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, 1998
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 $0.125 per share
7,555,240 shares outstanding at August 7, 1998
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information Page No.
- ------------------------------ --------
Item 1 - Financial Statements
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Unaudited Consolidated Statements of Income -
For the Three Months and Six Months Ended
June 30, 1998 and June 30, 1997 4
Unaudited Consolidated Statements of Comprehensive Income -
For the Three Months and Six Months Ended
June 30, 1998 and June 30, 1997 5
Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended
June 30, 1998 and June 30, 1997 6
Unaudited Consolidated Statements of Changes in Shareholders' Equity -
For the Six Months Ended
June 30, 1998 and June 30, 1997 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 15
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 16
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(In thousands, except share data) 1998 1997
- --------------------------------- -------- ----------
ASSETS
Cash and cash equivalents:
Cash and due from banks $82,927 $75,830
Interest bearing deposits in other banks 2,369 1,300
Federal funds sold and securities purchased
under agreements to resell 11,100 109,610
-------- ----------
Total cash and cash equivalents 96,396 186,740
Investment securities:
Available for sale 157,551 119,076
Held to maturity 90,322 95,686
-------- ----------
Total investment securities 247,873 214,762
Loans, net of unearned income 597,525 585,940
Allowance for loan losses (8,963) (9,114)
-------- ----------
Loans, net 588,562 576,826
Premises and equipment 24,385 21,214
Accrued interest receivable 8,108 7,805
Other assets 7,689 6,836
-------- ----------
Total assets $973,013 $1,014,183
======== ==========
LIABILITIES
Deposits:
Noninterest bearing $151,584 $151,600
Interest bearing 640,283 683,376
-------- ----------
Total deposits 791,867 834,976
Other borrowed funds 52,270 53,655
Dividends payable 1,813 1,815
Accrued interest payable 2,047 1,956
Other liabilities 4,563 4,737
-------- ----------
Total liabilities 852,560 897,139
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, par value $0.125 per share
9,608,000 shares authorized; 7,555,240
and 7,562,440 shares issued and
outstanding at June 30, 1998 and
December 31, 1997, respectively 944 945
Capital surplus 8,886 8,894
Retained earnings 110,587 107,105
Accumulated other comprehensive income 36 100
-------- ----------
Total shareholders' equity 120,453 117,044
-------- ----------
Total liabilities and shareholders' equity $973,013 $1,014,183
======== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
(In thousands, except per share data) 1998 1997 1998 1997
- ------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $13,540 $13,066 $26,921 $25,972
Interest on investment securities:
Taxable 2,159 2,207 4,150 4,337
Nontaxable 918 775 1,684 1,544
Interest on deposits in other banks 33 30 86 49
Interest on federal funds sold and securities
purchased under agreements to resell 644 635 1,481 1,374
------ ------ ------ ------
Total interest income 17,294 16,713 34,322 33,276
INTEREST EXPENSE
Interest on deposits 6,760 6,417 13,435 12,982
Interest on other borrowed funds 505 302 1,002 605
------ ------ ------ ------
Total interest expense 7,265 6,719 14,437 13,587
------ ------ ------ ------
Net interest income 10,029 9,994 19,885 19,689
Provision for loan losses 202 518 434 1,086
------ ------ ------ ------
Net interest income after provision for loan losses 9,827 9,476 19,451 18,603
NONINTEREST INCOME
Service charges and fees on deposits 1,302 1,273 2,579 2,575
Other service charges, commissions, and fees 1,008 930 2,055 1,943
Data processing income 426 410 790 758
Trust income 307 268 605 539
Investment securities gains 100
Gain on sale of loans 1 4 6 8
Other 143 110 288 434
------ ------ ------ ------
Total noninterest income 3,187 2,995 6,423 6,257
NONINTEREST EXPENSE
Salaries and employee benefits 4,105 3,728 8,300 7,758
Occupancy expense, net 534 506 1,033 989
Equipment expense 676 692 1,345 1,387
Data processing expense 252 238 548 488
Bank franchise tax 282 281 546 492
Other 2,084 1,720 4,008 3,684
------ ------ ------ ------
Total noninterest expense 7,933 7,165 15,780 14,798
------ ------ ------ ------
Income before income taxes 5,081 5,306 10,094 10,062
Income tax expense 1,347 1,521 2,778 2,886
------ ------ ------ ------
Net income $3,734 $3,785 $7,316 $7,176
====== ====== ====== ======
NET INCOME PER COMMON SHARE
Basic $.49 $.50 $.97 $.95
Diluted .49 .50 .96 .95
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,555 7,572 7,557 7,582
Diluted 7,675 7,572 7,653 7,582
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended Six Months Ended
June 30 June 30
(In thousands) 1998 1997 1998 1997
- -------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
NET INCOME $3,734 $3,785 $7,316 $7,176
Other comprehensive income:
Unrealized holding gain on available for sale
securities arising during the period, net of tax
of $48, $110, $3 and $13, respectively 93 213 6 26
Reclassification adjustment for prior period
unrealized gain recognized during current period,
net of tax of $36 in 1998 (70)
------ ------ ------ ------
Net gain (loss) recognized in other
comprehensive income 93 213 (64) 26
------ ------ ------ ------
Comprehensive income $3,827 $3,998 $7,252 $7,202
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, (In thousands) 1998 1997
- ---------------------------------------- ------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,316 $7,176
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,274 1,294
Net amortization of securities
premiums and discounts:
Available for sale 24 14
Held to maturity 123 44
Provision for loan losses 434 1,086
Mortgage loans originated for sale (7,988) (8,278)
Proceeds from sale of mortgage loans 8,085 8,340
Deferred income tax benefit (1)
Gain on sale of mortgage loans (6) (8)
Gain on sale of available for sale investment securities (100)
(Gain) loss on sale of fixed assets (1) 4
Increase in accrued interest receivable (303) (9)
Increase in other assets (1,491) (1,660)
Increase (decrease) in accrued interest payable 91 (104)
Increase (decrease) in other liabilities 232 (1,264)
------- --------
Net cash provided by operating activities 7,689 6,635
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity or call of investment securities:
Available for sale 51,833 59,141
Held to maturity 11,890 15,916
Proceeds from sale of available for sale investment securities 25,394
Purchase of investment securities:
Available for sale (115,721) (78,330)
Held to maturity (6,649) (6,599)
Loans originated for investment, net of principal collected (12,261) (6,281)
Purchase of premises and equipment (4,182) (2,256)
Proceeds from sale of equipment 1 3
------- --------
Net cash used in investing activities (49,695) (18,406)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits (43,109) (21,788)
Dividends paid (3,629) (3,113)
Purchase of common stock (215) (644)
Net (decrease) increase in other borrowed funds (1,385) 31,888
------- --------
Net cash (used in) provided by financing activities (48,338) 6,343
------- --------
Net change in cash and cash equivalents (90,344) (5,428)
Cash and cash equivalents at beginning of year 186,740 122,746
------- --------
Cash and cash equivalents at end of period $96,396 $117,318
======= ========
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest $14,346 $13,691
Income taxes 2,405 2,729
Cash dividend declared and unpaid 1,813 1,552
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Total
(In thousands, except per share data) Common Stock Capital Retained Accumulated Other Shareholders'
Six months ended June 30, 1998 and 1997 Shares Amount Surplus Earnings Comprehensive Income Equity
- --------------------------------------- ------ ------ ------- -------- -------------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 7,594 $949 $8,931 $100,078 $(362) $109,596
Cash dividends declared, $.41 per share (3,107) (3,107)
Purchase of common stock (32) (4) (37) (603) (644)
Comprehensive income:
Net income 7,176 7,176
Other comprehensive income, net of tax:
Unrealized gain on available for sale
securities, net of reclassification
adjustment 26 26
-----
Comprehensive income 7,202
----- ---- ------ -------- ----- --------
Balance at June 30, 1997 7,562 $945 $8,894 $103,544 $(336) $113,047
===== ==== ====== ======== ===== ========
Balance at December 31, 1997 7,562 $945 $8,894 $107,105 $100 $117,044
Cash dividends declared, $.48 per share (3,628) (3,628)
Purchase of common stock (7) (1) (8) (206) (215)
Comprehensive income:
Net income 7,316 7,316
Other comprehensive income, net of tax:
Unrealized loss on available for sale
securities, net of reclassification
adjustment (64) (64)
-----
Comprehensive income 7,252
----- ---- ------ -------- ----- --------
Balance at June 30, 1998 7,555 $944 $8,886 $110,587 $36 $120,453
===== ==== ====== ======== ===== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 general
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. The results of
operations for the interim periods are not necessarily indicative of the 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, 1997.
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.
3. ADOPTION OF NEW ACCOUNTING PRINCIPLES
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME and SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
SFAS 130 establishes standards for reporting and display of comprehensive income
and its components. Comprehensive income is defined as the change in equity (net
assets) of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. For the Company, this includes
net income and unrealized gains and losses on available for sale investment
securities. This Statement requires comprehensive income to be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The implementation of SFAS 130 did not have a material
impact on the Company's consolidated financial statements.
SFAS 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 in 1998. In the initial year of
application, this Statement is not required to be applied to interim periods.
The Company does not expect the implementation of this Statement to have a
material effect on the consolidated financial statements.
4. STOCK SPLIT
On January 26, 1998, the Company's Board of Directors approved a two-for-one
stock split of its common stock. The stock split was effective July 1, 1998 for
holders of record on June 1, 1998. The stock split increased the Company's
outstanding common shares from 3,777,620 to 7,555,240 shares. Additionally, all
references in the Consolidated Financial Statements, Footnotes, and
Supplementary data to the number of shares, per-share amounts, and market prices
of the Company's common stock have been restated to give retroactive recognition
to the stock split.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
Second Quarter 1998 vs. Second Quarter 1997
-------------------------------------------
The Company reported earnings of $3.7 million, or $.49 per diluted share, for
the second quarter of 1998 compared to earnings of $3.8 million, or $.50 per
diluted share for the second quarter of 1997.
Return on average assets was 1.58% for the second quarter of 1998, compared to
1.68% reported for the same period of 1997. Return on average equity was 12.60%
for the second quarter of 1998, a decrease from 13.60% during the same period of
1997.
Net Interest Income
- -------------------
Net interest income totaled $10.0 million for the second quarter of 1998,
unchanged from the second quarter 1997. Interest and fees on loans increased
$474 thousand or 3.6%, which is primarily attributable to an increase in volume.
Interest on taxable securities decreased $48 thousand, or 2.2% and interest on
nontaxable securities increased $143 thousand, or 18.5%. Interest on short term
investments increased $12 thousand, or 1.8%.
Interest expense on deposits increased $343 thousand, or 5.3% due to slight
increases in both rates and volume. Interest expense on other borrowed funds
increased $203 thousand due primarily to an increase in volume.
The net interest margin (net interest income as a percentage of average earning
assets), on a tax equivalent basis, decreased to 4.87% during the second quarter
of 1998 compared to 5.13% in the second quarter of 1997. The spread between
rates earned and paid decreased to 3.99% compared to 4.37% in the second quarter
of 1997.
Noninterest Income
- ------------------
Noninterest income of $3.2 million increased $192 thousand, or 6.4% from the
second quarter of 1997.
Service charges and fees on deposits of $1.3 million increased $29 thousand, or
2.3% from the second quarter of 1997. Other service charges, commissions, and
fees increased $78 thousand, or 8.4% to $1.0 million from the second quarter of
1997. Data processing income increased 3.9% to $426 thousand for the second
quarter of 1998. Trust fees increased $39 thousand, or 14.6% to $307 thousand.
Other noninterest income increased $33 thousand in 1998 compared to 1997.
Noninterest Expense
- -------------------
Total noninterest expenses increased $768 thousand or 10.7% from the second
quarter of 1997 to $7.9 million. Salaries and employee benefits, the largest
component of noninterest expense, increased $377 thousand, or 10.1%. Occupancy
expense, net of rental income, increased $28 thousand to $534 thousand. These
increases are partially attributed to the Company's efforts to expand into new
markets. Equipment expense decreased $16 thousand, or 2.3%. Data processing
expense increased 5.9% from $238 thousand to $252 thousand for the second
quarter of 1998. Bank franchise tax was relatively unchanged at $282 thousand.
Other noninterest expense increased from $1.7 million to $2.1 million.
Income Taxes
- ------------
Income tax expense for the second quarter of 1998 was $1.3 million, a decrease
of $174 thousand from the second quarter of 1997. The second quarter 1998
effective tax rate was 26.5%, a decrease of 7.7% from the second quarter of
1997.
First six months of 1998
------------------------
Net income for the six months ended June 30, 1998 was $7.3 million, or $.96 per
diluted share compared to earnings of $7.2 million, or $.95 per diluted share
for the same period in 1997. Net interest income increased 1.0% to $19.9
million. Noninterest income increased 2.7% to $6.4 million and the provision for
loan losses decreased $652 thousand, or 60.0%. These positive variances have
been partially offset by an increase in noninterest expense of $982 thousand, of
which $542 thousand relates to salaries and employee benefits.
Return on average assets was 1.57% for the six months ended June 30, 1998, a
decrease of 2 basis points from the same period in 1997. Return on average
equity was 12.48%, a decrease from 13.05% in the first six months of 1997.
Net Interest Income
- -------------------
Net interest income totaled $19.9 million for the six months ended June 30, 1998
compared to $19.7 million for the same period in 1997. Interest and fees on
loans increased $949 thousand, or 3.7%. The increase is primarily attributed to
a 4.4% increase in loan volume. Interest on taxable securities decreased $187
thousand, or 4.3%. The decrease is primarily attributed to a 5.9% decrease in
volume. Interest on nontaxable securities increased $140 thousand, or 9.1% due
to a 14.9% increase in volume. Interest on short term investments increased $147
thousand. This increase is attributed to slight increases in both rate and
volume.
Interest expense on deposits increased $453 thousand, or 3.5%. The increase is
primarily due to an increase in rates paid of approximately 10 basis points.
Interest expense on other borrowed funds increased $397 thousand, or 65.6%. The
increase is made up of an $11.3 million, or 40% increase in volume and an
increase of approximately 78 basis points on rates paid.
Net interest margin on a tax equivalent basis decreased to 4.84% during the
first six months of 1998 compared to 5.03% for the same period of 1997. The
spread between rates earned and paid decreased from 4.29% in 1997 to 3.99% in
the current period.
Noninterest Income
- ------------------
Total noninterest income increased $166 thousand, or 2.7% for the first six
months of 1998 compared to the same period in 1997. Service charges and fees on
deposits remained unchanged at $2.6 million. Other service charges, commissions,
and fees increased 5.8% to $2.1 million. Data processing fees increased 4.2% to
$790 thousand. Trust fees increased 12.2% to $605 thousand. The Company recorded
gains on the sale of available for sale investment securities of $100 thousand.
Other noninterest income decreased by $146 thousand in 1998 compared to 1997.
This is primarily attributed to a recovery of prior year legal expenses of $189
thousand recorded in 1997.
Noninterest Expense
- -------------------
Total noninterest expense increased $982 thousand, or 6.6% from the first six
months of 1997 to $15.8 million. Salaries and employee benefits, the largest
component of noninterest expense, increased $542 thousand, or 7.0%. Occupancy
expense, net of rental income, increased 4.4% to $1.0 million. These increases
are partially attributed to the Company's ongoing efforts to expand into new
markets. Equipment expense decreased $42 thousand, or 3.0%. Data processing
expense increased 12.3% to $548 thousand. This increase is primarily
attributable to an increase in credit card interchange and processing. Bank
franchise tax expense increased $54 thousand, or 11%. Other noninterest expense
increased $320 thousand, or 8.8%. The largest increase in noninterest expense
was in correspondent bank fees, which rose $121 thousand, or 31.9%. This
increase is attributable to increased activity in the Company's role as
custodian for various accounts of the Commonwealth of Kentucky in Frankfort. Net
Other Real Estate Owned expense also contributed to the increase in noninterest
expense by increasing $52 thousand.
Income Taxes
- ------------
Income tax expense for the first six months of 1998 was $2.8 million compared to
$2.9 million for the same period in 1997. The effective tax rate was 27.52% for
the first six months of 1998, down from 28.68% in the prior year.
FINANCIAL CONDITION
Total assets were $973 million on June 30, 1998, a decrease of 4.1% from
December 31, 1997. The fluctuation in total assets is primarily due to the
relationship between the Company's lead bank, Farmers Bank & Capital Trust Co.
and the Commonwealth of Kentucky. Farmers Bank provides various services to
state agencies of the Commonwealth of Kentucky. As the depository for the
Commonwealth, these agencies issue checks drawn on Framers Bank, including
paychecks and state income tax refunds. Farmers Bank also processes vouchers for
the WIC (Womens, Infants and Children) program for the Cabinet for Human
Resources. The Bank's investment department provides services to both the
Kentucky Retirement and Teachers Retirement systems. As the depository for the
Commonwealth, large fluctuations in deposits in the form of uncollected funds
are likely to occur on a daily basis. On December 31, 1997, Farmers Bank held a
significant amount of deposits for the Commonwealth, which were subsequently
reduced shortly after year end. Assets averaged $940 million for the first six
months of 1998, an increase of $34 million, or 3.8% from year end 1997.
Loans
- -----
Loans, net of unearned income, increased $11.6 million, or 2.0% from December
31, 1997 to $598 million. On average, loans represented 68.4% of earning assets
compared to 69.5% for year end 1997. As loan demand fluctuates, the available
funds are redirected between either temporary investments or investment
securities.
Allowance for Loan Losses
- -------------------------
The provision for loan losses decreased $652 thousand or 60.0% compared to the
first six months 1997. The Company had net charge-offs of $585 thousand in the
first six months of 1998 compared to net charge-offs of $977 thousand in the
same period of 1997. The allowance for loan losses was 1.50% of net loans at
June 30, 1998, an decrease of 6 basis points from year end 1997. Management
continues to emphasize collection efforts and evaluation of risks within the
portfolio.
Nonperforming Assets
- --------------------
Nonperforming assets, consisting of nonaccrual loans, restructured loans, loans
past due ninety days or more on which interest in still accruing, other real
estate owned, and other foreclosed assets, totaled $7.9 million on June 30,
1998, an increase of $1.2 million or 18.1% from year end 1997. Nonperforming
assets to total equity increased from 5.7% at year end 1997 to 6.5% at June 30,
1998. Nonperforming loans as a percentage of net loans increased from 1.13% at
year end to 1.17%.
Other real estate owned which had a balance of $29 thousand at year end 1997,
increased to $816 thousand as of June 30, 1998.
Temporary Investments
- ---------------------
Time deposits with banks, federal funds sold and securities purchased under
agreements to resell averaged $56.6 million, an increase of $8.9 million, or
18.6% from year end 1997.
Investment Securities
- ---------------------
Investment securities were $248 million on June 30, 1998, an increase of $33.1
million, or 15.4% from year end 1997. Available for sale and held to maturity
securities were $158 and $90 million, respectively. Investment securities
averaged $212 million for the first six months of 1998, an increase of $2.8
million, or 1.3% from year end 1997. The Company had a net unrealized gain on
securities available for sale, net of taxes, of $36 thousand on June 30, 1998,
as compared to a net unrealized gain of $100 thousand on December 31, 1997.
Deposits
- --------
Total deposits decreased $43 million, or 5.2%, from year end 1997 to $792
million. This fluctuation is primarily due to the relationship between the
Company's lead bank and the Commonwealth of Kentucky, as described under the
caption "FINANCIAL CONDITION". Deposits averaged $776 million, an increase of
$22.3 million, or 3.0% from year end 1997.
Borrowed Funds
- --------------
Borrowed funds totaled $52.3 million, a decrease of $1.4 million, or 2.6% from
year end 1997. This decrease is due primarily to repurchase agreements entered
into with the Commonwealth of Kentucky. The fluctuations are due to the
relationship with the Commonwealth of Kentucky as described under the caption
"FINANCIAL CONDITION". Borrowed funds averaged $39 million, an increase of $8.0
million, or 25.5%.
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 1998.
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 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.
Liquid assets consist of cash and due from banks, short-term investments, and
securities available for sale. At June 30, 1998, such assets totaled $254
million, a decrease of $52 million from year end 1997. The decrease in liquid
assets was primarily due to the decrease of the balances maintained by the
Commonwealth of Kentucky. Fluctuations such as this are normal and are
anticipated by Management in analyzing the Company's ongoing liquidity and
funding needs.
CAPITAL RESOURCES
Shareholders' equity was $120 million on June 30, 1998, increasing $3.4 million
from year end 1997. The Company purchased 7,200 shares of its outstanding common
stock during the first six months of 1998 for a total cost of $215 thousand.
Dividends of $3.6 million, or $.48 per share, were declared during the first six
months of 1998, an increase of 17.1% per share compared to the prior year.
Consistent with the objective of operating a sound financial organization, the
Company's goal is to maintain capital ratios well above the regulatory minimum
requirements. The Company's capital ratios as of June 30, 1998, 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 18.89% 4.00% 6.00%
Total risk based 20.14% 8.00% 10.00%
Leverage 12.66% 4.00% 5.00%
The capital ratios of all the subsidiary banks, on an individual basis, were in
excess of the applicable minimum regulatory capital ratio requirements at June
30, 1998.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The Year 2000 problem
arises when computer programs use two digits rather than four to define the
applicable year. Some systems may treat the year 2000 as the year 1900. This
could result in a major system failure or miscalculations. A number of computer
systems which are affected by the Year 2000 are utilized by the Company to
operate its day-to-day business. Most of these systems use software developed by
and licensed from third party software vendors.
The Company is utilizing both internal and external resources to identify,
correct and test the Company's systems for Year 2000 compliance. The Company is
actively managing all of its third party software vendors to determine that
software corrections and warranty commitments are obtained. The Company believes
that mission critical applications are Year 2000 compliant. Most of the systems
testing will be completed in 1998, with the remainder scheduled to be completed
during the first quarter of 1999. The Company believes that the costs associated
with Year 2000 compliance will be absorbed in routine annual software
maintenance contracts and are not likely to be incremental costs to the Company.
The Company does not anticipate future material expenditures in order to become
Year 2000 compliant.
EFFECT OF IMPLEMENTING RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT
BENEFITS. This Statement revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans. It standardizes the disclosure requirements for pensions and
other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures
required in SFAS No. 87, SFAS No. 88 and SFAS No. 106.
This Statement is effective for fiscal years beginning after December 15, 1997,
and requires restatement of disclosures in earlier periods. The Company does not
expect the implementation of this Statement to have a material effect on the
consolidated financial statements.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. This Statement requires companies to
recognize derivatives on the balance sheet and measure them at fair value. Gains
or losses resulting in the changes in fair value of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criteria for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. If the derivative is highly effective, but not perfectly
effective and does not exactly offset the changes in fair value or cash flows of
the hedged item, the ineffective portion must be recognized in income at the
same time the change in fair value of the derivative is recognized on the
balance sheet. This Statement amends SFAS No. 52 and SFAS No. 107, and
supersedes SFAS No. 80, SFAS No. 105 and SFAS No. 119.
This Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application should be as of the beginning of an
entity's fiscal quarter. Early application of this Statement is permitted only
as of the beginning of any fiscal quarter that begins after issuance of this
Statement. The Company is currently evaluating the merits of adopting this
Statement before the mandatory date. 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
<PAGE>
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
There have been no material changes in the Company's market risk from December
31, 1997. For information regarding the Company's market risk, refer to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The annual meeting of shareholders was held May 12, 1998. The matters that were
voted upon included:
a) The election of four directors for three-year terms ending in 2001 or
until their successors have been elected and qualified.
b) Ratification of the Company's Nonqualified Stock Option Plan.
c) Amendment of the Company's Articles of Incorporation to increase the
authorized Common Stock and to reduce the par value of the Common
Stock.
d) The ratification of the appointment of KPMG Peat Marwick LLP as
independent accountants for the Company and its subsidiaries for the
calendar year 1998.
The outcome of the voting was as follows:
NAME FOR AGAINST WITHHELD ABSTAINED
Lloyd C. Hillard 6,433,568 0 223,841 0
Harold G. Mays 6,657,209 0 200 0
Robert Roach, Jr. 6,351,117 0 306,292 0
Dr. John D. Sutterlin 6,433,509 0 223,900 0
Ratification of Nonqualified
Stock Option Plan 5,571,239 725,666 0 194,822
Amendment to Articles
of Incorporation 6,687,360 147,656 0 19,533
Ratification of the appointment
of KPMG Peat Marwick LLP 6,716,224 8,535 0 130,224
Listed below is the name of each director whose term of office continued after
the meeting.
Frank W. Sower, Jr. James E. Bondurant Harold G. Mays
J. Barry Banker James H. Childers Cecil D. Bell
Robert Roach, Jr. E. Bruce Dungan G. Anthony Busseni
Lloyd C. Hillard, Jr. Charles S. Boyd Dr. John D. Sutterlin
In addition to the directors above, Dr. John P. Stewart, Chairman Emeritus and
Charles T. Mitchell serve as advisory directors for the Company.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) List of Exhibits
----------------
3i Articles of incorporation
11 Statement re computation of per share earnings
27 Financial data schedule (for SEC use only)
b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the quarter.
<PAGE>
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: 8/11/98 /s/ Charles S. Boyd
-------------- ---------------------------------------------------
Charles Scott Boyd,
President and CEO (Principal Executive Officer)
Date: 8/11/98 /s/ C. Douglas Carpenter
-------------- ---------------------------------------------------
Cecil Douglas Carpenter
Vice President and CFO (Principal Financial
and Accounting Officer)
<PAGE>
Exhibit 3i
Articles of incorporation
-------------------------
Page No.
Amended and Restated Articles of Incorporation - December 14, 1982 19
Articles of Amendment to Articles of Incorporation - April 8, 1986 24
Articles of Amendment to Articles of Incorporation - May 12, 1987 28
Articles of Amendment to Articles of Incorporation - May 9, 1989 30
Articles of Amendment to Articles of Incorporation - June 3, 1998 32
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FARMERS CAPITAL BANK CORPORATION
The undersigned, Zack C. Saufley and James H. Childers, President and
Secretary, respectively, of Farmers Capital Bank Corporation, hereby execute
these Amended and Restated Articles of Incorporation of Farmers Capital Bank
Corporation, and certify that:
(A) The name of the corporation is Farmers Capital Bank Corporation.
(B) The amendments so adopted are amendments to ARTICLE VI and the addition
and amendment of ARTICLE X, so that each of said articles as amended shall read
in their respective entirety as hereinafter set out.
(C) The Restated Articles of Incorporation, as amended, are as follows:
ARTICLE I
---------
The name of the corporation is Farmers Capital Bank Corporation.
ARTICLE II
----------
The existence of this corporation shall commence upon the issuance of
the Certification of Incorporation and its duration shall be perpetual unless
sooner dissolved by action of the shareholders in accordance with the laws of
the Commonwealth of Kentucky.
ARTICLE III
-----------
The objects and purposes for which this corporation is organized and
the powers which may be exercised by it are those enumerated in Sections
271A.020, 271A.026, and 271A.030 of the Kentucky Revised Statutes, and:
(1) To purchase, subscribe for, or otherwise acquire and own, hold, use,
sell, lease, assign, transfer, mortgage, pledge, exchange, or otherwise dispose
of real and personal property of every kind and description including shares of
stock, bonds, debentures, notes, evidences of indebtedness, and other
securities, contracts or obligations, domestic or foreign, and to pay therefor
in whole or in part in cash or by exchanging therefor stocks, bonds, or other
evidences of indebtedness or securities of this or any other corporation, and
while the owner or holder of any such real or personal property, stocks, bonds,
debentures, notes, evidences of indebtedness or other securities, contracts, or
obligations, to receive, collect, and dispose of the interest, dividends and
income arising from such property, and to possess and exercise in respect
thereof all the rights, powers an privileges of ownership, including all voting
powers on any stocks so owned.
(2) To act as a bank holding company.
(3) To aid either by loans or by guaranty of securities or in any other
manner, any corporation, domestic or foreign, any shares of stock, or any bonds,
debentures, evidences of indebtedness or other securities whereof are held by
this corporation or in which it shall have any interest, and to do any acts
designed to protect, preserve, improve, or enhance the value of any property at
any time held or controlled by this corporation or in which it at that time may
be interested.
(4) To enter into, make, perform, and carry out contracts of any kind for
any lawful purpose with any firms, persons, associations or corporations.
(5) To purchase, acquire, lease, own, and enjoy any and all such other
property real and personal, as may be reasonably necessary for the carrying on
of the business of the corporation.
(6) To acquire, as a going concern or otherwise, and pay for in cash,
stock or bonds of this corporation or otherwise, the whole or any part of the
business, good will, rights, assets and other property, and to undertake, assume
or secure the whole or any part of the obligations or liabilities of any person,
firm, trust, association or corporation.
(7) To issue bonds, debentures or obligations of this corporation from time
to time, for any of the objects or purposes of the corporation, and to secure
the same by mortgage, pledge, deed of trust, or otherwise.
(8) To purchase the corporate assets of any other corporation and engage in
the same character of business.
(9) To apply for, acquire, enjoy, utilize and dispose of any patents,
copyrights and trademarks and any licenses or other rights of interest
thereunder or therein, whether or not in any way relating to any of the
businesses in which the corporation may engage.
(10) To purchase, hold, sell and transfer shares of its own capital stock,
subject to the limitations contained in Sections 271A.030 and 271A.330 of the
Kentucky Revised Statutes. The corporation may purchase its own capital stock to
the extent of unreserved and unrestricted earned surplus available therefor, and
to the extent of unreserved and unrestricted capital surplus available therefor.
Shares of its own capital stock owned by the corporation shall not be voted
directly or indirectly, or counted as outstanding for the purpose of any
stockholders' quorum or vote.
(11) To transact any and all lawful business for which corporations may be
incorporated under Chapter 271A of the Kentucky Revised Statutes.
The foregoing clauses shall be construed both as objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of this
corporation.
ARTICLE IV
----------
The total authorized number of shares of capital stock of the corporation
shall be Eight Hundred Four Thousand (804,000) shares, all of which shares shall
be common stock of the par value of One Dollar and Twenty Five Cents ($1.25)
each. All shares of common stock of the corporation shall have full and
unlimited voting power and each share shall be entitled to one vote. The owners
of common stock of the corporation shall have preemptive rights as set out in
Section 271A.130 of the Kentucky Revised Statutes, except with respect to
treasury shares of the corporation. No holder of shares of the capital stock of
the corporation shall have any preemptive or preferential right to subscribe
for, purchase or receive any treasury share(s) (as defined in Section
271A.010(8) of the Kentucky Revised Statutes) of the corporation.
ARTICLE V
---------
The location and post office address of the corporation's registered office
shall be One Farmers Bank Plaza, Frankfort, Kentucky 40601 and the registered
agent of the corporation at that address shall be Zack C. Saufley.
ARTICLE VI IS HEREBY AMENDED TO READ AS FOLLOWS:
------------------------------------------------
ARTICLE VI
----------
From and after the first annual meeting of the shareholders of the
corporation, the affairs of the corporation shall be conducted and managed by a
Board of Directors consisting of not less than nine (9) nor more than fifteen
(15) members, as may be fixed by the bylaws of the corporation from time to
time. From and after the first annual meeting of the shareholders the Directors
of the corporation shall be divided into three classes, each class to be as
nearly equal in number as possible, said classes to be designated as Class I,
Class II and Class III Directors. At the first annual meeting of the
shareholders there shall be elected ten (10) Directors of the corporation, as
follows: (a) three (3) members of Class I Directors who shall hold office until
the second annual meeting of the shareholders at which second annual meeting the
number of Class I Directors elected to office shall hold office for a term of
three (3) years or until their respective successors are duly elected and
qualified; (b) three (3) members of Class II Directors who shall hold office
until the third annual meeting of the shareholders at which third annual meeting
of the shareholders the number of Class II Directors elected to office shall
hold office for a term of three (3) years or until their respective successors
are duly elected and qualified, and (c) four (4) members of Class III Directors
who shall hold office for a term of three (3) years or until their respective
successors are duly elected and qualified and following the expiration of their
initial term of office the number of Class III Directors elected shall hold
office for a term of three (3) years or until their respective successors are
duly elected and qualified. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
The first Board of Directors who shall serve until the first annual meeting
of the shareholders or until their successors shall be duly elected and
qualified shall consist of ten (10) members who are:
John P. Stewart John D. Sutterlin
Route #7 12 Whitebridge Lane
Frankfort, Kentucky Frankfort, KY
Zack C. Saufley Joseph C. Yagel, Jr.
One Farmers Bank Plaza 511 Leawood Dr.
Frankfort, Kentucky Frankfort, KY
Warner U. Hines Bruce Dungan
Route #6 One Farmers Bank Plaza
Frankfort, Kentucky Frankfort, KY
John J. Hopkins Charles O. Bush
415 West Main Street 219 Walmac
Frankfort, Kentucky Frankfort, KY
Charles T. Mitchell Michael M. Sullivan
471 Breckinridge Avenue One Farmers Bank Plaza
Frankfort, Kentucky Frankfort, KY
ARTICLE VII
-----------
In furtherance, and not in limitation of the powers conferred by stature,
the board of directors is expressly authorized:
(1) To make and alter the bylaws of this corporation, to fix the amount to
be reserved as working capital over and above its capital stock paid in, to
authorize and cause to be executed mortgages, security interests, and liens upon
the real and personal property of this corporation, as an entirety or in part.
(2) From time to time to determine whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of this corporation (other then the stock book), or any of them, shall be
open to inspection of shareholders; and no shareholder shall have any right of
inspecting any account, book or document of this corporation except as conferred
by statute, unless authorized by a resolution of the shareholders or directors.
(3) To issue all or any portion of the capital stock of the corporation for
lawful money of the United States, real or personal property, services, or any
other right or thing of value having a value of not less than the par value of
the stock to be issued, for the uses and purposes of the corporation, and when
so issued the capital stock shall become and be fully paid and nonassessable;
and the directors shall be sole judges of the value of any property, right or
thing acquired in exchange for capital stock.
(4) If the bylaws so provide, to designate two or more of its number to
constitute an executive committee which committee shall for the time being, as
provided in said resolution or in the bylaws of this corporation, have and
exercise any or all of the powers of the board of directors in the management of
the business and affairs of this corporation, and have power to authorize the
seal of this corporation to be affixed to all papers which may require it. The
board of directors may also designate one or more other committees in the manner
prescribed by the bylaws, each committee to have such name and to exercise such
powers as may, from time to time, be prescribed by the bylaws or by resolution
adopted by the board of directors.
ARTICLE VIII
------------
No contract or other transaction between the corporation and any other
firm, partnership, association, corporation or other organization shall, in the
absence of fraud, be affected or invalidated by the fact that any one or more of
the directors of the corporation is or are interested in or is a member,
director, shareholder or officer or are members, directors, shareholders or
officers of such other firm, partnership, association, corporation or
organization. Any director of the corporation may vote upon any contract or
other transaction between the corporation and any subsidiary or controlled
company without regard to the fact that he also is a director of such subsidiary
or controlled company.
ARTICLE IX
----------
The name and address of the incorporator is:
Zack C. Saufley
One Farmers Bank Plaza
Frankfort, Kentucky 40601
ARTICLE X IS HEREBY ADDED TO THE ARTICLES OF INCORPORATION BY WAY OF
-----------------------------------------------------------------------
AMENDMENT TO THE ARTICLES OF INCORPORATION TO READ AS FOLLOWS:
- --------------------------------------------------------------
ARTICLE X
---------
The affirmative vote or written consent of the holders of two-thirds of the
outstanding shares of the common stock of the corporation shall be required for:
(1) The approval by the shareholders of the corporation of a plan of merger
or consolidation whereby this corporation would be merged or consolidated with
or into an affiliate of this corporation; or
(2) The authorization by the shareholders of a sale, lease, exchange, or
other disposition of all, or substantially all, the property and assets, with or
without the good will, of the corporation to an affiliate of this corporation;
or
(3) The adoption by the shareholders of the corporation of a resolution to
dissolve the corporation; or
(4) The removal without cause of any or all directors of the corporation;
or
(5) The approval by the shareholders of the corporation of any amendment or
amendments to the corporation's Articles of Incorporation which would amend,
alter, modify or repeal the provisions of Article VI or this Article X of the
Articles of Incorporation.
For the purposes of this Article X, the term:
(a) "Affiliate" means a person (i) who owns, directly or indirectly,
ten (10%) percent or more of the outstanding common stock of this corporation,
or (ii) who controls, is controlled by, or is under common control with a person
who owns, directly or indirectly, or who controls, ten (10%) percent or more of
the outstanding common stock of the corporation.
(b) "Control" means the power to vote, or direct the vote, of ten (10%)
percent or more of any class of voting securities of a person, and
(c) "Person" means an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, or any other form of legal entity.
* * * * *
(D) Except for the designated amendments, these Restated Articles of
Incorporation correctly set forth without change the corresponding provisions of
the Articles of Incorporation, and the Restated Articles of Incorporation,
together with the designated amendments, supersede the original Articles of
Incorporation.
(E) The foregoing Amended and Restated Articles of Incorporation were
unanimously approved by the Board of Directors of the Corporation by a
resolution adopted on the 14th day of December, 1982, upon which date no shares
had been issued. The members of the Board of Directors are the only persons who
have subscribed to stock in the corporation. As such stock subscribers (or
shareholders) they unanimously approved the resolution on the 14th day of
December, 1982.
IN WITNESS WHEREOF, Zack C. Saufley and James H. Childers, President and
Secretary, respectively, of the corporation, have set their hands this 14th day
of December, 1982.
FARMERS CAPITAL BANK CORPORATION
BY:/s/ Zack C. Saufley
----------------------
ZACK C. SAUFLEY, President
BY:/s/ James H. Childers
------------------------
JAMES H. CHILDERS, SECRETARY
STATE OF KENTUCKY)
COUNTY OF FRANKLIN)
I, /s/Martha B. O'Neill, a notary public, do hereby certify that on
this 14th day of December, 1982, personally appeared before me Zack C. Saufley,
who, being by me first duly sworn, declared that he is the President of Farmers
Capital Bank Corporation, a Kentucky corporation, that he signed the foregoing
document as President of the corporation, and that the statements contained
therein are true.
/s/ Martha B. O'Neill
---------------------
NOTARY PUBLIC, FRANKLIN COUNTY, KENTUCKY
My commission expires: 6/10/85
THIS INSTRUMENT PREPARED BY:
/s/ William L. Montague
- -----------------------
William L. Montague
Stoll, Keenon & Park
1000 First Security Plaza
Lexington, Kentucky 40507
<PAGE>
ARTICLES OF AMENDMENT
---------------------
TO ARTICLES OF INCORPORATION
----------------------------
OF FARMERS CAPITAL BANK CORPORATION
-----------------------------------
The undersigned corporation, Farmers Capital Bank Corporation, a Kentucky
corporation, hereby adopts and files Articles of Amendment to its Articles of
Incorporation in the manner provided for by Section 271A.305 of the Kentucky
Revised Statutes.
First. The name of the corporation is Farmers Capital Bank Corporation.
Second. At the annual meeting of shareholders of the corporation held on
April 8, 1986, a resolution was adopted by which Article VI and Article X were
amended and a new Article XI was added so that Articles VI, X and XI of the
Articles of Incorporation now read and provide as follows:
ARTICLE VI
----------
From and after the first annual meeting of the shareholders of the
corporation, the affairs of the corporation shall be conducted and managed by a
Board of Directors consisting of not less than nine (9) nor more than fifteen
(15) members, as may be fixed by the By-Laws of the corporation from time to
time.
The number of Directors so fixed in the By-Laws may be changed only by
receiving the affirmative vote of (i) the holders of at least 80% of all the
then outstanding shares of common stock of the corporation or (ii) a majority of
the Continuing Directors. ("Continuing Director" shall mean for the purposes of
this ARTICLE a member of the Board of Directors at the time the vote is taken,
who also meets one or more of the criteria set forth in ARTICLE X(2) (g) (2) of
these Articles.) From and after the first annual meeting of the shareholders the
Directors of the corporation shall be divided into three classes, each class to
be as nearly equal in number as possible, said classes to be designated as Class
I, Class II and Class III Directors. At the first annual meeting of the
shareholders there shall be elected ten (10) Directors of the corporation, as
follows: (a) three (3) members of Class I Directors who shall hold office until
the second annual meeting of the shareholders at which second annual meeting the
number of Class I Directors elected to office shall hold office for a term of
three (3) years or until their respective successors are duly elected and
qualified; (b) three (3) members of Class II Directors who shall hold office
until the third annual meeting of the shareholders at which third annual meeting
of the shareholders the number of Class II Directors elected to office shall
hold office for a term of three (3) years or until their respective successors
are duly elected and qualified, and (c) four (4) members of Class III directors
who shall hold office for a term of three (3) years or until their respective
successors are duly elected and qualified and following the expiration of their
initial term of office the number of Class III Directors elected shall hold
office for a term of three (3) years or until their respective successors are
duly elected and qualified. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
A Director may be removed without cause, but only upon the affirmative vote of
the holders of at least 80% of the outstanding shares of common stock of the
corporation then entitled to vote at an election of Directors.
The first Board of Directors who shall serve until the first annual meeting
of the shareholders or until their successors shall be duly elected and
qualified shall consist of ten (10) members who are: John P. Stewart, Route #7,
Frankfort, Kentucky; Zack C. Saufley, One Farmers Bank Plaza, Frankfort,
Kentucky; Warner U. Hines, Route #6, Frankfort, Kentucky; John J. Hopkins, 415
West Main Street, Frankfort, Kentucky; Charles T. Mitchell, 471 Breckinridge
Avenue, Frankfort, Kentucky; John D. Sutterlin, 12 Whitebridge Lane, Frankfort,
Kentucky; Joseph C. Yagel, 511 Leawood Drive, Frankfort, Kentucky; Bruce Dungan,
One Farmers Bank Plaza, Frankfort, Kentucky; Charles O. Bush, 219 Walma,
Frankfort, Kentucky; and Michael M. Sullivan, One Farmers Bank Plaza, Frankfort,
Kentucky.
* * * * *
ARTICLE X
---------
(1) In addition to the requirements of any applicable statute, the
affirmative vote of not less than 80% of the common stock of the corporation
shall be required for the approval or authorization of any "Business
Combination" (as hereinafter defined) between the corporation or any subsidiary
of the corporation and any "Related Person" (as hereinafter defined), provided,
however, that such 80% vote shall not be required and this ARTICLE shall not
apply if:
(a) The Business Combination is solely a merger of a subsidiary of the
corporation into the corporation under the provisions of Kentucky Revised
Statute 271A.375; or
(b) The Business Combination is approved by a majority of the "Continuing
Directors" of the corporation (as hereinafter defined).
(2) For the purposes of this ARTICLE:
(a) The term "Business Combination" shall mean (1) any merger or
consolidation of the corporation or any subsidiary of the corporation with or
into a Related Person, (2) any sale, lease, exchange, transfer or other
disposition, including without limitation a mortgage or any other security
device, of all or any "Substantial Part" (as hereinafter defined) of the assets
either of the corporation (including without limitation any voting securities of
a subsidiary) or of any subsidiary of the corporation to a Related Person, (3)
any merger or consolidation of a Related Person with or into the corporation or
any subsidiary of the corporation, (4) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of a Related
Person to the corporation or any subsidiary of the corporation, (5) the issuance
of any securities of the corporation or any subsidiary of the corporation to a
Related Person, (6) any recapitalization that would have the effect of
increasing the voting power of a Related Person, (7) the dissolution or
liquidation of the corporation or any of its subsidiaries at a time when there
is a Related Person to the corporation, or (8) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of Business Combination.
(b) The term "Related Person" shall mean a person (1) who owns, directly or
indirectly, ten (10%) percent or more of the outstanding common stock of this
corporation, or (2) who controls, is controlled by, or is under common control
with, a person who owns, directly or indirectly, or who controls, ten (10%)
percent or more of the outstanding common stock of this corporation.
(c) Without limitation, any shares of common stock of this corporation that
any person has the right to acquire pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise, shall be deemed "owned"
by that person.
(d) The term "control" shall mean the power, directly or indirectly, to
direct the management or policies of a person or to vote, or direct the vote, of
ten (10%) percent or more of any class of voting securities of a person.
(e) The term "person" shall mean an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of legal entity.
(f) The term "Substantial Part" shall mean more than 30% of the fair market
value of the total assets of the corporation in question, as of the end of its
most recent fiscal year ending prior to the time the determination is being
made.
(g) The term "Continuing Director" shall mean a member of the Board of
Directors of the corporation who (1) is a member of the Board of Directors of
the corporation at the time the Director vote with respect to the Business
Combination in question is taken, and (2) was (a) a member of the Board of
Directors of the corporation on March 1, 1986, or (b) a member of the Board of
Directors of the corporation immediately prior to the time that the Related
Person involved in the Business Combination which is the subject of the
Directors' vote became a Related Person, or (c) designated as a Continuing
Director by a majority of the then Continuing Directors within ninety (90) days
after the date upon which he or she was first elected as a member of the Board
of Directors of the corporation.
ARTICLE XI
----------
(1) The provisions of ARTICLE IV, ARTICLE VI, ARTICLE X AND ARTICLE XI of
these Articles of Incorporation may not be repealed or amended in any respect,
unless (in addition to the requirements of any applicable statute) such action
is approved by the affirmative vote of the holders of not less than 80% of the
common stock of the corporation, provided, however, that such 80% vote shall not
be required and this ARTICLE shall not apply if:
(a) At the time such repeal or amendment is approved by the Board of
Directors of the corporation and at the time such repeal or amendment is voted
upon by the shareholders of the corporation, there is no Related Person (as
defined in ARTICLE X herein) of the corporation, or
(b) In the event there is a Related Person of the corporation at the time
such repeal or amendment is approved by the Board of Directors of the
corporation or is voted upon by the shareholders, the repeal or amendment is, or
has been, approved by a majority of the "Prior Directors" (as herein defined).
(2) For the purpose of this ARTICLE XI, the term "Prior Director" shall
mean a member of the Board of Directors of the corporation who (1) is a member
of the Board of Directors of the corporation at the time the Directors' vote
with respect to such repeal or amendment is taken, and (2) was (a) a member of
the Board of Directors of the corporation on March 1, 1986, or (b) a member of
the Board of Directors of the corporation immediately prior to the time that the
Related Person became a Related Person, or (c) designated as a Prior Director by
a majority of the then Prior Directors within ninety (90) days after the date
upon which he or she was first elected as a member of the Board of Directors of
the corporation.
Third. The total number of shares of capital stock of the corporation
outstanding at the time of the adoption of the resolution amending and
supplementing the Articles of Incorporation as set forth above was 793,195
shares of $1.25 par value common stock (the "outstanding shares"), all of which
outstanding shares were entitled to vote upon the proposed amendments.
Fourth. At the annual meeting of the shareholders of the corporation held
on April 8, 1986, a total of 704,379 of the outstanding shares were voted in
favor of a resolution to amend Article VI and Article X of the Articles of
Incorporation and to add new Article XI to the Articles of Incorporation, so
that said Articles read and provide as set forth above, and none of the
outstanding shares were voted against said resolution, which amounts to the
affirmative vote of 88.8% of the outstanding shares.
IN WITNESS WHEREOF, the foregoing Articles of Amendment have been executed
by Zack C. Saufley as President and James H. Childers as Secretary of Farmers
Capital Bank Corporation, a Kentucky corporation, this 8th day of April, 1986.
FARMERS CAPITAL BANK CORPORATION
BY:/s/ Zack C. Saufley
----------------------
Zack C. Saufley, President
BY:/s/ James H. Childers
------------------------
James H. Childers, Secretary
STATE OF KENTUCKY
COUNTY OF FRANKLIN
I, /s/ Brenda Rogers, a notary public, do hereby certify that on the 8th
day of April, 1986, personally appeared before me Zack C. Saufley, who, being by
me first duly sworn declared that he is President of Farmers Capital Bank
Corporation, a Kentucky corporation, that he signed the foregoing Articles of
Amendment as President of the corporation, and that the statements contained
therein are true.
My Commission expires: July 11, 1987.
/s/ Brenda Rogers
-----------------
NOTARY PUBLIC,
FRANKLIN COUNTY, KENTUCKY
This Instrument Prepared By:
/s/ William L. Montague
- -----------------------
William L. Montague
STOLL, KEENON & PARK
1000 First Security Plaza
Lexington, Kentucky 40507
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
The undersigned corporation, FARMERS CAPITAL BANK CORPORATION, a Kentucky
corporation, hereby executes Articles of Amendment to its Articles of
Incorporation under and pursuant to Section 271A.305 of the Kentucky Revised
Statutes.
1. The name of the corporation is Farmers Capital Bank Corporation.
2. The Amendments adopted amend and change ARTICLE IV of the corporation's
Articles of Incorporation so that ARTICLE IV of the corporation's Articles of
Incorporation now reads and provides in its entirety as follows:
ARTICLE IV
----------
The total authorized number of shares of capital stock of the corporation
shall be Four Million, Eight Hundred and Four Thousand (4,804,000) shares, all
of which shares shall be common stock of the par value of Twenty Five Cents
($.25) each. All shares of common stock of the corporation shall have full and
unlimited voting power and shall be entitled to one vote on all matters properly
presented to shareholders, except as may otherwise be provided by statute. No
holder of shares of the common stock of the corporation shall have any
preemptive or preferential right to subscribe for, purchase or receive any
additional shares of capital stock of the corporation or rights or options to
purchase additional shares of capital stock of the corporation or securities
convertible into or carrying rights or options to purchase additional shares of
the capital stock of the corporation.
3. The foregoing amendments and changes to ARTICLE IV of the corporation's
Articles of Incorporation were adopted on May 12, 1987 by the affirmative vote
of the holders of a majority of the outstanding $1.25 par value (now $.25 par
value) common stock of the corporation, which is the only authorized, issued or
outstanding stock of the corporation, and the only class of stock of the
corporation entitled to vote upon said amendments.
IN WITNESS WHEREOF, the Farmers Capital Bank Corporation, a Kentucky
corporation, has caused the foregoing Articles of Amendment to Articles of
Incorporation to be executed by and through its duly authorized President and
Secretary, this 12th day of May, 1987.
FARMERS CAPITAL BANK CORPORATION
BY:/s/ Zack C. Saufley
----------------------
Zack C. Saufley, President
BY:/s/ James H. Childers
------------------------
James H. Childers, Secretary
<PAGE>
STATE OF KENTUCKY
COUNTY OF FRANKLIN
I, /s/ Brenda Rogers, a notary public, do hereby certify that on the 12th
day of May, 1987, personally appeared before me Zack C. Saufley, who, being by
me first sworn, declared that he is President of Farmers Capital Bank
Corporation, a Kentucky corporation, that he signed the foregoing Articles of
Amendment as President of said corporation, and that the statements contained
therein are true.
/s/ Brenda Rogers
-----------------
NOTARY PUBLIC
FRANKLIN COUNTY, KENTUCKY
My Commission expires: July 11, 1987.
THIS INSTRUMENT PREPARED BY:
/s/ William L. Montague
- -----------------------
William L. Montague
STOLL, KEENON & PARK
1000 First Security Plaza
Lexington, Kentucky 40507
<PAGE>
ARTICLES OF AMENDMENT
---------------------
TO ARTICLES OF INCORPORATION
----------------------------
The undersigned corporation, Farmers Capital Bank Corporation, hereby
executes and files Articles of Amendment to its Articles of Incorporation.
1. The name of the corporation is Farmers Capital Bank Corporation (the
"Corporation').
2. At the Corporation's annual meeting of shareholders held on the 9th
day of May, 1989 (the "Annual Meeting"), it was resolved that the Articles of
Incorporation of the Corporation be amended to add a new Article XII to the
Articles of Incorporation of the Corporation, said Article XII to read as
follows:
ARTICLE XII
-----------
The liability of each and all of the directors of the corporation shall be
and is hereby limited to the greatest extent permitted by law and no director of
the corporation shall be personally liable to the corporation or its
shareholders for monetary damages for a breach of his or her duties as director
except for liability:
(a) for any transaction in which the director's personal financial interest
is in conflict with the financial interest of the corporation or its
shareholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or are known to the director to be a violation of law;
(c) for voting for or assenting to any distributions made in violation of
Section 271B.8-330 of the Kentucky Revised Statutes; or
(d) for any transaction from which the director derives an improper
personal benefit.
The exceptions set forth in paragraphs (a) through (d) of this Article
shall be construed as narrowly as legally permissible. If the Kentucky Revised
Statutes are amended after approval by the shareholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Kentucky
Revised Statutes, as so amended. Any repeal or modification of this Article XII
by the shareholders of the corporation shall be approved by the affirmative vote
of the holders of not less than 80% of the common stock of the corporation as
governed and limited by Article XI of the corporation's Articles of
Incorporation and any such repeal or modification shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
3. At the Annual Meeting: (a) there were 3,888,152 shares of the $.25 par
value common voting stock (the "Common Stock") of the Corporation outstanding
and entitled to vote upon the proposed Article XII; (b) the Common Stock was
(and is) the only class of stock which the Corporation had (or has) authorized
or outstanding and holders of said Common Stock constitute the Corporation's
only voting group; (c) there were 3,204,941 shares of Common Stock indisputably
represented at the Annual Meeting; (d) there were 3,145,818 shares of Common
Stock cast for and in favor of the addition of Article XII to the Corporation's
Articles of Incorporation; (e) there were 29,890 shares of Common Stock cast
against the addition of Article XII to the Corporation's Articles of
Incorporation, with 29,233 shares of Common Stock abstaining from said vote; and
(f) the number of shares of Common Stock cast for and in favor of the addition
of Article XII to the Corporation's Articles of Incorporation was sufficient for
approval of said proposal by the holders of the Common Stock, which was the only
voting group entitled to vote upon said proposal.
IN WITNESS WHEREOF, Farmers Capital Bank Corporation, a Kentucky
corporation, has caused its name to be hereunto subscribed by and through its
duly authorized President on this 9th day of May, 1989.
FARMERS CAPITAL BANK CORPORATION
BY:/s/ E. Bruce Dungan
----------------------
E. Bruce Dungan,
President
STATE OF KENTUCKY
COUNTY OF FRANKLIN
I, /s/ Donna G. Teater, a Notary Public, do hereby certify that on the 9th
day of May, 1989, personally appeared before me E. Bruce Dungan, who being by me
first sworn, declared that he is President of Farmers Capital Bank Corporation,
a Kentucky corporation, that he signed the foregoing Articles of Amendment as
President of said corporation and that the statements contained therein are
true.
/s/ Donna G. Teater
-------------------
NOTARY PUBLIC,
STATE-AT-LARGE, KENTUCKY
My Commission expires: 2/28/89
THIS INSTRUMENT PREPARED BY:
/s/ J. David Smith, Jr.
- -----------------------
J. David Smith, Jr.
STOLL, KEENON & PARK
1000 First Security Plaza
Lexington, Kentucky 40507
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
FARMERS CAPITAL BANK CORPORATION
Pursuant to Kentucky Revised Statutes Section 271B.10-060, the undersigned
Kentucky corporation, Farmers Capital Bank Corporation, executes these Articles
of Amendment to its Articles of Incorporation:
(A) The name of the corporation is Farmers Capital Bank Corporation (the
"Corporation").
(B) At a meeting of the shareholders of the Corporation held on May 12,
1998, in the manner prescribed by the Kentucky Business Corporation Act, the
shareholders of the Corporation adopted a resolution that Article IV of the
Corporation's Articles of Incorporation be amended and changed so that Article
IV of the Articles of Incorporation reads in its entirety as follows:
ARTICLE IV
----------
The total authorized number of shares of capital stock of the corporation
shall be Nine Million, Six Hundred and Eight Thousand (9,608,000) shares,
all of which shares shall be Common Stock of a par value of Twelve and
One-Half Cents ($0.125) each. All shares of common stock of the corporation
shall have full and unlimited voting power and shall be entitled to one
vote on all matters properly presented to shareholders, except as may
otherwise be provided by statute. No holder of shares of the common stock
of the corporation shall have any preemptive or preferential right to
subscribe for, purchase or receive any additional shares of capital stock
of the corporation or rights or options to purchase additional shares of
capital stock of the corporation or securities convertible into or carrying
rights or options to purchase additional shares of the capital stock of the
corporation.
(C) The designation, number of outstanding shares, number of votes entitled
to be cast by the holders of the Corporation's common stock, which is the only
class of stock of the Corporation outstanding and therefore the only voting
group entitled to vote on the aforesaid amendment, and the number of votes
indisputably represented at the meeting, were as follows:
NUMBER OF VOTES
DESIGNATION OF NUMBER OF NUMBER OF VOTES REPRESENTED
VOTING GROUP OUTSTANDING SHARES ENTITLED TO BE CAST AT MEETING
----------------------------------------------------------------------------
Common Stock
(00.25 par value) 3,777,620 3,777,620 3,427,090
(E) The total number of undisputed votes cast for the amendment by the
holders of the common stock was 3,343,681. The number of votes cast for the
amendment by the holders of the Corporation's common stock, which was at the
time of shareholder vote and is now the only class of stock which the
Corporation has outstanding, was sufficient for approval by that voting group
and the adoption of the amendment by the shareholders of the Corporation.
IN WITNESS WHEREOF, the undersigned duly authorized officer has executed
these Articles of Amendment the 3rd day of June, 1998.
FARMERS CAPITAL BANK CORPORATION
By:/s/ Charles S. Boyd
----------------------
Charles S. Boyd, President
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Statement re computation of per share earnings
----------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 1998 1997 1998 1997
- ------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income, basic and diluted $3,734 $3,785 $7,316 $7,176
====== ====== ====== ======
Average shares outstanding 7,555 7,572 7,557 7,582
Effective of dilutive stock options 120 96
----- ----- ----- -----
Average diluted shares outstanding 7,675 7,572 7,653 7,582
===== ===== ===== =====
Net income per share, basic $ .49 $ .50 $ .97 $ .95
Net income per share, diluted .49 .50 .96 .95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1998 financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 82927
<INT-BEARING-DEPOSITS> 2369
<FED-FUNDS-SOLD> 11100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157551
<INVESTMENTS-CARRYING> 90322
<INVESTMENTS-MARKET> 90850
<LOANS> 597525
<ALLOWANCE> 8963
<TOTAL-ASSETS> 973013
<DEPOSITS> 791867
<SHORT-TERM> 48234
<LIABILITIES-OTHER> 8424
<LONG-TERM> 4035
0
0
<COMMON> 944
<OTHER-SE> 119509
<TOTAL-LIABILITIES-AND-EQUITY> 973013
<INTEREST-LOAN> 26921
<INTEREST-INVEST> 5834
<INTEREST-OTHER> 1567
<INTEREST-TOTAL> 34322
<INTEREST-DEPOSIT> 13435
<INTEREST-EXPENSE> 14437
<INTEREST-INCOME-NET> 19885
<LOAN-LOSSES> 434
<SECURITIES-GAINS> 100
<EXPENSE-OTHER> 15780
<INCOME-PRETAX> 10094
<INCOME-PRE-EXTRAORDINARY> 10094
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7316
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.96
<YIELD-ACTUAL> 4.84
<LOANS-NON> 2470
<LOANS-PAST> 3272
<LOANS-TROUBLED> 1274
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9114
<CHARGE-OFFS> 827
<RECOVERIES> 242
<ALLOWANCE-CLOSE> 8963
<ALLOWANCE-DOMESTIC> 8963
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
