UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
____________ to ____________
Commission File Number 0-14412
Farmers Capital Bank Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1017851
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
P.O. Box 309, 201 West Main Street
Frankfort, Kentucky 40602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502)227-1600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, par value $0.25 per share
3,866,382 shares outstanding at May 10, 1996
TABLE OF CONTENTS
Part I - Financial Information Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income -
For the Three Months Ended
March 31, 1996 and March 31, 1995 4
Consolidated Statements of Cash Flows -
For the Three Months Ended
March 31, 1996 and March 31, 1995 5
Notes to the Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II - Other Information
Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K 11
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(unaudited)
March 31, December 31,
1996 1995
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 66,315 $ 41,126
Interest bearing deposits in other banks 2,236 688
Federal funds sold and securities purchased
under agreements to resell 32,605 68,370
Total cash and cash equivalents 101,156 110,184
Investment securities:
Available for sale 122,068 105,933
Held to maturity 115,862 120,991
Loans 548,044 554,942
Less: Allowance for loan losses (8,807) (8,472)
Unearned income (10,805) (11,762)
Loans, net 528,432 534,708
Bank premises and equipment 19,784 19,916
Interest receivable 7,542 7,889
Other assets 5,099 6,492
TOTAL ASSETS $ 899,943 $ 906,113
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 105,603 $ 109,490
Interest bearing 646,711 645,371
Total deposits 752,314 754,861
Other borrowed funds 33,420 38,524
Dividends payable 1,392 1,392
Interest payable 2,367 2,370
Other liabilities 4,333 4,037
Total liabilities 793,826 801,184
SHAREHOLDERS' EQUITY
Common stock par value $0.25 per share
4,804,000 shares authorized; 3,866,382
shares issued and outstanding at March 31,
1996 and December 31, 1995 967 967
Capital surplus 9,094 9,094
Retained earnings 96,757 95,694
Unrealized net loss on
securities available for sale (701) (826)
Total shareholders' equity 106,117 104,929
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $ 899,943 $ 906,113
See notes to consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
Three Months Ended
March 31,
1996 1995
INTEREST INCOME
Interest and fees on loans $ 13,309 $ 12,891
Interest on investment securities:
Taxable 2,196 1,790
Nontaxable 679 562
Interest on deposits in other banks 11 29
Interest on federal funds sold and securities
purchased under agreements to resell 771 876
Total interest income 16,966 16,148
INTEREST EXPENSE
Interest on deposits 6,936 6,059
Interest on other borrowed funds 387 525
Total interest expense 7,323 6,584
Net interest income 9,643 9,564
Provision for loan losses 1,270 713
Net interest income after
provision for loan losses 8,373 8,851
NONINTEREST INCOME
Service charges and fees 1,330 1,091
Trust income 191 177
Investment gain 10
Other 1,366 1,294
Total noninterest income 2,897 2,562
NONINTEREST EXPENSE
Salaries and employee benefits 4,215 4,084
Occupancy expenses, net 551 556
Equipment expenses 660 695
Bank shares tax 261 297
Deposit insurance expense 3 396
Other 2,157 2,029
Total noninterest expense 7,847 8,057
Income before income taxes 3,423 3,356
Income tax expense 968 1,011
NET INCOME $ 2,455 $ 2,345
Per common share:
Net income $ 0.64 $ 0.61
Dividends declared $ 0.36 $ 0.33
Weighted average shares outstanding 3,866 3,866
See notes to consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands except per share data)
(unaudited)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income $ 2,455 $ 2,345
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 631 668
Net amortization of investment securities
premiums and discounts:
Available for sale (149) (205)
Held to maturity 46 75
Provision for loan losses (1,270) 713
Investment security gain on call:
Held to maturity (10)
Changes in:
Interest receivable 347 375
Other assets 1,195 (150)
Interest payable (3) 237
Other liabilities 295 569
Net cash provided by operating activities 3,537 4,627
Cash flows from investing activities:
Proceeds from maturity or call of
investment securities:
Available for sale 48,544 30,587
Held to maturity 12,635 13,553
Purchase of investment securities:
Available for sale (64,342) (33,229)
Held to maturity (7,542) (12,962)
Net increase in loans 7,546 (6,492)
Purchase of bank premises and equipment (363) (229)
Net cash used in investing activities (3,522) (8,772)
Cash flows from financing activities:
Net increase (decrease) in deposits (2,547) 21,930
Dividends paid (1,392) (1,276)
Net decrease in other borrowed funds (5,104) (10,787)
Net cash provided by (used in)
financing activities (9,043) 9,867
Net change in cash and cash equivalents (9,028) 5,722
Cash and cash equivalents at beginning of year 110,184 100,551
Cash and cash equivalents at end of period $ 101,156 $ 106,273
Supplemental disclosures:
Cash paid during the period for:
Interest $ 7,326 $ 6,347
Income taxes None None
Cash dividend declared and unpaid 1,392 1,276
See notes to consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation, have been included. Operating results
for the period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
NOTE 2 - RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements of prior periods to conform to the current period presentation.
These reclassifications do not affect net income or shareholders' equity as
previously reported.
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
First Quarter 1996 vs. First Quarter 1995
The Company reported earnings of $2.5 million, or $.64 per share, for the
first quarter of 1996 compared to earnings of $2.3 million, or $.61 per
share for the first quarter of 1995.
Return on average assets was 1.10% for the first quarter of 1996, unchanged
from 1.10% reported for the same period of 1995. Return on average equity
was 9.37% for the first quarter of 1996, a decrease from 9.50% during the
same period of 1995.
STATEMENT OF INCOME REVIEW
Net Interest Income
Net interest income totaled $9.6 million, unchanged from the first quarter
1995. Interest and fees on loans is up $418 thousand or 8.2%. Interest on
taxable securities is up $406 thousand, or 22.7% and interest on nontaxable
securities is up $117 thousand, or 20.8%. Interest on short term investments
is down $105 thousand, or 12.0%.
Interest expense on deposits is up $877 thousand, or 14.5%. Interest on
short term borrowings is down $138 thousand, or 26.3%.
The net interest margin (net interest income as a percentage of average
earning assets), decreased to 4.99% during the first quarter of 1996 compared
to 5.15% in the first quarter of 1995. The spread between rates earned and
paid decreased to 4.26% compared to 4.44% in the first quarter of 1995.
Asset Quality
The provision for loan losses increased $557 thousand compared to the first
quarter 1995. The Company had net charge-offs of $934 thousand in the first
quarter of 1996 compared to net charge-offs of $570 thousand in the same
period of 1995. The allowance for loan losses was 1.64% of net loans in the
first quarter of 1996, up 8 basis points from year end 1995. 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.
Noninterest Income
Noninterest income of $2.9 million increased $335 thousand, or 13.1% from the
first quarter of 1995. Service charges on deposits increased $239 thousand,
or 21.9% to $1.3 million. Trust fees increased $14 thousand, or 7.9% to $191
thousand. The Company had a $10 thousand gain on a called investment security
during the first quarter of 1996 compared to no gain or loss in the same
period of 1995.
Noninterest Expense
Total noninterest expenses decreased $210 thousand or 2.6% from the first
quarter of 1995 to $7.8 million. Salaries and benefits, the largest
component of noninterest expense, increased $131 thousand, or 3.2%.
Occupancy expense, net of rental income, was unchanged at approximately
$550 thousand. Equipment expenses decreased $35 thousand, or 5.0%. Taxes on
bank shares decreased $36 thousand, or 12.1%. FDIC insurance expense
decreased $393 thousand, or 99.2% due to the FDIC charging a nominal premium
in the first quarter of 1996.
Income taxes
Income tax expense decreased $43 thousand, or 4.3% from the first quarter of
1995 to $968 thousand. The 1996 effective tax rate was 28%, down slightly
from 30% in 1995. The reduction in the tax rate was due primarily to the
increased purchases of municipal bonds.
BALANCE SHEET REVIEW
Total assets were $900 million on March 31, 1996, less than a 1% change from
December 31, 1995. Assets averaged $894 million for the first quarter of
1996, an increase of $32 million, or 3.7% from year end 1995.
Loans
Loans, net of unearned income, decreased $5.9 million, or 1.1% from December
31, 1995 to $537 million. On average, loans represented 66.1% of earning
assets compared to 69.4% for 1995. When loan demand is down, the available
funds are redirected to either temporary investments or investment securities.
Temporary Investments
Federal funds sold and securities purchased under agreements to resell
averaged $53 million, an increase of $1 million, or 1.9% from year end 1995.
Investment Securities
Investment securities were $238 million on March 31, 1996, an increase of
$11 million, or 4.8% from year end 1995. Available for sale and held to
maturity securities were $122 and $116 million, respectively. Investment
securities averaged $224 million for the first quarter of 1996, an increase
of $65 million, or 35% from year end 1995. Net unrealized losses after tax
on securities available for sale were $701 thousand on March 31, 1996, as
compared to $826 thousand on December 31, 1995.
Nonperforming assets
Nonperforming assets totaled $8.8 million on March 31, 1996, up $1.8 million
or 26.3% from $6.9 million at year end 1995. Nonperforming assets to total
equity increased from 6.6% at year end 1995 to 8.3% at March 31, 1996.
Nonperforming assets as a percentage of loans and other real estate increased
from 1.28% at year end to 1.63%. The Company's loan policy includes strict
guidelines for approving and monitoring loans. This along with management's
efforts to improve the quality of the loan portfolio has decreased the
Company's nonperforming assets 61.7% since December 31, 1991.
Other real estate owned decreased $693 thousand, or 89.3% from year end 1995
to $83 thousand on March 31, 1996.
Deposits
Total deposits decreased $2.5 million, or 0.3%, from year end 1995 to $752
million. Deposits averaged $751 million, an increase of $29 million, or
4.0% from year end 1995.
Borrowed Funds
Borrowed funds totaled $33 million, a decrease of $5 million, or 13.2% from
year end 1995. Borrowed funds averaged $32 million, a decrease of $2
million, or 5.3%.
Shareholders' Equity
Shareholders' equity was $106 million on March 31, 1996, increasing $1.2
million from year end 1995. Dividends of $1.4 million were declared during
the first quarter of 1996. The Company's capital ratios as of March 31, 1996
and the regulatory minimums are as follows:
Farmers Capital Regulatory
Bank Corporation Minimum
Tier 1 risk based 18.34% 4.00%
Total risk based 19.59% 8.00%
Leverage 11.67% 3.00%
The capital ratios of all the subsidiary banks, on an individual basis, were
in excess of the applicable minimum regulatory capital ratio requirements at
March 31, 1996.
Liquidity
The liquidity of the Company is dependent on the receipt of dividends from
its subsidiary banks. Management expects that in the aggregate its
subsidiary banks will continue to have the ability to dividend adequate funds
to the Company during the remainder of 1996.
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.
These sources of funds are:
1. The bank's core deposits consisting of both business and nonbusiness
deposits
2. Cash flow generated by repayment of loan principal and interest
3. Federal funds purchased
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.
Part II
ITEM 1 - LEGAL PROCEEDINGS
There are no significant changes in contingencies or commitments, including
pending litigation to report at this time.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
1) On April 1, 1996, the Corporation filed a report on Form 8-K, pursuant
to Item 5 of that form. The Corporation reported a restructuring of its
Board of Directors. No financial statements were filed as part of that
report.
2) On May 10, 1996, the Corporation filed a report on Form 8-K pursuant
to Item 5 of that form. The Corporation reported it had entered into an
agreement to sell its twelve consumer finance offices. No financial
statements were filed as part of that report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: 05/15/96 /s/ Charles Scott Boyd
Charles Scott Boyd,
President and CEO (Principal Executive Officer)
Date: 05/14/96 /s/ C. Douglas Carpenter
Cecil Douglas Carpenter
Vice President and CFO (Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from March 31,
1996 financial statements and is qualifed in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 66315
<INT-BEARING-DEPOSITS> 2236
<FED-FUNDS-SOLD> 32605
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 122068
<INVESTMENTS-CARRYING> 115862
<INVESTMENTS-MARKET> 116096
<LOANS> 537239
<ALLOWANCE> 8807
<TOTAL-ASSETS> 899943
<DEPOSITS> 752314
<SHORT-TERM> 29596
<LIABILITIES-OTHER> 8092
<LONG-TERM> 3824
<COMMON> 967
0
0
<OTHER-SE> 105150
<TOTAL-LIABILITIES-AND-EQUITY> 899943
<INTEREST-LOAN> 13309
<INTEREST-INVEST> 2875
<INTEREST-OTHER> 782
<INTEREST-TOTAL> 16966
<INTEREST-DEPOSIT> 6936
<INTEREST-EXPENSE> 7323
<INTEREST-INCOME-NET> 9643
<LOAN-LOSSES> 1270
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 7847
<INCOME-PRETAX> 3423
<INCOME-PRE-EXTRAORDINARY> 2455
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2455
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0
<YIELD-ACTUAL> 1.19
<LOANS-NON> 5257
<LOANS-PAST> 2853
<LOANS-TROUBLED> 1316
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8472
<CHARGE-OFFS> 1069
<RECOVERIES> 134
<ALLOWANCE-CLOSE> 8807
<ALLOWANCE-DOMESTIC> 8807
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
