UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ___________________ Commission File Number: 33-96358 BOURBON BANCSHARES, INC. (Exact name of registrant as specified in its charter) Kentucky 61-0993464 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P.O. Box 157, Paris, Kentucky 40362-0157 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (859)987-1795 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Number of shares of Common Stock outstanding as of May 1, 2000: 2,817,731. BOURBON BANCSHARES, INC. Table of Contents Part I - Financial Information Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statement of Income and Comprehensive Income Three Months Ending March 31, 2000 & 1999 4 Consolidated Statements of Cash Flows Three Months Ending March 31, 2000 & 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Part II - Other Information 14 Signatures 14 Exhibits 3.1 Articles of Incorporation of the Registrant (as amended and restated) dated May 6, 1993 and as amended on March 27, 1994 and on June 10, 1999 15 11 Earnings Per Share Calculation 29 27 Financial Data Schedule 29 Item 1 - Financial Statements CONSOLIDATED BALANCE SHEETS (unaudited) (thousands) 3/31/00 12/31/99 Assets Cash and due from banks $ 9,243 $ 20,042 Federal funds sold 2,168 675 Cash and cash equivalents 11,411 20,717 Investment securities: Available for sale 54,252 54,930 Held to maturity 15,848 15,693 Mortgage loans held for sale 3,508 3,494 Loans 241,996 238,607 Allowance for loan losses 3,268 3,103 Net loans 238,728 235,504 Federal home loan bank stock 3,404 3,345 Bank premises and equipment, net 6,967 7,082 Interest receivable 3,346 3,454 Intangible assets 2,033 2,108 Other assets 469 1,152 Total assets $339,966 $347,479 Liabilities and Stockholders' Equity Deposits Non-interest bearing $ 42,359 $ 42,931 Savings and interest checking 91,744 94,907 Certificates of deposit 144,712 136,728 Total deposits 278,815 274,566 Securities sold under agreements to repurchase 7,952 10,331 Other borrowed funds 1,256 1,528 Federal home loan bank advances 16,484 26,592 Interest payable 2,450 2,142 Other liabilities 242 600 Total liabilities 307,199 315,759 Stockholders' equity Common stock 6,621 6,491 Retained earnings 26,720 25,778 Accumulated other comprehensive income (574) (549) Total stockholders' equity 32,767 31,720 Total liabilities & stockholders' equity $339,966 $347,479 BOURBON BANCSHARES, INC. CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (unaudited) (thousands, except per share amounts) Three Months Ending 3/31/00 3/31/99 INTEREST INCOME: Loans, including fees $ 5,441 $ 4,480 Investment securities 1,026 969 Other 125 123 Total interest income 6,592 5,572 INTEREST EXPENSE: Deposits 2,626 2,289 Other 398 232 Total interest expense 3,024 2,521 Net interest income 3,568 3,051 Loan loss provision 188 175 Net interest income after provision 3,380 2,876 OTHER INCOME: Service charges 615 465 Loan service fee income 73 71 Trust department income 159 127 Investment securities gains, net (1) 7 Gain on sale of mortgage loans - 148 Other 81 41 Total other income 927 859 OTHER EXPENSES: Salaries and employee benefits 1,325 1,195 Occupancy expenses 393 293 Amortization 108 104 Advertising and marketing 91 74 Taxes other than payroll, property and income 84 79 Other 520 426 Total other expenses 2,521 2,171 Income before taxes 1,786 1,564 Income taxes 478 445 Net income 1,308 1,119 Other Comprehensive Income, net of tax: Change in Unrealized Gains on Securities (24) (63) Comprehensive Income $ 1,284 $ 1,056 Earnings per share Basic $ 0.47 $ 0.40 Diluted 0.46 0.39 BOURBON BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (thousands) Three Months Ending 3/31/00 3/31/99 Cash Flows From Operating Activities Net Income $ 1,308 $ 1,119 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 195 150 Amortization 107 137 Investment securities (accretion) amortization, net (21) 2 Provision for loan losses 188 175 Investment securities losses (gains), net 1 (7) Originations of loans held for sale (2,934) (8,722) Proceeds from sale of loans 2,901 6,306 Gain on sale of mortgage loans - (148) Changes in: Interest receivable 109 438 Other assets 681 406 Interest payable 308 124 Other liabilities (358) (219) Net cash provided by operating activities 2,485 (239) Cash Flows From Investing Activities Purchases of securities available for sale (6,338) (15,629) Proceeds from sales of securities available for sale 2,000 4,847 Proceeds from principal payments, maturities and calls of securities available for sale 4,939 10,037 Purchase of securities held to maturity (269) - Proceeds from sales, principal payments, maturities and calls of securities held to maturity 115 - Net change in loans (3,412) 1,090 Purchases of bank premises and equipment, net (80) (174) Net cash provided by investing activities (3,045) 171 Cash Flows From Financing Activities: Net change in deposits 4,249 (234) Net change in securities sold under agreements to repurchase and other borrowings (2,651) (4,493) Advances from Federal Home Loan Bank - 5,000 Payments on Federal Home Loan Bank advances (10,108) (74) Proceeds from issuance of common stock 130 11 Purchase of common stock - (236) Dividends paid (366) (309) Net cash provided by financing activities (8,746) (335) Net increase (decrease) in cash and cash equivalents (9,306) (403) Cash and cash equivalents at beginning of period 20,717 10,756 Cash and cash equivalents at end of period $ 11,411 $ 10,353 BOURBON BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In Management's opinion, the financial information, which is unaudited, reflects all adjustments, (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three month periods ended March 31, 2000 and March 31, 1999 in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with Bourbon Bancshares, Inc. (Company) Annual Report on Form 10-K. 2. Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits. 3. Dividends per share paid for the quarter ended March 31, 2000 were $0.13 compared to $0.11 on March 31, 1999. 4. As of July 15, 1999, the Company approved a two for one stock split. Each shareholder received one additional share for each share they held. Relative numbers have been adjusted to reflect this change. 5. On August 13, 1999, Kentucky Bank acquired the Wilmore, Kentucky branch of National City Bank. Included in the purchase were $9.0 million in net deposits and $353,000 in fixed assets. The net deposits assumed exceeded the cash received by $287,000. 6. Beginning January 1, 2001, a new accounting standard will require all derivatives to be recorded at fair value. Unless designated as hedges, changes in these fair values will be recorded in the income statement. Fair value changes involving hedges will generally be recorded by offsetting gains and losses on the hedge and on the hedged item, even if the fair value of the hedged item is not otherwise recorded. This is not expected to have a material effect, but the effect will depend on derivative holdings when this standard applies. Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This discussion contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from the results discussed in the forward-looking statements include, but are not limited to: economic conditions (both generally and more specifically in the markets, including the tobacco market, in which the Company and its bank operate); competition for the Company's customers from other providers of financial and mortgage services; government legislation and regulation (which changes from time to time and over which the Company has no control); changes in interest rates (both generally and more specifically mortgage interest rates); material unforeseen changes in the liquidity, results of operations, or financial condition of the Company's customers; material unforeseen complications related to addressing the Year 2000 problem experienced by the Company, its suppliers, customers and governmental agencies; and other risks detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Summary Bourbon Bancshares, Inc. recorded net income of $1.3 million, or $0.47 per share and $0.46 per share assuming dilution for the first three months ended March 31, 2000 compared to $1.1 million, or $0.40 per share and $0.39 per share assuming dilution for the three month period ending March 31, 1999. The first three months reflects an increase in net income of 17%. The per share amounts above have been adjusted to reflect the 2 for 1 stock split effective in July 1999. Return on average assets was 1.51% for the first three months ended March 31, 2000 compared to 1.45% for the same time period in 1999, an increase of 4%. Return on average equity was 16.3% and 15.2% for the three months ended March 31, 2000 and 1999, respectively, an increase of 7%. Net Interest Income Net interest income was $3.6 million for the three months ended March 31, 2000 compared to $3.1 million in 1999, resulting in an increase of $517 thousand or 16.9%. Loan volume continues to improve. Year to date average loans are up $28 million, or 13% from 1999 to 2000 resulting in an increase in loan interest income of $961 thousand for the first three months. Average deposits also increased from 1999 to 2000, up $16 million, or 6%. This increased volume has resulted in an increase in deposit interest expense of $337 thousand for the first three months. Non-Interest Income Non-interest income increased for the three-month period ended March 31 from $859 thousand in 1999 to $927 thousand in 2000. For the quarter, an increase of $150 thousand in service charges from 1999 to 2000 is mainly attributable to an improvement in overdraft charges of $83 thousand. Trust department income increased $32 thousand for the first quarter of 2000 compared to the same period in 1999. The reduction of loan gains of $148 thousand is attributable to an increase in rates in 2000 as compared to 1999. The reduction in rates resulted in a reduction of loan originations and refinances. Due to the volatility of rates, the level of activity and related income may continue to decline. The increase in other income of $40 thousand in the first quarter of 2000 as compared to the same time period in 1999 is a result of an increase in debit and credit card income of $40 thousand. Non-Interest Expense The explanations for the increase of $369 thousand in non- interest expenses from $2.2 million for the three months ended March 31, 1999 to $2.5 million for the same period in 2000 follows. Salaries and benefits increased $130 thousand for the first three months of 2000 compared to 1999, an increase of 10.9%. Salaries, excluding bonuses and incentives, increased 6.7% from 1999 to 2000. Employee benefits increased $75 thousand for this same period. Occupancy expense increased $100 thousand to $393 thousand for the first three months of 2000 compared to 1999. Depreciation is up $45 thousand for the year. Building and equipment maintenance was $47 thousand higher for the first three months of 2000. These increases are a result on the Company's continued emphasis on improving and maintaining its facilities. Advertising and Marketing costs increased $17 thousand for the first three months of 2000 as compared to the same period in 1999. Continued efforts have been made by the Company to promote the name and the products of Kentucky Bank. Other expenses for the first three months of 2000 compared to 1999 increased $94 thousand, from $426 thousand to $520 thousand. The cost of maintaining repossessed property was $15 thousand higher in the first quarter of 2000 compared to the same period in 1999. Losses from checking accounts have also increased $26 thousand during the first quarter of 2000 compared to the first quarter of 1999. Income Taxes The tax equivalent rate for the three months ended March 31 was 27% for 2000 and 28% for 1999. These rates being less than the statutory rate is a result of the tax-free securities and loans held by the Company. Liquidity and Funding The cash flow statements provide a useful analysis of liquidity. This report reveals a decrease of cash and cash equivalents for the first three months of 2000 of $9.3 million compared to a decrease of $0.4 million for the same period in 1999. In 2000, proceeds from the sale of loans were $2.9 million compared to $6.3 million in 1999. Five million dollars of 1999 loans were securitizations and of a nonrecurring nature. Originations of loans held for sale were $2.9 million and $8.7 million for the three months ending March 31, 2000 and 1999, respectively. For the first three months, proceeds from security transactions have exceeded purchases by $447 thousand in 2000 whereas purchases exceeded proceeds by $700 thousand in 1999. Of these changes, principal payments on securities have amounted to over $939 thousand in 2000 and over $2 million for the same period in 1999. During 2000, $10 million has been repaid to the Federal Home Loan Bank (FHLB). In 1999, $5 million in advances were received from the FHLB. Short-term borrowings decreased $3 million in 2000 and $4 million in 1999. Deposits increased $4 million in 2000 and were relatively flat in 19998. Management believes there is sufficient liquidity to meet all reasonable borrower, depositor and creditor needs in the present economic environment. Non-Performing Assets As of March 31, 2000, the Company's non-performing assets totaled $1.8 million or 0.7% of loans compared to $1.1 million or 0.5% of loans in 1999. (See table below) Real estate loans composed 97% and 74% of the non-performing loans as of March 31, 2000 and 1999, respectively. Forgone interest income on the non-accrual loans for both 2000 and 1999 is immaterial. Nonperforming Assets March 31 (in thousands) 2000 1999 Non-accrual Loans 168 315 Accruing Loans which are Contractually past due 90 days or more 1,504 631 Restructured Loans 130 142 Total Nonperforming and Restructured 1,802 1,088 Other Real Estate 117 70 Total Nonperforming and Restructured Loans and Other Real Estate 1,919 1,158 Nonperforming and Restructured Loans as a Percentage of Loans 0.74% 0.51% Nonperforming and Restructured Loans and Other Real Estate as a Percentage of Total Assets 0.56% 0.37% Provision and Reserve for Possible Loan Losses The 2000 three-month provision for loan losses of $188 thousand is higher than the 1999 number of $175 thousand. Loan growth has required management to increase the provision in order to maintain a reserve for loan losses that is representative of the risk of loss based on the quality of loans currently in the portfolio. As depicted in the table below, the loan loss reserve to total loans was 1.35% on March 31, 2000 and on March 31, 1999. Net charge- offs for the periods mentioned above have been relatively insignificant. Management feels the current loan loss reserve is sufficient to meet future loan problems. Loan Losses Three Months Ended March 31 (in thousands) 2000 1999 Balance at Beginning of Period 3,104 2,735 Amounts Charged-off: Commercial - - Real Estate Mortgage - - Agricultural - 2 Consumer 50 41 Total Charged-off Loans 50 43 Recoveries on Amounts Previously Charged-off: Commercial 1 2 Real Estate Mortgage - - Agricultural - - Consumer 25 16 Total Recoveries 26 18 Net Charge-offs 24 25 Provision for Loan Losses 188 175 Balance at End of Period 3,268 2,885 Loans Average 238,644 211,003 At March 31 241,996 214,192 As a Percentage of Average Loans: Net Charge-offs 0.01% 0.01% Provision for Loan Losses 0.08% 0.08% Allowance as a Percentage of Period-end Loans 1.35% 1.35% Allowance as a Multiple of Net Charge-offs 136.2 115.4 Allowance as a percentage of non-performing And restructure loans 1.81 2.65 Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Asset/Liability management control is designed to ensure safety and soundness, maintain liquidity and regulatory capital standards, and achieve acceptable net interest income. Management considers interest rate risk to be the most significant market risk. The Company's exposure to market risk is reviewed on a regular basis by the Asset/Liability Committee. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximize income. Management realizes certain risks are inherent and that the goal is to identify and minimize the risks. Tools used by management include the standard GAP model and an interest rate shock simulation model. The Bank has no market risk sensitive instruments held for trading purposes. The following table depicts the change in net interest income resulting from 100 and 300 basis point changes in rates. The projections are based on balance sheet growth assumptions and repricing opportunities for new, maturing and adjustable rate amounts. In addition, the projected percentage changes from level rates are outlined below within the Board of Directors specified limits. As of March 31, 2000 the projected percentage changes are within the Board limits and the Company's interest rate risk is also with Board limits. The projected net interest income report summarizing the Company's interest rate sensitivity as of March 31, 2000 is as follows: (in thousands) PROJECTED NET INTEREST INCOME Level Rate Change: - 300 - 100 Rates + 100 + 300 Year One (4/1/00 - 3/31/01) Interest Income 24,429 26,586 27,667 28,747 30,907 Interest Expense 9,886 11,872 12,865 13,858 15,844 Net Interest Income 14,543 14,714 14,802 14,889 15,063 PROJECTED DOLLAR INCREASE (DECREASE) FROM "LEVEL RATES" Year One (4/1/00 - 3/31/01) Interest Income (3,238) (1,081) N/A 1,081 3,241 Interest Expense (2,979) (993) N/A 993 2,979 Net Interest Income (259) (88) N/A 88 262 PROJECTED PERCENTAGE INCREASE (DECREASE) FROM "LEVEL RATES" Year One (4/1/00 - 3/31/01) Interest Income -11.7% -3.9% N/A 3.9% 11.7% Interest Expense -23.2% -7.7% N/A 7.7% 23.2% Net Interest Income -1.7% -0.6% N/A 0.6% 1.8% Limitation on % Change >-10.0% >-4.0% N/A >-4.0% >-10.0% These numbers are comparable to 1999. In 2000, year one reflected a decline in net interest income of 1.7% with a 300 basis point decline compared to the 0.4% decline in 1999. The 300 basis point increase in rates reflected a 1.8% increase in net interest income in 2000 compared to 0.6% in 1999. Percentage changes in 2000 are greater than 1999 reflecting slightly greater vulnerability to drastic shifts in interest rates. Management measures the Company's interest rate risk by computing estimated changes in net interest income in the event of a range of assumed changes in market interest rates. The Company's exposure to interest rates is reviewed on a monthly basis by senior management and quarterly with the Board of Directors. Exposure to interest rate risk is measured with the use of interest rate sensitivity analysis to determine the change in net interest income in the event of hypothetical changes in interest rates, while interest rate sensitivity gap analysis is used to determine the repricing characteristics of the Company's assets and liabilities. If estimated changes to net interest income are not within the limits established by the Board, the Board may direct management to adjust the Company's asset and liability mix to bring interest rate risk within Board approved limits. In addition, the Company uses interest rate sensitivity gap analysis to monitor the relationship between the maturity and repricing of its interest-earning assets and interest- bearing liabilities, while maintaining an acceptable interest rate spread. Interest rate sensitivity gap is defined as the difference between the amount of interest- earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest-rate- sensitive assets exceeds the amount of interest-sensitive- liabilities, and is considered negative when the amount of interest-rate-sensitive liabilities exceeds the amount of interest-rate-sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would negatively affect net interest income. The Company's goal is to maintain a reasonable balance between exposure to interest rate fluctuations and earnings. The interest rate sensitivity analysis as of March 31 shown below depicts amounts based on the earliest period in which they can normally be expected to reprice. The chart reveals that assets and liabilities are fairly well matched for the early periods specified below. The 2000 numbers reflect a more negative position in the first two one-year time buckets due to the amount of 5 year loans originated, and deposits being generated, mainly with repricing opportunities of less than 2 years. The decay rates used for Demand deposits, NOW's, Savings and Money Market Savings are 5%, 30%, 20% and 30%, respectively. (in thousands) Total 1 Year 2 Years 3 Years 4 Years 5 Years >5 Years ASSETS Cash & Due From Banks 8,933 - - - - - 8,933 Fed Funds & Int-Earning Due from Banks 2,478 2,478 - - - - - Investment Securities 70,100 34,052 13,422 5,261 2,289 3,017 12,059 Loans (including held for sale) 241,996 103,517 32,943 40,208 38,853 24,120 2,355 Others Assets 16,459 - - - - - 16,459 Total Assets / Repricing Assets 339,966 140,047 46,365 45,469 41,142 27,137 39,806 Repricing Assets - Accumulated 140,047 186,412 231,881 273,023 300,160 339,966 % of Current Balance 41.2% 13.6% 13.4% 12.1% 8.0% 11.7% % of Current Balance - Accumulated 41.2% 54.8% 68.2% 80.3% 88.3% 100.0% LIABILITIES Total Deposits 278,815 158,896 35,985 15,252 11,074 8,533 49,075 Variable Rate Other Liabilities 8,457 8,457 - - - - - Fixed Rate Other Liabilities 17,235 1,207 226 239 10,506 5,018 39 Other Liabilities 2,692 - - - - - 2,692 Total Capital 32,767 - - - - - 32,767 Total Liabilities / Rericing Liab 339,966 168,560 36,211 15,491 21,580 13,551 84,573 Repricing Liabilities - Accumulated 168,560 204,771 220,262 241,842 255,393 339,966 % of Current Balance 49.6% 10.7% 4.6% 6.3% 4.0% 24.9% % of Current Balance - Accum 49.6% 60.2% 64.8% 71.1% 75.1% 100.0% SUMMARY Total Repricing Assets 140,047 46,365 45,469 41,142 27,137 39,806 Total Repricing Liabilities 168,560 36,211 15,491 21,580 13,551 84,573 Total Repricing Gap (by bucket) (28,513) 10,154 29,978 19,562 13,586 (44,767) Total Repricing Assets - Cumulative 320,864 140,047 186,412 231,881 273,023 300,160 339,966 Total Repricing Liabilities - Cum 305,705 168,560 204,771 220,262 241,842 255,393 339,966 Repricing Gap - Cumulative 15,159 (28,513) (18,359) 11,619 31,181 44,767 - Gap/Total Assets (by Bucket) -8.39% 2.99% 8.82% 5.75% 4.00% -13.17% Cumulative Gap/Total Assets -8.39% -5.40% 3.42% 9.17% 13.17% 0.00% Part II - Other Information Item 1. Legal Proceedings The Company is not a party to any material legal proceedings. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 1. Exhibits as required by Item 601 of Regulation S-B. 3.1 Articles of Incorporation of the Registrant (as amended and restated) dated May 6, 1993 and as amended March 27, 1994 and June 10, 1999 11 Earnings Per Share Calculation 27 Financial Data Schedule 2. No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. Bourbon Bancshares, Inc. Date __5/12/00_________ __/s/Buckner Woodford____________ Buckner Woodford, President and C.E.O. Date __5/12/00_________ __/s/Gregory J. Dawson___________ Gregory J. Dawson, Chief Financial Officer EXHIBIT 3.1 AMENDED AND RESTATED ARTICLES OF INORPORATION OF BOURBON BANCSHARES, INC. Pursuant to the provisions of KRS 271B.10-060 and .10-070, Bourbon Bancshares, Inc. (the "Corporation") amends and restates its Articles of Incorporation and in connection with these Amended and Restated Articles of Incorporation certifies the following: 1. The name of the corporation is Bourbon Bancshares, Inc. 2. The complete text of the Corporation's Articles of Incorporation, as amended and restated, is set forth on Exhibit A hereto. 3. The Amended and Restated Articles of Incorporation contain amendments to the Corporation's Articles of Incorporation requiring shareholder approval. On May 3, 1993, these amendments were approved by the shareholders of the Corporation at a meeting at which 581,210 Common Shares (the only outstanding class of shares of the Corporation) were entitled to be voted on the amendments, 473,686 Common Shares were indisputably represented at the meeting and 469,021 Common Shares were voted in favor of the amendments, representing a number of votes sufficient for approval by the shareholders of the Corporation. DATED: May 6, 1993 BOURBON BANCSHARES, INC. By: __/s/Buckner Woodford____ Buckner Woodford, President This Instrument Prepared By: /s/David W. Harper____ David W. Harper HIRN REED & HARPER 2000 Meidinger Tower Louisville, KY 40202 (502)585-2450 EXHIBIT A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF BOURBON BANCSHARES, INC. ARTICLE I Name The Corporation's name shall be Bourbon Bancshares, Inc. ARTICLE II Duration The Corporation's duration shall be perpetual. ARTICLE III Purposes The Corporation's purposes shall be to transact any and all lawful business for which corporations may be incorpo rated under the Kentucky Business Corporation Act ("KBCA"), as from time to time in existence or replaced by any successor Act. ARTICLE IV Authorized Shares The total number of shares that the Corporation shall have the authority to issue is 1,800,000 shares, which shall be divided into two classes as follows: 1,500,000 Common Shares; and 300,000 Preferred Shares. The designations, voting powers and relative rights and preferences of the shares shall be as follows: A. Common Shares. 1. Powers, Rights and Preferences. The Common Shares shall be without distinction as to powers, rights and preferences. Except as may be provided by the Board of Directors in a designation of any series of Preferred Shares (in accordance with the provisions of Paragraph B of Article IV) or as otherwise declared by law, the Common Shares shall have the exclusive right to vote for the election of direc tors and on all other matters in which shareholders are generally entitled to vote. Except with respect to the election of directors (where cumulative voting is required), each of the Common Shares shall have one vote per share (which vote may not be split into fractional votes) on matters on which holders of Common Shares are entitled to vote. 2. Dividends. After the requirements with respect to preferential dividends on Preferred Shares (fixed in accordance with the provisions of Paragraph B of Article IV), if any, have been met and after the Corporation has complied with any requirements for setting aside sums as sinking funds or redemption or purchase accounts and subject further to any other conditions that may be established in accordance with the provisions of Paragraph B of Article IV, the holders of Common Shares shall be entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors. 3. Distributions on Common Shares. After distribution in full of any preferential amount (as may be fixed in accordance with the provisions of Paragraph B of Article IV) to be distributed to the holders of Preferred Shares, and subject to any further rights of the holders of Preferred Shares to participate in a liquidation, distribution or sale of assets, dissolution or winding-up of the Corporation, the holders of Common Shares shall be entitled to receive, upon the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up of the Corporation, all of its remaining assets, tangible and intangible, of whatever kind available for distribution to the shareholders, ratably in proportion to the number of Common Shares held by each. 4. Issuance of Common Shares. Common Shares may be issued from time to time as the Board of Directors shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. B. Preferred Shares. 1. Issuance by Board Resolutions; Series. The Board of Directors of the Corporation shall have authority by resolution to issue from time to time Preferred Shares in one or more series. Each series shall be distinctly desig nated by number, letter or title. All shares of any one series of Preferred Shares shall be alike in every particu lar. The powers, preferences and voting, relative, partici pating, optional and other rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. 2. Preferences and Rights. Subject to the provisions of subparagraph 3 of this Paragraph B of Article IV, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolu tions adopted prior to the issuance of any shares of each particular series of Preferred Shares, the designation, powers, preferences and voting, relative, participating, optional and other rights, and the qualifications, limita tions and restrictions thereof, if any, of such series, including, but without limiting the generality of the foregoing, the following: (a) The distinctive designation of, and the number of Preferred Shares that shall constitute, the series, which number from time to time may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (b) The rate and times at which, and the terms and conditions upon which, dividends on the shares of the series shall be paid, whether the divi dends shall be cumulative or non-cumulative, and if cumulative, from what date or dates, and the prefer ences or relation, if any, of such dividends to the dividends payable on any shares of any other series or class of stock of the Corporation; (c) Whether shares of the series shall be subject to redemption, and if so subject, whether they shall be subject to redemption (i) at the option of the Corporation, the shareholder, another person and/or upon the occurrence of a designated event, (ii) for cash, indebtedness, securities (including, without limitation, Common Shares) or other property, or any combination thereof, and (iii) for a designated amount or for an amount determined in accordance with a designated formula or by reference to extrinsic data or events; and, as to any shares of a series subject to redemption, such other terms and conditions on which the shares of the series may be redeemed; (d) Whether the holders of the shares of the series shall be entitled to the benefit of a sinking fund or redemption or purchase account to be applied to the purchase or redemption of the shares of the series and, if so entitled, the amount of such fund and the terms and conditions relative to the operation thereof; (e) Whether the shares of the series shall be convertible into, or exchangeable for, any Common or other Preferred Shares of the Corporation or any other securities and, if so convertible or exchangeable, whether the conversion or exchange (i) is at the option of the Corporation, the shareholder, another person and/or upon the occurrence of a designated event, (ii) shall be for cash, indebtedness, securities (including, without limitation, Common Shares) or other property, or any combination thereof, and (iii) shall be for a designated amount or at a designated ratio, or for an amount or at a ratio determined in accordance with a designated formula or by reference to extrinsic data or events; and, as to any shares of a series so convert ible or exchangeable, such other terms and conditions on which the shares of the series may be converted or exchanged; (f) The rights, if any, of the holders of the shares of the series upon voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up of the Corporation; (g) Whether the shares of the series shall have priority over or parity with or be junior to the shares of any other class or series, or shall be entitled to the benefit of limitations restricting (i) the creation of indebtedness of the Corporation, (ii) the issuance of shares of any other class or series having priority over or being on a parity with the shares of such series, or (iii) the payment of divi dends on, the making of other distributions with respect to, or the purchase or redemption of shares of any other class or series on parity with or ranking junior to the shares of any such series as to dividends or other distributions, and the terms of any such restrictions; or any other restrictions with respect to shares of any class or series on parity with or ranking junior to the shares of such series in any respect; (h) Whether and in what circumstances shares of a series shall have voting rights, which voting rights, if any, may be general, special, conditional or limited (and, in the case of special, conditional or limited voting rights, may confer upon holders of such series in certain circumstances the exclusive right to elect a majority of the members of the Board of Direc tors); and, as to any shares of a series having voting rights, the number of votes each holder shall be entitled to cast per each share of the series and whether holders of the series are entitled to vote separately or together with the holders of one or more other series of Preferred Shares on all or some matters as a separate voting group; and (i) Any other powers, preferences, privileg es and relative, participating, optional, or other special rights of such series, and the qualifications, limitations or restrictions thereof, to the fullest extent now and hereafter permitted by law. 3. Issuance of Preferred Shares. Subject to the following provisions of this subparagraph 3, shares of any series of Preferred Shares may be issued from time to time as the Board of Directors shall determine, on such terms and for such consideration as shall be fixed by the Board of Directors. The relative powers, preferences and rights of each series of Preferred Shares in relation to the powers, preferences and rights of each other series of Preferred Shares shall be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in this Paragraph B of Article IV. Except as otherwise declared by law, the consent by class or series vote or otherwise of the holders of such of the series of the Preferred Shares as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Shares, whether the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Shares that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Shares. ARTICLE V Board of Directors A. Number. The business and affairs of the Corporation shall be managed and conducted by or under the direction of a Board of Directors. The number of directors (exclusive of directors to be elected by the holders of one or more series of Preferred Shares of the Corporation that may be outstanding, voting separately as a series or class) shall be fixed from time to time by the Board of Directors of the Corporation by resolution adopted by a majority of the entire Board of Directors, but in no event shall be less than nine (9) nor more than fifteen (15). B. Classes of Directors. The Board of Directors shall be divided into three classes, Class I, Class II and Class III, that shall be as nearly equal in number as reasonably possible; provided, however, that the number of directors in any one class may not exceed the number of directors in any other class by more than one. The initial allocation of directors among classes shall be established by resolution adopted by the holders of a majority of the outstanding shares of the Corporation entitled to vote in an election of directors. C. Terms of Office. Each initial director in Class I shall serve for a term expiring at the 1994 annual meeting of shareholders; each initial director in Class II shall serve for a term expiring at the 1995 annual meeting of shareholders; and each initial director in Class III shall serve for a term expiring at the 1996 annual meeting of shareholders. At each annual meeting of shareholders following adoption of these Amended and Restated Articles of Incorporation, the directors chosen to succeed those whose terms have expired shall be identified as being of the same class of directors they succeed and shall be elected to serve for a term ending on the third annual meeting of shareholders following the annual meeting of shareholders at which they were elected. Each director shall serve until his successor is duly elected and qualified, except in the case of death, resignation or removal. D. Removal. Subject to the rights, if any, of the holders of any series of Preferred Shares then outstanding, any director or the entire Board of Directors may be removed from office at any time, but only for cause and by the affirmative vote of the holders of at least 67% of all shares of the Corporation outstanding and then entitled to vote generally in an election of directors, voting together as a single class. Notwithstanding the immediately preceding sentence, if less than the entire Board of Directors is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the class of directors of which he is a part. E. Vacancies. Subject to the rights, if any, of the holders of any series of Preferred Shares then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation or removal may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of shareholders at which the term of office of the class to which they have been elected expires or, in the case of newly created directorships, shall hold office until such time as determined by the directors electing such new director (in a manner consistent with Paragraph B of this Article V). No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. F. Rights of Holders of Preferred Shares. Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Shares issued by the Corporation pursuant to Article IV shall have the right, voting separately as a class or by series, to elect directors at an annual or special meeting of shareholders, the election, term of office, removal, filling of vacancies and other features of such directorships shall be governed by the terms of the series of Preferred Shares applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article V unless expressly provided by the terms of the applicable series. ARTICLE VI Bylaws The Board of Directors is authorized to adopt, amend or repeal the Bylaws of the Corporation. Any Bylaws made by the directors under the powers conferred by this Article VI may be amended or repealed by the shareholders of the Corporation. The Bylaws may contain, among other matters, provisions requiring (i) advance notice of business to be conducted and shareholder proposals to be submitted at an annual meeting of shareholders of the Corporation, (ii) procedures for the nomination of persons for election to the Board of Directors, including nominations made other than by or at the direction of the Board of Directors, and (iii) provisions requiring that various provisions of the Bylaws may not be amended or repealed unless the holders of a supermajority percentage of the shares of the Corporation then entitled to vote generally in an election of directors, not to exceed 80%, voting together as a single class, approve such amendment or repeal. ARTICLE VII Higher Vote for Certain Business Combinations Required Except as otherwise provided in this Article VII, the affirmative vote of the holders of no fewer than (i) 67% of the outstanding Voting Shares (as hereinafter defined) of the Corporation and (ii) a majority of the outstanding Voting Shares of the Corporation that are not "beneficially owned" (as hereinafter defined) by an Interested Shareholder that directly, or indirectly through an Affiliate, is a party to or otherwise proposes any of the following transactions involving the Corporation or any of its Subsidiaries, shall be required to approve any of the following transactions ("Business Combination"): (a) Any merger or consolidation of the Corporation or any of its Subsidiaries (as hereinafter defined) with or into an Interested Shareholder or an Affiliate, or any merger or consolidation of an Interested Shareholder or an Affiliate with or into the Corporation or any of its Subsidiaries; (b) Any share exchange involving the Corporation or any of its Subsidiaries and the acquisition of shares of the Corporation or any of its Subsidiaries by an Interested Shareholder or an Affiliate pursuant to such share exchange; (c) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the corporation or any of its Subsidiaries to an Interested Shareholder or an Affiliate; (d) Any issuance or transfer by the Corporation or by any of its Subsidiaries (in one transaction or a series of transactions) of any Voting Shares of the Corporation or any of its Subsidiaries to any Interested Shareholder or an Affiliate in exchange for cash, securities or other property; (e) Any adoption of any plan or proposal for liquidation or dissolution of the Corporation or any of its Subsidiaries proposed by or on behalf of an Interested Shareholder; (f) Any reclassification of securities, recapitalization or other transaction (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any of its Subsidiaries that are beneficially owned by an Interested Shareholder or an Affiliate, or any partial or complete liquidation, spin-off, split-off or split-up of the Corporation or any of its Subsidiaries; or (g) Any agreement, contract or other arrangement providing for any of the transactions described above in paragraphs (a) to (f) in this Article VII. The voting requirement of this Article VII shall not be applicable to any particular Business Combination if the Business Combination has been approved by a majority of the Disinterested Directors (as hereinafter defined). The Business Combination that has been approved by a majority of the Disinterested Directors shall require the affirmative vote as is required by law. For the purposes of these Articles of Incorporation: (a) "Affiliate": An "Affiliate" of an Interested Shareholder is a person or other entity that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, an Interested Shareholder. (b) "Associate": An "Associate" of an Interested Shareholder means (i) a director, officer, partner or beneficial owner of ten percent or more of any class of its securities or other similar interests, (ii) if the Interested Shareholder is a trust or other estate, any person that has a substantial beneficial interest in, or who serves as a trustee of, the Interested Shareholder or serves in a similar fiduciary capacity for it, (iii) any relative or spouse of the Interested Shareholder or any relative or spouse of any officer, director or beneficial owner of ten percent or more of any class of securities or other similar interests of an Interested Shareholder, and (iv) any relative of such spouse referred to in clause (b)(iii), immediately above, who resides in the same home as the Interested Shareholder or any officer, director or beneficial owner of ten percent or more of any class of securities or other similar interests of the Interested Shareholder. (c) "Beneficial Ownership": A person or entity "beneficially owns" securities or other similar interests in another when such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (i) the voting power, which includes the power to direct the voting of such security or other similar interests, or (ii) the right to acquire the securities or other similar interests pursuant to any contract or arrangement upon the exercise of any option, warrant or other similar right, upon the conversion of any other shares or upon the revocation of a trust or otherwise. A person or entity shall be conclusively deemed to "beneficially own" securities or other similar interests of its Affiliates or Associates. (d) "Disinterested Director": A "Disinterested Director" shall mean any member of the Board of Directors who is unaffiliated with the Interested Shareholder and was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is not an Affiliate of the Interested Shareholder and is recommended to succeed a Disinterested Director by a majority of the Disinterested Directors then on the Board of Directors. (e) "Interested Shareholder": An "Interested Shareholder" of the Corporation means any person who or which: (i) itself or together with its Affiliates and Associates is the beneficial owner, directly or indirectly, of ten percent or more of the outstanding Voting Shares of the Corporation or any of its Subsidiaries; or (ii) is an assignee of or has otherwise succeeded to, the beneficial ownership of any Voting Shares of the Corporation or any of its Subsidiaries that were at any time within a two-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (f) "Subsidiary": A "Subsidiary" of the Corporation is another corporation of which one-half or more of its Voting Shares are beneficially owned by the Corporation, directly or indirectly, through one or more intermediaries. (g) "Voting Shares": "Voting Shares" shall mean any security or other similar interest of any corporation, trust, partnership or other entity that carries with it a right to vote generally in the election of directors or other governing body of that entity. The Disinterested Directors shall have the power and duty to determine for the purposes of this Article VII, on the basis of the information known to them after reasonable inquiry, (i) whether a person or entity is an Interested Shareholder, (ii) the number of Voting Shares beneficially owned by any person or entity, (iii) whether a person or entity is an Affiliate or an Associate of another, (iv) whether any transaction or series of transactions is a Business Combination, (v) whether the assets sold in any Business Combination constitute substantially all of the assets of the Corporation or any of its Subsidiaries, and (vi) such other matters with respect to which a determination is required under this Article VII. Any such determination made by a majority of the Disinterested Directors shall be final and binding for all purposes hereunder. ARTICLE VIII Shareholder Action A. General. Subject to the rights, if any, of the holders of any series of Preferred Shares then outstanding, any action required or permitted to be taken at any annual or special meeting of shareholders may be taken only upon the vote of the shareholders at an annual or special meeting duly called and may not be taken by written consent of the shareholders. B. Special Meetings. Subject to the rights, if any, of the holders of any series of Preferred Shares then outstanding, the Corporation shall only hold a special meeting of shareholders: (a) On call of a majority of the entire Board of Directors; or (b) If the holders of at least 67% of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the Corporation's secretary one (1) or more written demands for the meeting describing the purpose or purposes for which it is to be held. ARTICLE IX Indemnification and Insurance A. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to, or is involved in, any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the KBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorney's fees, judgements, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settle ment) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall contin ue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph B hereof, the Corpora tion shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this paragraph A of Article IX shall be a contract right and shall include the right to be paid by the Corporation the expenses in curred in defending any such proceeding in advance of its final disposition; provided, however, that, if the KBCA requires, the payment of such expenses incurred by a direc tor or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corpo ration of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this section or other wise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. B. Right of Claimant to Bring Suit. If a claim under paragraph A of this Article IX is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct that makes it permissible under the KBCA for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the KBCA, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. C. Non-Exclusivity of Rights. The right to indemni fication and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article IX shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of shareholders or disinterested directors, or otherwise. D. Insurance. The Corporation may maintain insur ance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the KBCA. ARTICLE X Limitation on Director Liability A. Scope of Limitation. A director of the Corpora tion shall not be personally liable to the Corporation or its shareholders for monetary damages for any act or omis sion constituting a breach of his duty as a director, unless such act or omission (i) relates to a transaction in which the director has a personal financial interest that is in conflict with the financial interests of the Corporation or its shareholders; (ii) is not in good faith or involves intentional misconduct or is known to the director to be a violation of law; (iii) is a vote for or assent to an unlawful distribution to shareholders as prohibited under KRS 271B.8-330; or (iv) relates to a transaction from which the director derives an improper personal benefit. B. Amendment of KBCA. If the KBCA is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the KBCA, as so amended, without the necessity for further shareholder action in respect thereof. C. Repeal or Modification. Any repeal or modifica tion of this Article X by the shareholders of the Corpora tion shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI Share Distributions Except as may be provided by the Board of Directors of the Corporation in a designation of any series of Preferred Shares (in accordance with the provisions of Paragraph B of Article IV), shares of one class or series may be issued as a share dividend in respect of shares of another class or series. ARTICLE XII Change in Control Proposals In furtherance and not in limitation of the powers conferred by law or in these Amended and Restated Articles of Incorporation, the Board of Directors (and any committee of the Board of Directors) is expressly authorized, to the extent permitted by law, to take such action or actions as the Board or such committee may determine to be reasonably necessary or desirable to (i) encourage any person to enter into negotiations with the Board of Directors and management of the Corporation with respect to any transaction that may result in a change in control of the Corporation that is proposed or initiated by such person or (ii) contest or oppose any such transaction that the Board of Directors or such committee determines to be unfair, abusive or otherwise undesirable with respect to the Corporation and its business, assets or properties or the shareholders of the Corporation, including, without limitation, the adoption of such plans or the issuance of rights, options, shares, notes, debentures or other evidences of indebtedness or other securities of the Corporation, which rights, options, shares, notes, debentures or evidences of indebtedness or other securities (x) may be exchangeable for or convertible into cash or other securities on such terms and conditions as may be determined by the Board or such committee and (y) may provide for the treatment of any holder or class of holders thereof designated by the Board of Directors or any such committee in respect of the terms, conditions, provisions and rights of such securities that is different from, and unequal to, the terms, conditions, provisions and rights applicable to all other holders thereof. ARTICLE XIII Super Majority Approval for Certain Amendments to These Amended and Restated Articles of Incorporation Notwithstanding any other provision in these Amended and Restated Articles of Incorporation to the contrary, the provisions of Articles V, VI, VII, VIII, IX, X and XII, and this Article XIII, shall not be amended or repealed, nor shall any provision in these Amended and Restated Articles of Incorporation that is inconsistent with Articles V, VI, VII, VIII, IX, X and XII, and this Article XIII, be adopted, unless approved by the affirmative vote of the holders of no fewer than (i) 67% of the voting power of all shares of the Corporation then entitled to vote generally in the election of directors, voting together as a single class, and (ii) a majority of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, excluding the voting power of all shares of the Corporation of a then Interested Shareholder not beneficially owned by such shareholder (whether then an "Interested Shareholder" or otherwise) on March 9, 1993. ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF BOURBON BANCSHARES, INC. Pursuant to the provisions of KRS 271B.10-030 and KRS 271B.10-060, Articles of Amendment to the Articles of Incorporation of Bourbon Bancshares, Inc. (the "Corporation") are hereby adopted: FIRST: The name of the Corporation is Bourbon Bancshares, Inc. SECOND: The amendment adopted amends the first leterary sentence of Article IV of the Articles of Incorporation to read in its entirety as follows: "The total number of shares that the Corporation shall have the authority to issue is 3,300,000 shares, which shall be divided into two classes as follows: 3,000,000 Common Shares; and 300,000 Preferred Shares." THIRD: The above-described amendment was adopted on May 2, 1994 at a meeting of the shareholders of the Corporation held upon written notice as provided in the Kentucky Business Corporation Act. FOURTH: Of the 585,590 Common Shares of the Corporation outstanding and entitled to vote on the above-described amendment, 454,825 Common Shares were indisputably represented at the meeting, and 454,825 were cast in favor there-of and none were cast against. The number of votes cast for approval of the above- described amendment was sufficient for approval thereof. Dated: May 27, 1994 BOURBON BANCSHARES, INC. By:__/s/Buckner Woodford______ Buckner Woodford, President ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF BOURBON BANCSHARES, INC. Pursuant to the provisions of KRS 271B.10-030 and KRS 271B.10-060, Articles of Amendment to the Articles of Incorporation of Bourbon Bancshares, Inc. (the "Corporation") are hereby adopted: FIRST: The name of the Corporation is Bourbon Bancshares, Inc. SECOND: The amendment (the "Share Amendment") adopted amends the first sentence of Article IV of the Articles of Incorporation to read in its entirety as follows: "The total number of shares that the Corporation shall have the authority to issue is 10,300,000 shares, which shall be divided into two classes as follows: 10,000,000 Common Shares; and 300,000 Preferred Shares." THIRD: The amendment (the "Director Amendment") adopted amends Section A. of Article V of the Articles of Incorporation to read in its entirety as follows: "A. Number. The business and affairs of the Corporation shall be managed and conducted by or under the direction of a Board of Directors. The number of directors (exclusive of directors to be elected by the holders of one or more series of Preferred Shares of the Corporation that may be outstanding, voting separately as a series or class) shall be fixed from time to time by the Board of Directors of the Corporation by resolution adopted by a majority of the entire Board of Directors, but in no event shall be less than five (5) nor more than fifteen (15)." FOURTH: The Share Amendment and the Director Amendment were adopted by holders of the Corporation's Common Shares, the Corporation's sole class of issued and outstanding shares, at the Corporation's 1999 Annual Meeting of Shareholders (the "1999 Annual Meeting") on May 3, 1999. FIFTH: There were 1,402,588 Common Shares issued, outstanding and entitled to vote at the 1999 Annual Meeting, of which 1,156,945 Common Shares were indisputably represented at the 1999 Annual Meeting. The total number of undisputed votes cast for the Share Amendment was 1,116,814 and the total number of undisputed votes cast for the Director Amendment was 1,112,535. The number of undisputed votes cast for each of the Share Amendment and the Director Amendment was sufficient for approval by the shareholders. Dated: June 10, 1999. BOURBON BANCSHARES, INC. By:_/s/Buckner Woodford_______ Buckner Woodford, President Exhibit 11 Earnings Per Share The factors used in the earnings per share computation follow: Three Months Ended March 31, 2000 1999 (in thousands) Basic Earnings Per Share Net Income $1,308 $1,119 Weighted average common shares outstanding 2,809 2,805 Basic earnings per share $ 0.47 $ 0.40 Diluted Earnings Per Share Net Income $1,308 $1,119 Weighted average common shares outstanding 2,809 2,805 Add dilutive effects of assumed exercise of stock options 63 57 Weighted average common and dilutive Potential common shares outstanding 2,872 2,862 Diluted earnings per share $ 0.46 $ 0.39 Stock options for 600 shares (for the quarter ended March 31, 2000) and 25,780 shares (for the quarter ended March 31, 1999) of common stock were not considered in computing earnings per share because they were antidilutive.