SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-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, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-14412
Farmers Capital Bank Corporation
(Exact name of registrant as specified in its charter)
KENTUCKY 61-1017851
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P.O. Box 309, 201 West Main St.
Frankfort, Kentucky 40601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502)227-1600
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.25 per share Par Value
(Title of Class)
Indicate by check mark if 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
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
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of March 1, 1996 was $159,488,258.
As of March 1, 1996, there were 3,866,382 shares issued and outstanding.
Documents incorporated by reference:
Proxy Statement for the annual meeting of shareholders scheduled to be
held May 14, 1996 - portions of which are incorporated by reference in
Part III.
An index of exhibits filed with this Form 10-K can be found on page 54.
FARMERS CAPITAL BANK CORPORATION
FORM 10-K
INDEX
Page
Part I
Item 1 - Business 4
Item 2 - Properties 9
Item 3 - Legal Proceedings 9
Item 4 - Submission of Matters to a Vote of Security Holders 11
Part II
Item 5 - Market for Registrant's Common Stock and Related
Shareholder Matters 11
Item 6 - Selected Financial Data 13
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8 - Financial Statements and Supplementary Data 28
Item 9 - Changes in and Disagreements With Accountants
on Accounting Issues and Financial Disclosure 50
Part III
Item 10 - Directors and Executive Officers of the Registrant 51
Item 11 - Executive Compensation 51
Item 12 - Security Ownership of Certain Beneficial Owners
and Management 51
Item 13 - Certain Relationships and Related Transactions 51
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 52
Signatures 53
Index of Exhibits 54
PART I
Item 1 - Business
Organization
Farmers Capital Bank Corporation ("the Registrant") is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, and was
organized on October 28, 1982, under the laws of the Commonwealth of
Kentucky. Its subsidiaries provide a wide range of banking and bank-related
services to customers throughout Kentucky. The bank subsidiaries owned by
the Registrant are Farmers Bank & Capital Trust Company ("Farmers Bank"),
Frankfort, Kentucky; United Bank & Trust Co. ("United Bank"), Versailles,
Kentucky; Lawrenceburg National Bank ("Lawrenceburg Bank"), Lawrenceburg,
Kentucky; First Citizens Bank, Hardin County, Incorporated ("First Citizens
Bank"), Elizabethtown, Kentucky; Farmers Bank and Trust Company
("Farmers Georgetown Bank"), Georgetown, Kentucky; and Horse Cave State Bank
("Horse Cave Bank"), Horse Cave Kentucky. The Registrant also owns two
non-bank subsidiaries; FCB Services, Inc. ("FCB Services"), Frankfort,
Kentucky and Farmers Capital Insurance Company ("Farmers Insurance"),
Frankfort, Kentucky. As of December 31, 1995, the Registrant has $906
million in consolidated assets.
Farmers Bank, originally organized in 1850, is a state chartered bank engaged
in a wide range of commercial and personal banking activities, which include
accepting savings, time and demand deposits; making secured and unsecured loans
to corporations, individuals and others; providing cash management services
to corporate and individual customers; issuing letters of credit; renting
safe deposit boxes; and providing funds transfer services. The bank's lending
activities include making commercial, construction, mortgage and personal loans
and lines of credit. The bank serves as an agent in providing credit card
loans. It acts as trustee of personal trusts, as executor of estates, as
trustee for employee benefit trusts, as registrar, transfer agent and paying
agent for bond issues. Farmers Bank also acts as registrar, transfer agent
and paying agent for the Registrant's stock issue. Farmers Bank is the general
depository for the Commonwealth of Kentucky and has been for more than 70 years.
Farmers Bank is the largest bank in Franklin County. It conducts business in
its principal office and four branches within Frankfort, the capital of
Kentucky. Franklin County is a diverse community, including government,
commerce, finance, industry, medicine, education and agriculture. The bank
also serves many individuals and corporations throughout Central Kentucky.
On December 31, 1995, it had total assets of $425 million, including loans of
$244 million. On the same date, total deposits were $353 million and
shareholders' equity totaled $36 million.
Farmers Bank has three subsidiaries: Farmers Bank Realty Company ("Realty");
Money One Credit of Kentucky, Inc. ("Money One"); and Leasing One Corporation
("Leasing One"). Farmers Bank, Realty and Money One, Inc. own a partnership
- - Money One Credit Company ("MOCC"). Farmers Bank also participates in a joint
venture - Frankfort ATM, Ltd. ("ATM").
Realty was incorporated in 1978 for the purpose of owning certain real estate
used by the Registrant and Farmers Bank in the ordinary course of business.
Realty had total assets of $3.6 million on December 31, 1995.
Money One was incorporated in 1989 and until January 1, 1993, was a direct
subsidiary of the Registrant. It manages the consumer finance company, MOCC.
At December 31, 1995 it had $1.2 million in assets.
MOCC was established on June 1, 1994. It is a partnership engaged in consumer
lending activities under Chapter 288 of the Kentucky Revised Statutes.
As stated earlier, the partners include Farmers Bank, Realty and Money One.
MOCC has fourteen offices throughout Kentucky. At December 31, 1995 it had
total assets of $15.0 million.
Leasing One was incorporated in August, 1993 to operate as a commercial
equipment leasing company. It is located in Frankfort, but conducts business
in Ohio, Indiana, Tennessee and Kentucky. At year end it had total assets of
$11.3 million.
A fourth subsidiary, Farmers Financial Services Corporation ("FFSC"), was in
existence for the first three quarters of 1995. FFSC was incorporated in
1985 in order to enter into a partnership with several other banks to form a
statewide electronic network. The partnership, known as "Transaction
Services Company", supported an automated teller machine network (Quest)
with machines throughout Kentucky and Indiana as well as point-of-sale
terminals in retail stores. With the termination of the "Quest" network,
the partnership known as "Transaction Services Company" was also terminated.
As a result, FFSC was dissolved as of September 27, 1995.
Farmers Bank has a 50% interest in ATM, a joint venture for the purpose of
ownership of automatic teller machines in the Frankfort area. State National
Bank, a Frankfort bank not otherwise associated with the Registrant, also has
a 50% interest in ATM.
On February 15, 1985, the Registrant acquired United Bank, a state chartered
bank originally organized in 1880. It is engaged in a general banking
business providing full service banking to individuals, businesses and
governmental customers. It conducts business in its principal office and
two branches in Woodford County, Kentucky. United Bank is the second largest
bank in Woodford County with total assets of $100 million and total deposits
of $89 million at December 31, 1995.
On June 28, 1985, the Registrant acquired Lawrenceburg Bank, a national
chartered bank originally organized in 1885. It is engaged in a general
banking business providing full service banking to individuals, businesses and
governmental customers. It conducts business in its principal office and one
branch in Anderson County, Kentucky. Lawrenceburg Bank is the largest bank
in Anderson County with total assets of $93 million and total deposits of $84
million at December 31, 1995.
On March 31, 1986, the Registrant acquired First Citizens Bank, a state
chartered bank originally organized in 1964. It is engaged in a general
banking business providing full service banking to individuals, businesses
and governmental customers. It conducts business in its principal office
and four branches in Hardin County, Kentucky. First Citizens Bank is the
largest bank in Hardin County with total assets of $108 million and total
deposits of $89 million at December 31, 1995.
On June 30, 1986, the Registrant acquired Farmers Georgetown Bank, a state
chartered bank originally organized in 1850. It is engaged in a general
banking business providing full service banking to individuals, businesses
and governmental customers. It conducts business in its principal office
and three branches in Scott County, Kentucky. Farmers Georgetown Bank is
the largest bank in Scott County with total assets of $113 million and total
deposits of $100 million at December 31, 1995.
On June 15, 1987, the Registrant acquired Horse Cave Bank, a state chartered
bank originally organized in 1926. It is engaged in a general banking
business providing full service banking to individuals, businesses and
governmental customers. It conducts business in its principal office and
one branch in Hart County, Kentucky. Horse Cave Bank is the largest bank in
Hart County with total assets of $75 million and total deposits of $65
million at December 31, 1995.
Subsidiary banks make first and second residential mortgages secured by the
real estate not exceeding 90% loan to value. Commercial real estate loans
are made in the low to moderate range, secured by the real estate not
exceeding 80% loan to value. Other commercial loans are asset based loans
secured by equipment and lines of credit secured by receivables. Secured and
unsecured consumer loans generally are made for automobiles and other motor
vehicles. In most cases loans are restricted to the subsidiaries' general
market area.
The consumer finance subsidiary makes secured and unsecured installment
loans for various purposes. The leasing subsidiary makes secured equipment
leases to commercial and municipal entities in Kentucky, Indiana, Ohio and
Tennessee.
FCB Services, organized in 1992, provides data processing services and
support for the Registrant and its subsidiaries. It is located in Frankfort,
Kentucky. During 1994, FCB Services began performing data processing
services for nonaffiliated banks.
Farmers Insurance was organized in 1988 to engage in insurance activities
permitted to the Registrant by federal and state law. This corporation has
had no activity to date.
Supervision and Regulation
The Registrant, as a registered bank holding company, is restricted to those
activities permissible under the Bank Holding Company Act of 1956, as
amended, and is subject to actions of the Board of Governors of the Federal
Reserve System thereunder. It is required to file various reports with the
Federal Reserve Board, and is subject to examination by the Board.
The Registrant's state bank subsidiaries are subject to state banking law and
to regulation and periodic examinations by the Kentucky Department of
Financial Institutions. Lawrenceburg Bank, a national bank, is subject to
similar regulation and supervision by the Comptroller of the Currency under
the National Bank Act and the Federal Reserve System under the Federal
Reserve Act.
Deposits of the Registrant's subsidiary banks are insured by the Federal
Deposit Insurance Corporation Bank Insurance Fund, which subjects the banks
to regulation and examination under the provisions of the Federal Deposit
Insurance Act.
The operations of the Registrant and its subsidiary banks also are affected
by other banking legislation and policies and practices of various regulatory
authorities. Such legislation and policies include statutory maximum rates
on some loans, reserve requirements, domestic monetary and fiscal policy,
and limitations on the kinds of services which may be offered.
The Bank Holding Company Act formerly prohibited the Federal Reserve Board from
approving an application from a bank holding company to acquire shares of
another bank across its own state lines. However, effective September 1995,
new legislation abolished those restrictions and now allows bank holding
companies to acquire shares of out of state banks, subject to certain
conditions. Currently, the Company has no plans to purchase shares of an
out of state bank.
The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides
that a holding company's controlled insured depository institutions are
liable for any loss incurred by the Federal Deposit Insurance Corporation
in connection with the default of or any FDIC assisted transaction involving
an affiliated insured bank.
Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
the FDIC was required to establish a risk-based assessment system for insured
depository institutions which became effective January 1, 1994. The FDIC has
adopted a risk-based deposit insurance assessment system under which the
assessment rate for an insured depository institution depends on the
assessment risk classification assigned to the institution by the FDIC which is
determined by the institution's capital level.
Under FDICIA, the federal banking regulators are required to take prompt
corrective action if an institution fails to satisfy certain minimum capital
requirements, including a leverage limit, a risk-based capital requirement,
and any other measure deemed appropriate by the federal banking regulators
for measuring the capital adequacy of an insured depository institution.
All institutions, regardless of their capital levels, are restricted from
making any capital distribution or paying any management fees that would
cause the institution to become undercapitalized.
The purpose of the Community Reinvestment Act (CRA) is to encourage banks to
respond to the credit needs of the communities they serve, including low and
moderate income neighborhoods. CRA states that banks should accomplish this
while still preserving the flexibility needed for safe and sound operations.
It is designed to increase the bank's sensitivity to investment opportunities
which will benefit the community. Of the Company's six subsidiary banks,
two have an outstanding CRA rating and four have a satisfactory rating.
Competition
The Corporation and its subsidiaries compete for banking business with
various types of businesses other than commercial banks and savings and loan
associations. These include, but are not limited to, credit unions, mortgage
lenders, finance companies, insurance companies, stock and bond brokers,
financial planning firms, and department stores which compete for one or
more lines of banking business. The banks also compete for commercial and
retail business not only with banks in Central Kentucky, but with banking
organizations from Ohio, Indiana, Tennessee and Pennsylvania which have
banking subsidiaries located in Kentucky and may possess greater resources
than the Corporation.
The primary areas of competition pertain to quality of services, interest
rates and fees.
The business of the Registrant is not dependent upon any one customer or on
a few customers, and the loss of any one or a few customers would not have a
materially adverse effect on the Registrant.
No material portion of the business of the Registrant is seasonal. No
material portion of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the government, though certain contracts are subject to such
renegotiation or termination.
The Registrant is not engaged in operations in foreign countries.
Employees
As of December 31, 1995, the Registrant and its subsidiaries had 494
full-time equivalent employees. Employees are provided with a variety of
employee benefits. A retirement plan, a profit-sharing (401K) plan, group
life insurance, hospitalization, dental and major medical insurance are
available to eligible personnel. The employees are not represented by a union.
Management and employee relations are good.
Item 2 - Properties
All of the Registrant's properties are owned or leased by the Banks or their
subsidiaries.
Farmers Bank and its subsidiary, Realty, currently own or lease nine
buildings. Farmers Bank operates five branches, two of which it owns and
three of which it leases. United Bank owns its two branch offices and
approximately 52% of a condominiumized building which houses its main office.
Lawrenceburg Bank owns its main office and its branch office. First Citizens
Bank owns its main office and two of its four branches. The other two branch
locations of First Citizens Bank are leased facilities, one of which being
located in a grocery store. Farmers Georgetown Bank owns its main office,
another branch in downtown Georgetown and one in Stamping Ground, Kentucky.
Farmers Georgetown Bank's third branch is located in a leased facility.
Horse Cave Bank owns the building where it is headquartered. In the first
quarter of 1991, Horse Cave Bank opened a branch in leased facilities in
Munfordville, Kentucky.
Money One operates out of fourteen leased offices in fourteen cities within
Kentucky.
Item 3 - Legal Proceedings
Farmers was named, on September 10, 1992, as a defendant in Case
No. 92CI05734 in Jefferson Circuit Court, Louisville, Kentucky, Earl H.
Shilling et al. v. Farmers Bank & Capital Trust Company. The named
plaintiffs purported to represent a class consisting of all present and
former owners of the County of Jefferson, Kentucky Nursing Home Refunding
Revenue Bonds (Filson Care Home Project) Series 1986A (the "Series A Bonds")
and County of Jefferson, Kentucky Nursing Home Improvement Bonds (Filson
Care Home Project) Series 1986B (the "Series B Bonds") (collectively the
"Bonds"). The plaintiffs alleged that the class which they purported to
represent has been damaged in the approximate amount of $2,000,000 through
the reduction in value of the Bonds and the collateral security therefore,
and through the loss of interest on the Bonds since June 1, 1989, as a
result of alleged negligence, breach of trust, and breach of fiduciary duty
on the part of Farmers Bank in its capacity as indenture trustee for the
Bonds. A subsequent amendment to the complaint further alleges that Farmers
Bank conspired with and aided and abetted the former management of the Filson
Care Home in its misappropriation of the nursing home's revenues and assets
to the detriment of the Bondholders and in order to unlawfully secure and
benefit Farmers Bank. The amendment seeks unspecified punitive damages
against Farmers Bank. On July 6, 1993, the Circuit Court denied the
plaintiff's motion to certify the case as a class action on behalf of all
present and former owners of the Bonds. Under that ruling, the action may
be maintained only with respect to the individual claims of the named
plaintiffs and any other Bondholders whom the court might allow to join in
the action with respect to their own individual claims. Since the denial of
class certifications, the complaint has been amended twice to join additional
Bondholders as plaintiffs. The 42 existing plaintiffs claim to hold Bonds
having an aggregate face value of $470,000. The case is presently in the
process of discovery. Farmers Bank believes that the claims of the
plaintiffs are unfounded and totally without merit, and Farmers Bank intends
to vigorously contest any further proceedings in the case.
Two of the original named plaintiffs in the case before the Circuit Court
filed a similar action, Earl H. Schilling et al v. Farmers Bank & Capital
Trust Company, on July 7, 1992 in the United State District Court for the
Western District of Kentucky at Louisville, Case No. C- 920399 L-M.
That action has been dismissed without prejudice on the grounds that the
plaintiffs did not appear to be able to establish federal jurisdiction.
On November 27, 1995, one of the Registrant's subsidiaries, Farmers Bank &
Capital Trust Co. ("Farmers Bank") filed suit in the Circuit Court for
Franklin County, Kentucky against Travel Professionals of Frankfort, Inc. and
Travel Professionals of Scott County, Inc. (the "TPI Companies") to collect
five (5) loans totaling approximately $1,158,572 plus interests, costs and
attorney's fees. In addition to the TPI Companies, other named defendants
were Charles O. Bush, Sr., a director of the bank (by virtue of certain
guarantees) and two of his children, Charles O. Bush, Jr. and Karen Wilhelm
and their respective spouses, Sandra Bush and David Wilhelm, (collectively,
the "Bush Family Members"). In addition, Ray Godbey and Virginia Godbey,
officers of the Corporation were joined as defendants. Each of the
defendants has filed an answer and counterclaim denying liability to Farmers
Bank and asserting various claims for damages against the Bank. The
Registrant believes that the defenses and claims asserted by the defendants
are without merit and Farmers Bank has denied any liability to the
defendants. The litigation presently is in the discovery phase and is being
vigorously defended. It is anticipated that Farmers Bank will amend its
complaint to assert additional claims against the defendants in this case.
The Registrant's Georgetown, Kentucky affiliate, Farmers Georgetown Bank, and
its Executive Vice President, have been named defendants in a civil action
brought on August 1, 1994 by a loan customer of the Bank, in which the
customer alleges (1) fraud, (2) breach of good faith and fair dealing,
(3) disclosure of false credit information (defamation) and (4) outrageous
conduct. As earlier reported, the initial amount in controversy for the
first three counts was unspecified. The amount originally sought as
punitive damages for outrageous conduct was $10,000,000. By order of the
Scott County Circuit Court, Georgetown, Kentucky, the plaintiffs were
recently required to quantify the amounts in controversy. For the count of
fraud the plaintiffs seek $50,000; for the count of breach of good faith and
fair dealing the plaintiff seeks $12,900,000; for the count of defamation the
plaintiffs seek $14,800,000 plus an estimated $75,000 in legal costs.
Further the amount now sought as punitive damages is $21,000,000.
The conduct complained about in counts 1 and 2 involves former officers of
Farmers Georgetown Bank. The Bank at this time has had the opportunity to
examine those former officers knowledge of the events alleged to have taken
place and believes there is no merit to the allegations. The Farmers
Georgetown Bank also believes that there is no merit to the allegations in
counts 3 and 4 and intends to vigorously defend all claims.
The case has been set for trial in both November 1995 and February 1996, but
has been recently continued once again. It is anticipated that the case will
go to trial in either September 1996 or in the alternative November 1996.
With respect to the issue of the count of defamation, the court at one point,
granted the defendants a summary judgement, but has agreed to reconsider that
action at some later time. Management believes the previously mentioned
actions are without merit, that in certain instances its actions or omissions
were pursuant to the advice of counsel, or that the ultimate liability, if
any, resulting from one or more of the claims will not materially affect the
Registrant's consolidated financial position, although resolution in any year
or quarter could be material for that period.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
Item 5 - Market for Registrant's Common Stock and Related Shareholders' Matters
The Registrant's stock is traded in the National Association of Security
Dealers Automated Quotation System (NASDAQ) National Market System and the
sales prices shown below are as reported by the National Association of
Securities Dealers under the NASDAQ symbol: FFKT. The amount of dividends
per share declared by the Registrant during the last two calendar years is
also included below:
Dividends
Stock Prices High Low Declared
4th Quarter, 1995 $43.50 $37.00 $0.36
3rd Quarter, 1995 39.50 33.00 0.33
2nd Quarter, 1995 37.00 32.50 0.33
1st Quarter, 1995 38.00 35.50 0.33
4th Quarter, 1994 $40.50 $36.50 $0.33
3rd Quarter, 1994 41.00 36.88 0.30
2nd Quarter, 1994 43.00 37.00 0.30
1st Quarter, 1994 39.50 33.00 0.30
As of January 1, 1996, there were 818 shareholders of record. This figure
does not include individual participants in security position listings.
Payment of dividends by the Registrant's subsidiary banks is subject to
certain regulatory restrictions as set forth in national and state banking
laws and regulations. At December 31, 1995, combined retained earnings of
the subsidiary banks were approximately $38,401,026 of which $4,519,000 was
available for the payment of dividends in 1996 without obtaining prior
approval from bank regulatory agencies.
Stock Transfer Agent and Registrar:
Farmers Bank & Capital Trust Co.
P.O. Box 309
Frankfort, Kentucky 40602
The Registrant offers shareholders automatic reinvestment of dividends in
shares of stock at the market price without fees or commissions. For a
description of the plan and an authorization card, contact the Registrar above.
NASDAQ Market Makers:
J.J.B. Hilliard, W.L. Lyons, Inc. Herzog, Heine, Geduld, Inc.
Phone: 502/588-8400 or Phone: 800/221-3600
800/444-1854
J.C. Bradford and Co., Inc. PaineWebber Incorporated
Louisville 502/589-7760 or Phone: 800/222-1448
800/752-6093
Lexington 606/255-7353 or
800/522-7353
Item 6 - Selected Financial Highlights
December 31
(In thousands, except per share data)
1995 1994 1993 1992 1991
Net interest income $ 39,146 $ 36,164 $ 32,844 $ 32,338 $ 28,869
Net income 10,389 10,250 10,804 6,317 4,261
Net income per share 2.69 2.65 2.79 1.63 1.10
Total assets 906,113 851,703 794,269 820,991 926,248
Long term debt 3,886 4,865 2,695 159 None
Dividends declared per share 1.35 1.23 1.11 1.08 1.08
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating Results
Farmers Capital Bank Corporation (the "Company") finished 1995 with net
income of $10.4 million, or $2.69 per share, up from $10.25 million, or
$2.65 per share reported for 1994. This increase was realized even though
the Company benefited during the second quarter of 1994 from a significant
nonrecurring recovery of prior year losses amounting to $503 thousand after
tax. Adjusting for the nonrecurring recovery, 1995 net income is $642
thousand, or 6.6% higher than net income for 1994. The performance ratios also
increased after adjusting for the nonrecurring recovery. Return on assets
increased 4.3% from 1.16% to 1.21%. Return on equity increased 2.1% from
9.99% to 10.20%.
The two items having the most beneficial impact on the Company during 1995
were the increase in net interest margin and the much publicized reduction
in the FDIC insurance premium.
Interest Income
Total interest income, on a tax equivalent basis was $68.7 million, up
$9.4 million, or 15.9% from 1994. Interest on taxable investment securities
was up $1.8 million, or 29.8% from 1994. The yield was 5.8%, up from 4.8% in
the previous year. Interest on nontaxable investment securities was stable
at $3.4 million while the yield dropped 19 basis points to 6.6%. Interest
on federal funds sold and securities purchased under agreement to resell was
$3.0 million, up $644 thousand or 26.9%. The yield was up, due to rate, 160
basis points to 5.9%. Interest on loans was $54.4 million, up $7.0 million,
or 14.9% over 1994. The yield was up 80 basis points to 10.0%.
The increase in loan and taxable investment securities interest was due
primarily to changes in rates. The decline in nontaxable investment security
interest was also due to rate. The yield on total earning assets increased
from 8.0% to 8.8%. This was accomplished by increased loan volumes and by
moving balances from lower yielding asset categories to higher earning loans.
Interest Expense
Total interest expense was $28.1 million, up $6.5 million, or 30.2%.
Interest expense on interest bearing demand deposits was up $537 thousand, or
8.0% from 1994 due to the rate variance. Interest paid on savings accounts
was $1.7 million, an increase of $91 thousand while the rate paid increased
30 basis points to 3.2% in 1995.
The largest interest expense impact came from those on time deposits which
had increases in both rate and volume. Interest expense on time deposits
increased $5.5 million, or 46.3% while the rate increased 125 basis points to
5.6%. Interest paid on securities sold under agreement to repurchase was
$1.6 million, up $375 thousand, or 31.0% due to rate. The rate paid on total
interest bearing liabilities was 4.36%, an increase of 85 basis points.
Net interest income is the most significant component of the Company's
earnings. Net interest income is the excess of the interest income earned on
assets over the interest paid for funds to support those assets. The
following table represents the major components of interest earning assets
and interest bearing liabilities on a tax equivalent basis (TE) where tax
exempt income is adjusted upward by an amount equivalent to the federal
income taxes that would have been paid if the income had been fully taxable
(assuming a 34% tax rate).
<TABLE>
Distribution of Assets, Liabilities and Shareholders' Equity:
Interest Rates and Interest Differential (In thousands)
<CAPTION>
December 31, 1995 1994 1993
Average Average Average Average Average Average
Balances Interest Rate Balances Interest Rate Balances Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning Assets
Investment Securities
Taxable $136,028 $ 7,923 5.82% $126,772 $ 6,106 4.82% $143,506 $ 7,539 5.25%
Nontaxable 1 50,852 3,376 6.64 50,476 3,447 6.83 27,687 2,224 8.03
Time deposits with banks,
federal funds sold and
securities purchased
under agreements
to resell 51,752 3,042 5.88 56,052 2,398 4.28 74,875 2,272 3.03
Loans 1,2,3 540,632 54,350 10.05 511,492 47,301 9.25 467,738 43,528 9.31
Total Earning Assets 779,264 68,691 8.81 744,792 59,252 7.96 713,806 55,563 7.78
Less Allowance
for loan losses 8,774 8,982 8,443
770,490 735,810 705,363
Non-Earning Assets
Cash and due from
banks 57,545 70,433 69,498
Bank premises and
other equipment 20,122 19,950 20,606
Other assets 14,001 13,362 16,045
Total Assets $862,158 $839,555 $811,512
Interest Bearing Liabilities
Deposits
Interest bearing
demand $245,926 7,279 2.96 $247,554 6,742 2.72 $221,086 6,038 2.73
Savings 53,417 1,703 3.19 55,853 1,612 2.89 55,697 1,576 2.83
Time 311,668 17,292 5.55 274,812 11,817 4.30 295,883 13,123 4.44
Securities sold under
agreements to
repurchase 28,889 1,584 5.48 33,348 1,209 3.63 30,590 884 2.89
Other borrowed funds 4,444 257 5.78 3,320 206 6.20 2,442 147 6.02
Total Interest Bearing
Liabilities 644,344 28,115 4.36 614,887 21,586 3.51 605,698 21,768 3.59
Non-interest Bearing Liabilities
Commonwealth of Kentucky
deposits 26,093 32,419 29,744
Demand deposits -
other deposits 84,666 89,073 80,977
Other liabilities 5,212 6,059 4,033
Total liabilities 760,315 742,438 720,452
Shareholders' Equity 101,843 97,117 91,060
Total Liabilities
and Shareholders'
Equity $862,158 $839,555 $811,512
Net interest income (TE) 40,576 37,666 33,795
TE basis of adjustment (1,430) (1,502) (951)
Net interest income $39,146 $36,164 $32,844
Net interest spread (TE) 4.45% 4.45% 4.19%
Net interest margin (TE) 5.21% 5.06% 4.73%
</TABLE>
1 Income and yield stated at a fully tax equivalent basis (TE), using a 34%
tax rate.
2 Loan balances include principal balances on non-accrual loans.
3 Loan fees included in interest income amounted to $1,781,000, $1,731,000
and $1,302,000 in 1995, 1994 and 1993, respectively.
Net interest income (TE) increased $2.9 million during 1995 to $40.6 million.
The change in the spread between rates earned and paid and the net interest
margin are summarized below:
1995 1994 % change
Spread between rates earned and paid 4.45% 4.45%
Net interest margin 5.21% 5.06% 3%
The following table is an analysis of the change in net interest income and
the attributable factors.
<TABLE>
Analysis of Changes in Net Interest Income (tax equivalent basis):
<CAPTION>
Variance Variance
Variance Attributed to Variance Attributed to
(In thousands) 1995/1994 2 Volume Rate 1994/1993 2 Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Interest income
Taxable investment securities $1,817 $ 470 $1,347 $(1,433) $ (922) $ (511)
Nontaxable investment securities1 (71) 26 (97) 1,223 1,599 (376)
Time deposits with banks, federal
funds sold and securities
purchased under agreement
to resell 644 (172) 816 126 (482) 608
Loans 1 7,049 2,803 4,246 3,773 4,048 (275)
Total Interest Income 9,439 3,127 6,312 3,689 4,243 (554)
Interest Expense
Interest bearing demand deposits 537 (44) 581 704 721 (17)
Savings deposits 91 (68) 159 36 4 32
Time deposits 5,475 1,728 3,747 (1,306) (954) (352)
Securities sold under agreements
to repurchase 375 (145) 520 325 85 240
Other borrowed funds 51 66 (15) 59 54 5
Total Interest Expense 6,529 1,537 4,992 (182) (90) (92)
Net Interest Income $2,910 $1,590 $1,320 $3,871 $4,332 $(461)
Percentage change 100% 54.6% 45.4% 100% 111.9% (11.9)%
</TABLE>
1 Income stated at fully tax equivalent basis using a 34% tax rate.
2 The changes which are not solely due to rate or volume are allocated on a
percentage basis, using the absolute values of rate and volume variances as
a basis for allocation.
As the table indicates, the $2.9 million increase for 1995 in net interest
income (TE) is nearly equally attributed to rate and volume variance.
Asset Quality
The provision for loan losses represents charges made to earnings to maintain
an adequate Allowance. Each subsidiary determines its level for the
Allowance and maintains it at an amount believed to be sufficient to absorb
possible losses that may be experienced in the credit portfolio. The
following factors are used in establishing an appropriate Allowance:
A careful assessment of the financial condition of individual borrowers
A realistic determination of the value and adequacy of underlying collateral
A thorough review of historical loss experience
The condition of the local economy
A comprehensive analysis of the levels and trends of loan categories
A review of delinquent and criticized loans
The provision for loan losses increased $1.6 million compared to 1994. The
Company had net charge-offs of $4.1 million compared to $1.8 million the
prior year. The Allowance was 1.56% of net loans, down from 1.67% at the end
of 1994. Management feels the current reserve is adequate to cover any
potential future losses within the loan portfolio. Management also continues
to emphasize collection efforts and evaluation of risks within the portfolio.
Several loans to one borrower (an entity controlled by relatives of a
director), totaling $1.4 million were charged off during 1995. Remaining
loans with this borrower have been addressed in determining the current
amount of reserve necessary to cover potential future losses.
The table below summarizes the loan loss experience for the past five years.
Year Ended December 31,
(In thousands) 1995 1994 1993 1992 1991
Average loans
net of unearned income $540,632 $511,492 $467,738 $473,271 $482,355
Balance of allowance for
loan losses at
beginning of period $ 8,889 $ 8,547 $ 8,261 $ 7,917 $ 7,947
Loans charged off:
Commercial, financial
and agricultural 2,390 741 1,826 2,427 2,126
Real estate 118 416 638 611 2,213
Installment loans to
individuals 2,376 1,467 1,483 1,233 1,460
Total loans charged off 4,884 2,624 3,947 4,271 5,799
Recoveries of loans
previously charged off:
Commercial, financial
and agricultural 192 193 343 651 329
Real estate 146 230 5,409 371 354
Installment loans to
individuals 402 418 507 357 268
Total recoveries 740 841 6,259 1,379 951
Net loans charged off/
(recovered) 4,144 1,783 (2,312) 2,892 4,848
Additions to allowance
charged (credited) to
expense 3,727 2,125 (2,026) 3,236 4,818
Balance at end of period $ 8,472 $ 8,889 $ 8,547 $ 8,261 $ 7,917
Ratio of net charge offs
(recoveries) during period
to average loans, net
of unearned income .77% .35% (.49)% .61% 1.01%
Noninterest Income
Noninterest income for 1995 totaled $11.9 million. Compared with 1994,
noninterest income increased $384 thousand; however, after considering that
in 1994 noninterest income was inflated by a $758 thousand nonrecurring
recovery, the actual increase is $1.1 million. The majority of the
improvement came from increased nonsufficient funds and overdraft fees.
Trust income, totalling $1.2 million was unchanged from the previous year.
The rest of the increase was made up from various unrelated service charges
and fees.
Noninterest Expense
Noninterest expense, excluding the provision for loan losses, increased
$1.5 million, or 4.9% to $32.6 million despite the significant reduction in
FDIC insurance premiums. FDIC premiums decreased $686 thousand, or 45.4% and
will be even lower in 1996. The premium rate declined during the third
quarter of 1995 from $.23 per $100 to $.04 per $100. No premium will be
collected in the first six months of 1996 before returning to the $.04 per
$100 rate.
Salaries and benefits were up $835 thousand, or 5.2% to $16.8 million. The
full time equivalent number of employees did not change during the last year;
the increase is due to rising health insurance premiums. Management has
addressed rising health insurance costs by adopting a self-insured medical
plan effective January 1, 1996. It is anticipated that the new self-funded
plan will help control rising costs. Occupancy expense is up $163 thousand,
or 8.2% and equipment expense is up $158 thousand, or 6.2%.
Other noninterest expense is up $1.1 million, a 14.4% increase to $9.1
million. Expense related to other real estate owned is $292 thousand. The
rest of the increase in other noninterest expense consists of various
unrelated service charges, and operating expenses.
Income Tax
Income tax expense increased $108 thousand or 2.5% which correlates to the
increase in income before tax. The effective tax rate for 1995 was 29.6%,
up 20 basis points from last year.
Financial Condition
On December 31, 1995 assets were $906 million, an increase of $54 million or
6.4% from year end 1994. Average assets for 1995 increased $23 million, or
2.7% to $862 million. Earning assets, primarily loans and investments,
averaged $779 million, up $34 million or 4.6%.
Loans
Average loans increased $29 million, or 5.7% in 1995 to $541 million and
represented 69.4% of total earning assets, up 7 basis points from 1994. The
average yield on the entire loan portfolio was 10.05% in 1995 compared to
9.25% in 1994.
On average, real estate mortgage loans are up $15.6 million, or 5.7%, direct
lease financing is up $8.7 million, or 86.7% while the other categories
experienced nominal fluctuations. Leasing One, our commercial leasing
subsidiary, has now completed its second full year of operations and will
continue to provide increased volume in the near future. The outlook for
increased volumes of other types of loans is not as favorable.
The composition of the loan portfolio is summarized in the table below:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 % 1994 % 1993 % 1992 % 1991 %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $114,412 20.6% $115,068 21.1% $108,755 22.2% $111,089 23.6% $129,439 26.4%
Real estate -
Construction 26,380 4.8 28,755 5.3 21,772 4.4 18,577 3.9 21,520 4.4
Real Estate -
Mortgage 292,913 52.8 279,264 51.3 262,074 53.5 247,054 52.5 243,577 49.7
Installment 99,571 17.9 107,450 19.7 95,544 19.5 93,676 19.9 95,271 19.4
Direct Leasing 21,666 3.9 14,029 2.6 2,200 0.4 215 0.1 416 0.1
Total $554,942 100.0% $544,566 100.0% $490,345 100.0% $470,611 100.0% $490,223 100.0%
</TABLE>
The following table indicates the amount of loans (excluding real estate
mortgages, consumer loans and direct lease financing) outstanding at
December 31, 1995, which, based on remaining scheduled repayments of
principal, are due in the periods indicated.
Maturing Within After One But After
(In thousands) One Year Within Five Years Five Years Total
Commercial, financial
and agricultural $ 92,699 $20,585 $1,128 $114,412
Real estate -
Construction 23,354 3,002 24 26,380
Total $116,053 $23,587 $1,152 $140,792
The table below shows the amount of loans (excluding real estate mortgages,
consumer loans and direct lease financing) outstanding at December 31, 1995,
which are due after one year classified according to sensitivity to changes
in interest rates.
Interest Sensitivity Fixed Variable
(In thousands) Rate Rate
Due after one but within five years $23,240 $347
Due after five years 1,090 62
$24,330 $409
Temporary Investments
Federal funds sold and securities purchased under agreement to resell are the
primary components of temporary investments. These funds help in the
management of liquidity and interest rate sensitivity. In 1995, temporary
investments averaged $52 million, a decrease of $4.3 million, or 7.7% from
year end 1994. Temporary investment funds are reallocated as loan demand
presents the opportunity.
Investment Securities
The majority of the investment security portfolio is comprised of U.S.
Treasury securities, Federal agency securities, tax-exempt securities, and
mortgage-backed securities. Total investment securities were $227 million
on December 31, 1995 an increase of $34 million, or 17.6% from year end 1994.
Obligations of other U.S. Government agencies are currently providing the
best opportunities. New funds and the reinvestment of called or matured
securities are typically being used to acquire agency bonds without lowering
the current level of tax free obligations. Obligations of states and
political subdivisions are the primary means of managing the Company's tax
position. The alternative minimum tax is not expected to impact our ability
to acquire tax free obligations in the near future as they become available
at an attractive yield.
Available for sale securities and held to maturity securities were $106
million and $121 million, respectively. Total investment securities averaged
$187 million, an increase of $9.6 million, or 5.4% from year end 1994. Net
unrealized losses, net of tax effect, on available for sale securities, was
$826 thousand on December 31, 1995.
The following table summarizes the carrying values of investment securities
on December 31, 1994 and 1995. The investment securities are divided into
available for sale and held to maturity securities. Available for sale
securities are carried at the estimated fair value and held to maturity
securities are carried at amortized cost.
1995 1994
Available Held to Available Held to
December 31, (In thousands) for sale maturity for sale maturity
U.S. Treasury securities $ 16,668 $ 15,994 $ 8,745 $ 45,559
Obligations of other
U.S. Government agencies 77,624 34,732 55,855 18,192
Obligations of states
and political subdivisions 54,696 51,095
Mortgage-backed securities 10,251 13,151 4,819 5,131
Other securities 1,390 2,418 3,047 500
Total $105,933 $120,991 $72,466 $120,477
During 1993, investment securities were carried at amortized cost. The
following table summarizes the carrying values on December 31, 1993.
December 31, (In thousands) 1993
U.S. Treasury securities $ 67,355
Obligations of other U.S. Government agencies 68,529
Obligations of states and political subdivisions 46,081
Mortgage-backed securities 5,792
Other securities 1,109
Total $188,866
The following is an analysis of the maturity distribution and weighted
average interest rates of investment securities at December 31, 1995. For
purposes of this analysis, available for sale securities are stated at fair
value and held to maturity securities are valued at amortized cost.
<TABLE>
<CAPTION>
Within After One But After Five But After
Available for Sale One Year Within Five Years Within Ten Years Ten Years
(In thousands) Amount Rate Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $15,100 5.49% $ 8,567 6.20%
Obligations of other U.S.
Government agencies 30,877 5.64 39,748 5.36
Mortgage-backed securities 438 7.52 7,002 7.00 $195 7.06% $2,616 6.93%
Other 700 7.52 690 4.88
Total $46,415 5.61% $56,017 5.72% $195 7.06% $3,306 6.50%
</TABLE>
<TABLE>
<CAPTION>
Within After One But After Five But After
Held to Maturity One Year Within Five Years Within Ten Years Ten Years
(In thousands) Amount Rate Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ 13,991 5.06% $2,003 6.59%
Obligations of other U.S.
Government agencies 7,496 4.85 24,987 6.23 $2,250 7.26%
States and political
subdivisions 7,118 6.27 29,300 7.11 16,343 6.98 $1,935 7.79%
Mortgage-backed securities 7,725 6.78 5,426 7.38
Other 598 7.77 1,372 5.45 447 6.52
Total $29,203 5.36% $65,387 6.69% $24,466 7.09% $1,935 7.79%
</TABLE>
The calculation of the weighted average interest rates for each category is
based on the weighted average costs of the securities. The weighted average
tax rates on exempt state and political subdivisions is computed on a taxable
equivalent basis using a 34% tax rate.
Deposits
On December 31, 1995, deposits totaled $755 million, an increase of $58
million, or 8.3% from year end 1994. Deposits averaged $722 million, an
increase of $22 million, or 3.1% from 1994.
During 1995 the total average interest bearing deposits increased $33
million, or 5.7% to $611 million while average noninterest bearing deposits
decreased $11 million, or 8.8% to $111 million. On average, interest bearing
demand deposits make up 34.1% of the total deposit base and have fluctuated
less than 1% from last year. Average savings accounts have declined 4.4% to
a total of $53 million.
The primary increase in the deposit base has been with time deposits.
Average time deposits have increased $37 million, or 13.4% to $312 million
due to the creation of a new flexible rate certificate of deposit product
("FlexSaver") introduced during the fourth quarter of 1994. The increase is
the result of both new deposits and the migration of existing accounts into
the FlexSaver.
The decline in noninterest bearing deposits can be attributed to the
introduction of the FlexSaver and the unpredictable fluctuation in activity
from the Commonwealth of Kentucky deposits. Farmers Bank & Capital Trust
Co., a subsidiary of the Company, is the general depository for the
Commonwealth of Kentucky and has been for more than 70 years.
A summary of average balances and rates paid on deposits follows:
1995 1994 1993
Average Average Average Average Average Average
(In thousands) Balance Rate Balance Rate Balance Rate
Noninterest demand
deposits $110,759 0.00% $121,492 0.00% $110,721 0.00%
Interest bearing
demand deposits 245,926 2.96 247,554 2.72 221,086 2.73
Savings deposits 53,417 3.19 55,853 2.89 55,697 2.83
Time deposits 311,668 5.55 274,812 4.30 295,883 4.44
$721,770 $699,711 $683,387
Maturities of time deposits of $100,000 or more outstanding at
December 31, 1995 are summarized as follows:
Time Deposits
(In thousands) >$100,000
3 months or less $13,286
Over 3 through 6 months 13,632
Over 6 through 12 months 15,506
Over 12 months 16,217
$58,641
Short-term Borrowings
Securities sold under
agreement to repurchase: (In thousands) 1995 1994 1993
Amount outstanding at year-end $34,638 $43,525 $22,372
Maximum outstanding at any month-end 55,929 43,525 36,058
Average outstanding 28,889 33,348 30,590
Weighted average prime rate during the year 8.83% 7.14% 6.00%
Weighted average interest rate at year-end 5.48 3.63 2.89
Such borrowings are generally on an overnight basis.
Nonperforming Assets
Nonperforming assets decreased $1.9 million, or 21.7% to $7.0 million at year
end 1995. As a percentage of loans and other real estate owned,
nonperforming assets were 1.3% in 1995, 1.7% in 1994, 1.6% in 1993, 3.7% in
1992, and 4.7% in 1991. Since 1991, nonperforming assets have decreased
$15.9 million, or 69.6%. The largest reductions have been in other real
estate owned and restructured loans. This trend is the result of
management's continued efforts to improve the quality of the loan portfolio.
The Company's loan policy includes strict guidelines for approving and
monitoring loans. The table below is a five year summary of nonperforming
assets.
Year Ended December 31, (In thousands)
1995 1994 1993 1992 1991
Loans accounted for on
non-accrual basis $2,897 $ 3,913 $ 1,565 $ 3,981 $ 5,479
Loans contractually past
due ninety days or more 1,713 1,056 1,402 2,730 3,275
Restructured loans 1,571 3,538 3,734 5,266 5,247
Other real estate owned 776 380 1,169 5,541 8,865
Total nonperforming assets $6,957 $ 8,887 $ 7,870 $17,518 $22,866
Liquidity and Interest Rate Sensitivity
The liquidity of the Company is dependent on the receipt of dividends from
its subsidiary banks (see Note 17 to the financial statements). Management
expects that in the aggregate, its subsidiary banks will continue to have the
ability to dividend adequate funds to the Company.
The Company's objective as it relates to liquidity is to insure that
subsidiary banks have funds available to meet deposit withdrawals and credit
demands without unduly penalizing profitability. In order to maintain a
proper level of liquidity, the banks have several sources of funds available
on a daily basis which can be used for liquidity purposes. Those sources of
funds are:
The banks' core deposits consisting of both business and non-business
deposits
Cash flow generated by repayment of loan principal and interest
Federal funds purchased and securities sold under agreements to repurchase
For the longer term, the liquidity position is managed by balancing the
maturity structure of the balance sheet. This process allows for an orderly
flow of funds over an extended period of time.
Interest Rate Sensitivity
In that it is extremely difficult to accurately predict interest rate
movements, it is management's intention to maintain the cumulative interest
sensitivity gap at the one year time frame between plus or minus 10% as a
percent of total assets. The gap position may be managed by (1) purchasing
investment securities with a maturity date within the desired time frame,
(2) offering interest rate incentives to encourage loan customers to choose
the desired maturity, and (3) offer interest rate incentives to encourage
deposit customers to choose the desired maturity.
The following chart illustrates interest rate sensitivity at December 31,
1995 for various time periods. The purpose of this GAP chart is to measure
interest rate risk utilizing the repricing intervals of the interest
sensitive assets and liabilities. Rising interest rates are likely to
increase net interest income in a positive GAP position while falling
interest rates are beneficial in a negative GAP position. The Company has a
negative GAP position through three months, but then shifts to a nearly
neutral GAP position at twelve months. This positioning is due to management's
anticipated economic outlook and other competitive factors.
After Three After
Months But One Year But
Within Within Twelve Within Five After
(In millions) Three Months Months Years Five Years Total
Interest earning
assets:
Investment securities $ 81.1 $ 28.4 $ 89.8 $ 27.6 $226.9
Federal funds sold 68.4 68.4
Loans, net of unearned
income 218.7 167.1 147.2 10.1 543.1
Total $368.2 $195.5 $237.0 $ 37.7 $838.4
Percentage of
total interest
earning assets 43.9% 23.3% 28.3% 4.5% 100.0%
Rate sensitive sources
of funds used to
finance interest
earning assets:
Interest bearing
deposits $379.5 $141.4 $119.5 $ 5.0 $645.4
Other borrowed funds 34.5 1.0 3.0 38.5
Total $414.0 $141.4 $120.5 $ 8.0 $683.9
Percent of total
rate sensitive
sources of funds 60.5% 20.7% 17.6% 1.2% 100.0%
Interest sensitivity
gap (45.8) 54.1 116.5 29.7 154.5
Cumulative interest
sensitivity gap (45.8) 8.3 124.8 154.5
Interest sensitive
assets to interest
sensitive liabilities .89:1 1.38:1 1.97:1 4.71:1 1.23:1
Cumulative ratio of
interest sensitive asset
to interest sensitive
liabilities .89:1 1.01:1 1.18:1 1.23:1
Effects of Inflation
Since most of the assets and liabilities are monetary in nature, inflation
has a minor effect on banking concerns. Personnel costs, occupancy expenses
and equipment costs all tend to reflect the inflation rate as measured by the
consumer price index. The Company continues to attempt to offset such
increases by raising noninterest income fees.
Shareholders' Equity
Shareholders equity was $105 million on December 31, 1995, increasing
$4.9 million, or 4.9% from year end 1994. Dividends of $5.2 million were
declared during 1995. The Company's Board of Directors approved a 9.1%
increase in the quarterly dividend rate in the fourth quarter of 1995 from
$.33 per share to $.36 per share. The Company's capital ratios as of
December 31, 1995 and the regulatory minimums are as follows:
Farmers Capital Regulatory
Bank Corporation Minimum
Tier 1 risk based 18.29% 4.00%
Total risk based 19.54 8.00
Leverage 11.73 3.00
The capital ratios of all the subsidiary banks, on an individual basis, were
well in excess of the applicable minimum regulatory capital ratio
requirements at December 31, 1995.
The table below is an analysis of dividend payout ratios and equity to
asset ratios for five years.
December 31, 1995 1994 1993 1992 1991
Percentage of dividends
declared to net income 50.24% 46.40% 39.78% 66.26% 98.18%
Percentage of average
shareholders' equity
to average total assets 11.81 11.57 11.22 10.85 10.64
Shareholder Information
As of January 1, 1996, there were 818 shareholders of record. This figure
does not include individual participants in security position listings.
Stock Prices
Farmers Capital Bank Corporation's stock is traded in the National
Association of Security Dealers Automated Quotation System (NASDAQ) National
Market System, with sales prices reported by the National Association of
Securities Dealers, under the NASDAQ symbol: FFKT. The table below is an
analysis of the stock prices and dividends declared for 1995 and 1994.
Stock Prices
Dividends
High Low Declared
1995
Fourth Quarter $43.50 $37.00 $0.36
Third Quarter 39.50 33.00 0.33
Second Quarter 37.00 32.80 0.33
First Quarter 38.00 35.50 0.33
1994
Fourth Quarter $40.50 $36.50 $0.33
Third Quarter 41.00 36.88 0.30
Second Quarter 43.00 37.00 0.30
First Quarter 39.50 33.00 0.30
Dividends declared per share increased $.12, or 9.8% and $.12 or 10.8%, for
the years 1995 and 1994, respectively.
Accounting Requirements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This Statement establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. This
Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may no be recoverable. If the sum of the expected future cash
flows resulting from an asset's use and disposition is less than the carrying
amount of the asset, an impairment loss is recognized.
This Statement if effective for fiscal years beginning after December 15,
1995. The Company does not expect the implementation of this Statement to
have a material effect on the financial statements.
In May 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage Servicing
Rights". This Statement amends FASB Statement No. 65, "Accounting for
Certain Mortgage Banking Activities", to require that a mortgage banking
enterprise recognize as separate assets rights to service mortgage loans for
others, however those servicing rights are acquired. The total cost of the
mortgage loans should be allocated between the mortgage servicing rights and
the loans based on their relative fair values if it is practicable to
estimate those fair values. If not, the entire cost should be allocated to
the mortgage loans.
This Statement applies prospectively in fiscal years beginning after
December 15, 1995. The Company does not expect the implementation of this
Statement to have a material affect on the financial statements.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation". The Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from nonemployees. Those transactions must be
accounted for based on the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable.
The accounting requirements of this Statement are effective for transactions
entered into in fiscal years that begin after December 15, 1995. The Company
does not expect this Statement to have an effect on the financial statements
in that the Company is not involved with any stock-based employee
compensation plans or transactions to acquire goods or services from
nonemployees in exchange for equity.
1994 Compared with 1993
Net income was $10.25 million in 1994 compared to $10.8 million in 1993, a
decrease of $550 thousand, or 5.0%. Net income per share decreased to $2.65
from $2.79, or 5.0%. The decrease resulted from three nonrecurring events:
(1)nonrecurring recovery of prior year losses increased 1994 net income by
$503 thousand; (2) settlement of a bond claim increased 1993 net income by
$3.5 million; (3) adoption of SFAS No. 109 "Accounting for Income Taxes"
increased 1993 net income by $380 thousand. Adjusting each year for these
items, net income would increase 40.7% to $9.7 million or $2.52 per share in
1994, from $6.9 million or $1.79 per share in 1993. Also after adjustment,
return on average assets and average equity would increase to 1.16% and 9.99%
in 1994 compared to 0.85% and 7.58% in 1993.
Net interest income on a tax equivalent basis increased 11% to $37.7 million.
The growth was due to the $31.0 million increase in average earning assets.
The spread between rates earned and paid and the net interest margin both
increased in 1994 to 4.45% and 5.06%, respectively compared to 4.19% and
4.73% in 1993.
Noninterest income increased $876 thousand, or 8.2% in 1994. The majority of
the increase can be attributed to the $758 thousand nonrecurring recovery of
prior year losses. Third party brokerage income, service charges and fees and
trust income contributed to the remaining part of the increase.
Noninterest expense increased $1.0 million to $31.1 million in 1994.
Salaries and benefits, the largest component, increased $793 thousand.
Occupancy expenses were up $56 thousand and equipment expenses were down $113
thousand. FDIC insurance premiums were down $61 thousand. Other real estate
expenses decreased $97 thousand.
Income tax expense was $4.3 million in 1994, a decrease of $802 thousand from
1993, which correlates to the decrease in income before taxes and the higher
percentage of tax free income. The effective tax rate for 1994 was 29.4%
compared to 32.7% in 1993.
On December 31, 1994, the allowance for loan losses totaled $8.9 million, or
1.7% of loans, net of unearned, down slightly from 1993. The provision for
loan losses increased $4.2 million in 1994, which can be directly attributed
to the bond claim settlement received in 1993. Nonperforming assets
increased $1.0 million, or 12.9% in 1994 although they have otherwise
steadily decreased over the previous four years.
Average assets, average earning assets, average loans, and average deposits
increased between 1994 and 1993 by 3.5%, 4.3%, 9.4% and 2.4% respectively.
Stockholders' equity was $100.1 million on December 31, 1994, an increase of
$5 million, or 5.2% from 1993.
Item 8 - Financial Statements and Supplementary Data
Report of Independent Accountants
To the Board of Directors and Shareholders
Farmers Capital Bank Corporation
We have audited the accompanying consolidated balance sheets of Farmers
Capital Bank Corporation and Subsidiaries as of December 31, 1995 and 1994
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Farmers Capital
Bank Corporation and Subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, in 1995 the
Company changed its method of accounting for impaired loans. Also, as
discussed in Notes 3, 10, and 12 to the consolidated financial statements,
in 1994, the Company changed its method of accounting for certain investments
in debt and equity securities and in 1993 the Company changed its method of
accounting for income taxes and other postretirement benefits.
Coopers & Lybrand L.L.P.
Louisville, Kentucky
January 16, 1996
Consolidated Balance Sheets
December 31, (In thousands, except share figures) 1995 1994
Assets
Cash and cash equivalents:
Cash and due from banks $ 41,126 $ 56,304
Interest bearing deposits in other banks 688 577
Federal funds sold and securities purchased under
agreement to resell 68,370 43,670
Total cash and cash equivalents 110,184 100,551
Investment securities:
Available for sale 105,933 72,466
Held to maturity 120,991 120,477
Loans 554,942 544,566
Less:
Allowance for loan losses (8,472) (8,889)
Unearned income (11,762) (11,376)
Loans, net 534,708 524,301
Bank premises and equipment 19,916 20,588
Interest receivable 7,889 6,778
Deferred income taxes 1,363 1,867
Other assets 5,129 4,675
Total Assets $906,113 $851,703
Liabilities
Deposits:
Noninterest bearing $109,490 $103,933
Interest bearing 645,371 592,762
Total deposits 754,861 696,695
Other borrowed funds 38,524 48,392
Dividends payable 1,392 1,276
Interest payable 2,370 1,715
Other liabilities 4,037 3,561
Total liabilities 801,184 751,639
Commitments and contingencies
Shareholders' equity
Common stock, par value $.25 per share,
4,804,000 shares authorized; 3,866,382
shares issued and outstanding at
December 31, 1995 and 1994 967 967
Capital surplus 9,094 9,094
Retained earnings 95,694 90,524
Net unrealized loss on securities
available for sale, net of tax (826) (521)
Total shareholders' equity 104,929 100,064
Total liabilities and shareholders' equity $906,113 $851,703
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statements of Income
For the years ended December 31,
(In thousands, except per share data) 1995 1994 1993
Interest income
Interest and fees on loans $ 53,965 $ 46,951 $ 43,291
Interest on investment securities:
Taxable 7,923 6,106 7,539
Nontaxable 2,331 2,295 1,510
Interest on deposits in other banks 116 122 37
Interest on federal funds sold and securities
purchased under agreement to resell 2,926 2,276 2,235
Total interest income 67,261 57,750 54,612
Interest expense
Interest on deposits 26,274 20,171 20,737
Interest on other borrowed funds 1,841 1,415 1,031
Total interest expense 28,115 21,586 21,768
Net interest income 39,146 36,164 32,844
Provision (credit) for loan losses 3,727 2,125 (2,026)
Net interest income after provision (credit)
for loan losses 35,419 34,039 34,870
Noninterest income
Service charges and fees on deposits 5,425 4,743 4,615
Trust income 1,176 1,202 1,157
Other 5,314 5,586 4,883
Total noninterest income 11,915 11,531 10,655
Noninterest expense
Salaries and employee benefits 16,788 15,953 15,160
Occupancy expenses, net 2,154 1,991 1,935
Equipment expenses 2,712 2,554 2,667
Bank shares tax 1,000 1,097 1,011
Deposit insurance expense 826 1,512 1,573
Other 9,093 7,949 7,689
Total noninterest expense 32,573 31,056 30,035
Income before income taxes and cumulative
effect of change in accounting principle 14,761 14,514 15,490
Income tax expense 4,372 4,264 5,066
Income before cumulative effect of
change in accounting principle 10,389 10,250 10,424
Cumulative effect of change
in accounting principle 380
Net income $10,389 $ 10,250 $ 10,804
Per common share:
Income before cumulative effect
of change in accounting principle $ 2.69 $ 2.65 $ 2.69
Cumulative effect of change
in accounting principle .10
Net income $ 2.69 $ 2.65 $ 2.79
Weighted average shares outstanding 3,866 3,866 3,866
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statements of Changes in Shareholders' Equity
For the years ended
December 31, 1995, 1994 and 1993
(In thousands, except per share data)
Net Unrealized
Gain(Loss) on Total
Common Capital Retained Securities Shareholders'
Stock Surplus Earnings Available for Sale Equity
Balance at
January 1, 1993 $967 $9,094 $78,518 $88,579
Cash dividends declared (4,292) (4,292)
Net income 10,804 10,804
Balance at
December 31, 1993 967 9,094 85,030 95,091
Cumulative effect of
net unrealized gain on
securities available
for sale, net of tax $182 182
Cash dividends declared,
$1.23 per share (4,756) (4,756)
Net income 10,250 10,250
Net unrealized loss
on securities available
for sale, net of tax (703) (703)
Balance at
December 31, 1994 967 9,094 90,524 (521) 100,064
Cash dividends declared,
$1.35 per share (5,219) (5,219)
Net income 10,389 10,389
Net unrealized loss
on securities available
for sale, net of tax (305) (305)
Balance at
December 31, 1995 $ 967 $ 9,094 $95,694 $(826) $104,929
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(In thousands) 1995 1994 1993
Cash flows from operating activities:
Net income $ 10,389 $ 10,250 $ 10,804
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,634 2,553 2,775
Net amortization of investment security
premiums and discounts:
Available for sale (818) 117
Held to maturity 238 326
Carried at amortized cost 893
Provision (credit) for loan losses 3,727 2,125 (2,026)
Loans originated for sale (14,730) (3,840) (5,035)
Sale of loans 14,730 3,840 5,035
Deferred income tax expense (benefit) 732 (18) (430)
Loss on sale of fixed assets 32 19
Investment security (gains) losses:
Available for sale 74
Carried at amortized cost (4)
Changes in:
Interest receivable (1,111) (358) 408
Other assets (1,078) 785 4,265
Interest payable 655 240 (477)
Other liabilities 476 589 (4,040)
Net cash provided by operating activities 15,844 16,715 12,187
Cash flows from investing activities:
Proceeds from maturities of investment securities:
Available for sale 84,897 73,841
Held to maturity 51,855 21,609
Carried at amortized cost 84,743
Proceeds from sales of investment securities:
Available for sale 11,603
Carried at amortized cost 7,989
Purchases of investment securities:
Available for sale (118,004) (77,005)
Held to maturity (52,607) (35,431)
Carried at amortized cost (121,643)
Net increase in loans (14,134) (53,336) (16,851)
Purchases of bank premises and equipmen (1,413) (921) (1,649)
Proceeds from sale of equipment 6 16
Net cash used in investing activities (49,406) (59,634) (47,395)
Cash flows from financing activities:
Net increase (decrease) in deposits 58,166 39,262 (27,096)
Dividends paid (5,103) (4,640) (4,176)
Net increase (decrease) in
other borrowed funds (9,868) 11,064 (1,737)
Net cash provided by (used in)
financing activities 43,195 45,686 (33,009)
Net change in cash and cash equivalents 9,633 2,767 (68,217)
Cash and cash equivalents at beginning of year 100,551 97,784 166,001
Cash and cash equivalents at end of year $110,184 $100,551 $ 97,784
Supplemental disclosures:
Cash paid during the year for:
Interest $ 27,460 $ 21,346 $ 22,245
Income taxes 3,730 4,255 5,337
Cash dividend declared and unpaid 1,392 1,276 1,160
The accompanying notes are an integral part of the consolidated financial
statements.
1. Summary of Significant Accounting Policies
The accounting and reporting policies of Farmers Capital Bank Corporation and
Subsidiaries conform to generally accepted accounting principles and general
practices applicable to the banking industry. The more significant
accounting policies are summarized below:
Basis of Presentation and Organization:
The consolidated financial statements include the accounts of Farmers
Capital Bank Corporation (the "Company"), a bank holding company, and
its subsidiaries, including its principal subsidiary, Farmers Bank &
Capital Trust Company. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The Company is predominantly engaged in the business of receiving
deposits from and making real estate, commercial and consumer loans to
businesses and consumers in central Kentucky.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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. Estimates used in the preparation of the
financial statements are based on various factors including the current
interest rate environment and the general strength of the local economy.
Changes in the overall interest rate environment can significantly
effect the Company's net interest income and the value of its recorded
assets and liabilities. Actual results could differ from those
estimates used in the preparation of the financial statements.
Reclassifications:
Certain amounts in the accompanying consolidated financial statements
presented for prior years have been reclassified to conform with the
1995 presentation. These reclassifications do not affect net income or
shareholders' equity as previously reported.
Cash and Cash Equivalents:
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, interest bearing demand deposits
in other banks, federal funds sold and securities purchased under
agreements to resell. Generally, federal funds sold and securities
purchased under agreements to resell are purchased and sold for one-day
periods.
Investment Securities:
All investments in debt securities and all investments in equity
securities that have readily determinable fair values are classified
into three categories. Securities that management has positive intent
and ability to hold until maturity are classified as held to maturity.
Securities that are bought and held specifically for the purpose of
selling them in the near term are classified as trading securities. All
other securities are classified as available for sale. Securities are
designated as available for sale if management intends to use such
securities in its asset/liability management strategy and therefore such
securities may be sold in response to changes in interest rates and
prepayment risk. Securities classified as trading and available for
sale are carried at market value. Unrealized holding gains and losses
for trading securities are included in current income. Unrealized
holding gains and losses for available for sale securities are reported
net as a separate component of stockholders' equity until realized.
Investments classified as held to maturity are carried at amortized
cost. Realized gains and losses on any sales of securities are computed
on the basis of specific identification of the adjusted cost of each
security and are included in noninterest income.
Loans:
Loans are stated at the principal amount outstanding. Interest income
on loans is recognized using the interest method based on loan principal
amounts outstanding during the period. Accrual of interest is adjusted
or discontinued on a loan when, in the opinion of management, its
collection becomes doubtful.
Provision for Loan Losses:
The provision for loan losses charged to operating expenses is an amount
that is sufficient to maintain the allowance for loan losses at an
adequate level based on management's best estimate of possible future loan
losses. Management's determination of the adequacy of the allowance is
based on such considerations as the current condition and volume of the
Company's loan portfolios, economic conditions within the Company's
service areas, review of specific problem loans, and any other factors
influencing the collectibility of the loan portfolios.
Other Real Estate:
Other real estate owned and held for sale included with other assets on
the accompanying consolidated balance sheets includes properties
acquired by the Company through actual loan foreclosures. Other real
estate owned is carried at lower of cost or fair value less estimated
costs to sell. Fair value is the amount that the Company could
reasonably expect to receive in a current sale between a willing buyer
and a willing seller, other than in a forced or liquidation sale. Fair
value of assets are measured by their market value based on comparable
sales. Any reduction to fair value from the fair value recorded at the
time of acquisition is accounted for as a valuation reserve.
Bank Premises and Equipment:
Bank premises, equipment and leasehold improvements are stated at cost
less accumulated depreciation and amortization. Depreciation is
computed primarily on the straight-line method over the estimated useful
lives for furniture, equipment and buildings. Leasehold improvements
are amortized over the shorter of the estimated useful lives or terms of
the related leases on the straight-line method. Maintenance, repairs
and minor improvements are charged to operating expenses as incurred and
major improvements are capitalized. The cost of assets sold or retired
and the related accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in income.
Earnings Per Share:
Earnings per share is calculated on the basis of the weighted average
number of common shares outstanding.
2. Restrictions on Cash and Due From Banks
Included in cash and due from banks are certain noninterest bearing deposits
that are held at the Federal Reserve Bank and correspondent banks in
accordance with average balance requirements specified by the Federal
Reserve Board of Governors. The total average balances maintained in
accordance with such requirements as of December 31, 1995 and 1994 were
$8,988,000 and $6,449,000, respectively.
3. Investment Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires investments in equity
securities that have a readily determinable fair value and investments in
debt securities to be classified into three categories, as follows: held to
maturity debt securities, trading securities, and available for sale
securities. Investments categorized as available for sale had an estimated
fair value in excess of carrying value of $276,000 at January 1, 1994, and
had the effect of increasing stockholders' equity by $182,000 (net of tax
effect of $94,000). There was no impact on the Company's consolidated net
income as a result of the adoption of SFAS No. 115.
The following summarizes the amortized cost and estimated fair values of the
securities portfolio at December 31, 1995. The summary is divided into
available for sale and held to maturity securities.
December 31, 1995 Gross Gross Estimated
(In thousands) Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
U.S. Treasury $ 16,609 $ 70 $ 11 $ 16,668
Obligations of U.S.
Government agencies 78,992 52 1,420 77,624
Mortgage-backed securities 10,210 41 10,251
Other securities 1,372 18 1,390
Total securities -
available for sale $107,183 $181 $1,431 $105,933
Held to Maturity
U.S. Treasury $ 15,994 $ 79 $ 6 $ 16,067
Obligations of U.S.
Government agencies 34,732 192 176 34,748
Obligations of states
and political subdivisions 54,696 721 256 55,161
Mortgage-backed securities 13,151 214 31 13,334
Other securities 2,418 24 8 2,434
Total securities -
held to maturity $120,991 $1,230 $477 $121,744
The following summarizes the amortized cost and estimated fair values of the
securities portfolio at December 31, 1994.
December 31, 1994 Gross Gross Estimated
(In thousands) Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
U.S. Treasury $ 8,991 $ 246 $ 8,745
Obligations of U.S.
Government agencies 56,308 $ 1 454 55,855
Mortgage-backed securities 4,910 91 4,819
Other securities 3,046 1 3,047
Total securities -
available for sale $73,255 $ 2 $ 791 $72,466
Held to Maturity
U.S. Treasury $ 45,559 $ 2 $ 699 $44,862
Obligations of U.S.
Government agencies 18,192 1,045 17,147
Obligations of states and
political subdivisions 51,095 333 1,835 49,593
Mortgage-backed securities 5,131 228 4,903
Other securities 500 10 490
Total securities -
held to maturity $120,477 $335 $3,817 $116,995
The amortized cost and estimated fair value of the securities portfolio at
December 31, 1995, by contractual maturity, are shown below. The summary is
divided into available for sale and held to maturity securities.
Available for Sale Held to Maturity
December 31, 1995 Amortized Estimated Amortized Estimated
(In thousands) Cost Fair Value Cost Fair Value
Due in one year or less $ 46,430 $ 46,415 $ 29,203 $ 29,208
Due after one year
through five years 57,277 56,017 65,387 65,854
Due after five years
through ten years 194 195 24,466 24,730
Due after ten years 3,282 3,306 1,935 1,952
$107,183 $105,933 $120,991 $121,744
Proceeds from sales and maturities of investments in debt securities during
1995, 1994 and 1993 were $136,752,000, $107,053,000 and $92,732,000,
respectively. Gross gains of $2,000, $3,000 and $48,000 and gross losses of
$0, $77,000 and $44,000 for 1995, 1994 and 1993, respectively, were realized
on those sales and maturities.
The amortized cost and estimated fair value of investment securities which
were pledged as collateral for public deposits, treasury deposits, trust
funds, customer repurchase agreements, and other purposes as required by law
at December 31, 1995 and 1994 are shown below. The securities are divided
into available for sale and held to maturity.
1995 1994
Available Held to Available Held to
December 31, (In thousands) for sale maturity for sale maturity
Amortized cost $51,077 $67,903 $31,224 $80,557
Estimated fair value 50,217 68,496 30,673 78,104
4. Loans
Major classifications of loans are summarized as follows:
December 31, (In thousands) 1995 1994
Commercial, financial and agricultural $114,412 $115,068
Real estate - construction 26,380 28,755
Real estate - mortgage 292,913 279,264
Consumer loans 99,571 107,450
Lease financing 21,666 14,029
Total loans 554,942 544,566
Less unearned income (11,762) (11,376)
Total loans, net of unearned income $543,180 $533,190
Loans to directors, executive officers, principal shareholders, including
loans to affiliated companies of which directors, executive officers and
principal shareholders are principal owners, and loans to members of the
immediate family of such persons, were approximately $12,602,000 and
$14,908,000 at December 31, 1995 and 1994, respectively. An analysis of the
activity with respect to these loans follows:
(In thousands)
Balance, December 31, 1994 $14,908
Additions, including loans now meeting
disclosure requirements 12,077
Amounts collected, including loans no longer
meeting disclosure requirements (12,965)
Amounts charged off related to director loans (1,418)
Balance, December 31, 1995 $12,602
5. Allowance for Loan Losses
On January 1, 1995, the Company implemented SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures" which
amends SFAS No. 114. The two Statements address the following:
1. The accounting by creditors for impairment of a loan.
2. The accounting by creditors for loans that are restructured in a troubled
debt restructuring involving a modification of terms of a receivable.
3. The elimination of the categories of loans classified as in-substance
foreclosures.
SFAS No. 114 requires the measurement of impaired loans based on the present
value of expected future cash flows using the loan's effective interest rate
or, as a practical expedient, it may be measured on the fair market value of
the loan if the loan is collateral dependent. A loan is considered impaired
when, based on current information and events, it is probable that the
Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. If the measure of the impaired loan
is less than the recorded investment, an impairment will be recognized by
creating a valuation allowance with a corresponding charge to the provision
for loan loss. The adoption of SFAS No. 114 did not result in additional
provisions for loan losses or changes in previously reported net earnings
due to the fact that the Company's existing methods of measuring loan
impairment are consistent with the methods prescribed by the Statement.
SFAS No. 114 does not apply to large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment. The Company has
identified these loans as credit card loans and home mortgages, and all
other loans less than $500,000.
The factors considered by management in determining if a loan is impaired
include, but are not limited to, the following: length of delinquency, past
history with the borrower, financial condition of the borrower, ability of the
borrower to repay the debt based upon cash flow information, intentions of
the borrower, and value of the collateral. Impairment is not necessarily
determined by a minimum delay in payment. A minimum delay in payment is when
the exact terms of the loan agreement have not been met by the borrower;
however, the Company believes that contractual interest and principal
payments will still be received These loans are considered non-accrual
loans because the timing of interest payments is unknown; however, it is
still likely that interest will be received. Payments received while a loan
is on non-accrual status are applied against principal only.
All of the loans of the Company to which SFAS No. 114 applies are classified
as commercial loans. Due to the size of the Company and the few loans that
meet the criteria for application of SFAS No. 114, no further risk
classification is necessary. On December 31, 1995, the recorded investment
in loans for which impairment has been recognized in accordance with the
SFAS No. 114 total $2.0 million and the total allowance related to such loans
was $785 thousand. Of the $2.0 million recorded investment, $1.1 million was
measured using the present value of future cash flows method and $.9 million
was measured using the fair value of collateral method. The recorded
investment averaged $2.6 million for the year ended December 31, 1995. The
amount of interest earned on these loans during 1995 was $113 thousand. If
the Company had used a cash-based method of accounting for the interest on
these loans, the interest earned would have been $114 thousand.
The Company's charge-off policy for impaired loans does not differ from the
charge-off policy for loans outside the definition of SFAS No. 114. Loans
that are delinquent in excess of 120 days are charged-off unless there is a
valid reason for the delinquency and the borrower continues to maintain a
satisfactory financial standing and/or the collateral securing the debt is of
such value that any loss appears to be unlikely.
An analysis of the allowance for loan losses follows:
Year Ended December 31, 1995 1994 1993
(In thousands)
Regular SFAS 114 Total Regular Regular
Allowance Allowance Allowance Allowance Allowance
Balance, beginning
of year $ 8,889 None $ 8,889 $ 8,547 $ 8,261
Provisions (credit)
for loan losses 3,727 3,727 2,125 (2,026)
Recoveries 740 740 841 6,259
Loans charged off (3,666) $(1,218) (4,884) (2,624) (3,947)
Amount transferred
to SFAS 114 allowance (2,003) (2,003)
Amount transferred
from regular allowance 2,003 2,003
Balance, end of year $7,687 $ 785 $8,472 $ 8,889 $ 8,547
The following is an estimate of the breakdown of the allowance for loan
losses by type for the date indicated:
Year Ended December 31,
(In thousands) 1995 1994
Commercial, financial and agricultural $4,138 $6,427
Real estate 1,928 1,027
Installment loans to individuals 2,176 1,264
Direct leasing financing 230 171
Total $8,472 $8,889
6. Nonperforming Assets
(In thousands) 1995 1994 1993
Non-accrual loans $2,897 $ 3,913 $ 1,565
Loans past due 90 days or more 1,713 1,056 1,402
Restructured loans 1,571 3,538 3,734
Total nonperforming loan balances
at December 31, 6,181 8,507 6,701
Other real estate owned 776 380 1,169
Total nonperforming assets
at December 31, $6,957 $ 8,887 $ 7,870
Nonperforming loans as a percentage
of loans - net of unearned interest 1.1% 1.6% 1.4%
Nonperforming assets as a percentage
of loans and other real estate owned 1.3% 1.7% 1.6%
Interest income that would have been
recognized under original terms for
the year on nonperforming loans $ 731 $ 576 $ 698
Amount of interest income recognized
for the year on nonperforming loans $ 133 $ 117 $ 431
7. Bank Premises and Equipment
Bank premises and equipment consist of the following:
December 31, (In thousands) 1995 1994
Land, building and leasehold improvement $22,566 $21,769
Furniture and equipment 17,919 17,616
40,485 39,385
Less accumulated depreciation and amortization 20,569 18,797
$19,916 $20,588
Depreciation and amortization of bank premises and equipment was $2,082,000,
$1,973,000 and $2,197,000 in 1995, 1994 and 1993, respectively.
8. Interest Bearing Deposits
Time deposits of $100,000 or more at December 31, 1995 and 1994 were
$58,641,000 and $54,951,000, respectively.
9. Other Borrowed Funds
Other borrowed funds are comprised primarily of securities sold under
agreement to repurchase with balances of $34,638,000 and $43,525,000 at
December 31, 1995 and 1994, respectively. The weighted average interest
rates for 1995 and 1994 were 5.48% and 3.63%, respectively.
10. Income Taxes
In February 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 109, "Accounting for Income Taxes". The Statement requires a
change from the deferred method to the asset and liability method of computing
deferred income taxes. Under the asset and liability method, deferred income
taxes are recognized for the tax consequences on future years of temporary
differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities.
Effective January 1, 1993, the Company adopted the Statement. The cumulative
effect of this adoption was an increase in net income of $380,000 ($.10 per
share).
The components of income tax expense are as follows:
(In thousands) 1995 1994 1993
Currently payable $ 3,640 $ 4,282 $ 5,116
Deferred income taxes 732 (18) (50)
$ 4,372 $ 4,264 $ 5,066
An analysis of the difference between the effective income tax rates and the
statutory federal income tax rate follows:
(In thousands) 1995 1994 1993
Federal statutory rate 35.0% 35.0% 34.0%
Changes from statutory
rates resulting from:
Tax exempt interest (7.4) (7.0) (4.3)
Nondeductible interest to
carry municipal obligations .9 .7 .4
Amortization of intangibles 1.2 1.3 1.2
Other, net (.1) (.6) 1.4
29.6% 29.4% 32.7%
The tax effects of the significant temporary differences which comprise
deferred tax assets and liabilities at December 31, 1995 and 1994 follows:
1995 1994
Assets:
Loan loss reserve $3,000 $3,022
Deferred directors' fees 145 125
Postretirement benefit obligation 257 164
Investment securities 425 268
Other 260 224
4,087 3,803
Liabilities:
Depreciation 1,643 1,589
Deferred loan fees 228 125
Lease financing operations 752 163
Other 101 59
2,724 1,936
Net assets $1,363 $1,867
11. Retirement Plans
The Company maintains a defined contribution-money purchase pension plan which
covers substantially all employees. The Company's contributions under the plan
are based upon a percentage of covered employees' salaries.
The Company has established a stock bonus/employee stock ownership plan for
the benefit of substantially all employees of the Company. The Company's
contributions under the plan are based upon a percentage of covered
employees' salaries, and are paid at the discretion of the Board of Directors
of the Company. The Company contributes cash to the plan and Company shares
are purchased with the cash in the open market. Cash contributed to the plan
was $0, $100,265 and $0 respectively for the years ended December 31, 1995,
1994 and 1993. No stock was contributed to the plan for the years ended
December 31, 1995, 1994 and 1993, respectively.
The Company has also established a profit-sharing (401K) plan which covers
substantially all employees. The Company will match all eligible employee
contributions up to 4% of the participant's compensation. The Company may,
at the discretion of the Board, contribute an additional amount based upon a
percentage of covered employees' salaries.
The total retirement plans' expense for 1995, 1994 and 1993 was $857,000,
$820,000, and $741,000, respectively.
12. Postretirement Benefits
The Company provides lifetime medical and dental benefits for certain
eligible retired employees. Only employees meeting the eligibility
requirements as of December 31, 1989 will be eligible for such benefits upon
retirement. The entire cost of these benefits is paid for by the Company as
incurred and totaled $131,000, $86,000 and $104,000, respectively, for the
years ended December 31, 1995, 1994 and 1993. The plan is unfunded.
In December of 1990, the FASB issued SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions", which requires that all
such benefits be accounted for on an accrual basis rather than the prevalent
cash basis. Management determined that the accumulated postretirement
benefit obligation at January 1, 1993 was approximately $2,029,000.
Management implemented this statement in the first quarter of 1993 and is
amortizing the transition obligation over 20 years.
The following table sets forth the plan's status reconciled with the
amount shown in the Company's balance sheets at December 31, 1995 and 1994.
(In thousands) 1995 1994
Accumulated postretirement benefit obligation
Retirees and dependents $3,367 $2,065
Fully eligible active plan participants 671 545
Other active plan participants 684 513
Total accumulated postretirement benefit obligation 4,722 3,123
Unrecognized net loss (1,768) (266)
Unamortized transition obligation (1,725) (1,826)
Unrecognized prior service cost (551) (594)
Accrued postretirement benefit cost $ 678 $ 437
The components of the net periodic postretirement benefit cost at
December 31, 1995 and 1994 are as follows:
(In thousands) 1995 1994
Service cost $ 19 $ 20
Interest on accumulated benefit obligation 243 213
Amortization of transition obligation and other 144 147
Total $ 406 $ 380
Major assumptions:
Discount rate 7.0% 8.0%
For measurement purposes, a 13% annual rate of increase in the per capita
cost of covered health care benefits for those below the age of 65 and 11%
for those over 65 was assumed. The rate was assumed to decrease gradually to
6% by 2012 and remain at that level thereafter. The health care cost trend
rate assumption has a significant affect on the amounts reported.
If the health care cost trend rate were to increase 1%, the service and
interest cost would be $296,000 and the accumulated benefit obligation would
be $5,328,000.
13. Leases
The Company leases certain of its branch sites and certain banking equipment
under operating leases. All of the branch site leases have renewal options
of varying lengths and terms. The aggregate minimum rental commitments under
these leases are not material.
14. Financial Instruments With Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. The financial instruments include commitments to extend credit
and standby letters of credit.
These financial instruments involve to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the consolidated
balance sheets. The contract amounts of these instruments reflect the extent
of involvement the Company has in particular classes of financial 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 the payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amount does
not necessarily represent future cash requirements. Total commitments to
extend credit at December 31, 1995, were $79,609,000. 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, marketable
securities, inventory, property, plant and equipment, residential real
estate, and income producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Since many of
the commitments are expected to expire without being drawn upon, the total
commitment amount does not necessarily represent future cash requirements.
The credit risk involved in using letters of credit is essentially the same
as that received when extending credit to customers. The Company had
approximately $4,652,000 in irrevocable letters of credit outstanding at
December 31, 1995.
15. Concentration of Credit Risk
The Company's bank subsidiaries actively engage in lending, primarily in home
counties and adjacent areas. Collateral is received to support these loans
when deemed necessary. The more significant categories of collateral include
cash on deposit with the Company's banks, marketable securities, income
producing property, home mortgages, and consumer durables. Loans
outstanding, commitments to make loans, and letters of credit range across a
large number of industries and individuals. The obligations are
significantly diverse and reflect no material concentration in one or more
areas.
16. Contingencies
The Company's bank subsidiaries are defendants in legal actions arising from
normal business activities. Management believes these actions are without
merit, that in certain instances its actions or omissions were pursuant to
the advice of counsel, or that the ultimate liability, if any, resulting
from them will not materially affect the Company's consolidated financial
position, although resolution in any year or quarter could be material for
that period.
17. Dividend Limitations
Payment of dividends by the Company's subsidiary banks is subject to certain
regulatory restrictions as set forth in national and state banking laws and
regulations. At December 31, 1995, combined retained earnings of the subsidiary
banks were approximately $38,401,000 of which $4,519,000 is available for the
payment of dividends in 1996 without obtaining prior approval from bank
regulatory agencies.
18. Bond Claim
During 1991, First Citizens Bank, Hardin County (the "Bank"), a subsidiary of
the Company, filed a bond claim for $6,800,000 with its bonding company to
recover loan losses incurred in 1990 resulting from an apparent scheme to
defraud the Bank. The original losses were recorded as loan losses. After
exhaustive efforts to settle the claim with the bonding company, the Bank
initiated litigation during the first quarter of 1992 against the bonding
company. During the third quarter of 1993, the Company reached a settlement
in the amount of $5,279,000, which was accounted for as a loan loss recovery.
Loan loss recoveries result in an increase in the allowance for loan losses
("Allowance"). The Allowance was subsequently adjusted to the amount
necessary, as determined by management, to absorb possible future losses on
the total loans currently outstanding. The adjustment resulted in a
reduction in the provision for loan losses to the extent that the provision
for the year was negative.
19. Effect of Implementing SFAS No. 116
In June 1993, the FASB issued SFAS No. 116 "Accounting for Contributions
Received and Contributions Made". This Statement required that contributions
made, including unconditional promises to give, be recognized as expenses
in the period made at their fair values. This Statement is effective for
fiscal years beginning after December 15, 1994. The Company implemented
this Statement on January 1, 1995 with no impact on the financial statements.
20. Effect of Implementing SFAS No. 121
In March, 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This Statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
the sum of the expected future cash flows resulting from an asset's use and
disposition is less than the carrying amount of the asset, an impairment loss
is recognized.
This Statement is effective for fiscal years beginning after December 15,
1995. The Company does not expect the implementation of this Statement to
have a material effect on the financial statements.
21. Effect of Implementing SFAS No. 122
In May 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage Servicing
Rights". This Statement amends FASB Statement No. 65, "Accounting for
Certain Mortgage Banking Activities", to require that a mortgage banking
enterprise recognize as separate assets the rights to service mortgage loans
for others, however those servicing rights are acquired. The total cost of
the mortgage loans should be allocated between the mortgage servicing rights
and the loans based on their relative fair values if it is practicable to
estimate those fair values. If not, the entire cost should be allocated to
the mortgage loans.
This Statement applies prospectively in fiscal years beginning after
December 15, 1995. The Company does not expect the implementation of this
Statement to have a material affect on the financial statements.
22. Effect of Implementing SFAS No. 123
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation". The Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from nonemployees. Those transactions must be
accounted for based on the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable.
The accounting requirements of this Statement are effective for transactions
entered into in fiscal years that begin after December 15, 1995. The Company
does not expect this Statement to have an effect on the financial statements
in that the Company is not involved with any stock-based employee
compensation plans or transactions to acquire goods or services from
nonemployees in exchange for equity.
23. Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value.
Cash and Cash Equivalents:
The carrying amount is a reasonable estimate of fair value.
Investment Securities:
For marketable equity securities held for investment purposes, fair
values are based on quoted market prices or dealer quotes. For other
securities held as investments, 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.
Loan Receivables:
For variable rate loans that reprice frequently with no significant
change in credit risk, fair values are based upon carrying amounts.
For certain homogeneous categories of loans, such as credit card
receivables, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using a discount rate that has been
adjusted for credit risk and the remaining maturities.
Deposit Liabilities:
The fair value of demand deposits, savings accounts and certain money
market deposits is the amount payable on demand at the reporting date.
The carrying amount for variable rate and fixed maturity money market
accounts and certificates of deposit approximates fair value at the
reporting date. The fair value of fixed rate and fixed maturity
certificates of deposit is estimated using a discounted cash flow method
that applies interest rates currently offered for certificates of deposit
with similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit:
Pricing of these financial instruments is based on the credit quality
and relationship, fees, interest rates, probability of funding,
compensating balance, and other covenants or requirements. Loan
commitments generally have fixed expiration dates, variable interest
rates and contain termination and other clauses which provide for relief
from funding in the event there is a significant deterioration in the
credit quality of the customer. Many loan commitments are expected to,
and typically do, expire without being drawn upon. The rates and terms
of the Company's commitments to lend, and standby letters of credit are
competitive with others in the various markets in which the Company
operates. There are no unamortized fees relating to these financial
instruments, as such the carrying value and market value are both zero.
Other Borrowed Funds:
The fair value of other borrowed funds is estimated using rates
currently available for debt with similar terms and remaining maturities.
The estimated fair values of the Company's financial instruments are as follows:
1995 1994
December 31, Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
Assets:
Cash and cash equivalents $110,184 $110,184 $100,551 $100,551
Investments securities:
Available for sale 105,933 105,933 72,466 72,466
Held to maturity 120,991 121,744 120,477 116,995
Loans, net 534,708 528,749 524,301 518,356
Liabilities:
Deposits 754,861 757,771 697,377 695,348
Other borrowed funds 38,524 37,362 47,710 46,489
24. Quarterly Financial Data
Quarters Ended 1995
Unaudited
(In thousands,
except per share data) March 31, June 30, Sept. 30, Dec. 31,
Interest income $16,148 $16,596 $16,972 $17,545
Interest expense 6,584 6,988 7,162 7,381
Net interest income 9,564 9,608 9,810 10,164
Provision for loan losses 713 1,048 945 1,021
Net interest income after
provision for loan losses 8,851 8,560 8,865 9,143
Other income 2,562 3,213 3,008 3,132
Other expense 8,057 8,667 7,727 8,122
Income before income taxes 3,356 3,106 4,146 4,153
Income tax 1,011 920 1,272 1,169
Net income $ 2,345 $ 2,186 $ 2,874 $ 2,984
Net income per common share $ 0.61 $ 0.57 $ 0.74 $ 0.77
Weighted average shares
outstanding 3,866 3,866 3,866 3,866
Quarters Ended 1994
Unaudited
(In thousands,
except per share data) March 31, June 30, Sept. 30, Dec. 31,
Interest income $13,354 $13,863 $14,765 $15,768
Interest expense 5,035 5,104 5,546 5,901
Net interest income 8,319 8,759 9,219 9,867
Provision for loan losses 646 419 498 562
Net interest income after
provision for loan losses 7,673 8,340 8,721 9,305
Other income 2,495 3,342 2,799 2,895
Other expense 7,501 7,478 7,883 8,194
Income before income taxes 2,667 4,204 3,637 4,006
Income tax 797 1,260 1,059 1,148
Net Income $ 1,870 $ 2,944 $ 2,578 $ 2,858
Net income per common share $ 0.48 $ 0.76 $ 0.67 $ 0.74
Weighted average shares
outstanding 3,866 3,866 3,866 3,866
25. Parent Company Financial Statements
Condensed Balance Sheets
December 31, (In thousands) 1995 1994
Assets
Cash on deposit with subsidiaries $ 24,598 $ 21,969
Investment in subsidiaries 81,349 78,577
Other assets 1,581 1,723
Total assets $107,528 $102,269
Liabilities
Dividends payable $ 1,392 $ 1,276
Other liabilities 1,207 929
Total liabilities 2,599 2,205
Shareholders' Equity
Common stock 967 967
Capital surplus 9,094 9,094
Retained earnings 95,694 90,524
Net unrealized loss on securities
available for sale, net of tax (826) (521)
Total shareholders' equity 104,929 100,064
Total liabilities and
shareholders' equity $107,528 $102,269
25. Parent Company Financial Statements (cont.)
Condensed Statements of Income
December 31, (In thousands) 1995 1994 1993
Income
Dividends from subsidiaries $ 7,756 $ 24,090 $ 4,038
Interest income 101 72 48
Other income 724 740 388
Total income 8,581 24,902 4,474
Expense
Other expense 1,556 1,526 1,579
Total expense 1,556 1,526 1,579
Income before income tax benefit,
cumulative effect of change in
accounting principle and equity
in income of subsidiaries less
amounts distributed to parent 7,025 23,376 2,895
Income tax benefit 288 154 378
Income before cumulative effect
of change in accounting principle
and equity in income of
subsidiaries less amounts
distributed to parent 7,313 23,530 3,273
Cumulative effect of change
ccounting principle 1,237
Income before equity in income
of subsidiaries less amounts
distributed to parent 7,313 23,530 4,510
Equity in income of subsidiaries
less amounts distributed
to parent 3,076 (13,280) 6,294
Net income $ 10,389 $ 10,250 $ 10,804
25. Parent Company Financial Statements (cont.)
Condensed Statements of Cash Flows
December 31, (In thousands) 1995 1994 1993
Cash flows from operating activities:
Net income $ 10,389 $ 10,250 $ 10,804
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in income of subsidiaries
less amounts distributed
to parent (3,076) 13,280 (6,294)
Deferred income tax
expense (benefit) 3 22 (1,237)
Change in other assets
and liabilities, net 417 526 (723)
Net cash provided by
operating activities 7,733 24,078 2,550
Cash flows from financing activities:
Cash dividends (5,104) (4,640) (4,176)
Net cash used in financing activities (5,104) (4,640) (4,176)
Net increase (decrease) in cash
and cash equivalents 2,629 19,438 (1,626)
Cash and cash equivalents
at beginning of year 21,969 2,531 4,157
Cash and cash equivalents
at end of year $ 24,598 $ 21,969 $ 2,531
Supplemental disclosures:
Cash paid during the year for:
Income taxes $ 3,730 $ 4,255 $ 5,337
Cash dividend declared and unpaid 1,392 1,276 1,160
PART II
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements with or changes in accountants during the
three month period ended December 31, 1995.
PART III
Item 10 - Directors and Executive Officers of the Registrant
Positions and Years of Service
Offices With With the
Executive Officer Age Registrant Registrant
Charles S. Boyd 54 Director 1, President 32*
and CEO
James H. Childers 53 Executive Vice President 26*
Director 2
Additional information required by Item 10 is hereby incorporated by
reference from the Registrant's definitive proxy statement in connection
with its annual meeting of shareholders scheduled for May 14, 1996 which will
be filed with the Commission in April 1996 pursuant to Regulation 14A.
* Includes years of service with the Registrant and Farmers Bank & Capital
Trust Co.
1 Also a director of Farmers Bank, Horse Cave Bank, Farmers Georgetown Bank,
United Bank, Lawrenceburg Bank, First Citizens Bank, FCB Services and
Money One.
2 A director of Farmers Georgetown Bank.
Item 11 - Executive Compensation
Item 12 - Security Ownership of Certain Beneficial Owners and Management
Item 13 - Certain Relationships and Related Transactions
The information required by Items 11 through 13 is hereby incorporated by
reference from the Registrant's definitive proxy statement in connection with
its annual meeting of shareholders scheduled for May 14, 1996 which will be
filed with the Commission in April, 1996 pursuant to Regulation 14A.
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of documents and exhibits
1 & 2 Financial Statements and Schedules Reference (page)
Report of Independent Accountants 28
Consolidated Balance Sheets at
December 31, 1995 and 1994 29
Consolidated Statements of Income
for the years ended December 31,
1995, 1994 and 1993 30
Consolidated Statements of Changes in
Stockholders Equity for the years
ended December 31, 1995, 1994 and 1993 31
Consolidated Statements of Cash Flows
for the years ended December 31,
1995, 1994 and 1993 32
Notes to the Consolidated Financial Statements 33 - 49
All schedules are omitted for the reason they are not required, or are not
applicable, or the required information is disclosed elsewhere in the
financial statements and related notes thereto.
3. Exhibits:
21. Subsidiaries of the Registrant
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during the three
month period ended December 31, 1995.
(c) Exhibits
See list of exhibits set forth on page 54.
(d) Separate Financial Statements and Schedules
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FARMERS CAPITAL BANK CORPORATION
By: Charles S. Boyd
Charles Scott Boyd
President and Chief Executive Officer
Date: 3/21/96
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 and on the dates indicated.
Charles S. Boyd President, Chief Executive
Charles Scott Boyd Officer and Director
(principal executive
officer of the Registrant) 3/21/96
Chairman
John Poage Stewart
Michael Meagher Sullivan Director 3/21/96
Michael Meagher Sullivan
Director
Joseph Charles Yagel
Warner Underwood Hines Director 3/22/96
Warner Underwood Hines
Director
John James Hopkins II
J.D. Sutterlin Director 3/21/96
John Douglas Sutterlin
William Ray Sykes Director 3/21/96
William Ray Sykes
Director
Charles Owen Bush
E. Bruce Dungan Director 3/22/96
Ellwood Bruce Dungan
C. Douglas Carpenter Vice President and CFO 3/21/96
Cecil Douglas Carpenter (principal financial and
accounting officer)
FARMERS CAPITAL BANK CORPORATION
INDEX OF EXHIBITS
21. Subsidiaries of the Registrant
27. Financial Data Schedule
EXHIBIT 21
Subsidiaries of the Registrant
The following table provides a listing of the direct and indirect operating
subsidiaries of the Registrant, the percent of voting stock held by the
Registrant as of December 31, 1995 and the jurisdiction or organization in
which each subsidiary was incorporated or organized.
Percentage of Voting
Jurisdiction Stock held by
Subsidiaries of the Registrant of Organization Registrant
Farmers Bank & Capital Trust Co. Kentucky 100%
United Bank & Trust Company Kentucky 100%
First Citizens Bank, Hardin County, Inc. Kentucky 100%
Lawrenceburg National Bank Kentucky 100%
Farmers Bank and Trust Company Kentucky 100%
Horse Cave State Bank Kentucky 100%
FCB Services, Incorporated Kentucky 100%
Farmers Capital Insurance Company 1 Kentucky 100%
Farmers Bank Realty Company 2 Kentucky
Frankfort ATM Ltd. 3 Kentucky
Money One Credit of Kentucky. Inc. 2 Kentucky
Money One Credit Company 4 Kentucky
Leasing One Corporation 2 Kentucky
1 Dormant company, no activity to date.
2 A wholly-owned subsidiary of Farmers Bank & Capital Trust Company.
3 A fifty (50%) percent owned joint venture of Farmers Bank & Capital
Trust Company.
4 A partnership of which ninety-eight (98%) is owned by Farmers Bank &
Capital Trust Company, one (1%) percent is owned by Money One Credit of
Kentucky, Inc. and one (1%) percent is owned by Farmers Bank Realty
Company.
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This schedule contains summary financial information extracted from the December
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