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, 2001
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 April 30, 2001:
2,795,058.
BOURBON BANCSHARES, INC.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income and
Comprehensive Income 4
Consolidated Statements of Changes in
Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
Part II - Other Information 16
Signatures 16
Exhibits
11 Earnings Per Share Calculation 17
Item 1 - Financial Statements
BOURBON BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands)
3/31/01
12/31/00
Assets
Cash and due from banks
$ 10,978
$ 11,596
Federal funds sold
8,058
3,749
Cash and cash equivalents
19,036
15,345
Investment securities:
Available for sale
63,876
52,823
Held to maturity
-
15,231
Mortgage loans held for sale
468
868
Loans
270,529
272,277
Allowance for loan losses
3,424
3,388
Net loans
267,105
268,889
Federal Home Loan Bank stock
3,662
3,598
Bank premises and equipment, net
8,758
8,299
Interest receivable
3,942
4,262
Intangible assets
1,660
1,744
Other assets
577
788
Total assets
$369,084
$371,847
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing
$ 44,805
$ 48,439
Time deposits, $100,000 and over
41,367
40,306
Other interest bearing
211,409
212,071
Total deposits
297,581
300,816
Securities sold under agreements to repurchase
2,820
8,189
Other borrowed funds
968
1,257
Federal Home Loan Bank advances
26,575
21,644
Interest payable
3,175
3,427
Other liabilities
850
654
Total liabilities
331,969
335,987
Stockholders' equity
Common stock
6,629
6,627
Retained earnings
29,845
29,241
Accumulated other comprehensive income
641
(8)
Total stockholders' equity
37,115
35,860
Total liabilities & stockholders' equity
$369,084
$371,847
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME (unaudited)
(thousands, except per share amounts)
Three Months Ending
3/31/01
3/31/00
INTEREST INCOME:
Loans, including fees
$ 6,127
$ 5,441
Investment securities
987
1,026
Other
112
67
Total interest income
7,226
6,534
INTEREST EXPENSE:
Deposits
3,188
2,626
Other
474
398
Total interest expense
3,662
3,024
Net interest income
3,564
3,510
Loan loss provision
192
188
Net interest income after provision
3,372
3,322
OTHER INCOME:
Service charges
820
615
Loan service fee income
68
73
Trust department income
101
159
Investment securities gains, net
18
(1)
Gain on sale of mortgage loans
75
-
Other
183
139
Total other income
1,265
985
OTHER EXPENSES:
Salaries and employee benefits
1,474
1,326
Occupancy expenses
453
393
Amortization of intangibles
104
107
Advertising and marketing
107
91
Taxes other than payroll, property and income
88
84
Other
600
520
Total other expenses
2,826
2,521
Income before taxes
1,811
1,786
Income taxes
530
478
Net income
$ 1,281
$ 1,308
Other Comprehensive Income, net of tax:
Change in Unrealized Gains on Securities
649
(24)
Comprehensive Income
$ 1,930
$ 1,284
Earnings per share
Basic
$ 0.46
$ 0.47
Diluted
0.45
0.46
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(thousands, except number of shares)
Accumulated
Other
Total
- ----Common Stock----
Retained
Comprehensive
Stockholders'
Shares
Amount
Earnings
Income
Equity
Balances, January 1, 2001
2,808,067
$ 6,627
$ 29,241
$ (8)
$ 35,860
Common stock issued
10,300
30
-
-
30
Common stock purchased
(14,541)
(28)
(256)
-
(284)
Net change in unrealized gain
on securities available for sale,
net of tax
-
-
-
649
649
Net income
-
-
1,281
-
1,281
Dividends declared - $.15 per share
-
-
(421)
-
(421)
Balances, March 31, 2001
2,803,826
$ 6,629
$ 29,845
$ 641
$ 37,115
BOURBON BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
Three Months Ending
3/31/01
3/31/00
Cash Flows From Operating Activities
Net Income
$ 1,281
$ 1,308
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation
242
195
Amortization
104
107
Investment securities accretion, net
(19)
(21)
Provision for loan losses
192
188
Investment securities losses (gains), net
(18)
1
Originations of loans held for sale
(5,035)
(2,934)
Proceeds from sale of loans
5,510
2,901
Federal Home Loan Bank Stock Dividends
(64)
(58)
Gain on sale of mortgage loans
(75)
-
Losses, including write-downs, on real
Estate acquired through foreclosure, net
4
-
Changes in:
Interest receivable
320
109
Other assets
211
739
Interest payable
(252)
308
Other liabilities
(155)
(358)
Net cash from operating activities
2,246
2,485
Cash Flows From Investing Activities
Purchases of securities available for sale
(3,255)
(6,338)
Proceeds from sales of securities available for sale
108
2,000
Proceeds from principal payments, maturities and
Calls of securities available for sale
8,338
4,939
Purchases of securities held to maturity
-
(269)
Proceeds from maturities and calls of securities
held to maturity
-
115
Net change in loans
1,592
(3,412)
Purchases of bank premises and equipment, net
(701)
(80)
Net cash from investing activities
6,082
(3,045)
Cash Flows From Financing Activities:
Net change in deposits
(3,235)
4,249
Net change in securities sold under agreements to
Repurchase and other borrowings
(5,658)
(2,651)
Advances from Federal Home Loan Bank
5,000
-
Payments on Federal Home Loan Bank advances
(69)
(10,108)
Proceeds from issuance of common stock
30
130
Purchase of common stock
(284)
-
Dividends paid
(421)
(366)
Net cash from financing activities
(4,637)
(8,746)
Net change in cash and cash equivalents
3,691
(9,306)
Cash and cash equivalents at beginning of period
15,345
20,717
Cash and cash equivalents at end of period
$ 19,036
$ 11,411
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 March 31, 2001 and December 31, 2000, and
for the three month periods ended March 31, 2001 and March 31, 2000
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. INVESTMENT SECURITIES
Period-end securities are as follows:
(in thousands)
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Available for Sale
March 31, 2001
U.S. Treasury
$ 11,982
$ 44
$ -
$ 12,026
U.S. government agencies
5,999
86
-
6,085
States and political subdivisions
17,980
728
-
18,708
Mortgage-backed
20,177
240
(94)
20,323
Equity securities
2,290
185
(226)
2,249
Other
4,485
-
-
4,485
Total
62,913
1,283
(320)
63,876
December 31, 2000
U.S. Treasury
14,970
24
(2)
$ 14,992
U.S. government agencies
4,999
40
(11)
5,028
States and political subdivisions
3,272
94
-
3,366
Mortgage-backed
22,876
141
(139)
22,878
Equity securities
2,230
96
(256)
2,070
Other
4,489
-
-
4,489
Total
52,836
395
(408)
52,823
Held to Maturity
December 31, 2000
States and political subdivisions
15,231
417
(10)
15,638
3. LOANS
Loans at period-end are as follows:
(in thousands)
3/31/01
12/31/00
Commercial
$ 17,761
$ 17,452
Real estate construction
16,388
15,270
Real estate mortgage
160,094
162,306
Agricultural
52,189
52,008
Consumer
24,097
25,241
Total
270,529
272,277
4. 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.
The factors used in the earnings per share computation follow:
Three Months Ended
March 31,
2001 2000
(in thousands)
Basic Earnings Per Share
Net Income $1,281 $1,308
Weighted average common shares outstanding 2,803 2,809
Basic earnings per share $ 0.46 $ 0.47
Diluted Earnings Per Share
Net Income $1,281 $1,308
Weighted average common shares outstanding 2,803 2,809
Add dilutive effects of assumed exercise
of stock options 48 63
Weighted average common and dilutive
Potential common shares outstanding 2,851 2,872
Diluted earnings per share $ 0.45 $ 0.46
Stock options for 4,600 shares (for the period ended March 31, 2001)
and 600 shares (for the period ended March 31, 2000) of common stock
were not considered in computing earnings per share because they were
antidilutive.
5. Dividends per share paid for the quarter ended March 31, 2001 were
$0.15 compared to $0.13 for March 31, 2000.
6. Beginning January 1, 2001, a new accounting
standard requires 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. The Company
periodically enters into non-exchange traded
mandatory forward sales contracts in
conjunction with its mortgage banking operation.
These contracts, considered
derivatives, typically last 90 days and are used to
hedge the risk of interest rate
changes between the time of the commitment to
make a loan to a borrower at a stated
rate and when the loan is sold. The Company did
not have any mandatory forward sales
contracts at March 31, 2001.
As allowed in conjunction with the adoption of this
standard, the Company transferred
its entire securities held to maturity portfolio to
available for sale. As a result of
this transfer and the corresponding adjustment
to fair value, on January 1, 2001
securities increased $407,000, other assets
decreased $138,000, and accumulated other
comprehensive income increased $269,000.
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. Words such as "believes," "anticipates," "expects,"
"intends," "plans," "targeted," and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of
identifying such statements. 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; 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 $0.46
basic earnings per share and $0.45 diluted earnings per share for the
first three months ended March 31, 2001 compared to $1.3 million, or
$0.47 basic earnings per share and $0.46 diluted earnings per share for
the three month period ending March 31, 2000.
Return on average assets was 1.38% for the first three months ended
March 31, 2001 compared to 1.53% for the same time period in 2000, a
decrease of 10%. Return on average equity was 14.0% and 16.2% for the
three months ended March 31, 2001 and 2000, respectively, a decrease of
13%.
The decrease in net income is mainly a result of softening loan demand
and slight temporary tightening of our net interest margin due to the
rapidly falling loan rates.
Loans decreased $1.7 million from $272.2 million on December 31, 2000 to
$270.5 million on March 31, 2001. This decrease was mainly attributable
to a reduction in real estate mortgage loans and consumer loans.
Management feels this is temporary and loans are expected to grow in
future periods.
Total deposits decreased from $300.8 million on December 31, 2000 to
$297.6 million on March 31, 2001, a decrease of $3.2 million. The
decrease is mainly attributable to non-interest bearing deposits
decreasing $3.6 million. The decline in total deposits is expected to
be temporary.
Net Interest Income
Net interest income was $3.6 million for the three months ending March
31, 2001 compared to $3.5 million for the three months ending March 31,
2000, resulting in an increase of $54 thousand or 2%. The interest
margin was 4.14% for the first three months of 2001 compared to 4.46%
for the same period in 2000, a decrease of 32 basis points. Typically,
banks have experienced declining margins over the past year as a result
of the general decline in interest rates. The Federal Reserve has
dropped the discount rate from 6% at December 31, 2000 to 4.5% at March
31, 2001, and to 4% since then. These decreases have had a short term
effect on net interest income, particularly a decrease in loan interest
income. However, as our interest rate shock simulation model that
follows shows, changes in interest rates have a minor effect on net
interest income, and therefore the decline in net interest margin is
felt to be temporary.
For the first quarter, the yield on assets increased from 8.24% in 2000
to 8.32% in 2001. The cost of liabilities increased from 3.96% in 2000
to 4.43% in 2001. Year to date average loans are up $33.0 million, or
13.9% from March 31, 2000 to March 31, 2001, resulting in an increase in
loan interest income of $685 thousand for the first quarter of 2001.
Average deposits also increased from March 31, 2000 to March 31, 2001,
up $18.6 million, or 6.6%. This increased volume has resulted in an
increase in deposit interest expense of $562 thousand for the first
quarter of 2001. The banking industry continues to battle competition
for deposit dollars, and this trend is expected to continue.
Non-Interest Income
Non-interest income increased $0.3 million for the three month period
ended March 31 from $1.0 million in 2000 to $1.3 million in 2001. An
increase of $205 thousand in service charges from the first quarter of
2000 to the comparable 2001 period is mainly attributable to an increase
in checking service charges and overdraft charges of $238 thousand.
Overdraft income increased principally due to the implementation of a
new "Kentucky Courtesy" overdraft program and an increase in overdraft
fees in the last quarter of 2000. Investment securities net gains were
$19 thousand greater for the first three months of 2001 compared to the
same period in 2000. Net gains from sale of securities were mainly
attributable to municipal securities being called at premiums before
their maturity.
The increase in gain on sale of mortgage loans of $75 thousand during
the first quarter of 2001 compared to the same 2000 period is
attributable to a decrease in rates in 2001 as compared to 2000. The
decrease in rates resulted in an increase in loan originations and
refinances. Volume of loan sales are inverse to rate changes. Rates
have fallen in the first quarter of 2001 and as a result, will favorably
impact our loan sales in 2001 compared to 2000. The increase in other
income of $44 thousand in the first three months of 2001 as compared to
the same time period in 2000 is primarily a result of an increase in
debit card income of $18 thousand and an increase in brokerage fee
income of $18 thousand. We continue to promote the use of electronic
products and the use of our brokerage services, and expect these to be
an integral part of our business.
Non-Interest Expense
The increase of $305 thousand in non-interest expenses from $2.5 million
for the three months ended March 31, 2000 to $2.8 million for the same
period in 2001 was a result of several factors. Salaries and benefits
increased $149 thousand for the first three months of 2001 compared to
2000, an increase of 11%. The increase is due to annual salary
increases and increased staffing. Salaries, excluding bonuses and
incentives, increased 12% from the first quarter of 2000 to the first
quarter of 2001. Employee benefits increased $6 thousand during these
comparable periods.
Occupancy expense increased $60 thousand to $453 thousand for the first
three months of 2001 compared to first three months of 2000.
Depreciation increased $47 thousand during these comparable periods.
Renovation of existing facilities and the purchase of hardware and
software for recent technological advances have added to the
depreciation expense. Currently, the construction a new full service
facility in Cynthiana is under way and is expected to be complete toward
the end of the third quarter of 2001. These increases are a result on
the Company's continued emphasis on improving and maintaining its
facilities, and to stay current with our technology.
Advertising and marketing costs increased $16 thousand to $107 thousand
for the first three months of 2001 as compared to the same period in
2000. Continued efforts have been made by the Company to promote the
name and the products of Kentucky Bank using various forms of
promotional materials and selected types of media, including television.
Other expenses for the first three months of 2001 compared to 2000
increased $80 thousand to $600 thousand. Internet banking and debit
card expenses increased $43 thousand and losses on checking account
overdrafts increased $11 thousand from 2000 to 2001. Outside of these
changes, the other changes are primarily the result of the growth of the
Bank and the general increase in the cost of doing business.
Income Taxes
The tax equivalent rate for the three months ended March 31 was 29% for
2001 and 27% for 2000. The increase in the tax equivalent rate is
mainly attributable to a non-recurring tax benefit in 2000. These rates
are less than the statutory rate as a result of the tax-free securities
and loans held by the Company.
Stock Repurchase Program
On October 25, 2000, the Company announced that its Board of Directors
approved a stock repurchase program. The Company is authorized to
purchase up to 100,000 shares of its outstanding common stock. Shares
will be purchased from time to time in the open market depending on
market prices and other considerations. Through March 31, 2001, 19,023
shares have been purchased.
Liquidity and Funding
Liquidity risk is the possibility that the Company may not be able to
meet its cash requirements. Management of liquidity risk includes
maintenance of adequate cash and sources of cash to fund operations and
meeting the needs of borrowers, depositors and creditors. Excess
liquidity has a negative impact on earnings as a result of the lower
yields on short-term assets.
Cash and cash equivalents were $19.0 million as of March 31, 2001
compared to $15.3 million at December 31, 2000. In addition to cash and
cash equivalents, the securities portfolio provides an important source
of liquidity. Total investment securities available for sale totaled
$63.9 million at March 31, 2001. The available for sale securities are
available to meet liquidity needs on a continuing basis.
The Company maintains a relatively stable base of customer deposits and
its steady growth is expected to be adequate to meet its funding
demands. In addition, management believes the majority of its $100,000
or more certificates of deposit are no more volatile than its core
deposits.
Generally, the Company relies upon net cash inflows from financing
activities, supplemented by net cash inflows from operating activities,
to provide cash used in its investing activities. As is typical of many
financial institutions, significant financing activities include deposit
gathering, and the use of short-term borrowings, such as federal funds
purchased and securities sold under repurchase agreements along with
long-term debt. The Company's primary investing activities include
purchasing investment securities and loan originations. Management
believes there is sufficient cash flow from operations to meet investing
and liquidity needs related to reasonable borrower, depositor and
creditor needs in the present economic environment.
Management is aware of the potential problem of funding sustained loan
growth. Therefore, in addition to deposits, other sources of funds,
such as FHLB Advances may be used. The Company relies on FHLB advances
for both liquidity and asset/liability management purposes. These
advances are used primarily to fund long-term fixed rate residential
mortgage loans. As of March 31, 2001, we have sufficient collateral to
borrow an additional $22 million from the FHLB. In addition, as of
March 31, 2001, over $53 million is available in overnight borrowing
through various correspondent banks. In light of this, 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, 2001, the Company's non-performing assets totaled $1.2
million or 0.4% of loans compared to $1.8 million or 0.7% of loans at
March 31, 2000. The decrease in accruing loans which are past due 90
days or more is due principally to one line of credit totaling $788
thousand in 2000. (See table below) Real estate loans composed 62% and
97% of the non-performing loans as of March 31, 2001 and 2000,
respectively. Forgone interest income on the non-accrual loans for both
2001 and 2000 is immaterial.
Nonperforming Assets
March 31
(in thousands)
2001
2000
Non-accrual Loans
$ 350
$ 168
Accruing Loans which are
Contractually past due
90 days or more
713
1,504
Restructured Loans
130
130
Total Nonperforming and Restructured
1,193
1,802
Other Real Estate
231
117
Total Nonperforming and Restructured
Loans and Other Real Estate
$ 1,424
$ 1,919
Nonperforming and Restructured Loans
as a Percentage of Loans
0.44%
0.74%
Nonperforming and Restructured Loans
and Other Real Estate as a Percentage
of Total Assets
0.39%
0.56%
Provision and Reserve for Possible Loan Losses
The first quarter 2001 provision for loan losses of $192 thousand is
higher than the comparable 2000 period by $4 thousand. Loan growth and
increase in charge-offs 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 1.27% on March 31, 2001 and 1.35% on
March 31, 2000. Net charge-offs for the three month period ending March
31, 2001 were $156 thousand compared to $24 thousand for the same period
in 2000. The increase is mainly attributable to several small consumer
loans. Future levels of charge-offs will be determined by the economic
environment surrounding individual loans. Management feels the current
loan loss reserve is sufficient to meet expected loan losses.
Loan Losses
Three Months Ended March 31
(in thousands)
2001
2000
Balance at Beginning of Period
$ 3,388
$ 3,104
Amounts Charged-off:
Commercial
3
-
Real Estate Mortgage
3
-
Consumer
168
50
Total Charged-off Loans
174
50
Recoveries on Amounts
Previously Charged-off:
Commercial
1
1
Real Estate Mortgage
1
-
Consumer
16
25
Total Recoveries
18
26
Net Charge-offs
156
24
Provision for Loan Losses
192
188
Balance at End of Period
3,424
3,268
Loans
Average
271,665
238,644
At March 31
270,529
241,996
As a Percentage of Average Loans:
Net Charge-offs
0.06%
0.01%
Provision for Loan Losses
0.07%
0.08%
Allowance as a Percentage of
Period-end Loans
1.27%
1.35%
Allowance as a Multiple of
Net Charge-offs
21.9
136.2
Allowance as a Percentage of
Non-performing and Restructured Loans
2.87
1.81
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. The primary tool used by management is
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, 2001 the projected
percentage changes are within the Board approved limits and the
Company's interest rate risk is also within Board approved limits. The
projected net interest income report summarizing the Company's interest
rate sensitivity as of March 31, 2001 is as follows:
(in thousands)
PROJECTED NET INTEREST INCOME
Level
Rate Change:
- - 300
- - 100
Rates
+ 100
+ 300
Year One (4/1/01 - 3/31/02)
Interest Income
$24,623
$26,946
$28,113
$29,280
$31,613
Interest Expense
9,926
12,176
13,300
14,425
16,675
Net Interest Income
14,697
14,770
14,813
14,855
14,938
PROJECTED DOLLAR INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (4/1/01 - 3/31/02)
Interest Income
$(3,490)
$(1,167)
N/A
$ 1,167
$ 3,500
Interest Expense
(3,375)
(1,125)
N/A
1,125
3,375
Net Interest Income
(115)
(42)
N/A
42
125
PROJECTED PERCENTAGE INCREASE (DECREASE) FROM "LEVEL RATES"
Year One (4/1/01 - 3/31/02)
Interest Income
- -12.4%
- -4.1%
N/A
4.1%
12.4%
Interest Expense
- -25.4%
- -8.5%
N/A
8.5%
25.4%
Net Interest Income
- -0.8%
- -0.3%
N/A
0.3%
0.8%
Board approved limit
>-10.0%
>-4.0%
N/A
>-4.0%
>-10.0%
These numbers are comparable to 2000. In 2001, year one reflected a
decline in net interest income of 0.8% with a 300 basis point decline
compared to the 1.7% decline in 2000. The 300 basis point increase in
rates reflected a 0.7% increase in net interest income in 2001 compared
to 1.8% in 2000. Percentage changes in 2001 are less when compared to
2000. Therefore, changes in interest rates should have a smaller affect
on net interest income.
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-K.
11 Earnings Per Share Calculation
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 ___5/14/01_________ __/s/Buckner Woodford____________
Buckner Woodford, President and C.E.O.
Date ___5/14/01_________ __/s/Gregory J. Dawson___________
Gregory J. Dawson, Chief Financial Officer
Exhibit 11
Earnings Per Share
See Note 4 in Notes to Consolidated Financial Statements for computation
of per share earnings.
17