UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 of (I.R.S. Employer Identification Number)
incorporation or organization)
P.O. Box 309, 202 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
3,781,220 shares outstanding at August 8, 1997
TABLE OF CONTENTS
Part I - Financial Information Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income -
For the Three Months and Six Months Ended
June 30, 1997 and June 30, 1996 4
Consolidated Statements of Cash Flows -
For the Six Months Ended
June 30, 1997 and June 30, 1996 5
Notes to the Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 6 - Exhibits and Reports on Form 8-K 15
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(unaudited)
June 30, December 31,
1997 1996
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 97,280 $ 52,073
Interest bearing deposits in other banks 3,098 758
Federal funds sold and securities purchased
under agreements to resell 16,940 69,915
Total cash and cash equivalents 117,318 122,746
Investment securities:
Available for sale 128,513 109,291
Held to maturity 102,248 111,609
Total investment securities 230,761 220,900
Loans 572,518 567,447
Less:
Allowance for loan losses (8,850) (8,741)
Unearned income (9,019) (9,198)
Loans, net 554,649 549,508
Bank premises and equipment 20,539 19,320
Interest receivable 8,138 8,129
Deferred income taxes 592 613
Other assets 5,499 4,103
TOTAL ASSETS $ 937,496 $ 925,319
LIABILITIES
Deposits:
Noninterest bearing $ 138,496 $ 103,488
Interest bearing 626,026 682,822
Total deposits 764,522 786,310
Other borrowed funds 52,053 20,165
Dividends payable 1,552 1,558
Interest payable 2,100 2,204
Other liabilities 4,222 5,486
Total liabilities 824,449 815,723
SHAREHOLDERS' EQUITY
Common stock par value $0.25 per share
4,804,000 shares authorized; 3,781,220 and
3,796,982 shares issued and outstanding
at June 30,1997 and December 31, 1996 945 949
Capital surplus 8,894 8,931
Retained earnings 103,544 100,078
Net unrealized loss on securities available
for sale, net of tax (336) (362)
Total shareholders' equity 113,047 109,596
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 937,496 $ 925,319
See notes to the consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
INTEREST INCOME
Interest and fees on loans $ 13,066 $ 13,335 $ 25,972 $ 26,644
Interest on investment securities:
Taxable 2,207 2,357 4,337 4,553
Nontaxable 775 709 1,544 1,388
Interest on deposits in other banks 30 20 49 31
Interest on federal funds sold and
securities purchased under
agreements to resell 635 611 1,374 1,382
Total interest income 16,713 17,032 33,276 33,998
INTEREST EXPENSE
Interest on deposits 6,417 6,728 12,982 13,664
Interest on other borrowed funds 302 383 605 770
Total interest expense 6,719 7,111 13,587 14,434
Net interest income 9,994 9,921 19,689 19,564
Provision for loan losses 518 1,819 1,086 3,089
Net interest income after provision
for loan losses 9,476 8,102 18,603 16,475
NONINTEREST INCOME
Service charges and fees on deposits 1,273 1,341 2,575 2,567
Other service charges, commissions,
and fees 919 860 1,916 1,721
Data processing income 410 328 758 687
Trust income 268 224 539 390
Investment securities gains 10
Gain on sale of loans 4 3,052 8 3,239
Other 121 371 461 131
Total noninterest income 2,995 5,848 6,257 8,745
NONINTEREST EXPENSE
Salaries and employee benefits 3,728 4,281 7,758 8,496
Occupancy expense, net 506 492 989 1,043
Equipment expense 692 644 1,387 1,304
Data processing expense 238 246 488 390
Bank franchise tax 281 260 492 521
Deposit insurance expense 29 3 50 6
Other 1,691 1,840 3,634 3,853
Total noninterest expense 7,165 7,766 14,798 15,613
Income before income taxes 5,306 6,184 10,062 9,607
Income tax expense 1,521 1,995 2,886 2,963
NET INCOME $ 3,785 $ 4,189 $ 7,176 $ 6,644
Per common share:
Net income $ 1.00 $ 1.08 $ 1.89 $ 1.72
Dividends declared $ .41 $ .36 $ .82 $ .72
Weighted average shares outstanding 3,786 3,866 3,791 3,866
See notes to the consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income $ 7,176 $ 6,644
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,294 1,251
Net amortization of securities
premiums and discounts:
Available for sale 14 (272)
Held to maturity 44 68
Provision for loan losses 1,086 3,089
Gain on sale of loans (8) (3,239)
Loss on sale of fixed assets 4
Securities gain on call:
Held to maturity (10)
Increase in interest receivable (9) (519)
(Increase) decrease in other assets (1,660) 1,223
Decrease in interest payable (104) (91)
Increase (decrease) in other liabilities (1,264) 869
Net cash provided by operating activities 6,573 9,013
Cash flows from investing activities:
Proceeds from maturity or call of investment securities:
Available for sale 59,075 84,978
Held to maturity 15,916 18,961
Proceeds from sale of investment securities:
Available for sale 66
Purchase of investment securities:
Available for sale (78,330) (97,136)
Held to maturity (6,559) (13,053)
Loans originated for investment, net of
principal collected (14,559) (11,737)
Purchase of bank premises and equipment (2,256) (765)
Proceeds from sale of equipment 3 180
Proceeds from sale of loans 8,340 14,792
Net cash used in investing activities (18,344) (3,780)
Cash flows from financing activities:
Net increase (decrease) in deposits (21,788) 2,229
Dividends paid (3,113) (2,784)
Purchase of common stock (644)
Net increase in other borrowed funds 31,888 5,175
Net cash provided by financing activities 6,343 4,620
Net increase (decrease) in cash and cash equivalents (5,428) 9,853
Cash and cash equivalents at beginning of year 122,746 110,184
Cash and cash equivalents at end of period $ 117,318 $ 120,037
Supplemental disclosures:
Cash paid during the period for:
Interest $ 13,691 $ 14,525
Income taxes 2,729 1,800
Cash dividend declared and unpaid 1,552 1,392
See notes to the consolidated financial statements
FARMERS CAPITAL BANK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of 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 strength
of the local economy. Changes in the overall interest rate environment can
significantly affect 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.
The financial information presented as of any date other than December 31 has
been prepared from the books and records without audit. The accompanying
consolidated financial statements have been prepared in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include
all of the information and the footnotes required by generally accepted
accounting principles for complete statements. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of such financial statements, have been included. Results
from interim periods are not necessarily indicative of results to be expected
for the full year.
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, 1996.
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.
NOTE 3 - ADOPTION OF NEW ACCOUNTING PRINCIPLES & DISCLOSURE REQUIREMENTS
On January 1, 1997, the Company implemented Statement of Financial Accounting
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extingishments of Liabilities." Under this standard, accounting for
transfers and servicing of financial assets and extinguishments of liabilities
is based on control. After a transfer of financial assets, an entity recognizes
the financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered and
derecognizes liabilities when extinquished.
The implementation of SFAS No. 125 did not have a material effect on the
Company's consolidated financial statements, as the Company enters into a very
limited number of sales of financial assets.
On January 28, 1997 the Securities and Exchange Commission adopted rules to
clarify and expand existing disclosure requirements about derivatives and other
financial instruments as well as derivative commodity instruments. These rules
require enhanced disclosure of accounting policies for derivative financial
instruments and derivative commodity instruments. These rules also expand
existing disclosure requirements to include quantitative and qualitative
information about market risk inherent in market risk sensitive instruments.
Accounting policy disclosures are required in the first quarterly report filed
for a period ended after June 15, 1997. Following are the Company's derivative
accounting policy disclosures.
A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts, and other financial instruments with similar
characteristics. The Company currently does not enter into futures, forwards,
swaps, or options. However, the Company is party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments involve to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated balance sheets. 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 and may require collateral from the borrower if deemed
necessary by the Company. Stanby letters of credit are conditional commitments
issued by the Company to guarantee the performance of a customer to a third
party up to a stipulated amount and with specified terms and conditions.
Commitments to extend credit and standby letters of credit are not recorded as
an asset or liability by the Company until the instrument is exercised.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Second Quarter 1997 vs. Second Quarter 1996
Net income for the second quarter of 1997 was $3.8 million or $1.00 per share
compared to earnings of $4.2 million or $1.08 per share for the same period in
1996. Earnings for the second quarter of 1996 were boosted by the $2.0 million
after tax gain on the sale of the Company's consumer finance subsidiary.
Excluding this gain, net income increased $1.6 million for the quarter ended
June 30, 1997 compared to the same quarter in 1996. The second quarter
provision for loan losses decreased $859 thousand, net of tax, when compared to
1996.
Return on average assets was 1.68% for the second quarter of 1997, compared to
1.86% reported for the same period of 1996. Return on average equity was 13.60%
for the second quarter of 1997, a decrease from 15.64% during the same period of
1996.
Net Interest Income
Net interest income totaled $10.0 million for the second quarter of 1997
compared to $9.9 million for the second quarter 1996. Interest and fees on
loans decreased $269 thousand or 2.0%. This decrease relates primarily to the
sale of Money One, the Company's consumer finance subsidiary, in 1996. Interest
on taxable securities decreased $150 thousand, or 6.4% and interest on
nontaxable securities increased $66 thousand, or 9.3%. Interest on short term
investments increased $34 thousand, or 5.4%.
Interest expense on deposits decreased $311 thousand, or 4.6%. This decrease is
partially due to the repricing of a substantial base of the Company's
certificates of deposit. Interest on short term borrowings decreased $81
thousand, or 21.1%.
The net interest margin (net interest income as a percentage of average earning
assets), increased to 5.13% during the second quarter of 1997 compared to 5.11%
in the second quarter of 1996. The spread between rates earned and paid
decreased to 4.37% compared to 4.38% in the second quarter of 1996.
Asset Quality
The Company continues to emphasize the importance of maintaining a quality loan
portfolio. These efforts have produced a decrease in the provision for loan
losses, net charge offs and nonperforming assets when compared to the prior
period. The provision for loan losses decreased $1.3 million, or 71.5% compared
to the second quarter 1996. The Company had net charge-offs of $131 thousand in
the second quarter of 1997 compared to net charge-offs of $2.3 million in the
same period of 1996. These reductions are the result of the sale of Money One
in the prior year and management's continuing efforts to improve the Company's
overall loan quality. The allowance for loan losses was 1.57% of net loans in
the second quarter of 1997, up 3 basis points from the same period in 1996.
Management continues to emphasize collection efforts and the evaluation of risks
within the portfolio.
Noninterest Income
Noninterest income of $3.0 million decreased $2.9 million, or 48.8% from the
second quarter of 1996. The decrease is primarily the result of the $3.0
million gain on the sale of the Company's consumer finance subsidiary during
1996. Service charges and fees on deposits of $1.3 million was unchanged from
the second quarter of 1996. Other service charges, commissions, and fees
increased $59 thousand, or 6.9% to $919 thousand from the second quarter of
1996. Data processing fees increased $82 thousand, or 25% to $410 thousand.
Trust fees increased $44 thousand, or 19.6% to $268 thousand.
Noninterest Expense
Total noninterest expenses decreased $601 thousand or 7.7% from the second
quarter of 1996 to $7.2 million. Salaries and benefits, the largest component
of noninterest expense, decreased $553 thousand, or 12.9%. These reductions are
primarily the result of the sale of Money One, the Company's consumer finance
subsidiary, during 1996. Occupancy expense, net of rental income, increased
$14 thousand to $506 thousand. Equipment expenses increased $48 thousand, or
7.5%. Data processing expense decreased 3.3% from $246 thousand to $238
thousand for the second quarter of 1997. Bank franchise taxes increased $21
thousand, or 81%. FDIC insurance expense increased $26 thousand to $29 thousand
for the second quarter of 1997.
Income taxes
Income tax expense for the second quarter of 1997 was $1.5 million compared to
$2.0 million for the same period in 1996. The second quarter 1997 effective tax
rate was 28.7%, down from 32.3% in the second quarter of 1996.
First six months of 1997
Net income for the six months ended June 30, 1997 was $7.2 million, or $1.89 per
share compared to $6.6 million, or $1.72 per share for the same period in 1996.
Excluding the after tax gain of $2.0 million for the sale of the Company's
consumer finance subsidiary in the prior year, net income increased $2.5 million
for the first six months of 1997 compared to the same period last year. The
increase in earnings is primarily due to the reduction of the provision for loan
losses and the reduction of the overhead expenses of the consumer finance
subsidiary in the amount of $1.3 million and $751 thousand, respectively, net of
tax.
Return on average assets was 1.59%, compared to 1.48% for the same period in
1996. Return on average equity was 13.05%, up from 12.55% for the first six
months of 1996.
Net interest income
Net interest income totaled $19.7 million for the first six months of 1997
compared to $19.6 million for the first six months of 1996. Interest and fees
on loans decreased $672 thousand or 2.5%. This decrease relates primarily to
the sale of Money One, the Company's consumer finance subsidiary. Interest on
taxable securities decreased $216 thousand, or 4.7% and interest on nontaxable
securities increased $156 thousand or 11.2%. Interest on short term investments
increased $10 thousand, or less than 1%.
Interest expense on deposits decreased $682 thousand, or 5.0%. This decrease is
partially due to the repricing of a substantial base of the Company's
certificates of deposit. Interest on short term borrowings decreased $165
thousand, or 21.4%.
The net interest margin (net interest income as a percentage of average earning
assets), decreased to 5.03% during the first six months of 1997 compared to
5.05% for the same period in 1996. The spread between rates earned and paid
decreased to 4.29% compared to 4.31% for the first six months of 1996.
Asset Quality
The provision for loan losses decreased $2.0 million or 64.8% compared to the
first six months of 1996. The Company had net charge-offs of $977 thousand for
the first six months of 1997 compared to net charge-offs of $3.2 million in the
same period of 1996. These reductions are the result of the sale of Money One
in the prior year and management's continuing efforts to improve the Company's
overall loan quality. The allowance for loan losses was 1.57% of net loans at
June 30, 1997, unchanged from year end 1996. Management continues to emphasize
collection efforts and evaluation of risks within the portfolio.
Noninterest Income
Noninterest income for the first six months of 1997 was $6.3 million, a decrease
of $2.5 million, or 28.5% from the same period in 1996. The decrease is
primarily due to the gain on the sale of the Company's consumer finance
subsidiary reported in the prior year. Service charges and fees on deposits of
$2.6 million was unchanged from the first six months of 1996. Other service
charges, commissions, and fees increased $195 thousand or 11.3% to $1.9 million
for the six months ended June 30, 1997. Data processing income increased $71
thousand or 10.3% for the period ended June 30, 1997 compared to the same period
in 1996. Trust fees increased $149 thousand, or 38.2% to $539 thousand.
Noninterest Expense
Total noninterest expenses decreased $815 thousand, or 5.2%, to $14.8 million
for the first six months of 1997 compared to the same period in 1996. Salaries
and benefits, the largest component of noninterest expense, decreased $738
thousand, or 8.7%. Occupancy expense, net of rental income, decreased $54
thousand to $989 thousand. These reductions are primarily the result of the
sale of Money One, the Company's consumer finance subsidiary, during 1996.
Equipment expense increased $83 thousand, or 6.4%. Data processing expense
increased 25.1% from $390 thousand to $488 thousand for the six months ended
June 30, 1997. The increase is primarily attributable to an increase in credit
card interchange and processing. Bank franchise taxes decreased $29 thousand,
or 5.6%. FDIC insurance expense increased $44 thousand to $50 thousand for the
six months ended June 30, 1997.
Income taxes
Income tax expense for the first six months of 1997 was $2.9 million compared to
$3.0 million in 1996. The effective tax rate was 28.7% for the first six months
of 1997, down from 30.8% for the same period in 1996.
FINANCIAL CONDITION
Total assets were $937 million on June 30, 1997, an increase of $12.2 million or
1.3% from December 31, 1996. Assets averaged $907 million for the first six
months of 1997, an increase of $8 million, or 1.0% from year end 1996.
Loans
Loans, net of unearned income, increased $5.3 million, or 0.9% from December 31,
1996 to $563 million. On average, loans represented 67.9% of earning assets
compared to 67.0% for year end 1996. Average loans have increased approximately
$20 million since year end. These loans were funded primarily from the proceeds
of bond maturities within the investment portfolio, temporary investments and
the increase in customer deposits.
Temporary Investments
Time deposits with banks, federal funds sold and securities purchased under
agreements to resell averaged $53.4 million, a decrease of $1.7 million, or 3.4%
from year end 1996.
Investment Securities
Investment securities were $231 million on June 30, 1997, an increase of $9.9
million, or 4.5% from year end 1996. Available for sale and held to maturity
securities were $129 million and $102 million, respectively. Investment
securities averaged $210 million for the first six months of 1997, a decrease of
$7.9 million, or 3.6% from year end 1996. The net unrealized loss on securities
available for sale, net of taxes, was $336 thousand on June 30, 1997, as
compared to $362 thousand on December 31, 1996.
Nonperforming assets
Nonperforming assets, consisting of nonaccrual loans, restructured loans, loans
past due ninety days or more, and other real estate owned, totaled $5.5 million
on June 30, 1997, down $1.1 million or 17.0% from $6.6 million at year end 1996.
Nonperforming assets to total equity decreased from 6.0% at year end 1996 to
4.8% at June 30, 1997. Nonperforming assets as a percentage of loans and other
real estate decreased from 1.2% at year end to 1.0%. 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 68.8% since December 31, 1992.
Nonaccrual loans were $3.0 million at June 30, 1997, up slightly from $2.9
million at year end 1996. Loans 90 days or more past due decreased to $950
thousand from $1.8 million. Restructured loans were $1.4 million, down from
$1.8 million at year end.
Other real estate owned which had a zero balance at year end 1996, increased to
$93 thousand at June 30, 1997.
Deposits
Total deposits decreased $21.8 million, or 2.8%, from year end 1996 to $765
million. The Company's lead bank, Farmers Bank & Capital Trust Company, is the
depository of the Commonwealth of Kentucky in Frankfort. As such, fluctuations
in deposits are not unexpected. Deposits averaged $762 million, an increase of
$8.4 million, or 1.1% from year end 1996.
Borrowed Funds
Borrowed funds totaled $52.1 million, an increase of $31.9 million from year end
1996. This increase is due to repurchase agreements with the Commonwealth of
Kentucky. The fluctuations are due to the relationship with the Commonwealth of
Kentucky as described above. Borrowed funds averaged $28 million, a decrease of
$1.4 million, or 4.9%.
CAPITAL RESOURCES
Shareholders' equity was $113 million on June 30, 1997, increasing $3.5 million
from year end 1996. During 1996, the Company announced that it would purchase
up to 200,000 shares of its outstanding common stock as market conditions
permit. At June 30, the Company has repurchased a total of 85,126 shares under
this plan for a total cost of approximately $3.4 million. The Company purchased
15,762 shares of its outstanding common stock during the first six months of
1997 for a total cost of $644 thousand. Dividends of $3.1 million, or $.82 per
share, were declared during the first six months of 1997, and increase of $.10
per share for the same period in 1996.
Consistent with the objective of operating a sound financial organization,
Farmers Capital Bank Corporation maintains capital ratio's well above regulatory
requirements. The Company's capital ratios as of June 30, 1997, the regulatory
minimums and the regulatory standard for a "well capitalized" institution are as
follows:
Farmers Capital Regulatory Well
Bank Corporation Minimum Capitalized
Tier 1 risk based 18.77% 4.00% 6.00%
Total risk based 20.02% 8.00% 10.00%
Leverage 12.29% 4.00% 5.00%
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 June 30, 1997.
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 1997.
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 subsidiary banks' core deposits consisting of both business and
nonbusiness deposits
2. Cash flow generated by repayment of loan principal and interest
3. 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.
EFFECT OF IMPLEMENTING RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128 "Earnings Per Share" and SFAS No. 129 "Disclosure of Information About
Capital Structure." SFAS No. 128 simplifies the computation of earnings per
share ("EPS") by replacing the presentation of primary EPS with a presentation
of basic EPS. The Statement requires dual presentation of basic and diluted EPS
by entities with complex capital structures. Basic EPS includes no dilution and
is computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the earnings
of an entity, similar to fully diluted EPS.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods, and requires restatement of
all prior period EPS data presented. The Company does not expect the
implementation of this Statement to have a material effect on the consolidated
financial statements.
SFAS No. 129 establishes standards for disclosing information about an entity's
capital structure. This Statement contains no change in disclosure requirements
for companies that were subject to previously existing requirements. This
Statement was issued to eliminate the exemption of nonpublic entities from
certain previously issued disclosure requirements.
This Statement is effective for financial statements for periods ending after
December 15, 1997. This Statement will not have an effect on the Company's
consolidated financial statements.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" and
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 130 defines comprehensive income as the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from non owner sources. The Statement requires
comprehensive income to be reported in a financial statement that is displayed
with the same prominence as other financial statements. This statement is
effective for fiscal years beginning after December 15, 1997. The Company does
not expect the implementation of this Statement to have a meterial effect on the
consolidated financial statements.
SFAS No. 131 changes the way public companies report information about segments
of their business in their annual financial statements and requires them to
report selected segment information in their quarterly report to shareholders.
This Statement requires that companies disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. This Statement is effective for fiscal years beginning after
December 15, 1997. The Company does not expect the implementation of this
Statement to have a material effect on the consolidated financial statements.
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements under the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included herein will prove to be accurate. Factors that could cause
actual results to differ from the results discussed in the forward-looking
statements include, but are not limited to: economic conditions (both generally
and more specifically in the markets in which the Company and its subsidiaries
operate); competition for the Company's customers from other providers of
financial services; government legislation and regulation (which changes from
time to time and over which the Company has no control); changes in interest
rates; material unforeseen changes in the liquidity, results of operations, or
financial condition of the Company's customers; and other risks detailed in the
Company's filings with the Securities and Exchange Commission, all of which are
difficult to predict and many of which are beyond the control of the Company.
Part II
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders was held May 13, 1997. The matters that were
voted upon included:
a) The election of four directors for three-year terms ending in 2000 or until
their successors have been elected and qualified.
b) The ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants for the Company and its subsidiaries for the calendar year 1997.
The outcome of the voting was as follows:
Name For Against Withheld Abstained
Frank W. Sower, Jr. 3,190,466 0 4,055 0
J. Barry Banker 3,190,466 0 4,055 0
Charles S. Boyd 3,190,466 0 4,055 0
Cecil D. Bell 3,190,466 0 4,055 0
Ratification of the
appointment of
KPMG Peat Marwick LLP 3,189,953 400 0 4,168
Listed below is the name of each director whose term of office continued after
the meeting:
Frank W. Sower, Jr. James E. Bondurant
J. Barry Banker James H. Childers
W. Benjamin Crain E. Bruce Dungan
Lloyd C. Hillard, Jr. Charles S. Boyd
Harold G. Mays Cecil D. Bell
G. Anthony Busseni Dr. John P. Stewart
In addition to the directors above, Charles T. Mitchell serves as an advisory
director for the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) List of Exhibits.
27 Financial Data Schedule (for SEC only)
b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter
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: 8/12/97 /s/ Charles S. Boyd
Charles Scott Boyd,
President and CEO (Principal Executive Officer)
Date: 8/12/97 /s/ C. Douglas Carpenter
Cecil Douglas Carpenter
Vice President and CFO (Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1997 financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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