UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1993
OR
{} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE
TRANSITION PERIOD ENDED .
COMMISSION FILE NUMBER 0-16878
CBT CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky 61-1030727
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
333 Broadway, Paducah, Kentucky 42001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 575-5100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
None On which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this
chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy
information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
The aggregate market value of the voting stock held by
nonaffiliates of the registrant at March 23, 1994 was
$ 98,873,958.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of March 23, 1994:
2,767,519 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement for the annual
meeting of shareholders to be held April 19, 1994 are
incorporated by reference in Part III of the Form 10-K.
The Exhibit Index in on Page 43 & 44.
This filing contains 46 Pages.
TABLE OF CONTENTS
PART I
Item Page
1. Business 1
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial
of Financial Condition and Results
of Operations 12
8. Financial Statements and Supplementary Data 20
9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 20
PART III
10. Directors and Executive Officers of the Registrant 20
11. Executive Compensation 20
12. Security Ownership of Certain Beneficial Owners
and Management 40
13. Certain Relationships and Related Transactions 40
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 40
Signatures 41
PART I
ITEM 1. BUSINESS
CBT Corporation (the "Corporation"), a Kentucky corporation
organized in March, 1983, is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended. The
Corporation is the holding company parent of Citizens Bank &
Trust Company of Paducah, Kentucky ("Citizens") and Pennyrile
Bancshares, Inc. of Hopkinsville, Kentucky. The Corporation
acquired 100% of the common stock of Pennyrile Bancshares,
Inc. on November 30, 1993.
At December 31, 1993, the Corporation had total consolidated
assets of $600.5 million, total net loans of $377.7 million
and total stockholders' equity of $66.9 million.
CITIZENS BANK AND TRUST COMPANY
Citizens was authorized to commence business in the year 1888
and conducts a general banking business embracing most of the
services, both consumer and commercial, which banks may
lawfully provide, including the following principal services:
acceptance of demand, savings, and time deposits; the making
of commercial, consumer, mortgage, and credit card loans;
personal and corporate trust services, safe deposit
facilities, and correspondent banking services. While
primarily serving customers in the Paducah, McCracken County
area, Citizens' market area also includes several other
counties in Western Kentucky and nearby Southern Illinois. On
September 1,1993, the Citizens completed the purchase of all
assets and assumption of all liabilities of three McCracken
County locations of Security Trust Federal Savings and Loan
Association. In the transaction the Corporation assumed
approximately $62.2 million in deposits, acquired
approximately $4.2 million in loans, premises and equipment
and other assets and received approximately $58 million in
cash. Upon consummation of the transaction one of the
locations continued to operate as Citizens branches. The
remaining two branches were consolidated with existing
Citizens locations. Total assets of Citizens before
intercompany eliminations at December 31, 1993 approximated
$542.6 million.
Citizens conducts business in its principal office at 333
Broadway, Paducah, Kentucky, in 5 branch facilities located
within the City of Paducah, Kentucky, and 2 branch facilities
in nearby Lone Oak and Reidand, Kentucky, all within McCracken
County. In addition five automated teller machines are
installed in select locations throughout McCracken County, all
at sites other than existing bank locations.
At the present time, Citizens, through outside consultants, is
conducting a complete review of its existing branch locations;
however, no specific plans, arrangements or commitments to
open new branch offices or to change the location of or
otherwise discontinue its use of the present locations have
been finalized.
In July 1984, the Corporation acquired 100% of the outstanding
common stock of Fidelity Credit Corporation ("FCC"), a
consumer finance company. In April 1993, ownership of FCC was
transferred to Citizens.
FCC, a Kentucky corporation, engages in the business of making
consumer loans, both secured and unsecured. In addition to
operating in Paducah, FCC is also licensed to conduct business
in the following cities located in Kentucky: Berea, Somerset,
Russell Springs, Campbellsville, Stanford, Danville, Whitley
City, Mayfield, Princeton, Owensboro, Madisonville,
Hopkinsville, Leitchfield, Russellville, and Central City.
FCC operates under the Consumer Loan Act and Industrial Loan
Act of Kentucky. In addition to the offices located in
Kentucky, FCC, as of December 31, 1992, also operated in
Tennessee with offices in Fayetteville, Murfreesboro,
Columbia, Clarksville, Tullahoma, and Union City. On February
18, 1993, the Tennessee offices, representing assets of $6.1
million, were sold to a consumer finance company located in
Dallas, Texas.
FCC operations are primarily financed by short and long-term
borrowings from a regional institution. Total assets before
intercompany eliminations at December 31, 1993 approximated
$17.3 million.
PENNYRILE BANCSHARES, INC.
Pennyrile Bancshares, Inc. was organized in 1990 and is a
registered bank holding company under the Bank Holding Company
Act of 1956, as amended. Its principal asset is Pennyrile
Citizens Bank and Trust Company ("Pennyrile"), a commercial
bank located in Hopkinsville, Kentucky. Pennyrile has
operated as a commercial bank since 1976 offering the same
wide array of financial products and services as offered by
Citizens Bank and Trust Company to individuals and businesses
primarily located in Hopkinsville and Christian County,
Kentucky. At December 31, 1993, Pennyrile had total assets of
approximately $50 million.
Pennyrile's principal office is located at 2800 Fort Campbell
Boulevard in Hopkinsville. In addition, Pennyrile has one
branch located within Hopkinsville and another located in
nearby Crofton, Kentucky.
COMPETITION
Competition for banking and related financial services is
active in all geographical areas served by the Corporation's
subsidiaries. The Corporation's subsidiaries compete with
other financial institutions in all product lines which are
presently offered. As a result of deregulation in the banking
industry, local bank competition has intensified and, at
present, both price and product range are critically important
in maintaining and expanding financial relationships. While
generally limited to Western Kentucky, the Bank's competitive
marketplace does reach beyond state boundaries to Southern
Illinois, and Northwest Tennessee.
Citizens competes in the McCracken County area with two
commercial banks, a branch of a Louisville, Kentucky based
savings association, and ten credit unions. Each of the
commercial banks are locally owned with branches throughout
McCracken County. According to recent studies, total deposits
in McCracken County aggregated $ 1.1 billion. Citizens held
approximately $428 million or 38.9% of the total. In assets,
as of December 31, 1993, Citizens was the largest financial
institution in McCracken County.
In its secondary market, Southern Illinois and Northwest
Tennessee, the Bank actively competes with other commercial
banks and financial institutions for all types of deposits,
loans, trust accounts, and the provision of financial, trust
and other services. The Bank also competes generally with
insurance companies, savings and loan associations, credit
unions, other financial institutions, and institutions which
have expanded into the quasi-financial market.
Pennyrile competes in Christian County with two commercial
banks, two savings and loan associations and three credit
unions. One of the commercial banks is owned by a regional
institution while the other is owned by an out-of-state
institution. One of the savings and loan associations is
affiliated with a regional commercial bank while the other is
locally owned. According to recent research, total deposits
in Christian County totaled approximately $521 million.
Pennyrile held approximately 7% of this total.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated
under both federal and state law. Any change in applicable
law or regulation may have a material effect on the business
and prospects of the Corporation and its subsidiaries.
The Corporation, as a registered bank holding company, is
subject to the supervision of and regulation by the Federal
Reserve Board under the Bank Holding Company Act of 1956. In
addition, the Corporation is subject to the provisions of
Kentucky's banking laws regulating bank acquisitions and
certain activities of controlling bank stockholders.
Citizens and Pennyrile are subject to the supervision of, and
regular examination by, the FDIC and the Kentucky Department
of Financial Institutions. The FDIC insures the deposits of
the Banks to the current maximum of $100,000 per depositor.
STATISTICAL INFORMATION
Specific financial information required to be included under
Item 1 of this Form 10-K is listed below along with a page
reference where the information can be found in this Form
10-K.
Description of Financial Information Reference Page
A. Average Balance Sheets and Net Interest
Analysis 5
B. Rate Volume Analysis of Year-to-Year Changes
in Net Interest Income 6
C. Carrying Value of Investment Securities 28
D. Carrying Value of Securities Available for Sale 29
E. Maturity Distribution of Investment Securities 29
F. Maturity Distribution of Securities Available for Sale 30
G. Loans Outstanding 6
H. Loan Maturities and Interest Sensitivity 7
I. Nonperforming Assets 7
J. Impact of Nonaccural Loans and Interest Income 30
K. Summary of Loan Loss Experience 8
L. Allocation of Allowance for Loan Losses 8
M. Average Deposits and Rates Paid 5
N. Maturity of Time Deposits of $100,000 or More 9
O. Return on Equity and Assets 11
P. Federal Funds Purchased and Repurchase Agreements 22
A. Three Year Average Balance and Net Interest Analysis
1993 1992 1991
Average Interest Yield Average Interest Yield Average Interest Yield
Balance & Fees /Rate Balance & Fees /Rate Balance & Fees /Rate
Assets
Earnings Assets:
Loans, net(1) 348,030 33,207 9.54% 327,219 34,492 10.54% 319,830 37,548 11.74% 0
Taxable
Investment
Securities 28,661 2,043 7.13% 34,583 2,533 7.32% 41,054 3,258 7.94%
Tax-exempt
investment
securities 43,675 4,389 10.05% 36,691 3,753 10.23% 30,566 3,357 10.98%
Mortgage-backed
securities 109,057 5,716 5.24% 103,312 6,824 6.61% 87,949 7,526 8.56%
Federal funds
sold 3,545 126 3.56% 9,355 373 3.99% 21,803 1,323 6.07% 7%
Total Earning
Assets 532,968 45,481 8.53% 511,160 47,975 9.39% 501,202 53,012 10.58%
Non-Earning
Assets:
Cash and Due
from banks 18,721 18,324 17,518
Premises and
equipment, net 11,328 11,204 11,260
Other 7,596 7,193 7,254
Allowance for
Loan losses (8,085) (7,162) (6,233)
Total Assets 562,528 540,719 531,001
Liabilities
and Stockholders' Equity
Interest-Bearing
Liabilities:
Demand
deposits 115,019 2,975 2.59% 118,374 3,819 3.23% 120,739 6,427 5.32%
Time deposits 257,965 13,493 5.23% 255,844 15,484 6.05% 271,169 20,469 7.55%
Savings
deposits 25,917 679 2.62% 19,598 652 3.33% 16,318 809 4.96%
Federal funds
purchased and
securities
sold under
agreements to
repurchase 35,832 1,039 2.90% 25,070 860 3.43% 8,082 462 5.72%
Other borrowings 16,237 828 5.10% 18,129 1,182 6.52% 17,183 1,364 7.94% 4%
Total Interest
Bearing
Liabilities 450,970 19,014 4.22% 437,015 21,997 5.03% 433,491 29,531 6.81%
Non-Interest
Bearing
Liabilities:
Demand
deposits 41,670 38,419 37,761
Other 5,772 6,044 6,368
Total
Liabilities 498,412 481,478 477,620
Stockholder'
Equity 64,116 59,241 53,381
Total
Liabilities
and Stockholders'
Equity 562,528 540,719 531,001
Net Interest
income 26,467 25,978 23,481
Net yield on
interest
earning
assets 4.97% 5.08% 4.68%
For purposes of these calculations, non-accruing loans are
included in the daily average loan amount outstanding.
B. Rate Volume Analysis of Changes in Net Interest Income
(Tax equivalent basis,
$ in thousands)
1993 vs. 1992 1992 vs. 1991
Attributed to Attributed to
Total Total
Dollar Dollar
Volume Rate Change Volume Rate Change
Interest income on:
Loans, net 2,110 (3,395) (1,285) 851 (3,097) (3,056)
Taxable investment
securities (424) (66) (490) (487) (238) (725)
Tax-exempt investment
securities 1,066 (1,538) (472) 1,823 (2,129) (306)
Federal funds sold (210) (37) (247) (592) (358) (950)
Total interest
income 2,542 (5,036) (2,494) 1,595 (6,632) (5,037)
Interest expense on:
Deposits 255 (3,063) (2,808) (948) (6,802) (7,750)
Federal funds
purchased and
securities
sold under
agreements
to repurchase 327 (148) 179 645 (247) 398
Other (115) (239) (354) 72 (254) (182)
Total interest
expense 467 (3,450) (2,983) (231) (7,303) (7,534)
Net interest income 2,075 (1,586) 489 1,826 671 2,497
The change in interest due to both rate and volume has been allocated to
rate and volume changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
G. Loan Portfolio at December 31, Five Year Summary
($ in thousands )
1993 1992 1991 1990 1989
Commercial 148,254 157,054 157,497 164,741 174,301
Residential 142,963 113,312 100,745 89,778 79,715
Consumer 93,906 78,164 79,035 78,615 79,391
Total loans 385,123 348,530 337,277 333,134 333,407
Less: unearned
interest 7,398 10,955 11,764 11,815 11,924
Total loans 377,725 337,575 325,513 321,319 321,483
H. Loan Maturities (Contractual) and Interest Sensitivity
($ in thousands )
December 31, 1993
One Year One Through Over Total
Or Less Five Years Five Years Gross Loans
Commercial 99,350 28,053 20,851 148,254
Residential 111,577 27,170 4,216 142,963
Consumer 25,417 65,550 2,939 93,906
Total 236,344 120,773 28,006 385,123
Loans with predetermined
rate 46,434 87,236 8,158 141,828
Loans with floating rate 189,910 33,537 19,848 243,295
Total 236,344 120,773 28,006 385,123
I. Non-Performing Assets - December 31
($ in thousands)
1993 1992 1991 1990 1989
Non-accrual loans 668 1,043 1,615 1,551 8,012
Ninety days past due 235 176 942 773 328
Other real estate owned 35 751 1,087 760 383
Total non-performing assets 938 1,970 3,644 3,084 8,723
Non-performing assets as a
% of total loans and other
real estate owned 0.25% 0.58% 1.12% 0.96% 2.71%
K. Allowance for Loan Losses
($ in thousands )
1993 1992 1991 1990 1989
Balance, beginning of year 7,658 6,532 5,130 6,421 4,597
Loans Charged-Off:
Commercial 282 685 1,155 4,340 1,797
Residential 0 8 26 142 151
Consumer 468 745 694 817 749
Total 750 1,438 1,875 5,299 2,697
Recoveries on Charged-Off Loans:
Commercial 275 164 475 142 292
Residential 47 18 21 16 22
Consumer 174 187 172 162 282
Total 496 369 668 320 596
Net Charge-offs 254 1,069 1,207 4,979 2,101
Provision for Loan Losses 1,256 2,199 2,580 3,678 3,837
Adjustments related to
purchase sale of finance
receivables (177) (4) 29 10 88
Balance, end of year 8,483 7,658 6,532 5,130 6,421
Average loans for the year 348,030 327,219 319,830 316,237 317,222
Allowance/year-end loans 2.25% 2.27% 2.01% 1.60% 2.00%
Net charge-offs average loans 0.07% 0.33% 0.38% 1.57% 0.66%
L. Management's Allocation of Allowance for Loan Losses - December 31
($ in thousands )
1993 1992 1991 1990 1989
Commercial 3,010 2,651 3,033 2,866 3,199
Residential 415 350 269 274 214
Consumer 1,393 1,242 1,185 837 802
Unallocated 3,665 3,415 2,045 1,153 2,206
Total 8,483 7,658 6,532 5,130 6,421
N. Certificates of Deposit of $100,000 or more - December 31
($ in thousands )
1993 1992
3 months or less 5,417 12,396
3 - 6 months 10,753 2,714
6 -12 months 20,767 18,553
Over 12 months 7,662 14,358
Total 44,599 48,021
ITEM 2. PROPERTIES
The offices of the Corporation and the main office of
Citizens, occupy six floors of the ten-story building known as
the Citizens Bank Building located in downtown Paducah,
Kentucky, 333 Broadway. Citizens owns the Citizens Bank
building and the property on which all of the present branch
banks are located, in addition to properties located at Fourth
and Jefferson Streets and Third and Jefferson Streets in
Paducah which are utilized as parking lots for customers and
tenants occupying the top four floors of the main office.
The nature of FCC's business is such that investment in
tangible property is not significant to its operations. No
real estate is owned and FCC leases all of its facilities.
These leases normally have terms of three years with aggregate
annual rental of approximately $150,000.
Pennyrile owns the property on which its main office and
Crofton branch is located. The Hopkinsville branch is located
on property Pennyrile leases from a director of Pennyrile.
This lease is for a term of 99 years at an annual lease
payment amount of $ 11,000.00.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of operations, the Corporation's
subsidiaries are defendants in various legal proceedings. In
the opinion of management, there is no preceding pending, or
to the knowledge of management, threatened in which an adverse
decision could result in a material adverse change in the
business or consolidated financial position of the Corporation
and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Corporation's Common Stock, no par value, is currently
traded over the counter and is quoted on the NASDAQ Small-Cap
Market under the symbol CBTC. The approximate number of
record holders as of March 23, 1994 was 1,018. The high and
low bid information along with dividend payments for each
quarterly period during the last two fiscal years is as
follows:
Low High Dividends
1st Quarter 1993 27.50 32.25 0.18
2nd Quarter 1993 32.25 35.50 0.20
3rd Quarter 1993 33.75 36.25 0.20
4th Quarter 1993 36.25 37.75 0.20
1st Quarter 1992 20.00 22.67 0.18
2nd Quarter 1992 22.67 30.25 0.18
3rd Quarter 1992 26.50 31.50 0.18
4th Quarter 1992 26.00 29.50 0.18
ITEM 6. SELECTED FINANCIAL DATA
($ in thousands except per common share data)
1993 1992 1991 1990 1989
RESULTS OF OPERATIONS:
Net Interest income 25,057 24,825 22,340 21,923 21,501
Procession for loan losses 1,256 2,199 2,580 3,678 3,837
Net Interest income after
provision for loan losses 23,801 22,626 19,760 18,245 17,664
Non-interest income 5,221 4,651 4,446 4,256 4,126
Gain on sale of finance
receivables 553 - - - 172
Gain on sale of securities 134 574 498 94 223
Non-interest expense 19,366 17,935 16,718 16,189 14,129
Income before income taxes 10,343 9,916 7,896 6,406 8,056
Income taxes 2,431 2,302 1,768 1,710 2,083
Net Income 7,912 7,614 6,218 4,696 5,973
PER COMMON SHARE DATA:
Net income 2.86 2.75 2.25 1.70 2.16
Cash Dividends .78 0.72 0.69 0.67 0.60
Book value per common share at
year-end 24.19 22.06 19.99 18.37 17.27
AVERAGES:
Total assets 562,528 540,719 531,001 504,861 468,759
Total deposits
and corporate cash
management repurchase
agreements 464,364 450,564 450,706 427,336 397,787
Loans, net of unearned
interest 348,030 327,219 319,830 316,635 317,517
Stockholder's equity 64,116 59,241 53,381 49,822 45,864
PERFORMANCE RATIOS:
Return on average total assets 1.41% 1.41% 1.17% .93% 1.27%
Return on average total
stockholders' equity 12.34% 12.85% 11.65% 9.43% 13.02%
Average total stockholders'
equity to average total
assets 11.40% 10.96% 10.05% 9.87% 9.78%
Dividend pay-out ratio 25.48% 26.17% 31.03% 30.00% 22.87%
Net charge-offs to average
loans 0.07% 0.33% 0.38% 1.57% 0.66%
Allowance for loan losses
as a percentage of
year-end loans 2.25% 2.27% 2.01% 1.60% 2.00%
Net interest yield 4.97% 50.8% 4.68% 4.84% 5.12%
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CBT Corporation (the Corporation) is a bank holding company
located in Paducah, Kentucky. The Corporation provides
banking services through its banking subsidiaries, Citizens
Bank & Trust Company (Citizens) and Pennyrile Citizens Bank &
Trust Company (Pennyrile) and consumer finance services
through its subsidiary, Fidelity Credit Corporation (FCC).
On September 1, 1993, the Corporation completed the purchase
of all assets and assumption of all liabilities of three
branches of Security Trust Federal Savings and Loan
Association (Security). In the transaction the Corporation
assumed approximately $62.2 million in deposits, acquired
approximately $4.2 million in loans, premises and equipment
and other assets and received approximately $58 million in
cash. This transaction was accounted for under the purchase
method; therefore, 1993 amounts reflect four months of
operations. Historical data was not affected by this
transaction.
On November 30, 1993, the Corporation completed the
acquisition of Pennyrile Bancshares, Inc. and its wholly owned
subsidiary Pennyrile Citizens Bank and Trust Company
(Pennyrile). At the time of the acquisition Pennyrile had
consolidated assets of approximately $46.5 million, total
deposits of approximately $38.5 million and total
stockholders' equity of approximately $4.3 million. This
transaction was accounted for under the pooling of interests
method; therefore, 1993 and all historical data have been
adjusted for the effects of this acquisition.
OVERVIEW
Net income in 1993 of $7,912,000 or $2.86 per common share was
an increase of 3.9% over 1992 net income of $7,614,000 or
$2.75 per common share. Total assets at December 31, 1993 were
$600.5 million, an increase of 8.3% over assets at December
31, 1992 of $554.5 million.
NET INTEREST INCOME
Net interest income, on a tax equivalent basis, is the
difference between interest earned on earning assets and
interest expensed on interest bearing liabilities. The net
interest rate spread is the difference between the average
rate of interest earned on average earning assets and the
average rate of interest expensed on average interest bearing
liabilities. The net interest margin is net interest income
divided by average earning assets. For computational purposes,
non-accrual loans are included in earning assets. The
following schedule presents the net interest spread and net
interest margin for 1993 and 1992. A complete analysis of net
interest income, with average balances and related interest
rates for the past three years is shown in TABLE A of the
Statistical Information and should be referred to in
conjunction with reading this section. In addition, the
effects to net interest income resulting from changes in
interest rates and volumes is presented in TABLE B of the
Statistical Information.
The Corporation's yield on earning assets declined 86 basis
points to 8.53% as these average assets increased 4.3% to $533
million in 1993. As interest rates remained stable in 1993 the
Corporation's yield on its loan portfolio dropped 100 basis
points to 9.54% as average outstanding increased approximately
6.4%, most notably in residential real estate. This decline
was primarily attributable to rate pressures, both local and
regional, within the commercial loan portfolio, residential
real estate refinancings and repricing of the mostly
adjustable mobile home portfolio. Average investment and
mortgage-backed securities (MBS) increased 3.9%. The
Corporation's strategy of shortening the portfolio's maturity
and taking advantage of adjustable rate MBS products combined
with increased amortization of premiums resulting from
accelerated principal payments on MBS continued to affect the
portfolio's yield. In 1993 the yield on investment securities
and MBS declined 81 basis points to 6.7%.
The Corporation's overall cost of funds continued to decline
in 1993, dropping 81 basis points to 4.22%, while average
interest bearing liabilities increased 3.2%. Interest bearing
demand deposits and savings accounts recorded a slight
increase as the Corporation was successful in reducing these
interest costs to 2.6% in 1993, down from 3.2% in 1992. As
interest rates remained low in 1993 and the Corporation
capitalized on repricing opportunities, time deposits
(certificates of deposit and individual retirement accounts)
increased only slightly, less than 1%, offsetting the inflow
of approximately $17 million (average) of these deposits from
Security. Time deposits repriced downward 82 basis points in
1993. Borrowings of the Corporation, primarily securities sold
under agreements to repurchase, federal funds and through the
Federal Home Loan Bank increased $8.9 million, or 20.5%, in
1993 at an average interest cost of 3.6%, down from 4.7% in
1992.
PROVISION FOR LOAN LOSSES
The provision for loan losses in 1993 declined $943,000 or
42.9% to $1,256,000. This decline will be included in further
discussions on loan quality and the allowance for loan losses
included later in this review under the caption "Non-
Performing Loans and Assets and Allowance for Loan Losses."
The provision in 1993 exceeded net charge-offs by 394.5% and
was .36% of average loans as compared to .67% in 1992.
NON-INTEREST INCOME
Non-interest income in 1993 increased $684,000 or 13.1% as
compared to 1992. Included in both periods were certain
gains associated with the sale of assets and/or securities.
Exclusive of such gains, non-interest income in 1993
increased 12.3% over 1992.
Trust and investment advisory fees include not only those fees
generated through the subsidiaries' trust departments, but
also fees generated by Invest, a full-service brokerage area
of Citizens.
Trust income increased 5.6% in 1993 as assets under management
increased to $237.1 million as compared to $213.4 million at
December 31, 1992. The general economic environment continues
to generate volume for Invest services, thus allowing fees in
1993 of $688,000 to approximate 1992 record earnings.
Service charges on deposits increased significantly in 1993,
approximately 17.9%. In 1993 some specific account and
maintenance fee enhancements were implemented. However, the
assumption of approximately 5,000 transaction accounts from
Security in 1993 provided the most notable effect on service
charges.
Included in 1993 is approximately $553,000 in gains derived
from FCC selling all of its branch offices in Tennessee. At
the time of the sale, these offices were profitable; however,
it was management's desire to concentrate FCC's focus to
Kentucky service areas, both existing and future expansion.
The 1993 and 1992 gains from the sale of investment securities
are the result of management's repositioning of the investment
portfolio in an attempt to take advantage of existing economic
factors and better position the portfolio going forward.
The most significant non-interest income fluctuation included
in the "Other" category involved Citizens' secondary mortgage
market fees. Based on the continued residential real estate
loan demand in 1993, these fees increased approximately 40.9%
over 1992.
NON-INTEREST EXPENSE
The Corporation is keenly aware that effective management of
operating costs is essential to the continued profitability of
the organization. However, management is also sensitive to
the fact that effective management of these costs must not be
a burden to the customer.
Non-interest expenses increased approximately 8% in 1993 as
compared to 1992.
Salaries and employee benefits increased 5.7% in 1993 as a
result of normal merit/promotional increases and the addition
of 22 full-time equivalent (FTE) employees in connection with
the Security transaction. At December 31, 1993, the number of
FTE employees was 311 as compared to 290 at December 31, 1992.
The 14.9% increase in depreciation of building and equipment
and the amortization of intangibles in 1993 is primarily
attributable to two factors. Depreciation expense increased
approximately 8.9% as the Corporation continued to invest
significant funds in technology and equipment for the purpose
of providing our customers with the highest quality service.
In addition, the Corporation acquired three facilities in the
Security transaction. Amortization expense of approximately
$85,000 was recognized in 1993 resulting from the Security
transaction in which a core deposit intangible of $1,555,000
and other associated acquisition costs were recorded and are
being amortized over ten and three years, respectively.
Other non-interest expense such as data processing, postage,
telephone and supplies increased an aggregate of approximately
6% as a result of normal volume increases affected by the
addition of approximately 10,500 accounts from Security. In
addition, advertising expenses rose $214,000 or 95.5% over
1992 as Citizens' market plan and new image campaign was
aggressively developed and initiated in 1993.
INCOME TAX EXPENSE
Effective tax rates were 23.5%, 23.2% and 22.1% in 1993, 1992
and 1991, respectively. The Corporation adopted SFAS No. 109,
"Accounting for Income Taxes" in January 1993. There were no
material effects on the consolidated financial statements as a
result of this change. A further discussion of the
Corporation's income taxes can be found under Note L to the
Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
Total assets of $600.5 million at year-end 1993 represents a
$46 million or 8.3% increase from one year ago. Average
earning assets increased $21.8 million or 4.3% in 1993 while
interest bearing liabilities increased $13.9 million or 3.2%.
LOANS
Average loans, net of unearned interest, increased $20.8
million or 6.4% in 1993. As was the case in 1992, this
increase was primarily concentrated in the residential real
estate and mobile home loan portfolios. These portfolios
increased $16.1 million and $6 million, respectively. Average
consumer loans increased approximately $6 million as the
Corporation continued to emphasize retail markets. Commercial
loan demand was depressed during most of 1993; however, in the
fourth quarter 1993 this loan demand did show signs of
improvement. Average commercial loans outstanding during 1993
were $141.9 million, a decline of 1.5% from $144.1 million one
year ago.
NON-PERFORMING LOANS AND ASSETS AND ALLOWANCE FOR
LOAN LOSSES
Non-performing loans include non-accrual loans, loans past due
over 90 days and other real estate owned. At December 31,
1993, non-performing loans were $938,000 or .25% of total
loans and other real estate owned. This represents a
$1,032,000 or 52.4% decline from one year ago when non
performing loans were $1,970,000 or .58% of loans and other
real estate owned.
A breakdown of the Corporation's non-performing loans is
reflected in TABLE I of the Statistical Information. At
December 31, 1993, 1992, 1991 and 1989 no loans were
classified as restructured troubled debt. At year-end 1990,
such troubled debt restructuring totaled $2,400,000.
Non-accrual loans declined $375,000 in 1993 through the
systematic workout of specific commercial credits. The
$716,000 decline from 1992 in other real estate owned is the
result of properties connected with three commercial credits
being liquidated and the proceeds applied to the asset
balance.
The Corporation's internal credit review process is designed
to identify potential problem credits in a timely manner. At
December 31, 1993 and 1992, the Corporation had identified
approximately $7.2 million and $7.8 million, respectively, of
such credits. These credits are not included in nonperforming
assets since the borrowers met all applicable loan agreement
terms.
In keeping with management's firm commitment of maintaining
high asset quality and above average peer group comparisons,
the Corporation's allowance for loan losses increased
approximately $825,000 or 10.8% even though the provision for
loan losses declined 42.9%. At December 31, 1993, the
allowance for loan losses as a percent of total loans was
2.25% as compared to 2.27% at December 31, 1992. This ratio
declined slightly due to lower provisions and increased loan
growth. The Corporation was able to achieve a higher allowance
for loan losses despite a lower provision as net charge-offs
to average loans declined to .07% at year-end 1993 as compared
to .33% one year ago. The allowance for loan losses to non-
performing loans, an indication of the relative ability to
cover problem loans with existing reserves, increased to 904%
at December 31, 1993 from 389% at December 31, 1992.
INVESTMENTS AND FEDERAL FUNDS SOLD
In 1992 and 1993, in anticipation of a new accounting
standard, the Corporation revised its investment accounting
policy by reclassifying investment securities having an
amortized cost of $51.7 million and $21.1 million,
respectively, to securities available for sale. In 1993, SFAS
No. 115 "Accounting for Certain Investments and Debt and
Equity Securities" was released. The specific details of this
pronouncement are discussed later in this review under the
caption "Accounting Pronouncements."
For purposes of discussion, investment securities and
securities available for sale are reviewed in aggregate and
ignore the effects of these reclassifications.
Average investment securities increased approximately $6.8
million or 3.9% in 1993 over 1992. This growth is primarily
concentrated in the tax-exempt municipals and mortgage backed
securities. Principal payments on mortgage-backed securities
increased significantly in 1993 as loan pools began to prepay
as loan rates remained low and refinancing continued. The
Corporation, by virtue of deposit growth, a roll-off of
approximately $5.8 million in federal funds and liquidity
within the investment portfolio, was able to fund loan growth
allowing funds obtained from Security and mortgage-backed
securities' principal pay downs to be reinvested in shorter-
term adjustable mortgage-backed instruments.
DEPOSITS AND BORROWED FUNDS
Average deposits were affected in 1993 by the assumption of
approximately $62 million in deposits from Security. The vast
majority of these deposits (approximately $49 million) was
certificates of deposits; however, deposits of all types were
assumed.
Total average deposits increased approximately $8.3 million or
1.9% in 1993. The typically shorter-term transaction accounts
recorded the most notable gains. NOW accounts increased $4.8
million or 8.1% while savings accounts increased $6.3 million
or 32.3%. Average money market accounts declined approximately
$8.3 million or 14.2%, while overnight cash management
repurchase agreements increased $6.8 million or 42.9%. Time
deposits (certificates of deposits and individual retirement
accounts) increased only slightly in 1993, $2.1 million, or
less than one percent. As deposit rates remained low in 1993
and the Corporation aggressively repriced deposit products,
customers continued to move out of certificates of deposit and
into lower yielding, more liquid interest-bearing transaction
accounts. This shifting of deposits offset the $49 million in
certificates of deposit assumed from Security.
Asset growth in 1993 was primarily funded with borrowings from
the Federal Home Loan Bank (FHLB) and the use of federal
funds. Borrowings from the FHLB in 1993 averaged $7.3
million, an increase of $3.4 million from 1992. The
Corporation has found that the FHLB offers a wide array of
funding programs at very competitive pricing. By utilizing
these various products, the Corporation has been better able
to match fund asset growth. Average federal funds purchased
increased $6.4 million over 1992 as the Corporation used these
funds to support asset growth as well as take advantage of
certain investment opportunities in anticipation of funds
generated in the Security transaction.
STOCKHOLDERS' EQUITY
Total stockholders' equity increased 9.6% to $66.9 million at
December 31, 1993. The ability to generate capital internally
is principally determined by earnings performance. This
earnings performance is typically measured by return on
average equity which was 12.34% and 12.85% in 1993 and 1992,
respectively. Book value per common share at December 31, 1993
was $24.19 as compared to $22.06 one year ago, a 9.7%
increase.
In 1993, the stockholders of the Corporation approved the
authorization of an additional 2,000,000 shares of common
stock bringing total authorized shares to 6,000,000.
Subsequent to the Pennyrile transaction, the Corporation had
issued an outstanding 2,767,519 shares of common stock.
Management is currently not aware of any recommendations by
regulatory authorities which, if implemented, would have a
material effect on the Corporation's liquidity, capital
resources or operations.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity represents a bank's ability to generate cash or
otherwise obtain funds at a reasonable price to satisfy
commitments to borrowers as well as demands of depositors.
Loan and investment portfolios are managed to provide
liquidity through maturity and marketability of such assets.
It is a major responsibility of management to maximize net
interest income within prudent liquidity constraints. Internal
corporate guidelines have been established to constantly
measure liquid assets as well as relevant ratios concerning
earning asset levels and purchased funds. Each subsidiary of
the Corporation is also required to monitor these same
indicators and report regularly to its own senior management
and board of directors.
The liquidity of the Corporation depends primarily on the
dividends paid to it as the sole shareholder of its
subsidiaries. In addition to dividends, another primary source
of liquidity for the Corporation includes unused credit lines
with correspondent banks. In addition to maintaining a
satisfactory level of liquidity, management must control the
degree of interest rate risk assumed on the balance sheet.
Managing this risk involves regular monitoring of the amount
of interest sensitive assets relative to interest sensitive
liabilities over specific time intervals. The Corporation's
one year cumulative ratio, is almost perfectly matched at 99%
at December 31, 1993, compared to 95% at December 31, 1992.
In January 1992, Citizens became a member of the FHLB of
Cincinnati. Members, based on certain criteria, are required
to purchase common stock in the FHLB. This stock is redeemable
at par and Citizens receives quarterly dividends. Citizens'
current investment in FHLB stock is $1.8 million. Based on
Citizens' level of single family residence real estate loans
and mortgage-backed securities, a credit line of $17.8 million
is available. At December 31, 1993, Citizens had borrowed
$15.5 million of this available credit at an average interest
rate of 4.9% in 1993. The specific maturities of these
borrowings are included in Note I to the Consolidated
Financial Statements.
ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued
the following SFAS which have been adopted by the
Corporation.
SFAS No. 106 - Employers' Accounting for Post retirement
Benefits Other Than Pensions
This Statement was effective for fiscal years beginning after
December 15, 1992. After that date, post retirement benefits
were no longer to be recognized on a cash "pay as you go"
basis; rather, the accrual basis for expense recognition of
the future value of these benefits was to be implemented.
The corporation adopted this Statement in January 1993 with
no material impact on the Consolidated Financial Statements.
SFAS No. 109 - Accounting for Income Taxes
This Statement is effective for fiscal years beginning
December 15, 1992 and supersedes the provision of Accounting
Principles Board (APB) Opinion No. 11. Under the new
Statement, income taxes are calculated using an asset and
liability approach that requires tax assets and liabilities to
be recognized for future tax consequences attributed to
differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases. The Corporation adopted this Statement in January 1993
with no material impact on the Corporation's consolidated
financial statements.
The FASB has also issued the following SFAS which is
applicable to the Corporation.
SFAS No. 115 - Accounting for Certain Investments and Debt and
Equity Securities
This Statement is effective for fiscal years beginning after
December 15, 1993. According to this Statement, each entity,
at acquisition, shall classify debt and equity securities into
one of three categories: held to maturity, available for sale
or trading. At each reporting date, the appropriateness of
the classification shall be reassessed. This Statement also
establishes standards of financial accounting and reporting
for investments in equity securities that have readily
determinable fair values. These standards include proper
accounting treatment for the differences between amortized
cost and fair market value.
At December 31, 1993, the Corporation had classified its
investment portfolio as held to maturity and available for
sale. The Corporation does not maintain any securities
classified as trading. Beginning in 1994, the Corporation
will, pursuant to this Statement, report the changes in fair
value of securities available for sale as a net amount in
stockholders' equity until realized.
PENDING ACQUISITIONS
On January 10, 1994, the Corporation entered into an Agreement
and Plan of Reorganization (Agreement) with BMC Bankcorp, Inc.
(BMC). The Agreement provides, among other things, for the
merger of BMC into a wholly owned subsidiary of the
Corporation. Terms of the Agreement call for BMC shareholders
to receive two shares of the Corporation's common stock for
each share of BMC common stock held. Consummation of the
merger is subject to certain conditions, including approval of
the shareholders of BMC and the appropriate regulatory
authorities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the
Corporation and report of independent auditors, Deloitte &
Touche, are included in this Form 10-K at the pages indicated.
Description Reference Page
Report of Deloitte & Touche, Independent Auditors 21
Consolidated Balance Sheets - December 31, 1993 and 1992 22
Consolidated Statements of Income - Years ended December 31,
1993, 1992, and 1991 23
Consolidated Statements of Changes in Stockholders' Equity -
Years ended December 31, 1993, 1992, and 1991 24
Consolidated Statements of Cash Flows - Years Ended
December 31, 1993, 1992, and 1991 25
Notes to Consolidated Financial Statements 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set out in the section entitled "Election of
Directors" of Registrant's Proxy Statement at pages 2 through
4 is incorporated herein by reference. In addition the
information set out in the section entitled "Election of
Directors" of Registrant's Proxy Statement at page 5 dealing
with Section 16 (a) filings under the Securities Exchange Act
of 1934 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set out in the sections entitled "Executive
Compensation", "Summary Compensation Table", "Options Granted
In Last Fiscal Year", "Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values", "Compensation
Committee Interlocks and Insider Participation", "Shareowner
Return Performance Presentation", and "Employment Contracts
and Termination of Employment and Changes-In-Control
Arrangements" of Registrant's Proxy Statement at pages 8
through 16 is incorporated herein by reference.
INDEPENDENT AUDITORS' REPORT
Suite 2100 Telephone: (502) 562-2000
220 W Main Street Facsimile: (502) 562-2073
Louisville, Kentucky 40202-5313
To the Board of Directors and Stockholders
CBT Corporation
Paducah, Kentucky
We have audited the consolidated balance sheets of
CBT Corporation and subsidiaries as of December
31,1993 and 1992, and the related consolidated
statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31,1993. These financial statements are the
responsibility of the Corporation'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 audit 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 CBT Corporation and
subsidiaries as of December 31,1993 and 1992, and the
results of their operations and their cash flows for
each of the three years in the period ended December
31,1993 in conformity with generally accepted
accounting principles.
January 28, 1994
CBT Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31
1993 1992
Assets
Cash and due from banks 19,365,314 24,823,719
Federal funds sold 2,571,000 225,000
Money market investments 2,010,229 2,139,502
Total cash and cash equivalents 23,946,543 27,188,221
Investment securities (fair values- 1993,
$43,302,000;1992, $130,844,000) 40,332,357 127,235,879
Securities available for sale (fair values -1993,
$148,085,000, 1992, $53,351,000) 144,727,587 51,664,266
Total investments 185,059,944 178,900,145
Loans net of unearned interest 377,725,379 337,574,771
Allowance for loan losses (8,482,708) (7,657,687)
Loans - net 369,242,671 329,917,084
Premises and equipment, net 11,962,700 11,059,273
Accrued interest receivable 3,973,829 3,838,392
Other 6,311,359 3,574,587
Total 600,497,046 554,477,702
Liabilities
Deposits:
Non-interest bearing 44,597,702 41,001,627
Interest bearing 423,696,122 389,209,163
Total deposits 468,293,824 430,210,790
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 36,446,060 35,709,917
Notes payable - U.S. Treasury 2,000,000 2,563,983
Revolving lines of credit 1,240,000 7,200,000
Total short-term borrowings 39,686,060 45,473,900
Accrued interest payable 1,658,582 1,624,582
Term debt 20,535,000 12,500,000
Other 3,384,397 3,619,747
Total liabilities 533,557,863 493,429,019
Stockholders' Equity
Common stock, no par value, authorized - 6,000,000 shares;
issued and outstanding 2,767,519 shares 4,100,000 4,100,000
Capital surplus 13,297,908 13,297,908
Retained earnings 49,541,275 43,650,775
Total stockholders' equity 66,939,183 61,048,683
Total 600,497,046 554,477,702
See notes to consolidated financial statements.
CBT Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
Years Ended December 31
1993 1992 1991
Interest Income
Loans, including fees:
Taxable $32,741,756 $33,959,716 $36,869,911
Tax-exempt 329,685 379,667 435,503
Investments:
Taxable 7,758,754 9,357,358 10,782,846
Tax-exempt 3,114,917 2,753,080 2,458,456
Other 126,064 372,486 1,323,964
Total interest income 44,071,176 46,822,307 51,870,680
Interest Expense
Deposits 17,147,038 19,955,429 27,705,937
Short-term borrowings 1,539,000 1,615,880 1,381,507
Term debt 328,167 426,163 443,582
Total interest expense 19,014,205 21,997,472 29,531,026
Net Interest Income 25,056,971 24,824,835 22,339,654
Provision for Loan Losses 1,256,321 2,199,000 2,580,133
Net Interest Income After
Provision for Loan Losses 23,800,650 22,625,835 19,759,521
Non-Interest Income
Trust and investment
advisory fees 1,443,928 1,437,435 1,246,120
Service charges on
deposit accounts 1,839,572 1,561,430 1,450,392
Insurance commissions 649,520 570,989 566,694
Gain on sale of investments 134,010 573,884 497,947
Gain on sale of finance receivables 553,095
Other 1,288,984 1,081,532 1,183,135
Total non-interest income 5,909,109 5,225,270 4,944,288
Non-Interest Expense
Salaries and employee
benefits 9,816,337 9,286,634 8,526,939
Net occupancy 1,017,028 1,034,502 1,141,765
Depreciation and amortization 1,321,668 1,151,255 1,082,250
Data processing 696,450 615,014 581,284
Tax on bank shares 729,047 638,198 615,014
FDIC assessments 1,011,316 989,433 929,559
Other 4,774,609 4,220,132 3,841,332
Total non-interest expense 19,366,455 17,935,168 16,718,143
Income Before Income Taxes 10,343,304 9,915,937 7,985,666
Income Taxes 2,431,000 2,302,000 1,767,774
Net Income 7,912,304 7,613,937 6,217,892
Per Common Share:
Net income 2.86 2.75 2.25
Cash dividends 0.78 0.72 0.69
CBT Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991
Common Stock Total
Capital Retained Stockholders'
Shares Amount Surplus Earnings Equity
Balance, January 1,1991 2,767,519 4,100,000 13,297,908 33,485,920 50,883,828
Net income - - - 6,217,892 6,217,892
Dividends on common stock - - (1,748,336)(1,748,336)
Balance, December 31,1991 2,767,519 4,100,000 13,297,908 37,955,476 55,353,384
Net income - - - 7,613,937 7,613,937
Dividends on common stock - - - (1,815,579)(1,815,579)
Stock options exercised 7,000 11,410 91,530 - 102,940
Purchase of common stock (7,000) (11,410) (91,530) (103,059) (205,999)
Balance, December 31,1992 2,767,519 4,100,000 13,297,908 43,650,775 61,048,683
Net income - - - 7,912,304 7,912,304
Dividends on common stock - - - (2,016,055) (2,016,055)
Other - - - (5,749) (5,749)
Balance, December 31,1993 2,767,519 4,100,000 13,297,908 49,541,275 66,939,183
CBT Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
1993 1992 1991
Operating Activities
Net income
Adjustments to reconcile net
income to net cash 7,912,304 7,613,937 6,217,892
provided by operating activities:
Provision for loan losses 1,256,321 2,199,000 2,580,133
Depreciation and amortization 1,321,667 1,151,255 1,103,289
Deferred income taxes 104,534 (437,000) (621,000)
Amortization and accretion
of securities 1,568,456 874,129 700,316
Gain on sale of securities (134,010) (573,884) (497,947)
Gain on sale of premises
and equipment (3,504) (11,456) (7,723)
Gain on sale of finance
receivables (553,094) - -
Changes in assets and
liabilities: (135,437) 719,535 612,433
Accrued interest receivable (1,239,176) (426,069) (850,306)
Other assets 34,000 (2,374,600) (286,899)
Accrued interest payable (99,609) - -
Dividends payable (339,885) 399,475 1,364,719
Other liabilities
Net cash provided by
operating activities 9,692,567 9,134,322 10,314,907
Investing Activities
Proceeds from sales of
investment securities - 37,635,092 36,330,551
Proceeds from maturities of
investment securities 3,130,000 10,108,104 6,681,447
Proceeds from sales of securities
available for sale 18,657,206 - -
Proceeds from maturities of
securities available for sale 10,561,779 - -
Principal collected on
mortgage-backed securities, including
mortgage-backed securities classified
as available for sale 1,480,624 37,466,296 16,724,137
Payment for purchases of
investment securities
and securities available
for sale (101,423,854) (102,637,579) (79,382,122)
Net increase in loans (43,060,740) (11,026,638) (4,826,140)
Purchases of loans (2,003,244) (2,552,159) (830,047)
Sale of finance receivables 7,635,171 677,947 -
Proceeds from sales of premises
and equipment 37,134 36,000 22,538
Payment for purchases of
premises and equipment (2,156,320) (797,467) (2,042,654)
Net cash received on branch
acquisitions 57,479,892 - -
Net cash provided by
(used in) investing activities 10,337,648 (31,090,404) (27,322,290)
Financing Activities
Net decrease in deposits (23,596,858) (10,181,564) (7,324,509)
Net increase (decrease) in other
short term borrowings 172,160 27,806,866 (2,082,143)
Cash advanced on revolving
lines of credit 1,000,000 5,200,000 1,500,000
Principal payments on
revolving lines of credit (6,960,000) (5,500,000) (5,000,000)
Proceeds from term debt 12,035,000 7,500,000 -
Payments on term debt (4,000,000) - -
Payments on capital lease
obligations - (84,699) (78,777)
Call dividends paid (1,916,446) (1,815,579) (1,714,714)
Purchase of common stock (5,749) (205,999) -
Stock options exercised - 102,940 -
Net cash provided by
(used in) financing activities (23,271,893) (22,821,965) 10,200,143)
Net Increase (Decrease) in
Cash and (3,241,678) 865,883 (27,207,526)
Cash and Cash Equivalents,
Beginning of Year 27,188,221 26,322,338 53,529,864
Cash and Cash Equivalents,
End of Year 23,271,893 27,188,221 26,322,338
Supplemental Disclosures Of
Cash Flow Information:
Cash paid during the year for:
Interest 18,980,205 24,372,326 29,822,726
Federal income taxes 2,827,776 2,694,000 3,105,000
CBT Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1993, 1992, and 1991
A - Basis Of Presentation And Summary Of Significant Accounting Policies
BASIS OF PRESENTATION
Included in the consolidated financial statements are CBT
Corporation (the Parent Company) and its wholly-owned subsidiaries;
Citizen's Bank and Trust Company (the Bank), Pennyrile Bancshares, Inc.
(Pennyrile) and Fidelity Credit Corporation (FCC), collectively the
"Corporation," which provide financial services primarily in Western
Kentucky and surrounding communities. All significant intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks, federal funds sold and money market
investments. Generally, federal funds are purchased and sold for one-day
periods.
INVESTMENT SECURITIES AND SECURITIES AVAILABLE FOR SALE
Prior to 1992, the Corporation accounted for all investments at
cost adjusted for amortization of premiums and accretion of discounts.
In 1992 and 1993, in anticipation of a new accounting standard, the
Corporation revised its investment policy by reclassifying investment
securities having an amortized cost of $51.7 million and $21 million,
respectively, to securities available for sale. Investment securities
are carried at amortized historical cost. Securities available for sale
are carried at the aggregate of the lower of amortized cost or fair
value. Amortization of premiums and accretion of discounts are recorded
primarily on the interest method. Securities available for sale include
securities that management intends to use as part of its asset/liability
management strategy and that may be sold in response to changes in
interest rates, resultant prepayment risk and other factors related to
interest rate and resultant prepayment risk. Gains and losses on
disposition of investment securities and securities available for sale
are computed by the specific identification method.
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" that addresses
the accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. Such investments are to be classified into three categories:
held to maturity securities (reported at amortized cost), trading
securities (reported at fair value, with unrealized gains and losses
included in earnings) and available for sale securities (reported at
fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of equity). SFAS No. 115 is effective
for fiscal years beginning after December 15, 1993. Upon adoption of
SFAS No. 115, at January 1, 1994, the Corporation will record available
for sale securities at fair value. The unrealized net gain of
approximately $2.2 million, net of income taxes, will be included as a
separate component of stockholders' equity.
LOANS AND INTEREST INCOME
Loans are stated at the principal balance outstanding, net of
unearned interest. Interest on loans is based upon the principal balance
outstanding, except interest on some consumer installment loans, which
is recognized on the sum-of-the-years-digits method, which does not
differ materially from the interest method.
The accrual of interest income is generally reviewed for
discontinuance when a loan becomes 90 days past due as to principal or
interest. Management may elect to continue the accrual of interest when
the estimated net realizable value of collateral is sufficient to cover
the principal balance and accrued interest or, in the opinion of
management, the interest is collectible.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level considered
adequate to provide for potential losses based on management's
evaluation of the loan portfolio, including the financial strength of
guarantors, valuation of collateral and the likelihood of further
collection based upon the borrower's financial condition, as well as on
prevailing and anticipated economic conditions.
In May 1993, the FASB issued SFAS No. 114 "Accounting by Creditors
for Impairment of a Loan" that requires impaired loans be measured based
upon the present value of expected future cash flows discounted at the
loan's effective interest rate or at the loan's market price or fair
value of collateral, if the loan is collateral dependent. Adoption of
SFAS No. 114 will be required by the Corporation no later than the year
ended December 31, 1995, and is not expected to have a material impact
on the consolidated financial statements.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation of premises and equipment is computed using
straight-line and accelerated methods over the estimated useful lives of
the assets.
REPURCHASE AGREEMENTS
Certain securities are sold under agreements to repurchase and are
treated as refinancing. The obligation to repurchase such securities is
reflected as a liability on the consolidated balance sheets. The dollar
amounts of securities underlying the agreements are included in the
respective asset accounts.
INCOME TAXES
Pursuant to the deferred method under Accounting Principles Board
(APB) Opinion 11, which was applied in 1992 and prior years, deferred
income taxes are recognized for income and expense items that are
reported in different years for financial reporting purposes and income
tax purposes using the tax rate applied for the year of the calculation.
Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
SFAS No. 109 "Accounting for Income Taxes", was issued by the FASB
in February 1992. SFAS No. 109 requires a change from the deferred
method under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Effective January 1, 1993, the
Corporation adopted SFAS No. 109. The cumulative effect of the change in
the method of accounting for income taxes was not material.
TRUST FEES AND ASSETS
Revenues from trust and agency services are reported on the cash
basis in accordance with customary banking practice. Reporting such
revenues on the accrual basis would not materially affect the
accompanying consolidated financial statements. Assets held by the
Bank's Trust Department in a fiduciary or agency capacity for its
customers and beneficiaries are not included in the consolidated
financial statements as such items are not assets of the Bank.
PER COMMON SHARE DATA
Net income per common share data is based on 2,767,519 shares
outstanding during each year. All per common share data has been
restated to reflect the November 1993 acquisition of Pennyrile
Bancshares, Inc. which was accounted for using the pooling of interests
method. Common stock options are not included in net income per common
share data since their effect is not significant.
B - Acquisitions
In 1993, the Corporation purchased On November 30,1993, Pennyrile
from Union Planters Corporation, Bancshares, Inc. ("Pennyrile") was
Memphis, Tennessee, and Security Trust merged into the Corporation and
Federal Savings and Loan Association 246,035 shares of the Corporation's
("Security"), Chattanooga, Tennessee, common stock were issued in exchange
the assets and assumed the liabilities for all of the issued and outstanding
of three locations of Security within shares of Pennyrile common stock. The
McCracken County, Kentucky. These merger was accounted for as a pooling
locations had total deposits of of interests, and accordingly, the
approximately $62 million. accompanying financial statements
have been restated to include the
accounts and operations of Pennyrile
for periods prior to the merger.
Separate results of the combining entities are as follows:
1992 1991
Interest income:
CBT, as previously reported $43,151,970 $47,466,105
Pennyrile 3,670,337 4,404,575
Total, as restated
$46,822,307 $51,870,680
Net income:
CBT, as previously reported $ 6,951,154 $ 5,635,061
Pennyrile 662,783 582,831
Total, as restated $ 7,613,937 $ 6,217,892
Pennyrile's net interest income and net income of $1,958,000 and $564,000
respectively, for the eleven months ended November 30, 1993 are included in
the Consolidated Statement of Income for the year ended December 31, 1993.
C - Restrictions On Cash And Due From Banks
Included in cash and due from banks reserve balances was approximately
are certain non interest bearing $1,451,000 and $1,707,000 during 1993
deposits that are held at the Federal and 1992, respectively. At December
Reserve in accordance with reserve 31,1993 and 1992, the Corporation was
requirements specified by the Federal in compliance with all cash reserve
Reserve Board o Governors. The requirements .
average amount of those
D - Investment Securities
Certain investment securities were securities had an estimated amortized
pledged to secure public deposits, cost and estimated fair value of
securities sold under agreements to approximately $17,222,555 and
repurchase, and for other purposes as $18,564,611, respectively, as of
required or permitted by law. These December 31,1993.
pledged
December 31, 1993
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U.S. Treasury securities and
obligation of other U.S.
Government Agencies $ 4,499,359 $ 4,625,412 $ 126,212 $159
State and other political
subdivisions 35,812,998 38,670,020 2,976,846 119,824
Other 20,000 6,750 - 13,250
Total $40,332,357 $43,302,182 3,103,058 $133,233
December 31, 1992
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U.S. Treasury securities and
obligation of other U.S.
Government Agencies $ 17,428,117 $ 18,548,309 $1,126,199 $ 6,007
State and other political
subdivisions 27,469,557 28,837,962 1,444,540 76,135
Mortgage-backed securities 80,085,809 81,104,586 1,218,609 199,832
Other 2,252,396 2,352,604 111,958 11,750
Total $127,235,879 $130,843,461 $3,901,306 $293,724
Maturity Distribution of Investment Securities
December 31
1993 1992
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
Within 1 Year $ 1,560,194 $ 1,671,750 $ 2,537,178 $ 2,574,459
1 - 5 Years 9,769,450 10,585,059 41,238,508 42,583,945
5 - 10 Years 25,510,808 27,567,651 10,869,295 11,515,565
Over 10 Years 3,491,905 3,477,722 72,590,898 74,169,492
Total $ 40,332,357 $43,302,182 $127,235,879 $130,843,461
Realized gains on sales of investment securities were $575,884 in 1992 and
$497,947 in 1991. There were no realized losses on investment securities.
E-Securities Available For Sale
Certain securities available $72,750,348 and an estimated fair
for sale were pledged to secure value of $73,654,705, respectively, as
deposits and securities sold under of December 31, 1993.
agreements to repurchase. These
pledged securities had an
estimated amortized cost of
December 31, 1993
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U.S. Treasury securities and
obligations of other U.S.
Government agencies 16,651,908 17,471,370 819,462 -
agencies
State and other political
subdivisions 15,246,301 17,034,925 1,811,642 23,018
Mortgage-backed securities 110,921,178 111,669,490 1,123,103 374,791
Other 1,908,200 1,908,727 527 -
Total 144,727,587 148,084,512 3,754,734 397,809
December 31, 1992
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U.S. Treasury securities and
obligation of other U.S.
Government Agencies 9,026,014 9,158,048 132,060 26
State and other political
subdivisions 13,108,821 14,218,867 1,110,046 -
Mortgage-backed securities 27,138,034 27,590,137 476,063 23,960
Other 2,391,397 2,383,825 38 7,610
Total 51,664,266 53,350,877 1,718,207 31,596
Maturity Distribution of Investment Securities Available for Sale
December 31
1993 1992
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
Within 1 Year 53,255,688 53,661,674 7,529,621 7,668,320
1 - 5 Years 71,490,783 74,033,774 2,500,000 2,628,065
5 - 10 Years 14,051,937 14,387,733 5,405,006 5,959,182
Over 10 Years 5,929,179 6,001,331 36,229,639 37,095,310
Total 144,727,587 148,084,512 51,664,266 53,350,877
Realized gains on sales of securities available for sale were $134,010 in
1993. There were no realized losses on sales of securities available for
sale.
F - Loans And allowance For loan Losses
December 31
1993 1992
Commercial 148,253,612 157,053,645
Residential 142,962,740 113,312,102
Consumer 93,907,165 78,163,652
385,123,517 348,529,399
Less: unearned interest 7,398,138 10,954,628
Total loans - net of unearned interest 377,725,379 337,574,771
At December 31,1993 and 1992, terms, interest income would have been
non-accrual loans totaled $668,000 approximately $125,000 and $101,500
and $1,043,000, respectively, and greater in 1993 and 1992, respectively.
loans contractually past due 90 Interest income recorded on these loans
days or more totaled $235,000 and was $11,700 and $10,400 for 1993 and 1992,
$176,000, respectively. If those respectively. At December 31,1993 and
loans on a non-accrual status had 1992, there were no troubled debt
been current and in accordance restructurings.
with their original loan
The activity in the allowance for loan losses follows:
1993 1992 1991
Balance, beginning of year 7,657,687 6,531,723 5,129,214
Provision for loan losses 1,256,321 2,199,000 2,580,133
Adjustments related to
purchase/sale of
finance receivables (177,104) (4,282) 28,692
Loans charged-off (750,000) (1,068,754) (1,875,447)
Recoveries 495,804 369,364 669,131
Net charge-offs (254,196) (1,068,754) (1,206,316)
Balance, end of year 8,482,708 7,657,687 6,531,723
It is the policy of the Certain directors and executive
Corporation to review each officers of the Corporation and
prospective credit in order to their associates are customers of
determine an adequate level of and have other transactions with
security or collateral, prior to the Corporation in the normal
making the loan. The type of course of business. Such
collateral will vary and ranges transactions included payments of
from liquid assets to real estate. $822,000 during 1991, to a company
The Corporation has access to associated with a director of the
collateral, in the event of Corporation for construction of
borrower default, through adherence bank premises. No material
to state lending laws and the payments were made in 1993 or
Corporation's sound lending 1992. All loans are made on
standards and credit monitoring substantially the same terms,
procedures. including interest rates and
The Corporation regularly collateral, as those prevailing at
monitors its credit concentration the time for comparable
for loan purposes, industry and transactions with other persons
customer bases. At December and do not involve more than
31,1993 and 1992, there were no normal risk of collectibility or
significant credit concentrations present other unfavorable features.
within these categories. Total loans to officers,
directors and associates of such
persons follows:
Balance, New Other Balance,
Year Beginning Loans Repayments Changes, End of Year
of Year Net
1993 19,764,000 8,748,000 (9,468,000) (3,024,000) 16,020,000
1992 18,315,000 14,952,000 (13,503,000) - 19,764,000
1991 20,389,000 9,389,00 (11,966,000) - 18,315,000
G - Premises And Equipment
December 31
1993 1992
Land 1,360,563 1,095,379
Building and improvements 11,885,449 11,420,832
Equipment 7,495,428 6,869,533
Construction in progress 400,710 151,166
21,142,200 19,536,910
Accumulated depreciation and amortization 9,179,500 8,477,637
Total 11,962,700 11,059,273
H - INTEREST BEARING DEPOSITS
December 31
1993 1992
NOW Accounts $ 69,797,130 $ 65,931,131
Money Manager Accounts 52,596,993 50,071,447
Individual Retirement Accounts 33,526,411 29,431,367
Savings 31,459,874 21,530,404
Certificates of Deposit
under $100,000 191,716,886 174,223,493
Certificates of Deposit
$100,000 44,598,828 48,021,321
Total $ 423,696,122 $ 389,209,163
I - BORROWINGS
The Corporation has a loan agreement with a regional bank
providing both revolving and term debt.
The revolving credit agreement provides for two lines of
credit, $2,500,000 and $7,500,000. Both are due June 30,
1994. Interest on the $2,500,000 line of credit is payable
quarterly at a rate of one-quarter of one percent point less
than the lender's prime rate (prime rate of 6% at December 31,
1993). Interest on the 7,500,000 line of credit is payable
quarterly and the rate of each advance is chosen from two
options available to the borrower. The options are either a
rate of one-quarter of one percentage point less than a
participating regional bank's base rate or a rate based on the
thirty-day London Interbank Offered Rate (LIBOR)(4.69% actual
rate at December 31, 1993). Additional funds available under
these lines of credit totaled $9,760,000 at December 31, 1993.
Term debt (debt with original maturities of more than one
year) at December 31 consisted of the following:
1993 1992
Term note $ 5,000,000 $ 5,000,000
Borrowings from Federal Home Loan Bank 15,535,000 7,500,000
Total $ 20,535,000 $ 12,500,000
The loan agreement with the regional bank stipulates, among
other things, maintenance of certain operating and equity
ratios, and that the Corporation will not incur any secured
debt, or sell or encumber investments in its subsidiaries
without the lender's prior consent. As of December 31, 1993,
the Corporation was in compliance with all covenants contained
in the loan agreement. In 1993 the term note had an average
interest rate of 6%. The Bank has an available credit line at
the Federal Home Loan Bank (FHLB) of approximately
$17,800,000. The average rate of interest paid on these
borrowings during 1993 was 4.90%. These borrowings have
varying maturity dates in 1995 and 1996; however, according to
the funding programs of the FHLB, all or a portion of
approximately $10,035,000 of these borrowings may be paid at
specific intervals in 1994.
Maturities of term debt outstanding at December 31, 1993 are
as follows:
1994 _
1995 $ 3,500,000
1996 12,035,000
1997 5,000,000
Total $ 20,535,000
J - DIVIDEND RESTRICTIONS
Regulatory banking laws restrict the amount of dividends that
may by paid by the subsidiary banks without obtaining prior
approval of the regulatory authority. Under such
restrictions, the subsidiary banks will have available for
payment of dividends during 1994, retained net profits, as
defined by the regulatory authority, of approximately
$11,695,000, plus net profits for 1994.
K - COMMON STOCK OPTIONS
Under the Corporation's 1986 Stock Option Plan, 105,000 shares
of the Corporation's common stock had been reserved. At
December 31, 1993, options for all of these shares had been
granted. At December 31, 1993, options totaling 50,000 shares
were exercisable at an average price of $17.94 per share.
At the Annual Meeting of Shareholders held in April 1993, an
additional 200,000 shares of the Corporation's common stock
were reserved for future grant. At December 31, 1993, 197,000
shares were available for future grant at the fair market
value at the time of the grant; none of the options were
exercisable at that date.
Activity with respect to outstanding common stock options:
1993 1992
Outstanding, beginning of year 74,750 57,000
Granted at $19.67 per share
in January 1992 _ 21,750
Granted at $26.66 per share
in May 1992 _ 3,000
Exercised at average price
of $14.71 _ (7,000)
Granted at $29.00 per share
in January 1993 23,250 _
Granted at $38.75 per share
in November 1993 3,000 _
Outstanding, end of year 101,000 74,750
L - INCOME TAXES
The tax effect of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 1993 are as follows:
December 31, 1993
Deferred tax assets:
Allowance for loan losses $ 2,338,161
Deferred compensation 217,735
Other 83,874
Total gross deferred tax assets 2,639,770
Deferred tax liabilities:
Depreciation 895,160
Capitalized interest 77,326
Other 79,372
Total gross deferred tax liabilities 1,051,858
Net deferred tax asset
(included in other assets) $ 1,587,912
Income tax expense consisted of:
1993 1992 1991
Current $2,326,466 $2,739,000 $2,388,774
Deferred (benefit) 104,534 (437,000) (621,000)
Total $2,431,000 $2,302,000 $1,767,774
The tax expense relating to gains on sales of securities
(exclusive of non-deductible net capital losses) approximated
$45,600 in 1993, $195,000 in 1992, and $169,300 in 1991.
Deferred income taxes (benefits) resulting from timing
differences in the recognition of revenues and expenses for
tax and financial reporting purposes for 1992 and 1991 are as
follows:
1992 1991
Loan losses $(415,836) $(616,995)
Interest expense 5,989 (8,100)
Deferred compensation (20,304) (38,042)
Depreciation 54,682 2,227
Other (61,531) 39,910
Total $(437,000) $(621,000)
The reasons for the differences between income taxes on the
consolidated financial statements and the amount computed by
applying the statutory rate to income before income taxes are
as follows:
1993 1992 1991
Taxes at statutory rate - 34% $3,516,725 $3,371,418 $2,714,996
Increase (decrease) resulting from:
Tax-exempt interest income (1,060,042) (981,133) (861,224)
Securities capital gains, net (12,311) (9,222) (19,463)
State income tax 76,560 65,340 50,160
Other, net (89,932) (144,403) (116,695)
Total $2,431,000 $2,302,000 $1,767,774
A deferred tax asset of approximately $1,692,000 is included
in other assets at December 31, 1992.
M - EMPLOYEE BENEFIT PLANS
Employees are covered by two defined contribution employee
benefit plans (Plans). All employees are eligible to
participate in the Plans after completing various lengths of
employment. Participants are immediately vested in employee
contributions, with 100% vesting in employer contributions
after 5 years of service or upon attainment of normal
retirement age. The annual cost of the Plans is based upon
percentages of participant compensation and contributions to
the Plans, plus any discretionary amounts as determined by the
Board of Directors. Total costs charged to operations for the
plans in 1993, 1992, and 1991 were $464,994, $457,400, and
$417,000, respectively.
N - OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENT
LIABILITIES
The Corporation has financial instruments which properly are
not reflected in the consolidated financial statements. These
include commitments to extend credit and standby letters of
credit. These instruments involve elements of credit and
interest rate risk. Nonperformance or default by the other
party to loan commitments or standby letter of credit could
result in a financial loss to the Corporation equal to the
amount of the loan commitments and standby letters of credit.
The same credit and collateral policies are used by the
Corporation in issuing these financial instruments as are used
for loans. Standby letter of credit are conditional
commitments issued by the Corporation to guarantee the payment
by a customer to a third party. The terms and risk of loss
involved is issuing standby letters of credit are similar to
those involved in issuing loan commitments and extending
credit. As of December 31, 1993 and 1992, commitments
outstanding under standby letters of credit totaled $5,000,000
and $5,155,000, respectively.
Commitments to extend credit are agreements to lend to a
customer under a set of specified terms and conditions.
Commitments generally have fixed expiration dates or
termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Loan commitments may be
secured or unsecured. In the case of secured commitments,
collateral varies but may include commercial or residential
properties; business assets such as inventory, equipment,
accounts receivable, securities, or other business or personal
assets or guarantees. As of December 31, 1993 and 1992,
commitments to extend credit totaled $82,726,000 and
$71,993,000, respectively.
O - FAIR VALUE 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, "Disclosure about fair Value of
Financial Instruments." The estimated fair value amounts have
been determined by the Corporation 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 Corporation 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.
December 31, 1993 December 31, 1992
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Cash and cash
equivalents 23,946,000 23,946,000 27,188,000 27,188,000
Investment securities 40,332,000 43,302,000 127,236,000 130,844,000
Securities available for
sale 144,728,000 148,085,000 51,884,000 53,351,000
Loans - Net of unearned
interest 377,725,000 390,054,000 337,575,000 340,750,000
Liabilities:
Deposits:
Non-interest bearing 44,598,000 44,598,000 41,002,000 41,002,000
Interest-bearing 423,696,000 430,504,000 389,209,000 393,605,000
Short-term borrowings 39,686,000 39,686,000 45,474,000 45,474,000
Term debt 20,535,000 20,315,000 12,500,000 12,366,000
The fair value of investment securities, and securities
available for sale is based on quoted market prices, dealer
quotes, and prices obtained from independent pricing services.
The fair value of loans, deposit, various types of borrowings
and term debt is estimated based on present values using entry-
value interest rates applicable to each category of such
financial instruments. The fair value of commitments to
extend credit are not included as they are not material.
No adjustment was made to the entry-value interest rates for
changes in credit of performing commercial loans for which
there are no known credit concerns. Management segregates
loans in appropriate risk categories. Management believes
that the risk factor embedded in the entry-value interest
rates along with the general reserves applicable to the
performing commercial loan portfolio for which there are no
known credit concerns result in a fair valuation of such loans
on an entry-value basis. The fair value of nonperforming
loans with a recorded book value of $938,000 and $1,970,000 at
December 31, 1993 and 1992, respectively, was not estimated
because it is not practicable to reasonably assess the credit
adjustment that would be applied in the marketplace for such
loans.
The fair value estimates presented herein are based on
pertinent information available to management as of December
31, 1993 and 1992. Loan and deposit information for Pennyrile
Bancshares, Inc. was not available at December 31, 1992;
therefore, no attempt was made to estimate the fair value of
these assets or liabilities. Although management is not aware
of any factors that would significantly affect the estimated
fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that
date and, therefore, current estimates of fair value may
differ significantly from the amounts presented herein.
P - QUARTERLY STATISTICAL INFORMATION (UNAUDITED)
1993 1992
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
Gross
interest
Income:
CBT Corp. 10,541,986 10,058,179 9,889,524 10,140,264 10,424,819 11,046,321 10,653,184 11,027,646
Pennyrile 881,273 890,178 844,276 825,496 873,736 928,348 940,386 927,867
Total 11,423,259 10,948,357 10,733,800 10,965,760 11,298,555 11,974,669 11,593,570 11,955,513
Net interest
income:
CBT Corp 6,042,335 5,641,459 5,554,260 5,673,655 6,145,158 5,678,090 5,381,974 5,453,753
Pennyrile 549,651 560,777 525,849 508,985 531,415 556,298 540,181 537,966
Total 6,591,986 6,202,236 6,080,199 6,182,640 6,676,573 6,234,388 5,922,155 5,991,719
Net income:
CBT Corp 2,021,920 1,685,463 1,731,871 2,041,434 1,761,667 1,737,584 1,598,740 1,853,163
Pennyrile 23,473 61,226 158,368 188,548 67,207 194,650 198,368 202,558
Total 2,045,393 1,746,689 1,890,240 2,229,982 1,828,874 1,923,234 1,797,108 2,055,721
Earnings per
share:
CBT Corp 0.73 0.61 0.63 0.74 0.64 0.63 0.58 0.67
Pennyrile 0.01 0.02 0.05 0.07 0.03 0.06 0.07 0.07
Total 0.74 0.63 0.68 0.81 0.67 0.69 0.65 0.74
Q - PARENT COMPANY CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
December 31
1993 1992
ASSETS
Cash and cash equivalents* $2,084,728 $2,163,520
Investment in subsidiaries* 64,891,255 58,896,869
Dividends receivable from subsidiaries 624,000 468,000
Other assets 33,607 -
Total $67,633,590 $61,528,389
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued liabilities 694,407 $479,706
Stockholders' equity 66,939,183 61,048,683
Total $67,633,590 $61,528,389
*Eliminated or partially eliminated in consolidation.
Statements Of Income
Years ended December 31
1993 1992 1991
INCOME
Dividends from subsidiaries 2,212,000 1,876,000 2,884,000
Interest income 24,548 45,150 48,335
Gain on sale of securities 36,210 27,123 57,163
Total income 2,272,758 1,948,273 2,989,498
EXPENSES
Other 505,839 138,449 25,628
Total expenses 505,839 138,449 25,628
Income Before Income Taxes 1,766,919 1,809,824 2,963,870
Income Taxes (151,000) - -
Income Before Equity in Undistributed
Net Income of Subsidiaries 1,917,919 1,809,824 2,963,870
Equity in Undistributed
Net Income of Subsidiaries* 5,994,385 5,804,113 3,254,022
Net Income 7,912,304 7,613,937 6,217,892
*Eliminated in consolidation.
Statements Of Cash Flows
Years ended December 31
1993 1992 1991
OPERATING ACTIVITIES:
Net income 7,912,304 7,613,937 6,217,892
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net income from subsidiaries (5,994,385) (5,804,113) (3,254,022)
Gain on sale of securities (36,210) (27,123) (57,163)
Change in other assets (33,607) - -
Change in other liabilities 214,701 18,813 8,123
Change in dividends payable (99,610) - -
Change in dividends receivable
from subsidiaries (156,000) 84,000 (132,000)
Net cash provided by operating activities 1,807,193 1,885,514 2,782,830
INVESTING ACTIVITIES:
Purchase of securities (6,524,688) (8,164,031) (18,809,013)
Proceeds from sales of securities 6,560,898 8,191,154 18,866,176
Net cash provided by investing activities 36,210 27,123 57,163
FINANCING ACTIVITIES:
Cash dividends paid (1,916,446) (1,815,579) (1,714,714)
Stock options exercised - 102,940 -
Purchase of common stock (5,749) 205,999) -
Net cash used in financing activities (1,922,195) (1,918,638) (1,714,714)
Net Increase (Decrease)
In Cash and Cash Equivalents (78,792) (6,001) 1,125,279
Cash and Cash Equivalents, Beginning of Year 2,163,520 2,169,521 1,044,242
Cash and Cash Equivalents, End of Year 2,084,728 2,163,520 2,169,521
R - Subsequent Event
On January 10, 1994, the Corporation entered into an Agreement and Plan
of Reorganization (Agreement) with BMC Bankcorp, Inc. (BMC). The Agreement
provides,among other things, for the merger of BMC into a wholly owned
subsidiary of the Corporation. Terms of Agreement call for BMC shareholders
to receive two shares ofthe Corporation's common stock for each share of
BMC common stock held.Consummation of the merger is subject to certain
conditions including approval of the shareholders of BMC and the appropriate
regulatory agencies. The merger is also subject to termination by the
parties by mutual consent or upon the occurrence of certain specified events.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information set out at page 2 of the Registrant's Proxy
Statement in the section entitled "Election of Directors" with
respect to security ownership of certain beneficial owners and
management is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set out in the section entitled "Transactions
with Management" of Registrant's Proxy Statement at page 16 is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8 - K
(a) (1) Financial Statements filed The consolidated financial
statements together withthe report thereon of
Deloitte & Touche, are included in this Form 10-K
under Item 8 of Part II.
(2) Financial Statement Schedules
Schedules to the consolidated financial statements
are omitted, as the required information is not applicable or the
information is presented in the consolidated financial statements
or related notes.
(3) List of Exhibits Filed
The exhibits listed in the Exhibit Index on pages through
of this Form 10-K are filed herewith or are incorporated herein
by reference. Management contracts and compensatory
plans and arrangements required to be filed as exhibits to
this Form 10-K pursuant to Item 14(c) thereon by a double asterisk
(**).
(b) Reports on Form 8 - K
None.
(c) Exhibits
The exhibits listed on the Exhibit Index on pages through
of this Form 10 - K are filed or are incorporated
herein by reference.
(d) Financial Statement Schedules
None.
SIGNATURES
Pursuant to the requirement 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.
CBT CORPORATION
(REGISTRANT)
By /s/ William J. Jones By /s/ Eddie L. Holman
William J. Jones Eddie L. Holman
President, Chief Executive Vice President and Principal
Officer and Director Financial and Accounting
Officer
Date: March 28, 1994 Date: March 28, 1994
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 and
on the date indicated.
By /s/Irving P. Bright, Jr. By /s/John Burman
Irving P. Bright, Jr., Director John Burman, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/Patrick J. Cvengros By /s/William H. Dyer
Patrick J. Cvengros, Director William H. Dyer, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/Louis A. Haas By /s/F. Donald Higdon
Louis A. Haas, Director F. Donald Higdon, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/M. Leon Johnson By /s/Louis M. Michelson
M. Leon Johnson, Director Louis M. Michelson, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/Louis D. Myre By /s/David M. Paxton
Louis D. Myre, Director David M. Paxton, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/Robert P. Petter By /s/Joseph A. Powell
Robert P. Petter, Director Joseph A. Powell, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/Allan R. Rhodes By /s/William A. Usher
Allan R. Rhodes, Director William A. Usher, Director
Date: March 28, 1994 Date: March 28, 1994
By /s/William J. Jones
William J. Jones, Director
Date: March 28, 1994
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
3(a) Articles of Incorporation of CBT Corporation
are
incorporated by reference to Exhibit 3 of the
Registration Statement on Form S-14 of
CBT Corporation (File No.
2-83583).
3(b) Articles of Amendment to Articles of
Incorporation of CBT Corporation are
incorporated by reference to Exhibit 3(b)
of the Form 10-K of CBT Corporation for
the year ended December 31, 1987.
3(c) Articles of Amendment to Articles of
Incorporation of CBT Corporation are
incorporated by reference to Exhibit 3(c)
of the Form 10-K of CBT Corporation for
the year ended December 31, 1989.
3(d) Articles of Amendment to Articles of
Incorporation of CBT Corporation are
incorporated by reference to Exhibit 3(d)
of the Form 10-K of CBT Corporation
for the year ended December 31, 1992.
3(e) Bylaws of CBT Corporation are incorporated
by reference to Exhibit 3 to the Registration
Statement on Form S-14 of CBT Corporation
(File No. 2-83583).
10(a) **CBT Corporation 1986 Stock Option Plan is
incorporated by reference to Exhibit 4 of
Registration Statement on Form S-8 of
CBT Corporation (Registration No. 33-28512).
10(b) **CBT Corporation 1993 Stock Option Plan
incorporated by reference to Form 10-Q of
CBT Corporation dated March 31, 1993.
10(c) **Salary Continuance Agreement is incorporated
by reference to Exhibit 10(c) of the Form 10-K
of
CBT Corporation for the year ended
December 31, 1990.
10(d) **Incentive Compensation Plans are incorporated
by reference to Exhibit 10(d) of the Form 10-K of
CBT Corporation for the year ended
December 31, 1990.
10(e) Agreement to Purchase Assets and Assume
Liabilities among Union Planters Corporation
and Security Trust Savings and Loan
Association and CBT Corporation is incorporated
by reference to Exhibit 10(e) of the Form 10-K
of CBT Corporation for the year ended
December 31, 1992.
10(f) Plan of Exchange and Share Exchange
Agreement between CBT Corporation
and Pennyrile Bancshares, Inc. are
incorporated by reference to Exhibit 2,
respectively, of the Registration Statement
on Form S-4 of CBT Corporation dated
September 30, 1993.[File No. 33-69644].
10(g) Plan of Exchange and Share Exchange
Agreements between CBT Corporation,
CBT Acquisition Corporation and BMC
Bankcorp, Inc. are incorporated by reference
to Exhibits 2(a) and 2(b) of Form 8-K of CBT
Corporation dated January 10, 1994.
21 Subsidiaries of CBT Corporation
23 Consent of Independent Auditors.
**Denotes management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Form 10-K pursuant to Item 14(c).