<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission file number 2-98651
----------------- --------
KINGFISHER BANCORP, INC.
------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 73-1247579
- ----------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Box 419
Kingfisher, Oklahoma 73750
- ----------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 375-3121
-------------------------
Securities registered pursuant to Section 12(b)
of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------------- -------------------------
None None
- ----------------------------------------- -------------------------
Securities registered pursuant to Section 12(g) of the Act:
Title of class
--------------
None
- --------------------------------------------------------------------------------
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 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
----- ----
As of March 1, 1996, 49,172 common shares were outstanding. The
aggregate market value of the common shares (based upon the book value per share
at December 31, 1995) of Kingfisher Bancorp, Inc. held by nonaffiliates was
approximately $4,253,124.
1
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KINGFISHER BANCORP, INC.
FORM 10-K
INDEX
PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 7
ITEM 3. LEGAL PROCEEDINGS 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITIES HOLDERS 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS 9
ITEM 6. SELECTED FINANCIAL DATA 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 48
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 48
ITEM 11. EXECUTIVE COMPENSATION 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 51
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 53
SIGNATURES 55
2
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PART I
------
ITEM 1. BUSINESS
- -----------------
General Development of Business
-------------------------------
Kingfisher Bancorp, Inc. (the "Company") was organized for the purpose of
becoming a bank holding company. The Company's application to become a bank
holding company was approved by the Federal Reserve Bank of Kansas City and the
transfer and acquisition of the common stock of Kingfisher Bank and Trust Co.
(the "Bank"), and the Kingfisher Investors Corp. ("Investors") occurred on
September 28, 1985.
The Company filed an application on March 11, 1986, to dissolve
Investors, an affiliate of the Company, which leased to the Bank its main
banking and drive-in facilities. The Certificate of Dissolution was received
May 11, 1986 and the assets and liabilities of Investors were absorbed by the
Company. The reorganization has been accounted for like a pooling-of-interests
combination.
The Company is regulated under the Bank Holding Company Act of 1956, as
amended, and by regulations and decisions of the Federal Reserve Board.
Generally, a bank holding company may engage in any business activity which the
Federal Reserve Board determines to be so closely related to banking as to be
properly incidental to the business of banking.
Industry Segment Information
----------------------------
The Company and its banking subsidiary are engaged primarily in the
commercial banking and trust businesses.
Narrative Description of Business
---------------------------------
The Bank conducts general commercial banking and trust businesses. It
offers general retail and wholesale banking services including demand, savings
and time deposits; commercial, mortgage and installment loans; and banking and
trust services. Services offered by the Bank's Trust Department include
administration of estates and trusts and escrow and custody services.
Foreign Operations
------------------
The Company does not engage in any operations in foreign countries.
Competition
-----------
Management considers the Company's primary trade area to consist of all
of Kingfisher County, Oklahoma. It encounters vigorous competition in its
commercial banking business from the other commercial bank and the savings and
loan association which are based in Kingfisher, Oklahoma. In addition, the Bank
competes for deposits and loans with other commercial banks, savings and loans,
credit unions and money market mutual funds which operate in its trade area.
Based upon its total deposits of approximately $77 million at December 31, 1995,
the Bank was the second largest commercial bank of the five commercial banks
located in Kingfisher County, Oklahoma.
3
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Supervision and Regulation
--------------------------
The Company and the Bank are extensively regulated under federal and
state law. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following information
describes statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable laws or regulations may have a material effect on the business and
prospects of the Company and the Bank. The operations of the Company and the
Bank may be affected by legislative changes and by the policies of various
regulatory authorities. The Company is unable to predict the nature or the
extent of the effects on its business and earnings that fiscal or monetary
policies, economic control or new Federal or state legislation may have in the
future.
Kingfisher Bancorp, Inc.
- ------------------------
The Company is a one-bank holding company registered under the Bank
Holding Company Act of 1956 (the "BHC Act"), as amended, and as such, it is
subject to regulation, supervision and examination by the Federal Reserve Board
(the "FRB"). The Company is required to file annual reports with the FRB and to
provide to the FRB such additional information as the FRB may require.
With certain limited exceptions, the BHC Act requires every bank holding
company to obtain the prior approval of the FRB before: (1) acquiring direct or
indirect ownership or control of any voting shares of another bank or bank
holding company if, after such acquisition, it would own or control more than 5%
of such shares (unless it already owns or controls the majority of such shares);
(2) acquiring all or substantially all of the assets of another bank or holding
company; or (3) merging or consolidating with another bank holding company. The
FRB will not approve any acquisition, merger or consolidation that would have
substantially anti-competitive results, unless the anti-competitive effects of
the proposed transaction are clearly outweighed by a greater public interest in
meeting the convenience and needs of the community to be served. The FRB also
considers capital adequacy and other financial and managerial factors, including
Community Reinvestment Act ("CRA") compliance, in reviewing acquisitions or
mergers.
In addition, and subject to certain exceptions, the Change in Bank
Control Act (the "Control Act") and regulations promulgated thereunder by the
FRB require any person acting directly or indirectly, or through or in concert
with one or more persons, to give the FRB 60 days' written notice before
acquiring control of a bank holding company. Transactions which are presumed to
constitute the acquisition of control include the acquisition of any voting
securities of a bank holding company having securities registered under section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), if,
after the transaction, the acquiring person (or persons acting in concert) owns,
controls or holds with power to vote 25% or more of any class of voting
securities of the institution. The acquisition may not be consummated
subsequent to such notice if the FRB issues a notice within 60 days, or within
certain extensions of such period, disapproving the same.
With certain exceptions, the BHC Act also prohibits a bank holding
company from acquiring or retaining direct or indirect ownership or control of
more than 5% of the voting shares of any company which is not a bank or bank
holding company, or from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or providing services for
its subsidiaries. The principal exceptions to these prohibitions involve
certain non-bank activities which, by statute or by FRB regulation or order,
have been identified as activities closely related to the business of banking or
of managing or controlling banks. In making this determination, the FRB
considers whether the performance of such activities by a bank holding company
can be expected to produce benefits to the public such as
4
<PAGE>
greater convenience, increased competition or gains in efficiency in resources,
which can be expected to outweigh the risks of possible adverse effects such as
decreased or unfair competition, conflicts of interest or unsound banking
practices.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its subsidiaries, on investments in their securities and
on the use of their securities as collateral for loans to any borrower. These
regulations and restrictions may limit the Company's ability to obtain funds
from the Bank for its cash needs, including funds for payment of dividends,
interest and operating expenses. Further, under the BHC Act and certain
regulations of the FRB, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services. For
example, the Bank may not generally require a customer to obtain other services
from the Bank or the Company, and may not require that customer to promise not
to obtain other services from a competitor, as a condition to an extension of
credit to the customer.
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies, which expresses the FRB's view that a bank holding
company should pay cash dividends only to the extent that the company's net
income for the past year is sufficient to cover both the cash dividends and a
rate of earning retention that is consistent with the company's capital needs,
asset quality, and overall financial condition.
Bank holding companies are required to give the FRB notice of any
purchase or redemption of their outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the bank holding company's consolidated net
worth. The FRB may disapprove such a purchase or redemption if it determines
that the proposal would violate any law, regulation, FRB order, directive, or
any condition imposed by, or written agreement with, the FRB. Bank holding
companies whose capital ratios exceed the thresholds for "well capitalized"
banks on a consolidated basis are exempt from the foregoing requirement if they
were rated composite 1 or 2 in their most recent inspection and are not the
subject of any unresolved supervisory issues.
The Federal Reserve Board has adopted risk-based capital standards
consistent with those adopted by the Federal Deposit Insurance Corporation.
These standards, which are applicable to bank holding companies, are discussed
at page 26, "Capital Resources."
Kingfisher Bank and Trust Co.
- -----------------------------
The Bank is chartered under the laws of the State of Oklahoma and is
subject to regulation and regular examination by the Oklahoma Banking Department
and the Federal Deposit Insurance Corporation ("FDIC"), and while not a member
of the Federal Reserve System, is subject to additional regulation by the FRB.
The Company and the Bank are "affiliates" within the meaning of the Federal
Reserve Act and the Bank is subject to restrictions on loans to the Company, on
investments in stock or securities of the Company, and on the use of such
Company stock or securities as collateral security for loans to any borrower.
Effective October 1, 1983, the Oklahoma Banking Code was amended to
provide that a bank may establish two limited purpose facilities, one of which
is to be located within 1,000 feet of the bank's main office and the second to
be located within three miles of the bank's main office. All banking functions
may be performed at a limited purpose facility except the making of loans. In
addition, these amendments provided that a bank could establish two full service
branches at which all banking functions could be
5
<PAGE>
performed. The location of a bank's branches is limited to the city limits of
the city in which the bank's main office is located or, in the case of Oklahoma
County, up to five miles from the main bank office. Also, a branch may be
located in another city or town as long as such city or town has no state or
national bank at the time the branch is established and the branch is within
twenty-five miles of the bank's main banking office. However, a bank may operate
an unlimited number of branches within Oklahoma when the branches are
established due to the insolvency or impairment of capital of another bank.
The operations of the Bank are also subject to numerous laws and
regulations relating to the extension of credit and making of loans to
individuals. Such laws include the Federal Consumer Credit Protection Act,
which regulates, among other things, disclosure of credit terms, credit
advertising, credit billing and collection, and expansion of credit.
On August 9, 1989, President Bush signed the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA") into law. The FIRREA
will restructure both the deposit insurance system and the regulation of savings
institutions. This legislation also includes several provisions that relate to
bank holding companies. First, the Bank Insurance Fund ("BIF") was established
to ensure the deposits of institutions previously insured by the FDIC and this
fund has increased premiums over the next several years. Second, FIRREA
provides for cross-guarantees on commonly controlled banks and thrifts. If the
FDIC incurs a loss in connection with the default of an insured bank or thrift,
any other commonly controlled depository institution may be required to
reimburse the FDIC for the loss. Third, FIRREA also amended Section 4 of the
Bank Holding Company Act to give the Board of Governors of the Federal Reserve
System the power to allow bank holding companies to acquire healthy, as well as
failing, savings and loan associations. In light of this, the Federal Reserve
System amended its Regulation Y to provide that owning, controlling or operating
a savings and loan is a permissible activity for a bank holding company.
However, the saving and loan can engage in only those activities authorized for
bank holding companies under Section 4 of the Bank Holding Company Act.
In December 1991, Congress passed the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). Among the provisions to be
implemented by the Act will be the requirement of certain institutions to have
an audit committee composed solely of outside directors, and a requirement for
certain banks that bank management submit an annual report to the FDIC regarding
the internal control structure of the institution. In addition, in accordance
with FDICIA, bank regulators will be required to adopt regulations calling for
prompt regulatory actions based on the level of an institution's capital.
Deposit Insurance
-----------------
As an FDIC member institution, the deposits of the Bank are currently
insured to a maximum of $100,000 per depositor through the BIF, administered by
the FDIC, and the Bank is required to pay semi-annual deposit insurance premium
assessments to the FDIC.
FDICIA included provisions to reform the federal deposit insurance
system, including the implementation of risk-based deposit insurance premiums,
and permits the FDIC to make special assessments on insured depository
institutions, in amounts determined by the FDIC to be necessary to give it
adequate assessment income to repay amounts borrowed from the U.S. Treasury and
other sources or for any other purpose the FDIC deems necessary. Pursuant to
FDICIA, the FDIC implemented a transitional risk-based insurance premium system
on January 1, 1993 which became the permanent risk-based premium system on
January 1, 1994. Generally, under this system, banks are assessed insurance
premiums according to how much risk they are deemed to present the BIF. Banks
with higher levels of capital and involving a low degree of supervisory concern
are assessed lower premiums than banks with lower levels of
6
<PAGE>
capital or involving a higher degree of supervisory concern. During 1995, the
FDIC amended the BIF risk-based assessment schedule which lowered the deposit
insurance assessment rate for deposits insured by the BIF.
Under FIRREA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default (the "Cross
Guarantee"). "Default" is defined generally as the appointment of a conservator
or receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating either that there is no reasonable prospect that
the institution will be able to meet the demands of its depositors or pay its
obligations in the absence of regulatory assistance, or that its capital has
been depleted and there is no reasonable prospect that it will be replenished in
the absence of regulatory assistance. The Cross Guarantee thus enables the FDIC
to assess a holding company's healthy BIF members. Cross Guarantee liabilities
are generally superior in priority to obligations of the depository institution
to its shareholders due solely to their status as shareholders and obligations
to other affiliates. Under FIRREA and FDICIA, failure to meet applicable
capital guidelines could subject a banking institution to a variety of
enforcement remedies available to Federal regulatory authorities, including the
termination of deposit insurance and a prohibition on the taking of "brokered
deposits."
Government Monetary Policy and Economic Controls
------------------------------------------------
Monetary policies of regulatory authorities have a significant effect on
the operating results of bank holding companies. Among the instruments of
monetary policy used by the Federal Reserve Board to regulate the supply of bank
credit are open-market operations in U.S. Government securities, changes in the
discount rate on bank borrowings and changes in reserve requirements against
bank deposits. These instruments of policy are used in varying combinations to
influence the overall growth of bank loans, investments and deposits and also
affect the interest rates charged on loans and paid in respect of deposits.
The Company is unable to predict the nature or the extent of the effects
on its business and earnings which fiscal or monetary policies or economic
controls may have in the future.
The Banking Industry in Oklahoma
--------------------------------
The banking industry is affected by general economic conditions such as
inflation, recession, unemployment and other factors beyond the Company's
control. Economic conditions in the agriculture and energy-related industries
significantly affect the Company and such conditions have been volatile during
the past several years. Continuing pressure in the agricultural economy due to
weather and market conditions will require close monitoring by the Company to
ensure the continued growth and strength that it has enjoyed over the past
decade.
ITEM 2. PROPERTIES
- -------------------
The Bank's primary banking facility is located at 124 South Main Street,
Kingfisher, Oklahoma and contains approximately 9,200 square feet of usable
space. The Bank also operates a drive-in facility with four drive-in lanes
located immediately behind this facility. These facilities are owned by the
Company and used by the Bank pursuant to a long-term lease arrangement. During
1993, the Company purchased land costing $20,000 in Hennessey, Oklahoma for use
as a possible future expansion of the Bank's banking facility.
7
<PAGE>
In 1995, the Bank decided to close its Hennessey Loan Production Office
in 1996 and sell the land in Hennessey, Oklahoma for fair value. The closing of
this Loan Production Office will not have a significant impact on the income of
the Bank.
Additionally, as growth and changing service requires from time to time,
the Company will add approximately 1,000 square feet of space to the existing
main building in Kingfisher, Oklahoma, in 1996 for use in recordkeeping and
customer service.
See the information set forth in Note 5 of "Notes to Consolidated
Financial Statements" in the Company's consolidated financial statements
included herein at Item 8.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is not a party to any significant pending or, to the
knowledge of management, threatened litigation. The Company is a party to
various matters in litigation which have arisen in the ordinary course of
conducting a commercial banking business in which damages in various amounts
have been claimed. Although the amount of any ultimate liability with respect
to such matters cannot be determined with any degree of certainty at this time,
in the opinion of management of the Company and the Bank, there is no pending
litigation to which the Company or Bank is a party which is expected to have a
material adverse impact upon either the financial position or the results of
operations of the Company or Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- --------------------------------------------------------------
None.
8
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PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------------------
In November 1995, stockholders of the Company were presented with an
unsolicited offer of $155 per share for their common stock, limited to 51% of
total outstanding shares. This offer was later raised to $175 per share. The
Company countered with an offer of $180 per share for stock up to 8,000 shares.
15,546 shares were offered to the Company and management elected to purchase all
of the shares offered in January 1996.
While this offer altered the way in which stock had been trading in from
previous years, it has not yet been determined whether or not the stock will
become an actively traded commodity. The Company is still the primary source
for purchases of stock and knows of no other stock transactions mentioned above
that may be pending.
To management's knowledge, during the year ended December 31, 1995, the
price at which Company common stock has traded for was $115 to $180 per share.
As of December 31, 1995, there were approximately 339 record owners of the
common stock of the Company.
The historical book value per share of the Company's common stock at
December 31, 1995, 1994 and 1993 was $159.94, $149.62 and $142.44,
respectively. The repurchase of common shares in January of 1996 would result
in a proforma book value at year end 1995 of approximately $153.60 per share.
Dividends
---------
The Board of Directors of the Company has established a practice of
paying annual cash dividends on its common stock. During 1995 and 1994, the
Company declared a cash dividend in the amount of $4.00 and $4.00 per share,
respectively. Subsequent to 1995, the Company declared a cash dividend in the
amount of $1.00 per share to shareholders of record at January 31, 1996.
The Company's ability to pay future cash dividends will depend upon the
earnings, liquidity needs, financial condition and capital requirements of the
Company and the Bank. Although management will attempt to follow the same
dividend practice as has been used over the past years, the level of dividends
may be affected by the debt incurred during 1996 for the purchase of treasury
stock. Furthermore, the ability of the Bank to pay dividends to the Company is
limited by the Oklahoma Banking Code. See Note 3 in the "Notes to Consolidated
Financial Statements" in the Company's consolidated financial statements
included herein at Item 8.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
The following schedule sets forth a comparison of the most recent two
years' consolidated month-end average balance sheets for the Company. These
statements have been arranged in a format that highlights the earning asset
components of the balance sheet. Management believes that growth in earning
assets and an increase in net interest spread are the most significant elements
in increasing earnings from year-to-year.
9
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Immediately following the consolidated month-end average balance sheets
is a table of selected financial data for the last five years and condensed
consolidated statements of income and a table of average interest rates earned
and paid for the most recent three years.
CONSOLIDATED MONTH-END AVERAGE BALANCE SHEETS
---------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE
1995 1994 1995-1994
ASSETS
------
<S> <C> <C> <C>
LOANS, net $50,696,244 $47,163,088 7.49%
INVESTMENT SECURITIES 28,994,688 30,751,818 (5.71)
FEDERAL FUNDS SOLD 4,116,667 6,441,667 (36.09)
----------- ----------- ---------
Total earning assets 83,807,599 84,356,573 (0.65)
CASH AND DUE FROM BANKS 2,805,555 2,994,606 (6.31)
BANK PREMISES AND EQUIPMENT 288,740 380,214 (24.06)
OTHER ASSETS 1,989,860 1,616,257 23.12
----------- ----------- ---------
$88,891,754 $89,347,650 (0.51)%
=========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
NOW, SAVINGS AND TIME DEPOSITS $71,007,970 $71,815,402 (1.12)%
SHORT-TERM BORROWINGS 250,805 328,051 (23.55)
LONG-TERM BORROWINGS 50,118 72,472 (30.85)
----------- ----------- ---------
Interest-bearing liabilities 71,308,893 72,215,925 (1.26)
DEMAND DEPOSITS 6,485,026 6,918,985 (6.27)
----------- ----------- ---------
Total deposits, short-term
borrowings and long-term
borrowings 77,793,919 79,134,910 (1.69)
OTHER LIABILITIES 730,511 181,923 301.55
STOCKHOLDERS' EQUITY 10,367,324 10,030,817 3.35
----------- ----------- ---------
$88,891,754 $89,347,650 (0.51)%
=========== =========== =========
</TABLE>
10
<PAGE>
SELECTED FINANCIAL DATA
-----------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS $88,200 $89,138 $87,060 $86,379 $81,238
INTEREST INCOME 6,583 6,213 6,188 6,832 6,997
INTEREST EXPENSE 3,413 2,715 2,582 3,210 4,126
NET INTEREST INCOME 3,170 3,498 3,607 3,622 2,871
PROVISION FOR POSSIBLE
LOAN LOSSES 540 240 240 640 940
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 2,630 3,258 3,367 2,982 1,931
NET INCOME 748 827 1,348 1,065 512
NOTES PAYABLE 39 62 84 535 -0-
NET INCOME AS A PERCENT OF:
Average assets 0.84% 0.93% 1.57% 1.26% 0.63%
Average stockholders' equity 7.22 8.25 14.35 12.51 5.95
PER SHARE:
Net income $ 11.33 $ 12.20 $ 19.57 $ 13.68 $ 6.36
Cash dividends declared 4.00 4.00 3.00 2.00 2.00
Book value - year end 159.94 149.62 142.44 125.68 107.58
MISCELLANEOUS:
Average loans to deposits 65.42% 59.90% 62.80% 53.73% 57.91%
Average equity capital to assets 11.66 11.89 10.94 10.06 10.58
Average interest-bearing
liabilities to earning assets 85.09 85.61 86.94 87.52 86.17
Net yield on total earning assets 3.91 4.34 4.72 4.88 4.15
Net charge-offs to average loans 1.10 0.47 0.00 0.96 1.90
Allowance for possible loan
losses to year-end loans 2.19 2.12 2.33 2.10 1.58
Dividend declared pay-out ratio 36.29 33.23 15.31 13.77 32.14
</TABLE>
11
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME:
Loans $4,516,938 $3,999,091 $3,916,802
Investment securities 1,826,282 1,944,334 2,074,413
Federal funds sold and other 240,240 269,515 197,078
---------- ---------- ----------
Earning assets 6,583,460 6,212,940 6,188,293
---------- ---------- ----------
INTEREST EXPENSE:
Savings and time deposits 3,396,804 2,702,809 2,547,825
Other borrowings 12,515 7,523 7,510
Notes payable 3,740 4,513 26,284
---------- ---------- ----------
Interest bearing liabilities 3,413,059 2,714,845 2,581,619
---------- ---------- ----------
NET INTEREST INCOME BEFORE PROVISION
FOR POSSIBLE LOAN LOSSES 3,170,401 3,498,095 3,606,674
LESS PROVISION FOR POSSIBLE LOAN LOSSES 540,000 240,000 240,000
---------- ---------- ----------
NET INTEREST INCOME 2,630,401 3,258,095 3,366,674
OTHER INCOME 380,373 332,946 400,625
LESS OTHER EXPENSE 2,051,969 2,429,620 2,099,351
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 958,805 1,161,421 1,667,948
INCOME TAX PROVISION 210,694 334,362 482,120
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 748,111 827,059 1,185,828
CUMULATIVE EFFECT OF CHANGE IN
METHOD OF ACCOUNTING FOR
INCOME TAXES - - 162,000
---------- ---------- ----------
NET INCOME $ 748,111 $ 827,059 $1,347,828
========== ========== ==========
CASH DIVIDENDS DECLARED $ 271,472 $ 274,872 $ 206,334
========== ========== ==========
</TABLE>
12
<PAGE>
AVERAGE INTEREST RATES EARNED AND PAID
--------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
RATES EARNED ON:
Loans 8.91% 8.48% 9.00%
Investment securities (1) 6.68 6.87 7.54
Federal funds sold 5.84 4.18 2.83
---- ---- ----
Earning assets 7.99 7.56 7.92
RATES PAID ON:
Savings and time deposits 4.78 3.76 3.68
Short-term borrowings 4.99 2.29 1.87
Long-term borrowings 7.46 6.23 6.94
---- ---- ----
Interest bearing liabilities 4.79 3.76 3.69
---- ---- ----
NET INTEREST SPREAD 3.20% 3.80% 4.23%
==== ==== ====
</TABLE>
(1) Fully taxable equivalent basis at
an assumed rate of 34% for 1995, 1994
and 1993.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
General
- -------
The Company is a one-bank holding company with the Bank its sole
subsidiary. The Bank offers a full range of commercial, agricultural, retail,
lending, trust and other financial services.
Analysis of Results of Operations
- ---------------------------------
Net income for 1995 was $748,000 compared to $827,000 in 1994. Return on
----------
average assets decreased from 0.93% in 1994 to 0.84% in 1995. The decreases in
1995 in net income and return on average assets were primarily attributable to
an increase in the provision for possible loan losses and decline in net
interest income, which was partially offset by a decrease in other expenses and
a decrease in the provision for income taxes..
Net income for 1993 was $1,348,000. Return on average assets was 1.57%
in 1993. The decrease in net income in 1994 compared to 1993 was primarily
attributable to a decline in net interest income and an increase in non-interest
expense.
The return on average stockholders' equity decreased to 7.22% in 1995
from 8.25% in 1994. This decrease was due to an increase in the provision for
possible loan losses.
The return on average stockholders' equity decreased to 8.25% in 1994
from 14.35% in 1993. This decrease was due to the decrease in net income.
Net income per share in 1995 was $11.33, down 7% from 1994.
Net income for 1994 was $12.20 per share, down 38% from the $19.57 per
share earned in 1993.
Net interest income on a fully taxable equivalent basis and net interest
-------------------
spread for 1995 was $3,281,000 and 3.20%, respectively, compared to $3,665,000
and 3.80%, respectively, in 1994. This decrease was primarily the result of
interest expense increasing at a faster rate than interest income. Total
interest income increased by approximately $314,000 on a fully taxable
equivalent basis in 1995 compared to 1994. This increase was primarily
attributable to a $3,500,000 increase in loans. Total interest expense
increased by approximately $698,000 in 1995 compared to 1994. This increase in
interest expense was caused primarily by an increase in rates paid on deposits.
Total interest income decreased approximately $4,000, on a fully taxable
equivalent basis, in 1994 compared to 1993.
Net interest income on a fully taxable equivalent basis and net interest
spread for 1993 were $3,802,000 and 4.23%, respectively. The decreased net
interest spread in 1994 compared to 1993 was primarily the result of interest
expense increasing at a faster rate than interest income. Total interest income
declined approximately $4,000, on a fully taxable equivalent basis, in 1994
compared to 1993.
14
<PAGE>
CONDENSED AVERAGE BALANCE SHEETS; INTEREST EARNINGS
AND AVERAGE INTEREST RATES AND NET INTEREST SPREAD
--------------------------------------------------
The following table presents the consolidated month-end average balance
of assets, liabilities and stockholders' equity and the interest income,
interest expense and average rates associated with such average balances:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------------- ----------------------- ----------------
MONTH-END MONTH-END MONTH-END
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE
<S> <C> <C> <C> <C> <C> <C> <C>
NET LOANS (2) $50,696,244 $4,516,938 8.91% $47,163,088 $3,999,090 8.48% $43,500,764
INVESTMENT SECURITIES:
Taxable 25,680,359 1,612,007 6.28 26,216,331 1,620,404 6.18 22,538,737
Nontaxable (1) 3,314,329 324,659 9.80 4,535,487 490,801 10.82 7,574,035
FEDERAL FUNDS SOLD 4,116,667 240,240 5.84 6,441,667 269,514 4.18 6,958,333
----------- ---------- ----------- ---------- -----------
Total earning assets 83,807,599 6,693,844 7.99 84,356,573 6,379,809 7.56 80,571,869
---------- ----------
CASH AND DUE FROM
BANKS 2,805,555 2,994,606 3,023,487
BANK PREMISES AND
EQUIPMENT, net 288,740 380,214 446,259
OTHER ASSETS 1,989,860 1,616,257 1,798,079
----------- ----------- -----------
$88,891,754 $89,347,650 $85,839,694
=========== =========== ===========
TRANSACTION DEPOSITS $ 8,653,169 238,439 2.76 $ 9,069,101 246,377 2.72 $ 8,797,268
NONTRANSACTION
DEPOSITS 62,354,801 3,158,365 5.07 62,746,301 2,456,428 3.91 60,474,787
OTHER SHORT-TERM
BORROWINGS 250,805 12,515 4.99 328,051 7,525 2.29 402,095
LONG-TERM BORROWINGS 50,118 3,740 7.46 72,472 4,513 6.23 378,666
----------- ---------- ----------- ---------- -----------
Interest-bearing
liabilities 71,308,893 3,413,059 4.79 72,215,925 2,714,843 3.76 70,052,816
---------- ----------
DEMAND DEPOSITS 6,485,026 6,918,985 6,215,124
OTHER LIABILITIES 730,511 181,923 178,524
STOCKHOLDERS' EQUITY 10,367,324 10,030,817 9,393,230
----------- ----------- -----------
$88,891,754 $89,347,650 $85,839,694
=========== =========== ===========
NET INTEREST INCOME (1) $3,280,785 $3,664,966
========== ==========
NET INTEREST SPREAD (1) 3.20% 3.80%
NET YIELD ON TOTAL
EARNING ASSETS (1) 3.91% 4.34%
</TABLE>
<TABLE>
<CAPTION>
-----------------------
1993
-----------------------
AVERAGE
INTEREST RATE
<S> <C> <C>
NET LOANS (2) $3,916,802 9.00%
INVESTMENT SECURITIES:
Taxable 1,694,563 7.52
Nontaxable (1) 575,526 7.60
FEDERAL FUNDS SOLD 197,077 2.83
----------
Total earning assets 6,383,968 7.92
----------
CASH AND DUE FROM
BANKS
BANK PREMISES AND
EQUIPMENT, net
OTHER ASSETS
TRANSACTION DEPOSITS 244,846 2.78
NONTRANSACTION
DEPOSITS 2,302,977 3.81
OTHER SHORT-TERM
BORROWINGS 7,510 1.87
LONG-TERM BORROWINGS 26,284 6.94
----------
Interest-bearing 2,581,617 3.69
liabilities ----------
DEMAND DEPOSITS
OTHER LIABILITIES
STOCKHOLDERS' EQUITY
NET INTEREST INCOME (1) $3,802,351
==========
NET INTEREST SPREAD (1) 4.23%
NET YIELD ON TOTAL
EARNING ASSETS (1) 4.72%
</TABLE>
(1) Yields and income on tax exempt securities are computed on a fully taxable
equivalent basis at an assumed rate of 34% for 1995, 1994 and 1993.
(2) Nonaccrual loans are included in net loans. Loan fees, which are included
in interest income, are not material.
15
<PAGE>
CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
-----------------------------------------------
<TABLE>
<CAPTION>
1995 VS. 1994 1994 VS. 1993
------------------------------------ ---------------------------------
CHANGES CHANGES
FROM CHANGES CHANGES FROM CHANGES CHANGES
PRIOR IN IN PRIOR IN IN
YEAR VOLUME RATES (1) YEAR VOLUME RATES (1)
INTEREST INCOME:
<S> <C> <C> <C> <C> <C> <C>
Loans $ 517,848 $ 299,586 $ 218,262 $ 82,288 $ 329,609 $(247,321)
Investment securities:
Taxable (8,397) (33,128) 24,731 (74,159) 276,555 (350,714)
Nontaxable (2) (166,142) (132,146) (33,996) (84,725) (230,930) 146,205
Federal funds sold (29,274) (97,276) 68,002 72,437 (14,622) 87,059
--------- --------- --------- --------- --------- ---------
Total interest income 314,035 37,036 276,999 (4,159) 360,612 (364,771)
--------- --------- --------- --------- --------- ---------
INTEREST EXPENSE:
Savings deposits (7,938) (11,299) 3,361 1,531 7,557 (6,026)
Other time deposits 701,937 (15,327) 717,264 153,451 86,545 66,906
Other short-term
borrowings 4,991 (1,772) 6,763 15 (1,385) 1,400
Long term borrowings (773) (1,392) 619 (21,771) (21,250) (521)
--------- --------- --------- --------- --------- ---------
Total interest
expense 698,217 (29,790) 728,007 133,226 71,467 61,759
--------- --------- --------- --------- --------- ---------
NET INTEREST
INCOME
(EXPENSE) (2) $(384,182) $ 66,826 $(451,008) $(137,385) $ 289,145 $(426,530)
========= ========= ========= ========= ========= =========
</TABLE>
(1) The rate/volume variance (change in rate times change in volume) has been
allocated to the change in rate amount in all cases.
(2) Fully taxable equivalent basis at an assumed rate of 34% in 1995, 1994 and
1993.
Other operating income consists of income earned from service charges and
----------------------
fees on deposit accounts and fees from other non-loan services such as trust,
exchange, etc. Other operating income increased from $333,000 in 1994 to
$380,000 in 1995. This increase was the result of a $53,000 increase in
insufficient check charges. Other operating income decreased by $68,000 from
1993 to 1994. This decrease was primarily the result of a 1993 $75,000 recovery
of attorneys' fees from litigation.
Noninterest expense consists primarily of salaries and employee benefits,
-------------------
occupancy and equipment costs, and legal and examination expenses. Noninterest
expense decreased $378,000 or 15.54% over 1994 primarily due to the deferred
compensation arrangement that was adopted in 1994. Noninterest expenses in 1994
increased $330,000 or 15.73% over 1993 primarily due to the deferred
compensation arrangement with the Company's and Bank's directors which increased
noninterest expense by $290,000.
Provision for possible loan losses is determined by evaluating loan
----------------------------------
growth and credit risk considerations. Management has adopted the policy of
providing additions to the loan loss reserve on a regular basis taking into
consideration management's assessment of risks in the loan portfolio. The
provision for possible loan losses for 1995 was $540,000, a 125% increase over
1994. This significant increase was primarily the result of the charge-off from
a singular borrower. While management monitors all lines of credit and attempts
to predict and prepare for problem loans through the provision for possible loan
losses, some
16
<PAGE>
lines become problem lines faster than others. Management does not believe that
this isolated large charge-off incident in 1995 is a trend in the economy or of
the Bank's loan portfolio. The provision for possible loan losses for 1994 as
well as 1993 was $240,000. Management continues to monitor all lines of credit
and attempts to predict and prepare for problem loans through the provision for
possible loan losses.
The allowance for possible loan losses at December 31, 1995 was 2.19% of
total loans outstanding (net of unearned discounts) compared to 2.12% at
December 31, 1994. For additional commentary on this subject, see the Loan
Quality section elsewhere in this discussion.
Sources and Uses of Funds
- -------------------------
The Company's primary source of funds is customer deposits. Average
total deposits in 1995 were $78 million. Average total deposits in 1994 and
1993 were $79 million and $75 million, respectively. Average noninterest
bearing funds for 1995 were 8.34% of total deposits compared to 8.79% for 1994
and 8.23% for 1993.
Savings and time deposits in 1995 averaged $71.0 million, 1.11% less than
the $71.8 million in 1994 and 2.45% greater than the $69.3 million in 1993. The
largest single increase in these funds in 1995, 1994 and 1993 was time deposits.
This stability in deposits, rather than the growth normally seen by the Company,
could be attributable to the movement of investor money to higher return
investments. While this change in deposits is not significant and can be
attributed to normal growth, it could also be the beginning of a trend by
depositors moving their savings from investments outside the banking industry
back into the banking industry due primarily to increased rates being paid on
deposits.
The Company's 1995 net cash provided by operating activities decreased
only slightly to $1,439,806 from the $1,463,835 in 1994. Net cash provided by
operating activities was $1,573,658 in 1993. This $109,823 decrease in 1994
compared to 1993 was primarily due to a decrease in net income.
The Company's 1995 net cash provided by investing activities was
$6,317,299 compared to net cash used in investing activities of $11,165,603 in
1994 and $1,077,982 in 1993. The $17,482,902 increase in net cash provided by
investing activities in 1995 compared to 1994 was primarily due to a net
decrease in loans of $8,350,793 and a $9,082,262 decrease in net investment
securities. The $10,087,621 increase in net cash used in investing activities
in 1994 compared to 1993 was primarily due to a net increase in loans of
$6,163,906 and a net increase in securities of $4,731,927.
The Company's 1995 net cash used in financing activities was $1,908,589
as compared to net cash provided by financing activities of $966,745 in 1994.
This $2,875,334 decrease in 1995 as compared to 1994 was primarily due to a net
$338,677 decrease in demand deposits and NOW accounts and time deposits, and a
$910,596 decrease in other borrowed funds. The 1994 net cash provided by
financing activities was $966,745 as compared to net cash used in financing
activities of $585,833 in 1993. The $1,552,578 increase in net cash provided by
financing activities was primarily due to a $867,009 increase in net deposits
and a $528,516 net increase in other borrowed funds due to an increase in
federal funds purchased.
The Company's primary use of these funds is to support the loan
portfolio. Average loans outstanding during 1995 increased 7.49% from the 1994
amount.
Average investment securities decreased 5.71% from 1994 totals.
17
<PAGE>
MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES ON LOANS
--------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1994
------------------- -------------------------------
LOAN TYPE
-----------------------------------------------------
COMMERCIAL, COMMERCIAL,
AGRICULTURE, INSTALLMENT AGRICULTURE, INSTALLMENT
MORTGAGE AND MORTGAGE AND
AND OTHERS OVERDRAFTS AND OTHERS OVERDRAFTS
<S> <C> <C> <C> <C>
Due in 1 year or Less (1):
Fixed interest rate $30,385,317 $ 5,945,933 $35,955,770 $ 4,755,928
Floating or adjustable interest 215,278 393,616 155,368 134,142
Due after 1 year through 5 years:
Fixed interest rate 481,546 15,257,513 1,150,323 12,464,358
Floating or adjustable interest rate - 7,428 - 11,003
Due after 5 years:
Fixed interest rate 50,299 379,288 102,173 904,776
Floating or adjustable interest rate - - - -
----------- ----------- ----------- -----------
TOTAL $31,132,440 $21,983,778 $37,363,634 $18,270,207
=========== =========== =========== ===========
</TABLE>
(1) Demand loans and overdrafts are reported in "Due in 1 Year or Less"
category.
The maturities presented above are based upon contractual maturities.
Many of these loans are made on a short-term basis anticipating that they
will be renewed at maturity at prevailing rates if the borrower's credit
worthiness supports continued extension of credit.
18
<PAGE>
MATURITY DISTRIBUTION AND AVERAGE YIELD OF INVESTMENT SECURITIES
----------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1995 1994
---------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
AMOUNT YIELD (1) AMOUNT YIELD (1)
U. S. TREASURY SECURITIES:
<S> <C> <C> <C> <C>
Due within one year $ 5,973,277 6.49% $ 2,026,245 4.89%
Due after one year but within five years 14,919,416 6.38 20,610,293 6.28
----------- -----------
20,892,693 22,636,538
U. S. GOVERNMENT AGENCY
SECURITIES:
Due after one but within five years 1,000,000 5.92 1,800,000 5.91
Due after five years but within ten years 1,295,185 7.26 1,447,367 7.32
Due after ten years 731,686 5.94 799,266 6.01
----------- -----------
3,026,871 4,046,633
STATES AND POLITICAL
SUBDIVISIONS:
Due within one year 104,993 9.37 983,258 10.14
Due after one year but within five years 1,230,930 10.08 876,688 10.46
Due after five years but within ten years 1,396,747 7.33 1,967,572 7.99
Due after ten years 281,290 8.96 290,983 9.02
----------- -----------
3,013,960 4,118,501
----------- -----------
$26,933,524 $30,801,672
=========== ===========
</TABLE>
(1) Fully taxable equivalent basis at an assumed rate of 34% in 1995 and 1994.
MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
-----------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1995
<S> <C>
Due within 3 months $ 9,942,127
Due after 3 months but within 6 months 3,119,987
Due after 6 months but within one year 2,202,299
Due after one year 1,623,767
-----------
Total $16,888,180
===========
</TABLE>
19
<PAGE>
INTEREST RATE SENSITIVITY - DECEMBER 31, 1995
---------------------------------------------
<TABLE>
<CAPTION>
ASSETS
-----------------------------------------------------------------------
TAXABLE NON-TAXABLE FEDERAL
INVESTMENT INVESTMENT FUNDS
MATURITIES SECURITIES SECURITIES SOLD LOANS TOTAL
<S> <C> <C> <C> <C> <C>
Due within 1 year $ 5,973,277 $ 104,993 $4,750,000 $36,940,144 $47,768,414
Due after 1 year but within 5 years 15,919,416 1,230,930 - 15,746,487 32,896,833
Due after 5 years but within 10 years 1,295,185 1,396,747 - 429,587 3,121,519
Due after 10 years 731,686 281,290 - - 1,012,976
------------ ------------ ----------- ------------ -----------
Total $ 23,919,564 $ 3,013,960 $4,750,000 $53,116,218 $84,799,742
============ ============ =========== ============ ===========
LIABILITIES
-----------------------------------------------------------------------
OTHER INTEREST-
SAVINGS TIME BEARING NOTES
MATURITIES DEPOSITS DEPOSITS DEMAND PAYABLE TOTAL
Due within 1 year $ 10,674,123 $ 45,768,136 $8,218,752 $ 23,513 $64,684,524
Due after 1 year but within 5 years - 3,525,715 - 15,767 3,541,482
Due after 5 years but within 10 years - 2,458,006 - - 2,458,006
------------ ------------ ----------- ------------ -----------
Total $ 10,674,123 $ 51,751,857 $8,218,752 $ 39,280 $70,684,012
============ ============ =========== ============ ===========
TOTAL ASSETS
LESS
TOTAL
LIABILITIES CUMULATIVE
MATURITIES ("GAP") "GAP"
Due within 1 year $(16,916,110) $(16,916,110)
Due after 1 year but within 5 years 29,355,351 12,439,241
Due after 5 years but within 10 years 663,513 13,102,754
Due after 10 years 1,012,976 14,115,730
------------ ------------
Total $ 14,115,730 $ 14,115,730
============ ============
</TABLE>
Liquidity
- ---------
Liquidity management involves meeting the funds flow requirements of
customers withdrawing funds on deposit or obtaining funds for their credit
needs. Banks in general must maintain large cash balances to meet daily cash
flow requirements and maintain required reserves of cash and cash equivalents.
The cash balances maintained on hand and amounts due from other banks are
sources of liquidity. Other sources of liquidity are provided by short-term
investments, interest-bearing deposits in other banks and the investment
20
<PAGE>
portfolio. The Company has chosen to maintain a relatively short maturity of
the investment portfolio, with an average maturity of less than five years. At
December 31, 1995 and 1994, securities maturing in less than five years total
$23.2 million and $26.5 million, respectively, representing 86.2% and 86.0% of
the portfolio. At the same dates, securities pledged as collateral on deposits
represent only 49.4% and 49.2%, respectively, of the total investment security
portfolio carrying value. The Company has designated certain U.S. Treasury
securities, totaling approximately $3 million, as available for sale which are
available to be sold to meet liquidity needs. The remainder of the investment
portfolio, totaling approximately $24 million, is designated as held-to-maturity
and only becomes available to meet liquidity needs as investments mature.
The Company is very active in short-term agricultural and commercial
lending. A large portion of these assets are short-term in nature as the
Company attempts to match the maturities of its interest-earning assets with the
maturities of its interest-bearing liabilities. However, due to customer
demands it is not possible to perfectly match the maturity of interest-bearing
assets with the maturity of interest-bearing liabilities. At December 31, 1995,
interest-bearing liabilities maturing within one year exceed interest-bearing
assets maturing within one year by approximately $16,916,000. This leaves the
Company vulnerable to an increase in interest rates which would decrease the net
interest spread in the short term. After one year this "Gap" turns around and
the cumulative gap is interest-bearing assets maturing within five years
exceeding interest-bearing liabilities maturing within five years by
approximately $12,439,000. All interest-bearing assets exceed all interest-
bearing liabilities by approximately $14,116,000. The Company actively monitors
this interest rate risk and attempts to maintain a rate sensitive asset to rate
sensitive liability ratio of between .8 and 1.2.
Subsequent to year end, the Company incurred debt for the purchase of
treasury stock. The scheduled repayment plan will increase interest-bearing
liabilities maturing within five years by approximately $2,000,000. The Company
does not anticipate the servicing of this debt materially affecting the rate
sensitive asset to rate sensitive liability ratio. See Note 14 in the "Note to
Consolidated Financial Statements" in the Company's consolidated financial
statements included herein at Item 8.
Loan Quality
- ------------
One of the major risks faced by the Company in its role of providing
financial services is credit risk. It is the general policy of management to
review all past due lines of credit on a regular basis. Loans 90 days or more
past due are additionally reviewed. Based on this review, loans may be
classified as nonaccrual. If such loans are placed on nonaccrual, any interest
previously accrued but unpaid on these loans is reversed from income. A
nonaccrual loan may be returned to accrual status once all interest and
principal are no longer considered doubtful.
The Bank has four primary lending categories. While each of these
categories require the same rules and guidelines for analysis of credit
worthiness, each carries different economic risk and collateralization policies.
Approximately 18% of the Bank's loan portfolio is commercial loans.
These loans are primarily loans to individuals and businesses for purposes other
than consumer purchases and financing. Types of businesses range from legal
professions to oilfield equipment. Economic risks involved with the commercial
loans varies as to the type of industry in which the business is involved.
The most significant category of the Bank's loan portfolio, approximately
43%, is in the agricultural category. The purpose of these loans would fall
into three primary categories, machinery purchase or refinance, operations and
livestock purchase.
21
<PAGE>
The economic risk of an agricultural loan lies primarily in the price
fluctuation in the markets in which agricultural businessmen sell and purchase
the products. Since about 60% of these agricultural loans are for purchases of
stocker livestock, significant attention and analysis must be given to stocker
and feeder livestock prices.
Loans made for the purpose of purchasing livestock are in general short-
term (one year or less) loans allowing the Bank the opportunity to analyze
progress of the collateral and the borrower's condition more frequently. This
provides a better opportunity to make changes to the collateral or liquidity
position of the borrower as market changes occur.
Approximately 19% of the Bank's loan portfolio is in real estate mortgage
loans. The loans primarily are for the purchase of 1-4 family residential
property and unimproved agricultural real estate (farmland). Maturities of the
loans are generally 3-7 years in length and appraisals and inspection of the
properties are required.
The primary economic risk with this category as well as the consumer
loans (mentioned below) is the borrower's ability to repay. The other risk is
market price stability of the real estate. The early 1980's proved to be
strenuous on local (Kingfisher County area) real estate lending because of
declining real estate prices. However, the past three to four years indicate
that market prices of real estate has remained steady to 2-3% higher than the
past year.
Approximately 21% of the loan portfolio is in installment lending and
other consumer loans. These loans consist primarily of loans made for the
purpose of consumer purchase of items such as vehicles, boats, furniture, etc.
Risks with this category as mentioned above lies primarily in the borrower's
ability to repay.
The Bank's loan policy states that the Bank should require 20% equity
(either cash or additional collateral) in loans made for each of the above
categories. Consumer loans secured by a second mortgage limit the loan amount
to 60% of the equity in the property. Management believes that this 20% cushion
provides an adequate margin for valuations of collateral and changes in market
values.
The Bank is continually reviewing estimated market values of collateral
(both new and existing) and believes that its personnel have a good working
knowledge of market prices for collateral in each of the above listed
categories.
In 1995, the total interest income that would have been earned under the
original terms for nonaccrual and restructured loans had these loans performed
in accordance with their original terms would have been $322,000. Interest
income actually collected and reported on these loans was $64,000. Comparable
amounts for 1994 are $308,000 and 45,000 and for 1993 are $211,000 and $27,000,
respectively.
In evaluating the allowance for possible loan losses, management
systematically employs a methodology which considers the level of credit risk
assets, the industry and economic trends, and other pertinent data which may
have an impact on projected losses in the loan portfolio. At December 31, 1995,
the allowance for possible loan losses was $1,163,000, or 2.19% of loans (net of
unearned discount) compared to $1,182,000, or 2.12% of net loans at December 31,
1994.
22
<PAGE>
The adequacy of the allowance for loan losses is determined by management based
upon a number of factors, including among others, the specific allowances needed
on impaired loans, analytical reviews of loan loss experience in relationship to
outstanding loans and commitments, other loans presenting credit concerns;
trends in loan growth, portfolio composition and quality; use of appraisals to
estimate the value of collateral and management's judgment with respect to
current and expected economic conditions and their impact on the existing loan
portfolio. A loan is considered to be impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. Changes in the allowance may occur because of changing economic
conditions and economic prospects or financial position of borrowers. While
there can be no assurance that the allowance for loan losses will be adequate to
cover all losses from all loans, management believes that the allowance for loan
losses is adequate. While management uses all available information to estimate
the adequacy of the allowance for loan losses, the ultimate collectibility of a
substantial portion of the loan portfolio and the need for future addition to
the allowance will be based upon changes in economic conditions and other
relevant factors that may be beyond the Company's control.
Net charge-offs as a percentage of average net loans for 1995, 1994 and
1993 were 1.10%, 0.47% and 0.00%, respectively. Of the $559,000 net charge-offs
in 1995, $318,000 was the result of the failure of one borrower in the last
quarter of 1995. The $220,000 net charge-offs in 1994 is the result of charge-
offs coming back into line with what historically has been a normal charge-off
amount for the Company.
As of January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 114 ("SFAS 114"), Accounting by Creditors for
Impairment of a Loan, and SFAS No. 118, Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures. These new standards had no
material impact on the Company's financial statements at initial adoption nor
expected ongoing operations. The new standards address the accounting by
creditors for impairment of loans, except large groups of smaller-balance
homogeneous loans, that are collectively valued for impairment. The new
standards require that the allowance for possible loan loss on impaired loans be
measured based on the present value of expected future cash flows discounted at
the loans' effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. As the measurement of the allowance for possible loan
losses changes, the change is reported as provision for possible loan losses in
the same manner in which the impairment initially was recognized or as a
reduction in the amount of provision for possible loan losses that otherwise
would be reported.
The Company has defined its population of impaired loans as consisting of
all loans internally classified by management's loan review process. This
review process includes consideration of factors such as cash flow, collateral
position, past performance, and overall financial condition of the borrower.
All nonaccrual loans are also considered to be impaired. When an impaired loan
is deemed to be nonperforming and the only repayment method would be through
liquidation, the loan is charged-off down to the market value of the collateral
and the liquidation process begins. Any remaining deficit is then charged-off
after the liquidation process.
23
<PAGE>
Due to the majority of the Bank's loans being in the agricultural sector,
management uses the market price or the fair value of the collateral compared to
the balance of the loan method for most of its impaired loans.
<TABLE>
<CAPTION>
DECEMBER 31,
1995
<S> <C>
Gross impaired loans which have allowances $4,110,000
Less: Related allowances for loan losses (733,000)
----------
Net impaired loans with related allowances 3,377,000
Impaired loans with no related allowances 2,967,000
----------
$6,344,000
==========
</TABLE>
The average impaired loans outstanding for the period ended December 31,
1995, was approximately $6,372,000 and interest income recognized for the period
ended December 31, 1995 was approximately $440,000.
An analysis of the allowance for loan losses by quarter for the three-
year period ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1993
-------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
<S> <C> <C> <C> <C>
Balance at beginning of period $ 923,000 $1,110,000 $1,175,000 $1,095,000
Provision charged to expense 60,000 60,000 60,000 60,000
Recoveries of amounts charged-off 133,000 28,000 37,000 62,000
Loans charged-off (6,000) (23,000) (177,000) (55,000)
---------- ---------- ---------- ----------
Balance at end of period $1,110,000 $1,175,000 $1,095,000 $1,162,000
========== ========== ========== ==========
1994
-------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
Balance at beginning of period $1,162,000 $1,221,000 $1,260,000 $1,291,000
Provision charged to expense 60,000 60,000 60,000 60,000
Recoveries of amounts charged-off - 1,000 58,000 5,000
Loans charged-off (1,000) (22,000) (87,000) (174,000)
---------- ---------- ---------- ----------
Balance at end of period $1,221,000 $1,260,000 $1,291,000 $1,182,000
========== ========== ========== ==========
1995
-------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
Balance at beginning of period $1,182,000 $1,241,000 $1,295,000 $1,264,000
Provision charged to expense 60,000 60,000 60,000 360,000
Recoveries of amounts charged-off 2,000 12,000 12,000 2,000
Loans charged-off (3,000) (18,000) (103,000) (463,000)
---------- ---------- ---------- ----------
Balance at end of period $1,241,000 $1,295,000 $1,264,000 $1,163,000
========== ========== ========== ==========
</TABLE>
24
<PAGE>
The large increase in the provision for loan losses in the fourth quarter
of 1995 was the result of the failure of one borrower. While management
monitors all lines of credit and attempts to predict and prepare for problem
loans through the provision for possible loan losses, some lines become problem
lines faster than others. Management does not believe that this isolated
incident is a trend in the economy or of the Bank's loan portfolio. The Board
of Directors regularly reviews the provision for loan losses and has a
systematic approach by which adequacy is determined. This is done on a
quarterly basis or as events occur which affect the reserve's adequacy. In
management's opinion the reserve for loan losses has been adequate as of each
quarter. Market conditions indicate that amounts in 1996 may be slightly higher
than in past years.
Loans are placed on nonaccrual status when management believes that the
borrower's financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of interest
is doubtful. When a loan is placed on nonaccrual and previously accrued but
uncollected interest is deemed to be uncollectible, the amount of accrued
interest receivable which was recorded in the current year is reversed against
current year operations and the remainder is charged against the allowance for
loan losses. Subsequently, interest income is only recognized upon receipt.
A bank is said to have a concentration of credit when more than 10% of
its total loans are to borrowers who would, by the nature of their businesses,
be similarly impacted by economic or other conditions. The Company has a
concentration of loans to individuals and companies in the agriculture industry.
In addition, the local economy of Kingfisher County, where most of the Bank's
customers reside, is significantly affected by the energy industry. While the
Bank has made few direct loans to energy related borrowers, indirectly events
which affect the energy industry will affect the Bank's borrowers.
Details of the year end loan balances are as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 9,336,785 17.6% $ 9,198,218 16.5%
Agriculture 22,622,901 42.6 27,475,657 49.4
Real estate mortgage 9,820,978 18.5 8,459,308 15.2
Installment and other consumer 11,340,534 21.3 10,514,031 18.9
----------- ----- ----------- -----
53,121,198 100.0 55,647,214 100.0
Less unearned discount (4,980) 0.0 (13,372) 0.0
----------- ----- ----------- -----
$53,116,218 100.0% $55,633,842 100.0%
=========== ===== =========== =====
</TABLE>
Current economic conditions in the agriculture industry demand that the
Company's monitoring efforts with respect to these borrowers be intense.
Management and the Board of Directors have been and will continue to devote a
significant amount of time and effort to working with borrowers in this industry
whose loans comprise a significant portion of the amounts included in the
nonperforming asset table below.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Nonaccrual loans $1,635,120 $1,214,240
Loans 90 days past due, still accruing income 376,575 99,764
---------- ----------
Total nonperforming loans 2,011,695 1,314,004
Owned real estate 13,100 264,197
---------- ----------
Total nonperforming assets $2,024,795 $1,578,201
========== ==========
</TABLE>
25
<PAGE>
ANALYSIS OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
----------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994
<S> <C> <C>
BALANCE, at beginning of year $1,182,000 $1,162,000
CHARGE-OFFS:
Commercial (19,000) (87,099)
Agriculture (536,699) (168,625)
Installment and other (31,301) (28,276)
---------- ----------
(587,000) (284,000)
RECOVERIES:
Commercial 14,505 4,333
Agriculture 3,405 54,616
Installment and other 10,090 5,051
---------- ----------
28,000 64,000
---------- ----------
NET CHARGE-OFFS (559,000) (220,000)
PROVISION CHARGED TO EXPENSE 540,000 240,000
---------- ----------
BALANCE, at end of year $1,163,000 $1,182,000
========== ==========
</TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
---------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT LOANS AMOUNT LOANS
<S> <C> <C> <C> <C>
COMMERCIAL $ 82,000 .16% $ 200,000 .36%
AGRICULTURE 1,069,000 2.02 755,000 1.35
MORTGAGE - - 60,000 .11
INSTALLMENT AND OTHER 12,000 .01 167,000 .30
---------- ---- ---------- ----
$1,163,000 2.19% $1,182,000 2.12%
========== ==== ========== ====
</TABLE>
In 1995, in connection with the adoption of SFAS 114, the allocation of
allowances includes specific allowances for impaired loans.
Capital Resources
- -----------------
The Federal Deposit Insurance Corporation has issued minimum capital
requirements. The capital standards, which have also been adopted by the
Federal Reserve Board, require minimum "total" capital of 8.00% of risk-adjusted
assets, of which 4.00% must be Tier 1 capital and a minimum 3% leverage ratio.
The Federal Reserve Board requires minimum capital for a "well capitalized" bank
holding company to be "total" capital of 10.00% of risk-adjusted assets, of
which 6% must be Tier 1 capital and a leverage ratio of 5%. The Company's
capital ratios at December 31, 1995 were 20.45% "total" capital, 19.20% Tier 1
capital
26
<PAGE>
and 11.61% leverage ratio, which exceed all required levels. The
repurchase of common stock in January of 1996 would result in proforma ratios as
follows: "total" capital of 15.25%, Tier 1 capital of 14.00%, and a leverage
ratio of 8.46%, which would exceed all required levels for a "well-capitalized"
bank holding company.
The Company's most important source of capital has been internal growth
through retained earnings. Internal capital generation is a factor of earnings
and dividend policy. The rate of internal equity growth for the Company was
4.29 in 1995 and 5.22 in 1994.
Inflation
- ---------
The financial statements presented in this report have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and results of operations in terms of
historical dollars without regard to changes over time in the relative
purchasing power of money. Unlike most industrial companies, banks hold
substantially all of their assets and liabilities, other than premises and
equipment and other real estate, in monetary form, and generally have an excess
of monetary assets over liabilities. While inflation causes a loss of
purchasing power in the value of stockholders' equity for all banking
organizations, the ability of a company, financial or industrial, to earn a real
return on equity is of greater importance. Management believes that historical
information regarding the maturities of various assets and liabilities and
interest rate sensitivity, coupled with an understanding of current economic
trends, offers insights for assessing a financial institution's ability to cope
with continuing inflation.
Accounting Standards Not Yet Adopted
- ------------------------------------
In May 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 122, Accounting for Mortgage Servicing Rights, which amends the
accounting for the rights to service mortgage loans originated and requires
evaluating for impairment amounts capitalized as mortgage servicing rights. In
October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 establishes a fair value method and disclosure
standards for stock-based employee compensation arrangements, such as stock
purchase plans and stock options. The Company does not participate in stock-
based employee compensation arrangements and does not anticipate participation
in such arrangements in the future. Adoption of SFAS Nos. 122 and 123 is
required in fiscal years beginning after December 15, 1995. Therefore, as
permitted by SFAS No. 123, the Company will continue to follow the provisions of
APB No. 25 for any such future stock-based compensation arrangements and
disclose proforma effects. The Company will adopt these new standards effective
January 1, 1996. Management believes that adoption of SFAS Nos. 122 and 123
will not have a material impact on the Company's consolidated financial position
or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
See Item 14.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Kingfisher Bancorp, Inc.
Kingfisher, Oklahoma
We have audited the accompanying consolidated balance sheets of Kingfisher
Bancorp, Inc. and subsidiary (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Kingfisher Bancorp, Inc. and
subsidiary at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, subsequent
to the 1995 year end the Company reacquired 15,546 shares of its common stock
from stockholders.
/s/ Deloitte & Touche LLP
January 26, 1996
Oklahoma City, Oklahoma
28
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 7,160,772 $ 1,312,256
INVESTMENT SECURITIES 26,933,524 30,801,672
LOANS, less allowance for loan losses
of $1,163,000 and $1,182,000 51,953,218 54,451,842
OWNED REAL ESTATE 13,100 264,197
BANK PREMISES AND EQUIPMENT, net 251,357 335,841
ACCRUED INTEREST AND OTHER ASSETS 1,505,444 1,519,834
DEFERRED INCOME TAXES 382,879 452,337
----------- -----------
TOTAL $88,200,294 $89,137,979
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Demand - noninterest bearing $ 6,291,322 $ 6,834,733
NOW accounts 8,218,752 8,492,928
Savings and time deposits less than
$100,000 45,537,800 45,093,593
Time deposits of $100,000 or more 16,888,180 16,853,477
----------- -----------
76,936,054 77,274,731
OTHER LIABILITIES 722,662 629,748
NOTES PAYABLE 39,280 62,474
OTHER BORROWINGS 151,111 1,061,707
----------- -----------
TOTAL LIABILITIES 77,849,107 79,028,660
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $1.00 per
share, 240,000 shares authorized;
120,000 shares issued 120,000 120,000
Additional paid-in capital 2,360,000 2,360,000
Retained earnings 11,598,039 11,121,400
Unrealized gain (loss) on investment
securities available for sale,
net of deferred income taxes of
$(19,932) and $60,499 31,170 (98,709)
----------- -----------
14,109,209 13,502,691
Less 55,282 and 52,432 shares of
treasury stock, at cost (Note 14) (3,758,022) (3,393,372)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 10,351,187 10,109,319
----------- -----------
TOTAL $88,200,294 $89,137,979
=========== ===========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INTEREST INCOME:
Loans $4,516,938 $3,999,091 $3,916,802
Investment securities:
U.S. Treasury and U.S. Government
agency securities 1,612,007 1,620,406 1,694,565
Obligations of states and political
subdivisions 214,275 323,928 379,848
Federal funds sold and other
temporary investments 240,240 269,515 197,078
---------- ---------- ----------
Total interest income 6,583,460 6,212,940 6,188,293
---------- ---------- ----------
INTEREST EXPENSE:
NOW, savings and time deposits less
than $100,000 2,529,157 2,050,154 2,240,005
Time deposits of $100,000 or more 867,647 652,655 307,820
Other borrowings 12,515 7,523 7,510
Notes payable 3,740 4,513 26,284
---------- ---------- ----------
Total interest expense 3,413,059 2,714,845 2,581,619
---------- ---------- ----------
NET INTEREST INCOME BEFORE PROVISION
FOR LOAN LOSSES 3,170,401 3,498,095 3,606,674
PROVISION FOR LOAN LOSSES 540,000 240,000 240,000
---------- ---------- ----------
NET INTEREST INCOME 2,630,401 3,258,095 3,366,674
---------- ---------- ----------
OTHER INCOME:
Service charges and fees on deposit
accounts 313,486 255,851 246,739
Other 66,887 77,095 153,886
---------- ---------- ----------
Total other income 380,373 332,946 400,625
---------- ---------- ----------
OTHER EXPENSES:
Salaries and wages 919,237 882,746 814,790
Employee benefits 225,877 240,507 233,748
Insurance 146,008 227,580 230,344
Printing and supplies 72,269 71,622 90,516
Data processing 63,233 63,542 40,629
Legal and examination 81,494 86,447 126,707
Loss on sale of available for sale - 53,093 -
investment securities
General and administrative 543,851 804,083 562,617
---------- ---------- ----------
Total other expenses 2,051,969 2,429,620 2,099,351
---------- ---------- ----------
(Continued)
</TABLE>
30
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND CUMU-
LATIVE EFFECT OF ACCOUNTING CHANGE $958,805 $1,161,421 $1,667,948
INCOME TAX PROVISION 210,694 334,362 482,120
-------- ---------- ----------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 748,111 827,059 1,185,828
CUMULATIVE EFFECT OF CHANGE
IN METHOD OF ACCOUNTING FOR
INCOME TAXES - - 162,000
-------- ---------- ----------
NET INCOME $748,111 $ 827,059 $1,347,828
======== ========== ==========
INCOME PER SHARE BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ 11.33 $ 12.20 $ 17.22
CUMULATIVE EFFECT OF CHANGE
IN METHOD OF ACCOUNTING
FOR INCOME TAXES PER SHARE - - 2.35
-------- ---------- ----------
NET INCOME PER SHARE $ 11.33 $ 12.20 $ 19.57
======== ========== ==========
</TABLE>
See notes to consolidated financial statements. (Concluded)
31
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
UNREALIZED GAIN (LOSS)
ADDITIONAL ON SECURITIES TREASURY STOCK
COMMON PAID-IN RETAINED AVAILABLE FOR SALE, ---------------------
STOCK CAPITAL EARNINGS NET OF TAX SHARES COST
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $120,000 $2,360,000 $ 9,427,719 $ - 51,097 $3,248,172
Acquisition of treasury stock - - - - 185 12,950
Cash dividends ($3.00 per share) - - (206,334) - - -
Net income - - 1,347,828 - - -
--------- ----------- ----------- ----------- ------ -----------
BALANCE, DECEMBER 31, 1993 120,000 2,360,000 10,569,213 - 51,282 3,261,122
Acquisition of treasury stock - - - - 1,150 132,250
Cash dividends ($4.00 per share) - - (274,872) - - -
Net income - - 827,059 - - -
Unrealized loss on securities
available for sale, net of tax - - - (98,709) - -
--------- ----------- ----------- ----------- ------ -----------
BALANCE, DECEMBER 31, 1994 120,000 2,360,000 11,121,400 (98,709) 52,432 3,393,372
Acquisition of treasury stock - - - - 2,850 364,650
Cash dividends ($4.00 per share) - - (271,472) - - -
Net income - - 748,111 - - -
Unrealized gain on securities
available for sale, net of tax - - - 129,879 - -
--------- ----------- ----------- ----------- ------ -----------
BALANCE, DECEMBER 31, 1995 $120,000 $2,360,000 $11,598,039 $ 31,170 55,282 $3,758,022
========= =========== =========== =========== ====== ===========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 748,111 $ 827,059 $ 1,347,828
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 540,000 240,000 240,000
Cumulative effect of change in
accounting for income taxes - - (162,000)
Depreciation and amortization 94,849 126,601 144,765
Amortization of investment
security premiums 60,416 101,512 79,568
Accretion of investment security
discounts (99,901) (81,421) (38,645)
(Benefit) provision for deferred
income taxes (10,973) (160,838) 103,400
(Increase) decrease in accrued
interest receivable and other assets 14,390 (24,883) (60,274)
Increase (decrease) in other
liabilities 92,914 382,712 (80,984)
Loss on sale of investment
securities available for sale - 53,093 -
----------- ------------ -----------
Net cash provided by
operating activities 1,439,806 1,463,835 1,573,658
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in loans 2,186,887 (6,163,906) (6,136,264)
Proceeds from maturities of
investment securities 4,117,943 9,177,608 10,662,225
Proceeds from sale of investment
securities -
available for sale - 941,875 -
Purchase of investment securities -
held to maturity - (15,083,802) (5,940,294)
Purchase of bank premises and
equipment (10,365) (44,267) (70,088)
Proceeds from sale of owned real
estate 22,834 6,889 406,439
----------- ------------ -----------
Net cash provided by (used
in) investing activities 6,317,299 (11,165,603) (1,077,982)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand
deposit and NOW accounts (817,587) 13,591 (1,018,011)
Net increase in savings and time
deposits 478,910 853,418 977,948
(Decrease) increase in other borrowed
funds (910,596) 528,516 124,146
Payments to acquire treasury stock (364,650) (132,250) (12,950)
Cash dividends paid (271,472) (274,872) (206,334)
Repayment of notes payable (23,194) (21,658) (450,632)
----------- ------------ -----------
Net cash (used in) provided
by financing activities (1,908,589) 966,745 (585,833)
----------- ------------ -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,848,516 (8,735,023) (90,157)
CASH AND CASH EQUIVALENTS:
Beginning of the year 1,312,256 10,047,279 10,137,436
----------- ------------ -----------
End of the year $ 7,160,772 $ 1,312,256 $10,047,279
=========== ============ ===========
</TABLE>
(Continued)
33
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest (including
interest credited to deposit
accounts) $3,314,907 $2,481,895 $2,646,583
========== ========== ==========
Cash paid for income taxes $ 239,920 $ 420,019 $ 494,250
========== ========== ==========
SUPPLEMENTAL SCHEDULE OF
NONCASH FINANCING ACTIVITIES:
Owned real estate transferred to
loans $ 228,263 $ - $ -
========== ========== ==========
Loans transferred to owned real
estate $ - $ 204,002 $ 83,124
========== ========== ==========
Unrealized (gain) loss on
securities available for sale,
net of tax $ (129,879) $ 98,709 $ -
========== ========== ==========
</TABLE>
See notes to consolidated financial statements. (Concluded)
34
<PAGE>
KINGFISHER BANCORP, INC. AND SUBSIDIARY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Kingfisher Bancorp, Inc. (the "Company") and
Kingfisher Bank and Trust Co. (the "Bank") after elimination of all
material intercompany accounts and transactions.
BASIS OF PRESENTATION - In preparing its financial statements, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities as of the dates shown on the consolidated statements of
financial position and revenues and expenses for the periods. Actual
results could differ significantly from those estimates. Changes in
economic conditions could impact the determination of material estimates
such as the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans.
CASH AND CASH EQUIVALENTS AND CASH FLOWS - Cash and cash equivalents
include cash on hand, demand deposits with other banks and Federal funds
sold. Cash and cash equivalents include Federal funds sold of $4,750,000
and $-0-at December 31, 1995 and 1994, respectively.
INVESTMENT SECURITIES - Investments in debt and equity securities are
identified as held to maturity, trading, and available for sale based on
management's consideration of asset/liability strategy, changes in
interest rates and prepayment risk, the need to increase capital and other
factors. Under certain circumstances (including the deterioration of the
issuer's creditworthiness, a change in tax law, or statutory or regulatory
requirements), the Company may change the investment security
classification. The classifications the Company utilizes determine the
related accounting treatment for each category of investments. Investments
classified as trading are accounted for at fair value, available for sale
are accounted for at fair value with unrealized gains or losses, net of
taxes, excluded from earnings and reported as a separate component of
shareholders' equity, and held to maturity are accounted for at amortized
cost.
All held to maturity investment securities are adjusted for amortization
of premiums and accretion of discounts. Amortization of premiums and
accretion of discounts are recorded to income over the contractual
maturity or estimated life of the individual investment on the level yield
method. The Company has the ability and intent to hold to maturity its
investment securities classified as held to maturity; accordingly, no
adjustment has been made for the excess, if any, of amortized cost over
market. Gain or loss of sale of investments is based upon the specific
identification method. Income earned on the Company's investments in state
and political subdivisions is not taxable.
LOANS - Loans are carried at principal amounts outstanding after reduction
of unearned discounts. Unearned discounts on installment loans are
recognized as income over the terms of the loans using a method which
approximates the interest method. Interest income on loans is credited to
operations based on the principal amount outstanding. Loan origination
fees and related costs, if material, are deferred and amortized as a yield
adjustment over the life of the related loan.
35
<PAGE>
Loans are placed on nonaccrual status when management believes that the
borrower's financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of
interest is doubtful. When a loan is placed on nonaccrual and previously
accrued but uncollected interest is deemed to be uncollectible, the amount
of accrued interest receivable which was recorded in the current year is
reversed against current year operations and the remainder is charged
against the allowance for loan losses. Subsequently, interest income is
only recognized upon receipt.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is established
through a provision for loan losses charged to expense. Loans which are
determined to be uncollectible are charged against this allowance and
recoveries, if any, are added to the allowance. The adequacy of the
allowance for loan losses is determined by management based upon a number
of factors, including, among others, the specific allowances needed on
impaired loans, analytical reviews of loan loss experience in relationship
to outstanding loans and commitments, other loans presenting credit
concerns; trends in loan growth, portfolio composition and quality; use of
appraisals to estimate the value of collateral and management's judgment
with respect to current and expected economic conditions and their impact
on the existing loan portfolio. A loan is considered to be impaired when,
based on current information and events, it is probable that the Company
will be unable to collect all amounts due according to the contractual
terms of the loan agreement. Changes in the allowance may occur because of
changing economic conditions and economic prospects or financial position
of borrowers. While there can be no assurance that the allowance for loan
losses will be adequate to cover all losses from all loans, management
believes that the allowance for loan losses is adequate. While management
uses all available information to estimate the adequacy of the allowance
for loan losses, the ultimate collectibility of a substantial portion of
the loan portfolio and the need for future additions to the allowance will
be based upon changes in economic conditions and other relevant factors
that may be beyond the Company's control.
Beginning in 1995, the Company adopted Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No.
114, Accounting by Creditors for Impairment of a Loan ("SFAS No. 114"), as
amended by SFAS No. 118, Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosure. The allowance for loan losses
related to loans that are identified for evaluation in accordance with
SFAS No. 114 is based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral if the loan is
collateral dependent. The amount of impairment determined in accordance
with SFAS No. 114 did not differ materially from amounts previously
provided. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected
to be received on impaired loans that may be susceptible to significant
change.
OWNED REAL ESTATE - Owned real estate is carried at the lower of cost or
estimated fair value.
BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using
accelerated and straight-line methods over the estimated useful lives of
the depreciable assets which range from five to 40 years.
INCOME TAXES - The Company and its subsidiary file consolidated income tax
returns. Effective January 1, 1993, the Bank adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, on a
prospective basis. This standard requires, among other things, recognition
of tax expense or benefit, measured by enacted tax rates, attributable to
deductible temporary differences in the bases of certain assets and
liabilities for financial statement and income tax reporting purposes,
primarily the allowance for loan losses and directors deferred
compensation. A valuation allowance will be established if it is more
likely than not that some portion of the deferred tax asset will not be
realized.
36
<PAGE>
NET INCOME PER SHARE - Net income per share of common stock is based on
the weighted average number of shares outstanding during each year which
was 66,018, 67,774 and 68,869 in 1995, 1994 and 1993, respectively. See
Note 14 regarding repurchase of common stock subsequent to year end.
DIVIDEND RESTRICTIONS - Banking regulations limit the amount of dividends
that may be paid by the Bank without prior approval of regulatory
authorities.
TRUST DEPARTMENT - Assets (other than cash deposits) held by the Bank in a
fiduciary or agency capacity are not included in the consolidated balance
sheets, since such items are not assets or liabilities of the Bank. Trust
fee income is recognized on the cash basis which does not differ
materially from the accrual basis.
NEW ACCOUNTING STANDARDS - Statement of Financial Accounting Standards No.
107, Disclosures about Fair Value of Financial Instruments ("SFAS No.
107"), was adopted for the year ending December 31, 1995. SFAS No. 107
requires the disclosure of the fair value of financial instruments, both
assets and liabilities recognized and not recognized, in the balance
sheet.
Statement of Financial Accounting Standards No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments
("SFAS No. 119"), was also adopted for the year ending December 31, 1995.
SFAS No. 119 requires the disclosure about amounts, nature and terms of
derivative financial instruments. The Company has never purchased or sold
any derivative financial instruments and presently does not anticipate
involvement in any such transactions.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1994
and 1993 financial statements to conform them to the classifications used
in 1995.
2. INVESTMENT SECURITIES
Information with respect to investment securities is presented below:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
----------------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE AMOUNT
<S> <C> <C> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury securities $17,871,143 $308,917 $ 26,060 $18,154,000 $17,871,143
U.S. Government agency
securities 3,026,871 30,566 12,437 3,045,000 3,026,871
Obligations of states and
political subdivisions 3,013,960 102,732 108,692 3,008,000 3,013,960
----------- -------- -------- ----------- -----------
23,911,974 442,215 147,189 24,207,000 23,911,974
AVAILABLE FOR SALE:
U.S. Treasury securities 2,970,448 51,102 - 3,021,550 3,021,550
----------- -------- -------- ----------- -----------
Total $26,882,422 $493,317 $147,189 $27,228,550 $26,933,524
=========== ======== ======== =========== ===========
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE AMOUNT
<S> <C> <C> <C> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury securities $19,834,678 $ 6,078 $ 689,756 $19,151,000 $19,834,678
U.S. Government agency
securities 4,046,633 2,543 213,476 3,835,700 4,046,633
Obligations of states and
political subdivisions 4,118,501 67,179 229,680 3,956,000 4,118,501
----------- ----------- ----------- ------------- -------------
27,999,812 75,800 1,132,912 26,942,700 27,999,812
AVAILABLE FOR SALE:
U.S. Treasury securities 2,961,068 - 159,208 2,801,860 2,801,860
----------- ----------- ----------- ------------- -------------
Total $30,960,880 $ 75,800 $ 1,292,120 $29,744,560 $30,801,672
=========== =========== =========== ============= =============
</TABLE>
The contractual maturity distributions of investment securities held at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED FAIR CARRYING
HELD TO MATURITY: COST VALUE AMOUNT
<S> <C> <C> <C>
U.S. Treasury securities:
Due within 1 year $ 5,973,278 $ 6,001,000 $ 5,973,278
Due after 1 but within 5 years 11,897,865 12,153,000 11,897,865
----------- ----------- -------------
17,871,143 18,154,000 17,871,143
----------- ----------- -------------
U.S. Government agency securities:
Due after 1 but within 5 years 1,000,000 1,006,600 1,000,000
Due within 10 years 1,295,185 1,319,200 1,295,185
Due after 10 years 731,686 719,200 731,686
----------- ----------- -------------
3,026,871 3,045,000 3,026,871
----------- ----------- -------------
Obligations of states and political
subdivisions:
Due within 1 year 104,993 105,500 104,993
Due after 1 but within 5 years 1,230,930 1,270,000 1,230,930
Due after 5 but within 10 years 1,396,747 1,340,000 1,396,747
Due after 10 years 281,290 292,500 281,290
----------- ----------- -------------
3,013,960 3,008,000 3,013,960
----------- ----------- -------------
AVAILABLE FOR SALE:
U.S. Treasury securities:
Due after one but within five years 2,970,448 3,021,550 3,021,550
----------- ----------- -------------
Total $26,882,422 $27,228,550 $26,933,524
=========== =========== =============
</TABLE>
At December 31, 1995 and 1994, investment securities with carrying amounts
of approximately $13,293,000 and $15,169,000, respectively, were pledged
to secure public and trust deposits and the treasury, tax and loan
account.
During 1994, available for sale investment securities with an amortized
cost of $994,968 were sold for $941,875, resulting in a loss of $53,093.
No investment securities were sold during 1995.
38
<PAGE>
3. CAPITAL REQUIREMENTS
The Federal Reserve Board requires minimum capital for bank holding
companies as follows: 8% total risk-based capital to risk-weighted
assets; 4% Tier I risk-based capital to risk-weighted assets; and a 3%
leverage ratio. At December 31, 1995, the Company's capital exceeds these
requirements. The Company's capital ratios at December 31, 1995 are as
follows: 20.4% total risk-based capital to risk-adjusted assets; 19.2%
Tier I risk-based capital to risk-adjusted assets; and an 11.6% leverage
ratio. Similar capital requirements also exist for the Bank.
Approval of the regulatory authorities is required if the Bank declares
dividends in any calendar year which exceed the net profits for that year,
as defined, combined with the retained net profits of the two preceding
years, less any required transfers to surplus. At December 31, 1995, the
Bank had approximately $1,300,000 available for the payment of dividends
without regulatory approval.
See Note 14 regarding repurchase of common stock subsequent to year end.
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
The Bank grants agricultural, commercial, real estate and other loans
throughout its lending area which is primarily Kingfisher County,
Oklahoma. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their obligations to
the Bank is dependent on the general economic conditions in Oklahoma and
Kingfisher County. Furthermore, a significant portion of the Bank's loans
are made to loan customers engaged in the agricultural industry, which, by
its nature, is subject to volatility, based on factors and events beyond
the customer's control such as weather conditions and livestock and crop
prices. Generally, the loans are secured by assets which are primarily
located within the Bank's lending area. In the normal course of business,
the loans are expected to be repaid from cash flow or proceeds from the
sale of assets of the borrowers. The Bank's lending policy requires that
secured loans be collateralized by sufficient assets to provide a margin
of safety between the loan balance and the value of underlying collateral
securing the loan. When borrowers default on loans, the Bank pursues
normal legal actions to foreclose upon or repossess the collateral
securing the loan.
Details of the loan balances are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
<S> <C> <C>
Commercial $ 9,336,785 $ 9,198,218
Agricultural 22,622,901 27,475,657
Real estate mortgage 9,820,978 8,459,308
Installment and other consumer 11,340,534 10,514,031
----------- -----------
53,121,198 55,647,214
Less unearned discount (4,980) (13,372)
----------- -----------
53,116,218 55,633,842
Less allowance for loan losses (1,163,000) (1,182,000)
----------- -----------
Net loans $51,953,218 $54,451,842
=========== ===========
</TABLE>
Loans on which interest was not being accrued amounted to $1,634,000 and
$1,574,000 at December 31, 1995 and 1994, respectively. Had these loans
been earning interest in 1995 in accordance with the original terms,
interest income of $322,000 would have been recorded rather than the
$64,000 included in
39
<PAGE>
the consolidated statement of income. The comparable amounts for 1994 and
1993 were $308,000 and $45,000, and $211,000 and $27,000, respectively.
A summary of transactions in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of year $1,182,000 $1,162,000 $ 923,000
Provision charged to expense 540,000 240,000 240,000
Recoveries of amounts charged-off 28,000 64,000 260,000
Loans charged-off (587,000) (284,000) (261,000)
---------- ---------- ----------
Balance at end of year $1,163,000 $1,182,000 $1,162,000
========== ========== ==========
</TABLE>
In general, the Bank has defined its population of impaired loans as
consisting of all loans internally classified by management's loan review
process. This review process includes consideration of factors such as
cash flow, collateral position, past performance, and overall financial
condition of the borrower. A summary of impaired loans at December 31,
1995 follows:
<TABLE>
<CAPTION>
<S> <C>
Gross impaired loans which have allowances $4,110,000
Less: Related allowances for loan losses (733,000)
----------
Impaired loans, net of related allowances 3,377,000
Impaired loans with no related allowances 2,967,000
----------
Total $6,344,000
==========
</TABLE>
The average balance of impaired loans outstanding for the period ended
December 31, 1995 was approximately $6,372,000, and interest income
recognized on impaired loans for the year ended December 31, 1995 was
approximately $440,000.
The Company's only financial instruments with off balance sheet risk are
unfunded lines of credit and standby letters of credit issued by the Bank.
The amount of unfunded lines of credit were $11,077,000 and $8,210,000 at
December 31, 1995 and 1994, respectively. In addition, the Bank has
extended standby letters of credit amounting to $124,000 and $149,000 at
December 31, 1995 and 1994, respectively. These commitments are generally
secured by terms similar to funded extensions of credit. Management does
not anticipate any material loss as a result of these commitments.
Certain of the Bank's executive officers and directors had transactions
with the Bank in the ordinary course of business. Furthermore, certain of
these officers and directors also own partial interest in the Company's
common stock. In the opinion of management, such transactions were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable
40
<PAGE>
transactions with other persons and did not involve more than normal risk.
Loan transactions with executive officers and directors and their
affiliated interests whose indebtedness to the Bank exceeded $60,000 at
any time during the year were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994
<S> <C> <C>
Balance at beginning of year $ 3,374,898 $ 3,216,950
Loans made during the year 3,387,371 3,527,306
Repayment and renewal of loans (3,569,798) (3,369,358)
----------- -----------
Balance at end of year $ 3,192,471 $ 3,374,898
=========== ===========
</TABLE>
During 1995 and 1994, there were no such loans charged off or considered
to be nonperforming.
5. BANK PREMISES AND EQUIPMENT
Bank premises and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
<S> <C> <C>
Land $ 104,193 $ 104,193
Premises and equipment 1,699,886 1,689,521
Accumulated depreciation (1,552,722) (1,457,873)
----------- -----------
Bank premises and equipment, net $ 251,357 $ 335,841
=========== ===========
</TABLE>
6. NOTES PAYABLE
Notes payable at December 31, 1995 and 1994 consist
of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable to a trust with interest
at the Bank's certificate of deposit
rate plus 2%, monthly payments
of $2,310 (adjusted annually), secured
by 1,633 shares of the Company's
treasury stock, due June 1, 1997 $39,280 $62,474
======= =======
</TABLE>
Aggregate maturities of notes payable
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $23,512
1997 15,768
-------
$39,280
=======
</TABLE>
7. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (the
"Statement"). This Statement required an asset and liability approach for
financial accounting and reporting for income taxes. The cumulative
effect of this accounting change
41
<PAGE>
on years prior to 1993 was $162,000 and is reported as an increase to 1993
net earnings. Had the Statement not been adopted, the 1993 income tax
expense would have been reduced by $162,000.
The components of income tax expense (benefit) follow:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $269,070 $ 454,590 $339,050
State 5,551 40,610 39,670
Deferred:
Federal (47,809) (136,812) 101,500
State (16,118) (24,026) 1,900
-------- --------- --------
$210,694 $ 334,362 $482,120
======== ========= ========
</TABLE>
The deferred tax assets at December 31, 1995 and 1994 were $382,879 and
$452,337, respectively. The deferred income tax asset results from
differences in the basis of the allowance for loan losses for financial
statement and income tax purposes, the deferred compensation arrangements
being deductible on a cash basis for income tax purposes and income taxes
computed on unrealized gains and losses on securities available for sale.
There were no valuation allowances at December 31, 1995 or 1994.
The effective income tax rates are different from the statutory Federal
income tax rates as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1994 1993
------------------- ------------------- -------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
expense $325,993 34.0 $ 394,883 34.0 $ 567,120 34.0
Increase (decrease) in
taxes resulting from:
Nontaxable municipal
interest income (72,854) (7.6) (110,135) (9.5) (129,100) (7.7)
Nondeductible interest
expense 7,931 .8 6,937 .6 7,800 0.5
Other, net (50,376) (5.2) 42,677 3.7 36,300 2.1
-------- ---- --------- ---- --------- ----
$210,694 22.0 $ 334,362 28.8 $ 482,120 28.9
======== ==== ========= ==== ========= ====
</TABLE>
8. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
<S> <C> <C>
Federal funds purchased $ - $ 900,000
Treasury, tax and loan account 151,111 161,707
-------- ----------
$151,111 $1,061,707
======== ==========
</TABLE>
42
<PAGE>
9. PROFIT-SHARING RETIREMENT PLAN
The Company has a profit-sharing retirement plan covering substantially
all employees. Contributions to the Plan are made on an annual basis
pursuant to the formulas defined in the Plan. Employee benefits expense
includes $34,270, $56,985 and $72,276 contributed to the Plan for 1995,
1994 and 1993, respectively.
10. DEFERRED COMPENSATION ARRANGEMENTS
The Company and Bank have unfunded deferred compensation arrangements
which were created in 1994 for the benefit of the Company's and Bank's
directors. Under the provisions of these arrangements, directors
initially were provided deferred compensation equal to one-half of the
current year's retainer times the director's number of years of service,
not to exceed ten years. Thereafter, each director with less than eleven
years board tenure will earn deferred compensation in an amount equal to
one-half of the director's retainer for that year. Plan vesting starts
after completion of the sixth year, with full vesting after completion of
the tenth year. The amount charged to general and administrative expense
in 1995 and 1994 was $48,075 and $290,175, respectively. Six of the nine
directors have served on the board eleven or more years and their deferred
compensation arrangements have been credited with the maximum amount to be
paid at the current retainer. The remaining three directors will reach
the maximum ten years of credit with an additional one, two and five years
of service, respectively. At the current retainer level, a maximum of
$33,000 remains to be accrued under these arrangements.
11. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures About Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
CASH AND CASH EQUIVALENTS - For cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES - The fair value of investment securities is
estimated based on available bid prices published in financial newspapers
or bid quotations received from securities dealers.
LOANS RECEIVABLE - Fair values are estimated for certain homogeneous
categories of loans adjusted for differences in loan characteristics. The
Bank's loans have been aggregated by categories consisting of commercial,
agricultural, real estate, and installment and other consumer. The fair
value of loans is estimated by discounting the cash flows using credit and
interest rate risks inherent in the loan category and interest rates
currently offered for loans with similar terms and credit risks.
ACCRUED INTEREST RECEIVABLE - The carrying amount is a reasonable estimate
of fair value for accrued interest receivable.
43
<PAGE>
DEPOSITS - The fair value of demand deposits, savings and NOW accounts, is
the amount payable on demand at the consolidated balance sheet date. The
fair value of fixed-maturity certificates of deposit is estimated using
the rates currently offered for deposits of similar remaining maturities.
SHORT-TERM BORROWINGS - The fair value of short-term borrowings and
federal funds purchased are the amounts payable at the consolidated
balance sheet date, as the carrying amount is a reasonable estimate of
fair value.
OTHER LIABILITIES AND ACCRUED INTEREST PAYABLE - The estimated fair value
of other liabilities, which primarily include trade accounts payable, and
accrued interest payable approximates their carrying value.
COMMITMENTS - Commitments to extend credit, standby letters of credit and
financial guarantees written or other items have short maturities and
therefore have no significant fair values.
The carrying values and estimated fair values of the Company's financial
instruments follow:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
CARRYING FAIR
VALUES VALUES
<S> <C> <C>
Cash and cash equivalents $ 7,160,772 $ 7,160,772
Investment securities:
Held to maturity 23,911,974 24,207,000
Available for sale 3,021,550 3,021,550
Loans receivable 51,953,218 52,701,000
Accrued interest receivable 1,300,619 1,300,619
Deposits 76,936,054 77,028,000
Accrued interest payable 384,412 384,412
Other liabilities 528,641 528,641
Commitments - -
</TABLE>
The above values do not take into consideration the potential income tax
effect or other expenses that would be incurred in an actual sale or
settlement of the financial instruments. Also, the above values do not
reflect the estimated fair value of deposit or other customer intangible
assets.
12. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
In May 1995, the FASB issued SFAS No. 122, Accounting for Mortgage
Servicing Rights, which amends the accounting for the rights to service
mortgage loans originated and requires evaluating for impairment amounts
capitalized as mortgage servicing rights. In October 1995, the FASB
issued SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No.
123 establishes a fair value method and disclosure standards for stock-
based employee compensation arrangements, such as stock purchase plans and
stock options. The Company does not participate in stock-based employee
compensation arrangements and does not anticipate participation in such
arrangements in the future. Adoption of SFAS Nos. 122 and 123 is required
in fiscal years beginning after December 15, 1995. Therefore, as
permitted by SFAS No. 123, the Company will continue to follow the
provisions of APB No. 25 for any such future stock-based compensation
arrangements and disclose proforma effects. The Company will adopt these
new standards effective January 1, 1996. Management believes that
adoption of SFAS Nos. 122 and 123 will not have a material impact on the
Company's consolidated financial position of results of operations.
44
<PAGE>
13. CONTINGENCIES
At periodic intervals, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation and Federal Reserve Bank routinely
examine the Company's and Bank's financial statements as part of their
legally prescribed oversight of the banking industry. Based on these
examinations, the regulators can direct that the Company's and the Bank's
financial statements be adjusted in accordance with their findings.
14. SUBSEQUENT EVENTS
On January 18, 1996, the Board of Directors of the Company accepted offers
to purchase 15,546 shares of common stock from stockholders at a per share
amount of $180. This treasury stock transaction will result in a
reduction of total stockholders' equity of approximately $2,798,000. The
purchase will be partially funded by a third party bank loan in the
approximate amount of $3,100,000, funded under a $2,500,000 line of credit
with variable interest at lender's prime (8.5% at inception), and secured
by bank stock. Quarterly principal payments of approximately $88,000
commence on March 31, 1997 until maturity on December 31, 1998 when the
unpaid balance shall be due in full.
15. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Following are condensed balance sheets at December 31, 1995 and 1994, and
the related condensed statements of income and cash flows for each of the
three years in the period ended December 31, 1995, for Kingfisher Bancorp,
Inc. (parent company only).
KINGFISHER BANCORP, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CASH $ 2,422 $ 11,806
INVESTMENT IN SUBSIDIARY BANK* 10,310,348 10,076,740
LAND 104,193 104,193
OTHER ASSETS 118,028 128,816
----------- -----------
TOTAL $10,534,991 $10,321,555
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
OTHER LIABILITIES $ 144,524 $ 149,762
NOTES PAYABLE 39,280 62,474
STOCKHOLDERS' EQUITY 10,351,187 10,109,319
----------- -----------
TOTAL $10,534,991 $10,321,555
=========== ===========
*Eliminated in consolidation.
</TABLE>
45
<PAGE>
KINGFISHER BANCORP, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
DIVIDEND RECEIVED FROM SUBSIDIARY BANK* $618,000 $387,600 $ 669,600
RENTAL INCOME* 114,000 114,000 114,000
OTHER INCOME 54 1,553 343
-------- -------- ----------
732,054 503,153 783,943
-------- -------- ----------
INTEREST EXPENSE, OTHER 3,740 4,513 26,284
OTHER EXPENSE 117,410 230,874 66,066
-------- -------- ----------
121,150 235,387 92,350
-------- -------- ----------
INCOME BEFORE INCOME TAX EXPENSE AND
UNDISTRIBUTED INCOME OF SUBSIDIARY 610,904 267,766 691,593
INCOME TAX BENEFIT (33,477) (9,752) (9,700)
-------- -------- ----------
INCOME BEFORE UNDISTRIBUTED INCOME OF
SUBSIDIARY 644,381 277,518 701,293
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARY* 103,730 549,541 646,535
-------- -------- ----------
NET INCOME $748,111 $827,059 $1,347,828
======== ======== ==========
</TABLE>
*Eliminated in consolidation.
46
<PAGE>
KINGFISHER BANCORP, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 748,111 $ 827,059 $1,347,828
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed income of
subsidiary (103,730) (549,541) (646,535)
Other, net 5,551 126,702 4,265
--------- --------- ----------
Net cash provided by
operating activities 649,932 404,220 705,558
--------- --------- ----------
CASH USED IN INVESTING ACTIVITIES:
Purchase of land - - (20,000)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (23,194) (21,658) (450,632)
Payments to acquire treasury stock (364,650) (132,250) (12,950)
Dividends paid (271,472) (274,872) (206,334)
--------- --------- ----------
Net cash used in financing
activities (659,316) (428,780) (669,916)
--------- --------- ----------
(DECREASE) INCREASE IN CASH (9,384) (24,560) 15,642
CASH:
Beginning of year 11,806 36,366 20,724
--------- --------- ----------
End of year $ 2,422 $ 11,806 $ 36,366
========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 3,740 $ 4,513 $ 26,284
========= ========= ==========
Cash paid for income taxes $ 2,800 $ 12,000 $ 12,000
========= ========= ==========
</TABLE>
* * * * * *
47
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
Not applicable.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Directors
- ---------
The directors of the Company are also directors of the Bank and will
continue to serve as such until the next annual stockholders' meeting of the
Company to be held in April 1996. Set forth below are the directors' names,
ages, principal occupations and the year in which they first became a director
of the Bank.
Each of the persons named below was elected as a director of the Company
at the time of its organization in April 1985 with two exceptions. Mr.
Henderson was elected in April 1986 and Mr. Smith in August 1989. Each person
named below has been engaged in his present occupation for more than five years
unless otherwise noted.
AGE AS OF OFFICER OR DIRECTOR
NAME AND PRINCIPAL OCCUPATION DECEMBER 31, 1995 OF BANK SINCE
James P. Beall 55 December 1972
Attorney
Glen Boeckman 58 May 1980
Vice President
Boeckman Ford, Inc.
Tom L. Feagins 63 January 1976
Insurance Agent
Solomon Insurance Agency
John L. Gilmour 56 January 1985
Contractor
Gilmour Construction Co.
Waynard Hasenfratz 60 July 1965
President of Company
Brent Henderson 38 April 1986
President of Bank
Carroll E. Holsted 57 January 1973
Physician
Loren E. Pollard 65 January 1979
Farmer
Charles D. Smith 67 August 1989
Farmer
48
<PAGE>
Executive Officers
- ------------------
The name, age, position and year in which they first became an executive
officer of the Bank, except Mr. Hasenfratz and Mr. Henderson, who as directors
are described above, are as follows:
AGE AS OF EXECUTIVE OFFICER
NAME DECEMBER 31, 1995 OF BANK SINCE POSITION
George Brownlee 65 March 1965 Vice President
Linda Dich Randall 49 January 1982 Vice President
Dennis Themer 33 January 1986 Vice President
Marvin L. Wilcox 49 January 1984 Vice President
Craig Blair 33 September 1993 Vice President
Sheryl Eberhardt 34 January 1995 Vice President
Each of the executive officers have been employed by the Bank for more
than five years except for Mr. Blair who joined the Bank in August 1993. Prior
to joining the Bank, Mr. Blair was with Alva State Bank and Trust Co., Chisholm
Branch located in Enid, Oklahoma.
49
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Compensation of the Company's Directors
- ---------------------------------------
For serving as directors of the Company and its subsidiaries, each
director receives a fee of $650 per month. No fees are paid with respect to
committee memberships or attendance at committee meetings.
Deferred Directors' Compensation
- --------------------------------
The Company and Bank have unfunded deferred compensation arrangements
which were created in 1994 for the benefit of the Company's and Bank's
directors. Under the provisions of these arrangements, directors are provided
deferred compensation equal to one-half of the current year's retainer times the
director's number of years of service, not to exceed ten years. The amount
charged to general and administrative expense in 1995 was $48,075. Six of the
nine directors have served on the board ten or more years and their deferred
compensation arrangements have been credited with the maximum amount to be paid
at the current retainer. The remaining three directors will reach the maximum
ten years of credit with an additional two, three and six years of service,
respectively. At the current retainer level, a maximum of $33,000 remains to be
accrued under these arrangements.
Compensation of the Bank's Management
- -------------------------------------
The following table shows the compensation paid by the Bank for services
rendered in all capacities during the fiscal years ended December 31, 1995, 1994
and 1993 to the chief executive officer and the four other highest paid officers
of the Company or the Bank. No executive officer's total compensation exceeded
$100,000.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
YEAR SALARY BONUS OTHER TOTAL (2)
<S> <C> <C> <C> <C> <C>
Waynard Hasenfratz, 1995 $20,268 $1,038 $21,306
President and Chief Executive Officer 1994 20,268 1,038 21,306
of Company 1993 85,025 5,089 (1) 90,114
Brent Henderson, 1995 74,577 4,500 (1) 79,077
President and Chief Executive Officer 1994 72,078 4,327 (1) 76,405
of Bank 1993 55,104 3,323 (1) 58,427
Dennis Themer 1995 49,809 2,825 52,634
Vice President of Bank 1994 46,770 2,769 49,539
1993 42,000 2,423 44,423
Craig Blair 1995 46,425 2,683 49,108
Vice President of Bank 1994 45,074 2,631 47,705
1993 15,346 909 16,255
George Brownlee, 1995 44,139 2,579 46,718
Vice President of Bank 1994 43,314 2,527 45,841
1993 42,600 2,458 45,058
</TABLE>
50
<PAGE>
(1) The only other annual compensation is a Bank-furnished automobile, the use
of which is partially nonbusiness related. The determination of the value of the
nonbusiness use cannot be precisely determined; however, in management's
judgment, the amount is less than $5,000.
(2) The Company does not provide any long-term or other compensation to its
executive officers.
Profit Sharing Plan
- -------------------
The Company has a Profit Sharing Plan covering substantially all
employees who have completed one year of service and have attained the age of
25. Contributions to the Plan are determined under the following schedule: 3%
of profits in excess of $300,000 but not in excess of $500,000; 3.5% of profits
in excess of $500,000 but not in excess of $700,000; 4% of profits in excess of
$700,000 but not in excess of $900,000; 6% of profits in excess of $900,000 but
not in excess of $1,500,000 and 7% of profits in excess of $1,500,000 but not in
excess of $2,500,000. Any contribution with respect to any profits which the
Bank might have in excess of $2,500,000 is subject to the determination of the
Board of Directors at that time. During 1995 the Bank contributed $34,270 to
the Plan. Contributions under the Plan are allocated based upon each
participant's compensation during the year for which the contribution is made.
The Bank acts as trustee of the profit sharing trust created pursuant to the
Plan.
Each participant's contribution account will become nonforfeitable and
fully vested upon the occurrence of the earlier of (i) normal retirement age,
(ii) death, (iii) total and permanent disability of the participant or (iv) the
completion of ten years service. Upon a participant's termination of service
for any other reason, a percentage of his contribution account becomes vested
and nonforfeitable and may be distributed to or for his benefit.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Principal Stockholders
- ----------------------
The following table sets forth as of December 31, 1995, the number of
shares of Common Stock of Kingfisher Bancorp, Inc. held by each person or entity
known by Company management to beneficially own more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS
(CITY AND STATE) BENEFICIAL OWNERSHIP OF BANK STOCK
-----------------------------------
OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
<S> <C> <C>
Charles D. Smith 5,140 7.94%
Kingfisher, OK
Waynard L. Hasenfratz 4,153 6.42
Kingfisher, OK
Loren E. Pollard 3,680 5.69
Dover, OK
Glen Boeckman 3,524 5.45
Kingfisher, OK
</TABLE>
51
<PAGE>
Stock Owned by Directors
- ------------------------
The number of shares and percentage of Common Stock of the Company each
director owned beneficially as of December 31, 1995, are listed below. Also set
forth below is the number of shares and percentage of Common Stock owned by all
the executive officers and directors of the Company as a group as of December
31, 1995.
<TABLE>
<CAPTION>
SHARES OF BANK
STOCK OWNED PERCENT OF
NAME BENEFICIALLY (1) CLASS
<S> <C> <C>
James P. Beall 526 (2) 0.8
Glen Boeckman 3,524 (3) 5.4
Tom L. Feagins 1,060 (4) 1.6
John L. Gilmour 1,980 (5) 3.1
Waynard Hasenfratz 4,153 (6) 6.4
Brent Henderson 100 0.2
Carroll E. Holsted 504 0.8
Loren E. Pollard 3,680 5.7
Charles D. Smith 5,140 (7) 7.9
All directors and executive
officers as a group (11 persons) 20,922 32.3
</TABLE>
(1) All shares are owned of record and beneficially with sole voting and
investment power unless otherwise noted.
(2) Includes 426 shares owned by Mr. Beall's wife as to which he is deemed to
share voting and investment power. Mr. Beall disclaims beneficial
ownership of these shares.
(3) Includes 1,712 shares owned by Mr. Boeckman's trust and 1,712 owned by Mr.
Boeckman's wife's trust as to which he is deemed to share voting and
investment power. Mr. Boeckman disclaims beneficial ownership of these
shares.
(4) Includes 50 shares owned by Mr. Feagins' wife as to which he is deemed to
share voting and investment power. Mr. Feagins disclaims beneficial
ownership of these shares.
(5) Includes 986 shares owned by Mr. Gilmour's wife as to which he is deemed to
share voting and investment power. Mr. Gilmour disclaims beneficial
ownership of these shares.
(6) Includes 120 shares owned by Mr. Hasenfratz's wife as to which he is deemed
to share voting and investment power. Mr. Hasenfratz disclaims beneficial
ownership of these shares.
(7) Includes 100 shares owned by Mr. Smith's wife as to which he is deemed to
share voting and investment power. Mr. Smith disclaims beneficial
ownership of these shares.
52
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The Bank has made loans and extended credit from time to time in the
ordinary course of business to officers and directors of the Bank and their
associates and expects to make loans and advances in the future to directors,
officers, principal stockholders and their associates. Such loans and
extensions of credit have been and will be made in the ordinary course of
business, on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and will
not involve more than the normal risk of collectibility or present other
unfavorable features. See Note 4 of "Notes to Consolidated Financial
Statements" in the Company's 1995 consolidated financial statements included in
Item 8.
James P. Beall is owner of Beall Law Office, Inc. which serves as legal
counsel to the Bank.
All directors of the Company also serve as directors of the Bank. The
Bank leases its main banking facility and drive-in from the Company under a
lease agreement which expires in 2000 and provided for monthly rent in the
amount of $9,500. The Bank paid total rent to the Company of $114,000 for 1995,
1994, 1993, 1992 and 1991.
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
A) Certain Documents Filed as Part of Form 10-K
Financial statements and financial statement schedules required to be filed
by Item 8 of this Form 10-K are listed as follows:
Page Number
Independent Auditors' Report 28
Financial Statements:
Consolidated Balance Sheets - December 31, 1995
and 1994 29
Consolidated Statements of Income -
Years ended December 31, 1995, 1994 and 1993 30
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995, 1994 and 1993 32
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994 and 1993 33
Notes to Consolidated Financial Statements 35
All schedules have been omitted since the required information is either not
applicable, not in amounts sufficient to be deemed material, or is shown in the
respective consolidated financial statements or in the notes thereto.
53
<PAGE>
B) Reports on Form 8-K
Item Reported
-------------
None filed.
C) Exhibits Required by Item 601 of Regulation S-K
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER EXHIBIT REFERENCE TO
<S> <C> <C>
3(a) Articles of
Incorporation of Exhibit 3(a) to Registration
Registrant Statement on Form S-14
3(b) Bylaws of Exhibit 3(b) to Registration
Registrant Statement on Form S-14
4 Stock Certificate Exhibit 4 to Registration
Statement on Form S-14
22 Subsidiaries of
the Registrant 56
27 Financial Data
Schedule 57
</TABLE>
54
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 25th day of
March, 1996.
KINGFISHER BANCORP, INC.
/s/ Waynard L. Hasenfratz
-------------------------
By: Waynard L. Hasenfratz
(President, Principal Executive and
Financial Officer and Chairman
of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 25th day of March, 1996.
/s/ Waynard L. Hasenfratz /s/ J. Brent Henderson /s/ Charles D. Smith
- -------------------------- ------------------------- ----------------------
Waynard L. Hasenfratz J. Brent Henderson Charles D. Smith
(President, Principal President and Chief (Director)
Executive Officer and Financial Officer of
Chairman of the Board) Bank and Director)
/s/ Tom L. Feagins /s/ Dr. Carroll E. Holsted /s/ Glen Boeckman
- -------------------------- -------------------------- ----------------------
Tom L. Feagins Dr. Carroll E. Holsted Glen Boeckman
(Director) (Director) (Director)
/s/ James P. Beall /s/ John L. Gilmour /s/ Loren E. Pollard
- -------------------------- -------------------------- ----------------------
James P. Beall John L. Gilmour Loren Pollard
(Attorney and Director) (Director) (Director)
55
<PAGE>
EXHIBIT 22
KINGFISHER BANCORP, INC.
SUBSIDIARIES OF THE REGISTRANT
------------------------------
NAME UNDER WHICH THE
NAME JURISDICTION ENTITY DOES BUSINESS
Kingfisher Bank and Trust Co. Oklahoma Kingfisher Bank and Trust Co.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,411
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,750
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,022
<INVESTMENTS-CARRYING> 23,912
<INVESTMENTS-MARKET> 24,207
<LOANS> 53,116
<ALLOWANCE> 1,163
<TOTAL-ASSETS> 88,200
<DEPOSITS> 76,936
<SHORT-TERM> 151
<LIABILITIES-OTHER> 723
<LONG-TERM> 39
0
0
<COMMON> 120
<OTHER-SE> 10,231
<TOTAL-LIABILITIES-AND-EQUITY> 88,200
<INTEREST-LOAN> 4,517
<INTEREST-INVEST> 2,066
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,583
<INTEREST-DEPOSIT> 3,397
<INTEREST-EXPENSE> 3,413
<INTEREST-INCOME-NET> 3,170
<LOAN-LOSSES> 540
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,630
<INCOME-PRETAX> 959
<INCOME-PRE-EXTRAORDINARY> 748
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 748
<EPS-PRIMARY> 11.33
<EPS-DILUTED> 11.33
<YIELD-ACTUAL> 0.87
<LOANS-NON> 1,635
<LOANS-PAST> 378
<LOANS-TROUBLED> 184
<LOANS-PROBLEM> 7,376
<ALLOWANCE-OPEN> 1,182
<CHARGE-OFFS> 587
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 1,163
<ALLOWANCE-DOMESTIC> 733
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 430
</TABLE>
