998, Exhibit
3 (b) to the Company's annual report on Form 10-K for
the year ended December 31, 1995, and Exhibit
4 to the Company's report on Form 8-K dated
February 23, 1998, respectively.
10. Material Contracts
10.(a) MidAmerica Bancorp Non-Employee Directors
Deferred Compensation Plan.(*)
10.(b) Employment Agreement between the Company
and Orson Oliver incorporated by reference
to Exhibit 10 (b) of the Company's annual
report on form 10-K for the year ended
December 31, 1995.(*)
10.(c) Employment Agreement between the Company and
R. K. Guillaume incorporated by reference to
Exhibit 10 (n)of the Company's quarterly report
on Form 10-Q for the quarter ended September
30, 1995. (*)
10.(d) Employment Agreement between the Company
and David N. Klein incorporated by reference
to Exhibit 10 (d) of the Company's annual
report of Form 10-K for the year ended December
31, 1995.(*)
10.(e) Employment Agreement between the Company
and Richard B. Klein incorporated by reference
to Exhibit 10 (e) of the Company's annual report
of Form 10-K for the year ended December 31,
1995.(*)
10.(f) Employment Agreement between the Company
and John T. Rippy incorporated by reference
to Exhibit 10 (a) of the Company's quarterly
report on Form 10-Q for the quarter ended September
30, 1999.(*)
10.(g) Employment Agreement between the Company
and Gail Pohn incorporated by reference
to Exhibit 10 (g) of the Company's annual
report on Form 10-K for the year ended December
31, 1995.(*)
10.(h) Employment Agreement between the Company
and Steven Small incorporated by reference
to Exhibit 10 (b) of the Company's quarterly
report on Form 10-Q for the quarter ended
September 30, 1999.(*)
10.(i) Amended and Restated MidAmerica Bancorp
Incentive Stock Option Plan is incorporated
herein by reference to Post-Effective Amendment
Number 1 to Form S-8 Registration Statement No.
2-92270.(*)
10.(j) MidAmerica Bancorp 1991 Incentive Stock Option
Plan is incorporated by reference to Exhibit
28 to Registration Statement No. 33-42989(*)
10.(k) MidAmerica Bancorp 1996 Management Incentive
Compensation Plan incorporated by reference to
Exhibit 10 (l) of the Company's annual report on
Form 10-K for the year ended December 31, 1996.(*)
10.(l) Employment Agreement between the Company and
William J. Hornig incorporated by reference to
Exhibit 10 of the Company's quarterly report on
Form 10-Q for the quarter ended March 31, 1998.(*)
10.(m) 1995 Incentive Stock Option plan of MidAmerica
Bancorp incorporated by reference to Exhibit 10(m)
of the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1995.(*)
10.(n) Employment Agreement between the Company
and Donald L. LaMar incorporated by reference
to Exhibit 10 (a) of the Company's quarterly
report on Form 10-Q for the quarter ended
June 30,1999.(*)
10.(o) Employment Agreement between the Company
and David C. Meece incorporated by reference
to Exhibit 10 (b) of the Company's quarterly
report on Form 10-Q for the quarter ended
June 30,1999.(*)
10.(p) Employment Agreement between the Company
and Marlyn Y. Smith incorporated by reference
to Exhibit 10 (c) of the Company's quarterly
report on Form 10-Q for the quarter ended
June 30, 1999.(*)
* Management contract or compensatory plan or
arrangement required to be filed as an exhibit
pursuant to Item 14 of this report.
11. Statement re Computation of per share earnings.
13. Selected portions of the annual report to
shareholders for the year ended December 31, 1999.
21. Subsidiaries of the Company.
23. Consent of independent auditors.
27. Financial Data Schedule.
99. Additional Exhibits
Form 11-K
Exhibit 10(a)
MID-AMERICA BANCORP
NON-EMPLOYEE DIRECTORS DEFERRED
COMPENSATION PLAN
ARTICLE 1
Purposes
1.1 Purposes. The purposes of this Non-Employee Directors
Deferred Compensation Plan ("Plan") of Mid-America Bancorp, a
Kentucky corporation ("Company"), are to encourage the Company's
non-employee directors to invest in the future of the Company
through ownership of an interest in the Company and to provide
flexibility to the Company in attracting and retaining
directors.
ARTICLE 2
Eligibility and Participation
2.1 Eligibility. Any director of the Company who is not an
employee of the Company or a subsidiary of the Company
("Director") is eligible to participate in the Plan.
2.2 Participation. A Director shall become a participant in
the Plan ("Participant") by filing an Election Form in
accordance with the provisions of Section 5.1.a. A Participant
shall remain a Participant until such time as the Participant has
received all payments to which the Participant is entitled under
the terms of the Plan.
ARTICLE 3
Shares Subject to Plan
3.1 Number of Shares. Subject to adjustment as provided in
Section 3.2, the number of shares of the Company's common stock
("Common Stock"), reserved for issuance under the Plan is 70,000
shares. Any Common Stock issued under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury
shares.
3.2 Adjustments. In the event of a merger, reorganization,
consolidation, recapitalization, reclassification, split-up,
spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, share combination, share exchange, or other
change in the corporate structure of the Company affecting the
Common Stock, the Committee, (as hereinafter defined) shall
substitute or adjust the total number and class of stock or
securities which may be issued under the Plan and which are
credited to a Participant's Deferred Stock Account as it determines
to be appropriate and equitable to prevent dilution or enlargement
of the rights of Participants.
ARTICLE 4
Administration
4.1 The Committee. The Plan shall be administered by the
Planning & Management Committee of the Board of Directors of the
Company ("Board"), or by any other committee ("Committee")
appointed by the Board consisting of two or more directors of
the Company who are "disinterested persons" within the meaning
of Rule 16b-3 (or any successor provision) promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act").
4.2 Authority of the Committee. The Committee shall have sole
discretion to make all determinations which may be necessary or
advisable for the administration of the Plan. To the extent
permitted by law and Rule 16b-3 promulgated under the Exchange Act,
the Committee may delegate its authority as identified hereunder.
All determinations and decisions made by the Committee pursuant to
the provisions of the Plan, and all related orders or resolutions
of the Board, shall be final, conclusive and binding upon all
persons, including the Company, Participants and their estates and
beneficiaries.
4.3 Section 16 Compliance. It is the intention of the Company
that the Plan and the administration of the Plan comply in all
respects with Section 16(b) of the Exchange Act and the rules
and regulations promulgated thereunder. If any Plan provision,
or any aspect of the administration of the Plan, is found not to
be in compliance with Section 16(b) of the Exchange Act, the
provision or administration shall be deemed null and void, and
in all events the Plan shall be construed in favor of its
meeting the requirements of Rule l6b-3 promulgated under the
Exchange Act.
ARTICLE 5
Deferral Election
5.1 Making of Election.
a. Each Director may elect in writing, in the manner and on
the form ("Election Form")prescribed by the Committee, to defer
payment of all, but not less than all, of the fees which would
otherwise be paid to such Director by the Company for services
on the Board and committees thereof. An election shall be
effective with respect to amounts which would otherwise be paid
to the Participant beginning on or after the first day of the
calendar quarter following the making of the election; provided,
however, that in the case of those persons who are Directors on
the date hereof, the initial election shall become effective as
of July 1, 1994. Once an election has been made, it shall remain
in effect with respect to all future amounts which would
otherwise be paid to the Participant, as a Director until
changed by the filing of a new election in the manner provided
in Section 5. 1.b.
b. In the case of those persons who are Directors on the
date hereof, the initial election, if any, to participate in the
Plan shall be made by April 30, 1994. In the case of Directors
elected or reelected at an annual meeting of the Company, an
election or change in an existing election may only be made
within 30 days following the annual meeting. In the case of a
Director elected at other than an annual meeting, the initial
election to participate in the Plan may only be made within 30
days following the Director's election to the Board. At the time
of making any such election or change in an existing election,
the Participant shall further elect, in accordance with
procedures adopted by the Committee, (i) to have either 100% or
50% of the amount of such deferred fees be deemed invested in
Common Stock ("Share Election"), or (ii) to have either 100% or
50% of such deferred fees deemed invested with interest ("Cash
Election"); provided, however, that in no event shall a Share
Election be effective until six months after the date of the
Share Election, with the result that during such six-month
period, the Participant shall be deemed to have made a Cash
Election.
5.2 Participant Account. A Participant Account shall be
established for each Participant. Deferred compensation will be
credited to the Participant's Participant Account as of the date
such compensation would otherwise be payable to the Participant. A
Participant Account shall include a Deferred Cash Account, if a
Cash Election has been made, and/or a Deferred Stock Account, if a
Share Election has been made.
5.3 Deferred Cash Account. Each Deferred Cash Account shall
be credited with the amounts deferred on behalf of a Participant
plus annual interest thereon as provided in Section 7. 1.
5.4 Deferred Stock Account. Each Deferred Stock Account shall
be credited with 110 % of the amounts deferred to the Deferred
Stock Account on behalf of a Participant. Deferred Stock
Accounts shall also be credited as of the payment date for
dividends on Common Stock in an amount equal to the dividends
attributable to the number of shares of Common Stock credited to
the Participant's Deferred Stock Account as of the record date
set by the Board for the payment of dividends (the amounts
referred to in the first two sentences of this Section 5.4 are
hereinafter referred to as the "Cash Credits"). As of the last
day of March, June, September and December of each year, there
shall be credited to a Participant's Deferred Stock Account a
number of shares of Common Stock equal to that whole number
obtained by dividing (i) the amount of Cash Credits in the
Deferred Stock Account as of such date, by (ii) the fair market
value of the Common Stock (determined as provided in Section 6.
1) on such date. Any amount of the Deferred Stock Account in
excess of the number of shares of Common Stock credited to the
Deferred Stock Account shall be treated as a Cash Credit and
held in the Deferred Stock Account until the end of the
following quarterly crediting date.
ARTICLE 6
Fair Market Value
6.1 Fair Market Value. For purposes of this Plan, the fair
market value of the Common Stock on any date shall be (i) if the
Common Stock is listed on a national or regional exchange, or on
the NASDAQ National Market System or a comparable market, the
closing price of the Common Stock on such date, or (ii) if (i)
above does not apply, the value determined by the Committee.
ARTICLE 7
Interest
7.1 Interest on Deferred Cash Account. Interest will be
credited to each Deferred Cash Account at the announced prime rate
of Bank of Louisville as the same shall exist from time to time,
changing with each change in such announced prime rate. This
assumed interest shall be compounded annually and treated as earned
from the date deferred compensation is credited to the Deferred
Cash Account to the date of withdrawal.
ARTICLE 8
Payment of Deferred Amounts
8.1 Limitation on Payment of Deferred Amounts. No payment may
be made from any Participant Account except as provided in this
Article 8.
8.2 Time for Payment of Deferred Amounts.
a. Payment of the amount in a Participant Account shall be
made upon the earlier to occur of (i) 60 days following the date
the Participant ceases to be a Director, (ii) the date selected
by the Participant at the time of making a Cash Election or
Share Election (which date may be different for the Cash
Election and the Stock Election) or (iii) 60 days following a
Change in Control (as defined in Section 8.2.b). Payment shall
be made in the form of a lump sum, with payment from a Deferred
Cash Account made in cash, and payment from a Deferred Stock
Account made in Common Stock (except for any Cash Credits
remaining in the Participant's Deferred Stock Account, which
shall be paid in cash).
b. For purposes of the Plan, a Change in Control shall
occur upon (i) the acquisition by any person after the date
hereof of beneficial ownership of 50% or more of the voting
power of the Company's outstanding voting stock, (ii) five or
more of the current members of the Board ceasing to be members
of the Board unless any replacement director was elected by a
vote of either at least 75% of the remaining directors, or of at
least 75% of the shares entitled to vote on such replacement, or
(iii) approval by the stockholders of the Company of (a) a
merger or consolidation of the Company with another corporation
if the stockholders of the Company immediately before such vote
will not, as a result of such merger or consolidation own more
than 50% of the voting stock of the corporation resulting from
such merger or consolidation, or (b) a complete liquidation of
the Company or sale of all, or substantially all, of the assets
of the Company. Notwithstanding the foregoing, a Change in
Control shall not occur solely because 50 % or more of the
voting stock of the Company is acquired by (i) a trust which is
part of an employee benefit plan maintained by the Company or
its subsidiaries, or (ii) a corporation which, immediately
following such acquisition, is owned directly or indirectly by
the stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.
ARTICLE 9
Miscellaneous
9.1 Assignability. No right to receive payments hereunder
shall be transferable or assignable by a Participant except by
will or by the laws of descent and distribution.
9.2 Amendment or Termination. The Plan may be amended,
modified or terminated by the Board at any time or from time to
time. Notwithstanding the foregoing, without the approval of
stockholders of the Company (as may be required by Section 16 of
the Exchange Act and the rules promulgated thereunder, any national
securities exchange or system on which the Common Stock is then
listed or reported or a regulatory body having jurisdiction with
respect hereto), no such amendment, modification or termination may
(i) materially increase the benefits accruing to Participants under
the Plan, (ii) materially increase the total number of shares of
Common Stock which may be issued under the Plan, except as provided
in Section 3.2 or (iii) materially modify the eligibility
requirements for participation in the Plan. No amendment,
modification or termination shall, without the consent of a
Participant, adversely affect such Participant's existing rights
under the Plan.
9.3 Future Director Terms. Nothing in the Plan, nor any
action taken under the Plan, shall be construed as giving any
Participant a right to continue as a Director or require the
Company to nominate or cause the nomination of a Participant for
a future term as a Director.
9.4 Participant's Rights Unsecured. The right of any
Participant to receive payment of deferred amounts under the
provisions of the Plan shall be an unsecured claim against the
general assets of the Company. The maintenance of individual
Participant Accounts is for bookkeeping purposes only. The
Company is not obligated to acquire or set aside any particular
assets for the discharge of its obligations, nor shall any
Participant have any property rights in any particular assets held
by the Company, whether or not held for the purpose of funding the
Company's obligations hereunder.
9.5 Governing Law. To the extent not preempted by Federal
law, this Plan shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Kentucky without regard to
its conflict of laws rules.
IN WITNESS WHEREOF the Company has caused the Plan to be
executed by the Board this 21st day of February 1994.
MID-AMERICA BANCORP
By: /s/ Bertram W. Klein
Bertram W. Klein, Chairman of the Board
<TABLE>
<CAPTION>
Statements re computation of per share earnings Exhibit 11
(In Thousands Except for Per Share Data)
Year ended December 31
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
BASIC NET INCOME PER SHARE
Weighted average common stock outstanding....... 10,616 10,521 10,396
========= ========= =========
Net income...................................... $22,375 $20,213 $17,915
========= ========= =========
Basic net income per share...................... $2.11 $1.92 $1.73
========= ========= =========
DILUTED NET INCOME PER SHARE
Weighted average common stock outstanding....... 10,616 10,521 10,396
Common equivalent shares for stock options using
the treasury stock method................... 153 217 181
--------- --------- ---------
Weighted average shares outstanding............. 10,769 10,738 10,577
========= ========= =========
Net income...................................... $22,375 $20,213 $17,915
========= ========= =========
Diluted net income per share.................... $2.08 $1.88 $1.70
========= ========= =========
</TABLE>
All share and per share information has been adjusted for the 3% stock
dividend declared in November 1999.
Comparative Summary
<TABLE>
<CAPTION>
Dollars In Thousands, Except Per Share Amounts 1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
AT YEAR END
Total assets $1,744,706 $1,594,763 $1,509,579
Total deposits 997,899 953,924 878,829
Loans, net of unearned income 1,063,949 1,005,021 891,075
Total shareholders' equity 178,548 167,436 155,709
FOR THE YEAR
Net income $22,375 $20,213 $17,915
Cash dividends declared 9,072 8,345 7,441
PER SHARE DATA
Book value $16.78 $15.86 $14.85
Market value 28.50 26.34 31.68
Cash dividends declared 0.854 0.792 0.714
Basic net income 2.11 1.92 1.73
Diluted net income 2.08 1.88 1.70
SELECTED RATIOS
Return on average total assets 1.43% 1.40% 1.30%
Return on average shareholders' equity 12.97 12.54 12.15
Efficiency ratio 56.74 61.18 61.30
Cash dividend payout ratio 40.47 41.25 41.27
Average shareholders' equity to average total assets 11.01 11.20 10.73
Allowance for loan losses to loans, net of unearned income 0.93 0.90 1.03
</TABLE>
MANAGEMENT'S DISCUSSION and ANALYSIS OF
FINANCIAL CONDITION and RESULTS OF OPERATIONS
This discussion analyzes the results of operations and
financial condition for MidAmerica Bancorp and subsidiaries (the
Company), including its primary subsidiary, Bank of Louisville (the
Bank). It should be read in conjunction with the consolidated
financial statements and related notes presented on pages 23 to 46.
1999 COMPARED TO 1998
Net income for 1999 was $22.375 million or $2.08 on a diluted
per share basis compared with $20.213 million or $1.88 on a diluted
per share basis for 1998, an increase of 10.6% on a diluted per
share basis. Basic net income per share was $2.11 in 1999 and
$1.92 in 1998. Excluding the non-recurring revenue items in 1999
and 1998 discussed below, diluted net income per share reflects an
increase of 22.6% for the year ended December 31, 1999 compared
with the year ended December 31, 1998.
Net income for the year ended December 31, 1999 and 1998
includes non-recurring revenue related to the sale of the Company's
money order subsidiary and gains on sales of other real estate.
For the year ended December 31, 1999, the Company recognized
revenue of $1.8 million related to the discontinuance of a
processing agreement between the Company and the purchaser of the
money order subsidiary, and $1.381 million of gains on sales of
other real estate. For the year ended December 31, 1998, a $4.588
million gain on the sale of the money order subsidiary and $1.172
million of gains on sales of other real estate were recognized.
These matters aggregated $0.18 and $0.33 on a diluted per share
basis in 1999 and 1998, respectively.
The table below presents operating results and the previously
discussed non-recurring items.
Year Ended December 31
Dollar In Thousands, Change
Except Per Share Amounts 1999 1998 Amount Percent
------- ------- --------- ---------
Net income $22,375 $20,213 $2,162 10.7%
Non-recurring items,
net of taxes (1,948) (3,500) 1,552 44.3
------- ------- --------- ---------
Net income excluding
non-recurring items $20,427 $16,713 $3,714 22.2%
======= ======= ========= =========
Diluted net income per share $2.08 $1.88 $0.20 10.6%
Non-recurring items, net
of taxes on a diluted
per share basis (0.18) (0.33) 0.15 45.5
------- ------- --------- ---------
Diluted net income per
share excluding non-
recurring items $1.90 $1.55 $0.35 22.6%
======= ======= ========= =========
The principal factors that contributed to the $3.7 million
increase in net income, excluding the impact of non-recurring
items discussed above, included the following:
*An increase in net interest income on a tax equivalent basis
of $5.3 million or 8.6% in 1999, with the benefit of increased
average earning assets of $126 million offsetting the negative
impact of lower interest rates.
*An increase of $2.4 million in the core sources of non-
interest income, including trust revenue, deposit service
charges, gift certificate fees and bank card fees.
*A decrease in operating expenses of $1.2 million or 2.5% in
1999. Significant decreases in legal expenses and advertising
costs aggregating $2.4 million offset increases in other
categories of operating expenses.
These positive factors were partially offset by an increase in
the provision for loan losses. For the year ended December 31,
1999, the provision for loan losses increased $2.479 million from
$972,000 in 1998 to $3.451 million in 1999. The increase in the
provision for loan losses is primarily attributable to increased
losses on the indirect automobile lending portfolio.
Return on average assets (ROA), return on average
stockholders' equity (ROE) and the efficiency ratio were as
follows:
Year ended December 31,
1999 1998
ROA 1.43% 1.40%
ROE 12.97% 12.54%
Efficiency ratio 56.74% 61.18%
Excluding the previously discussed non-recurring revenue, ROA
would have been 1.30% for the year ended December 31, 1999 and
1.16% for the year ended December 31, 1998. ROE without this non-
recurring revenue would have been 11.84% for the year ended
December 31, 1999 and 10.37% for the year ended December 31, 1998.
The efficiency ratio, without this non-recurring revenue would have
been 58.93% and 65.85% for the year ended December 31, 1999 and
1998, respectively.
The discussion that follows explains in more detail the
factors affecting 1999 operating results and changes in financial
condition.
NET INTEREST INCOME
Net interest income is the difference between interest income
on earning assets and interest expense incurred for funding sources
used to support earning assets. Earning assets include primarily
loans and securities. The primary sources used to fund these
assets include deposits, purchased and borrowed funds, and capital.
In 1999, net interest income on a tax equivalent basis increased
$5.3 million or 8.6% to $66.8 million. Net interest income was
favorably impacted by the 9.2% increase in average earning assets
during 1999. The average prime rate in 1999 was 7.99% compared to
8.36% in 1998. The impact of generally lower market interest rates
in 1999 than in 1998 partially offset the benefits of earning asset
growth. See "Interest Income and Interest Expense - Volume and
Rate Changes For the Years 1999 and 1998 - Tax Equivalent Basis".
The net interest spread is the difference between the average
rate of interest earned on earning assets on a tax equivalent basis
and the average rate of interest expensed on interest bearing
liabilities. The net yield on earning assets is net interest
income on a tax equivalent basis as a percent of the average
balance of earning assets. The average yield on earning assets was
7.97% in 1999 compared to 8.31% in 1998, which was accompanied by
a decline in the average rate on interest bearing liabilities from
4.71% in 1998 to 4.37% in 1999. The net interest spread was 3.60%
in both 1999 and 1998. The net yield on earning assets declined
slightly in 1999 to 4.48% compared to 4.52% in 1998. Detailed
information on the average balances of earning assets and funding
sources, interest rates, and the net yield on earning assets is
shown in the table on page 16.
Average earning assets increased approximately $126 million or
9.2% in 1999 to $1.489 billion. Average loans increased
approximately $94 million or 10.1% to $1.019 billion.
Approximately $44 million of the average loan growth related to
retail loans, with this growth being attributed to the Company's
indirect automobile lending program. Average commercial loans
increased $50 million during 1999. There was an increase in the
net average of the securities portfolio and short-term investments
of approximately $32 million.
The net growth in average earning assets was supported by a
$45 million increase in average interest bearing deposits and a $34
million increase in average non-interest bearing sources of funds,
which included gift certificates outstanding, demand deposits, and
shareholders' equity. The average level of federal funds purchased
and repurchase agreements increased $49 million to $304 million,
and continues to be a consistent funding source. Average non-
interest bearing deposits, other liabilities and capital were
approximately 24% of average assets in both 1999 and 1998.
The changes in interest income attributable to volume and rate
changes are summarized in the table on page 17.
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $3.451 million in 1999, an
increase of $2.479 million compared to $972,000 in 1998. The
adequacy of the allowance for loan losses was determined with
consideration given to the level of charge-off experience and non-
performing loans, overall economic conditions, the composition of
the loan portfolio, and the results of detailed internal loan
review procedures. The increase in the provision for loan losses
for the year ended December 31, 1999 related primarily to the
increased level of charged-off loans and increased level of past
due indirect automobile loans. During 1999, the Company had net
charge-offs of $2.607 million or 0.26% of average loans, compared
to $1.171 million or 0.13% of average loans in 1998. Net loans
charged-off related to indirect automobile lending activities were
$1.459 million for the year ended December 31, 1999, compared to
$211,000 for the year ended December 31, 1998. Net loan charge-
offs for 1999 also include $730,000 related to a loss on the sale
of a problem commercial loan in the second quarter. Nonperforming
loans of $4.7 million at December 31, 1999, were 0.44% of total
loans compared to $4.5 million and 0.44% at December 31, 1998.
The allowance for loan losses is maintained at a level
adequate to absorb estimated probable credit losses in the loan
portfolio, considering nonperforming loans and overall economic
conditions. In evaluating the allowance for loan losses,
management considers its evaluation of the risk characteristics of
the loan portfolio, including the impact of current economic
conditions on the borrowers' ability to repay, past collection and
loss experience and such other factors which, in management's
judgment, deserve current recognition. The Company's loan review
procedures include detailed reviews of loans in excess of $500,000
on an annual basis, and reviews of loans over $50,000 that become
30 days past due. Each loan reviewed is graded and assigned to a
risk category and, if necessary, a specific allowance is
established. Smaller homogenous loans in the consumer, indirect
automobile and real estate mortgage categories, are evaluated as a
group considering historical loss experience, the level of
delinquent loans, and changes in the risk characteristics of these
homogeneous categories of loans. Impaired loans were $4.969
million at December 31, 1999 and specific allowances for $4.2
million of impaired loans aggregated $1.4 million at December 31,
1999. At December 31, 1998, impaired loans were $3.578 million. At
December 31, 1999, the allowance for loan losses was 0.93% of loans
outstanding and 212% of nonperforming loans, compared to 0.90% of
loans outstanding and 202% of nonperforming loans at December 31,
1998.
During 1999, the commercial and financial loan category
increased $48 million or 10.5%. While these loans are generally
larger, the Company limits its risk exposure for these, as well as
other categories of loans, by following established underwriting
practices. The Company's aggregate net loss for this category of
loans over the last three years has been approximately $1.8
million. Real estate construction and development loans decreased
approximately $2 million since last year, while the underlying loan
composition in this category remains diversified between
residential and commercial properties. There have been no losses
in this category of loans over the last three years. During 1999,
the Company continued its participation in the indirect automobile
lending market. Indirect automobile loans increased $32 million to
$103 million at December 31, 1999. Aggregate net losses on
indirect automobile loans since the program started in late 1997
have been $1.7 million. Management has extensively reviewed the
Company's 1999 loss experience and related lending practices on
indirect automobile loans and at various times during 1999,
underwriting guidelines were revised.
The table below is a summary of the Company's loan loss
experience for each of the last three years.
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
Dollars In Thousands 1999 1998 1997
------------------------------------
<S> <C> <C> <C>
Balance, January 1 $9,010 $9,209 $9,167
Provision for loan losses 3,451 972 300
Net loan charge-offs (2,607) (1,171) (258)
------------------------------------
Balance, December 31 $9,854 $9,010 $9,209
====================================
Average loans $1,019,338 $925,522 $817,262
Loans at year-end 1,063,949 1,005,021 891,075
Non-performing loans at year-end 4,652 4,466 2,466
Impaired loans at year-end 4,969 3,578 1,670
Provision for loan losses to average loans 0.34% 0.11% 0.04%
Net charge-offs to average loans 0.26 0.13 0.03
Allowance for loan losses to average loans 0.97 0.97 1.13
Allowance for loan losses to year-end loans 0.93 0.90 1.03
</TABLE>
NON-INTEREST INCOME
The core components of non-interest income, after excluding
the previous discussed non-recurring items and excluding money
order processing fees, aggregated $15.1 million in 1999 and
increased $2.4 million or 18.6% over the aggregate of comparable
items in 1998. Processing fees for services provided to the
purchaser of the money order subsidiary declined $900,000 for the
year. These services were phased out by September 30, 1999.
Service charges on deposit accounts, the largest component of
non-interest income, were $6 million in 1999, an increase of 8%
over 1998. During 1999, the Company promoted its consumer
transaction account product line, and continued its image
promotions, causing the retail customer account base to increase,
with a resultant favorable movement in local market share. This
increase in retail volume and normal fee adjustments contributed to
the increase in service charges on deposit accounts.
Trust income was approximately $2.9 million in 1999, an
increase of $433,000 or 18%, compared to 1998. The increase in
trust income is attributed to the continuing business expansion
activities of the Personal Trust and Investment Group and the
increased market value of Trust assets.
Gift certificate fees were $2.3 million in 1999, an increase
of $1.3 million compared to 1998. The Company continued to develop
this expanding business through its subsidiary, MidAmerica Gift
Certificate Company. The gift certificate subsidiary is a
nationwide provider of gift certificates, through an expanding
network of 389 mall agents. In 1999, gift certificate volume
increased 18% to 7.5 million items. The gift certificate fee
increase is attributable to the increased volume, as well as
increased service charge revenue on unredeemed items which were
initially recognized in the fourth quarter of 1998.
The aggregate of the remaining components of other non-
interest income, excluding the previously discussed non-recurring
items and excluding money order processing fees, increased $148,000
in 1999 compared to 1998. Net fees from the Company's debit and
credit card products and merchant business increased 31% to $1.7
million in 1999, as the retail card base expanded and the merchant
business continued to penetrate the gift certificate subsidiary's
mall agent base. ATM fees increased $124,000 to $780,000 in 1999,
as higher surcharge rates offset lower non-customer ATM activity.
Gains on dispositions of lease residuals declined from $266,000 in
1998 to $61,000 in 1999.
OTHER OPERATING EXPENSES
Other operating expenses decreased $1.2 million or 2.5% in
1999 compared to 1998. Significant declines in legal and
advertising costs were partially offset by the expense increases
discussed below. Legal costs declined $1.460 million for the year
as discovery efforts in one ongoing litigation matter involving
Kentucky Central Life Insurance Company (in Rehabilitation) were
concluded in early 1999. Advertising expenses declined $908,000
for the year to $1.3 million. Advertising costs in 1999 moved back
to historical levels, after the additional cost of a new image
campaign in 1998. Excluding the declines in legal and advertising
expenses, the remaining categories of other operating expenses
increased $1.1 million or 2.5%.
Salaries and benefits, the largest component of other
operating expenses, increased $410,000 or 1.4% to $28.8 million in
1999. Increases in pension and health insurance costs aggregating
$814,000 offset lower salary costs as discussed below, causing the
overall increase in salaries and benefits. Pension costs increased
$581,000 in 1999, as a result of a reduction in the actuarial
discount rate and the $270,000 settlement loss arising from a lump
sum payment to settle obligations of the Company's non-qualified
excess benefit plan in 1999. Health insurance costs increased
$233,000 in 1999 as claims experience increased over the prior year
level. Normal salary increases were effective in April 1999.
However, lower personnel costs for the Year 2000 project,
controlled staffing levels, and lower costs for deferred
compensation and certain bonus programs, resulted in a decrease in
salary expenses of $313,000. Personnel levels decreased 5.6% to
586 full-time equivalent (FTE) employees at December 31, 1999, with
average FTE employees of 611 in 1999 and 622 in 1998.
Occupancy and furniture and equipment expenses both reflected
increases in 1999 compared to 1998. Occupancy expense of $3.2
million increased $205,000 in 1999 primarily as a result of the
discontinuance of the subleasing of the former money order
subsidiary's location and the expenses related to numerous
improvements throughout the branch network. Furniture and
equipment expenses of $4.6 million increased $306,000 in 1999
compared to 1998. In 1999, depreciation expense increased
primarily as a result of new computer equipment upgraded in
connection with the Year 2000 project and the branch platform
automation project which was completed and placed in service in
early 1999. Management monitors and controls the level of capital
expenditures and each significant capital project is subject to
rigorous cost/benefit analysis.
The other expenses category of other operating expenses
includes advertising and marketing, operating supplies, legal and
professional fees, taxes other than income taxes and other
expenses. Excluding the impact of the decline in legal and
advertising costs in 1999, previously discussed, the aggregate
amount of other operating expenses increased $219,000 or 2.2% in
1999 compared to 1998. Operating supplies expenses of $1.6 million
declined 0.2% compared to 1998. The professional fees component of
legal and professional fees increased approximately $110,000 in
1999, primarily as a result of contractors and consultants for
market and branch studies and Web site development. Other real
estate expenses declined $213,000 in 1999 as a result of lower
property taxes and other expenses associated with the lower level
of property held. There were no significant changes in the
remaining components of other operating expenses, which include
charitable contributions, bank card processing expenses, ATM
processing expenses, dues and subscriptions, postage and similar
general business expenses.
INCOME TAXES
The effective tax rates were 29.4% and 29.8% for 1999 and
1998, respectively. The difference between the statutory and the
effective tax rates was principally attributable to tax-exempt
interest income on obligations of states and political subdivisions
and certain loans. In 1999 and 1998, the Company recognized tax
credits of $720,000 and $602,000, related to its investments in
low-income housing joint ventures, which also reduce the effective
tax rate.
BALANCE SHEET
Total assets were $1.745 billion at December 31, 1999,
compared with $1.595 billion at the end of 1998. Total assets
averaged $1.568 billion during 1999, an increase of approximately
$129 million, or 9% over 1998. Average earning assets increased
approximately $126 million or 9.2% to $1.489 billion in 1999. The
year-end asset position is typically higher than average assets due
to seasonal customer deposit activity and the seasonal impact of
increased gift certificates balances.
SECURITIES
The Company's securities portfolio includes obligations of
the U.S. Government and its agencies, collateralized mortgage
obligations, obligations of various states and political
subdivisions, corporate debt securities, and equity securities
(Federal Reserve Bank and Federal Home Loan Bank stock). At
December 31, 1999, securities available for sale totaled
approximately $586 million. These securities had net unrealized
holding losses during 1999 of approximately $5.1 million that
resulted in a decrease in shareholders' equity of approximately
$3.3 million, net of income taxes, for the year ended December 31,
1999. Higher market interest rates at December 31, 1999 than a year
earlier caused the decline in market value. During 1999, the
average securities portfolio increased approximately $58 million to
$381 million. During 1999, the Company shifted funds from previous
overnight investments, to short-term government agency securities
with higher yields, and directed the excess of the growth in
deposits and other funding sources in excess of loan demand, to the
securities portfolio. The collateralized mortgage obligations in
the portfolio aggregated approximately $183 million at December 31,
1999 and have an estimated weighted average life of 2.7 years,
based on current market prepayment conditions.
Securities classified as held to maturity were approximately
$4 million at December 31, 1999, and did not have significant
unrealized gains or losses.
The securities portfolio is utilized for pledging requirements
on securities sold under agreements to repurchase, and public and
fiduciary deposits, and provides liquidity from scheduled
maturities.
LOANS
Total loans, net of unearned income, were $1.064 billion at
December 31, 1999, an increase of approximately $59 million or 5.9%
compared to December 31, 1998. Average loans increased
approximately $94 million or 10.1%, to $1.019 billion in 1999 from
$926 million in 1998.
Commercial and financial, and construction and development
loans increased approximately $46 million or 8.6% to $581 million
at December 31, 1999, as the Company continues to emphasize lending
to businesses in the community. The significant categories of
commercial and financial borrowers are religious organizations,
financial holding entities, general building contractors, and those
requiring permanent financing on commercial real estate.
Construction and development loans are principally for the
development of residential housing tracts, office buildings and
shopping centers.
Residential real estate mortgage loans were approximately $322
million at December 31, 1999, a decrease of approximately $14
million or 4% from a year ago. The Company has historically
emphasized home equity financing which contributes to this
concentration in the loan portfolio. Real estate mortgages are
principally in the metropolitan Louisville, Kentucky area. This
geographic market has not experienced significant inflation or
deflation in real estate prices over the past several years.
Direct consumer loans, excluding residential real estate
mortgage loans, decreased approximately $5 million or 7.5% in 1999
to approximately $58 million as competition for retail loans
continued to increase. In late 1997, the Company started an
indirect automobile lending program. In 1998, this program was
significantly expanded to area automobile dealers and at December
31, 1998, the indirect loan portfolio was approximately $71
million. During 1999, the growth of indirect automobile loans
continued and the portfolio increased $32 million or 45% to $103
million.
The Company has no foreign loans and lends principally within
the Louisville, Kentucky metropolitan area.
NONPERFORMING ASSETS
Nonperforming assets include non-accrual loans, loans 90 days
or more past due and other real estate held for sale. At December
31, 1999, nonperforming assets totaled $14.434 million compared
with $15.824 million at December 31, 1998. Information with
respect to nonperforming loans and assets is presented in the table
below.
<TABLE>
<CAPTION>
NONPERFORMING ASSETS
Dollars In Thousands
December 31
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis $1,551 $1,416 $1,678 $3,424 $14,301
Restructured loans 811 -- -- -- --
Loans contractually past due ninety days or more
as to interest or principal payments 2,290 3,050 788 925 842
-------- -------- -------- -------- --------
Total nonperforming loans 4,652 4,466 2,466 4,349 15,143
Other real estate held for sale 9,782 11,358 16,186 9,577 1,085
-------- -------- -------- -------- --------
Total nonperforming assets $14,434 $15,824 $18,652 $13,926 $16,228
======== ======== ======== ======== ========
Nonperforming loans to total loans 0.44% 0.44% 0.28% 0.54% 2.02%
Nonperforming assets to total assets 0.83 0.99 1.24 0.98 1.24
Allowance for loan losses to non-performing loans 211.82 201.75 373.44 210.78 61.53
</TABLE>
The accrual of interest on loans is discontinued when it is
determined that the collection of interest or principal is
doubtful, or generally when a default of interest or principal has
existed for 90 days or more, unless the loan is fully secured and
in the process of collection.
Nonperforming loans were approximately $4.7 million at the end
of 1999 compared to $4.5 million at December 31, 1998. Of these
nonperforming loans at December 31, 1999, $3.6 million are
classified as impaired and $2.8 million of these impaired loans
have a related allowance for loan losses of $984,000. At December
31, 1999, there were loans of approximately $16.7 million for which
payments were current or less than 90 days past due where borrowers
are currently experiencing financial difficulties, including $1.4
million of indirect automobile loans classified as impaired with a
related allowance for loan losses of $422,000. Management has
carefully evaluated its risk, including consideration of underlying
collateral values based on current market conditions, with respect
to nonperforming and potential problem loans. Significant losses,
in excess of the allowance for loan losses related to impaired
loans, are not expected from nonperforming or potential problem
loans as of December 31, 1999.
Other real estate held for sale at December 31, 1999,
aggregated $9.8 million and was principally comprised of properties
acquired in settlement of real estate development loans in 1996,
and a completed condominium project acquired in settlement of loans
in 1997. The carrying value of the real estate development
property has been substantially reduced through sales from the
original carrying value of $15.2 million in 1996, to $1.7 million
at December 31, 1999. The Company has 15 acres of commercial
property remaining. The condominium project which had 35 unsold
units at the time of acquisition, now involves 30 completed and
readily marketable units and 7.5 acres of adjacent developed land.
This riverfront development has a carrying value of $7.4 million,
which is supported by the sales value of the units and appraised
value of the land. Management has taken recent action to enhance
marketing efforts for these condominiums.
During 1999, other real estate acquired in settlement of loans
aggregated $.4 million, and sales of other real estate aggregated
$2.4 million, resulting in gains of $1.381 million.
DEPOSITS
Total deposits increased approximately $44 million to $998
million on December 31, 1999, compared to $954 million on December
31, 1998. Average deposits during 1999 increased approximately $55
million or 6.2% to $945 million. In recent years, the Company has
taken several measures to increase its deposit balances: consumer
checking products were redesigned, simplified and repriced,
commercial cash management services were enhanced and expanded, new
higher rate/higher minimum balance transaction and savings account
products were developed and product and rate advertising campaigns
were consistently used. Average interest bearing deposits for the
year increased $45 million or 5.8% from $768 million to $813
million. A significant portion of the increase related to savings
products that are priced to be competitive with money market rates.
Average noninterest bearing deposits increased approximately 8.6%
to $133 million, with growth in both commercial and retail account
balances. The average balances of large certificates of deposit
and other time deposits, primarily regular certificates of deposit,
increased approximately $5 million to $438 million during 1999.
ADVANCES FROM THE FEDERAL HOME LOAN BANK
FHLB advances decreased to $68 million at the end of 1999,
from $75 million at the end of 1998. There were no new term
advances during 1999. The Company has historically used this
source of fixed rate funds to match its fixed rate mortgage loan
products.
GIFT CERTIFICATES OUTSTANDING
Gift certificates outstanding at December 31, 1999, were $123
million, compared to $95 million at the end of 1998, an increase of
30%. This increase resulted from the 18% increase in items issued
in 1999 compared to 1998 and a 10% increase in the average face
value of gift certificates issued during 1999. During 1999, the
average gift certificate balance increased approximately $13
million or 35% to $52 million. Gift certificates outstanding will
continue to be a significant source of non-interest bearing funds
for the Company.
SHAREHOLDERS' EQUITY
Shareholders' equity increased approximately $11 million to
$178.5 million at December 31, 1999. Average shareholders' equity
increased approximately $11 million to $173 million and was 11% of
average total assets for 1999. The Company's primary source of
capital is net income, net of dividends paid. Shareholders' equity
was impacted by unrealized holding losses on securities available
for sale, which decreased shareholders' equity during 1999 by $3.3
million. Shareholders' equity was also increased $1.1 million in
1999 through proceeds and tax benefits from exercised stock
options.
Bank regulators monitor capital adequacy under risk based
capital guidelines which place assets and certain off-balance-sheet
activities in various categories of risk with varying weights.
Also, a minimum leverage ratio, based on shareholders' equity as a
percentage of total assets, is required. As of December 31, 1999,
the Company's capital ratios exceeded required minimums and placed
the Company in the "Well Capitalized" category under applicable
banking regulations. Refer to Note M to the consolidated financial
statements for regulatory capital information.
YEAR 2000
At December 31, 1999, the Company had completed all phases of
its organization-wide program of preparing its systems for Year
2000 compliance and developing detailed plans to address the
possible business exposures related to the Year 2000 issue. The
Company's systems operated normally through the century change
period and the Company did not experience any significant Year 2000
issues. The Company will continue to monitor system performance at
critical dates during the first quarter of 2000.
During 1999, the Company had reviewed Year 2000 issues with
its major business relationships, significant loan and deposit
customers, counterparties, intermediaries and vendors with whom it
has important financial and operational relationships to access
their vulnerability to Year 2000 issues. The Company did not
experience any material adverse impact from third-party Year 2000
related systems interruptions during the century change period.
The Company has incurred internal staff costs as well as
consulting, new hardware and software expenses, and other expenses
related to its Year 2000 program. A significant portion of these
costs are not incremental costs to the Company, but rather
represent the redeployment of existing information technology and
business unit resources. A summary of costs incurred on the
project through December 31, 1999 and estimated future costs is set
forth below.
In thousands Costs Incurred Through Estimated
December 31, 1999 Future Costs Total
---------------------- ------------ ------
IT PERSONNEL RESOURCES $2,002 $75 $2,077
BUSINESS UNIT PERSONNEL RESOURCES 353 25 378
EXTERNAL CONTRACTORS / CONSULTANTS 134 -- 134
REPLACEMENT SOFTWARE 410 -- 410
REPLACEMENT / UPGRADE HARDWARE 1,049 5 1,054
OTHER COSTS 107 10 117
------ ---- ------
$4,055 $115 $4,170
====== ==== ======
Project cost increased $1.067 million during 1999. Portions
of the costs relate to capital items that are depreciated over
useful lives. Accordingly, the above cost summary is not
representative of amounts expensed during 1999. For the year ended
December 31, 1999, $1.3 million of the Year 2000 costs were
expensed, including $467,000 of depreciation.
The disclosure contained in this Annual Report is designated
as a Year 2000 Readiness Disclosure as that term is used in the
Year 2000 Information and Readiness Disclosure Act.
INTEREST RATE SENSITIVITY MANAGEMENT
The primary objective of interest rate risk management is to
control the effects that interest rate fluctuations have on net
interest income and net income. Interest rate risk is measured
using net interest margin simulation and asset/liability
sensitivity analyses.
Simulation tools serve as the primary means to quantify
interest rate exposure. Assumptions regarding the replacement of
maturing assets and liabilities are made to simulate the impact of
future changes in rates and/or changes in balance sheet
composition. The effect of changes in future interest rates on the
mix of assets and liabilities may cause actual results to differ
from simulated results. Further, the simulation does not
contemplate any actions the Company could undertake in response to
changes in interest rates. In addition, certain financial
instruments provide customers a certain degree of flexibility. For
instance, customers have migrated from lower cost deposit products
to higher cost products. Also, customers may choose to refinance
fixed rate loans when interest rates decrease. While the Company's
simulation analysis considers these factors, the extent to which
customers utilize the ability to exercise their financial options
may cause actual results to differ from the simulation.
The table below illustrates the simulation analysis of the
impact of a 50 or 100 basis point (bp) upward or downward movement
in interest rates on net interest income and earnings per share.
This analysis was done assuming that interest-earning asset levels
at December 31, 1999, adjusted to exclude the seasonally high
volume of gift certificates outstanding and corresponding
securities, remained constant and that the level of loan fees
remains unchanged. The impact of the rate movements was developed
by simulating the effect of rates changing immediately from the
December 31, 1999 levels and remaining at those levels thereafter
for twelve months. There are many factors influencing these
results, such as existing asset and liability rates, timing of
repricing and the extent to which different assets and liability
rates change as general market rates change.
The results of the December 31, 1999 simulation analysis
indicate that the Company has exposure to changing interest rates.
As a result of changes in interest rates, diluted earnings per
share could be reduced from $0.05 to $0.10, depending on the
direction and magnitude of interest rate changes. Management
continually evaluates this data and could make adjustments to the
asset and liability structure in the future to minimize the actual
impact of rate changes.
The situation involving time deposit costs illustrates the
non-symmetrical impact on net interest income of interest rate
changes. Interest expense on time deposits in a declining rate
environment may not decrease in the same magnitude as the increase
in interest expense when rates rise by a similar percentage. Rates
on maturing time deposits are currently less than existing time
deposit market rates. Accordingly, a decline in market rates may
not significantly reduce current interest expense levels on time
deposits, while an increase in market rates would increase current
interest expense levels.
The interest rate sensitivity gap table on page 18, shows the
repricing characteristics of the Company's interest-earning assets
and supporting funds at December 31, 1999. The data is based on
contractual repricing or maturities, except for estimated cash
flows on collateralized mortgage obligations, and where applicable,
management's assumptions as to the estimated repricing
characteristics of certain assets and supporting funds. At
December 31, 1999, the Company had a liability-sensitive interest
rate risk position at the one-year repricing period of $89 million
or 5.13% of assets. The December 31, 1999 static interest rate
sensitivity gap position differs from the normal position due to
seasonal activity near the end of the year. Gift certificates
outstanding at December 31, 1999, of $123 million, exceeded the
average outstanding amount by $71 million. The cumulative one year
liability-sensitive gap averaged $178 million during the July 1999
to November 1999 period and would be approximately $160 million at
December 31, 1999, if adjusted for seasonal gift certificate
activity. The liability-sensitive position will be reduced during
2000, as $59 million of the Company's interest rate swap contracts
mature by August 2000. Generally, a liability-sensitive gap
indicates that rising interest rates could negatively affect net
interest income, and falling rates could positively affect net
interest income. Assets and liabilities with similar contractual
repricing characteristics, however, may not reprice to the same
degree. As a result, the Company's static interest rate
sensitivity gap position does not quantify the impact of changes in
general levels of interest rates on net interest income, as does
the simulation analysis previously discussed.
<PAGE>
Interest Rate Simulation Sensitivity Analysis
<TABLE>
<CAPTION>
Movements in interest rates from
December 31, 1999, rates
- ----------------------------------------------------------------------
Increase Decrease
- ----------------------------------------------------------------------
Simulated impact in the next 12 months
from December 31, 1999: +50 bp +100 b -50 bp -100 bp
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income
decrease (in 1000s) ($1,039) ($1,632) ($862) ($1,215)
Net income per share decrease ($0.06) ($0.10) ($0.05) ($0.07)
</TABLE>
LIQUIDITY MANAGEMENT
Liquidity management represents the Company's ability to
generate cash or otherwise obtain funds at a reasonable price to
satisfy commitments to borrowers as well as the demands of
depositors. Funds are available from a number of sources,
including the securities portfolio, the core deposit and repurchase
agreements base, FHLB advances and purchased funds. The Company's
short-term investments, which include security maturities and cash
flows within one year, are approximately 20% of total assets.
These short-term investments are approximately 73% of non-core
liabilities, which consist of securities sold under agreements to
repurchase, federal funds purchased, and large certificates of
deposit. The Company's net short-term non-core fund dependence, a
measure of non-core liabilities, net of short-term investments,
supporting loans and the securities portfolio, was approximately
9.7% at December 31, 1999, and averaged 10.5% during 1999. In the
opinion of management, the Company's incremental funding sources
are sufficient to meet known or reasonably anticipated funding
requirements.
During 1999, financing and operating activities adequately
supported the investing activities of the Company. Investing
activities, primarily loans to customers, were funded by increased
deposits, increased gift certificates outstanding, and operating
activities.
The liquidity of the holding company is impacted primarily by
the ability of its principal subsidiary, the Bank, to pay
dividends. During 1999, it was not necessary for the Bank to pay
dividends to the holding company to support its cash needs. The
holding company had cash balances available during 1999, primarily
as a result of the receipt of proceeds from the money order
processing agreement settlement in 1999 and the sale of the money
order subsidiary in 1998, and had approximately $6.7 million of
cash and short-term securities available at December 31, 1999.
Certain regulatory restrictions limit the amount of dividends the
Bank may pay. As of January 1, 2000, the Bank could pay dividends
of $39 million without prior regulatory approval. Additional
information about these restrictions is contained in Note M to the
consolidated financial statements.
1998 COMPARED TO 1997
Net income for 1998 was $20.213 million or $1.88 on a diluted
per share basis compared with $17.915 million or $1.70 on a diluted
per share basis for 1997. Basic net income per share was $1.92 in
1998 and $1.73 in 1997. For 1998, ROA was 1.40% and ROE was
12.54%, compared with ROA of 1.30% and ROE of 12.15% in 1997. The
efficiency ratio in 1998 was 61.18%, a slight improvement from
61.30% in 1997.
The principal factors that contributed to the increase in net
income in 1998 compared to 1997 included the following:
*A non-recurring gain on the sale of the money order
subsidiary of $4.6 million was recognized in 1998.
*An increase in net interest income on a tax equivalent basis
of $2.2 million in 1998, with the benefit of increased average
earning assets of $56 million offsetting the negative impact
of lower interest rates.
*An increase of $1.8 million in the core sources of non-
interest income, including trust revenue, deposit service
charges, gift certificate fees and bank card fees.
*An increase in non-interest expenses of $7.5 million in 1998,
considering the absence of expenses of the former money order
subsidiary from the 1997 expense base. Approximately $3.4
million of the increase is attributed to three matters;
incremental expenses associated with the Company's Year 2000
project, costs associated with the Company's new image
campaign and legal costs related primarily to intensive
discovery efforts in one ongoing litigation matter. Excluding
these matters, other operating expenses increased 9.8% in 1998
compared to the adjusted 1997 expense base.
The discussion that follows explains in more detail the
factors affecting 1998 operating results and changes in financial
condition.
NET INTEREST INCOME
In 1998, net interest income on a tax equivalent basis
increased $2.184 million or 3.7% to $61.482 million. Net interest
income was favorably impacted by the increase in average earning
assets and the redeployment of earning assets from maturing
securities to loans. The average prime rate in 1998 was 8.36%
compared to 8.44% in 1997. The average rate on five year U.S.
Treasury securities was 5.15% in 1998 compared to 6.21% in 1997.
The impact of generally lower market interest rates in 1998 than in
1997 partially offset the benefits of earning asset growth. A
significant result of lower rates was increased premium
amortization on collateralized mortgage obligations, which
corresponded to accelerated prepayments experienced in the low
mortgage rate environment in 1998. See "Interest Income and
Interest Expense - Volume and Rate Changes For the Years 1999 and
1998 - Tax Equivalent Basis."
The average yield on earning assets was 8.31% in 1998 compared
to 8.35% in 1997, which was accompanied by a decline in the average
rate on interest bearing liabilities from 4.80% in 1997 to 4.71% in
1998. The net interest spread was 3.60% in 1998 compared to 3.55%
in 1997. The net yield on earning assets declined slightly in 1998
to 4.52% compared to 4.54% in 1997. Detailed information on the
average balances of earning assets and funding sources, interest
rates, and the net yield on earning assets is shown in the table on
page 16.
Average earning assets increased approximately $56 million or
4.3% in 1998 to $1.364 billion. Average loans increased
approximately $108 million or 13.2% to $926 million. Approximately
$47 million of the average loan growth related to retail loans,
with the vast majority of this growth being attributed to the
Company's indirect automobile lending program. Average commercial
loans increased $61 million during 1998, despite substantial pay-
offs arising from refinancing activities in 1998's lower fixed rate
environment. There was a decrease in the average securities
portfolio of approximately $50 million, as proceeds from maturing
securities were used to fund loan growth.
The net growth in average earning assets was supported by a
$57 million increase in average interest bearing deposits and a $6
million increase in average non-interest bearing sources of funds,
which included gift certificates outstanding, demand deposits, and
shareholders' equity. Average advances from the Federal Home Loan
Bank (FHLB) increased approximately $5 million, as the addition of
$20 million of convertible fixed rate advances exceeded scheduled
payments. Repurchase agreements averaged $247 million during 1998.
Average non-interest bearing deposits, other liabilities and
capital were approximately 24% and 25% of average assets in 1998
and 1997, respectively. The changes in interest income attributable
to volume and rate changes are summarized in the table on page 17.
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $972,000 in 1998 compared to
$300,000 for 1997. During 1998, the Company had net charge-offs of
$1.171 million or 0.13% of average loans, compared to $258,000 or
0.03% of average loans in 1997. Non-performing loans of $4.5
million at December 31, 1998, were 0.44% of total loans compared to
$2.5 million and 0.28% at December 31, 1997. At December 31, 1998,
the allowance for loan losses was 0.90% of loans outstanding and
202% of non-performing loans, compared to 1.03% of loans
outstanding and 373% of non-performing loans at December 31, 1997.
The table on page 6 is a summary of the Company's loan loss
experience for each of the last three years.
NON-INTEREST INCOME
In 1998, the Company completed the sale of its money order
subsidiary, MidAmerica Money Order Company, and recognized a gain
of $4.6 million. As part of the agreement with the purchaser, the
Company was to provide data processing and other services to the
purchaser. These processing fees, included in other non-interest
income, aggregated $1.3 million and when combined with $2.2 million
of expense reductions and income related to investment of the sales
proceeds, more than offset the absence of float revenue and $2.2
million of money order fees from 1998.
Other non-interest income in 1998 also includes gains on sales
of other real estate aggregating approximately $1.2 million.
The remaining core components of non-interest income, after
excluding the above matters, aggregated $12.7 million in 1998 and
increased $1.8 million or 16% over the aggregate of comparable
items in 1997.
Service charges on deposit accounts, were $5.5 million in
1998, an increase of 9% over 1997. Increased retail volume and
normal fee adjustments contributed to the increase in service
charges on deposit accounts.
Trust income was approximately $2.5 million in 1998, an
increase of $1.1 million or 81%, compared to 1997. The increase in
trust income is primarily attributed to the business expansion
activities of the Personal Trust and Investment Group, whose
personnel joined the Company near the end of the second quarter of
1997. The Company's securities transfer operation, which generated
fees of $168,000 in 1998, was discontinued in the fourth quarter of
1998.
Gift certificate fees were $952,000 in 1998, a 75% increase
compared to 1997. In 1998, gift certificate volume increased 35%
to 6.3 million items. The gift certificate fee increase is
attributable to the increased volume, as well as service charge
revenue on unpaid items.
The aggregate of the remaining components of other non-
interest income was down slightly in 1998 compared to 1997. Net
fees from the Company's debit and credit card products and merchant
business increased 35% to $1.3 million in 1998, as the retail card
base expanded and the merchant business was expanded to the gift
certificate subsidiary's mall agent base. ATM fees of $656,000 in
1998, were relatively unchanged from the prior year level. Credit
life and A & H insurance premiums and commissions decreased
$276,000 or 27% as direct retail loan activity in 1998 declined. A
new service in 1998, an investment management service for community
banks, generated revenue of $240,000. Operating losses on low-
income housing joint ventures increased $373,000 in 1998 to
$407,000.
OTHER OPERATING EXPENSES
Other operating expenses increased $5.3 million in 1998 on a
previous year base of $44 million. The 1997 expense base includes
approximately $2.2 million of operating expenses related to the
former money order subsidiary. Considering the absence of these
1997 expenses, 1998 operating expenses increased approximately $7.5
million. This increase in other operating expenses was
significantly impacted by expenses attributed to three matters:
Year 2000, the Company's new image campaign and legal costs.
Incremental expenses associated with the Company's Year 2000
project were approximately $1.1 million. Advertising and marketing
expenses increased $625,000 in 1998, as the Company supplemented
its regular product promotions with the promotion of its new
corporate image. Legal expenses increased $1.6 million in 1998 as
the Company incurred legal costs for intensive discovery efforts in
the ongoing litigation matter involving Kentucky Central Life
Insurance Company (in Rehabilitation), the sale of the money order
subsidiary and the dispute involving the money order processing
agreement. In the aggregate, the above matters contributed $3.4
million to the increased level of other operating expenses. In
addition to these expenses, the Company's remaining operating
expenses increased $4.1 million or 9.8% in 1998, with a significant
portion of the remaining increase attributed to the increased level
of salaries and benefits.
Salaries and benefits, the largest component of other
operating expenses, increased $2.6 million to $28.5 million in
1998. Excluding the 1997 salaries and benefits of the former money
order subsidiary from the comparison, salaries and benefits
increased $3.4 million. Included in the increase are incremental
salaries and benefits related to the Year 2000 project of $826,000
and increases in employee benefits, discussed below, of $440,000.
The remaining increase was $2.1 million, an increase of 8.6% over
the adjusted 1997 base. Approximately one-half of this increase
was attributed to annual salary merit increases, effective in April
1998, and increases in certain incentive bonus plans. The
remaining portion of the year-to-year comparison was impacted by
the mid-year 1997 addition of senior level trust personnel and
staff increases primarily for new or growing operating areas, such
as the indirect lending function and gift certificate subsidiary.
Personnel levels increased with average full-time equivalent
employees of 622 in 1998 and 603 in 1997 (19 former money order
subsidiary employees are excluded from 1997 for comparability).
Excluding the impact of a $298,000 settlement loss arising
from a lump sum payment to settle obligations of the Company's non-
qualified excess benefit plan in 1997, pension costs increased
$368,000 in 1998, as a result of a reduction in the actuarial
discount rate and an increase in covered compensation. Health
insurance costs increased $260,000 in 1998 as claims experience
increased over the prior year level.
Occupancy and furniture and equipment expenses both reflected
decreases in 1998 compared to 1997. Occupancy expense of $3.0
million decreased $87,000 in 1998 primarily as a result of
subleasing the former money order subsidiary's location in 1998.
Furniture and equipment expenses of $4.2 million declined $358,000
in 1998 compared to 1997. Excluding the impact of the former money
order subsidiary's depreciation and maintenance in 1997, furniture
and equipment expenses in 1998 would have reflected an increase of
$419,000 or 10.9%. In 1998, depreciation expense increased as
computer equipment was upgraded in connection with the Year 2000
project and the new branch automation system was completed.
The aggregate amount of other operating expenses increased
$3.2 million in 1998 compared to 1997. Excluding other expenses of
the former money order subsidiary from 1997, the increase would
have been $3.7 million. The previously discussed matters related
to Year 2000, Company image and legal costs contribute $2.3 million
to this increase in other expenses. Advertising and marketing
expenses of $2.2 million increased $625,000 or 40% in 1998 compared
to 1997, as the Company continued its level of regular advertising
for loan and deposit product promotions, which was supplemented
with corporate image promotion subsequent to the unveiling of the
Company's new logo and image at the end of the first quarter of
1998. Operating supplies expenses decreased $537,000 in 1998, with
$305,000 of the decrease attributed to the absence of the former
money order subsidiary's supplies expenses and $185,000 of the
decrease attributed to the absence of 1997 expenses associated with
forms and logo design for the Company's new image project. The
professional fees component of legal and professional fees
increased approximately $380,000 in 1998, primarily as a result of
contractors and consultants for the Year 2000 project, market and
branch studies and Web site development. Bank, property and other
taxes decreased $117,000 in 1998, as a result of lower levels of
other real estate owned and the absence of $49,000 of such expenses
related to the former money order subsidiary. Aside from these
issues, other operating expenses increased $1.4 million in 1998
compared to 1997. This increase related to several individually
insignificant other expense components.
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
(Statement 133) was issued by the Financial Accounting Standards
Board in June 1998. During 1999, Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Financial Instruments
and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133" was issued, and the effective date of Statement
133 was delayed one year. Statement 133 standardizes the
accounting for derivative instruments and will be effective for the
Company January 1, 2001. Statement 133 currently applies to the
Company's interest rate swap contracts. Under the standard,
entities are required to carry all derivative instruments on the
balance sheet at fair value. The accounting for changes in the
fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of
a hedging relationship and, if so on the reason for holding it. If
certain conditions are met, entities may elect to designate a
derivative instrument as a hedge of exposures to changes in fair
value, cash flows, or foreign currencies. If the hedged exposure
is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change
together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. If the hedged exposure is
a cash flow exposure, the effective portion of the gain or loss on
the derivative instrument is reported initially as a component of
other comprehensive income and subsequently reclassified into
earnings when the forecasted transaction affects earnings. Any
amounts excluded from the assessment of hedge effectiveness as well
as the ineffective portion of the gain or loss is reported in
earnings immediately.
The Company is in the process of determining the impact that
Statement 133 will have on its financial statements and believes
that such determination will not be meaningful until closer to the
date of initial adoption. The Company's swap contracts
substantially mature during 2000 and it can not be determined
presently whether the Company will have any significant derivative
instruments on the date of initial adoption. Depending on
asset/liability management issues, market interest rates and other
factors, the Company's current interest rate swap positions may be
increased or reduced by the time Statement 133 is adopted.
Forward Looking Statements
The Statements contained in this filing that are not purely
historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The use of words such as
"believes", "estimates", "plans", "expects" and similar expressions
are intended to identify forward-looking statements. All forward-
looking statements included in this document are based on
information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking
statement. It is important to note that the Company's actual
results could differ materially from those in such forward-looking
statements. Factors that could cause actual results to differ
materially from those projected include, among others, customer
concentration; cyclicality; changes in interest rates; changes in
economic conditions in Louisville, Kentucky and the surrounding
region; asset quality and the adequacy of the allowance for loan
losses; increased competition from banking and other financial
institutions; the valuation of other real estate; dependence on key
personnel; and changes in government regulation. Prospective
purchasers of the Company's common stock should consult the risk
factors listed from time to time in the Company's Reports on Form
10-Q, 8-K, 10-K, and Annual Reports to Shareholders.
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
Dollars In Thousands Non-interest
December 31, 1999 0-90 91-180 181-365 1-5 Over 5 Bearing
Days Days Days Years Years Funds Total
----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans, net $432,238 $35,361 $55,425 $293,510 $236,010 $1,551 $1,054,095
Securities 266,868 18,659 56,470 156,039 92,505 590,541
Other assets 100,070 100,070
----------- ----------- ----------- ----------- ----------- ----------- ----------
Total assets 699,106 54,020 111,895 449,549 328,515 101,621 1,744,706
----------- ----------- ----------- ----------- ----------- ----------- ----------
Sources of Funds
Deposits:
Demand deposits 54,191 126,443 180,634
Savings deposits 114,541 72,906 187,447
Time deposits 107,157 95,391 120,411 149,488 651 473,098
Federal funds purchased and
securities sold under 361,758 361,758
Advances from the Federal Home
Loan Bank 1,677 1,869 3,472 24,285 37,086 68,389
Other liabilities and non-interest
bearing deposits 294,832 294,832
Shareholders' equity 178,548 178,548
----------- ----------- ----------- ----------- ----------- ----------- ----------
Total sources of funds 639,324 97,260 123,883 173,773 237,086 473,380 1,744,706
----------- ----------- ----------- ----------- ----------- ----------- ----------
Asset / liability gap 59,782 (43,240) (11,988) 275,776 91,429 (371,759)
----------- ----------- ----------- ----------- ----------- -----------
Interest rate swap contracts (94,000)
----------- ----------- ----------- ----------- ----------- -----------
INTEREST SENSITIVITY GAP (34,218) (43,240) (11,988) 275,776 91,429 (371,759)
----------- ----------- ----------- ----------- ----------- -----------
CUMULATIVE INTEREST SENSITIVITY GAP ($34,218) ($77,458) ($89,446) $186,330 $277,759
=========== =========== =========== =========== ===========
CUMULATIVE INTEREST SENSITIVITY GAP
AS A PERCENT OF TOTAL ASSETS -1.96% -4.44% -5.13% 10.68% 15.92%
RATE-SENSITIVE ASSETS TO RATE-
SENSITIVE LIABILITIES 0.95X 0.56X 0.90X 2.59X 1.39X
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES AND YIELDS/RATES TAX EQUIVALENT BASIS
Dollars In Thousands 1999 1998 1997
----------------------------- ----------------------------- -----------------------------
Average Yields/ Average Yields/ Average Yields/
Balance Interest Rates Balance Interest Rates Balance Interest Rates
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Securities:
U.S. Treasury and
government agencies $141,612 $7,713 5.45% $72,131 $4,418 6.18% $130,501 $8,146 6.27%
States and political
subdivisions 53,044 4,404 8.71 54,039 4,385 8.66 49,364 4,086 8.51
Collateralized mortgage obligations
and other 186,105 10,375 5.49 197,021 11,169 5.65 192,927 12,104 6.31
Federal funds sold 4,701 236 5.02 9,508 526 5.53 19,261 1,071 5.56
Securities purchased under
agreements to resell 84,371 4,167 4.94 105,310 5,789 5.50 98,342 5,399 5.49
Loans, net of unearned income 1,019,338 91,880 9.01 925,522 86,758 9.37 817,262 78,169 9.56
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
Total earning assets 1,489,171 118,775 7.97% 1,363,531 113,045 8.31% 1,307,657 108,975 8.35%
NON-EARNING ASSETS:
Allowance for loan losses (9,113) (9,150) (8,979)
Cash and due from banks 32,900 30,688 26,010
Other 54,676 53,719 49,058
----------- ----------- -----------
Total assets $1,567,634 $1,438,788 $1,373,746
=========== =========== ===========
INTEREST BEARING LIABILITIES:
Deposits:
Demand deposits $190,115 3,903 2.05% $194,920 4,858 2.49% $196,705 5,739 2.92%
Savings deposits 184,848 6,710 3.63 140,444 5,136 3.66 105,199 3,525 3.35
Certificates of deposit
$100,000 and over 73,888 3,827 5.18 59,657 3,383 5.67 57,167 3,335 5.83
Other time deposits 363,891 19,074 5.24 372,791 21,101 5.66 351,748 19,836 5.64
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
Total interest bearing deposits 812,742 33,514 4.12 767,812 34,478 4.49 710,819 32,435 4.56
Federal funds purchased and
securities sold under
agreements to repurchase 304,320 14,175 4.66 255,119 12,744 5.00 258,744 13,159 5.09
Advances from the Federal Home
Loan Bank 72,277 4,293 5.94 71,792 4,341 6.05 66,359 4,083 6.15
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
Total interest bearing liabilities 1,189,339 51,982 4.37% 1,094,723 51,563 4.71% 1,035,922 49,677 4.80%
NON-INTEREST BEARING LIABILITIES:
Demand deposits 132,513 121,964 107,955
Other 73,215 60,953 82,440
----------- ----------- -----------
Total liabilities 1,395,067 1,277,640 1,226,317
SHAREHOLDERS' EQUITY 172,567 161,148 147,429
Total liabilities and ----------- ----------- -----------
shareholders' equity $1,567,634 $1,438,788 $1,373,746
=========== =========== ===========
NET INTEREST INCOME $66,793 $61,482 $59,298
======== ======== ========
NET INTEREST SPREAD 3.60% 3.60% 3.55%
NET YIELD ON EARNING ASSETS 4.48% 4.52% 4.54%
======== ======== ========
</TABLE>
Tax exempt income is calculated on a tax equivalent basis using a tax rate of
35%. The yields on securities are based on amortized historical cost, excluding
FASB Statement No.115 adjustments to fair value. Non-accrual loans and loan fees
are included in the computation of loan yields. The Company has no deposits from
foreign depositors.
<PAGE>
<TABLE>
<CAPTION>
INTEREST INCOME AND INTEREST EXPENSE
VOLUME AND RATE CHANGES FOR THE YEARS 1999 AND 1998 TAX EQUIVALENT BASIS
In Thousands Net Change Due to Due to Net Change Due to Due to
1999/1998 Volume Rate 1998/1997 Volume Rate
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease)
Interest Income:
Securities $2,520 $3,651 ($1,131) ($4,364) ($3,162) ($1,202)
Federal funds sold (290) (245) (45) (545) (540) (5)
Securities purchased under
agreements to resell (1,622) (1,074) (548) 390 383 7
Loans, net of unearned income 5,122 8,549 (3,427) 8,589 10,175 (1,586)
-----------------------------------------------------------------------
Total interest income 5,730 10,881 (5,151) 4,070 6,856 (2,786)
Interest Expense:
Deposits:
Demand deposits (955) (117) (838) (881) (52) (829)
Savings deposits 1,574 1,612 (38) 1,611 1,266 345
Certificates of deposit
$100,000 and over 444 756 (312) 48 143 (95)
Other time deposits (2,027) (495) (1,532) 1,265 1,191 74
Federal funds purchased and
securities sold under
agreements to repurchase 1,431 2,335 (904) (415) (183) (232)
Advances from the Federal Home
Loan Bank (48) 29 (77) 258 330 (72)
-----------------------------------------------------------------------
Total interest expense 419 4,120 (3,701) 1,886 2,695 (809)
-----------------------------------------------------------------------
Net Interest Income $5,311 $6,761 ($1,450) $2,184 $4,161 ($1,977)
=======================================================================
</TABLE>
The volume/rate variance is allocated to the volume and rate categories based
upon the absolute value of volume and rate variances before the allocation.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF FINANCIAL DATA
In Thousands, Except Per Share Amounts
Years Ended December 31
1999 1998 1997 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total interest income $116,942 $111,255 $107,196 $100,785 $90,595
Total interest expense 51,982 51,563 49,677 47,979 42,451
-----------------------------------------------------------------
Net interest income 64,960 59,692 57,519 52,806 48,144
Provision for loan losses 3,451 972 300 414 6,047
-----------------------------------------------------------------
Net interest income after
provision for loan losses 61,509 58,720 57,219 52,392 42,097
Non-interest income 18,699 19,809 13,173 14,527 11,191
Other operating expenses 48,507 49,735 44,422 44,577 41,844
-----------------------------------------------------------------
Income before income taxes 31,701 28,794 25,970 22,342 11,444
Income tax expense 9,326 8,581 8,055 7,313 3,378
-----------------------------------------------------------------
Net income $22,375 $20,213 $17,915 $15,029 $8,066
=================================================================
Per common share:
Net income:
Basic $2.11 $1.92 $1.73 $1.46 $0.80
Diluted 2.08 1.88 1.70 1.46 0.79
Cash dividends declared 0.854 0.792 0.714 0.631 0.553
<CAPTION>
December 31
1999 1998 1997 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans, net of unearned income $1,063,949 $1,005,021 $891,075 $804,182 $748,565
Total assets 1,744,706 1,594,763 1,509,579 1,420,933 1,313,987
Total deposits 997,899 953,924 878,829 825,257 784,957
Advances from the Federal Home Loan Bank 68,389 74,862 63,165 69,042 75,109
Total shareholders' equity 178,548 167,436 155,709 140,638 132,950
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
In Thousands, Except 1999 1998 1997
Per Share Amounts --------------------------------------------------------------------------------------------------
First Second Third Fourth First Second Third Fourth First Second Third Fourth
-------------------------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest
income $28,241 $28,955 $29,365 $30,381 $28,016 $27,541 $28,021 $27,677 $26,391 $26,620 $26,606 $27,579
Total interest
expense 12,887 12,929 12,792 13,374 13,293 12,798 12,908 12,564 12,497 12,384 12,162 12,634
Provision for
loan losses 281 1,470 590 1,110 --- 500 --- 472 --- --- --- 300
Net interest income ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
after provision for
loan losses 15,073 14,556 15,983 15,897 14,723 14,243 15,113 14,641 13,894 14,236 14,444 14,645
Non-interest income 4,745 5,509 4,193 4,252 4,317 7,360 3,525 4,587 3,348 3,020 3,236 3,569
Other operating
expenses 11,833 11,733 12,158 12,783 11,746 12,546 12,436 12,987 10,692 10,586 11,348 11,796
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income before
income taxes 7,985 8,332 8,018 7,366 7,294 9,057 6,202 6,241 6,550 6,670 6,332 6,418
Income taxes 2,367 2,640 2,175 2,144 2,169 2,749 1,792 1,871 2,033 2,065 2,007 1,950
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income $5,618 $5,692 $5,843 $5,222 $5,125 $6,308 $4,410 $4,370 $4,517 $4,605 $4,325 $4,468
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Per common share
Net income
Basic $0.53 $0.54 $0.55 $0.49 $0.49 $0.60 $0.42 $0.42 $0.44 $0.45 $0.42 $0.43
Diluted 0.52 0.53 0.54 0.48 0.48 0.58 0.41 0.41 0.44 0.44 0.41 0.42
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
MARKET FOR MIDAMERICA BANCORP'S STOCK AND
RELATED SECURITY HOLDER MATTERS
MidAmerica Bancorp's common stock is traded on the American Stock
Exchange (AMEX) under the symbol MAB. As of December 31, 1999, the
total number of registered holders of the Company's common stock was
1002 and the closing price of the Company's common stock was $ 28.50.
Reliance Trust Company is the stock transfer agent, dividend disbursing
agent, and registrar for the common stock of the Company.
The tables below represent the high and low market prices for
MidAmerica Bancorp's common stock as reported by AMEX and the cash
dividends declared on common stock, in each quarter of the last two
years. Per share data has been adjusted to reflect the effect of
stock dividends during the periods presented.
<TABLE>
<CAPTION>
Market Price
--------------------------
1999 Cash Dividends Declared High Low
- --------------------------------------------------------------------
<S> <C> <C> <C>
1st Quarter $ .2135 $27.91 $22.63
2nd Quarter .2135 25.79 22.51
3rd Quarter .2135 25.12 22.33
4th Quarter .2135 34.63 22.69
<CAPTION>
Market Price
--------------------------
1998 Cash Dividends Declared High Low
- --------------------------------------------------------------------
<S> <C> <C> <C>
1st Quarter $ .1980 $31.80 $29.13
2nd Quarter .1980 33.01 29.18
3rd Quarter .1980 31.55 23.00
4th Quarter .1980 28.28 21.60
</TABLE>
<PAGE>
Management's Statement on Financial Reporting
The Management of the Company is responsible for the integrity and
objectivity of the financial information presented in this Annual
Report. Management has prepared the consolidated financial
statements in accordance with generally accepted accounting
principles, which involve the use of estimates and judgments where
appropriate.
To meet its responsibility, Management maintains a comprehensive
system of internal control to assure proper authorization of
transactions, safeguarding of assets and reliability of financial
records. This system can provide only reasonable, not absolute,
assurance that errors and irregularities can be prevented or
detected. The concept of reasonable assurance is based on the
recognition that the cost of a system of internal control must be
related to the benefits derived.
The Audit Committee of the Board of Directors reviews the systems of
internal control and financial reporting. The Committee meets and
consults regularly with Management, the internal auditors, and the
independent auditors to review the scope and results of their work.
The accounting firm of KPMG LLP has performed an
independent audit of the Company's consolidated financial
statements. The firm's report appears on the following page.
/s/Bertram W. Klein /s/R. K. Guillaume /s/Steven A. Small
Bertram W. Klein R. K. Guillaume Steven A. Small
Chairman of the Board Chief Executive Officer Chief Financial Officer and
Executive Vice President
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
MidAmerica Bancorp:
We have audited the accompanying consolidated balance sheets of
MidAmerica Bancorp and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income, changes
in shareholders' equity, comprehensive income, and cash flows for each of
the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company'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 MidAmerica Bancorp and subsidiaries as of December 31,
1999 and 1998, and the results of their operations and their cash
flows for each of the years in the three-year period ended December
31, 1999, in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
Louisville, Kentucky
January 12, 2000
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
In Thousands, Except Share and Per Share Amounts
December 31
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $41,478 $39,644
Securities purchased under agreements to resell - 35,000
Securities available for sale, amortized cost
of $588,427 (1999) and $382,580 (1998) 586,523 385,767
Securities held to maturity, market value
of $4,001 (1999) and $84,013 (1998) 4,018 83,998
Loans, net of unearned income 1,063,949 1,005,021
Allowance for loan losses (9,854) (9,010)
----------- -----------
Loans, net 1,054,095 996,011
Premises and equipment 21,822 21,854
Other assets 36,770 32,489
----------- -----------
Total assets $1,744,706 $1,594,763
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing $156,720 $165,072
Interest bearing 841,179 788,852
----------- -----------
Total deposits 997,899 953,924
Securities sold under agreements to repurchase 319,368 276,454
Federal funds purchased 42,390 12,090
Advances from the Federal Home Loan Bank 68,389 74,862
Gift certificates outstanding 123,354 95,127
Accrued expenses and other liabilities 14,758 14,870
----------- -----------
Total liabilities 1,566,158 1,427,327
SHAREHOLDERS' EQUITY
Preferred stock, no par value; authorized-750,000 shares;
none issued ---- ----
Common stock, no par value; stated value $2.77 per share;
authorized-15,000,000 shares; issued and outstanding -
10,642,873 shares (1999); 10,246,157 shares (1998) 29,515 28,416
Additional paid-in capital 133,038 123,905
Retained earnings 17,233 13,043
Accumulated other comprehensive income (loss) (1,238) 2,072
----------- -----------
Total shareholders' equity 178,548 167,436
----------- -----------
Total liabilities and shareholders' equity $1,744,706 $1,594,763
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
In Thousands, Except Per Share Amounts
Years Ended December 31
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $91,587 $86,503 $77,820
Interest and dividends on:
Taxable securities 18,089 15,587 20,249
Tax exempt securities 2,863 2,850 2,656
Interest on federal funds sold 236 526 1,072
Interest on securities purchased under agreements to resell 4,167 5,789 5,399
---------- ---------- ----------
Total interest income 116,942 111,255 107,196
INTEREST EXPENSE
Interest on deposits 33,513 34,478 32,434
Interest on federal funds purchased and
securities sold under agreements to repurchase 14,175 12,744 13,160
Interest on Federal Home Loan Bank advances 4,294 4,341 4,083
---------- ---------- ----------
Total interest expense 51,982 51,563 49,677
---------- ---------- ----------
NET INTEREST INCOME 64,960 59,692 57,519
PROVISION FOR LOAN LOSSES 3,451 972 300
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 61,509 58,720 57,219
NON-INTEREST INCOME
Income from trust department 2,898 2,465 1,363
Service charges on deposit accounts 5,999 5,541 5,078
Gift certificate and money order fees 2,298 952 2,709
Securities gains 24 40 59
Gain on sale of money order subsidiary -- 4,588 --
Other 7,480 6,223 3,964
---------- ---------- ----------
Total non-interest income 18,699 19,809 13,173
OTHER OPERATING EXPENSES
Salaries and employee benefits 28,857 28,447 25,885
Occupancy expense 3,218 3,013 3,100
Furniture and equipment expenses 4,555 4,249 4,607
Other 11,877 14,026 10,830
---------- ---------- ----------
Total other operating expenses 48,507 49,735 44,422
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 31,701 28,794 25,970
INCOME TAX EXPENSE 9,326 8,581 8,055
---------- ---------- ----------
NET INCOME $22,375 $20,213 $17,915
========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 10,616 10,521 10,396
DILUTED 10,769 10,738 10,577
========== ========== ==========
NET INCOME PER COMMON SHARE
BASIC $2.11 $1.92 $1.73
DILUTED 2.08 1.88 1.70
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In Thousands, Except Share and Per Share Amounts
Years Ended December 31, 1999, 1998 and 1997
Common Common Additional Other Total
Stock Stock Paid-in Retained Comprehensive Shareholders'
Shares Amount Capital Earnings Income (Loss) Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 9,425,803 $26,144 $104,932 $8,093 $1,469 $140,638
Net income 17,915 17,915
Cash dividends declared, 0
($0.714 per share) (7,441) (7,441)
Stock dividend declared 287,159 795 7,999 (8,794) ---
Stock options exercised,
including related tax benefits 165,841 460 2,251 2,711
Change in accumulated other
comprehensive income (loss) 1,886 1,886
--------------------------------------------------------------------------
Balance, December 31, 1997 9,878,803 27,399 115,182 9,773 3,355 155,709
Net income 20,213 20,213
Cash dividends declared,
($0.792 per share) (8,345) (8,345)
Stock dividend declared 297,785 824 7,774 (8,598) ---
Stock options exercised,
including related tax benefits 69,569 193 949 1,142
Change in accumulated other
comprehensive income (loss) (1,283) (1,283)
--------------------------------------------------------------------------
Balance, December 31, 1998 10,246,157 28,416 123,905 13,043 2,072 167,436
Net income 22,375 22,375
Cash dividends declared,
($0.854 per share) (9,072) (9,072)
Stock dividend declared 309,545 858 8,255 (9,113) ---
Stock options exercised,
including related tax benefits 87,171 241 878 1,119
Change in accumulated other
comprehensive income (loss) (3,310) (3,310)
--------------------------------------------------------------------------
Balance, December 31, 1999 10,642,873 $29,515 $133,038 $17,233 ($1,238) $178,548
==========================================================================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands
Years Ended December 31
1999 1998 1997
---------- ---------- -------------
<S> <C> <C> <C>
Net Income $22,375 $20,213 $17,915
Other comprehensive income (loss), net of tax:
Unrealized gains (losses)
on securities available for sale:
Unrealized holding gains (losses) arising
during the period (3,294) (1,297) 1,848
Less reclassification adjustment for
gains included in net income (16) (26) (38)
-----------------------------------
(3,310) (1,323) 1,810
Pension liability adjustment --- 40 76
-----------------------------------
Other comprehensive income (loss) (3,310) (1,283) 1,886
-----------------------------------
COMPREHENSIVE INCOME $19,065 $18,930 $19,801
===================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
Years Ended December 31
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $22,375 $20,213 $17,915
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion, net 3,539 5,805 4,256
Provision for loan losses 3,451 972 300
Federal Home Loan Bank stock dividends (1,202) (1,139) (1,060)
Securities gains (24) (40) (59)
Gain on sale of money order subsidiary --- (4,588) ---
Gain on sales of other real estate (1,381) (1,172) (74)
Deferred taxes 160 (315) 580
Increase in interest receivable (1,897) (2,222) (524)
Decrease (increase) in other assets (4,502) (4,294) 959
Increase (decrease) in accrued expenses
and other liabilities 1,626 (887) 1,231
----------- ---------- ----------
Net cash provided by operating activities 22,145 12,333 23,524
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (1,176,329) (197,212) (212,434)
Proceeds from maturities of securities available for sale 954,914 206,160 96,250
Proceeds from sales of securities available for sale 16,275 10,206 45,181
Purchases of securities held to maturity (501) (83,724) (106,781)
Proceeds from maturities of securities held to maturity 80,500 77,500 70,000
Proceeds from sale of money order subsidiary --- 8,134 ---
Proceeds from sales of premises and equipment 45 119 257
Purchases of premises and equipment (2,998) (3,676) (3,407)
Proceeds from sales of other real estate 3,813 8,226 3,570
Net increase in loans (61,904) (115,795) (96,540)
----------- ---------- ----------
Net cash used in investing activities (186,185) (90,062) (203,904)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 43,975 75,095 53,572
Net increase (decrease) in securities sold
under agreements to repurchase 42,914 (8,046) (1,448)
Net increase (decrease) in federal funds purchased 30,300 12,090 (4,000)
Advances from the Federal Home Loan Bank --- 26,216 ---
Repayment of advances from the Federal Home Loan Bank (6,473) (14,519) (5,877)
Increase in gift certificates and money
orders outstanding 28,227 23,036 28,076
Stock options exercised 1,003 944 2,316
Dividends paid (9,072) (8,345) (7,441)
----------- ---------- ----------
Net cash provided by financing activities 130,874 106,471 65,198
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (33,166) 28,742 (115,182)
Cash and cash equivalents at beginning of year 74,644 45,902 161,084
----------- ---------- ----------
Cash and cash equivalents at end of year $41,478 $74,644 $45,902
=========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MidAmerica Bancorp is a bank and savings and loan holding
company whose primary subsidiary is Bank of
Louisville (the Bank). Other subsidiaries
include Bank of Louisville, FSB and MidAmerica Gift
Certificate Company. The Company is primarily engaged in commercial
and personal banking activities and trust services. Banking
activities are conducted predominantly in Jefferson County,
Kentucky and surrounding communities.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation -- The consolidated financial
statements include the accounts of MidAmerica Bancorp and its
wholly-owned subsidiaries (the Company). Significant
intercompany accounts have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform with
current classifications.
Securities -- Debt securities are classified as securities held
to maturity and carried at amortized cost if management has the
positive intent and ability to hold the securities to maturity.
Securities purchased with the intention of recognizing short-term
profits are placed in a trading account and are carried at market
value with unrealized gains or losses reported in income.
Securities not classified as securities held to maturity or
trading and which may be sold in response to or in anticipation
of changes in interest rates or based on other factors are
designated as securities available for sale and are carried at
fair value with unrealized holding gains or losses, net of tax
effects, reflected in shareholders' equity. Amortization of
premiums and accretion of discounts are recorded on the interest
method. The specific identification method is used in
determining gains and losses on the sale of securities.
Loans and Allowance for Loan Losses -- Loans are reported at the
principal balance outstanding, net of unearned income and
deferred loan fees. Interest on loans and amortization of
unearned income and deferred loan fees are computed by methods
which result in level rates of return. Generally, the accrual of
interest on loans, including impaired loans, is discontinued
when it is determined that the collection of interest or
principal is doubtful, or when a default of interest or principal
has existed for 90 days or more, unless such loan is well secured
and in the process of collection. Cash payments received on
nonaccrual loans generally are applied against principal, and
interest income is only recorded once principal recovery is
reasonably assured. Loans are not reclassified as accruing until
principal and interest payments are brought current and future
payments appear reasonably certain.
The allowance for loan losses is maintained at a level adequate
to absorb estimated probable credit losses. Management
determines the adequacy of the allowance based upon reviews of
individual credits, evaluation of the risk characteristics of the
loan portfolio, including the impact of current economic
conditions on the borrowers' ability to repay, past collection
and loss experience and such other factors, which, in
management's judgment, deserve current recognition. The
allowance for loan losses is increased by charges to operating
earnings and reduced by charge-offs, net of recoveries.
Loans are classified as impaired when it is probable that
the Company will be unable to collect contractual interest and
principal according to the terms of the loan agreement. The
allowance for loan losses related to impaired loans is based on
discounted cash flows at the loan's initial effective interest
rate or the fair value of collateral for collateral dependent
loans. Generally, impaired loans are also in non-accrual status.
In certain instances, however, the Company may continue to
accrue interest on an impaired loan. The Company does not
apply the impairment criteria to individual loans which are
part of a large group of smaller-balance homogeneous loans,
such as residential and consumer loans. Such loans are
collectively evaluated for impairment.
Premises and Equipment -- Premises and equipment are stated at
cost less accumulated depreciation and amortization.
Depreciation is computed over the estimated useful lives of the
assets or lease term, if shorter, on the straight line method.
Other Assets -- Included in other assets is real estate acquired
in settlement of loans which is carried at the lower of cost or
fair value minus estimated disposition costs. Any write-downs at
the date of acquisition are charged to the allowance for loan
losses. Expenses incurred in maintaining assets, subsequent
write-downs to reflect declines in value, and realized gains or
losses are reflected in operations.
Income Taxes -- The Company utilizes the asset and liability
method of accounting for income taxes. 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.
Interest Rate Swap Contracts -- The Company uses interest rate
swap contracts to manage its sensitivity to interest rate risk.
Interest income is accrued over the life of the swap agreements.
The fair market value of these instruments is not included in
the consolidated financial statements.
Net Income Per Common Share -- Basic net income per common share
is determined by dividing net income by the weighted average
number of shares of common stock outstanding. Diluted net income
per share is determined by dividing net income by the weighted
average number of shares of common stock outstanding plus the
weighted average number of shares that would be issued upon
exercise of dilutive options assuming proceeds are used to
repurchase shares pursuant to the treasury stock method.
Recently Issued Financial Accounting Standards -- Statement of
Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (Statement 133) was
issued by the Financial Accounting Standards Board in June 1998.
During 1999, Statement of Financial Accounting Standards No. 137,
Accounting for Derivative Instruments and Hedging Activites - Deferral
of the Effective Date of FASB Statement No. 133" was issued, and the
effective date of Statement 133 was delayed one year.
Statement 133 standardizes the accounting for derivative instruments
and will be effective for the Company on January 1, 2001. Statement
133 currently would apply to the Company's interest rate swap
contracts. Under the standard, entities are required to carry all
derivative instruments on the balance sheet at fair value. The
accounting for changes in the fair value (i.e. gains or losses) of a
derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so on the reason
for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes
in fair value, cash flows, or foreign currencies. If the hedged
exposure is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change together
with the offsetting loss or gain on the hedged item attributable to
the risk being hedged. If the hedged exposure is a cash flow
exposure, the effective portion of the gain or loss on the
derivative instrument is reported initially as a component of other
comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects
earnings. Any amounts excluded from the assessment of hedge
effectiveness as well as the ineffective portion of the gain or loss
is reported in earnings immediately. Accounting for foreign currency
hedges is similar to the accounting for fair value and cash flow
hedges. If the derivative instrument is not designated as a hedge,
the gain or loss is recognized in earnings in the period of change.
<PAGE>
B. CASH FLOWS
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash on hand, amounts due from banks,
and securities purchased under agreements to resell. Certain activities of
the Company, such as the acquisition of property in exchange for
release of indebtedness, do not result in cash receipts or payments
and, therefore, are not presented in the consolidated statements of cash flows.
During 1999, 1998 and 1997, cash paid for income taxes
amounted to $9.7 million, $8.4 million and $5.7 million,
respectively, and cash paid for interest was $51 million,
$53 million and $50 million, respectively. Loans transferred
to other assets were $369,000 in 1999, $678,000 in 1998,
and $9.4 million in 1997.
<PAGE>
C. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
The Company enters into purchases of U.S. Treasury and U.S. government agency
securities under agreements to resell such securities. The amounts advanced
under these agreements represent short-term loans and are reflected as a
receivable on the consolidated balance sheets. The securities are delivered
to third-party custodians' accounts designated by the Company under a written
custodial agreement that explicitly recognizes the Company's interest in these
securities. Securities purchased under agreements to resell averaged
$84 million during 1999 with an average yield of 4.94% and averaged
$105 million during 1998 with an average yield of 5.50%. The maximum
month-end balance outstanding during 1999 and 1998 was $235 million and
$178 million, respectively.
<PAGE>
D. SECURITIES
The amortized cost and market value of securities available for sale follows:
<TABLE>
<CAPTION>
In Thousands December 31, 1999 December 31, 1998
--------------------------------------- ---------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $317,316 $63 $273 $317,106 $159,821 $595 $1 $160,415
Collateralized mortgage obligations 184,896 152 2,318 182,730 148,524 675 2,229 146,970
States and political subdivisions 52,448 836 366 52,918 50,609 4,129 -- 54,738
Corporate obligations 13,110 2 -- 13,112 4,634 18 -- 4,652
Equity securities 20,657 -- -- 20,657 18,992 -- -- 18,992
--------------------------------------- ---------------------------------------
$588,427 $1,053 $2,957 $586,523 $382,580 $5,417 $2,230 $385,767
======================================= =======================================
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and market value of securities held to maturity follows:
In Thousands December 31, 1999 December 31, 1998
--------------------------------------- ---------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $4,018 $1 $18 $4,001 $83,998 $22 $7 $84,013
======================================= =======================================
</TABLE>
A summary of debt securities at December 31, 1999 based on scheduled
maturities is shown in the table below. Actual maturities may differ
from scheduled maturities because issuers may have the right to call
or prepay obligations with or without prepayment penalties.
Collateralized mortgage obligations are assigned to maturity categories
based on expected cash flows.
<TABLE>
<CAPTION>
In Thousands Securities Available for Sale Securities Held to Maturity
----------------------------- -----------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Due within one year $338,672 $338,480 $3,517 $3,503
Due after one year through five years 157,127 155,538 501 498
Due after five years through ten years 30,132 29,502 -- --
Due after ten years 41,839 42,346 -- --
----------------------------- -----------------------------
$567,770 $565,866 $4,018 $4,001
============================= =============================
</TABLE>
Gross realized gains and losses on sales of securities available for sale
were $24,000, and $0, respectively, in 1999, $40,000, and $0,
respectively, in 1998, and $146,000 and $87,000, respectively, in 1997.
Securities with a book value of $377,842,000 and $300,559,000 at December
31, 1999 and 1998, respectively, were pledged to secure public and trust
deposits, repurchase agreements and for other purposes.
<PAGE>
E. LOANS
The composition of loans follows:
<TABLE>
<CAPTION>
In Thousands
December 31
1999 1998
------------ ------------
<S> <C> <C>
Commercial and financial $505,963 $457,682
Real estate - construction and development 75,117 77,349
Real estate - residential mortgages 321,568 336,365
Consumer 57,972 62,682
Indirect automobile 103,329 70,943
------------ ------------
$1,063,949 $1,005,021
============ ============
</TABLE>
Loans outstanding and unfunded commitments are primarily concentrated in
the Company's market area which encompasses Jefferson County, Kentucky and
surrounding communities. The Company's credit exposure is diversified,
with secured and unsecured loans to consumers, small businesses and large
corporations. Although the Company has a diversified loan portfolio, the
ability of customers to honor loan commitments is based, in part, on the
economic stability of the geographic region and/or industry in which they
do business.
At December 31, 1999 and 1998, the recorded investment in impaired loans
was $4.969 and $3.578 million, respectively. Included in impaired loans
at December 31, 1999 is $4.237 million of impaired loans for which the
related allowance for loan losses is $1.406 million. Included in impaired
loans at December 31, 1998 were $3.022 million of impaired loans for which the
related allowance for loan losses was $1.210 million. The average recorded
investment in impaired loans during 1999 and 1998 was approximately
$4.603 and $2.448 million, respectively. For the years ended December 31,
1999, 1998 and 1997, the Company recognized interest income on impaired
loans of $309,000 , $119,000 and $129,000, respectively, using the cash
basis method of income recognition. Interest income of $509,000,
$284,000 and $198,000 would have been recognized on impaired loans in
1999, 1998 and 1997, respectively, if these loans were performing under
original terms.
<PAGE>
F. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
In Thousands
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Balance, January 1 $9,010 $9,209 $9,167
Loans charged-off (3,030) (1,355) (621)
Recoveries 423 184 363
------------------------------
Net loans charged-off (2,607) (1,171) (258)
Provision for loan losses 3,451 972 300
------------------------------
Balance, December 31 $9,854 $9,010 $9,209
==============================
</TABLE>
<PAGE>
G. PREMISES AND EQUIPMENT AND LEASE COMMITMENTS
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
In Thousands
December 31
1999 1998
----------------------
<S> <C> <C>
Land $4,872 $4,872
Buildings and leasehold improvements 15,307 14,094
Furniture and equipment 20,137 19,050
----------------------
40,316 38,016
Less accumulated depreciation and amortization 18,494 16,162
----------------------
$21,822 $21,854
======================
</TABLE>
At December 31, 1999, the Company was obligated under long-term operating
leases covering various premises and equipment. The Company's main
office and most branch office lease agreements contain renewal options.
Rental expense was $1,164,000, $1,059,000 and $1,145,000 for 1999,
1998 and 1997, respectively.
Minimum rental commitments under noncancelable leases in future years are
as follows:
<TABLE>
<CAPTION>
In Thousands
Year Ending December 31
<S> <C>
2000 $1,189
2001 1,140
2002 1,137
2003 1,089
2004 919
Thereafter 3,124
================================================
</TABLE>
<PAGE>
H. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
In Thousands
Years ended December 31
1999 1998 1997
---------------------------
<S> <C> <C> <C>
Income taxes applicable to operations:
Current:
Federal $8,830 $8,313 $7,196
State 336 583 279
---------------------------
9,166 8,896 7,475
Deferred 160 (315) 580
---------------------------
Total applicable to operations 9,326 8,581 8,055
Charged (credited) to components of shareholders' equity:
Net unrealized securities gains (losses) (1,782) (713) 976
Stock options exercised (116) (198) (395)
Pension liability adjustment - 21 41
---------------------------
Total income taxes $7,428 $7,691 $8,677
===========================
</TABLE>
The provision for income taxes in the consolidated statements of income
is reconciled to the federal statutory rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------
<S> <C> <C> <C>
Tax at federal statutory rate 35.0% 35.0% 35.0%
Tax exempt interest income (3.8) (4.0) (4.5)
Non-deductible expenses 0.7 0.6 0.6
Other, net (2.5) (1.8) (0.1)
---------------------------
29.4% 29.8% 31.0%
===========================
</TABLE>
The principal types of basis differences between assets and liabilities for
financial reporting and tax return purposes which give rise to deferred taxes
relate to the following:
<TABLE>
<CAPTION>
In Thousands
December 31
1999 1998
------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $3,457 $3,161
Deferred compensation 428 383
Mark-to-market adjustments related to securities 649 -
Pension 652 509
Other 992 860
------------------
Total deferred tax assets 6,178 4,913
------------------
Deferred tax liabilities:
Lease accounting 1,952 1,739
Depreciation 970 983
Mark-to-market adjustments related to securities - 1,004
Federal Home Loan Bank stock dividends 2,286 1,866
Other 543 387
------------------
Total deferred tax liabilities 5,751 5,979
------------------
Net deferred tax asset (liability) $427 ($1,066)
==================
</TABLE>
Based upon historical and projected levels of taxable income, management
believes it is more likely than not that the Company will realize the
income tax benefits of its deductible temporary differences. Accordingly,
no valuation allowance for deferred tax assets was recorded at December 31,
1999 and 1998.
Income taxes are net of low income housing tax credits recognized of
$720,000 in 1999, $602,000 in 1998 and $69,000 in 1997.
<PAGE>
I. DEPOSITS
A summary of deposits follows:
<TABLE>
<CAPTION>
In thousands
December 31
1999 1998
--------- ---------
<S> <C> <C>
Interest bearing demand deposits $180,634 $194,849
Savings deposits 163,589 145,021
Time and savings deposits $100,000 and over 130,445 92,908
All other time deposits 366,511 356,074
--------- ---------
Total interest bearing deposits 841,179 788,852
Non-interest bearing deposits 156,720 165,072
--------- ---------
Total deposits 997,899 953,924
========= =========
</TABLE>
Maturities of certificates of deposits at December 31, 1999,
were $322 million less than one year, $150 million
1 - 5 years and $1 million over 5 years.
<PAGE>
J. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company enters into sales of securities under agreements to
repurchase which are treated as financings. The obligation to
repurchase securities sold is reflected as a liability and the
assets underlying the agreements remain in the respective
securities account. Information concerning securities sold
under agreements to repurchase is summarized as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Dollars In Thousands ------------------------------------------------ -------------------------------------------------
Asset Sold Repurchase Liability Asset Sold Repurchase Liability
------------------------- ---------------------- ------------------------- ----------------------
Weighted Weighted
Average Average
Carrying Market Interest Carrying Market Interest
Maturity/Type of Asset Amount Value Amount Rate Amount Value Amount Rate
------------ ------------ ------------ --------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Overnight to 30 Days
U.S. Treasury and
government agencies $313,402 $315,074 $311,531 4.48% $269,401 $270,930 $268,239 4.45%
Over 90 Days
U.S. Treasury and
government agencies 8,517 8,515 7,837 5.40% 8,975 9,053 8,215 5.50%
------------ ------------ ------------ --------- ------------ ------------ ------------ ---------
$321,919 $323,589 $319,368 4.50% $278,376 $279,983 $276,454 4.48%
============ ============ ============ ========= ============ ============ ============ =========
</TABLE>
1999 1998
------------ ------------
Average balance during the year $267,805 $246,585
Average interest rate during the year 4.60% 4.99%
Maximum month-end balance during the year $325,404 $330,308
<PAGE>
K. ADVANCES FROM THE FEDERAL HOME LOAN BANK AND YEAR 2000 CREDIT FACILITY
The Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB) and,
accordingly, is eligible to borrow from the FHLB. The Bank pledges certain
first mortgage loans as collateral for these advances. The aggregate balance
in these mortgages must equal 150% of the advances outstanding. At December 31,
1999, the Company's eligible collateral provided a borrowing limit of
approximately $104 million. Certain information with respect to outstanding
advances from the FHLB is summarized below:
<TABLE>
<CAPTION>
Dollars In Thousands
Weighted
Average
Interest
Year of Maturity Amount Rate
--------------------------------------------------------
<S> <C> <C>
2000 $174 5.77 %
2002 - 2007 21,195 5.81
2008 - 2012 43,038 5.91
2013 - 2014 3,982 7.10
------------ -----------
$68,389 5.95 %
============ ===========
</TABLE>
Scheduled principal repayments on advances from the FHLB are $7,018,000,
$7,255,000, $7,402,000, $5,880,000, and $3,748,000 for 2000 through 2004,
respectively, and $37,086,000 thereafter.
In 1999, the Bank participated in the Federal Reserve Bank's special lending
program to accommodate liquidity needs during the century date change period.
The credit facility is available until April 7, 2000. There were no amounts
borrowed under this credit facility during 1999. The Bank has granted the
Federal Reserve Bank of St. Louis a security interest in certain loans
aggregating $331 million, which provide a borrowing base of approximately
$282 million.
<PAGE>
L. EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all of
its employees. The Company also sponsors an unfunded non-qualified excess
benefit plan covering certain executive officers.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
In Thousands
December 31
1999 1998
----------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $14,727 $11,977
Service cost 1,089 912
Interest cost 1,022 900
Actuarial (gain) loss (1,994) 1,686
Benefits paid (1,239) (748)
Settlement 133 --
----------------------
Benefit obligation at end of year 13,738 14,727
----------------------
Change in plan assets:
Fair value of plan assets at beginning of year 10,689 10,012
Actual return on plan assets 378 807
Company contributions 1,232 618
Benefits paid (1,239) (748)
----------------------
Fair value of plan assets at end of year 11,060 10,689
----------------------
Funded status (2,678) (4,038)
Unrecognized actuarial loss 1,031 2,960
Unrecognized prior service cost 84 100
Unrecognized net asset at transition (295) (476)
----------------------
Accrued pension cost ($1,858) ($1,454)
======================
Weighted average assumptions as of December 31:
Discount rate 7.75% 6.75%
Expected return on plan assets 7.00% 7.00%
Rate of compensation increase 4.25% 4.25%
</TABLE>
Net pension expense for 1999, 1998, and 1997 included the following components:
<TABLE>
<CAPTION>
In Thousands
Years ended December 31
1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period (1,089) (912) (696)
Interest cost on projected benefit obligation (1,022) (900) (896)
Expected return on plan assets 738 694 745
Amortization of prior service cost, transition asset, and
actuarial loss 7 63 153
---------------------------------
Net pension expense (1,366) (1,055) (694)
=================================
</TABLE>
The projected benefit obligation and accumulated benefit obligation for the
unfunded non-qualified excess benefit plan were $1,195,000 and $665,000, as
of December 31, 1999, respectively and $1,098,000 and $540,000, respectively
as of December 31, 1998.
In 1999 and 1997, a portion of the unfunded plan's obligations were settled
by lump sum payments of $487,000 and $1.1 million, respectively resulting in
the recognition of settlement losses of $270,000 and $298,000, respectively.
The Company does not have a significant commitment to pay post-retirement or
post-employment benefits other than pension benefits.
The Company also offers a defined contribution employee stock ownership plan.
The Company's contributions to this plan were $566,000, $652,000, and $585,000
for 1999, 1998, and 1997, respectively.
The Company has incentive stock option plans under which shares of common
stock have been reserved for the granting of stock options to certain key
employees of the Company. The Company applies APB Opinion No.25 and
related Interpretations in accounting for these plans. No
compensation expense has been recognized for these fixed stock option plans.
Had compensation cost for the Company's stock options granted in 1999, 1998 and
1997 been determined under the fair value approach described in FASB Statement
No. 123, "Accounting for Stock-Based Compensation", the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
In Thousands, Except Per Share Amounts
Years ended December 31
1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Net income As Reported $22,375 $20,213 $17,915
Pro forma 21,908 19,899 17,841
Basic net income As Reported $2.11 $1.92 $1.73
per share Pro forma 2.06 1.89 1.72
Diluted net As Reported $2.08 $1.88 $1.70
income per share Pro forma 2.03 1.85 1.69
</TABLE>
The fair values of the option grants are estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend
yields of 3.42%, 2.56% and 3.63%; expected volatility of 23%, 21% and 16%;
risk-free interest rates of 4.73%, 5.59% and 6.64%; and expected lives of
6.11, 6.50 and 6.50 years.
The plans provide that the option price shall not be less than the fair market
value of the stock at the effective date the options are granted, and that the
term of the options shall not be more than ten years from the date of the
grant. Options are exercisable ratably over a four year period. Options
granted under the plans prior to 1997 were exercisable one year after the date
of the grant. Shares available for future grants were 635,032 at December
31, 1999.
A summary of the status of the Company's incentive stock option plans as of
December 31, 1999, 1998, and 1997 and changes during the years ended on those
dates is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
Weighted Weighted Weighted
Average Average Average
Shares Price Shares Price Shares Price
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 824,823 $18.35 707,206 $14.45 770,205 $13.38
Granted 188,622 25.27 205,422 30.42 127,783 18.94
Expired (22,933) 27.60 (9,995) 23.37 (5,247) 14.52
Exercised (110,573) 13.75 (77,810) 13.76 (185,535) 13.11
Outstanding at December 31 ----------- ----------- -----------
879,939 $20.18 824,823 $18.35 707,206 $14.45
=========== =========== ===========
Exercisable at December 31 508,872 532,841 579,423
=========== =========== ===========
Weighted-average fair value
of options granted $5.20 $7.47 $3.59
=========== =========== ===========
</TABLE>
The following table summarizes information about incentive stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- ----------------------
Weighted- Weighted- Weighted-
Range of Average Average Average
Exercise Remaining Exercise Exercise
Prices Shares Life Price Shares Price
- -------------- --------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
$ 9.53 to 15.00 266,700 3.3 years $12.50 266,700 $12.50
15.01 to 20.00 231,759 5.4 years 16.73 185,065 16.22
20.01 to 25.00 174,519 8.4 years 24.67 6,555 20.60
25.01 to 33.04 206,961 7.1 years 30.16 50,552 30.63
----------- -----------
$ 9.53 to 33.04 879,939 5.8 years $20.18 508,872 $15.75
=========== ===========
</TABLE>
Common stock received through the exercise of incentive stock options which
is sold by the optionee within two years of grant or one year of exercise
results in a tax deduction for the Company equivalent to the taxable gain
recognized by the optionee. For financial reporting purposes, the tax effect
of this deduction is accounted for as an increase in additional paid-in
capital rather than as a reduction of income tax expense.
The Company has a Non-employee Directors Deferred Compensation Plan that
entitles directors to elect to defer director fees into a participant
account that includes a deferred stock or cash account. Under the terms of
the plan at December 31, 1999, 28,188 shares of common stock of the Company
have been accumulated in participant accounts for future issuance. The
accumulated liability recorded to cover the issuance of these shares was
approximately $589,000 at December 31, 1999. The Company has reserved
83,581 shares of common stock for issuance under the plan.
<PAGE>
M. REGULATORY RESTRICTIONS ON DIVIDENDS AND CASH AND OTHER REGULATORY MATTERS
Under the Federal Reserve Act, prior approval of the Federal banking
authorities is required if dividends declared by the Company's banking
subsidiary in any year exceed its net profits for that year, as defined,
combined with retained net profits, as defined, for the two preceding
years. As of January 1, 2000, the aggregate amount of retained earnings
available for distribution to the Company by subsidiaries without prior
approval was approximately $39 million. In addition to restrictions
on the payment of dividends, the Federal Reserve and the Commonwealth of
Kentucky place certain cash reserve requirements on deposits. The reserve
requirements, which were $13.8 million at December 31, 1999, are met by
holding a percentage of deposits in vault cash or maintaining a balance
directly with the Federal Reserve. The Company was in compliance with all
cash reserve requirements at December 31, 1999.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material impact on the Company's and the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of the Company's and
the Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Company's and the
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier I Capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier I Capital (as defined) to average assets
(as defined). Management believes, as of December 31, 1999, that the
Company and the Bank meet all capital adequacy requirements to which they
are subject.
As of December 31, 1999, the most recent notification from the Federal
Reserve Bank categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following table.
There are no conditions or events since that notification that management
believes have changed the institution's category.
The Company's and the Bank's actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
Dollars In Thousands To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(to Risk Weighted Assets)
Consolidated $189,640 15.2% $99,775 > 8.0 % $124,719 >10.0 %
Bank $163,355 13.5% $96,725 > 8.0 % $120,906 >10.0 %
Tier I Capital
(to Risk Weighted Assets)
Consolidated $179,786 14.4% $49,888 > 4.0 % $74,831 > 6.0 %
Bank $153,546 12.7% $48,362 > 4.0 % $72,544 > 6.0 %
Tier I Capital
(to Average Assets)
Consolidated $179,786 11.5% $62,705 > 4.0 % $78,382 > 5.0 %
Bank $153,546 10.2% $59,977 > 4.0 % $74,971 > 5.0 %
As of December 31, 1998:
Total Capital
(to Risk Weighted Assets)
Consolidated $174,374 15.0% $92,883 > 8.0 % $116,104 >10.0 %
Bank $144,624 12.7% $90,883 > 8.0 % $113,603 >10.0 %
Tier I Capital
(to Risk Weighted Assets)
Consolidated $165,364 14.2% $46,442 > 4.0 % $69,662 > 6.0 %
Bank $135,667 11.9% $45,441 > 4.0 % $68,162 > 6.0 %
Tier I Capital
(to Average Assets)
Consolidated $165,364 11.5% $57,552 > 4.0 % $71,939 > 5.0 %
Bank $135,667 9.6% $56,718 > 4.0 % $70,898 > 5.0 %
</TABLE>
<PAGE>
N. NET INCOME PER SHARE AND COMMON STOCK DIVIDENDS
The following are the numerators and denominators for the basic and diluted
net income per share computations:
<TABLE>
<CAPTION>
In Thousands, Except Per Share Amounts
1999 1998 1997
---------------------------------- ---------------------------------- ----------------------------------
Net Income Shares Per Share Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS $22,375 10,616 $2.11 $20,213 10,521 $1.92 $17,915 10,396 $1.73
========= ========= =========
Effect of dilutive
stock options --- 153 --- 217 --- 181
--------- --------- --------- --------- --------- ---------
Diluted EPS $22,375 10,769 $2.08 $20,213 10,738 $1.88 $17,915 10,577 $1.70
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The following table sets forth the Company's stock dividends to common
shareholders:
<TABLE>
<CAPTION>
Declaration Record Payable Stock Dividend
Date Date Date Percentage
- ---------- ---------- ---------- ----------
<S> <C> <C> <C>
November 15, 1999 December 3, 1999 December 17, 1999 3.0
November 16, 1998 December 2, 1998 December 18, 1998 3.0
November 17, 1997 December 1, 1997 December 12, 1997 3.0
</TABLE>
Per share information in the consolidated financial statements reflects the
adjusted number of shares resulting from these stock dividends.
<PAGE>
O. COMMITMENTS AND CONTINGENCIES
In the normal course of business, in order to meet the financing needs of
customers, the Company has outstanding commitments and contingent liabilities.
At December 31, 1999, the Company had $336 million of commitments to extend
credit (of which $132 million relates to floating rate home equity lines of
credit), which are not reflected in the consolidated financial statements.
The Company's exposure to credit loss in the event of nonperformance by the
other party to these commitments is represented by the contractual amount of
those instruments.
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 Company
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon
extension of credit is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, real estate and income-producing
commercial properties.
Standby letters of credit and financial guarantees written, aggregating $20.9
million at December 31, 1999, are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing and similar transactions.
At December 31, 1999, there were various pending legal actions in which claims
for damages were asserted. In one such matter, the Bank is a defendant named
in a lawsuit filed on December 10, 1993, by Kentucky Central Life Insurance
Company (in Rehabilitation) involving certain real estate loans. Management,
after discussion with legal counsel concerning the adequacy of the Company's
defenses, believes that this and other legal actions will not have a material
adverse effect upon the financial condition or results of operations of the
Bank or the Company.
<PAGE>
P. OTHER NON-INTEREST INCOME AND OPERATING EXPENSES
Significant components of other non-interest income and other
operating expenses are set forth below:
<TABLE>
<CAPTION>
In Thousands
Years Ended December 31
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Other non-interest income:
Gain on sale of other real estate $1,381 $1,172 $74
Merchant and bank card fees 1,729 1,317 977
Settlement of money order processing
agreement 1,800 --- ---
Money order processing fees 402 1,302 ---
Other 2,168 2,432 2,913
----------- ----------- -----------
$7,480 $6,223 $3,964
=========== =========== ===========
<CAPTION>
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Other operating expenses:
Advertising and marketing $1,279 $2,187 $1,562
Operating supplies 1,580 1,584 2,121
Legal and professional fees 2,013 3,363 1,610
Taxes-Bank, property and other 1,538 1,500 1,741
Other 5,467 5,392 3,796
----------- ----------- -----------
$11,877 $14,026 $10,830
=========== =========== ===========
</TABLE>
<PAGE>
Q. RELATED PARTY TRANSACTIONS
Loans to directors, executive officers and principal holders of the Company's
common stock and associates of such persons are presented below:
<TABLE>
<CAPTION>
In Thousands
<S> <C>
Balance, January 1, 1999 $17,883
New loans and advances on lines of credit 8,028
Repayments (5,180)
---------
Balance, December 31, 1999 $20,852
=========
</TABLE>
The above transactions were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for other
customers in the ordinary course of business.
<PAGE>
R. FINANCIAL INSTRUMENTS - INTEREST RATE SWAP CONTRACTS
The Company manages its exposure to market risk, in part, by
using interest rate swap contracts to modify the existing interest
rate characteristics of its floating rate loan portfolio.
The notional amount of the interest rate swap contracts
represents only an agreed-upon amount on which calculations of
interest payments to be exchanged are based, and is significantly
greater than the amount at risk. Credit risk is measured as the
cost of replacing, at current market rates, contracts in an
unrealized gain position. Although the Company is exposed to
credit-related losses in the event of nonperformance by the
counterparty, based on management's assessment, as of
December 31, 1999, the counterparty was expected to meet its
obligations. In addition, the Company deals exclusively with
counterparties with high credit ratings, enters into bilateral
collateral arrangements and arranges master netting
agreements. These agreements include legal rights of setoff that
provide for the net settlement of the subject contracts with the
same counterparty in the event of default.
At December 31, 1999, the Company had entered into interest
rate swap contracts with notional amounts totaling $94 million,
with a weighted average maturity of .76 years. Under these
contracts the Company receives or pays the difference between
the floating prime rate and fixed rates stated in the contracts.
At December 31, 1999, the floating prime rate to be paid by the
Company was 8.50% and the weighted average fixed rate to be
received by the Company was 8.60%. At December 31, 1998 the
Company had interest rate swap contracts of $114 million, with a
weighted average fixed rate to be received by the Company of 8.60%.
Interest rate swap contracts increased net interest income by
$688,000 in 1999, $264,000 in 1998 and $176,000 in 1997. At
December 31, 1999 and 1998, the aggregate fair value of
interest rate swap contracts, determined through market
quotes, was approximately ($.3)million and $1.6 million, respectively.
<PAGE>
S. DISCLOSURES ABOUT SEGMENTS
The Company, through the branch network of its subsidiary banks, provides
a broad range of financial services to individuals and businesses in and
around Jefferson County, Kentucky. These services include demand, time
and savings deposits; lending and lease financing; credit cards; ATMs;
cash management; and trust services. While the Company's chief decision
makers monitor the revenue streams of the various banking products and
services, operations are managed and financial performance is evaluated
on a bank-wide basis. Accordingly, all of the Company's banking operations
are considered by management to be aggregated in one reportable operating
segment. The gift certificate subsidiary which commenced operations
November 1, 1997, is reported as a seperate business segment. The other
catagory includes the aggregate of other activites, which individually
are not significant. These activities include a captive data processing
subsidiary, an insurance subsidiary that sells insurance products on
loans made by the banks, and subsidiaries holding foreclosed real estate.
The measurement of the performance of the business segments
is based on the management stucture of the Company and is not
necessarily comparable with similar information for any other
financial institution. The information presented is also not
necessarily indicative of the segments' financial condition and
results of operations if they were independent entities.
Selected financial information by business segment for
1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
In thousands
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net interest income
Banking $61,369 $56,310 $53,250
Gift certificate subsidiary 2,824 2,236 366
Other 767 1,146 3,903
----------- ----------- -----------
Total $64,960 $59,692 $57,519
=========== =========== ===========
Non-interest income
Banking $14,747 $13,952 $10,775
Gift certificate subsidiary 2,323 1,155 240
Other (a)(b) 9,095 11,134 8,092
Eliminations (a) (7,466) (6,432) (5,934)
----------- ----------- -----------
Total $18,699 $19,809 $13,173
=========== =========== ===========
Net income
Banking $19,324 $16,857 $16,350
Gift certificate subsidiary 1,829 943 107
Other 1,222 2,413 1,458
----------- ----------- -----------
Total $22,375 $20,213 $17,915
=========== =========== ===========
Assets
Banking $1,609,700 $1,507,101 $1,393,632
Gift certificate subsidiary 131,179 101,568 77,462
Other 16,334 21,880 58,616
Eliminations (12,507) (35,786) (20,132)
----------- ----------- -----------
Total $1,744,706 $1,594,763 $1,509,578
=========== =========== ===========
(a) Data processing revenues, for services provided to the banking
segment and certain other operating areas by the data
processing subsidiary, are eliminated in the consolidated statement
of income.
(b) In 1999 and 1998, other non-interest income includes
the settlement of the money order processing agreement and
a gain on the sale of the money order subsidiary, respectively.
</TABLE>
<PAGE>
T. SHAREHOLDER RIGHTS PLAN
On February 23, 1998, the Board of Directors of the Company adopted a
shareholder rights plan. Pursuant to the Plan, the Board declared a
dividend distribution of one right for each outstanding share of the
Company's common stock. Under certain conditions, each right entitles
the registered holder to purchase from the Company a unit consisting of
one-hundredth of a share of Junior Participating Preferred Stock at a
purchase price of $75.00 per unit, subject to adjustment. The Company
can redeem the rights for $0.01 per right at any time prior to their
becoming exercisable. The Rights expire on March 13, 2008, unless
earlier redeemed by the Company.
The rights become exercisable upon the earlier of (i) the tenth day
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
shares of common stock of the Company or (ii) the tenth business day
following the commencement of the tender offer or exchange offer that
would result in a person or group beneficially owning 15% or more of such
outstanding shares of common stock of the Company.
After an Acquiring Person acquires 15% or more of the common stock of the
Company, (i) each right not owned by an Acquiring Person will become a
right to receive, upon exercise, common stock of the Company having a
value equal to two times the exercise price of the right; and (ii) all
rights that are owned by any Acquiring Person will be null and void.
If the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or 50%
or more of the Company's assets or earning power is sold or transferred,
each holder of a right shall thereafter have the right to recieve, upon
exercise, common stock of the acquiring company having a value equal to
two times the exercise price of the right.
<PAGE>
U. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
In Thousands
December 31, 1999 December 31, 1998
--------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $41,478 $41,478 $74,644 $74,644
Securities 590,541 590,524 469,765 469,780
Loans, net of allowance for loan losses 1,054,095 1,045,375 996,011 1,012,572
Financial liabilities:
Deposits 997,899 996,166 953,924 958,752
Short-term borrowings 361,758 361,758 288,544 288,544
Advances from the Federal Home Loan Bank 68,389 66,029 74,862 82,361
Gift certificates outstanding 123,354 123,354 95,127 95,127
Off-balance sheet financial instruments
Interest rate swaps --- (311) --- 1,599
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash, Short-Term Investments, and Short-Term Borrowings--For those short-
term instruments, 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.
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,
reduced by the allowance for loan losses which represents the estimated
credit losses in the loan portfolio.
Deposits--The fair value of demand deposits, savings accounts, and money
market deposits is the amount payable on demand at the reporting date. The
fair value of certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
Advances from the Federal Home Loan Bank--Rates currently available to the
Company for debt with similar terms and remaining maturities are used to
estimate fair value of existing debt.
Gift certificates and money orders outstanding--The fair value of
these instruments, payable upon demand, is carrying value.
Interest Rate Swaps--The fair value of interest rate swaps is the estimated
amount, based on market quotes, that the Company would receive or pay to
terminate the agreement at the reporting date, taking into account current
interest rates and the remaining term of the agreements.
Commitments--The fair value of commitments to extend credit is estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. For fixed rate loan commitments,
fair value also considers the difference between current levels of interest
rates and the committed rates. There are no significant fair value
adjustments for commitments.
Limitations--The fair value estimates are made at a discrete point in time
based on relevant market information about the financial instruments.
Because no market exists for a significant portion of the Company'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 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.
<PAGE>
V. CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
<TABLE>
<CAPTION>
Condensed Balance Sheets
In Thousands
December 31
1999 1998
--------------------------
<S> <C> <C>
Assets:
Cash on deposit with bank subsidiary $722 $2,501
Securities available for sale 5,998 ---
Investment in bank and thrift subsidiaries 155,967 139,937
Investment in other subsidiaries 15,858 13,422
Other assets 53 1,292
------------ ------------
Total assets $178,598 $167,508
============ ============
Liabilities and shareholders' equity:
Other liabilities $50 $72
Shareholders' equity 178,548 167,436
------------ ------------
Total liabilities and shareholders' equity $178,598 $167,508
============ ============
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Income
In Thousands
Years Ended December 31
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash dividends from bank subsidiary $ --- $ --- $2,550
Gain on sale of money order subsidiary --- 4,588 ---
Settlement of money order processing agreement 1,800 --- ---
Interest income and other income 516 892 697
Other expenses (809) (1,159) (233)
------------ ------------ ------------
Income before income taxes and equity
in undistributed earnings of subsidiaries 1,507 4,321 3,014
Applicable income tax expense (658) (1,833) (167)
------------ ------------ ------------
Income before equity in undistributed earnings of
subsidiaries 849 2,488 2,847
Equity in undistributed earnings of subsidiaries 21,526 17,725 15,068
------------ ------------ ------------
Net income $22,375 $20,213 $17,915
============ ============ ============
</TABLE>
<PAGE>
V. CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY (CONTINUED)
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
In Thousands
Years Ended December 31
1999 1998 1997
-------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $22,375 $20,213 $17,915
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in undistributed earnings of subsidiaries (21,526) (17,725) (15,068)
Accretion on securities available for sale (51) --- ---
Gain on sale of money order subsidiary --- (4,588) ---
Decrease in other assets 1,355 780 2,008
Increase (decrease) in other liabilities (22) 57 (9)
--------- --------- ---------
Net cash provided by (used in) operating activities 2,131 (1,263) 4,846
Cash flows from investing activities:
Purchases of securities available for sale (46,544) --- ---
Proceeds from maturities of securities
available for sale 40,597 --- ---
Investment in subsidiaries (250) (125) (5,000)
Proceeds from sale of money order subsidiary --- 14,630 ---
--------- --------- ---------
Net cash provided by (used in) investing activities (6,197) 14,505 (5,000)
--------- --------- ---------
Cash flows used in financing activities:
Dividends paid (9,072) (8,345) (7,441)
Stock options exercised 1,003 944 2,316
--------- ---------- ---------
Net cash used in financing activities (8,069) (7,401) (5,125)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (12,135) 5,841 (5,279)
Cash and cash equivalents at beginning of year 12,857 7,016 12,295
--------- --------- ---------
Cash and cash equivalents at end of year $722 $12,857 $7,016
========= ========= =========
</TABLE>
SUBSIDIARIES OF REGISTRANT Exhibit 21
The subsidiaries of Mid-America Bancorp are listed below. Each of the companies
with the exception of Bank of Louisville, F.S.B., which is a Federal Savings
Bank organized under laws of the United States, is incorporated in the state of
Kentucky.
Bank of Louisville
Mid-America Gift Certificate Company
Eton Life Insurance Company
Mid-America Data Processing Inc.
Mid-America Property Management Company
MABC Leasing Company
Bank of Louisville, F.S.B.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Mid-America Bancorp:
We consent to incorporation by reference in the Registration
Statements No. 2-92270, No. 2-99495, No. 33-42989, and No. 333-
45091 on Forms S-8 of Mid-America Bancorp of our report dated
January 12, 2000, relating to the consolidated balance sheets of
Mid-America Bancorp and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in
shareholders' equity, comprehensive income, and cash flows for each
of the years in the three-year period ended December 31, 1999,
which report appears in the 1999 annual report to shareholders,
which is incorporated by reference in the December 31, 1999 annual
report on Form 10-K of Mid-America Bancorp.
Louisville, Kentucky /s/ KPMG LLP
March 27, 2000
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> YEAR
<CASH> 41,478
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 586,523
<INVESTMENTS-CARRYING> 4,018
<INVESTMENTS-MARKET> 4,001
<LOANS> 1,063,949
<ALLOWANCE> (9,854)
<TOTAL-ASSETS> 1,744,706
<DEPOSITS> 997,899
<SHORT-TERM> 361,758
<LIABILITIES-OTHER> 138,112
<LONG-TERM> 68,389
0
0
<COMMON> 29,515
<OTHER-SE> 149,033
<TOTAL-LIABILITIES-AND-EQUITY> 1,744,706
<INTEREST-LOAN> 91,587
<INTEREST-INVEST> 20,952
<INTEREST-OTHER> 4,403
<INTEREST-TOTAL> 116,942
<INTEREST-DEPOSIT> 33,513
<INTEREST-EXPENSE> 51,982
<INTEREST-INCOME-NET> 64,960
<LOAN-LOSSES> 3,451
<SECURITIES-GAINS> 24
<EXPENSE-OTHER> 48,507
<INCOME-PRETAX> 31,701
<INCOME-PRE-EXTRAORDINARY> 31,701
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,375
<EPS-BASIC> 2.11
<EPS-DILUTED> 2.08
<YIELD-ACTUAL> 4.48
<LOANS-NON> 1,551
<LOANS-PAST> 2,290
<LOANS-TROUBLED> 811
<LOANS-PROBLEM> 16,721
<ALLOWANCE-OPEN> 9,010
<CHARGE-OFFS> 3,030
<RECOVERIES> 423
<ALLOWANCE-CLOSE> 9,854
<ALLOWANCE-DOMESTIC> 9,854
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
ADDITIONAL EXHIBITS Exhibit 99
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10602
A. Full title of the plan and the address of the plan, if different from
that of the issuer name below.
The Bank of Louisville Employee Stock Ownership Plan
B. Name of the issuer of the securities held pursuant to the plan and
the address of its principal executive office.
Mid-America Bancorp
500 West Broadway
Louisville, Kentucky 40202
REQUIRED INFORMATION
Financial statements and schedules prepared in accordance with the financial
reporting requirements of ERISA will be filed in paper, as permitted by Rule
101 (6) (3) of Regulation S-T within 180 days of the Plan's year-end (December
31, 1999).
