SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1994 Commission file number 0-16878
CBT CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky 61-1030727
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Broadway, Paducah, Kentucky 42001
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 575-5100
Indicate by check mark whether the registrant (1) has filed
all reports required to be filled 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.
Class Outstanding at August 10, 1994
Common Stock, No Par Value 3,963,079
CBT CORPORATION
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Condensed Balance Sheeets for
periods ended June 30, 1994, and December 31,1993 3
Consolidated Condensed Statements of Income
for Three Months and Six Months Ended June 30,
1994, and 1993 4
Consolidated Condensed Statements of Changes in
Stockholders' Equity for Six Months Ended June 30,
1994, and 1993 5
Consolidated Condensed Statements of Cash Flows
for Six Months Ended June 30, 1994, and 1993 6
Notes to Consolidated Financial Statements 7 - 11
Item 2. Management's Discussion and Analysis of
Consolidated Condensed Financial Condition
and Results of Operations 12 - 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
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CBT CORPORATION AND SUBSIDIARIES (unaudited) (audited)
CONSOLIDATED BALANCE SHEETS June 30 December 31
($ in thousands)
1994 1993
ASSETS
Cash and due from banks $32,482 $24,521
Federal funds sold 50 10,916
Money market investments - 2,010
Total cash and cash 32,532 37,447
equivalents
Investment securities (fair
value June 30, 1994-$48,590
and December 31,1993-$49,250) 47,905 45,843
Securities available for sale
(fair value December 31,
1993-$184,328) 177,767 181,027
Total investments 225,672 226,870
Loans (net of unearned interest) 566,348 524,185
Less allowance for credit (11,649)(10,998)
losses
Loans, net 554,699 513,187
Premises and equipment, net 15,105 15,203
Accrued interest receivable 5,621 5,489
Other assets 8,204 7,280
Total assets $841,833 $805,476
LIABILITIES
Deposits:
Non-interest bearing $66,322 $61,505
Interest bearing 598,025 587,139
Total deposits 664,347 648,644
Short-term borrowings:
Federal funds purchased and
securities
sold under agreements to 40,903 36,446
repurchase
Notes payable - U.S. Treasury 1,996 2,000
Revolving lines of credit and 8,000 1,240
other short-term borrowings
Total short-term borrowings 50,899 39,686
Long-term borrowings:
FHLB advances 22,950 16,961
Other term debt 5,115 5,115
Total long-term borrowings 28,065 22,076
Accrued interest payable 3,822 2,554
Other liabilities 4,231 3,804
Total liabilities 751,364 716,764
STOCKHOLDERS' EQUITY
Common stock, no par value,
authorized 12,000,000 shares;
issued and outstanding 3,963,079
as of June 30, 1994, and December
31, 1993 4,100 4,100
Capital surplus 18,543 18,543
Retained earnings 69,891 66,069
Unrealized loss on securities
available for sale,
net of deferred tax (2,065) -
Total stockholders' equity 90,469 88,712
Total liabilities and $841,833 $805,476
stockholders' equity
</TABLE>
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CBT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF INCOME (unaudited) Three Months Ended Six Months Ended
($ in thousands except June 30 June 30
per share data)
1994 1993 1994 1993
INTEREST INCOME
Loans, including fees:
Taxable $12,248 $10,774 $23,777 $21,484
Tax-exempt 79 104 163 197
Investment securities:
Taxable 2,631 2,545 4,965 5,386
Tax-exempt 967 860 1,925 1,731
Other interest income 75 68 192 142
Total interest 16,000 14,351 31,022 28,940
income
INTEREST EXPENSE
Deposits 5,655 5,657 11,181 11,459
Other borrowings 711 466 1,299 946
Total interest 6,366 6,123 12,417 12,405
expense
NET INTEREST INCOME 9,634 8,228 18,605 16,535
Provision for loan losses 384 403 695 779
NET INTEREST INCOME AFTER
PROVISION FOR LOAN 9,250 7,825 17,910 15,756
LOSSES
NON-INTEREST INCOME
Trust and investment 360 379 711 783
advisory fees
Service charges on 730 596 1,385 1,119
deposit accounts
Insurance commissions 245 194 459 365
Investment securities 115 61 111 77
gains
Gain of sale of certain - - - 553
receivables
Other 354 414 712 779
Total non-interest 1,804 1,644 3,378 3,676
income
NON-INTEREST EXPENSE
Salaries and employee 3,517 2,992 6,858 6,062
benefits
Net occupancy 243 350 490 673
Depreciation and 447 396 854 762
amortization
Data processing 267 235 559 495
Federal Deposit 365 335 731 670
Insurance
Bank shares tax 272 241 544 465
Other 1,920 1,449 3,620 2,857
Total non-interest 7,031 5,998 13,656 11,984
expense
INCOME BEFORE INCOME 4,023 3,471 7,632 7,448
TAXES
Income tax expense 1,109 928 2,088 2,057
NET INCOME $2,914 $2,543 $5,544 $5,391
PER COMMON SHARE:
Net income $0.74 $0.64 $1.40 $1.36
Cash dividends $0.22 $0.20 $0.42 $0.38
</TABLE>
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CBT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN (unaudited)
STOCKHOLDERS' EQUITY
($ in thousands)
Total Stockholders' Equity
Balance, December 31, 1993 $88,712
Net income 5,544
Dividends on common stock (1,545)
Stock options exercised 158
Purchase of common stock (335)
Net unrealized loss on securities available for (2,065)
sale, net of deferred tax
Balance June 30, 1994 $90,469
Total Stockholders' Equity
Balance, December 31, 1992 $80,750
Net income 5,391
Dividends on common stock (1,151)
Balance June 30, 1993 $84,990
</TABLE>
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CBT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH Six months ended
FLOWS ($ in thousands) (unaudited) June 30
1994 1993
OPERATING ACTIVITIES:
Net income $5,544 $5,391
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 695 779
Depreciation 724 726
Amortization 130 18
Amortization and accretion of 428 1,268
securities
Gain on sale of securities (111) (77)
Gain on sale of fixed assets (52) (14)
Changes in assets and liabilities:
Accrued interest receivable (132) 234
Other assets 60 270
Accrued interest payable 1,268 698
Dividends payable - (51)
Other liabilities 427 1,430
Net cash provided by operating 8,981 10,672
activities
INVESTING ACTIVITIES:
Proceeds from maturities of investment 1,328 4,091
securities
Proceeds from sales of securities 27,105 14,731
available for sale
Proceeds from maturities of securities 9,264 14,867
available for sale
Principal collected on mortgage-backed
securities,including those classified
as available for sale 17,500 23,967
Payment for purchases of securities (57,495) (40,635)
Net increase in loans (42,207) (27,661)
Sale of finance receivables - 7,083
Proceeds from sales of premises and 472 39
equipment
Payment for purchase of premises and (1,046) (677)
equipment
Net cash used in investing activities (45,079) (4,195)
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 15,703 (1,293)
Net increase (decrease) in other short 3,413 (2,544)
term borrowings
Increase in FHLB advances 5,989 -
Proceeds from term debt - 2,000
Payments on term debt - (4,000)
Cash advanced on revolving lines of 7,800 -
credit
Principal payments on revolving lines of - (6,203)
credit
Cash dividends paid (1,545) (1,102)
Stock options exercised 158 -
Purchase of common stock (335) -
Net cash provided by (used in) 31,183 (13,142)
investing activities
NET DECREASE IN CASH AND
CASH EQUIVALENTS (4,915) (6,665)
CASH AND CASH EQUIVALENTS, JANUARY 1 37,447 39,932
CASH AND CASH EQUIVALENTS, JUNE 30 $32,532 $33,267
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the six months period for:
Interest $11,149 $11,707
Federal income taxes $1,598 $2,123
</TABLE>
CBT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1994
NOTE 1: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-1 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period
ending June 30, 1994, are not necessarily indicative of the
results that may be expected for the year ended December 31,
1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Corporation's annual report on Form 10-K for the year ended
December 31, 1993.
Cash and Cash Equivalents
For purpose of reporting cash flows, cash and cash equivalents
include cash and due from banks, federal funds sold and money
market investments. Generally, federal funds are purchased and
sold for one-day periods.
Income Taxes
The provision for income taxes in the interim periods has been
calculated using the anticipated effective tax rate for the
respective calendar year, taking into consideration certain tax
exempt loan and investment income.
Effective January 1, 1993, the Corporation adopted SFAS No. 109.
Under SFAS 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date. The cumulative effect of the
change in the method of accounting for income taxes was not
material.
Per Common Share Data
Net income per common share is based on 3,963,079 shares
outstanding during the six months and three months ended June 30,
1994, and year ended December 31, 1993, and 3,965,499 shares
outstanding during the six months and three months ended June 30,
1993, in these interim financial statements. Common stock
options are not included in net income per common share data
since their effect is not significant.
Reclassifications
Certain reclassifications of investments securities and
securities available for sale have been made in the 1993
financial statements to conform to the presentation of the 1994
financial statements.
NOTE 2: ACQUISITIONS
On May 31, 1994, CBT Corporation (CBT) of Paducah, Kentucky
acquired 100% of the outstanding shares of common stock of BMC
Bankcorp, Inc. (BMC). In the transaction, accounted for as a
pooling of interests, BMC shareholders received two shares of CBT
common stock for each one share of BMC common stock held. As a
result of the exchange, CBT issued an additional 1,195,560 shares
of common stock. Accordingly, the accompanying financial
statements have been restated to include the accounts and
operations of BMC for periods prior to the merger.
Separate results of the combining entities are as follows:
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CBT CORPORATION
SCHEDULE OF ACQUISITIONS
($ in thousands)
Three Months Six Months
Ended Ended
June 30 June 30
1993 1993
Interest Income:
CBT Corp as previously reported $10,734 $21,700
BMC Bankcorp 3,617 7,240
Total as restated $14,351 $28,940
Net Income:
CBT Corp as previously reported $1,890 $4,120
BMC Bankcorp 653 1,271
Total as restated $2,543 $5,391
</TABLE>
BMC Bankcorp's net interest income and net income of $3,606,036
and $937,788 respectively, for the five months ended May 31,
1994, are included in the Consolidated Statement of Income for
the period ended June 30, 1994.
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NOTE 3: INVESTMENT SECURITIES
($ in thousands)
June 30, 1994
ESTIMATED
AMORTIZED MARKET GROSS UNREALIZED
COST VALUE GAIN LOSS
U.S. Treasury
securities and
obligations
of other U.S. $4,712 $4,658 $28 $82
Government agencies
State and political 43,073 43,822 1,773 1,024
subdivisions
Other 120 110 1 11
Total securities $47,905 $48,590 $1,802 $1,117
December 31, 1993
ESTIMATED
AMORTIZED MARKET GROSS UNREALIZED
COST VALUE GAIN LOSS
U.S. Treasury
securities and
obligations
of other U.S. $4,499 $4,625 $126 -
Government agencies
State and political 41,324 44,618 3,415 121
subdivisions
Other 20 7 - 13
Total securities $45,843 $49,250 $3,541 $134
</TABLE>
Certain investment securities were pledged to secure public
deposits, securities sold under agreements to repurchase, and for
other purposes as required or permitted by law. These pledged
securities had an estimated amortized cost and estimated fair
value of approximately $17,825,455 and $18,079,440 respectively
at period ended June 30, 1994.
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NOTE 4: SECURITIES AVAILABLE FOR SALE
($ in thousands)
June 30, 1994
ESTIMATED
AMORTIZED MARKET GROSS UNREALIZED
COST VALUE GAIN LOSS
U.S. Treasury
securities and
obligations
of other U.S. $38,596 $38,117 $370 $849
Government agencies
State and political 13,944 14,977 1,143 110
subdivisions
Mortgage-backed 125,019 121,288 628 4,359
securities
Other, 3,385 3,385 - -
Total securities $180,944 $177,767 $2,141 $5,318
December 31, 1993
ESTIMATED
AMORTIZED MARKET GROSS UNREALIZED
COST VALUE GAIN LOSS
U.S. Treasury
securities and
obligations
of other U.S. $40,750 $41,953 $1,250 $47
Government agencies
State and political 15,246 17,035 1,812 23
subdivisions
Mortgage-backed 122,364 123,431 1,481 414
securities
Other 2,667 2,668 1 -
Total securities $181,027 $185,087 $4,544 $484
</TABLE>
Certain securities available for sale were pledged to secure
deposits and securities sold under agreements to repurchase.
These pledged securities had an estimated amortized cost and
estimated fair value of approximately $95,442,013 and $94,694,352
respectively at period ended June 30, 1994.
<TABLE>
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NOTE 5: LOANS
June 30 December 31
($ in thousands)
1994 1993
Commercial, industrial, and $186,583 $180,426
agricultural loans
Residential real estate loans 243,895 222,867
Installment loans 145,836 130,457
Total loans 576,314 533,750
Unearned interest 9,966 9,564
Loans, net of unearned $566,348 $524,186
interest
NOTE 6: PREMISES AND EQUIPMENT
June 30 December 31
($ in thousands)
1994 1993
Land $1,984 $2,084
Buildings and improvements 14,933 14,645
Furniture and equipment 10,173 9,627
Construction in progress 214 401
27,304 26,757
Accumulated depreciation and 12,199 11,554
amortization
Total premises and equipment $15,105 $15,203
NOTE 7: DEPOSITS
SCHEDULE OF INTEREST BEARING
DEPOSITS June 30 December 31
($ in thousands)
1994 1993
NOW Accounts $116,537 $104,051
Money Manager Accounts 46,198 63,022
Individual Retirement Accounts 44,626 44,720
Savings 44,092 43,905
Certificates of Deposit Under 277,074 271,519
$100,000
Certificates of Deposit 69,498 59,922
$100,000 and above
Total Interest-bearing $598,025 $587,139
Deposits
</TABLE>
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
CBT Corporation (the Corporation) is a bank holding company
located in Paducah, Kentucky. The Corporation provides banking
services through its banking subsidiaries, Citizens Bank & Trust
(Citizens), Pennyrile Citizens Bank & Trust Company (Pennyrile),
Bank of Marshall County (BOMC) and Graves County Bank (Graves).
The Corporation also provides banking services through its
savings bank, United Commonwealth Bank (UCB) and consumer finance
services through its subsidiary Fidelity Credit Corporation
(FCC).
On May 31, 1994, the Corporation completed its merger with BMC
Bankcorp, Inc., (BMC) the holding company of BOMC, Graves and
UCB. At the time of the merger BMC had total assets of $216
million, deposits of $189 million and stockholders' equity of $23
million. This merger was accounted for as a pooling of
interests; accordingly, all financial data has been adjusted for
the effects of this acquisition.
CBT, through its subsidiaries, provides a full range of corporate
and retail banking services, including the acceptance of
checking, savings and time deposits; making of secured and
unsecured loans to corporations, individuals and others; issuance
of letters of credit and financial counseling for individuals and
institutions. Interest income on loans provides the largest
contribution to operating revenue.
Citizens and Pennyrile also provide a wide variety of personal
and corporate trust and trust related services including serving
as executor of estates; as trustee under testamentary and inter
vivos trusts; as guardian of the estates of minors and
incompetents; and as financial advisor to and custodian for
individuals, corporations and others.
Citizens has eight offices located in McCracken County, Pennyrile
has three offices located in Christian County, BOMC has three
offices located in Marshall County, Graves has three offices
located in Graves county and UCB has one office located in
Calloway County. Fidelity, which is primarily a regional finance
company has seventeen offices located in Kentucky.
Overview
Net income for the first six months of 1994, which was $5,544,000
or $1.40 per common share, was an increase of 2.8% over the
$5,391,000 or $1.36 per common share for the first six months of
1993. Net income for the June 1994 quarter of $2,914,000 or
$0.74 per common share, had a greater increase at 14.6% over the
June 1993 quarter of $2,543,000 or $0.64 per common share. All
figures prior to the merger with BMC have been adjusted to
include the effects of this merger.
Net Interest Income
Net interest income, on a tax equivalent basis, is the difference
between interest earned on earning assets and interest expensed
on interest bearing liabilities. The net interest rate spread is
the difference between the average rate of interest earned on
average earning assets and the average rate of interest expensed
on average interest bearing liabilities. The net interest margin
is net interest income divided by average earning assets. For
computational purposes, non-accrual loans are included in earning
assets. The following schedule presents yields and rates on key
components of interest income and interest expense. Also
presented are the net interest spread and net interest margin for
the first six months and second quarters of 1994 and 1993.
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Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Yield on loans (including 8.99% 9.34% 8.96% 9.47%
fees)
Yield on investments 6.88% 6.77% 6.79% 6.95%
Yield on other earning 5.84% 3.25% 4.52% 3.22%
assets
Yield on earning 8.35% 8.45% 8.28% 8.57%
assets
Rate on interest-bearing 3.83% 4.23% 3.81% 4.32%
deposits
Rate on other borrowings 3.85% 3.93% 3.77% 3.84%
Rate on interest- 3.82% 4.20% 3.81% 4.28%
bearing liabilities
Net interest margin 5.11% 4.93% 5.04% 4.99%
including fees
Net interest spread 4.53% 4.25% 4.47% 4.29%
</TABLE>
The Corporation's yield on earning assets declined 29 basis
points from the first six months of 1993 to the first six months
of 1994. Yields on earning assets have not fallen as far as
rates in general because of two factors. One, loan growth has
been strong over the last year, $77 million or 16.6%. Loan
growth has accounted for almost all of the increase in earning
assets. Loans are typically made at higher rates than securities
which is the bulk of the remainder of earning assets.
Consequently, an increase in loan balances increases the overall
earning asset yield. The second factor effecting overall yields
is that security yields are only down 16 basis points. This is
due to the phenomena that as rates have increased over the last
few months of 1994, mortgage paydowns have greatly decreased,
causing decreased amortization on mortgage backed securities
which make up a large portion of the security portfolio. The
rates on other earning assets are of no material effect; other
earning assets account for approximately 1% of total earning
assets.
The rate for the Corporation's overall cost of funds has declined
47 basis points to 3.81% for the first six months of 1994. The
largest factor in this decline has been time deposits repricing
at lower levels; many high interest rate time deposits
originated in prior years have been replaced at current years
pricing, which although up over the last few months, is still
below earlier periods.
Net interest spread increased 18 basis points from 4.29% in the
first six months of 1993 to 4.47% in the first six months of
1994, due to the aforementioned items. Net interest margin,
although up 5 basis points to 5.04%, did not increase by as much
as the interest spread mainly because free funds (which can be
thought of as a 0% deposit) contribute less to the margin in a
lower interest rate environment.
For the second quarter of 1994, the yield on earning assets
declined 10 basis points from last years second quarter, while
the rate on interest bearing liabilities declined 38 basis
points. The net interest margin and net interest spread
increased over the June 1993 quarter by 18 basis points and 28
basis points respectively. The reasons for these changes follow
the six months events as previously discussed.
Provision for Loan Losses
The provision for loan losses in the first half of 1994 declined
$84,000 or 12% from 1993 figures. Citizens, (the lead bank)
reduced its provision by half over the previous year, but
increases were recorded at other business units, particularly
FCC, which increased its provision due to growth in its
receivables and higher charge-offs. The allowance for loan
losses has decreased from 2.20% of loans at June 30, 1993, to
2.06% of loans at June 30, 1994. This decrease is attributable
to the large growth in loan volumes. Charge-off experience, the
long-term driving factor behind provision expense, improved
slightly from last year's levels. The net charge-off ratio for
the first six months of 1994 is 0.02% of average net loans down
from 0.03% for the same period of 1993. For the first half of
1994, annualized provision expense is at 0.26% of net loans
compared with 0.29% in 1993.
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The following is a progression of the allowance for loan losses:
Six Months Ended
June 30
($ in thousands) 1994 1993
Balance, beginning of period $10,998 $10,022
Provision for loan losses 695 779
Adjustments related to purchases
and sales of finance receivables - (177)
Loans charged-off (287) (281)
Recoveries 243 218
Net charge-offs (44) (63)
Balance, end of period $11,649 $10,561
</TABLE>
In a quarterly comparison, net charge-offs for the June 1994
quarter were $45,000, while the June 1993 quarter net charge-offs
were $21,000. Provision for loan losses for the June 1994
quarter followed the same downward trend as the year-to-date
figures with a 5% decrease from last years second quarter total.
Non-Performing Assets
Non-performing assets are up slightly from last year's levels.
Total non-performing assets at June 30, 1994 were $2.26 million
compared with $1.64 million at June 30, 1993. The non-performing
ratio at June 30, 1994, was 0.40%, versus 0.34% at the end of the
same quarter of 1993. All of the increase can be traced to an
increase in 90 day past due accounts at the lead bank. Half of
the increase results from the 1993 numbers reflecting abnormally
low 90 day past dues, while $350,000 of the increase is due to
one credit which is expected to be resolved shortly, with no
effect on net charge-offs.
The accrual of interest income is reviewed for discontinuance
when a loan becomes 90 days past due as to principal
or interest. Management may elect to continue the
accrual of interest when the estimated net realizable value of
collateral is sufficient to cover the principal balance and
accrued interest or, in the opinion of management, the interest
is collectable.
The following table provides a summary of non-performing loans
and other real estate owned:
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June 30 December 31 June 30
($ in thousands) 1994 1993 1993
Non-accrual loans $1,284 $759 $1,075
Accruing loans which are
contractually past due 970 298 508
90 days or more
Other real estate owned 1 128 61
Total non performing loans
and other real estate owned $2,255 $1,185 $1,644
Non performing Loans and
OREO to total loans and OREO 0.40% 0.23% 0.34%
</TABLE>
CBT Corporation is in the process of developing its credit policy
modeled after the policy of the lead bank, Citizens. The lead
bank has a comprehensive internal credit review process
to identify potential problem credits in a timely manner.
Citizens, at June 30, 1994, has rated $6.1 million of credits as
potential problems. These credits are not included in the
schedule of non-performing assets above since the borrowers are
servicing their loans in accordance with extablished repayment
terms.
This credit reveiw process is being extended throughout the entire
Corporation. Based on credit reviews done in conjunction with
merger due diligence, and favorable delinquency ratios and non-
performing loan levels, it is believed there are no material
credit problems at the other banks.
Non-Interest Income
Non-interest income for the first six months of 1994 was
$3,378,000 which was down $298,000 or 8.1% from the same period
in 1993. The 1993 numbers, however included a gain on the sale
of receivables in the amount of $553,000. This gain was a result
of the sale of all Tennessee offices of FCC in a strategic move
to concentrate expansion within Kentucky. With this gain
excluded, non-interest income would have been up $255,000 or
8.2%. Six month trust and investment advisory fees were down
$72,000 or 9.2% from year earlier figures. The 1993 trust income
included the settlement of several large estates which is not
comparable to 1994 settlements. Also, in the second quarter of
1994, a long-term strategic decision was made to change brokerage
alliances. The Corporation began an affiliation with J.C.
Bradford & Co., in an effort to expand the range of brokerage
services it can offer its customers. The change in affiliation
has resulted in slightly less brokerage income in the second
quarter of 1994.
Non-interest income for the second quarter 1994 was up from the
second quarter 1993 by $160,000. Although trust and investment
advisory fees followed the same downward trend as the six months
period 1994, service charges on deposit accounts, insurance
commissions, and investments securities gains continued to
increase over last years second quarter totals.
Non-Interest Expense
Non-interest expense for the first half of 1994 of $13,656,000
represents an increase of $1,672,000 or 14.0% over the same 1993
period. Of this increase, merger related expenses amounted to
approximately $350,000. Quarterly comparison of non-interest
expense shows a 17% increase of $1,033,000, over the June 1993
amount of $5,998,000. Salary related expenses year-to-date were
up 13% or $796,000, with $277,000 of the increase resulting from
the addition of approximately 21 extra headcount at FCC in
connection with opening of new offices. Of the remaining increase
in personnel expenses, most relate to the strengthening of
management necessary to handle the Corporation's growing size.
Other increases in non-interest expense are largely related to
this growth.
Management recognizes that non interest expenses are
controllable; therefore in the third quarter of 1994, the
Corporation expects to retain a management consulting firm to
begin an efficiency study with goals of redesign, reducing non-
interest expense and expanding revenue. It is expected that
implementation of the plan will begin by 1995.
Income Taxes
Effective tax rates for the first six months of 1994 and 1993
were 27.35% and 27.62% of income before income taxes,
respectively. The effective tax rate has fallen slightly as the
effect of increased tax exempt assets have been slightly offset
by non-deductible merger expenses. The Corporation adjusts for
deferred taxes on a quarterly basis.
Liquidity
Liquidity represents a bank's ability to generate cash or
otherwise obtain funds at a reasonable price to satisfy
commitments to borrowers as well as demands of depositors. Loan
and investment portfolios are managed to provide liquidity
through maturity and marketability of those assets.
It is a major responsibility of management to maximize net
interest income within prudent liquidity constraints. Internal
corporate guidelines have been established to constantly measure
liquid assets as well as relevant ratios concerning earning asset
levels and purchased funds. Each subsidiary of the Corporation
is also required to monitor these same indicators and report
regularly to its own senior management and board of directors.
The liquidity of the Corporation depends primarily on the
dividends paid to it as sole shareholder of its subsidiaries. In
addition to dividends, another primary source of liquidity for
the Corporation includes unused credit lines with correspondent
banks. In addition to maintaining a satisfactory level of
liquidity, management must control the degree of interest rate
risk assumed on the balance sheet. Managing this risk involves
running detailed interest rate scenarios and determining the
effect on net interest income under each scenario. Management
also monitors the amount of interest sensitive assets relative to
interest sensitive liabilities over specific time intervals. The
Corporation's one year cumulative ratio is within policy limits
at .94% as of June 30, 1994.
All of the bank and savings bank subsidiaries of the Corporation
are members of the Federal Home Loan Bank (FHLB) of Cincinnati.
Members, based on certain criteria, are required to purchase
common stock in the FHLB. This stock is redeemable at par and
pays dividends on a quarterly basis. At June 30, 1994, total
advances from the FHLB were $22,950,000. The Corporation through
its subsidiaries has the ability to borrow in excess of $100
million based upon further stock purchase. Membership in the
FHLB gives the member banks great flexibility in managing any
future deposit runoff and allows the banks to more aggressively
price deposit accounts without having significant liquidity
concerns.
Capital Resources
Current regulatory guidelines for minimum capital requirements
assign measures of credit risk to balance sheet and off-balance
sheet exposure.
<TABLE>
<S> <C> <C>
The following table summarizes the Corporation's capital ratios:
Required Actual
June 30, 1994
Leverage ratio 3% 10.75%
Total risk-based 8% 16.61%
capital ratio
December 31, 1993
Leverage ratio 3% 11.01%
Total risk-based 8% 16.22%
capital ratio
</TABLE>
Management is currently not aware of any recommendations by
regulatory authorities which, if implemented, would have a
material effect on the Corporation's liquidity, capital
resources, or operations.
Market Data
At June 30, 1994, the Corporation had issued and outstanding
3,963,079 shares of common stock which was held by approximately
1,420 shareholders. Shareholders have received cash dividends
per share of common stock quarterly in 1993 and thus far in 1994.
CBT Corporation common stock is traded on the NASDAQ Market
System under the symbol CBTC.
The following table summarizes transactions in common stock and
cash dividends declared in 1994 and 1993. The trading price
information reflects the range of actual reported sales prices
for CBT Corporation common stock as reported by NASDAQ.
<TABLE>
<S> <C> <C> <C>
Price
Quarter High Low Dividends
June 30, 1994 $ 43.00 $ 39.00 $.22
March 31, 1994 46.75 37.00 .20
December 31, 1993 38.50 35.50 .20
September 30, 1993 36.50 33.00 .20
June 30, 1993 35.25 31.63 .20
</TABLE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a.) A Form 8-K dated May 31, 1994, was filed by CBT
Corporation reporting the results of the
acquisition of BMC Bancorp.
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.
CBT CORPORATION
DATE:__________________________SIGNED:_____/s/ John E. Sircy______
John E. Sircy
Executive Vice President
and Chief Operating Officer
