x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the fiscal year ended December 31, 2003 | |
Or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the transition period from _____________ to _____________ | |
Kentucky | 61-0979818 |
(State or other jurisdiction of incorporation or organization) | IRS Employer Identification No. |
346 North Mayo Trail Pikeville, Kentucky (address of principal executive offices) | 41501 (Zip Code) |
Yesü | No |
Yesü | No |
DOCUMENTS INCORPORATED BY REFERENCE
Document | Form 10-K |
(1) Proxy statement for the annual meeting of shareholders to be held April 27, 2004 | Part III |
COMPETITION
SELECTED STATISTICAL INFORMATION
2003 |
| 2002 | 2001 | |||||||||||||||||||||||||
(in thousands) | Average Balances |
|
| Interest |
|
| Average Rate |
|
| Average Balances |
|
| Interest |
|
| Average Rate |
|
| Average Balances |
|
| Interest |
|
| Average Rate | |||
Earning assets: | ||||||||||||||||||||||||||||
Loans, net of unearned income (1)(2)(3) | $ | 1,658,289 | $ | 108,827 | 6.56 | % | $ | 1,660,912 | $ | 121,130 | 7.29 | % | $ | 1,748,241 | $ | 150,669 | 8.62 | % | ||||||||||
Loans held for sale (4) | 5,456 | 460 | 8.43 | 5,696 | 771 | 13.54 | 1,651 | 775 | 46.94 | |||||||||||||||||||
Securities: | ||||||||||||||||||||||||||||
U.S. Treasury and agencies | 284,980 | 12,378 | 4.34 | 324,375 | 17,238 | 5.31 | 236,493 | 13,642 | 5.77 | |||||||||||||||||||
Tax exempt state and political subdivisions (3) | 50,419 | 3,408 | 6.76 | 57,049 | 4,160 | 7.29 | 60,545 | 4,423 | 7.31 | |||||||||||||||||||
Other securities | 226,505 | 4,289 | 1.89 | 130,869 | 3,661 | 2.80 | 51,336 | 3,111 | 6.06 | |||||||||||||||||||
Federal funds sold | 66,499 | 746 | 1.12 | 89,559 | 1,485 | 1.66 | 157,858 | 6,186 | 3.92 | |||||||||||||||||||
Interest bearing deposits | 103 | 1 | 0.97 | 119 | 2 | 1.68 | 217 | 11 | 5.07 | |||||||||||||||||||
Total earning assets | 2,292,251 | $ | 130,109 | 5.68 | % | 2,268,579 | $ | 148,447 | 6.54 | % | 2,256,341 | $ | 178,817 | 7.93 | % | |||||||||||||
Allowance for loan losses | (23,966 | ) | (24,520 | ) | (25,782 | ) | ||||||||||||||||||||||
2,268,285 | 2,244,059 | 2,230,559 | ||||||||||||||||||||||||||
Nonearning assets: | ||||||||||||||||||||||||||||
Cash and due from banks | 69,111 | 68,231 | 65,777 | |||||||||||||||||||||||||
Premises and equipment, net | 49,956 | 50,658 | 49,703 | |||||||||||||||||||||||||
Other assets | 104,934 | 104,521 | 98,656 | |||||||||||||||||||||||||
Total assets | $ | 2,492,286 | $ | 2,467,469 | $ | 2,444,695 | ||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||
Savings and demand deposits | $ | 631,424 | $ | 6,309 | 1.00 | % | $ | 631,055 | $ | 9,007 | 1.43 | % | $ | 549,072 | $ | 13,343 | 2.43 | % | ||||||||||
Time deposits | 1,139,419 | 30,901 | 2.71 | 1,164,457 | 41,104 | 3.53 | 1,267,476 | 72,266 | 5.70 | |||||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements | 83,270 | 1,108 | 1.33 | 70,275 | 1,400 | 1.99 | 74,743 | 2,845 | 3.81 | |||||||||||||||||||
Other short-term borrowings | 262 | 24 | 9.16 | 679 | 33 | 4.86 | 6,349 | 346 | 5.45 | |||||||||||||||||||
Advances from Federal Home Loan Bank | 4,123 | 230 | 5.58 | 7,381 | 418 | 5.66 | 11,279 | 645 | 5.72 | |||||||||||||||||||
Long-term debt | 60,304 | 5,323 | 8.83 | 60,379 | 5,331 | 8.83 | 47,991 | 4,272 | 8.90 |
Total interest bearing liabilities | 1,918,802 | $ | 43,895 | 2.29 | % | 1,934,226 | $ | 57,293 | 2.96 | % | 1,956,910 | $ | 93,717 | 4.79 | % | |||||||||||||
Noninterest bearing liabilities: | ||||||||||||||||||||||||||||
Demand deposits | 338,909 | 315,202 | 277,748 | |||||||||||||||||||||||||
Other liabilities | 19,489 | 15,479 | 22,138 | |||||||||||||||||||||||||
Total liabilities | 2,277,200 | 2,264,907 | 2,256,796 | |||||||||||||||||||||||||
Shareholders’ equity | 215,086 | 202,562 | 187,899 | |||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,492,286 | $ | 2,467,469 | $ | 2,444,695 | ||||||||||||||||||||||
Net interest income | $ | 86,214 | $ | 91,154 | $ | 85,100 | ||||||||||||||||||||||
Net interest spread | 3.39 | % | 3.58 | % | 3.14 | % | ||||||||||||||||||||||
Benefit of interest free funding | 0.37 | % | 0.44 | % | 0.63 | % | ||||||||||||||||||||||
Net interest margin | 3.76 | % | 4.02 | % | 3.77 | % | ||||||||||||||||||||||
Net Interest Differential
Total Change | Change Due to | Total Change | Change Due to |
(in thousands) | 2003/2002 | Volume | Rate | 2002/2001 | Volume | Rate | |||||||||||||
Interest income | |||||||||||||||||||
Loans | $ | (12,303 | ) | $ | (192 | ) | $ | (12,111 | ) | $ | (29,539 | ) | $ | (6,967 | ) | $ | (22,572 | ) | |
Loans held for sale | (311 | ) | (34 | ) | (277 | ) | (4 | ) | 852 | (856 | ) | ||||||||
U.S. Treasury and federal agencies | (4,860 | ) | (2,246 | ) | (2,614 | ) | 3,596 | 4,740 | (1,144 | ) | |||||||||
Tax exempt state and political subdivisions | (752 | ) | (505 | ) | (247 | ) | (264 | ) | (248 | ) | (16 | ) | |||||||
Other securities | 628 | 2,076 | (1,448 | ) | 551 | 2,893 | (2,342 | ) | |||||||||||
Federal funds sold | (739 | ) | (437 | ) | (302 | ) | (4,701 | ) | (2,014 | ) | (2,687 | ) | |||||||
Interest bearing deposits | (1 | ) | 0 | (1 | ) | (9 | ) | (4 | ) | (5 | ) | ||||||||
Total interest income | (18,338 | ) | (1,338 | ) | (17,000 | ) | (30,370 | ) | (748 | ) | (29,622 | ) | |||||||
Interest expense | |||||||||||||||||||
Savings and demand deposits | (2,698 | ) | 5 | (2,703 | ) | (4,336 | ) | 1,774 | (6,110 | ) | |||||||||
Time deposits | (10,203 | ) | (901 | ) | (9,302 | ) | (31,162 | ) | (5,480 | ) | (25,682 | ) | |||||||
Federal funds purchased and securities sold under repurchase agreements | (292 | ) | 228 | (520 | ) | (1,445 | ) | (161 | ) | (1,284 | ) | ||||||||
Other short-term borrowings | (9 | ) | (13 | ) | 4 | (313 | ) | (279 | ) | (34 | ) | ||||||||
Advances from Federal Home Loan Bank | (188 | ) | (187 | ) | (1 | ) | (227 | ) | (221 | ) | (6 | ) | |||||||
Long-term debt | (8 | ) | 28 | (36 | ) | 1,059 | 898 | 161 |
Total interest expense | (13,398 | ) | (840 | ) | (12,558 | ) | (36,424 | ) | (3,469 | ) | (32,955 | ) | |||||||
Net interest income | $ | (4,940 | ) | $ | (498 | ) | $ | (4,442 | ) | $ | 6,054 | $ | 2,721 | $ | 3,333 | ||||
Estimated Maturity at December 31, 2003 | ||||||||||||||||||||||||||||||||||
Within 1 Year | 1-5 Years | 5-10 Years | After 10 Years | Total Fair Value | Amortized Cost | |||||||||||||||||||||||||||||
(in thousands) | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | |||||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 0 | 0.00 | % | $ | 1,605 | 5.99 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 1,605 | 5.99 | % | $ | 1,510 | ||||||||||||
U.S. government agencies and corporations | 38,844 | 2.39 | 101,990 | 5.29 | 75,615 | 4.04 | 0 | 0.00 | 216,449 | 4.33 | 212,891 | |||||||||||||||||||||||
State and municipal obligations | 364 | 7.34 | 13,634 | 6.63 | 35,251 | 6.49 | 42,823 | 1.52 | 92,072 | 3.70 | 89,107 | |||||||||||||||||||||||
Other securities | 12,441 | 4.38 | 21,684 | 4.65 | 0 | 0.00 | 77,604 | 2.19 | 111,729 | 2.89 | 110,896 | |||||||||||||||||||||||
Total | $ | 51,649 | 2.90 | % | $ | 138,913 | 5.33 | % | $ | 110,866 | 4.82 | % | $ | 120,427 | 1.95 | % | $ | 421,855 | 3.82 | % | $ | 414,404 |
Estimated Maturity at December 31, 2003 | ||||||||||||||||||||||||||||||||||
Within 1 Year | 1-5 Years | 5-10 Years | After 10 Years | Total Amortized Cost | Fair Value | |||||||||||||||||||||||||||||
(in thousands) | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | |||||||||||||||||||||||
Held-to-maturity | ||||||||||||||||||||||||||||||||||
U.S. government agencies and corporations | $ | 4,000 | 6.00 | % | $ | 74,771 | 3.72 | % | $ | 5,000 | 6.37 | % | $ | 0 | 0.00 | % | $ | 83,771 | 3.99 | % | $ | 83,158 | ||||||||||||
State and municipal obligations | 1,650 | 8.21 | 1,683 | 6.78 | 393 | 6.61 | 0 | 0.00 | 3,726 | 7.40 | 3,903 | |||||||||||||||||||||||
Total | $ | 5,650 | 6.65 | % | $ | 76,454 | 3.79 | % | $ | 5,393 | 6.39 | % | $ | 0 | 0.00 | % | $ | 87,497 | 4.13 | % | $ | 87,061 | ||||||||||||
Total securities | $ | 57,299 | 3.27 | % | $ | 215,367 | 4.78 | % | $ | 116,259 | 4.89 | % | $ | 120,427 | 1.95 | % | $ | 509,352 | 3.87 | % | ||||||||||||||
(in thousands) | Available-for-Sale |
|
| Held-to-Maturity | |||
U.S. Treasury and government agencies | $ | 51,347 | $ | 57,499 | |||
State and political subdivisions | 41,265 | 23,739 | |||||
U.S. agency and mortgage-backed pass through certificates | 232,505 | 2,086 | |||||
Collateralized mortgage obligations | 9,901 | 0 | |||||
Other debt securities | 26,343 | 0 | |||||
Total debt securities | 361,361 | 83,324 | |||||
Equity securities | 5,872 | 0 | |||||
Total securities | $ | 367,233 | $ | 83,324 | |||
Loan Portfolio
(in thousands) | 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
Commercial: | ||||||||||||||||
Construction | $ | 67,147 | $ | 66,797 | $ | 78,508 | $ | 78,487 | $ | 80,988 | ||||||
Secured by real estate | 583,924 | 509,856 | 496,790 | 469,646 | 406,330 | |||||||||||
Other | 256,837 | 280,492 | 293,502 | 303,141 | 293,659 | |||||||||||
Total commercial | 907,908 | 857,145 | 868,800 | 851,274 | 780,977 | |||||||||||
Real estate construction | 32,495 | 23,311 | 19,932 | 14,704 | 18,002 | |||||||||||
Real estate mortgage | 413,939 | 377,109 | 423,953 | 434,397 | 396,674 | |||||||||||
Consumer | 368,578 | 366,493 | 390,311 | 386,504 | 415,935 | |||||||||||
Equipment lease financing | 13,340 | 10,549 | 6,830 | 6,933 | 7,398 | |||||||||||
Total loans | $ | 1,736,260 | $ | 1,634,607 | $ | 1,709,826 | $ | 1,693,812 | $ | 1,618,986 | ||||||
Percent of total year-end loans | ||||||||||||||||
Commercial: | ||||||||||||||||
Construction | 3.87 | % | 4.08 | % | 4.59 | % | 4.63 | % | 5.00 | % | ||||||
Secured by real estate | 33.63 | 31.19 | 29.06 | 27.73 | 25.10 | |||||||||||
Other | 14.79 | 17.16 | 17.17 | 17.89 | 18.14 | |||||||||||
Total commercial | 52.29 | 52.43 | 50.82 | 50.25 | 48.24 | |||||||||||
Real estate construction | 1.87 | 1.43 | 1.16 | 0.87 | 1.11 | |||||||||||
Real estate mortgage | 23.84 | 23.07 | 24.80 | 25.65 | 24.50 | |||||||||||
Consumer | 21.23 | 22.42 | 22.82 | 22.82 | 25.69 | |||||||||||
Equipment lease financing | 0.77 | 0.65 | 0.40 | 0.41 | 0.46 | |||||||||||
Total loans | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||
Maturity at December 31, 2003 | |||||||||||||
(in thousands) | Within One Year |
|
| After One but Within Five Years |
|
| After Five Years |
|
| Total | |||
Commercial and consumer real estate construction | $ | 200,957 | $ | 291,914 | $ | 347,890 | $ | 840,761 | |||||
Other commercial | 63,032 | 14,761 | 21,849 | 99,642 | |||||||||
$ | 263,989 | $ | 306,675 | $ | 369,739 | $ | 940,403 | ||||||
Rate sensitivity: | |||||||||||||
Predetermined rate | $ | 68,168 | $ | 58,602 | $ | 20,587 | $ | 147,357 | |||||
Adjustable rate | 195,821 | 248,073 | 349,152 | 793,046 | |||||||||
$ | 263,989 | $ | 306,675 | $ | 369,739 | $ | 940,403 | ||||||
Nonperforming Assets
(in thousands) | 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
Nonaccrual loans | $ | 9,705 | $ | 19,649 | $ | 30,496 | $ | 22,731 | $ | 14,861 | ||||||
Restructured loans | 1,726 | 276 | 518 | 338 | 390 | |||||||||||
90 days or more past due and still accruing interest | 5,463 | 2,814 | 2,640 | 3,000 | 3,237 | |||||||||||
Total nonperforming loans | 16,894 | 22,739 | 33,654 | 26,069 | 18,488 | |||||||||||
Foreclosed properties | 6,566 | 2,761 | 1,982 | 4,339 | 2,193 | |||||||||||
Total nonperforming assets | $ | 23,460 | $ | 25,500 | $ | 35,636 | $ | 30,408 | $ | 20,681 | ||||||
Nonperforming assets to total loans and foreclosed properties | 1.35 | % | 1.56 | % | 2.08 | % | 1.79 | % | 1.28 | % | ||||||
Allowance to nonperforming loans | 145.93 | 102.34 | 70.27 | 99.30 | 135.77 |
(in thousands) | Nonaccrual loans |
|
| As a % of Loan Balances by Category |
|
| Restructured Loans |
|
| As a % of Loan Balances by Category |
|
| Accruing Loans Past Due 90 Days or More |
|
| As a % of Loan Balances by Category |
|
| Balances | |||
December 31, 2003 | ||||||||||||||||||||||
Commercial construction | $ | 84 | 0.13 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 67,147 | ||||||||
Commercial secured by real estate | 4,165 | 0.71 | 637 | 0.11 | 1,824 | 0.31 | 583,924 | |||||||||||||||
Commercial other | 2,269 | 0.88 | 1,089 | 0.42 | 1,076 | 0.42 | 256,837 | |||||||||||||||
Consumer real estate construction | 134 | 0.41 | 0 | 0.00 | 0 | 0.00 | 32,495 | |||||||||||||||
Consumer real estate secured | 3,013 | 0.73 | 0 | 0.00 | 1,984 | 0.48 | 413,939 | |||||||||||||||
Consumer other | 40 | 0.01 | 0 | 0.00 | 579 | 0.16 | 368,578 | |||||||||||||||
Equipment lease financing | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 13,340 | |||||||||||||||
Total | $ | 9,705 | 0.56 | % | $ | 1,726 | 0.10 | % | $ | 5,463 | 0.31 | % | $ | 1,736,260 | ||||||||
December 31, 2002 | ||||||||||||||||||||||
Commercial construction | $ | 891 | 1.33 | % | $ | 0 | 0.00 | % | $ | 0 | 0.00 | % | $ | 66,797 | ||||||||
Commercial secured by real estate | 11,467 | 2.25 | 276 | 0.05 | 591 | 0.12 | 509,856 | |||||||||||||||
Commercial other | 2,167 | 0.77 | 0 | 0.00 | 344 | 0.12 | 280,492 | |||||||||||||||
Consumer real estate construction | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 23,311 | |||||||||||||||
Consumer real estate secured | 5,040 | 1.34 | 0 | 0.00 | 1,143 | 0.30 | 377,109 | |||||||||||||||
Consumer other | 84 | 0.02 | 0 | 0.00 | 736 | 0.20 | 366,493 | |||||||||||||||
Equipment lease financing | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 10,549 | |||||||||||||||
Total | $ | 19,649 | 1.20 | % | $ | 276 | 0.02 | % | $ | 2,814 | 0.17 | % | $ | 1,634,607 | ||||||||
Discussion of the Nonaccrual Policy
Analysis of the Allowance for Loan Losses
(in thousands) | 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
Allowance for loan losses, beginning of year | $ | 23,271 | $ | 23,648 | $ | 25,886 | $ | 25,102 | $ | 26,089 | ||||||
Loans charged off: | ||||||||||||||||
Commercial construction | 164 | 662 | 275 | 106 | 121 | |||||||||||
Commercial secured by real estate | 773 | 2,386 | 3,252 | 1,210 | 491 | |||||||||||
Commercial other | 4,085 | 3,393 | 2,406 | 1,480 | 1,219 | |||||||||||
Real estate mortgage | 957 | 1,098 | 1,061 | 1,006 | 1,585 | |||||||||||
Consumer | 5,725 | 6,598 | 8,452 | 9,645 | 11,888 | |||||||||||
Total charge-offs | 11,704 | 14,137 | 15,446 | 13,447 | 15,304 | |||||||||||
Recoveries of loans previously charged off: | ||||||||||||||||
Commercial construction | 32 | 0 | 25 | 4 | 5 | |||||||||||
Commercial secured by real estate | 243 | 156 | 105 | 348 | 427 | |||||||||||
Commercial other | 450 | 207 | 224 | 228 | 469 | |||||||||||
Real estate mortgage | 159 | 107 | 76 | 123 | 195 | |||||||||||
Consumer | 2,870 | 3,204 | 3,593 | 4,311 | 4,116 | |||||||||||
Total recoveries | 3,754 | 3,674 | 4,023 | 5,014 | 5,212 | |||||||||||
Net charge-offs: | ||||||||||||||||
Commercial construction | 132 | 662 | 250 | 102 | 116 | |||||||||||
Commercial secured by real estate | 530 | 2,230 | 3,147 | 862 | 64 | |||||||||||
Commercial other | 3,635 | 3,186 | 2,182 | 1,252 | 750 | |||||||||||
Real estate mortgage | 798 | 991 | 985 | 883 | 1,390 | |||||||||||
Consumer | 2,855 | 3,394 | 4,859 | 5,334 | 7,772 | |||||||||||
Total net charge-offs | 7,950 | 10,463 | 11,423 | 8,433 | 10,092 | |||||||||||
Provisions charged against operations | 9,332 | 10,086 | 9,185 | 9,217 | 9,105 | |||||||||||
Balance, end of year | $ | 24,653 | $ | 23,271 | $ | 23,648 | $ | 25,886 | $ | 25,102 | ||||||
Allocation of allowance, end of year: | ||||||||||||||||
Commercial construction | $ | 2,323 | $ | 305 | $ | 552 | $ | 499 | $ | 328 | ||||||
Commercial secured by real estate | 5,281 | 2,327 | 4,264 | 3,632 | 2,126 | |||||||||||
Commercial other | 608 | 1,280 | 2,293 | 2,284 | 1,773 | |||||||||||
Real estate mortgage | 76 | 810 | 1,404 | 942 | 463 | |||||||||||
Real estate mortgage construction | 971 | 50 | 66 | 32 | 115 | |||||||||||
Consumer | 2,833 | 3,390 | 7,737 | 8,689 | 12,313 | |||||||||||
Equipment lease financing | 121 | 48 | 56 | 52 | 45 | |||||||||||
Unallocated | 12,440 | 15,061 | 7,276 | 9,756 | 7,939 | |||||||||||
Balance, end of year | $ | 24,653 | $ | 23,271 | $ | 23,648 | $ | 25,886 | $ | 25,102 | ||||||
Average loans outstanding, net of unearned interest | $ | 1,658,289 | $ | 1,660,912 | $ | 1,748,241 | $ | 1,665,349 | $ | 1,557,209 | ||||||
Loans outstanding at end of year, net of unearned interest | $ | 1,736,260 | $ | 1,634,607 | $ | 1,709,826 | $ | 1,693,812 | $ | 1,618,986 | ||||||
Net charge-offs to average loan type: | ||||||||||||||||
Commercial construction | 0.19 | % | 0.94 | % | 0.32 | % | 0.13 | % | 0.15 | % | ||||||
Commercial secured by real estate | 0.10 | 0.44 | 0.63 | 0.19 | 0.02 | |||||||||||
Commercial other | 1.29 | 1.12 | 0.70 | 0.40 | 0.25 | |||||||||||
Real estate mortgage | 0.20 | 0.25 | 0.22 | 0.21 | 0.36 | |||||||||||
Consumer | 0.79 | 0.90 | 1.22 | 1.34 | 1.91 | |||||||||||
Total | 0.48 | % | 0.63 | % | 0.65 | % | 0.51 | % | 0.65 | % | ||||||
Other ratios: | ||||||||||||||||
Allowance to net loans, end of year | 1.42 | % | 1.42 | % |
| 1.38 | % |
| 1.53 | % |
| 1.55 | % | |||
Provision for loan losses to average loans |
|
| 0.56 |
|
| 0.61 |
|
| 0.53 |
|
| 0.55 |
|
| 0.58 |
|
The allowance for loan losses balance is maintained by management at a level considered adequate to cover anticipated probable losses based on past loss experience, general economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors and estimates which are subject to change over time. This analysis is completed quarterly and forms the basis for allocation of the loan loss reserve and what charges to the provision may be required. See note 1 to the consolidated financial statements for further information.
(in thousands) | 2003 | 2002 | 2001 | |||||||
Deposits: | ||||||||||
Noninterest bearing deposits | $ | 338,909 | $ | 315,202 | $ | 277,748 | ||||
NOW accounts | 15,852 | 19,617 | 19,353 | |||||||
Money market accounts | 403,314 | 416,078 | 379,372 | |||||||
Savings accounts | 212,258 | 195,360 | 150,347 | |||||||
Certificates of deposit of $100,000 or more | 361,037 | 363,480 | 389,556 | |||||||
Certificates of deposit < $100,000 and other time deposits | 778,382 | 800,977 | 877,920 | |||||||
Total deposits | 2,109,752 | 2,110,714 | 2,094,296 | |||||||
Other borrowed funds: | ||||||||||
Federal funds purchased and securities sold under repurchase agreements | 83,270 | 70,275 | 74,743 | |||||||
Other short-term borrowings | 262 | 679 | 6,349 | |||||||
Advances from Federal Home Loan Bank | 4,123 | 7,381 | 11,279 | |||||||
Long-term debt | 60,304 | 60,379 | 47,991 | |||||||
Total other borrowed funds | 147,959 | 138,714 | 140,362 | |||||||
Total deposits and other borrowed funds | $ | 2,257,711 | $ | 2,249,428 | $ | 2,234,658 | ||||
(in thousands) | Certificates of Deposit | Other Time Deposits | Total | |||||||
Three months or less | $ | 141,905 | $ | 5,289 | $ | 147,194 | ||||
Over three through six months | 67,587 | 3,791 | 71,378 | |||||||
Over six through twelve months | 112,993 | 7,977 | 120,970 | |||||||
Over twelve through sixty months | 35,088 | 3,822 | 38,910 | |||||||
Over sixty months | 0 | 106 | 106 | |||||||
$ | 357,573 | $ | 20,985 | $ | 378,558 | |||||
Item 2. Properties
Location | Owned | Leased | Total | ||
Banking locations: | |||||
Community Trust Bancorp, Inc. | |||||
* | Tug Valley Market | 1 | 0 | 1 | |
1 location in Mingo County, West Virginia | |||||
* | Hamlin Market | 3 | 0 | 3 | |
2 locations in Lincoln County, West Virginia and 1 location in Wayne County, West Virginia | |||||
* | Summersville Market | 1 | 0 | 1 | |
1 location in Nicholas County, West Virginia | |||||
Community Trust Bank, Inc. | |||||
l | Pikeville Market (lease land to 2 owned locations) | 8 | 2 | 10 | |
10 locations in Pike County, Kentucky | |||||
Floyd/Knott Market | 2 | 0 | 2 | ||
1 location in Floyd County, Kentucky and 1 location in Knott County, Kentucky | |||||
Tug Valley Market | 0 | 1 | 1 | ||
1 location in Pike County, Kentucky | |||||
Whitesburg Market (own land to 1 leased office) | 3 | 2 | 5 | ||
5 locations in Letcher County, Kentucky | |||||
l | Lexington Market | 1 | 4 | 5 | |
5 locations in Fayette County, Kentucky | |||||
Winchester Market | 1 | 2 | 3 | ||
3 locations in Clark County, Kentucky | |||||
Richmond Market | 2 | 2 | 4 | ||
4 locations in Madison County, Kentucky | |||||
Mt. Sterling Market | 2 | 0 | 2 | ||
2 locations in Montgomery County, Kentucky | |||||
l | Versailles Market | 2 | 3 | 5 | |
2 locations in Woodford County, Kentucky, 1 location in Franklin County, Kentucky, 1 location in Mercer County, Kentucky, and 1 location in Scott County, Kentucky | |||||
l | Ashland Market | 5 | 0 | 5 | |
4 locations in Boyd County, Kentucky and 1 location in Greenup County, Kentucky | |||||
Flemingsburg Market | 4 | 0 | 4 | ||
4 locations in Fleming County, Kentucky | |||||
l | Middlesboro Market (lease land to 1 owned location) | 3 | 0 | 3 | |
3 locations in Bell County, Kentucky | |||||
Williamsburg Market | 4 | 0 | 4 | ||
2 locations in Whitley County, Kentucky and 2 locations in Laurel County, Kentucky | |||||
Campbellsville Market | 6 | 2 | 8 | ||
2 locations in Taylor County, Kentucky, 2 locations in Pulaski County, Kentucky, 1 location in Adair County, Kentucky, 1 location in Green County, Kentucky, 1 location in Russell County, Kentucky, and 1 location in Marion County, Kentucky | |||||
Mt. Vernon Market | 2 | 0 | 2 | ||
2 locations in Rockcastle County, Kentucky | |||||
Hazard Market | 6 | 0 | 6 | ||
6 locations in Perry County, Kentucky | |||||
Total banking locations | 56 | 18 | 74 | ||
Operational locations: | |||||
Community Trust Bank, Inc. | |||||
Pikeville (Pike County, Kentucky) | 1 | 0 | 1 | ||
Lexington (Fayette County, Kentucky) | 0 | 1 | 1 | ||
Total operational locations | 1 | 1 | 2 | ||
Other: | |||||
Community Trust Bank, Inc. | |||||
Ashland (Boyd County, Kentucky) | 0 | 1 | 1 | ||
Williamsburg (Whitley County, Kentucky) | 1 | 0 | 1 | ||
Total other locations | 1 | 1 | 2 | ||
Total locations | 58 | 20 | 78 | ||
Name and Age(1) | Positions and Offices Currently Held | Date First Became Director or Executive Officer | Principal Occupation | |
Jean R. Hale; 57 | Vice Chairman, President and CEO | 1992 | Vice Chairman, President and CEO of Community Trust Bancorp, Inc. | |
Mark A. Gooch; 45 | Executive Vice President and Treasurer | 1997 | President and CEO of Community Trust Bank, Inc. | |
Tracy Little; 63 | Executive Vice President | 2003 | (2) | President and CEO of Community Trust and Investment Company |
William Hickman III; 53 | Executive Vice President and Secretary | 1998 | Executive Vice President/Staff Attorney of Community Trust Bank, Inc. | |
Michael S. Wasson; 52 | Executive Vice President | 2000 | (3) | Executive Vice President/ Central Kentucky Region President of Community Trust Bank, Inc. |
James B. Draughn; 44 | Executive Vice President | 2001 | (4) | Executive Vice President/Operations of Community Trust Bank, Inc. |
Kevin J. Stumbo; 43 | Executive Vice President | 2002 | (5) | Executive Vice President/ Controller of Community Trust Bank, Inc. |
Ricky D. Sparkman; 41 | Executive Vice President | 2002 | (6) | Executive Vice President/ South Central Region President of Community Trust Bank, Inc. |
Richard W. Newsom; 49 | Executive Vice President | 2002 | (7) | Executive Vice President/ Eastern Region President of Community Trust Bank, Inc. |
James Gartner; 62 | Executive Vice President | 2002 | (8) | Executive Vice President/ Chief Credit Officer of Community Trust Bank, Inc. |
Larry W. Jones; 57 | Executive Vice President | 2002 | (9) | Executive Vice President/ Northeast Region President of Community Trust Bank, Inc. |
PART II
(in thousands except per share amounts) | |||||||||||||
Three Months Ended | December 31 | September 30 | June 30 | March 31 | |||||||||
2003 | |||||||||||||
Net interest income | $ | 22,297 | $ | 20,776 | $ | 21,018 | $ | 20,528 | |||||
Net interest income, taxable equivalent basis | 22,689 | 21,162 | 21,437 | 20,926 | |||||||||
Provision for loan losses | 2,115 | 2,085 | 3,585 | 1,547 | |||||||||
Noninterest income | 8,148 | 10,093 | 9,585 | 8,546 | |||||||||
Noninterest expense | 18,249 | 18,111 | 16,764 | 17,611 | |||||||||
Net income | 7,553 | 7,281 | 7,064 | 6,993 | |||||||||
Per common share: | |||||||||||||
Basic earnings per share | $ | 0.56 | $ | 0.54 | $ | 0.52 | $ | 0.52 | |||||
Diluted earnings per share | 0.55 | 0.53 | 0.52 | 0.51 | |||||||||
Dividends declared | 0.23 | 0.21 | 0.19 | 0.19 | |||||||||
Common stock price: | |||||||||||||
High | $ | 33.73 | $ | 28.26 | $ | 27.27 | $ | 24.22 | |||||
Low | 25.50 | 23.76 | 22.96 | 22.46 | |||||||||
Last trade | 30.20 | 26.43 | 23.78 | 22.96 | |||||||||
Selected ratios: | |||||||||||||
Return on average assets, annualized | 1.20 | % | 1.15 | % | 1.14 | % | 1.15 | % | |||||
Return on average common equity, annualized | 13.61 | 13.45 | 13.27 | 13.38 | |||||||||
Net interest margin, annualized | 3.93 | 3.62 | 3.75 | 3.74 | |||||||||
2002 | |||||||||||||
Net interest income | $ | 21,677 | $ | 22,360 | $ | 22,783 | $ | 22,437 | |||||
Net interest income, taxable equivalent basis | 22,125 | 22,853 | 23,253 | 22,923 | |||||||||
Provision for loan losses | 1,670 | 2,530 | 3,145 | 2,741 | |||||||||
Noninterest income | 8,205 | 8,687 | 5,442 | 5,594 | |||||||||
Noninterest expense | 17,851 | 16,783 | 16,164 | 16,543 | |||||||||
Net income | 6,968 | 7,933 | 6,377 | 6,322 | |||||||||
Per common share: | |||||||||||||
Basic earnings per share | $ | 0.51 | $ | 0.58 | $ | 0.46 | $ | 0.46 | |||||
Diluted earnings per share | 0.51 | 0.57 | 0.46 | 0.45 | |||||||||
Dividends declared | 0.19 | 0.18 | 0.17 | 0.17 | |||||||||
Common stock price: | |||||||||||||
High | $ | 27.27 | $ | 23.14 | $ | 24.36 | $ | 21.36 | |||||
Low | 21.49 | 18.72 | 19.84 | 17.99 | |||||||||
Last trade | 22.86 | 22.23 | 23.23 | 21.18 | |||||||||
Selected ratios: | |||||||||||||
Return on average assets, annualized | 1.12 | % | 1.30 | % | 1.04 | % | 1.02 | % | |||||
Return on average common equity, annualized | 13.31 | 15.32 | 12.81 | 13.00 | |||||||||
Net interest margin, annualized | 3.88 | 4.06 | 4.11 | 4.02 |
(in thousands except per share amounts) | ||||||||||||||||
Year Ended December 31 | 2003 | 2002 | 2001 | 2000 | 1999 | |||||||||||
Interest income | $ | 128,514 | $ | 146,550 | $ | 176,835 | $ | 175,749 | $ | 163,516 | ||||||
Interest expense | 43,895 | 57,293 | 93,717 | 91,515 | 79,740 | |||||||||||
Net interest income | 84,619 | 89,257 | 83,118 | 84,234 | 83,776 | |||||||||||
Provision for loan losses | 9,332 | 10,086 | 9,185 | 9,217 | 9,105 | |||||||||||
Noninterest income | 36,372 | 27,928 | 23,774 | 19,526 | 21,026 | |||||||||||
Noninterest expense | 70,735 | 67,341 | 64,938 | 61,927 | 64,388 | |||||||||||
Income before income taxes | 40,924 | 39,758 | 32,769 | 32,616 | 31,309 | |||||||||||
Income taxes | 12,033 | 12,158 | 10,497 | 10,270 | 9,464 | |||||||||||
Net income | $ | 28,891 | $ | 27,600 | $ | 22,272 | $ | 22,346 | $ | 21,845 | ||||||
Per common share: | ||||||||||||||||
Basic earnings per share | $ | 2.14 | $ | 2.01 | $ | 1.60 | $ | 1.55 | $ | 1.48 | ||||||
Cash dividends declared- | $ | 0.82 | $ | 0.71 | $ | 0.67 | $ | 0.62 | $ | 0.59 | ||||||
as a % of net income | 38.32 | % | 35.32 | % | 41.88 | % | 40.00 | % | 39.86 | % | ||||||
Book value, end of year | $ | 16.45 | $ | 15.42 | $ | 13.86 | $ | 12.85 | $ | 11.73 | ||||||
Market price, end of year | $ | 30.20 | $ | 22.86 | $ | 19.63 | $ | 12.29 | $ | 15.03 | ||||||
Market value to book value, end of year | 1.84 | x | 1.48 | x | 1.42 | x | 0.96 | x | 1.28 | x | ||||||
Price/earnings ratio, end of year | 14.11 | x | 11.37 | x | 12.27 | x | 7.93 | x | 10.15 | x | ||||||
Cash dividend yield, end of year | 2.72 | % | 3.11 | % | 3.41 | % | 5.04 | % | 3.93 | % | ||||||
At year-end: | ||||||||||||||||
Total assets | $ | 2,474,039 | $ | 2,487,911 | $ | 2,503,905 | $ | 2,264,395 | $ | 2,176,090 | ||||||
Long-term debt | 59,500 | 60,604 | 47,944 | 48,060 | 48,174 | |||||||||||
Shareholders’ equity | 221,393 | 209,419 | 191,606 | 181,904 | 172,419 | |||||||||||
Averages: | ||||||||||||||||
Assets | $ | 2,492,286 | $ | 2,467,469 | $ | 2,444,695 | $ | 2,195,380 | $ | 2,182,721 | ||||||
Deposits | 2,109,752 | 2,110,714 | 2,094,296 | 1,886,198 | 1,882,364 | |||||||||||
Earning assets | 2,292,251 | 2,268,579 | 2,256,341 | 2,004,686 | 1,976,679 | |||||||||||
Loans | 1,658,289 | 1,660,912 | 1,748,241 | 1,665,349 | 1,557,209 | |||||||||||
Shareholders’ equity | 215,086 | 202,562 | 187,899 | 176,911 | 169,467 | |||||||||||
Profitability ratios: | ||||||||||||||||
Return on average assets | 1.16 | % | 1.12 | % | 0.91 | % | 1.02 | % | 1.00 | % | ||||||
Return on average equity | 13.43 | 13.63 | 11.85 | 12.63 | 12.89 |
Capital ratios: | ||||||||||||||||
Equity to assets, end of year | 8.95 | % | 8.42 | % | 7.65 | % | 8.03 | % | 7.92 | % | ||||||
Average equity to average assets | 8.63 | 8.21 | 7.69 | 8.06 | 7.76 | |||||||||||
Risk based capital ratios: | ||||||||||||||||
Tier 1 capital (to average assets) | 8.73 | % | 8.23 | % | 6.44 | % | 7.29 | % | 7.09 | % | ||||||
Tier 1 capital (to risk weighted assets) | 11.35 | 10.98 | 9.11 | 9.26 | 8.92 | |||||||||||
Total capital (to risk weighted assets) | 12.60 | 12.22 | 10.32 | 10.51 | 10.17 | |||||||||||
Other significant ratios: | ||||||||||||||||
Allowance to net loans, end of year | 1.42 | % | 1.42 | % | 1.38 | % | 1.53 | % | 1.55 | % | ||||||
Allowance to nonperforming loans, end of year | 145.93 | 102.34 | 70.27 | 99.30 | 135.77 | |||||||||||
Nonperforming assets to loans and foreclosed properties, end of year | 1.35 | 1.56 | 2.08 | 1.79 | 1.28 | |||||||||||
Net interest margin | 3.76 | 4.02 | 3.77 | 4.33 | 4.37 | |||||||||||
Other statistics: | ||||||||||||||||
Average common shares outstanding | 13,474 | 13,722 | 13,935 | 14,455 | 14,726 | |||||||||||
Number of full-time equivalent employees, end of year | 901 | 874 | 883 | 795 | 830 |
Twelve Months Ended December 31, 2001 | ||||||||||
Reported Earnings | Goodwill Amortization | Pro Forma | ||||||||
Income before income tax expense | $ | 32,769 | $ | 3,121 | $ | 35,890 | ||||
Income tax expense | 10,497 | 821 | 11,318 | |||||||
Net income | $ | 22,272 | $ | 2,300 | $ | 24,572 | ||||
Basic earnings per share | $ | 1.60 | $ | 0.16 | $ | 1.76 | ||||
Diluted earnings per common share | 1.59 | 0.16 | 1.75 |
(in thousands, except per share amounts) Years ended December 31 | 2003 | 2002 | 2001 | ||||||||||
Net income as reported | $ | 28,891 | $ | 27,600 | $ | 22,272 | |||||||
Loss effect of stock compensation | (339 | ) | (495 | ) | (257 | ) | |||||||
Net income pro forma | $ | 28,552 | $ | 27,105 | $ | 22,015 | |||||||
Basic net income per share | As reported | $ | 2.14 | $ | 2.01 | $ | 1.60 | ||||||
Pro forma | 2.10 | 1.98 | 1.58 | ||||||||||
Diluted net income per share | As reported | $ | 2.11 | $ | 1.99 | $ | 1.59 | ||||||
Pro forma | 2.08 | 1.95 | 1.57 |
Board Allocation | Repurchases | Average Price ($) | Shares Available for Repurchase | |
1998 | 500,000 | 0 | 0 | 500,000 |
1999 | 0 | 119,561 | 17.48 | 380,439 |
2000 | 1,000,000 | 630,967 | 12.40 | 749,472 |
2001 | 0 | 404,495 | 16.16 | 344,977 |
2002 | 0 | 327,534 | 21.43 | 17,443 |
2003 | 1,000,000 | 214,244 | 23.74 | 803,199 |
Total | 2,500,000 | 1,696,801 | 16.83 | 803,199 |
Management considers interest rate risk the Corporation’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of the Corporation’s net interest revenue is largely dependent upon the effective management of interest rate risk. The Corporation employs a variety of measurement techniques to identify and manage its interest rate risk including the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. Assumptions based on the historical behavior of deposit rates and balances in relation to ch anges in interest rates are also incorporated into the model. These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.
The Corporation’s Asset/Liability Management Committee (ALCO), which includes executive and senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk within Board-approved policy limits. The Corporation’s current exposure to interest rate risks is determined by measuring the anticipated change in net interest income over a twelve-month period assuming a 200 basis point increase or decrease in rates, spread evenly over the twelve-month period. The following table shows the Corporation’s estimated earnings sensitivity profile as of December 31, 2003:
Change in Interest Rates (basis points) | Percentage Change in Net Interest Income (12 Months) |
+200 | 1.46% |
-200 | (2.18)% |
Change in Interest Rates (basis points) | Percentage Change in Net Interest Income (12 Months) |
+200 | 4.38% |
-200 | (7.42)% |
The simulation model used a 200 basis point increase in the yield curve spread evenly over a twelve-month period. The measurement at December 31, 2003 estimates that net interest income for the Corporation would increase by 1.46% over one year. A 200 basis point immediate and sustained decrease in interest rates would decrease net interest income by 2.18% over one year. In order to reduce the exposure to interest rate fluctuations and to manage liquidity, the Corporation has developed sale procedures for several types of interest-sensitive assets. All long-term, fixed rate single family residential mortgage loans underwritten according to Federal Home Loan Mortgage Corporation guidelines are sold for cash upon origination. Periodically, additional assets such as commercial loans are also sold. In 2003 and 2002, $195.8 million and $162.9 million, respectively, was realized on the sale of fixed rate residential mor tgages. Management focuses its efforts on consistent net interest revenue and net interest margin growth through each of the retail and wholesale business lines. The Corporation does not currently engage in trading activities.
Capital Resources
The Corporation continues to grow its shareholders’ equity while also providing an average annual dividend yield during 2003 of 3.05% to shareholders. Shareholders’ equity of $221.4 million on December 31, 2003 is a 5.7% increase from the $209.4 million on December 31, 2002. The primary source of capital growth for the Corporation is retained earnings. Cash dividends were $0.82 per share for 2003 and $0.71 per share for 2002. The Corporation retained 61.7% of its earnings in 2003 compared to 64.7% in 2002.
Contractual Obligations: | Payments Due by Period | ||||||||||||
(in thousands) | Total | 1 Year | 2-5 Years | After 5 Years | |||||||||
Deposits without stated maturity | $ | 973,952 | $ | 973,952 | $ | 0 | $ | 0 | |||||
Certificates of deposit | 1,093,663 | 979,833 | 113,061 | 769 | |||||||||
Federal funds purchased and other short-term borrowings | 105,293 | 77,008 | 28,267 | 18 | |||||||||
Advances from Federal Home Loan Bank | 3,192 | 846 | 1,628 | 718 | |||||||||
Long-term debt | 59,500 | 0 | 0 | 59,500 | |||||||||
Annual rental commitments under leases | 16,732 | 1,213 | 4,153 | 11,366 | |||||||||
Total | $ | 2,252,332 | $ | 2,032,852 | $ | 147,109 | $ | 72,371 | |||||
Other Commitments: | Amount of Commitment - Expiration by Period | ||||||||||||
(in thousands) | Total |
|
| 1 Year |
|
| 2-5 Years |
|
| After 5 Years | |||
Standby letters of credit | $ | 30,654 | $ | 30,592 | $ | 52 | $ | 10 | |||||
Commitments to extend credit | 269,095 | 189,884 | 72,884 | 6,327 | |||||||||
Total | $ | 299,749 | $ | 220,476 | $ | 72,936 | $ | 6,337 | |||||
(dollars in thousands) December 31 | 2003 | 2002 | |||||
Assets: | |||||||
Cash and due from banks | $ | 79,907 | $ | 92,955 | |||
Federal funds sold | 9,054 | 49,251 | |||||
Securities available-for-sale at fair value | |||||||
(amortized cost of $414,404 and $515,931, respectively) | 421,855 | 527,339 | |||||
Securities held-to-maturity at amortized cost | |||||||
(fair value of $87,061 and $52,673, respectively) | 87,497 | 51,243 | |||||
Loans held for sale | 315 | 2,279 | |||||
Loans | 1,736,260 | 1,634,607 | |||||
Allowance for loan losses | (24,653 | ) | (23,271 | ) | |||
Net loans | 1,711,607 | 1,611,336 | |||||
Premises and equipment, net | 49,990 | 50,767 | |||||
Goodwill | 60,122 | 60,122 | |||||
Core deposit intangible (net of accumulated amortization of $3,131 and | |||||||
$2,552, respectively) | 3,829 | 4,409 | |||||
Other assets | 49,863 | 38,210 | |||||
Total assets | $ | 2,474,039 | $ | 2,487,911 | |||
Liabilities and shareholders’ equity: | |||||||
Deposits | |||||||
Noninterest bearing | $ | 359,403 | $ | 343,565 | |||
Interest bearing | 1,708,212 | 1,784,151 | |||||
Total deposits | 2,067,615 | 2,127,716 | |||||
Federal funds purchased and other short-term borrowings | 105,293 | 68,431 | |||||
Advances from Federal Home Loan Bank | 3,192 | 5,617 | |||||
Long-term debt | 59,500 | 60,604 | |||||
Other liabilities | 17,046 | 16,124 | |||||
Total liabilities | 2,252,646 | 2,278,492 | |||||
Shareholders’ equity: | |||||||
Preferred stock, 300,000 shares authorized and unissued | |||||||
Common stock, $5 par value, shares authorized 25,000,000; | |||||||
shares outstanding 2003 - 13,461,600; 2002 - 13,582,995 | 67,308 | 61,741 | |||||
Capital surplus | 105,579 | 73,723 | |||||
Retained earnings | 43,663 | 66,540 | |||||
Accumulated other comprehensive income, net of tax | 4,843 | 7,415 | |||||
Total shareholders’ equity | 221,393 | 209,419 | |||||
Total liabilities and shareholders’ equity | $ | 2,474,039 | $ | 2,487,911 | |||
See notes to consolidated financial statements
Consolidated Statements of Income
(in thousands except per share data) Year Ended December 31 | 2003 | 2002 | 2001 | |||||||
Interest income: | ||||||||||
Interest and fees on loans, including loans held for sale | $ | 108,885 | $ | 121,460 | $ | 151,001 | ||||
Interest and dividends on securities | ||||||||||
Taxable | 16,667 | 20,899 | 16,753 | |||||||
Tax exempt | 2,215 | 2,704 | 2,885 | |||||||
Other, including interest on federal funds sold | 747 | 1,487 | 6,196 | |||||||
Total interest income | 128,514 | 146,550 | 176,835 | |||||||
Interest expense: | ||||||||||
Interest on deposits | 37,210 | 50,111 | 85,609 | |||||||
Interest on federal funds purchased and other short-term borrowings | 1,132 | 1,433 | 3,191 | |||||||
Interest on advances from Federal Home Loan Bank | 230 | 418 | 645 | |||||||
Interest on long-term debt | 5,323 | 5,331 | 4,272 | |||||||
Total interest expense | 43,895 | 57,293 | 93,717 | |||||||
Net interest income | 84,619 | 89,257 | 83,118 | |||||||
Provision for loan losses | 9,332 | 10,086 | 9,185 | |||||||
Net interest income after provision for loan losses | 75,287 | 79,171 | 73,933 | |||||||
Noninterest income: | ||||||||||
Service charges on deposit accounts | 17,057 | 13,484 | 11,086 | |||||||
Gains on sales of loans, net | 5,693 | 4,415 | 2,554 | |||||||
Trust income | 2,457 | 2,500 | 2,520 | |||||||
Securities gains, net | 3,042 | 1,528 | 775 | |||||||
Other | 8,123 | 6,001 | 6,839 | |||||||
Total noninterest income | 36,372 | 27,928 | 23,774 | |||||||
Noninterest expense: | ||||||||||
Salaries and employee benefits | 34,593 | 34,643 | 31,093 | |||||||
Occupancy, net | 5,819 | 5,580 | 5,291 | |||||||
Equipment | 3,688 | 3,626 | 3,593 | |||||||
Data processing | 3,841 | 3,890 | 3,973 | |||||||
Stationery, printing, and office supplies | 1,407 | 1,459 | 1,364 | |||||||
Taxes other than payroll, property, and income | 2,772 | 2,850 | 2,231 | |||||||
FDIC insurance | 319 | 375 | 395 | |||||||
Legal and professional fees | 3,937 | 2,940 | 2,677 | |||||||
Other | 14,359 | 11,978 | 14,321 | |||||||
Total noninterest expense | 70,735 | 67,341 | 64,938 | |||||||
Income before income taxes | 40,924 | 39,758 | 32,769 | |||||||
Income taxes | 12,033 | 12,158 | 10,497 | |||||||
Net income | $ | 28,891 | $ | 27,600 | $ | 22,272 | ||||
Basic earnings per share | $ | 2.14 | $ | 2.01 | $ | 1.60 | ||||
Diluted earnings per share | 2.11 | 1.99 | 1.59 | |||||||
See notes to consolidated financial statements
Consolidated Statements of Changes in Shareholders’ Equity
(in thousands except per share and share amounts) | Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Tax | Total | |||||||||||
Balance, January 1, 2001 | $ | 58,352 | $ | 54,893 | $ | 68,420 | $ | 239 | $ | 181,904 | ||||||
Net income | 22,272 | 22,272 | ||||||||||||||
Net change in unrealized appreciation on securities available-for-sale, net of tax of $927 | 1,721 | 1,721 | ||||||||||||||
Comprehensive income | 23,993 | |||||||||||||||
Cash dividends declared ($0.67 per share) | (9,297 | ) | (9,297 | ) | ||||||||||||
Issuance of 109,043 shares of common stock | 451 | 1,004 | 1,455 | |||||||||||||
Purchase of 405,038 shares of common stock | (1,674 | ) | (4,775 | ) | (6,449 | ) | ||||||||||
Balance, December 31, 2001 | 57,129 | 51,122 | 81,395 | 1,960 | 191,606 | |||||||||||
Net income | 27,600 | 27,600 | ||||||||||||||
Net change in unrealized appreciation on securities available-for-sale, net of tax of $2,938 | 5,455 | 5,455 | ||||||||||||||
Comprehensive income | 33,055 | |||||||||||||||
Cash dividends declared ($0.71 per share) | (9,770 | ) | (9,770 | ) | ||||||||||||
To record 10% common stock dividend | 5,604 | 27,081 | (32,685 | ) | 0 | |||||||||||
Issuance of 88,642 shares of common stock | 372 | 1,224 | 1,596 | |||||||||||||
Purchase of 330,090 shares of common stock | (1,364 | ) | (5,704 | ) | (7,068 | ) | ||||||||||
Balance, December 31, 2002 | 61,741 | 73,723 | 66,540 | 7,415 | 209,419 | |||||||||||
Net income | 28,891 | 28,891 | ||||||||||||||
Net change in unrealized depreciation on securities available-for-sale, net of tax of $1,385 | (2,572 | ) | (2,572 | ) | ||||||||||||
Comprehensive income | 26,319 | |||||||||||||||
Cash dividends declared ($0.82 per share) | (11,055 | ) | (11,055 | ) | ||||||||||||
To record 10% common stock dividend | 6,114 | 34,599 | (40,713 | ) | 0 | |||||||||||
Issuance of 93,849 shares of common stock | 431 | 1,389 | 1,820 | |||||||||||||
Purchase of 215,244 shares of common stock | (978 | ) | (4,132 | ) | (5,110 | ) | ||||||||||
Balance, December 31, 2003 | $ | 67,308 | $ | 105,579 | $ | 43,663 | $ | 4,843 | $ | 221,393 | ||||||
See notes to consolidated financial statements
Consolidated Statements of Cash Flows
(in thousands) Year Ended December 31 | 2003 | 2002 | 2001 | |||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 28,891 | $ | 27,600 | $ | 22,272 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 4,418 | 4,458 | 7,451 | |||||||
Change in net deferred tax asset, net | 561 | 2,448 | 1,465 | |||||||
Provision for loan and other real estate losses | 9,541 | 10,158 | 9,514 | |||||||
Securities gains | (3,404 | ) | (1,580 | ) | (775 | ) | ||||
Securities losses | 362 | 52 | 0 | |||||||
Gains on sale of mortgage loans held for sale | (5,378 | ) | (4,415 | ) | (2,554 | ) | ||||
Gains on sale of other loans | (315 | ) | 0 | 0 | ||||||
Gains (losses) on sale of assets, net | 90 | (22 | ) | 2 | ||||||
Proceeds from sale of mortgage loans held for sale | 195,794 | 162,864 | 119,775 | |||||||
Amortization (accretion) of securities premiums, net | 1,435 | 626 | (291 | ) | ||||||
Change in mortgage loans held for sale, net | 1,964 | (1,033 | ) | (534 | ) | |||||
Changes in: | ||||||||||
Other liabilities | 2,306 | (3,712 | ) | (1,764 | ) | |||||
Other assets | (8,549 | ) | 986 | (10,505 | ) | |||||
Net cash provided by operating activities | 227,716 | 198,430 | 144,056 | |||||||
Cash flows from investing activities: | ||||||||||
Securities available-for-sale: | ||||||||||
Proceeds from sales | 189,628 | 74,960 | 26,827 | |||||||
Proceeds from prepayments and maturities | 138,504 | 101,875 | 117,166 | |||||||
Purchase of securities | (224,837 | ) | (327,720 | ) | (270,908 | ) | ||||
Securities held-to-maturity: | ||||||||||
Proceeds from prepayments and maturities | 44,646 | 32,154 | 16,057 | |||||||
Purchase of securities | (81,060 | ) | 0 | (50,390 | ) | |||||
Proceeds from sale of loans | 7,315 | 0 | 0 | |||||||
Change in loans, net | (315,128 | ) | (99,029 | ) | (147,726 | ) | ||||
Purchase of premises, equipment, and other real estate | (3,065 | ) | (3,544 | ) | (6,403 | ) | ||||
Proceeds from sale of premises and equipment | 15 | 8 | 564 | |||||||
Proceeds from sale of other real estate | 4,134 | 4,552 | 5,470 | |||||||
Assets acquired net of cash | 0 | (577 | ) | (11,913 | ) | |||||
Net cash used in investing activities | (239,848 | ) | (217,321 | ) | (321,256 | ) | ||||
Cash flows from financing activities: | ||||||||||
Change in deposits, net | (60,101 | ) | (28,056 | ) | 211,856 | |||||
Change in federal funds purchased and other short-term borrowings, net | 36,862 | (14,153 | ) | 23,633 | ||||||
Payments on advances from Federal Home Loan Bank | (2,425 | ) | (3,908 | ) | (3,801 | ) | ||||
Proceeds from junior subordinated debentures | 0 | 25,000 | 0 | |||||||
Payments on long-term debt | (1,104 | ) | (12,340 | ) | (116 | ) | ||||
Issuance of common stock | 1,820 | 1,596 | 1,455 | |||||||
Purchase of common stock | (5,110 | ) | (7,068 | ) | (6,449 | ) | ||||
Dividends paid | (11,055 | ) | (9,770 | ) | (9,297 | ) | ||||
Net cash provided by (used in) financing activities | (41,113 | ) | (48,699 | ) | 217,281 | |||||
Net increase (decrease) in cash and cash equivalents | (53,245 | ) | (67,590 | ) | 40,081 | |||||
Cash and cash equivalents at beginning of year | 142,206 | 209,796 | 169,715 | |||||||
Cash and cash equivalents at end of year | $ | 88,961 | $ | 142,206 | $ | 209,796 | ||||
See notes to consolidated financial statements
Notes to Consolidated Financial Statements
Allowance for Loan Losses– The adequacy of the allowance is reviewed quarterly by management using a methodology that includes several key factors. The Corporation utilizes an internal risk grading system for commercial credits, and those larger commercial credits identified through this grading system as having weaknesses are individually reviewed for the customer's ability and potential to repay their loans. The borrower’s cash flow, adequacy of collateral held for the loan, and other options available to the Corporation including legal avenues are all evaluated. Based upon this individual credit evaluation, a specific allocation to the allowance may be made for the loan.
Twelve Months Ended December 31, 2001 | ||||||||||
Reported Earnings | Goodwill Amortization | Pro Forma | ||||||||
Income before income tax expense | $ | 32,769 | $ | 3,121 | $ | 35,890 | ||||
Income tax expense | 10,497 | 821 | 11,318 | |||||||
Net income | $ | 22,272 | $ | 2,300 | $ | 24,572 | ||||
Basic earnings per share | $ | 1.60 | $ | 0.16 | $ | 1.76 | ||||
Diluted earnings per common share | 1.59 | 0.16 | 1.75 |
(in thousands, except per share amounts) Years ended December 31 | 2003 | 2002 | 2001 | ||||||||||
Net income as reported | $ | 28,891 | $ | 27,600 | $ | 22,272 | |||||||
Loss effect of stock compensation | (339 | ) | (495 | ) | (257 | ) | |||||||
Net income pro forma | $ | 28,552 | $ | 27,105 | $ | 22,015 | |||||||
Basic net income per share | As reported | $ | 2.14 | $ | 2.01 | $ | 1.60 | ||||||
Pro forma | 2.10 | 1.98 | 1.58 | ||||||||||
Diluted net income per share | As reported | $ | 2.11 | $ | 1.99 | $ | 1.59 | ||||||
Pro forma | 2.08 | 1.95 | 1.57 |
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. Treasury and government agencies | $ | 34,165 | $ | 149 | $ | 0 | $ | 34,314 | |||||
State and political subdivisions | 89,107 | 2,965 | 0 | 92,072 | |||||||||
U.S. agency mortgage-backed pass through certificates | 180,236 | 4,252 | (748 | ) | 183,740 | ||||||||
Collateralized mortgage obligations | 4,197 | 178 | 0 | 4,375 | |||||||||
Other debt securities | 30,538 | 621 | (10 | ) | 31,149 | ||||||||
Total debt securities | 338,243 | 8,165 | (758 | ) | 345,650 | ||||||||
Marketable equity securities | 76,161 | 44 | 0 | 76,205 | |||||||||
$ | 414,404 | $ | 8,209 | $ | (758 | ) | $ | 421,855 | |||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. Treasury and government agencies | $ | 9,499 | $ | 168 | $ | 0 | $ | 9,667 | |||||
State and political subdivisions | 3,726 | 177 | 0 | 3,903 | |||||||||
U.S. agency mortgage-backed pass through certificates | 74,272 | 0 | (781 | ) | 73,491 | ||||||||
$ | 87,497 | $ | 345 | $ | (781 | ) | $ | 87,061 | |||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. Treasury and government agencies | $ | 88,467 | $ | 1,821 | $ | 0 | $ | 90,288 | |||||
State and political subdivisions | 186,984 | 2,362 | 0 | 189,346 | |||||||||
U.S. agency mortgage-backed pass through certificates | 154,916 | 7,416 | (7 | ) | 162,325 | ||||||||
Collateralized mortgage obligations | 7,685 | 327 | 0 | 8,012 | |||||||||
Other debt securities | 18,811 | 49 | (548 | ) | 18,312 | ||||||||
Total debt securities | 456,863 | 11,975 | (555 | ) | 468,283 | ||||||||
Marketable equity securities | 59,068 | 0 | (12 | ) | 59,056 | ||||||||
$ | 515,931 | $ | 11,975 | $ | (567 | ) | $ | 527,339 | |||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. Treasury and government agencies | $ | 37,318 | $ | 1,052 | $ | 0 | $ | 38,370 | |||||
State and political subdivisions | 13,925 | 378 | 0 | 14,303 | |||||||||
$ | 51,243 | $ | 1,430 | $ | 0 | $ | 52,673 | ||||||
Available-for-Sale | Held-to-Maturity | ||||||||||||
(in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||
Due in one year or less | $ | 33,011 | $ | 33,073 | $ | 5,650 | $ | 5,823 | |||||
Due after one through five years | 14,302 | 15,239 | 2,182 | 2,295 | |||||||||
Due after five through ten years | 33,358 | 35,251 | 5,393 | 5,452 | |||||||||
Due after ten years | 42,602 | 42,824 | 0 | 0 | |||||||||
Mortgage-backed securities and collateralized mortgage obligations | 184,432 | 188,114 | 74,272 | 73,491 | |||||||||
Other securities | 30,538 | 31,149 | 0 | 0 | |||||||||
338,243 | 345,650 | 87,497 | 87,061 | ||||||||||
Marketable equity securities | 76,161 | 76,205 | 0 | 0 | |||||||||
$ | 414,404 | $ | 421,855 | $ | 87,497 | $ | 87,061 | ||||||
Available-for-Sale
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. agency mortgage-backed pass through certificates | $ | 34,871 | $ | 0 | $ | (748 | ) | $ | 34,123 | ||||
Other debt securities | 1,409 | 0 | (10 | ) | 1,399 | ||||||||
$ | 36,280 | $ | 0 | $ | (758 | ) | $ | 35,522 | |||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
U.S. agency mortgage-backed pass through certificates | $ | 74,272 | $ | 0 | $ | (781 | ) | $ | 73,491 |
(in thousands) December 31 | 2003 | 2002 | |||||
Commercial construction | $ | 67,147 | $ | 66,797 | |||
Commercial secured by real estate | 583,924 | 509,856 | |||||
Commercial other | 256,837 | 280,492 | |||||
Real estate construction | 32,495 | 23,311 | |||||
Real estate mortgage | 413,939 | 377,109 | |||||
Consumer | 368,578 | 366,493 | |||||
Equipment lease financing | 13,340 | 10,549 | |||||
$ | 1,736,260 | $ | 1,634,607 | ||||
(in thousands) | 2003 | 2002 | 2001 | |||||||
Balance, beginning of year | $ | 23,271 | $ | 23,648 | $ | 25,886 | ||||
Provision charged to operations | 9,332 | 10,086 | 9,185 | |||||||
Recoveries | 3,754 | 3,674 | 4,023 | |||||||
Charge-offs | (11,704 | ) | (14,137 | ) | (15,446 | ) | ||||
Balance, end of year | $ | 24,653 | $ | 23,271 | $ | 23,648 | ||||
(in thousands) December 31 | 2003 | 2002 | |||||
Land and buildings | $ | 57,140 | $ | 59,005 | |||
Leasehold improvements | 4,826 | 4,328 | |||||
Furniture, fixtures, and equipment | 29,351 | 29,978 | |||||
Construction in progress | 343 | 480 | |||||
91,660 | 93,791 | ||||||
Less accumulated depreciation and amortization | (41,670 | ) | (43,024 | ) | |||
$ | 49,990 | $ | 50,767 | ||||
(in thousands) December 31 | 2003 | 2002 | |||||
Noninterest bearing deposits | $ | 359,403 | $ | 343,565 | |||
NOW accounts | 16,578 | 16,177 | |||||
Money market deposits | 380,613 | 425,973 | |||||
Savings | 217,358 | 202,068 | |||||
Certificates of deposit of $100,000 or more | 357,573 | 354,007 | |||||
Certificates of deposit less than $100,000 and other time deposits | 736,090 | 785,926 | |||||
$ | 2,067,615 | $ | 2,127,716 | ||||
(in thousands) | 2003 | 2002 | 2001 | |||||||
Savings, NOW, and money market accounts | $ | 6,309 | $ | 9,007 | $ | 13,343 | ||||
Certificates of deposit of $100,000 or more | 10,092 | 13,372 | 22,812 | |||||||
Certificates of deposit less than $100,000 and other time deposits | 20,809 | 27,732 | 49,454 | |||||||
$ | 37,210 | $ | 50,111 | $ | 85,609 | |||||
(in thousands) December 31 | 2003 | 2002 | |||||
Due in one year or less | $ | 846 | $ | 2,559 | |||
Due in one to five years | 1,628 | 2,168 | |||||
Due in five to ten years | 689 | 852 | |||||
Due after ten years | 29 | 38 | |||||
$ | 3,192 | $ | 5,617 | ||||
(in thousands) December 31 | 2003 | 2002 | |||||
Subsidiaries: | |||||||
Federal funds purchased | $ | 7,785 | $ | 17,080 | |||
Securities sold under agreements to repurchase | 96,506 | 51,351 | |||||
Capital lease obligations, interest at lender's prime rate, payable in quarterly principal and interest installments of $53 thousand, adjusted for prime rate changes through September 2004, secured by real property. The Bank intends to exercise the purchase option that becomes available in September 2004 for $921 thousand. | 1,002 | 0 | |||||
$ | 105,293 | $ | 68,431 | ||||
(in thousands) December 31 | 2003 | 2002 | |||||
Parent: | |||||||
Junior subordinated debentures, 9.00%, due 3/31/27 | $ | 34,500 | $ | 34,500 | |||
Junior subordinated debentures, 8.25%, due 3/31/32 | 25,000 | 25,000 | |||||
Subsidiaries: | |||||||
Capital lease obligations | 0 | 1,102 | |||||
Other | 0 | 2 | |||||
$ | 59,500 | $ | 60,604 | ||||
(in thousands) | 2003 | 2002 | 2001 | |||||||
Current income taxes | $ | 11,472 | $ | 9,710 | $ | 9,032 | ||||
Deferred income taxes | 561 | 2,448 | 1,465 | |||||||
$ | 12,033 | $ | 12,158 | $ | 10,497 | |||||
(in thousands) | 2003 | 2002 | |||||
Deferred tax assets | |||||||
Allowance for loan losses | $ | 9,234 | $ | 8,036 | |||
Interest on nonperforming loans | 856 | 1,715 | |||||
Other | 1,481 | 1,242 | |||||
Total deferred tax assets | 11,571 | 10,993 | |||||
Deferred tax liabilities | |||||||
Depreciation | (5,841 | ) | (5,168 | ) | |||
FHLB stock dividends | (3,293 | ) | (3,020 | ) | |||
Other | (2,367 | ) | (2,174 | ) | |||
Total deferred tax liabilities | (11,501 | ) | (10,362 | ) | |||
Net deferred tax asset | $ | 70 | $ | 631 | |||
(in thousands) | 2003 | 2002 | 2001 | |||||||
Tax at statutory rate | $ | 14,323 | $ | 13,915 | $ | 11,469 | ||||
Tax-exempt interest | (1,037 | ) | (1,233 | ) | (1,288 | ) | ||||
Other, net | (1,253 | ) | (524 | ) | 316 | |||||
$ | 12,033 | $ | 12,158 | $ | 10,497 | |||||
December 31 | 2003 | 2002 | 2001 | ||||||||||||||||
Options |
|
| Weighted Average Exercise Price |
|
| Options |
|
| Weighted Average Exercise Price |
|
| Options |
|
| Weighted Average Exercise Price | ||||
Outstanding at beginning of year | 514,744 | $ | 17.23 | 335,240 | $ | 15.21 | 285,973 | $ | 15.87 | ||||||||||
Granted | 115,199 | 23.08 | 190,575 | 20.67 | 133,705 | 14.05 | |||||||||||||
Exercised | (37,594 | ) | 17.56 | (8,891 | ) | 15.28 | (6,475 | ) | 15.00 | ||||||||||
Forfeited/expired | (46,064 | ) | 17.31 | (2,180 | ) | 16.25 | (77,963 | ) | 15.63 | ||||||||||
Outstanding at end of year | 546,285 | $ | 18.43 | 514,744 | $ | 17.23 | 335,240 | $ | 15.21 | ||||||||||
Exercisable at end of year | 39,580 | $ | 14.59 | 36,895 | $ | 14.84 | 24,852 | $ | 15.21 |
1998 Option Plan | |||||||
Remaining Life | Outstanding Options | Weighted Average Price | |||||
Five years | 70,948 | $ | 16.89 | ||||
Six years | 79,787 | 13.90 | |||||
Seven years | 108,446 | 14.29 | |||||
Eight years | 181,198 | 20.79 | |||||
Nine years | 105,906 | 23.08 | |||||
Total outstanding | 546,285 | ||||||
Weighted average price | $ | 18.43 | |||||
December 31 | 2003 | 2002 | 2001 | ||||||||||||||||
Options |
|
| Weighted Average Exercise Price |
|
| Options |
|
| Weighted Average Exercise Price |
|
| Options |
|
| Weighted Average Exercise Price | ||||
Outstanding at beginning of year | 120,834 | $ | 14.72 | 169,820 | $ | 15.15 | 228,158 | $ | 14.32 | ||||||||||
Exercised | (22,786 | ) | 14.87 | (40,934 | ) | 16.40 | (57,908 | ) | 11.80 | ||||||||||
Forfeited/expired | 0 | 0 | (8,052 | ) | 15.36 | (430 | ) | 17.03 | |||||||||||
Outstanding at end of year | 98,048 | $ | 14.68 | 120,834 | $ | 14.72 | 169,820 | $ | 15.15 | ||||||||||
Exercisable at end of year | 98,048 | $ | 14.68 | 120,834 | $ | 14.72 | 83,073 | $ | 14.25 |
1989 Option Plan | |||||||
Remaining Life | Outstanding Options | Weighted Average Price | |||||
One year or less | 2,918 | $ | 21.42 | ||||
Two years | 1,990 | 13.20 | |||||
Three years | 41,668 | 12.83 | |||||
Four years | 47,080 | 15.35 | |||||
Five years | 4,392 | 21.26 | |||||
Total outstanding | 98,048 | ||||||
Weighted average price | $ | 14.68 | |||||
(in thousands) | ||||
2004 | $ | 1,213 | ||
2005 | 1,150 | |||
2006 | 1,137 | |||
2007 | 1,087 | |||
2008 | 779 | |||
Thereafter | 11,366 | |||
$ | 16,732 | |||
(in thousands) December 31 | 2003 | 2002 | |||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||
Financial assets | |||||||||||||
Cash and cash equivalents | $ | 88,961 | $ | 88,961 | $ | 142,206 | $ | 142,206 | |||||
Securities | 509,352 | 508,916 | 578,582 | 580,012 | |||||||||
Loans and loans held for sale | 1,736,575 | 1,898,448 | 1,636,886 | 1,791,458 | |||||||||
$ | 2,334,888 | $ | 2,496,325 | $ | 2,357,674 | $ | 2,513,676 | ||||||
Financial liabilities | |||||||||||||
Deposits | $ | 2,067,615 | $ | 2,074,022 | $ | 2,127,716 | $ | 2,139,843 | |||||
Short-term borrowings | 105,293 | 104,536 | 68,431 | 68,431 | |||||||||
Advances from Federal Home Loan Bank | 3,192 | 3,244 | 5,617 | 5,915 | |||||||||
Long-term debt | 59,500 | 66,295 | 60,604 | 62,756 | |||||||||
$ | 2,235,600 | $ | 2,248,097 | $ | 2,262,368 | $ | 2,276,945 | ||||||
(in thousands) | 2003 | 2002 | |||||
Standby letters of credit | $ | 30,654 | $ | 22,763 | |||
Commitments to extend credit | 269,095 | 258,515 |
Actual | For Capital Adequacy Purposes | To Be Well-Capitalized Under Prompt Corrective Action Provision | |||||||||||||||||
(in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||
As of December 31, 2003: | |||||||||||||||||||
Tier 1 capital | |||||||||||||||||||
(to average assets) | $ | 211,751 | 8.73 | % | $ | 97,022 | 4.00 | % | $ | 121,278 | 5.00 | % | |||||||
Tier 1 capital | |||||||||||||||||||
(to risk weighted assets) | 211,751 | 11.35 | 74,626 | 4.00 | 111,939 | 6.00 | |||||||||||||
Total capital | |||||||||||||||||||
(to risk weighted assets) | 235,047 | 12.60 | 149,236 | 8.00 | 186,545 | 10.00 | |||||||||||||
As of December 31, 2002: | |||||||||||||||||||
Tier 1 capital | |||||||||||||||||||
(to average assets) | $ | 196,325 | 8.23 | % | $ | 95,419 | 4.00 | % | $ | 119,274 | 5.00 | % | |||||||
Tier 1 capital | |||||||||||||||||||
(to risk weighted assets) | 196,325 | 10.98 | 71,521 | 4.00 | 107,281 | 6.00 | |||||||||||||
Total capital | |||||||||||||||||||
(to risk weighted assets) | 218,653 | 12.22 | 143,144 | 8.00 | 178,930 | 10.00 |
(in thousands) December 31 | 2003 | 2002 | |||||
Assets: | |||||||
Cash on deposit | $ | 3,707 | $ | 2,264 | |||
Securities available-for-sale | 243 | 187 | |||||
Investment in and advances to subsidiaries | 274,297 | 263,035 | |||||
Excess of cost over net assets acquired (net of accumulated amortization) | 4,973 | 4,973 | |||||
Other assets | 4,600 | 2,827 | |||||
Total assets | $ | 287,820 | $ | 273,286 | |||
Liabilities and shareholders’ equity: | |||||||
Subordinated debt | $ | 61,341 | $ | 61,341 | |||
Other liabilities | 5,086 | 2,526 | |||||
Total liabilities | 66,427 | 63,867 | |||||
Shareholders’ equity | 221,393 | 209,419 | |||||
Total liabilities and shareholders’ equity | $ | 287,820 | $ | 273,286 | |||
Condensed Statements of Income
(in thousands) Year Ended December 31 | 2003 | 2002 | 2001 | |||||||
Income: | ||||||||||
Dividends from subsidiary banks | $ | 18,660 | $ | 17,155 | $ | 28,296 | ||||
Other income | 79 | 70 | 14 | |||||||
Total income | 18,739 | 17,225 | 28,310 | |||||||
Expenses: | ||||||||||
Interest expense | 5,415 | 5,425 | 4,604 | |||||||
Amortization expense | 0 | 6 | 406 | |||||||
Other expenses | 1,018 | 857 | 812 | |||||||
Total expenses | 6,433 | 6,288 | 5,822 | |||||||
Income before income taxes and equity in undistributed income of subsidiaries | 12,306 | 10,937 | 22,488 | |||||||
Applicable income taxes | (2,715 | ) | (2,476 | ) | (1,873 | ) | ||||
Income before equity in undistributed income of subsidiaries | 15,021 | 13,413 | 24,361 | |||||||
Equity in undistributed income of subsidiaries | 13,870 | 14,187 | (2,089 | ) | ||||||
Net income | $ | 28,891 | $ | 27,600 | $ | 22,272 | ||||
(in thousands) Year Ended December 31 | 2003 | 2002 | 2001 | |||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 28,891 | $ | 27,600 | $ | 22,272 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Amortization, net | 0 | 6 | 406 | |||||||
Equity in undistributed earnings of subsidiaries | (13,870 | ) | (14,187 | ) | 2,089 | |||||
Change in other assets and liabilities, net | 2,831 | (6,698 | ) | (1,413 | ) | |||||
Net cash provided by operating activities | 17,852 | 6,721 | 23,354 | |||||||
Cash flows from investing activities: | ||||||||||
Payments to acquire subsidiary | 0 | (1,639 | ) | (15,063 | ) | |||||
Repayment of investments in and advances to subsidiaries | 0 | 16 | 1,800 | |||||||
Other | (2,066 | ) | 12 | 0 | ||||||
Net cash used in investing activities | (2,066 | ) | (1,611 | ) | (13,263 | ) | ||||
Cash flows from financing activities: | ||||||||||
Dividends paid | (11,055 | ) | (9,770 | ) | (9,297 | ) | ||||
Net repurchase of common stock | (3,288 | ) | (5,472 | ) | (4,994 | ) | ||||
Proceeds from long-term debt | 0 | 25,773 | 0 | |||||||
Repayment of long-term debt | 0 | (12,230 | ) | 0 | ||||||
Proceeds from short-term debt | 0 | 0 | 2,500 | |||||||
Repayment of short-term debt | 0 | (8,000 | ) | 0 | ||||||
Net cash used in financing activities | (14,343 | ) | (9,699 | ) | (11,791 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 1,443 | (4,589 | ) | (1,700 | ) | |||||
Cash and cash equivalents at beginning of year | 2,264 | 6,853 | 8,553 | |||||||
Cash and cash equivalents at end of year | $ | 3,707 | $ | 2,264 | $ | 6,853 | ||||
20. Earnings Per Share
Year Ended December 31 | 2003 | 2002 | 2001 | |||||||
Numerator: | ||||||||||
Net income(in thousands) | $ | 28,891 | $ | 27,600 | $ | 22,272 | ||||
Denominator: | ||||||||||
Basic earnings per share: | ||||||||||
Weighted average shares | 13,473,559 | 13,722,355 | 13,935,186 | |||||||
Diluted earnings per share: | ||||||||||
Effect of dilutive securities - stock options | 203,620 | 145,852 | 61,968 | |||||||
Adjusted weighted average shares | 13,677,179 | 13,868,207 | 13,997,154 | |||||||
Earnings per share: | ||||||||||
Basic earnings per share | $ | 2.14 | $ | 2.01 | $ | 1.60 | ||||
Diluted earnings per share | 2.11 | 1.99 | 1.59 |
(in thousands) | 2003 | 2002 | 2001 | |||||||
Reclassification adjustment, pretax: | ||||||||||
Change in unrealized net gains arising during year | $ | (915 | ) | $ | 9,921 | $ | 3,423 | |||
Reclassification adjustment for net gains included in net income | (3,042 | ) | (1,528 | ) | (775 | ) | ||||
Change in unrealized gains on securities available-for-sale | (3,957 | ) | 8,393 | 2,648 | ||||||
Related tax effects: | ||||||||||
Change in unrealized net gains arising during year | (320 | ) | 3,473 | 1,198 | ||||||
Reclassification adjustment for net gains included in net income | (1,065 | ) | (535 | ) | (271 | ) | ||||
Change in unrealized gains on securities available-for-sale | (1,385 | ) | 2,938 | 927 | ||||||
Reclassification adjustment, net of tax: | ||||||||||
Change in unrealized net gains arising during year | (595 | ) | 6,448 | 2,225 | ||||||
Reclassification adjustment for net gains included in net income | (1,977 | ) | (993 | ) | (504 | ) | ||||
Change in unrealized gains on securities available-for-sale | $ | (2,572 | ) | $ | 5,455 | $ | 1,721 | |||
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
A | B | C | |
Plan Category | Number of Common Shares to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Issuance Outstanding Options | Number of Securities Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in Column A) |
Equity compensation plans approved by shareholders | 644,333 | $17.86 | 405,380 |
Equity compensation plans not approved by shareholders | 0 | 0 | 0 |
Total | 644,333 | $17.86 | 405,380 |
PART IV
(a) | The following documents are filed as a part of this report: |
Financial Statements and Financial Statement Schedules | |
Exhibit No. | Description of Exhibits |
3.1 | Articles of Incorporation and all amendments thereto (incorporated by reference to registration statement no. 33-35138) |
3.2 | By-laws of the Corporation, as amended July 25, 1995 (incorporated by reference to registration statement no. 33-61891) |
10.1 | Community Trust Bancorp, Inc. Savings and Employee Stock Ownership Plan (Revised November 2002) (incorporated herein by reference to Form 10-K for the fiscal year ended December 31, 2002 under SEC file no. 000-111-29) |
10.2 | Second restated Pikeville National Corporation 1989 Stock Option Plan (commonly known as Community Trust Bancorp, Inc. 1989 Stock Option Plan) (incorporated by reference to registration statement no. 33-36165) |
10.3 | Community Trust Bancorp, Inc. 1998 Stock Option Plan (incorporated by reference to registration statement no. 333-74217) |
10.4 | Form of Severance Agreement between Community Trust Bancorp, Inc. and executive officers (currently in effect with respect to eleven executive officers) (incorporated herein by reference to Form 10-K for the fiscal year ended December 31, 2001 under SEC file no. 000-111-29) |
10.5 | Senior Management Incentive Compensation Plan (2004) |
21 | List of subsidiaries |
23.1 | Consent of Deloitte & Touche LLP, Independent Auditors |
31.1 | Certification of Principal Executive Officer (Jean R. Hale, Vice Chairman, President and CEO) |
31.2 | Certification of Principal Financial Officer (Kevin J. Stumbo, Executive Vice President/Controller) |
32.1 | Certification of Jean R. Hale, Vice Chairman, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
32.2 | Certification of Kevin J. Stumbo, Executive Vice President/Controller, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) | Reports on Form 8-K required to be filed during the last quarter of 2003 |
1.)On October 15, 2003, the Corporation issued a Form 8-K announcing third quarter earnings. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29) | |
2.)On October 29, 2003, the Corporation issued a Form 8-K with respect to the declaration of a 10% stock dividend. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29) | |
3.)On October 31, 2003, the Corporation issued a Form 8-K announcing the addition of James R. Ramsey to the Board of Directors. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29) | |
(c) | Exhibits |
The response to this portion of Item 15 is submitted as a separate section of this report. | |
(d) | Financial Statement Schedules |
None |
COMMUNITY TRUST BANCORP, INC. | ||
| | |
Date: March 15, 2004 | By: | /s/ Jean R. Hale |
Jean R. Hale | ||
Vice Chairman, President and CEO |
| | |
By: | /s/ Kevin J. Stumbo | |
Kevin J. Stumbo | ||
Executive Vice President/Controller |
Signatures
March 15, 2004 | /s/ Burlin Coleman | Chairman of the Board and Director |
Burlin Coleman | ||
March 15, 2004 | /s/ Jean R. Hale | Vice Chairman, President and Chief Executive Officer |
Jean R. Hale | ||
March 15, 2004 | /s/ Kevin J. Stumbo | Executive Vice President and Controller |
Kevin J. Stumbo | ||
March 15, 2004 | /s/ Charles J. Baird | Director |
Charles J. Baird | ||
March 15, 2004 | /s/ Nick A. Cooley | Director |
Nick A. Cooley | ||
March 15, 2004 | /s/ William A. Graham, Jr. | Director |
William A. Graham, Jr. | ||
March 15, 2004 | /s/ M. Lynn Parrish | Director |
M. Lynn Parrish | ||
March 15, 2004 | /s/ E. M. Rogers | Director |
E. M. Rogers | ||
March 15, 2004 | /s/ James R. Ramsey | Director |
James R. Ramsey |
COMMUNITY TRUST BANCORP, INC. AND SUBSIDIARIES
Exhibit No. | Description of Exhibits |
3.1 | Articles of Incorporation and all amendments thereto (incorporated herein by reference) |
3.2 | By-laws of the Corporation, as amended July 25, 1995 (incorporated herein by reference) |
10.1 | Community Trust Bancorp, Inc. Savings and Employee Stock Ownership Plan (Revised November 2002) (incorporated herein by reference) |
10.2 | Second restated Pikeville National Corporation 1989 Stock Option Plan (commonly known as Community Trust Bancorp, Inc. 1989 Stock Option Plan) (incorporated herein by reference) |
10.3 | Community Trust Bancorp, Inc. 1998 Stock Option Plan (incorporated herein by reference) |
10.4 | Form of Severance Agreement between Community Trust Bancorp, Inc. and executive officers (currently in effect with respect to eleven executive officers) (incorporated herein by reference) |
10.5 | Senior Management Incentive Compensation Plan (2004) |
21 | List of subsidiaries |
23.1 | Consent of Deloitte & Touche LLP, Independent Auditors |
31.1 | Certification of Principal Executive Officer (Jean R. Hale, Vice Chairman, President and CEO) |
31.2 | Certification of Principal Financial Officer (Kevin J. Stumbo, Executive Vice President/Controller) |
32.1 | Certification of Jean R. Hale, Vice Chairman, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) |
32.2 | Certification of Kevin J. Stumbo, Executive Vice President/Controller, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |