1994
BEYOND
THE
ANNUAL
BOX
REPORT
(A Box appears here)
CBT
CORPORATION
MISSION
TO BE A HIGH-PERFORMANCE
DRIVEN FINANCIAL SERVICES
PROVIDER WHERE CUSTOMER,
SHAREHOLDER AND EMPLOYEE
EXPECTATIONS ARE EXCEEDED.
CONTENTS
(A Box appears here) Financial highlights
INSIDE FRONT COVER
Report to Collaboration
shareholders (A Box appears here) PAGE 13
(A Box appears here) PAGE 2
Performance Directors and
(A Box appears here) PAGE 5 Officers
PAGE 14
Expansion Financial section
(A Box appears here) PAGE 9 (A Box appears here) PAGE 15
Re-engineering Corporate information
(A Box appears here) PAGE 11 (A Box appears here) PAGE 46
Map of operations
INSIDE BACK COVER
CBT Corporation, a holding company based in Paducah, Kentucky, provides
financial services for a variety of retail and commercial customers through
four commercial banks, a savings bank and a consumer finance company in
Kentucky. It operates 39 offices in 27 communities.
2
R E P O R T T O S H A R E H O L D E R S
(A Box appears here)
CBT Corporation had an outstanding year in 1994. (A Box appears here)
We achieved record earnings.
We strengthened and expanded our market position.
We broadened the range of financial services we provide our customers.
We launched a comprehensive initiative to improve customer service and
efficiency.
The key to our continuing success is our focus on serving the needs of
our customers. Our goal: to exceed their expectations. When we do this,
the company prospers, rewarding shareholders and providing greater
opportunity for employees. Our performance suggests we're succeeding.
CBT's strategic objective is to be a high-performance financial services
provider. The plan we've adopted mandates expanding our line of products and
services beyond traditional bank boundaries -"beyond the box" - to meet the
changing and growing needs of our customers.
1994 FINANCIAL RESULTS
By nearly every measure, 1994 was a great year for CBT Corporation.
Net income for the year rose 9.9 percent to a record $11.5 million, or
$1.45 per share. Return on equity increased to 12.42 percent and return on
assets was 1.37 percent. Assets exceeded $875 million, an 8.6 percent
increase.
Capital ratios continued to be exceptionally strong.
We improved earnings while maintaining strong credit quality. Net charge-
offs were only .15 percent of loans and non-performing assets stayed low at
.37 percent.
EXPANDING THROUGH GROWTH, ACQUISITION AND PARTNERSHIP
The acquisition of BMC Bankcorp, Inc. in May substantially strengthened CBT
Corporation's regional presence. The transaction added over $200 million in
assets and gave CBT offices in the key Western Kentucky markets of Benton,
Mayfield and Murray.
We continue to look within our region for strategic affiliations with
organizations that share our passion for customer service and high
performance.
Also, we are continuing to look for opportunities to open additional offices
for our finance company, Fidelity Credit Corporation, in selected locations
across Kentucky.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
3
To provide our customers with a broader array of investment opportunities,
we entered into an alliance with J.C. Bradford and Co., a major regional
brokerage firm. Over time, this partnership will put brokers into most, if
not all, of our bank offices and generate increased fee income.
IMPROVING CUSTOMER SERVICE AND EFFICIENCY THROUGH "CBT 2000"
To help us serve customers better and improve efficiency in our new
affiliates and within existing operations, we hired the noted consulting
firm of Alex Sheshunoff Management Services, Inc. ("ASMS"). ASMS has an
outstanding record of helping bank holding companies redesign their core
processes.
We expect that this initiative, which we call "CBT 2000," will help sharpen
our focus on customers, enrich the jobs of our employees, reduce costs and
increase shareholder value. We expect CBT 2000 will begin to produce
significant results in 1995.
CREATING SHAREHOLDER VALUE
We continue to strive to create increased value for our shareholders.
During the year, the Board raised the quarterly dividend 10 percent to 11
cents per share. This is the 17th consecutive year of dividend increases.
The stock also split 2-for-1 in October.
During 1994, CBT stock began trading on the NASDAQ National Market System,
which should expand investment community interest in CBT.
We're gratified by the recognition the company has received for our
performance. For the second straight year, U.S. BANKER magazine named CBT
Corporation one of the nation's five best mid-sized financial institutions,
based on profitability and financial soundness.
We appreciate your support of CBT Corporation, the patronage of our
customers and the contributions of our employees. We plan to continue to
strengthen the company's position as a premier financial services provider
in order to exceed the expectations of these three constituencies.
Sincerely,
William J. Jones
President and Chief Executive Officer
CBT Corporation
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
4
BEYOND THE
SECURITY OF TRADITIONAL
BANKING APPROACHES.
AS A SAFE DEPOSIT BOX REPRESENTS
BUT ONE OF MANY BANK SERVICES,
BANKING ITSELF REPRESENTS ONE
IMPORTANT COMPONENT OF THE
ENTIRE FINANCIAL SERVICES LAND-
SCAPE. CBT CORPORATION IS
EXPANDING BEYOND TRADITIONAL
BANKING BOUNDARIES TO PROVIDE A
WIDE VARIETY OF FINANCIAL SERVICES
IN ORDER TO BUILD AN ORGANIZATION
THAT EXCEEDS CUSTOMER,
SHAREHOLDER AND EMPLOYEE
EXPECTATIONS.
(A Box appears here)
F I N A N C I A L L A N D S C A P E 5
(A Box appears here)
The financial services landscape continues its rapid evolution. []
Customers are demanding more. And financial institutions are responding.
Better, more sophisticated products are being introduced as technology
streamlines processing and improves customer support. []As banks and non-
banks compete to serve these customers, traditional geographic and product
boundaries are disappearing. The pace of mergers and acquisitions has
quickened as organizations benefit from expanding their expertise into
additional markets. [] In this changing environment, the successful financial
services provider is defined not only by its ability to meet customer and
community needs, but by the strength of its financial foundation. [] CBT
Corporation, one of Kentucky's 10 largest publicly held financial
institutions, built its strategic vision on that premise and is taking the
actions necessary to achieve its goal as a high performance financial
services provider. [] In 1994, CBT formed key partnerships to expand its
breadth of services. It launched an initiative to help employees serve
customers even better and to improve overall efficiency. And it grew
internally and through acquisition, bringing its 106-year history of service
to new customers and to other communities throughout the region. [] By
exceeding expectations through enhanced performance, customers are better
served, opportunities are created for employees and shareholders are
rewarded through improved returns. [] Those are the keys to CBT
Corporation's success.
(A Box appears here) PERFORMANCE
CBT Corporation performed well in 1994 as it continued its strategic
expansion as a financial services provider. [] Net income increased 9.9
percent to a record $11.5 million, or $1.45 per share, from $10.4 million,
or $1.32 per share. Return on average equity was 12.42 percent, compared
with 12.30 percent the previous year. Return on average assets was 1.37
percent in 1994, compared with 1.38 percent in 1993. [] Assets grew 8.6
percent to $875 million at year end, reflecting healthy growth in loans
and
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
6
(A Box appears here)
WHETHER IT'S THE BOSTON MARATHON OR
THE NBA, PERFORMANCE COUNTS. SO IT IS
WITH BANKING. CUSTOMERS ARE LOOKING
FOR THE RIGHT PRODUCTS TO FIT THEIR
NEEDS. THEY ALSO DEMAND EXCELLENT
SERVICE. THEIR SATISFACTION ULTIMATELY
RESULTS IN IMPROVED PERFORMANCE AND
HIGHER SHAREHOLDER VALUE.
BEYOND GREAT PAST
PERFORMANCE AND TOWARD
BUILDING AN ORGANIZATION POISED TO
PROVIDE EVEN BETTER RETURNS.
P E R F O R M A N C E 7
(A Box appears here)
deposits. Capital ratios continued to be strong. Tier I capital at
December 31, 1994, was 15.95 percent, total risk-based capital was 17.20
percent and the leverage ratio was 10.81 percent. [] The net income gains
resulted primarily from better performance in core operations across all
markets. [] Net interest income grew 15.2 percent to $38.7 million,
primarily because of a 17.5 percent growth in net loans and a 16 basis
point improvement in net interest margin. Consumer, manufactured housing
and automobile lending were strong. At 5.04 percent, CBT's net interest
margin improved in the face of a steady rise in interest rates throughout
the year. [] Loan portfolio quality remained high as CBT followed prudent
lending practices. Net charge-offs were a mere 0.15 percent of average
loans. Non-performing assets were 0.37 percent at December 31, 1994.
[] Non-interest income, excluding non-recurring items, improved 5.0
percent to $6.65 million as trust fees grew by $199,000 and service charges
on deposit accounts increased $311,000. Commissions on credit-related
insurance also improved, growing $275,000 to $1 million for 1994.
[] Revenue growth exceeded additional costs of investing in CBT's future.
Strategic investments in 1994 included the acquisition of BMC Bankcorp,
Inc., the continued expansion of Fidelity Credit and the "CBT 2000"
initiative. "CBT 2000," which started in the latter part of 1994, is
expected to improve customer service, employee satisfaction, corporate
competitiveness and efficiency in 1995 and beyond. []CBT's performance was
recognized by U.S. BANKER, which named CBT one of the country's top five
mid-sized bank-holding companies. CBT's lead bank, Citizens Bank and Trust,
received an "outstanding" rating from banking regulators for its role in
helping revitalize downtown and low-income neighborhoods and meeting
community credit needs.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
8
CBT CORPORATION SIGNIFICANTLY
EXPANDED ITS PRESENCE WITH THE
ACQUISITION OF BMC BANKCORP,
INC. THIS ADDED THREE KEY
WESTERN KENTUCKY MARKETS AND
MORE THAN $200 MILLION IN
ASSETS TO THE CORPORATION.
BEYOND THE CONFINES OF
SPECIFIC GEOGRAPHIC AND PRODUCT
BOUNDARIES.
(A Box appears here)
9
E X P A N S I O N 9
(A Box appears here)
(A Box appears here) EXPANSION
Expanding and strengthening its presence constitutes an important part of
CBT Corporation's strategic vision for the future. Consistent with that
vision, the corporation continued to look for opportunities to expand in
1994. [] Following the acquisitions of Pennyrile Bancshares, Inc., and
three Security Trust Savings and Loan locations in 1993, CBT engineered
the largest addition in its history with the acquisition of BMC Bankcorp,
Inc., a performance-minded multi-bank holding company in Western Kentucky.
[] The transaction added more than $200 million in assets to CBT and
dramatically expanded CBT's presence in the region. The Bank of Marshall
County in Benton, Graves County Bank in Mayfield and United Commonwealth
Bank, FSB, in Murray place CBT locations in several key Western Kentucky
markets. [] In connection with the transaction, BMC Chairman Joe Tom Haltom
and BMC board members Kerry B. Harvey, Ted S. Kinsey and Bill B. Morgan
brought their commitment to excellence and performance to the CBT Corporation
board of directors. [] With four commercial banks ranging in size from $38
million to $582 million in assets, a $36 million federal savings bank and a
Kentucky-based consumer finance company, CBT continues to investigate
opportunities for expansion in Western Kentucky as well as in Southern
Illinois, Northwest Tennessee and Southeast Missouri. [] CBT's consumer
finance subsidiary, Fidelity Credit Corporation, continued to expand across
Kentucky. Founded in 1976 and acquired by CBT a decade ago, Fidelity Credit
meets the varied loan needs of consumers. As one of Kentucky's largest
independent consumer finance organizations, Fidelity Credit continued to
expand into strategic locations by opening six new offices during 1994.
[] CBT is also expanding its realm of financial products to meet customer
needs through a partnership with a Nashville-based brokerage firm.
[] Offering trust and investment
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
10
(A Box appears here)
A NEW INITIATIVE IS RE-ENGINEERING AND IMPROVING THE
WAY EMPLOYEES WORK, AND THUS, HOW CUSTOMERS ARE
SERVED. "CBT 2000" AIMS TO MAKE CBT MORE EFFICIENT,
TO SERVE CUSTOMERS BETTER AND ULTIMATELY TO LEAD TO
INCREASED SHAREHOLDER RETURN.
BEYOND TODAY'S
OPERATIONS AND RETOOLING
FOR A CUSTOMER-FOCUSED,
MORE EFFECTIVE ENVIRONMENT.
11
R E - E N G I N E E R I N G 11
(A Box appears here)
services in markets served by CBT Corporation will leverage CBT's existing
expertise and capabilities. [] Internal growth combined with acquisitions
will continue to be key elements in CBT's drive to expand beyond traditional
boundaries.
(A Box appears here) RE-ENGINEERING
CBT Corporation launched a major initiative during 1994 that is designed to
find new and better ways to provide outstanding customer service.
[] This approach-known as "CBT 2000"-represents CBT Corporation's approach
to improving its performance and competitive position. [] With employees
taking a key role in strengthening customer service and contributing to the
redesign of core processes, their jobs are enriched and opportunities for
personal and career growth are enhanced. [] Core processes were examined
using customer needs as a filter to determine the most effective approach.
Improving customer service leads to a more responsive and competitive
corporation. In turn, the company's infrastructure is streamlined, costs
are lowered, performance is strengthened and shareholder return is
maximized. [] In short, the process helps ensure that CBT remains among the
very best providers of financial services. [] CBT chose the national
consulting firm Alex Sheshunoff Management Services, Inc. ("ASMS") to
study customer service and structures and to modify systems. [] Chosen
because of its considerable expertise in identifying opportunities to
improve the delivery of financial services, ASMS consultants assisted CBT
in the areas of retail delivery systems, productivity measurement, technology
deployment and organizational design. [] The end result of "CBT 2000" is
simple-employees focus on sales and customer service, not merely on
processing transactions. They explore the needs of customers and recommend
appropriate financial products and services. Ultimately, this attention to
customer service should improve delivery quality and effectiveness.
[] In "CBT 2000," CBT Corpora-
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
12
BEYOND THE EXISTING
BANKING NETWORK TOWARD
THE OFFERING OF BROKERAGE SERVICES.
THE ADVENT OF THE COMPUTER BROUGHT
HOMES AND BUSINESSES A WIDE ARRAY OF
SERVICES AND PRODUCTIVITY TOOLS. THUS
CBT CORPORATION'S STRATEGIC ALLIANCE WITH
J.C. BRADFORD AND CO., PROVIDES A FULL LINE
OF BROKERAGE SERVICES FOR CBT CUSTOMERS.
THE WIDER CHOICES AVAILABLE SHOULD
ENHANCE CBT'S POSITION AS A PREMIER
PROVIDER OF FINANCIAL SERVICES.
(A Box appears here)
13
C O L L A B O R A T I O N
(A Box appears here)
tion is showing its commitment to remaining on the cutting edge of the
tremendous change that is taking place within the financial services industry,
while maintaining its focus on providing the best in personal service.
(A Box appears here) COLLABORATION
With the many investment opportunities available in the marketplace, it is
important that CBT customers have access to a full range of financial
products. [] To that end, CBT entered a strategic partnership with J.C.
Bradford and Co., a prominent regional brokerage firm, to offer customers a
full range of brokerage investment products. [] As one of the largest
investment firms located outside of New York City, Nashville-based J.C.
Bradford and Co. is a 68-year-old investment firm with offices in 11 states.
From stock and mutual funds to tax-free bonds and limited partnerships, J.C.
Bradford's offerings within CBT Corporation offices provide CBT custom-ers
more investment and financial choices. This wider array of brokerage services
and financial options fit both short-and long-term customer financial
objectives. [] The first J. C. Bradford and Co. branch opened May 16
in Paducah. Eventually, brokers may be part of many, if not all,
of our affiliate offices. Fee income from this cross-selling relationship
should strengthen considerably in 1995. [] With banks and non-banks competing
for customers, offering brokerage services with CBT's banking products ensures
that virtually any customer need can be met. This combination offers CBT
customers a "one-stop shopping" edge. [] This collaboration-combined with CBT
Corporation's actions to strengthen market share, expand into new markets and
emphasize and streamline core processes-represents the strategic vision to
build performance, and thus, exceed the expectations of customers, employees
and shareholders.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
14 D I R E C T O R S A N D O F F I C E R S
Executive Officers of CBT Corporation
and Affiliates
WILLIAM J.JONES
President and CEO, CBT Corporation and Citizens Bank &
Business Consultant Trust Company
JOHN E.SIRCY
Executive Vice President and COO, CBT Corporation and
Citizens Bank & Trust Company
T. DONALD ATWOOD
President and CEO, Pennyrile Citizens Bank & Trust
Company
JIMMIE J. ELLINGTON
President and CEO, Graves County Bank
M. LEON JOHNSON
President and CEO, Fidelity Credit Corporation
C. THOMAS MURRELL, III
Executive Vice President, Commercial and Consumer
Banking, Citizens Bank & Trust Company
J. RUSSELL OGDEN , III
Executive Vice President,Financial Services, Citizens Bank
& Trust Company
JOHN E. PECK
President and CEO, United Commonwealth Bank
LOIS J. SWAIN
Senior Vice President, Human Resources, CBT Corporation
and Citizens Bank & Trust Company
LARRY D. WRIGHT
President and CEO, Bank of Marshall County
CBT Corporation Board of Directors
IRVING P. BRIGHT, JR.
Business Consultant
JOHN BURMAN
Agency Manager, Kentucky Farm Bureau
PATRICK J. CVENGROS
Investor
WILLIAM H. DYER
President and CEO
Tennessee Valley Towing
LOUIS A. HAAS
Investor
JOE TOM HALTOM
Chairman, Bank of Marshall County
F. DONALD HIGDON
Investor
WILLIAM J. JONES
President and CEO, CBT Corporation and Citizens Bank
& Trust Company
TED S. KINSEY
President and CEO, Parkway Chrysler
LOUIS M. MICHELSON
President and CEO, Michelson Jewelers, Inc.
BILL B. MORGAN
Brig. Gen. USAF (Retired) and Investor
LOUIS D. MYRE, M.D.
Retired Physician
DAVID M. PAXTON
Vice President and CFO, Paxton Media Group
ROBERT P. PETTER
President and CEO, Henry A. Petter Supply Company
JOSEPH A. POWELL
President and CEO, Old Hickory Clay Company
WILLIAM A. USHER
Chairman of the Board and CEO, Usher Transportation,
Inc.
Directors Emeritus:
E.M. BAILEY
WILLIAM R. BLACK
HOWARD Z. GRAY
M ARSHALL E. NEMER
ALLAN R. RHODES
F I N A N C I A L H I G H L I G H T S
($ IN THOUSANDS EXCEPT PER SHARE DATA)
1994 1993 % Change
PERFORMANCE:
Net income $ 11,486 $ 10,448 9.9
Return on average assets 1.37% 1.38% (0.7)
Return on average equity 12.42% 12.30% 1.0
Efficiency ratio 60.06% 60.05% 0.0
Net interest margin (tax equivalent) 5.04% 4.88% 3.3
PER SHARE:
Net income $ 1.45 $ 1.32 9.8
Dividends .43 .39 10.3
Book value 11.52 11.19 2.9
Stock price
High 23.38 19.25 21.5
Low 18.50 13.50 37.0
December 31 21.00 18.50 13.5
Price/earnings ratio 14.5X 14.0x 3.6
AT DECEMBER 31:
Assets $875,117 $805,476 8.6
Net loans 616,009 524,185 17.5
T otal securities 209,653 226,870 (7.6)
Deposits 669,577 648,644 3.2
Stockholders' equity 91,337 88,712 3.0
Tier 1 risk-based capital ratio 15.95% 16.20% (1.5)
Total risk-based capital ratio 17.20% 17.45% (1.4)
Leverage ratio 10.81% 10.51% (2.8)
Allowance for loan losses
As a % of total loans 1.87% 2.10% (11.0)
As a % of non-performing assets 499.91% 928.10% (46.1)
NET INCOME (THOUSANDS)
Bar graph appears here with the following plot points:
90 91 92 93 94
6,194 8,166 10,305 10,448 11,486
EARNINGS PER SHARE
DIVIDENDS PER SHARE
Bar graph appears with the following plot points:
Earnings Per Share 90 91 92 93 94
.78 1.03 1.30 1.32 1.45
Dividends Per Share 90 91 92 93 94
.34 .35 .36 .39 .43
AVERAGE TOTAL ASSETS (MILLIONS)
Bar graph appears with the following plot points:
90 91 92 93 94
663,176 698,877 716,915 755,936 838,608
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S 15
15
[]MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
CBT Corporation ("CBT") consists of four state chartered commercial banks,
one federal savings bank, and a consumer finance company. The following
discussion and analysis is presented on a consolidated basis.
CBT reported record net income of $11,486,000 in 1994, an increase of 9.9
percent over earnings of $10,448,000 in 1993 and 11.5 percent over the
$10,305,000 earned in 1992. Net income per share was $1.45 in 1994, compared
with $1.32 in 1993 and $1.30 in 1992, an increase of 9.8 percent and 11.5
percent, respectively. Return on average equity was 12.42 percent and return
on average assets was 1.37 percent for 1994, compared with 12.30 percent and
1.38 percent in 1993, respectively, and 13.29 percent and 1.44 percent in
1992, respectively.
Net income per common share amounts for periods prior to 1994 have been
restated to reflect a two-for-one split of the outstanding shares of common
stock of CBT which was payable on October 25, 1994.
CBT's results for the periods prior to 1994 have been restated to include
the results of BMC Bankcorp, Inc. which was acquired by CBT effective May 31,
1994 and has been accounted for using the pooling of interests method of
accounting, and accordingly, the accompanying financial statements have been
restated to include the accounts and operations of BMC Bankcorp, Inc. for
periods prior to the acquisition.
[]CONSOLIDATED INCOME
STATEMENT ANALYSIS
NET INTEREST INCOME
Net interest income on a tax-equivalent basis is the difference between
interest earned on assets and interest paid on liabilities, with adjustments
made to present yields on tax-exempt assets as if such income was fully
taxable. Changes in the mix and volume of earning assets and interest-bearing
liabilities, their related yields, and overall interest rates have a major
impact on net income. In 1994, tax-equivalent net interest income provided
86.1 percent of CBT's net revenues, compared with 83.3 percent in 1993 and
85.9 percent in 1992.
Total tax-equivalent net interest income was $40,323,000 in 1994, a 15.2
percent increase over the $35,008,000 reported in 1993. Growth in tax-
equivalent net interest income over 1993 was primarily due to an 11.2
percent increase in average earning assets and a 16 basis point increase
in net interest margin. The increase in earning assets is primarily due to
increases in average loans, partially offset by declines in securities and
federal funds sold.
For the year ended Basis
December 31 Points
1994 1993 Change
Yield on earning assets 8.44% 8.34% 10
Rate on interest-bearing
liabilities 4.03% 4.13% (10)
Net interest rate spread 4.41% 4.21% 20
Net interest margin 5.04% 4.88% 16
Residential real estate loan growth was robust during 1994, in spite of the
increases in long-term interest rates experienced during the year. Strong
local economies and increased sales efforts produced a 20.5 percent increase
in outstandings for 1994. Historic lows in long-term rates combined with
local economic growth resulted in 26.2 percent growth in 1993.
Commercial loan outstandings, down 1.3 percent in 1993, rebounded modestly
in 1994, posting an increase of 6.0 percent. Increased borrowings by current
customers, together with modest growth in new commercial loan business,
produced the increase.
Consumer loan growth was exceptional in 1994. Building on 1993's increase
of 21.3 percent, consumer loans net of unearned interest grew 29.2 percent
in 1994. Significant increases were achieved because of CBT's commanding
local market share in indirect automobile and manufactured housing
installment credit. Strong automobile and mobile home
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
16
sales in CBT's trade area assisted in producing outstanding growth. In
addition, direct consumer loans grew as the result of expansion in CBT's
consumer finance company, Fidelity Credit Corporation ("FCC"). Six new FCC
offices were opened in 1994.
The 1993 increase in tax-equivalent net interest income of 3.1 percent over
the $33,957,000 reported in 1992 was due to a 5.5 percent increase in average
earning assets, partially offset by an 11 basis point decline in net interest
margin. The increase in average earning assets reflects increases in average
loans, offset in part by declines in average securities and federal funds
sold. Loan growth was achieved primarily in residential real estate and
consumer credit in 1993 because of low interest rates and strengthening
local economies. The growth in earning assets was funded in part by the
assumption of $62.2 million in deposits from three branches of Security
Trust Federal Savings and Loan Association ("Security Trust") on September
1, 1993.
Net interest margin, the ratio of tax-equivalent net interest income divided
by average earning assets, was 5.04 percent in 1994, compared with 4.88
percent in 1993 and 4.99 percent in 1992. The increase over 1993 reflects
declines in the cost of savings and time deposits, as well as improved yields
on mortgage-backed securities and federal funds sold. Also contributing to
the improvement of 1994 over 1993 was the shift in asset mix towards loans,
which produce higher yields, and the increase in non-interest bearing demand
deposits. The 1993 decline compared with 1992 reflects declines in loan and
security yields of 89 basis points, partially offset by reductions in the
cost of all interest-bearing liabilities.
PROVISION FOR LOAN LOSSES
The provision for loan losses reflects management's judgment of the cost
associated with the credit risk inherent in CBT's loan portfolio. The
consolidated provision for loan losses was $1,361,000 in 1994, virtually the
same as the $1,366,000 reported for 1993 and 44.2 percent less than the 1992
amount of $2,441,000. The provision for loan losses was 0.24 percent of
average loans in 1994, compared with 0.28 percent in 1993 and 0.56 percent
in 1992. The maintenance of the level of provision for loan losses in 1994,
compared with 1993, reflects the relative stability of non-performing asset
levels and net loan losses in 1994. The decline in the provision for loan
losses in 1993, compared with 1992, reflects reductions in non-performing
assets and lower net loan losses in 1993.
Net loan losses for 1994 were $826,000, an increase of $613,000 over 1993,
and a decrease of $353,000 from 1992. Net loan losses as a percent of average
loans were 0.15 percent in 1994, compared to 0.04 percent in 1993 and 0.27
percent in 1992. The increase in net loan losses in 1994 from 1993 reflects
the partial charge-off on one commercial credit in 1994 and the unusually
low level of net loan losses experienced in 1993. The decrease from 1993 to
1992 is primarily due to lower commercial loan net charge-offs.
NON-INTEREST INCOME
Non-interest income represented 13.9 percent of CBT's tax-equivalent revenue
in 1994, compared with 16.7 percent in 1993 and 14.1 percent in 1992.
Consolidated non-interest income declined 7.2 percent in 1994 to $6,513,000.
Excluding the gain realized in 1993 on the sale of finance receivables and
excluding the effects of security sales in 1994 and 1993, non-interest income
grew 5.0 percent, or $319,000. This increase was primarily the result of
increases in service charges on deposit accounts and commissions earned on the
sale of credit-related insurance. The growth in service charges was caused in
part by the assumption of approximately 5,000 transaction accounts from
Security Trust in September 1993.
For the year ended
December 31 Change
1994 1993 Amount Percent
Trust and investment
advisory fees $1,413 $1,485 $ (72) (4.85)
Service charges on
deposit accounts 2,821 2,510 311 12.39
Insurance commissions 1,012 737 275 37.31
Gain on sale of assets
and/or securities (136) 687 (823) (119.80)
Other 1,403 1,598 (195) (12.20)
Total non-interest
income $ 6,513 $ 7,017 $(504) (7.18)
A portion of CBT's mortgage-backed securities were sold during 1994 to fund
loan growth. Increases in long-term rates reduced the market value of these
securities, creating losses on their sale. In addition, selected U. S.
Treasury issues were pre-refunded, or sold in anticipation of their
approaching maturity, with the proceeds reinvested in similar issues with
intermediate-term maturities. All securities sold were classified as
available for sale.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
17
The 1993 sale of finance receivables resulted in a gain of $553,000.
Tennessee offices of FCC were sold to enable company management to focus on
growth in Kentucky.
In 1994, CBT announced a strategic alliance with J. C. Bradford and Co.
("JCB"), a Nashville-based regional brokerage firm, involving the placement of
JCB brokers in CBT banking locations. Because of the transition from another
provider of brokerage services to JCB, revenues from this activity declined
$271,000 in 1994, compared with 1993. Trust fees increased $199,000 in 1994,
compared with 1993, to partially offset the decline in brokerage revenues.
Non-interest income increased 13.8 percent in 1993, compared with 1992,
primarily because of growth in service charges on deposit accounts,
increases in other fee income, and gains on the sale of finance receivables
and loans. Excluding investment securities sales and gains on sale of
finance receivables, non-interest income increased 13.3 percent to
$6,330,000 in 1993, compared with $5,587,000 in 1992.
NON-INTEREST EXPENSE
Consolidated non-interest expense increased 11.5 percent to $28,129,000 in
1994. The increase is primarily due to increased salaries and employee
benefits, fees paid for consulting and other professional business services,
and growth in other non-interest expense. Salaries and employee benefits
grew in 1994 as a result of merit increases and additions to staff required
to support current and future business growth. Consulting and other
professional business services were utilized primarily in conjunction with
a significant effort at CBT, which was initiated in September 1994. This
effort, announced under the title "CBT 2000," involves a review of
organizational structure, staffing levels, core processes, and the use of
technology in order to most appropriately position CBT for the future. The
consulting engagement for "CBT 2000," not yet complete as of December 31,
increased non-interest expense by $698,000 in 1994. Increases in other non-
interest expense, tax on bank shares, depreciation and amortization,
data processing, and FDIC assessments were partially offset by declines in
net occupancy and supplies.
For the year ended
December 31 Change
1994 1993 Amount Percent
Salaries and employee
benefits $14,014 $12,868 $1,146 $ 8.91
Net occupancy 984 1,206 (222) (18.41)
Depreciation and
amortization 1,702 1,619 83 5.12
Data processing 1,127 1,030 97 9.42
Supplies 744 857 (113) (13.19)
FDIC assessments 1,535 1,382 153 11.07
Tax on bank shares 1,158 942 216 22.93
Consulting and other
professional services 1,444 454 990 218.06
Other 5,421 4,878 543 11.13
Total non-interest
expense $28,129 $25,236 $2,893 11.46
Non-interest expense increased $2,071,000 or 8.9 percent in 1993 over 1992.
This increase is primarily attributable to growth in salary and benefit
costs to support business expansion, increases in depreciation and
amortization reflective of the 1993 increase in depreciable assets, higher
bank shares tax assessments, and increases in other non-interest expense.
The efficiency ratio, defined as non-interest expense divided by tax-
equivalent net revenues, is a measure of how effective a financial services
company is in leveraging its resources to produce revenue. For 1994 and 1993,
CBT's efficiency ratio was 60.1 percent; in 1992, the efficiency ratio was
57.7 percent. A lower ratio indicates better performance. CBT's efficiency
ratio was maintained in 1994 compared to 1993 as revenue growth, primarily
achieved in the form of an increase in tax-equivalent net interest income
due to loan growth, was sufficient to support the increase of non-interest
expenses. The 1992 efficiency ratio, at 57.7 percent, was superior to 1993
and 1994 performance due to lower levels of non-interest expenses supporting
higher relative tax-equivalent net revenues. One anticipated outcome of the
"CBT 2000" initiative is an improvement in CBT's efficiency ratio.
INCOME TAXES
CBT's income tax planning is based upon the goal of maximizing long-term,
after-tax profitability. Income tax expense is significantly affected by the
mix of taxable versus tax-exempt revenues.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
18
The effective income tax rate was 26.9 percent in 1994, compared with 25.4
percent in 1993 and 22.9 percent in 1992. The increase in the effective tax
rate in 1994 from 1993 is primarily due to the fact that taxable revenue
increases exceeded the increase in tax-exempt revenues. The increase in the
effective tax rate in 1993 from 1992 also reflected the relationship between
taxable and tax-exempt revenue growth. For more information on income taxes,
see footnote 12.
[]CONSOLIDATED BALANCE SHEET
ANALYSIS
EARNING ASSETS
At December 31, 1994, earning assets were $825.7 million, compared with
$764.0 million at December 31, 1993. This increase is due to a $91.8 million
increase in loans, partially offset by a $17.2 million decline in securities
and a $12.9 million reduction in federal funds sold and money market
investments.
Healthy local economies and increased sales efforts enabled CBT to achieve
growth in each major loan type. Commercial loans, declining 1.3 percent in
1993,increased by 6.0 percent in 1994 as commercial activity increased in
CBT's markets. Residential real estate loans continued to grow in 1994 as
interest rate increases did not choke-off demand until very late in the year.
Consumer loan growth was fueled by robust automobile and mobile home sales,
combined with an increased sales focus on consumer lending and the expansion
of FCC.
Investment securities held to maturity and securities available for sale
declined in 1994 because of sales and principal pay-downs on mortgage-backed
securities. Solid loan demand prompted the sale of securities as CBT altered
its earning asset mix to take advantage of economic growth in its markets.
CBT has certain securities in its held to maturity and available for sale
portfolios that are classified as derivative securities by banking regulators.
At the end of 1994, CBT has $200,000 book value of federal agency derivatives
in its held to maturity portfolio, representing less than one percent of
total investment securities held to maturity. There were none held at the
end of 1993. The market value of these securities on December 31, 1994 was
$186,000.
In its available-for-sale portfolio, CBT had $11,439,000 and $8,392,000 book
value at December 31, 1994 and 1993, respectively, in derivative securities as
defined by regulators. These amounts represent 6.74% and 4.64% of the total
securities available for sale at the end of 1994 and 1993, respectively.
Market value for these securities was $10,533,000 at the end of 1994 and
$8,463,000 at the end of 1993. All are guaranteed by government agencies
and none have a maturity of over 7 years. The amount and nature of these
securities pose no undue risk to CBT's financial position and there are no
plans to change the amount of these securities held.
Average earning assets were $799.4 million in 1994, an increase of 11.2
percent over 1993. This increase is due to a 17.8 percent increase in average
loans, partially offset by a 2.1 percent decline in securities, federal funds
sold, and money market investments.
Leverage, the ratio of average assets to average stockholders' equity, was
9.1 times during 1994 versus 8.9 times during 1993. This increase is due to a
10.9 percent increase in average assets, partially offset by an 8.9 percent
increase in average stockholders' equity in 1993.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which was adopted by CBT in the first quarter of 1994. The
Statement requires that investment securities classified as available for
sale be reported at fair value with unrealized gains and losses reported,
net of deferred taxes, as a separate component of stockholders' equity. As
of December 31, 1994, unrealized losses related to investment securities
available for sale were $5.4 million, net of deferred taxes.
CREDIT RISK MANAGEMENT
CBT manages exposure to credit risk though loan portfolio diversification by
customer, industry, and loan type. As a result, there is no undue
concentration in any single sector. Credit risk management also includes
pricing loans to cover anticipated future loan losses, funding and servicing
cost, and to allow for a profit margin. Loans by type appear in Footnote 6.
At December 31, 1994, CBT's commercial, industrial, and agricultural loans
totaled $191.2 million, or 31.0 percent of total loans, net of unearned
interest ("net loans"). The com-
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
19
parable December 31, 1993 balance outstanding was $180.4 million,
representing 34.4 percent of net loans. The decline was primarily due to
growth in residential real estate and installment loans in excess of that
experienced in commercial, industrial, and agricultural loans.
At December 31, 1994, residential real estate loans totaled $268.5 million
or 43.6 percent of net loans, compared with $222.9 million or 42.5 percent of
net loans as of December 31, 1993. Net installment loans totaled $156.2
million or 25.4 percent of net loans as of December 31, 1994, compared with
$120.9 million or 23.1 percent of net loans as of December 31,1993.
CBT is not aware of any loans classified for regulatory purposes at
December 31, 1994, that are expected to have a material impact on CBT's
future operating results, liquidity, or capital resources. CBT is not aware
of any material credits about which there is serious doubt as to the ability
of borrowers to comply with the loan repayment terms. There are no material
commitments to lend additional funds to customers whose loans were classified
as non-accrual at December 31, 1994.
ALLOWANCE FOR LOAN LOSSES
At December 31, 1994, the allowance for loan losses was $11.5 million, or
1.88 percent of net loans outstanding, compared with $11.0 million, or 2.10
percent at December 31, 1993. The ratio of the allowance for loan losses to
non-performing assets was 499.9 percent at December 31, 1994, compared with
928.1 percent at December 31, 1993. Non-performing assets consist of non-
accrual loans, loans past due ninety days or more that are still accruing
interest, and other real estate owned. The decline in the ratio of the
allowance for loan losses to non-performing assets at December 31, 1994,
reflects the unusually low level of non-performing assets at December 31,
1993, and the placement of one commercial credit on non-accrual status in
1994.
Although it is impossible for any lender to predict future loan losses with
complete accuracy, management monitors the allowance for loan losses with the
intent to provide for all losses that can reasonably be anticipated based on
current conditions. CBT maintains the allowance available to cover future loan
losses within the entire loan portfolio.
NON-PERFORMING ASSETS
Table 8 presents data on CBT's non-performing assets. At December 31, 1994,
non-performing assets totaled $2.3 million, or 0.37 percent of net loans and
other real estate owned, compared with $1.2 million, or 0.23 percent of net
loans and other real estate owned, at December 31, 1993.
The increase is primarily due to the placement of one commercial credit on
non-accrual status in 1994. Non-accrual loans increased $1.0 million compared
with December 31, 1993, and ninety days past due outstandings increased $0.2
million compared with December 31, 1993. Other real estate owned declined $0.1
million comparing December 31, 1994 with December 31, 1993. The earnings per
share impact of non-accrual loans for 1994, 1993, and 1992 was negligible.
In 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan," (FAS 114) which must be adopted for CBT's 1995
financial statements. It requires that impaired loans, as defined within
FAS 114, be measured based on the present value of expected future cash flow
discounted at the loan's effective rate, at the loan's market price, or the
fair value of the collateral if the loan is collateral dependent. The
adoption of FAS 114 is not expected to have a material effect on CBT's
consolidated financial statements.
[]FUNDING SOURCES
INTEREST-BEARING LIABILITIES
At December 31, 1994, interest-bearing liabilities totaled $703.8 million,
an increase of $54.9 million over December 31, 1993. The increase is
principally due to a $45.0 million increase in short-term borrowings and a
$11.5 million increase in interest-bearing deposits, partially offset by an
$1.6 million reduction in long-term borrowings. The short-term borrowings
increase is primarily due to greater use of Federal Home Loan Bank short-term
advances as a cost-effective funding source and growth in customer
repurchase agreements.
Average interest-bearing liabilities were $674.3 million in 1994, compared
with $604.9 million in 1993, primarily due to a 7.4 percent increase in
average interest-bearing deposits and a 54.4 percent increase in average
short-and long-term borrowings.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
20
CORE DEPOSITS
In CBT's banking subsidiaries, demand deposits, NOW, Money Manager,
Individual Retirement and savings accounts, and certificates of deposit
under $100,000 provide a stable source of funding. At December 31, 1994,
these funds accounted for 70.7 percent of CBT's total funding sources,
compared with 73.1 percent at December 31, 1993. This level of core
deposits is considered appropriate by management given CBT's asset mix.
PURCHASED DEPOSITS
Purchased deposits, consisting of certificates of deposit with denominations
of $100,000 or more, represented 5.8 percent of total funding sources at
December 31, 1994, compared with 7.4 percent at December 31, 1993. The
decline was primarily due to a $9.5 million decrease in purchased deposits
combined with a $69.6 million increase in total funding sources.
SHORT-TERM BORROWINGS
Short-term borrowings include federal funds purchased, securities sold under
agreements to repurchase, U. S. Treasury notes payable, revolving lines of
credit, and short-term Federal Home Loan Bank advances. At December 31, 1994,
short-term borrowings represented 10.8 percent of total funding sources,
compared with 5.5 percent at December 31, 1993. The increase reflects growth
in federal funds purchased and securities sold under agreements to repurchase
of $20.5 million, an increase in Federal Home Loan Bank advances of $20.0
million, and an increase in revolving lines of credit used to fund FCC of
$4.8 million, partially offset by a $0.3 million decline in U. S. Treasury
notes payable. Management views short-term borrowings as a cost-effective
alternative to purchased deposits and actively manages CBT's short-term
borrowing position to maintain acceptable net interest margins and liquidity.
LONG-TERM BORROWINGS
Long-term borrowings include Federal Home Loan Bank advances with maturities
in excess of one year and term debt used to fund FCC. At December 31, 1994,
long-term borrowings represented 2.6 percent of total funding sources,
compared with 3.1 percent at December 31, 1993. The decline in long-term
borrowings of $1.5 million is primarily due to reductions in Federal Home
Loan Bank advances.
ASSET AND LIABILITY MANAGEMENT
The goal of the asset and liability management process is to manage the
structure of the balance sheet to provide the maximum level of net interest
income while maintaining acceptable levels of interest rate risk (as defined
below) and liquidity. The focal point of this process for much of 1994 was the
Asset and Liability Management Committee (ALCO) of Citizens Bank and Trust
Company ("Citizens"), CBT's lead bank. In addition to considering the position
of this bank, ALCO did review at a summary level the overall risk to changes
in interest rates and the liquidity of CBT on a consolidated basis during its
monthly meetings. In the fourth quarter of 1994, a corporate ALCO was formed
that meets monthly to consider CBT's consolidated interest rate risk and
liquidity posture.
INTEREST RATE RISK AND ITS MEASUREMENT
Interest rate risk is the risk that future changes in interest rates will
reduce net interest income or the market value of CBT's balance sheet.
Management uses various measurement tools to monitor CBT's interest rate
risk position. One measurement tool is the GAP report, which classifies
assets and liabilities and their respective yields and costs in terms of
maturity or repricing date. While considerable judgment is necessary to
appropriately classify certain balance sheet items that do not have
contractual maturity or repricing dates, the GAP report provides management
a basic measure of interest rate risk. CBT monitors the GAP position of each
subsidiary individually (FCC is included with Citizens), as well as on a
consolidated basis.
Because of the limitations of GAP reports, CBT uses a computer model to
estimate the impact of various parallel shifts in the yield curve on net
interest income and market value. This model is run monthly for each
subsidiary (as previously defined), as well as on a consolidated basis.
At Citizens, management has developed a model that identifies the portion
of year-to-date net interest income derived from interest rate mismatches
("mismatch profits"). Identifying mismatch profits assists management in
understanding the relative importance of such profits, which by their nature
are largely beyond management's control, to overall net interest income.
For 1994, mismatch profits represent less than 3 per cent of Citizen's
tax-equivalent net interest income.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
21
MANAGEMENT OF INTEREST RATE RISK
The management of interest rate risk is governed by an asset and liability
management policy in place at Citizens. The policy specifies targets based
primarily on the GAP report. During 1994, Citizens operated within the policy
guidelines. Consolidated GAP reports produced in the fourth quarter of 1994
indicated that CBT's consolidated interest rate risk position was also in
compliance with policy.
CHANGES IN INTEREST RATE RISK
In 1994, CBT supplemented its use of the GAP model, with a computer modeling
approach that measures effects on net interest income and market value under
a variety of interest rate scenarios. CBT's management believes the two
approaches complement each other in understanding the impact of changes in
interest rates. Based on modeling done using December 1994 data, CBT would
expect its net interest income to decline no more than 3 percent under a
300 basis point parallel shift upward or downward of the yield curve. The GAP
approach of measuring interest rate risk produced a one year cumulative
interest rate GAP on December 31, 1994 of 93 percent compared to a one year
cumulative interest rate GAP of 95 percent on December 31, 1993.
LIQUIDITY MANAGEMENT
Liquidity management involves planning to meet funding needs at a reasonable
cost, as well as developing contingency plans to meet unanticipated funding
needs or a loss of funding sources. Liquidity management for CBT is monitored by
ALCO, which takes into account the marketability of assets, the sources and
stability of funding, and the level of unfunded loan commitments.
CBT's consumer deposits provide stability with respect to liquidity. In
addition, membership in the Federal Home Loan Bank of Cincinnati provides a
cost-effective alternate source of funding.
CAPITAL MANAGEMENT
CBT believes that a strong capital position is vital to continued
profitability and to promote depositor and investor confidence. Bank
subsidiaries are required to maintain capital levels sufficient to qualify
for "well capitalized" status with banking regulators and to meet anticipated
growth needs. Net income is the primary source of new capital for
subsidiaries. Net income of subsidiaries in excess of capital requirements
is available to CBT in the form of dividends and is used primarily to pay
corporate dividends.
Well
Capitalized Actual Excess
December 31, 1994
Leverage Ratio 5.00% 10.81% 5.81%
Tier I 6.00% 15.95% 9.95%
Total Risk-Based 10.00% 17.20% 7.20%
December 31, 1993
Leverage Ratio 5.00% 10.51% 5.51%
Tier I 6.00% 16.20% 10.20%
Total Risk-Based 10.00% 17.45% 7.45%
Because of solid performance and conservative capital management, CBT has
a strong capital position. CBT's Tier 1 capital ratio at December 31, 1994,
was 15.95 per total capital to risk-based assets ratio was 17.20 per cent
compared with 16.20 percent and 17.45 percent, respectively December 31,
1993. CBT's leverage ratio was 10.81 per at December 31, 1994, compared with
10.51 percent at December 31, 1993. These ratios compare favorably to the
regulatory "well capitalized" minimums of 6.0 percent for Tier 1, 10.0 percent
for total capital to risk-based assets, and 5.0 per cent for the leverage
ratio.
CBT's stockholders' equity, exclusive of the unr loss on securities
available for sale, net of deferred tax, gr to $96.7 million at December 31,
1994, a 9.0 percent incr over December 31, 1993. CBT's internal capital
growth rate (ICGR) in 1994 was 8.9 percent. The ICGR represents the rate at
which CBT's average stockholders' equity grew as a result of earnings retained
(net income less dividends paid).
In the second quarter of 1994, CBT increased the quarterly cash dividends
paid to stockholders from 10.0 cents per share to 11.0 cents per share. This
represents a 10 percent increase in the quarterly dividend rate and reflects
CBT's continuing record of strong earnings performance and its policy of
maintaining the dividend payout ratio in a range of 25 to 35 percent. In the
third quarter of 1994, CBT declared a two-for-one stock split payable on
October 25, 1994.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
22
TABLE 1
[]SELECTED FINANCIAL DATA SUMMARY, LAST FIVE YEARS
($ IN THOUSANDS EXCEPT PER COMMON SHARE DATA)
1994 1993 1992 1991 1990
RESULTS OF OPERATIONS:
Net interest income $ 38,696 $ 33,598 $ 32,804 $ 29,241 $ 28,226
Provisions for loan losses 1,361 1,366 2,441 2,847 3,873
Net interest income after
provision for loan losses 37,335 32,232 30,363 26,394 24,353
Non-interest income 6,649 6,330 5,587 5,035 4,528
Gain on sale of finance receivables - 553 3 - -
Gain (loss) on sale of securities (136) 134 575 498 94
Non-interest expense 28,129 25,236 23,165 21,387 20,623
Income before income taxes 15,719 14,013 13,363 10,540 8,352
Income taxes 4,233 3,565 3,058 2,374 2,158
Net income $ 11,486 $ 10,448 $ 10,305 $ 8,166 $ 6,194
PER COMMON SHARE DATA:
Net income $ 1.45 $ 1.32 $ 1.30 $ 1.03 $ 0.78
Cash dividends $ 0.43 $ 0.39 $ 0.36 $ 0.35 $ 0.34
Book value per common share at
year-end (a) $ 11.52 $ 11.19 $ 10.18 $ 9.17 $ 8.39
AVERAGES:
Assets $ 838,608 $ 755,936 $ 716,915 $ 698,877 $ 663,176
Deposits and corporate cash
management repurchase agreements $ 689,671 $ 634,258 $ 606,242 $ 600,926 $ 568,815
Loans, net $ 567,182 $ 481,664 $ 439,492 $ 425,573 $ 417,432
Stockholders' equity $ 92,495 $ 84,914 $ 77,549 $ 69,539 $ 65,019
PERFORMANCE RATIOS
Return on average assets (b) 1.37% 1.38% 1.44% 1.17% 0.93%
Return on average stockholders'
equity (b) 12.42% 12.30% 13.29% 11.74% 9.53%
A verage stockholders' equity to
average assets 11.03% 11.23% 10.82% 9.95% 9.80%
Dividend pay out ratio 28.63% 23.19% 21.11% 24.31% 31.08%
Net charge-offs to average loans 0.15% 0.04% 0.27% 0.34% 1.21%
Allowance for loan losses as a
percentage of year-end loans 1.87% 2.10% 2.12% 1.96% 1.67%
Net interest margin (tax equivalent) 5.04% 4.88% 4.99% 4.63% 4.71%
(a) Includes SFAS 115.
(b) Excludes SFAS 115.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
23
TABLE 2
[]ANALYSIS OF CHANGES IN NET INTEREST INCOME
(TAX EQUIVALENT BASIS, $ IN THOUSANDS)
1994 vs 1993 1993 vs 1992
Attributed to Attributed to
Total Total
Dollar Dollar
Volume Rate Change Volume Rate Change
INTEREST INCOME ON:
Loans, net $ 7,879 $ (617) $ 7,262 $ 4,335 $ (5,134) $ (799)
Taxable investment securities (445) 339 (106) (402) (2,088) (2,490)
Tax-exempt investments securities 691 (224) 467 460 (18) 442
Federal funds sold and other (134) 27 (107) (88) 50 (38)
Total interest income 7,991 (475) 7,516 4,305 (7,190) (2,885)
INTEREST EXPENSE ON:
Deposits 1,710 (1,215) 495 910 (4,690) (3,780)
Federal funds purchased and securities
sold under agreements to repurchase 58 157 215 369 (190) 179
Other 1,351 140 1,491 (99) (236) (335)
Total interest expense 3,119 (918) 2,201 1,180 (5,116) (3,936)
NET INTEREST INCOME $ 4,872 $ 443 $ 5,315 $ 3,125 $ (2,074) $ 1,051
Note: For purposes of this schedule, changes which are not due solely to volume
or solely to rate have been allocated to rate.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
24
TABLE 3
[]THREE YEAR AVERAGE BALANCE AND NET INTEREST ANALYSIS
(TAX EQUIVALENT BASIS, $ IN THOUSANDS)
1994 1993 1992
Average Interest Yield Average Interest Yield Average Interest Yield
Balance & Fees /Rate Balance & Fees /Rate Balance & Fees /Rate
ASSETS
EARNING ASSETS
Loans, net (1) $ 567,182 $ 51,638 9.10% $ 481,664 $ 44,376 9.21% $ 439,492 $ 45,175 10.28%
Taxable investment securities 58,986 3,521 5.97% 55,696 3,680 6.61% 63,598 5,874 9.24%
Tax-exempt investments
securities 56,862 5,302 9.32% 49,740 4,835 9.72% 45,022 4,393 9.76%
Mortgage-backed securities 109,668 6,795 6.20% 120,500 6,742 5.60% 118,255 7,038 5.95%
Federal funds sold 6,713 228 3.40% 11,202 335 2.99% 14,670 373 2.54%
TOTAL EARNING ASSETS 799,411 67,484 8.44% 718,802 59,968 8.34% 681,037 62,853 9.23%
Non-earning assets
Cash and due from banks 24,263 22,663 21,795
Premises and equipment, net 14,881 14,244 14,010
Other 11,647 10,715 9,542
Allowance for loan losses (11,594) (10,488) (9,469)
TOTAL ASSETS $ 838,608 $ 755,936 $ 716,915
LIABILITIES AND
STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Demand deposits $ 157,599 $ 4,312 2.74% $ 154,315 $ 4,136 2.68% $ 150,081 $ 4,908 3.27%
Time deposits 391,146 18,106 4.63% 360,523 17,935 4.97% 355,234 20,997 5.91%
Savings deposits 44,638 1,151 2.58% 37,632 1,003 2.67% 29,048 949 3.27%
Federal funds purchased and
securities sold under
agreements to repurchase 37,848 1,254 3.31% 35,832 1,039 2.90% 25,070 860 3.43%
Other borrowings 43,106 2,338 5.42% 16,609 847 5.10% 18,129 1,182 6.52%
TOTAL INTEREST-BEARING
LIABILITIES 674,337 27,161 4.03% 604,911 24,960 4.13% 577,562 28,896 5.00%
NON-INTEREST-BEARING
LIABILITIES
Demand deposits 63,999 57,995 53,550
Other 7,777 8,116 8,254
TOTAL LIABILITIES 746,113 671,022 639,366
TOTAL STOCKHOLDERS' EQUITY 92,495 84,914 77,549
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 838,608 $ 755,936 $ 716,915
NET INTEREST INCOME $ 40,323 $ 35,008 $ 33,957
NET INTEREST MARGIN 5.04% 4.88% 4.99%
(1) Non-accruing loans are included in the average balances.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
25
TABLE 4
[]INTEREST RATE SENSITIVITY ANALYSIS - DECEMBER 31, 1994
($ IN THOUSANDS)
Within 6 Mos.- 1-5 After
6 Mos. 1 Year Years 5 Years Total
EARNING ASSETS
Investment securities to be held to maturity $ 1,306 $ 1,486 $ 6,606 $ 38,777 $ 48,175
Securities available for sale 15,840 6,188 42,904 96,546 161,478
Loans 238,902 143,793 161,311 82,646 626,652
Other assets - - - 38,812 38,812
TOTAL ASSETS $ 256,048 $ 151,467 $ 210,821 $ 256,781 $ 875,117
Non-interest bearing deposits $ 3,548 $ 3,548 $ 28,385 $ 35,481 $ 70,962
Interest bearing deposits 299,811 79,928 136,640 82,236 598,615
Borrowed funds 67,213 17,544 20,321 140 105,218
Other liabilities/equity - - - 100,322 100,322
TOTAL LIABILITIES/EQUITY $ 370,572 $ 101,020 $ 185,346 $ 218,179 $ 875,117
Interest sensitivity gap (114,524) 50,447 25,475 38,602
Cumulative interest sensitivity gap (114,524) (64,077) (38,602) 0
Cumulative ratio at December 31, 1994 87% 93% 96% 100%
Cumulative ratio at December 31, 1993 90% 95% 108% 100%
TABLE 5
[]MATURITY DISTRIBUTION OF INVESTMENT SECURITIES -
DECEMBER 31, 1994
($ IN THOUSANDS)
Within 1-5 5-10 After
1 Year Years Years 10 Years Total
U.S. Treasury securities and obligations
of U. S. Government agencies $ 1,500 $ 2,351 - - $ 3,851
State and other political subdivisions 1,292 4,055 $ 9,037 $ 29,740 44,124
Other - 200 - - 200
Total $ 2,792 $ 6,606 $ 9,037 $ 29,740 $ 48,175
Weighted average tax equivalent yield 11.07% 8.40% 9.62% 8.53% 8.83%
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
26
TABLE 6
[] LOAN PORTFOLIO AT DECEMBER 31, FIVE YEAR SUMMARY
($ IN THOUSANDS)
1994 1993 1992 1991 1990
Commercial $ 191,243 $ 180,426 $ 182,821 $ 181,591 $ 189,995
Residential 268,538 222,867 176,572 154,280 141,083
Consumer 166,871 130,457 113,043 111,385 109,549
Total loans 626,652 533,750 472,436 447,256 440,627
Less: unearned interest 10,643 9,565 13,348 14,150 14,271
Loans, net $ 616,009 $ 524,185 $ 459,088 $ 433,106 $ 426,356
TABLE 7
[] COMPOSITION OF LOAN PORTFOLIO AT DECEMBER 31, BY TYPE
1994 1993 1992 1991 1990
Commercial 30% 34% 39% 41% 43%
Residential 43% 42% 37% 34% 32%
Consumer 27% 24% 24% 25% 25%
Total 100% 100% 100% 100% 100%
TABLE 8
[]NON-PERFORMING ASSETS - DECEMBER 31
($ IN THOUSANDS)
1994 1993 1992 1991 1990
Non-accrual loans $ 1,806 $ 759 $ 1,173 $ 1,883 $ 1,767
Ninety days past due 494 298 528 1,549 837
Other real estate owned 7 128 844 1,234 1,019
Total non-performing assets $ 2,307 $ 1,185 $ 2,545 $ 4,666 $ 3,623
Non-performing assets as a % of total loans
and other real estate owned 0.37% 0.23% 0.54% 1.04% 0.82%
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
27
TABLE 9
[] ALLOWANCE FOR LOAN LOSSES
($ IN THOUSANDS)
1994 1993 1992 1991 1990
Balance, beginning of year $ 10,998 $ 10,022 $ 8,764 $ 7,346 $ 8,510
Loans Charged-Off:
Commercial 488 283 725 1,324 4,362
Residential 33 32 84 90 171
Consumer 734 518 807 803 912
Total 1,255 833 1,616 2,217 5,445
RECOVERIES ON CHARGED-OFF LOANS:
Commercial 245 352 180 525 177
Residential 20 61 22 35 19
Consumer 164 207 235 199 202
Total 429 620 437 759 398
NET CHARGE-OFFS 826 213 1,179 1,458 5,047
PROVISION FOR LOAN LOSSES 1,361 1,366 2,441 2,847 3,873
ADJUSTMENTS RELATED TO PURCHASE/
SALE OF FINANCE RECEIVABLES 0 (177) (4) 29 10
Balance, end of year $ 11,533 $ 10,998 $ 10,022 $ 8,764 $ 7,346
Average loans for the year $ 567,182 $ 481,664 $ 439,492 $ 425,573 $ 417,432
Allowance/year-end loans 1.87% 2.10% 2.12% 1.96% 1.67%
Net charge-offs/average loans 0.15% 0.04% 0.27% 0.34% 1.21%
TABLE 10
[]MANAGEMENT'S ALLOCATION OF ALLOWANCE FOR LOAN LOSSES -
DECEMBER 31
($ IN THOUSANDS)
1994 1993 1992 1991 1990
Commercial $ 3,724 $ 3,359 $ 3,408 $ 4,392 $ 4,566
Residential 1,500 1,488 1,089 627 510
Consumer 2,559 2,486 2,110 1,700 1,117
Unallocated 3,750 3,665 3,415 2,045 1,153
Total $ 11,533 $ 10,998 $ 10,022 $ 8,764 $ 7,346
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
28
TABLE 11
[] CONTRACTUAL LOAN MATURITIES AND INTEREST SENSITIVITY
($ IN THOUSANDS)
December 31, 1994
One Year One Through Over Total
Or Less Five Years Five Years Gross Loans
Commercial $ 141,918 $ 37,166 $ 12,159 $ 191,243
Residential 152,332 49,644 66,562 268,538
Consumer 88,445 74,501 3,925 166,871
Total $ 382,695 $ 161,311 $ 82,646 $ 626,652
Loans with predetermined
rate $ 73,521 $ 93,348 $ 46,418 $ 213,287
Loans with floating rate 309,174 67,963 36,228 413,365
Total $ 382,695 $ 161,311 $ 82,646 $ 626,652
TABLE 12
[] AVERAGE DEPOSITS AND CORPORATE CASH MANAGEMENT
REPURCHASE AGREEMENTS
($ IN THOUSANDS)
1994 1993 1992 1991
Savings, daily interest checking $ 144,408 $ 132,927 $ 113,285 $ 93,767
Money market accounts and corporate cash
management repurchase agreements 90,118 82,814 84,173 82,623
Certificates of deposit $100,000 and over 67,299 62,314 60,118 60,239
Other time deposits 323,847 298,208 295,116 313,186
Total interest bearing deposits 625,672 576,263 552,692 549,815
Demand deposits 63,999 57,995 53,550 51,111
Total deposits and corporate cash
management repurchase agreements $ 689,671 $ 634,258 $ 606,242 $ 600,926
TABLE 13
[]CERTIFICATES OF DEPOSIT OF $100,000 OR MORE - DECEMBER 31
($ IN THOUSANDS)
1994 1993
3 months or less $ 13,144 $ 13,423
3 - 6 months 12,804 13,939
6 - 12 months 25,355 22,602
Over 12 months 19,865 9,958
Total $ 71,168 $ 59,922
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
29
I N D E P E N D E N T A U D I T O R S ' R E P O R T 29
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, 1994 and 1993, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. 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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Corporation changed its method of accounting for securities effective
January 1, 1994 to conform with Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity Securities".
(Signature of Deloitte & Touche LLP)
Deloitte & Touche LLP
Louisville, Kentucky
February 3, 1995
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
30
C O N S O L I D A T E D B A L A N C E S H E E T S
CBT CORPORATION AND SUBSIDIARIES
AT DECEMBER 31, 1994 AND 1993
(IN THOUSANDS EXCEPT FOR COMMON SHARE DATA)
1994 1993
ASSETS
Cash and due from banks $ 30,404 $ 24,521
Federal funds sold - 10,916
Money market investments - 2,010
Total cash and cash equivalents 30,404 37,447
Investment securities to be held to maturity
(Fair values: 1994, $46,400; 1993, $49,250) 48,175 45,843
Securities available for sale (Fair values: 1994,
$161,478; 1993, $185,087) 161,478 181,027
Loans, net of unearned interest 616,009 524,185
Allowance for loan losses (11,533) (10,998)
Loans, net 604,476 513,187
Premises and equipment, net 15,910 15,203
Accrued interest receivable 6,068 5,489
Other 8,606 7,280
Total assets $ 875,117 $ 805,476
LIABILITIES
Deposits:
Non-interest bearing $ 70,962 $ 61,505
Interest bearing 598,615 587,139
Total deposits 669,577 648,644
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 56,976 36,446
Notes payable - U. S. Treasury 1,718 2,000
Revolving lines of credit and other 6,023 1,263
Federal Home Loan Bank advances 20,040 39
Total short-term borrowings 84,757 39,748
Long-term borrowings:
Federal Home Loan Bank advances 15,392 16,922
Term debt 5,069 5,092
Total long-term borrowings 20,461 22,014
Accrued interest payable 3,881 2,554
Other liabilities 5,104 3,804
Total liabilities 783,780 716,764
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized
12,000,000 shares; issued and
outstanding 7,927,113 and 7,926,158 shares 4,100 4,100
Capital surplus 18,553 18,543
Retained earnings 74,070 66,069
Unrealized losses on securities available for
sale, net of deferred taxes (5,386) -
Total stockholders' equity 91,337 88,712
Total liabilities and stockholders' equity $ 875,117 $ 805,476
See notes to consolidated financial statements.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
31
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E 31
CBT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
1994 1993 1992
INTEREST INCOME
Loans, including fees:
Taxable $ 51,266 $ 43,863 $ 44,589
Tax-exempt 266 3777 434
Securities:
Taxable 10,315 10,409 12,698
Tax-exempt 3,782 3,561 3,393
Other 228 348 586
Total interest income 65,857 58,558 61,700
INTEREST EXPENSE
Deposits 23,569 23,074 26,854
Other borrowings 3,592 1,886 2,042
Total interest expense 27,161 24,960 28,896
NET INTEREST INCOME 38,696 33,598 32,804
PROVISION FOR LOAN LOSSES 1,361 1,366 2,441
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 37,335 32,232 30,363
NON-INTEREST INCOME
Trust and investment advisory fees 1,413 1,485 1,437
Service charges on deposit accounts 2,821 2,510 2,201
Insurance commissions 1,012 737 734
Gain (loss) on sale of securities (136) 134 575
Gain on sale of finance receivables - 553 3
Other 1,403 1,598 1,215
Total non-interest income 6,513 7,017 6,165
NON-INTEREST EXPENSE
Salaries and employee benefits 14,014 12,868 11,821
Net occupancy 984 1,206 1,456
Depreciation and amortization 1,702 1,619 1,407
Data processing 1,127 1,030 922
Supplies 744 857 838
FDIC assessments 1,535 1,382 1,432
Tax on bank shares 1,158 942 699
Consulting and other professional
business services 1,444 454 535
Other 5,421 4,878 4,055
Total non-interest expense 28,129 25,236 23,165
INCOME BEFORE INCOME TAXES 15,719 14,013 13,363
INCOME TAXES 4,233 3,565 3,05
NET INCOME $ 11,486 $ 10,448 $ 10,305
PER COMMON SHARE
Net income $ 1.45 $ 1.32 $ 1.30
Cash dividends $ 0.43 $ 0.39 $ 0.36
See notes to consolidated financial statements.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
32
C O N S O L I D A T E D S T A T E M E N T S O F
S T O C K H O L D E R S ' E Q U I T Y
CBT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(IN THOUSANDS, EXCEPT FOR SHARES)
Net Unrealized
Gains (Losses)
Common Stock on Securities Total
Capital Retained Available Stockholders'
Shares Amount Surplus Earnings for Sale Equity
BALANCE, JANUAR Y 1, 1992 7,930,998 $ 4,100 $ 18,552 $ 50,071 - $ 72,723
Net income - - - 10,305 - 10,305
Dividends on common stock - - - (2,175) - (2,175)
Stock options exercised 14,000 - 103 - - 103
Purchase of common stock (14,000) - (103) (103) - (206)
BALANCE, DECEMBER 31, 1992 7,930,998 4,100 18,552 58,098 - 80,750
Net income - - - 10,448 - 10,448
Dividends on common stock - - - (2,423) - (2,423)
Purchase of common stock (4,840) - (9) (54) - (63)
BALANCE, DECEMBER 31, 1993 7,926,158 4,100 18,543 66,069 - 88,712
Cumulative effect to January 1, 1994 of
change in accounting for securities - - - - 2,639 2,639
Net income - - - 11,486 - 11,486
Dividends on common stock - - - (3,288) - (3,288)
Stock options exercised 18,935 - 182 - - 182
Purchase of common stock (17,980) - (172) (197) - (369)
Net change in unrealized gains (losses)
on securities available for sale - - - - (8,025) (8,025)
BALANCE, DECEMBER 31, 1994 7,927,113 $ 4,100 $ 18,553 $ 74,070 $ (5,386) $ 91,337
See notes to consolidated financial statements.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
33
C O N S O L I D A T E D S T A T E M E N T S O F C A S H
F L O W S
CBT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
1994 1993 1992
OPERATING ACTIVITIES
Net income $ 11,486 $ 10,448 $ 10,305
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 1,361 1,366 2,441
Depreciation 1,449 1,494 1,403
Amortization 253 126 5
Deferred income taxes (327) 79 (518)
Amortization and accretion of securities 842 1,391 838
Loss (gain) on sale of securities 136 (134) (575)
Gain on sale of premises and equipment (63) (3) (11)
Gain on sale of finance receivables - (553) 3
Changes in assets and liabilities:
Accrued interest receivable (579) (44) 1,130
Other assets 1,648 (2,989) (456)
Accrued interest payable 1,327 (95) (2,645)
Other liabilities 982 (153) 364
Net cash provided by operating activities 18,515 10,933 12,284
INVESTING ACTIVITIES
Proceeds from maturities of investment securities 3,411 16,246 27,853
Proceeds from sales of securities available for sale 48,178 18,657 37,635
Proceeds from maturities of securities available for
sale 9,383 10,562 -
Principal collected on mortgage-backed securities,
including
those classified as available for sale 25,017 67,429 41,507
Payment for purchases of securities (78,036) (114,903) (120,253)
Net increase in loans (92,650) (63,484) (25,081)
Purchase of loans - (9,085) (2,552)
Sale of finance receivables - 7,635 678
Proceeds from sale of premises and equipment 508 37 39
Payment for purchase of premises and equipment (2,601) (2,844) (1,093)
Net cash received on branch acquisition - 57,480 -
Net cash used in investing activities (86,790) (12,270) (41,267)
(CONTINUED ON NEXT PAGE)
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
34
C O N S O L I D A T E D S T A T E M E N T S O F
C A S H F L O W S - ( C O N T I N U E D )
CBT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
1994 1993 1992
FINANCING ACTIVITIES
Net increase (decrease) in deposits $ 20,933 $ (2,549) $ 912
Cash advanced on revolving lines of credit 15,800 1,000 5,200
Principal payments on revolving lines of credit (11,040) (6,960) (5,500)
Net increase in other short-term borrowings 20,248 172 27,807
Increase in FHLB advances 18,471 1,426 7,500
Proceeds from term debt - 12,150 -
Payments on term debt (23) (4,000) -
Cash dividends paid (2,970) (2,323) (2,175)
Stock options exercised 182 - 103
Purchase of common stock (369) (63) (206)
Net cash provided by (used in) investing
activities 61,232 (1,147) 33,641
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,043) (2,484) 4,658
CASH AND CASH EQUIV ALENTS, BEGINNING OF YEAR 37,447 39,931 35,273
CASH AND CASH EQUIV ALENTS, END OF YEAR $ 30,404 $ 37,447 $ 39,931
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 25,834 $ 25,056 $ 31,542
Federal income taxes $ 4,345 $ 4,060 $ 3,789
See notes to consolidated financial statements.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
35
N O T E S T O F I N A N C I A L S T A T E M E N T S 35
CBT CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
[] 1. 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 (Citizens), Pennyrile Citizen's Bank and
Trust Company (Pennyrile), Bank of Marshall County (BOMC), Graves County
Bank (GCB), United Commonwealth Bank, FSB (UCB), 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.
INVESTMENT SECURITIES TO BE HELD TO MATURITY AND SECURITIES AVAILABLE FOR
SALE - Effective January 1, 1994, the Corporation changed its method of
accounting for securities to conform with Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." Securities to be held to maturity are reported at cost,
adjusted for premiums and discounts, and consist of securities for which
the Company has the positive intent and ability to hold to maturity. Available
for sale securities are reported at fair value and consist of securities not
classified as securities to be held to maturity. Unrealized holding gains
and losses, net of tax, on available for sale securities are reported as a
net amount in a separate component of stockholders' equity until realized.
The change had the effect of increasing stockholders' equity at January 1,
1994 by $2,639,000.
Federal Home Loan Bank stock is not considered to be a marketable equity
security under SFAS No. 115 and, therefore is carried at cost.
In 1993, the Corporation classified its investment securities similar to
1994, and investments were stated at amortized cost.
Amortization of premiums and accretion of discounts are recorded primarily
on the interest method. Gains and losses on disposition of investment
securities and securities available for sale are computed by the specific
identification method.
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, and 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. When
interest is discontinued, all unpaid accrued interest is reversed. 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 in
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.
Although management believes it uses the best information available to make
determinations with respect to the Corporation's allowances, future
adjustments may be necessary if economic or other conditions differ
substantially from the economic and other conditions in the assumptions
used in making the initial determinations, and such adjustments could be
material.
In May 1993, SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," was issued and requires impaired loans be measured based upon the
present value of expected
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
36
future cash flows discounted at the loans' effective interest rate or at the
loans' market price or fair value of collateral, if the loan is collateral
dependent. Adoption of SFAS No. 114 will be required by the Corporation for
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 the straight-line and accelerated methods over the estimated useful
lives of the assets, as follows:
Years
Buildings and improvements 15 - 35
Furniture and fixtures 7
Computer equipment 5
REPURCHASE AGREEMENTS - Certain securities are sold under agreements to
repurchase and are treated as financings. 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 - Prior to January 1993, the Corporation used the deferred
method under Accounting Principles Board (APB) Opinion 11 in which the
deferred income taxes were recognized for income and expense items 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 were not adjusted for subsequent changes in
tax rates.
Effective January 1, 1993, the Corporation adopted SFAS No. 109. Under SFAS
109 deferred taxes are recorded using the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the 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 109, the effect on deferred tax assets and liabilities of changes
in tax rates is recognized in income in the period that includes the
enactment date. The cumulative effect of the change in the method of
accounting for income taxes from APB Opinion 1 1 to SFAS No. 109 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 in a fiduciary
or agency capacity for customers and beneficiaries are not included in the
consolidated financial statements as such items are not assets of the
Corporation.
PER COMMON SHARE DATA - Net income per common share data is based upon
7,926,168, 7,928,578 and 7,930,998 average shares outstanding for the years
ended December 31, 1994, 1993 and 1992, respectively. All share and per share
data has been restated to reflect a 2-for-1 common stock split declared by the
Board of Directors on September 28, 1994, payable October 25, 1994. All share
and per share data has also been restated to reflect the May 31, 1994
acquisition of BMC Bankcorp and its subsidiaries, which was accounted for
under the pooling of interests method. Common stock options are not included
in net income per common share data since their effect is not significant.
[] 2. ACQUISITIONS
On May 31, 1994, the Corporation completed a Plan of Merger with BMC
Bankcorp, Inc. (BMC), a bank holding company, and its wholly-owned
subsidiaries, Bank of Marshall County, Graves County Bank, and United
Commonwealth Bank, FSB. As a result of the transaction, 1,195,560 shares
of common stock were issued by the Corporation in exchange for all of the
issued and outstanding stock of BMC. The merger was accounted for as a
pooling of interests, and accordingly, the accompanying financial statements
have been restated to include the accounts and operations of BMC prior to
the merger.
Separate results of the combining entities are as follows:
(IN THOUSANDS) Years Ended
December 31
1993 1992
Interest income:
CBT Corporation,
as previously reported $ 44,071 $ 46,822
BMC 14,487 14,878
Total, as restated $ 58,558 $ 61,700
Net income:
CBT Corporation,
as previously reported $ 7,912 $ 7,614
BMC 2,536 2,691
Total, as restated $ 10,448 $ 10,305
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
37
BMC's interest income and net income of $6,202,000 and $938,000,
respectively, for the five months ended May 31, 1994 (unaudited) are included in
the consolidated statement of income for the year ended December 31, 1994.
[] 3. RESTRICTIONS ON CASH
AND DUE FROM BANKS
Included in cash and due from banks are certain non-interest bearing
deposits that are held at the Federal Reserve in accordance with reserve
requirements specified by the Federal Reserve Board of Governors. The average
amount of those reserve balances was approximately $2,251,000 and $2,544,000
during 1994 and 1993, respectively. At December 31, 1994 and 1993, the
Corporation was in compliance with all cash reserve requirements.
[] 4. INVESTMENT SECURITIES
TO BE HELD TO MATURITY
(IN THOUSANDS)
December 31, 1994
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U. S. Treasury securities
and obligations of U. S.
Government agencies $ 3,851 $ 3,741 $ 15 $ 125
State and political
subdivisions 44,124 42,473 539 2,190
Other 200 186 - 14
Total $ 48,175 $ 46,400 $ 554 $ 2,329
(IN THOUSANDS)
December 31, 1993
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U. S. Treasury securities
and obligations of U. S.
Government agencies $ 4,499 $ 4,625 $ 126 -
State and political
subdivisions 41,324 44,618 3,415 $ 121
Other 20 7 - 13
Total $ 45,843 $ 49,250 $ 3,541 $ 134
The maturity distribution of investment securities to be held to maturity
is as follows:
(IN THOUSANDS)
December 31, 1994
Estimated
Amortized Fair
Cost Value
Within 1 year $ 2,792 $ 2,816
1 - 5 years 6,606 6,369
5 - 10 years 9,037 9,095
Over 10 years 29,740 28,120
Total $48,175 $46,400
Realized gains on sales of investment securities were $575,000 in 1992.
There were no realized losses on sales of investment securities.
Certain investment securities were pledged to secure public deposits,
securities sold under agreements to repurchase, and for other purposes as
required or permitted by law. These pledged securities had an estimated
amortized cost and estimated fair value of approximately $16,550,000 and
$16,035,000, respectively, as of December 31, 1994.
[] 5. SECURITIES AVAILABLE FOR
SALE
(IN THOUSANDS)
December 31, 1994
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U. S. Treasury securities
and obligations of U. S.
Government agencies $ 32,408 $ 31,469 $ 28 $ 967
State and political
subdivisions 13,945 14,417 646 174
Mortgage-backed
securities 104,543 97,632 177 7,088
Derivative securities 11,439 10,532 - 907
Federal Home Loan
Bank Stock - at cost 6,740 6,740 - -
Other 688 688 - -
Total $ 169,763 $ 161,478 $ 851 $ 9,136
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
38
(IN THOUSANDS)
December 31, 1993
Estimated Gross Unrealized
Amortized Fair
Cost Value Gain Loss
U. S. Treasury securities
and obligations of U. S.
Government agencies $ 32,358 $ 33,490 $ 1,160 $ 28
State and political
subdivisions 15,246 17,035 1,812 23
Mortgage-backed
securities 122,364 123,431 1,481 414
Derivative securities 8,392 8,464 91 19
Federal Home Loan
Bank stock - at cost 2,589 2,589 - -
Other 78 78 - -
Total $ 181,027 $ 185,087 $ 4,544 $ 484
The maturity distribution of securities available for sale is as follows:
(IN THOUSANDS)
December 31, 1994
Estimated
Amortized Fair
Cost Value
Within 1 year $ 3,589 $ 3,581
1 - 5 years 46,113 44,795
5 - 10 years 19,434 18,720
Over 10 years 100,627 94,382
Total $ 169,763 $ 161,478
Mortgage-backed securities have been allocated in the above table by
contractual maturity date.
Derivative securities available for sale at December 31, 1994 consist of
$7,873,000 of step-up bonds, $3,006,000 of deleveraged bonds and $560,000 of
index amortizing notes. At December 31, 1993, derivative securities available
for sale consisted of $4,506,000 step-up bonds, $3,011,000 of de-lever-aged
bonds, and $875,000 of index amortizing notes. The step-up bonds have an
increasing interest rate during the life of the bonds and are callable by the
issuer at specific intervals. The de-leveraged bonds pay an adjustable rate of
interest based on movement of an index; and the indexed amortizing notes have
a fixed interest rate, with maturities potentially fluctuating based on a
mortgage index. All of these securities are guaranteed by a government agency
and have maturities of seven years or less.
Realized losses on sales of securities available for sale were $136,000 in
1994. There were no realized gains on investment securities available for sale
in 1994. Realized gains on sale of securities available for sale were $134,000
in 1993. There were no realized losses on investment securities available for
sale in 1993.
Certain securities available for sale were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes as required or permitted by law. These pledged securities had an
estimated amortized cost and estimated fair value of approximately
$102,348,000 and $96,902,000, respectively, as of December 31, 1994.
[] 6. LOANS AND ALLOWANCE FOR
LOAN LOSSES
(IN THOUSANDS)
December 31
1994 1993
Commercial, industrial,
and agricultural loans $191,243 $180,426
Residential real estate loans 268,538 222,867
Installment loans 166,871 130,457
Total loans 626,652 533,750
Less: Unearned interest 10,643 9,565
Loans, net of unearned interest $616,009 $524,185
Loans outstanding and unfunded commitments are primarily concentrated in the
Corporation's market area which encompasses western Kentucky and surrounding
communities. The Corporation's credit exposure is diversified with secured and
unsecured loans to consumers, small businesses and large corporations.
Although the Corporation has a diversified loan portfolio, the ability of
customers to honor loan commitments is based, in part, on the economic
stability of the geographic region and/or industry in which they do business.
At December 31, 1994 and 1993, non-accrual loans totaled $1,806,000 and
$759,000, respectively, and loans contractually past due 90 days or more
totaled $494,000 and $298,000, respectively. If those loans on a non-accrual
status had been current and in accordance with their original loan terms,
interest income would have been approximately $80,000 and $128,000 greater in
1994 and 1993, respectively. Interest income recorded on these loans was
$158,000 and $17,000 for 1994 and 1993, respectively. At December 31, 1994
and 1993, there were no troubled debt restructurings.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
39
The activity in the allowance for loan losses follows:
(IN THOUSANDS)
Years Ended December 31
1994 1993 1992
Balance, beginning of year $10,998 $10,022 $ 8,764
Provision for loan losses 1,361 1,366 2,441
Adjustments related to purchase/
sale of finance receivables - (177) (4)
Charge-offs (1,255) (833) (1,616)
Recoveries 429 620 437
Net charge-offs (826) (213) (1,179)
Balance, end of year $11,533 $10,998 $10,022
It is the policy of the Corporation to review each prospective credit in
order to determine an adequate level of security or collateral prior to making
the loan. The type of collateral will vary and ranges from liquid assets to
real estate
At December 31, 1994 and 1993, there were no significant credit
concentrations by industry or customer bases.
Certain directors and executive officers of the Corporation and their
associates are customers of, and have other transactions with the Corporation
in the normal course of business. All loans to these individuals are made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons
and do not involve more than the normal risk of collectibility or present
other unfavorable features.
Total loans to officers, directors, and associates of such persons,
follows:
(IN THOUSANDS)
Balance, January 1, 1994 $ 16,020
New loans 6,802
Repayments (4,137)
Changes in officers, directors and associates (3,340)
Balance, December 31, 1994 $ 15,345
[] 7. PREMISES AND EQUIPMENT
(IN THOUSANDS) December 31
1994 1993
Land $ 1,996 $ 2,084
Buildings and improvements 15,071 14,645
Furniture and equipment 10,679 9,627
Construction in progress 1,145 401
T otal premises and equipment 28,891 26,757
Accumulated depreciation and
amortization 12,981 11,554
Net premises and equipment $ 15,910 $ 15,203
[] 8. INTEREST BEARING DEPOSITS
(IN THOUSANDS) December 31
1994 199
NOW accounts $103,631 $104,051
Money Manager accounts 47,306 63,022
Individual retirement accounts 45,432 44,720
Savings accounts 49,174 43,905
Certificates of deposit
under $100,000 281,904 271,519
Certificates of deposit $100,000
and above 71,168 59,922
Total interest bearing deposits $598,615 $587,139
[]9. BORROWINGS
(IN THOUSANDS) December 31
1994 1993
Short-term:
Federal funds purchased and
securities sold under agreements
to repurchase $ 56,976 $ 36,446
Notes payable - U. S. Treasury 1,718 2,000
Revolving lines of credit 6,000 1,240
Federal Home Loan Bank advances 20,040 39
Other 23 23
Total short-term borrowings $ 84,757 $ 39,748
Long-term:
Term debt $ 5,069 $ 5,092
Federal Home Loan Bank advances 15,392 16,922
Total long-term borrowings $ 20,461 $ 22,014
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
40
The weighted average interest rate on federal funds purchased and securities
sold under agreements to repurchase at December 31, 1994 was 4.45 percent.
The revolving lines of credit, which expire in August 1995, with regional
banks provide for maximum borrowings of $15,000,000. Interest on both lines
is payable quarterly at the lesser of (1) one-quarter of one percentage
point less than the participating bank's prime rate or (2) a rate one and
one-quarter percentage point above the thirty-day London Inter-bank Offered
Rate (LIBOR). The actual rate at December 31, 1994 was 7.1875%. Borrowings
under the lines are collateralized by accounts receivable of FCC.
The Federal Home Loan Bank (FHLB) advances are collateralized by a blanket
pledge of all the Corporation's one-to-four family residential real estate
loans. The advances bear interest at 4.60 percent to 6.175 percent at
December 31, 1994, with a weighted average interest rate of 5.26 percent.
According to a funding program of the FHLB, up to $13,535,000 of these
borrowings may be paid at specific intervals in 1995.
The term notes bear interest of 8.5% at December 31, 1994 and are
collateralized by accounts receivable of FCC.
The loan agreements for the revolving lines of credit, FHLB advances and
term notes stipulate, among other items, maintenance of certain operating and
equity ratios, and that the Corporation will not incur any additional secured
debt, or sell or encumber investments in its subsidiaries without the lenders'
prior consent. At December 31, 1994, the Corporation was in compliance with
all covenants contained in the loan agreements.
Maturities of long-term borrowings outstanding at December 31, 1994 are as
follows:
(IN THOUSANDS)
1996 $12,099
1997 8,065
1998 66
1999 45
2000 45
Thereafter 141
$20,461
[] 10. REGULATORY MATTERS
Regulatory banking laws restrict the amount of dividends that may be paid
by the subsidiary banks to the parent without obtaining prior approval of the
regulatory authority. Under such restrictions, the subsidiary banks will have
available $13,342,000, plus net profits for 1995, for payment of dividends to
the parent during 1995.
The Corporation's banks are required to maintain minimum amounts of capital
to total "risk weighted" assets, as defined by the banking regulators. At
December 31, 1994, the Corporation's banks are required to have minimum Tier
1 Risk Based Capital, and Total Risk Based Capital Ratios of 4 percent and 8
percent, respectively. All of the Corporation's subsidiary banks and savings
and loan had Tier 1 Risk Based Capital of at least 13.02 percent and 11.51
percent, Total Risk Based Capital of 14.27 percent and 12.76 percent and a
leverage ratio of at least 8.61 percent and 8.36 percent at December 31,
1994 and 1993, respectively.
[] 11. COMMON STOCK OPTIONS
Under the Corporation's 1986 Stock Option Plan, options for 210,000 shares
of the Corporation's common stock had been reserved. At December 31, 1994,
options for 156,065 shares were outstanding, of which 98,565 shares were
exercisable at an average price of $9.08 per share.
In 1993, an additional 400,000 shares of the Corporation's common stock
were reserved for future grant. At December 31, 1994, options to purchase
80,000 shares of common stock were outstanding; none of the options granted
were exercisable at December 31, 1994.
Stock options have been adjusted to reflect a 2 for 1 stock split in
October 1994.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
41
Activity with respect to outstanding common stock op tions follows:
1994 1993 1992
Outstanding, beginning
of year 202,000 149,500 114,000
Granted at $9.84 per share,
January 1992 - - 43,500
Granted at $13.33 per share,
May 1992 - - 6,000
Exer cised at average price
of $7.36 - - (14,000)
Granted at $14.50 per share
in January , 1993 - 46,500 -
Granted at $19.38 per share
in November , 1993 - 6,000 -
Granted at $19.13 per share
in January 1994 51,000 - -
Granted at $21.00 per share
in January 1994 2,000 - -
Granted at $20.38 per share
in April 1994 4,000 - -
Granted at $19.88 per share
in June 1994 23,000 - -
Granted at $21.25 per share
in July 1994 4,000 - -
Exer cised at average price
of $9.61 (18,935) - -
Forfeited (31,000) - -
Outstanding, end of year 236,065 202,000 149,500
[]12. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993, are as follows:
(IN THOUSANDS)
December 31
1994 1993
Deferred tax assets:
Allowance for credit losses $ 3,213 $ 2,844
Net unrealized losses on
securities available for sale 2,899 -
Other 473 328
Total gross deferred tax assets 6,585 3,172
Deferred tax liabilities:
Depreciation 1,202 1,069
Other 280 226
Total gross deferred tax liabilities 1,482 1,295
Net deferred tax asset (included
in other assets) $ 5,103 $ 1,877
Income tax expense consisted of:
(IN THOUSANDS)
Years Ended December 31,
1994 1993 1992
Current $ 4,560 $ 3,486 $ 3,576
Deferred (benefit) (327) 79 (518)
Total $ 4,233 $ 3,565 $ 3,058
The tax expense (benefit) relating to gains on sales of securities
(exclusive of non-deductible net capital losses) approximated $(46,000)
in 1994, $46,000 in 1993, and $196,000 in 1992.
The reasons for the difference between income taxes in the consolidated
financial statements and the amount computed by applying the statutory
rate to income before income taxes are as follows:
(IN THOUSANDS)
Years Ended December 31,
1994 1993 1992
Taxes at statutory rate - 35% in
1994 and 1993; 34% in 1992 $ 5,502 $ 4,764 $ 4,543
Increase (decrease) resulting from:
Tax-exempt interest income (1,263) (1,215) (1,195)
Other, net (6) 16 (290)
Total $ 4,233 $ 3,565 $ 3,058
[] 13. 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 1994, 1993, and 1992 were $836,000,
$647,000 and $620,000, respectively.
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
42
[] 14. OFF-BALANCE SHEET RISKS,
COMMITMENTS AND CONTINGENT
LIABILITIES
The Corporation has financial instruments which 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. The same credit and collateral policies are used by
the Corporation in issuing these financial instruments as are used for loans.
Standby letters 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 in issuing standby letters of credit are similar to
those involved in issuing loan commitments and extending credit. As of
December 31, 1994 and 1993, commitments outstanding under standby letters of
credit totaled $4,271,000 and $5,619,000, 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, variable interest rates, and may
require payment of a fee. Since many of the commitments are ex-pected 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 December 31, 1994 and 1993,
commitments to extend credit totaled $81,507,000 and $86,600,000,
respectively.
[] 15. 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,
"Disclosures 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
estimate 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
(IN THOUSANDS)
1994 1993
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Assets:
Cash and cash equivalents $ 30,404 $ 30,404 $ 37,447 $ 37,447
Investment securities to be held to maturity 48,175 46,400 45,843 49,250
Securities available for sale 161,478 161,478 181,027 185,087
Loans, net of unearned interest 616,009 606,261 524,185 537,816
Liabilities:
Deposits:
Non-interest bearing 70,962 70,962 61,505 61,505
Interest bearing 598,615 593,513 587,139 594,032
Short-term borrowings 84,757 84,315 39,748 39,686
Long-term borrowings 20,461 20,085 22,014 21,849
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
43
The fair value of investment securities to be held to maturity 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, deposits, and 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.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1994 and 1993. 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 both dates, and therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
[] 16. QUARTERLY STATISTICAL INFORMATION (UNAUDITED)
(IN THOUSANDS)
1994 1993
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
Gross interest income:
CBT Corporation $ 17,638 $ 17,197 $ 16,000 $ 11,379 $ 11,423 $ 10,948 $ 10,734 $ 10,966
BMC Bankcorp, Inc. 3,643 3,529 3,718 3,617 3,623
Total $ 17,638 $ 17,197 $ 16,000 $ 15,022 $ 14,952 $ 14,666 $ 14,351 $ 14,589
Net interest income:
CBT Corporation $ 9,736 $ 10,355 $ 9,634 $ 6,821 $ 6,592 $ 6,202 $ 6,080 $ 6,183
BMC Bankcorp, Inc. 2,150 2,027 2,242 2,148 2,124
Total $ 9,736 $ 10,355 $ 9,634 $ 8,971 $ 8,619 $ 8,444 $ 8,228 $ 8,307
Net income:
CBT Corporation $ 2,832 $ 3,110 $ 2,914 $ 2,134 $ 2,045 $ 1,747 $ 1,890 $ 2,230
BMC Bankcorp, Inc. 496 559 706 653 618
Total $ 2,832 $ 3,110 $ 2,914 $ 2,630 $ 2,604 $ 2,453 $ 2,543 $ 2,848
Earnings per share:
CBT Corporation $ 0.36 $ 0.39 $ 0.37 $ 0.27 $ 0.26 $ 0.22 $ 0.24 $ 0.28
BMC Bankcorp, Inc. 0.06 0.07 0.09 0.08 0.08
Total $ 0.36 $ 0.39 $ 0.37 $ 0.33 $ 0.33 $ 0.31 $ 0.32 $ 0.36
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
44
[] 17. PARENT COMPANY CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
AT DECEMBER 31, 1994, AND 1993
(IN THOUSANDS)
1994 1993
Assets:
Cash and cash equivalents * $ 1,847 $ 2,103
Investment in subsidiaries * 87,846 85,786
Dividends receivable from subsidiaries * 1,000 624
Other assets 1,667 1,054
Total assets $92,360 $89,567
Liabilities and stockholders' equity:
Accrued liabilities $ 1,023 $ 694
Other liabilities - 161
Stockholders' equity, net of unrealized losses on
securities available for sale 91,337 88,712
Total liabilities and stockholders' equity $92,360 $89,567
* Eliminated completely or partially in consolidation.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
1994 1993 1992
Income:
Dividends from subsidiaries * $ 6,139 $ 2,904 $ 5,391
Interest income 48 24 45
Gain on sale of securities - 36 27
Rental income 55 66 67
Total income 6,242 3,030 5,530
Expenses - other 910 761 254
Income before income taxes 5,332 2,269 5,276
Income taxes (benefit) (162) (208) 19
Income before equity in undistributed net income of
subsidiaries 5,494 2,477 5,257
Equity in undistributed net income of subsidiaries * 5,992 7,971 5,048
Net income $11,486 $10,448 $10,305
* Eliminated in consolidation
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
45
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
1994 1993 1992
Operating activities:
Net income $ 11,486 $ 10,448 $ 10,305
Adjustments to reconcile net income to net cash provided
by operating activities: -
Equity in undistributed net of income of subsidiaries (5,992) (7,971) (5,048)
Gain on sale of securities - (36) (27)
Change in other assets (1,067) 60 244
Change in accrued and other liabilities (150) 118 5
Change in dividends receivable from subsidiaries (376) (109) 84
Net cash provided by operating activities 3,901 2,510 5,563
Investing activities:
Purchase of premises - (382) -
Contribution of capital to subsidiaries (1,000) (2) (2,292)
Payment for purchases of securities - (6,525) (8,164)
Proceeds from sales of securities - 6,563 8,191
Net cash used in investing activities (1,000) (346) (2,265)
Financing activities:
Proceeds from (payments on) term debt - 115 (1,000)
Cash dividends paid (2,970) (2,323) (2,175)
Stock options exercised 182 - 103
Purchase of common stock (369) (63) (206)
Net cash used in financing activities (3,157) (2,271) (3,278)
Net increase (decrease) in cash and cash equivalents (256) (107) 20
Cash and cash equivalents, beginning of year 2,103 2,210 2,190
Cash and cash equivalents, end of year $ 1,847 $ 2,103 $ 2,210
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
46
C O R P O R A T E I N F O R M A T I O N
INVESTOR CONTACT
John E. Sircy Executive Vice President and Chief Operating Officer CBT
Corporation 333 Broadway Paducah, Kentucky 42001 (502) 575-5324
(800) 345-5591
STOCK TRANSFER AGENT AND REGISTRAR
UMB, n.a. Securities Transfer Department 928 Grand Avenue, 13th floor
Kansa City, MO 64106 (816) 860-7891
DIVIDEND REINVESTMENT PLAN
CBT Corporation offers shareholders automatic reinvestment of dividends in
shares of the corporation at the market price. For a description of the plan
and an authorization card, contact the Investor Contact or the Registrar
listed above.
MARKET DATA
The common stock of CBT Corporation is traded on the NASDAQ National Market
System and is quoted under the symbol CBTC. As of February 27, 1995, there
were 1,478 shareholders of record.
1994
High Low Dividends
First Quarter $23.38 $18.50 $0.10
Second Quarter $21.50 $19.50 $0.11
Third Quarter $22.75 $20.75 $0.11
Fourth Quarter $23.00 $20.63 $0.11
1993
High Low Dividends
First Quarter $16.50 $13.50 $0.09
Second Quarter $17.63 $15.81 $0.10
Third Quarter $18.25 $16.50 $0.10
Fourth Quarter $19.25 $17.75 $0.10
FORM 10-K
Copies of CBT Corporation's 10-K filed with the Securities and Exchange
Commission are available without charge by writing to: CBT Corporation 333
Broadway Paducah, Kentucky 42001
ANNUAL MEETING
The annual meeting of shareholders of CBT Corporation will be held on April
18, 1995 at 2 p.m. Central Time, third floor, Citizens Bank & Trust Company,
333 Broadway, Paducah, Kentucky 42001.
MARKET MAKERS
J.C. Bradford & Co.
330 Commerce Street
Nashville, TN 37201
(615) 748-9000
Morgan Keegan and Co., Inc.
Fifty Front Street
Memphis, TN 38103
(901) 524-4100
J.J.B. Hilliard, W. L. Lyons, Inc.
Hilliard Lyons Center
P.O. Box 32760
Louisville, KY 40232-2760
(502) 588-8400
C B T C O R P O R A T I O N 1 9 9 4 A N N U A L R E P O R T
M A P O F O P E R A T I O N S
(Map appears here depicting the Fidelity Credit Corp. offices, CBT
Corporation-owned banks, Fidelity Credit Corp. and CBT Corporation-owned
banks)
CBT Corporation
corporate offices []
Branch/office locations for Citizens Bank & Trust, Fidelity Credit
Corporation, Bank of Marshall County, Graves County Bank, Pennyrile Citizens
Bank & Trust and United Commonwealth Bank.
CBT CORPORATION
333 BROADWAY
PADUCAH, KENTUCKY 42001
(800) 345-5591