Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-14412
Farmers Capital Bank Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1017851
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
P.O. Box 309, 202 West Main St.
Frankfort, Kentucky 40601
- --------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502) 227-1600
Securities registered pursuant to Section 12(b) of the Act:
None None
- -------------------------------------------- ----------------------
(Title of each class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $ .125 per share Par Value
-----------------------------------------
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [x] No [ ]
The aggregate market value of the registrant's outstanding voting stock held by
non-affiliates on June 30, 2004 (the last business day of the registrant's most
recently completed second fiscal quarter) was $240,625,778.
As of March 10, 2005 there were 6,790,872 shares outstanding.
Documents incorporated by reference:
Portions of the Registrant's 2004 Annual Report to Shareholders are incorporated
by reference into Part II. Portions of the Registrant's Proxy Statement relating
to the Registrant's 2005 Annual Meeting of Shareholders are incorporated by
reference into Part III.
An index of exhibits filed with this Form 10-K can be found on page 16.
FARMERS CAPITAL BANK CORPORATION
FORM 10-K
INDEX
Page
Part I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
Part II
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 13
Item 9A. Controls and Procedures 13
Item 9B. Other Information 14
Part III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management 14
Item 13. Certain Relationships and Related Transactions 14
Item 14. Principal Accounting Fees and Services 14
Part IV
Item 15. Exhibits, Financial Statement Schedules 15
Signatures 16
Index of Exhibits 17
PART I
Item 1. Business
- ----------------
Organization
------------
Farmers Capital Bank Corporation (the "Registrant" or the "Company") is a
financial holding company. The Registrant was originally formed as a bank
holding company under the Bank Holding Company Act of 1956, as amended, on
October 28, 1982 under the laws of the Commonwealth of Kentucky. During 2000,
the Registrant elected to change from a bank holding company to a financial
holding company (see discussion in Supervision and Regulation section of this
report). The Registrant's subsidiaries provide a wide range of banking and
bank-related services to customers throughout Kentucky. The bank subsidiaries
owned by the Registrant include Farmers Bank & Capital Trust Co. ("Farmers
Bank"), Frankfort, Kentucky; United Bank & Trust Co. ("United Bank"),
Versailles, Kentucky; Lawrenceburg National Bank ("Lawrenceburg Bank"),
Harrodsburg, Kentucky; First Citizens Bank, Elizabethtown, Kentucky; Farmers
Bank and Trust Company ("Farmers Georgetown"), Georgetown, Kentucky; and
Kentucky Banking Centers, Inc. ("Ky. Banking Centers"), Glasgow, Kentucky.
The Registrant also owns FCB Services, Inc., ("FCB Services"), a nonbank data
processing subsidiary located in Frankfort, Kentucky, Kentucky General Life
Insurance Company, Inc., ("Kentucky General Life"), a nonbank insurance agency
subsidiary located in Frankfort, Kentucky, which provides services to the
Company's banks as well as unaffiliated banks, and Kentucky General Holdings,
LLC, ("Kentucky General"), in Frankfort, Kentucky. Kentucky General holds a 50%
voting interest in KHL Holdings, LLC. KHL Holdings announced that it acquired
the Kentucky Home Life Insurance Company effective January 1, 2005.
On July 1, 2004 the Company acquired Citizens Bank (Kentucky), Inc. ("Citizens
Georgetown") in Georgetown, Kentucky. The impact of this acquisition was an
immediate boost in loans and deposits of $50.1 million and $62.4 million,
respectively. During the fourth quarter of 2004, the Company merged Citizens
Georgetown into Farmers Georgetown.
The Registrant provides a broad range of financial services to individuals,
corporations, and others through its 27 banking locations in 16 communities
throughout Central Kentucky. These services primarily include the activities of
lending and leasing, receiving deposits, providing cash management services,
safe deposit box rental, and trust activities. Operations are managed and
financial performance is evaluated at the subsidiary level. The Registrant's
chief decision makers monitor the results of the various banking products and
services of its subsidiaries. Accordingly, all of the Registrant's operations
are considered by management to be aggregated in one reportable operating
segment: commercial and retail banking. As of December 31, 2004, the Registrant
had $1.4 billion in consolidated assets.
Farmers Capital Bank Corporation
Frankfort, KY
.
.
. Kentucky General Life
. Insurance Company, Inc.
....................... Frankfort, KY
. (Inactive)
.
.
.
......................................................................................................................
. . . . . . . .
. . . . . . . .
. . . . . . . .
. . . . . . . .
United Bank & Lawrenceburg Farmers Bank Farmers Bank & First Citizens Kentucky Banking FCB Services, Kentucky General
Trust Co. National Bank and Trust Company Capital Trust Co. Bank Centers, Inc. Inc. Holdings, LLC
Versailles, KY Harrodsburg, KY Georgetown, KY Frankfort, KY Elizabethtown, KY Glasgow, KY Frankfort, KY Frankfort, KY
100% 100% 100% 100% 100% 100% 100% 100%
. . . . .
. . . . .
. . . ............................................ .
. . . . .
. ........ .................................................. . .
. . . . . . . . . . .
. . . . . . . . . . .
. . . . . . . . . . .......
. Pro Mortgage . Farmers Bank . Leasing One . . . . .
EV Propeties, Inc. Partners, LLC . Realty Co. . Corporation . EG Properties, Inc. Farmers Capital EH Properties, Inc. .
Versailles, KY Georgetown, KY . Frankfort, KY . Frankfort, KY . Frankfort, KY Insurance Corp. Elizabethtown, KY .
100% 100% . 100% . 100% . 100% Frankfort, KY 100% .
. . . 100% .
. . . . .
. . . . .............
. . . . .
Community Development Austin Park Frankfort . KHL Holdings, LLC
of Kentucky, Inc. Apartments II,LTD Apartments II, LTD . Frankfort, KY
Georgetown, KY Frankfort, KY Frankfort, KY . 45%(equity) 50% (voting)
(Inactive) 99% 99.9 . .
. .
. .
. .
. .
. .
. .
Farmers Fidelity Kentucky Home Life
Insurance Agency, LLP Insurance Company
Lexington, KY Frankfort, KY
50% 100%
Farmers Bank, originally organized in 1850, is a state chartered bank engaged in
a wide range of commercial and personal banking activities, which include
accepting savings, time and demand deposits; making secured and unsecured loans
to corporations, individuals and others; providing cash management services to
corporate and individual customers; issuing letters of credit; renting safe
deposit boxes; and providing funds transfer services. The bank's lending
activities include making commercial, construction, mortgage, and personal loans
and lines of credit. The bank serves as an agent in providing credit card loans.
It acts as trustee of personal trusts, as executor of estates, as trustee for
employee benefit trusts and as registrar, transfer agent and paying agent for
bond issues. Farmers Bank also acts as registrar, transfer agent and paying
agent for the Registrant's stock. Farmers Bank is the general depository for the
Commonwealth of Kentucky and has been for more than 70 years.
Farmers Bank is the largest bank chartered in Franklin County. It conducts
business in its principal office and four branches within Frankfort, the capital
of Kentucky. Franklin County is a diverse community, including government,
commerce, finance, industry, medicine, education and agriculture. The bank also
serves many individuals and corporations throughout Central Kentucky. On
December 31, 2004, it had total consolidated assets of $511.8 million, including
loans net of unearned income of $277.7 million. On the same date, total deposits
were $368.5 million and shareholders' equity totaled $34.5 million.
Farmers Bank had six active subsidiaries during 2004: Farmers Bank Realty Co.
("Farmers Realty"), Leasing One Corporation ("Leasing One"), Farmers Capital
Insurance Corporation ("Farmers Insurance"), EG Properties, Inc. ("EG
Properties"), Austin Park Apartments, LTD ("Austin Park"), and Frankfort
Apartments II, LTD ("Frankfort Apartments").
Farmers Realty was incorporated in 1978 for the purpose of owning certain real
estate used by the Registrant and Farmers Bank in the ordinary course of
business. Farmers Realty had total assets of $3.4 million on December 31, 2004.
Leasing One was incorporated in August 1993 to operate as a commercial equipment
leasing company. It is located in Frankfort and is currently licensed to conduct
business in thirteen states. At year-end 2004 it had total assets of $20.1
million, including leases net of unearned income of $22.2 million.
Farmers Insurance was organized in 1988 to engage in insurance activities
permitted to the Registrant under federal and state law. Farmers Bank
capitalized this corporation in December 1998. Farmers Insurance acts as an
agent for Commonwealth Land Title Co. At year-end 2004 it had total assets of
$972 thousand. Farmers Insurance holds a 50% interest in Farmers Fidelity
Insurance Company, LLP ("Farmers Fidelity"). The Creech & Stafford Insurance
Agency, Inc., an otherwise unrelated party to the Registrant, also holds a 50%
interest in Farmers Fidelity.
In November 2002 Farmers Bank incorporated EG Properties. EG Properties is
involved in real estate management and liquidation for properties repossessed by
Farmers Bank. It had total assets of $2.6 million at December 31, 2004.
Farmers Bank is a limited partner in Austin Park and Frankfort Apartments, two
low income housing tax credit partnerships located in Frankfort, Kentucky. These
investments provide for federal income tax credits to the Company. Farmers
Bank's aggregate investment in these partnerships was $1.6 million at year-end
2004.
On February 15, 1985, the Registrant acquired United Bank, a state chartered
bank originally organized in 1880. It is engaged in a general banking business
providing full service banking to individuals, businesses and governmental
customers. It conducts business in its principal office and two branches in
Woodford County, Kentucky. During 2003 United Bank incorporated EV Properties,
Inc. EV Properties is involved in real estate management and liquidation for
properties repossessed by United Bank. EV Properties had total assets of $637
thousand at year-end 2004. Based on deposits, United Bank is the second largest
bank chartered in Woodford County with total assets of $175.8 million and total
deposits of $154.3 million at December 31, 2004.
On June 28, 1985, the Registrant acquired Lawrenceburg Bank, a national
chartered bank originally organized in 1885. It is engaged in a general banking
business providing full service banking to individuals, businesses and
governmental customers. During 1998, it was granted permission by the Office of
the Comptroller of the Currency ("OCC") to move its charter and main office to
Harrodsburg, Kentucky in Mercer County. Construction of the new site in
Harrodsburg was completed and operations began there in July 1999. Lawrenceburg
Bank conducts business at the Harrodsburg site and two branches in Anderson
County, Kentucky. Based on deposits, the Anderson County branches rank number
one in size compared to all banks chartered in Anderson County. Total assets
were $158.2 million and total deposits were $144.5 million at December 31, 2004.
On March 31, 1986, the Registrant acquired First Citizens Bank, a state
chartered bank originally organized in 1964. It is engaged in a general banking
business providing full service banking to individuals, businesses and
governmental customers. During 1997, it applied and was granted permission by
the Kentucky Department of Financial Institutions ("KDFI") to move its charter
and main office to Shepherdsville, Kentucky in Bullitt County. First Citizens
Bank completed construction of the site and began operations there in April
1998. In August, 2004 First Citizens Bank moved its charter and main office
designation back to Elizabethtown, Kentucky. It now conducts business at its
main office and its three branches in Hardin County, Kentucky along with its
branch office in Shepherdsville. During 2003 First Citizens Bank incorporated EH
Properties, Inc. This company, which had total assets of $1.1 million at
December 31, 2004, is involved in real estate management and liquidation for
properties repossessed by First Citizens Bank.
On October 8, 2004 First Citizens Bank acquired Financial National Electronic
Transfer, Inc. ("FiNET"), a data processing company that specializes in the
processing of federal benefit payments and military allotments and headquartered
in Radcliff, Kentucky. At December 31, 2004 FiNET had total assets of $6.5
million. Effective January 1, 2005 FiNET was merged into First Citizens Bank.
Based on deposits, First Citizens Bank ranks fourth in size compared to all
banks chartered in Hardin County. Total assets were $186.1 million and total
deposits were $152.4 million at December 31, 2004.
On June 30, 1986, the Registrant acquired Farmers Georgetown, a state chartered
bank originally organized in 1850. It is engaged in a general banking business
providing full service banking to individuals, businesses and governmental
customers. During the fourth quarter of 2004 the Company merged its recently
acquired Citizens Georgetown into Farmers Georgetown. Farmers Georgetown
conducts business at its principal office and three branches in Scott County,
Kentucky, two branches in Bath County, Kentucky, and two braches in Fayette
County, Kentucky.
On July 16, 2002, Farmers Georgetown incorporated Community Development of
Kentucky, Inc. ("CDK, Inc.") in order to apply to be certified as a Community
Development Entity for participation in the New Markets Tax Credit Program
("Program") as provided by the Community Renewal Tax Relief Act of 2000. The
Program is designed to promote economic development in qualified low-income
communities as defined by the tax regulations. The Program is still evolving and
the extent of the Company's participation, if any, will be determined at a
future date. In May, 2004 Farmers Georgetown incorporated Pro Mortgage Partners,
LLC ("Pro Mortgage"), a mortgage brokerage company established to offer a
variety of fixed rate loan products. At December 31, 2004 Pro Mortgage had total
assets of $1.3 million.
Based on deposits, Farmers Georgetown is the largest bank chartered in Scott
County with total assets of $291.7 million and total deposits of $209.0 million
at December 31, 2004.
On June 15, 1987, the Registrant acquired Horse Cave State Bank, a state
chartered bank originally organized in 1926. During 1997, it received approval
from the KDFI to move its charter to Glasgow, Kentucky. Subsequent to that
approval, Horse Cave State Bank changed its name to Kentucky Banking Centers,
Inc. Ky. Banking Centers is engaged in a general banking business providing full
service banking to individuals, businesses, and governmental customers. It
conducts business in its principal office in Glasgow and two branches in Hart
County, Kentucky. Based on deposits, Ky. Banking Centers' Hart County branches
rank first in size compared to all banks chartered in Hart County. Total assets
were $138.0 million and total deposits were $123.6 million at December 31, 2004.
FCB Services, organized in 1992, provides data processing services and support
for the Registrant and its subsidiaries. It is located in Frankfort, Kentucky.
During 1994, FCB Services began performing data processing services for
nonaffiliated banks. FCB Services had total assets of $3.9 million at December
31, 2004.
Kentucky General Life was incorporated on June 22, 2000 to engage in insurance
activities permitted by federal and state law. This corporation was inactive as
of December 31, 2004.
Lending
-------
A significant part of the Company's operating activities include originating
loans, approximately 72% of which are secured by real estate at December 31,
2004. Real estate lending primarily includes loans secured by owner-occupied
one-to-four family residential properties as well as commercial real estate
mortgage loans to developers and owners of other commercial real estate. Real
estate lending primarily includes both variable and adjustable rate products.
Loan rates on variable rate loans generally adjust upward or downward
immediately based on changes in the loan's index, normally prime rate as
published in the Wall Street Journal. Rates on adjustable rate loans move upward
or downward after an initial fixed term of normally 1, 3, or 5 years. However,
rate adjustments on adjustable rate loans are made annually after the initial
fixed term expires and are indexed primarily to shorter-term Treasury indexes.
Generally, variable and adjustable rate loans contain provisions that cap annual
increases at a maximum of 100 basis points with lifetime caps and floors of up
to 600 basis points. The Registrant also makes fixed rate commercial real estate
loans to a lesser extent with repayment terms generally not exceeding 12 months.
The Registrant's subsidiary banks make first and second residential mortgage
loans secured by real estate not to exceed 90% loan to value without seeking
third party guarantees. Commercial real estate loans are made primarily to small
and mid-sized businesses, secured by real estate not exceeding 80% loan to
value. Other commercial loans are asset based loans secured by equipment and
lines of credit secured by receivables and include lending across a diverse
range of business types. Commercial lending and real estate construction
lending, including commercial leasing, generally includes a higher degree of
credit risk than other loans, such as residential mortgage loans. Commercial
loans, like other loans, are evaluated at the time of approval to determine the
adequacy of repayment sources and collateral requirements. Collateral
requirements vary to some degree among borrowers and depend on the borrower's
financial strength, the terms and amount of the loan, and collateral available
to secure the loan. Credit risk results from the decreased ability or
willingness to pay by a borrower. Credit risk also results when a liquidation of
collateral occurs and there is a shortfall in collateral value as compared to a
loans outstanding balance. For construction loans, inaccurate initial estimates
of a property's value could lead to a property having a value that is
insufficient to satisfy full payment of the amount of funds advanced for the
property. Secured and unsecured consumer loans generally are made for
automobiles, boats, and other motor vehicles. In most cases loans are restricted
to the subsidiaries' general market area.
Supervision and Regulation
--------------------------
The Registrant is a legal entity that is separate and distinct from its bank and
nonbank subsidiaries. The Registrant originally registered as a bank holding
company and was restricted to those activities permissible under the Bank
Holding Company Act of 1956, as amended ("BHC Act"). The BHC Act provides for
regulation, supervision, and examination by the Board of Governors of the
Federal Reserve System ("FRB").
The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") became law in July 2002.
Sarbanes-Oxley addresses, among other issues, corporate governance, auditing and
accounting oversight, executive compensation, and enhanced and timely disclosure
of corporate information. The Nasdaq Stock Market has also proposed and adopted
corporate governance rules related to Sarbanes-Oxley. These changes are intended
to allow shareholders to more easily and efficiently monitor the performance of
companies and their directors.
Effective August 29, 2002, as directed by Section 302(a) of Sarbanes-Oxley, the
Company's chief executive officer and chief financial officer of the Registrant
are each required to certify that the Company's Quarterly and Annual Reports do
not contain any untrue statement of a material fact. The rules have several
requirements, including having these officers certify that: they are responsible
for establishing, maintaining and regularly evaluating the effectiveness of the
Company's internal controls; they have made certain disclosures to the Company's
auditors and the audit committee of the Board of Directors about the Company's
internal controls; and they have included information in the Company's Quarterly
and Annual Reports about their evaluation and whether there have been
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to the evaluation.
The Gramm-Leach-Bliley Act of 1999 ("GLB Act") signed into law in 1999 had a
significant effect on Federal banking laws applicable to the Registrant and its
subsidiary banks. The GLB Act permitted the Registrant to elect to become a
financial holding company. The Registrant elected this option during 2000. In
order to be granted status as a financial holding company, a bank holding
company and each of its subsidiary depository institutions must be well
capitalized, well managed, and have achieved at least a satisfactory record of
meeting community credit needs at its most recent Community Reinvestment Act
("CRA") examination. Depository institutions are periodically examined for
compliance with CRA and are assigned a rating. Each insured depository
institution subsidiary of a financial holding company must have a "satisfactory"
rating in order for a financial holding company to commence a new activity or
acquire a company engaged in a new activity permitted by the BHC Act. In
addition, banking regulators consider CRA ratings when determining whether to
approve a proposed transaction. A financial holding company is subject to
corrective action by the FRB if any depository institution controlled by the
company fails to maintain both well capitalized and well managed status.
The GLB Act amended the BHC Act to allow a bank holding company that has elected
financial holding company status to engage in an expanded list of permissible
activities, including insurance and securities underwriting, among others. The
GLB Act includes a system of functional regulation in which the FRB serves as
the umbrella regulator of the holding company. The FRB regulates the
Registrant's business activities in a variety of ways including, but not limited
to, requirements on acquiring control of other banks and bank holding companies,
limitations on activities and investments, and regulatory capital requirements.
State and other federal financial regulators, such as the KDFI, OCC, the Federal
Deposit Insurance Corporation ("FDIC"), and the Securities and Exchange
Commission ("SEC") also regulate either affiliates of the Registrant or the
Registrant itself.
The Registrant's state bank subsidiaries are subject to state banking law and
regulation and periodic examinations by the KDFI. Lawrenceburg Bank, a national
bank, is subject to similar regulation and supervision by the OCC under the
National Bank Act and the Federal Reserve System under the Federal Reserve Act.
Other regulations that apply to the Registrant's bank subsidiaries include, but
are not limited to, insurance of deposit accounts, capital ratios, payment of
dividends, liquidity requirements, the nature and amount of investments that can
be made, transactions with affiliates, community and consumer lending, and
internal policies and control.
The operations of the Registrant and its subsidiary banks are also affected by
other banking legislation and policies and practices of various regulatory
authorities. Such legislation and policies include statutory maximum rates on
loans, reserve requirements, domestic monetary and fiscal policy, and
limitations on the kinds of services that may be offered. During 2000, the State
Wide Branching Bill became effective, which allows banks to open a branch
anywhere in the Commonwealth of Kentucky. Previously, banks could only branch
within the county where the main office was located.
The BHC Act formerly prohibited the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of another bank across
its own state lines. However, effective September 1995, new legislation
abolished those restrictions and now allows bank holding companies to acquire
shares of out of state banks, subject to certain conditions. Currently, the
Company has no plans to purchase an out of state bank.
The GLB Act includes various extensive customer privacy protection provisions.
The GLB Act requires a financial institution to clearly disclose its privacy
policy to its customers regarding the sharing of non-public personal information
with affiliates and third parties. The financial institution's privacy policy
must be disclosed at the time a customer relationship is established and not
less than annually thereafter.
The Financial Reform, Recovery and Enforcement Act of 1989 provides that a
holding company's controlled insured depository institutions are liable for any
loss incurred by the FDIC in connection with the default of, or any FDIC
assisted transaction involving, an affiliated insured bank.
Deposits of the Registrant's subsidiary banks are insured by the FDIC's Bank
Insurance Fund, which subjects the banks to regulation and examination under the
provisions of the Federal Deposit Insurance Act. During periodic exams, FDIC
examiners review bank policies and evaluate lending and investment portfolios,
as well as being watchful for possible violations of banking regulations and
statutes.
Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), the
FDIC established a risk-based assessment system for insured depository
institutions, which became effective January 1, 1994. The FDIC has adopted a
risk-based deposit insurance assessment system under which the assessment rate
for an insured depository institution depends on the assessment risk
classification assigned to the institution by the FDIC which is determined by
the institution's capital level.
Under FDICIA, the federal banking regulators are required to take prompt
corrective action if an institution fails to satisfy certain minimum capital
requirements, including a leverage limit, a risk-based capital requirement, and
any other measure deemed appropriate by the federal banking regulators for
measuring the capital adequacy of an insured depository institution. All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees that would cause the
institution to become undercapitalized.
The purpose of the CRA is to encourage banks to respond to the credit needs of
the communities they serve, including low and moderate-income neighborhoods. CRA
states that banks should accomplish this while still preserving the flexibility
needed for safe and sound operations. It is designed to increase the bank's
sensitivity to investment opportunities that will benefit the community.
References under the caption "Supervision and Regulation" to applicable statutes
and regulations are brief summaries of portions thereof which do not purport to
be complete and which are qualified in their entirety by reference thereto.
Competition
-----------
The Registrant and its subsidiaries compete for banking business with various
types of businesses other than commercial banks and savings and loan
associations. These include, but are not limited to, credit unions, mortgage
lenders, finance companies, insurance companies, stock and bond brokers,
financial planning firms, and department stores which compete for one or more
lines of banking business. The banks also compete for commercial and retail
business not only with banks in Central Kentucky, but with banking organizations
from Ohio, Indiana, Tennessee, Pennsylvania, and North Carolina which have
banking subsidiaries located in Kentucky. These competing businesses may possess
greater resources than the Registrant and, as such, may have higher lending
limits and may offer other services that are not provided by the Registrant.
The Registrant competes primarily on the basis of quality of services, interest
rates and fees charged on loans, and the rates of interest paid on deposit
funds.
The business of the Registrant is not dependent upon any one customer or on a
few customers, and the loss of any one or a few customers would not have a
material adverse effect on the Registrant.
No material portion of the business of the Registrant is seasonal. No material
portion of the business of the Registrant is subject to renegotiation of profits
or termination of contracts or subcontracts at the election of the government,
though certain contracts are subject to such renegotiation or termination.
The Registrant is not engaged in operations in foreign countries.
Employees
---------
As of December 31, 2004, the Registrant and its subsidiaries had 514 full-time
equivalent employees. Employees are provided with a variety of employee
benefits. A retirement plan, a profit-sharing (401K) plan, group life insurance,
hospitalization, dental, and major medical insurance along with postretirement
health insurance benefits are available to eligible personnel. Employees are not
represented by a union. Management and employee relations are good.
During 1997, the Registrant's Board of Directors approved its Stock Option Plan
("Plan"), which grants certain eligible employees the option to purchase a
limited number of the Registrant's common stock. The Plan specifies the
conditions and terms that the grantee must meet in order to exercise the
options. The Registrant's shareholders at its annual meeting held on May 12,
1998 subsequently ratified the Plan.
In January, 2004 the Registrant's Board of Directors adopted an Employee Stock
Purchase Plan ("ESPP"). The ESPP was subsequently approved by the Registrant's
shareholders in May, 2004 and became effective July 1, 2004. Under this ESPP, in
the discretion of the Board of Directors, employees of the Registrant and its
subsidiaries can purchase Registrant common stock at a discounted price and
without payment of brokerage costs or other fees, in the process benefiting from
the favorable tax treatment afforded such plans pursuant to Section 423 of the
Internal Revenue Code.
Available Information
---------------------
The Registrant makes available, free of charge through its website
(www.farmerscapital.com), its Code of Ethics, its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
these reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after electronically filing such
material with the Securities and Exchange Commission.
Item 2. Properties
- ------------------
The Registrant leases its main office in downtown Frankfort, Kentucky from
Farmers Realty.
Farmers Bank and its subsidiaries currently own or lease nine buildings. Farmers
Bank operates at five locations, two of which it owns and three of which it
leases. United Bank owns its two branch offices and approximately 52% of a
condominium building that houses its main office. Lawrenceburg Bank owns its
main office in Harrodsburg and its two branch sites in Lawrenceburg. First
Citizens Bank owns its main office and two of its four branches and leases
office space for its allotment operations in Radcliff. The other two branch
locations of First Citizens Bank are leased facilities, one of which is located
in a grocery store. Farmers Georgetown owns its main office in Georgetown, a
branch in Georgetown, Sharpsburg, Owingsville, Stamping Ground, and Lexington.
Farmers Georgetown's also leases a branch in both Georgetown and Lexington.
Banking Centers owns its main office in Glasgow, Kentucky and its branch site in
Horse Cave, Kentucky. It leases its branch facilities in Munfordville, Kentucky.
The Registrant considers its properties to be suitable and adequate based on its
present needs.
Item 3. Legal Proceedings
- -------------------------
As of December 31, 2004, there were various pending legal actions and
proceedings against the Company arising from the normal course of business and
in which claims for damages are asserted. Management, after discussion with
legal counsel, believes that these actions are without merit and that the
ultimate liability resulting from these legal actions and proceedings, if any,
will not have a material adverse effect upon the consolidated financial
statements of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders, through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and
- --------------------------------------------------------------------------------
Issuer Purchases of Equity Securities
-------------------------------------
The information set forth under the sections "Shareholder Information" and
"Stock Prices" on page 37 of the 2004 Annual Report to Shareholders is hereby
incorporated by reference. Additional information set forth under Footnote 16 in
the notes to the Registrant's 2004 audited consolidated financial statements on
pages 58 through 59 of the 2004 Annual Report to Shareholders is also hereby
incorporated by reference.
The following table provides information with respect to shares of common stock
repurchased by the Company during the quarter ended December 31, 2004.
- ------------------------------------------------------------------------------------------------------------------
Total Number of Maximum Number of
Shares Purchased as Shares that May Yet
Total Number of Part of Publicly Be Purchased Under
Shares Average Price Announced Plans or the Plans or
Period Purchased Paid per Share Programs Programs
- ------------------------------------------------------------------------------------------------------------------
October 1, 2004 to
October 31, 2004 2,718 $ 33.86 2,718 196,408
- ------------------------------------------------------------------------------------------------------------------
November 1, 2004 to
November 30, 2004 196,408
- ------------------------------------------------------------------------------------------------------------------
December 1, 2004 to
December 31, 2004 196,408
- ------------------------------------------------------------------------------------------------------------------
Total 2,718 $ 33.86 2,718
- ------------------------------------------------------------------------------------------------------------------
On January 27, 2003, the Company's Board of Directors authorized the purchase of
up to 300,000 shares of the Company's outstanding common stock. No stated
expiration date was established under this plan.
STOCK TRANSFER AGENT AND REGISTRAR:
Farmers Bank & Capital Trust Co.
P.O. Box 309
Frankfort, Kentucky 40602
The Registrant offers shareholders automatic reinvestment of dividends in shares
of stock at the market price without fees or commissions. For a description of
the plan and an authorization card, contact the Registrar above.
NASDAQ MARKET MAKERS:
J.J.B. Hilliard, W.L. Lyons, Inc. Morgan, Keegan and Company
(502) 588-8400 (800) 260-0280
(800) 444-1854
Knight Securities LP Trident Securities, Inc.
(888) 302-9197 (800) 340-6355
Item 6. Selected Financial Data
- -------------------------------
SELECTED FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2004 2003 2002 2001 2000
(In thousands, except per share data)
- ----------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Interest income $ 61,902 $ 58,413 $ 66,291 $ 77,039 $ 75,481
Interest expense 19,176 19,883 25,746 34,357 32,536
Net interest income 42,726 38,530 40,545 42,682 42,945
Provision for loan losses 2,129 2,592 4,748 2,448 2,472
Net income 13,392 12,963 12,561 14,671 14,380
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Net income -
Basic $ 1.99 $ 1.93 $ 1.83 $ 2.10 $ 1.97
Diluted 1.98 1.92 1.82 2.09 1.97
Cash dividends declared 1.32 1.29 1.25 1.21 1.17
Book value 19.38 18.83 18.52 17.89 17.49
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Percentage of net income to:
Average shareholders' equity (ROE) 10.46% 10.39% 10.04% 11.93% 11.61%
Average total assets (ROA) .99 1.04 1.04 1.28 1.40
Percentage of dividends declared to
net income 66.43 66.91 68.38 57.70 59.33
Percentage of average shareholders'
equity to average total assets 9.50 9.98 10.37 10.75 12.06
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 131,450 $ 126,471 $ 125,773 $ 123,560 $ 125,461
Total assets 1,397,144 1,318,565 1,275,602 1,183,530 1,204,752
Long-term debt 53,158 56,413 57,152 10,913 10,501
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 6,737 6,727 6,870 6,982 7,304
Diluted 6,780 6,770 6,910 7,025 7,307
- ----------------------------------------------------------------------------------------------------------------------------
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
-------------
The discussion on pages 22 through 37 of the 2004 Annual Report to Shareholders
is hereby incorporated by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information set forth under the item "Market Risk Management" on pages 34
through 35 of the 2004 Annual Report to Shareholders is hereby incorporated by
reference.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Farmers Capital Bank Corporation:
We have audited the accompanying consolidated statements of income,
comprehensive income, changes in shareholders' equity, and cash flows for the
year ended December 31, 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
the internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Farmers Capital Bank Corporation and Subsidiaries for the year ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
Louisville, Kentucky
January 17, 2003
The information set forth below on pages 39 through 64 of the 2004 Annual Report
to Shareholders is hereby incorporated by reference:
Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
--------------------
None.
Item 9A. Controls and Procedures
- ---------------------------------
As of the end of the period covered by this report, an evaluation was carried
out under the supervision and with the participation of the Registrant's
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934). Based on their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures and internal control over financial reporting are, to the best of
their knowledge, effective to ensure that information required to be disclosed
by the Registrant in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms.
Our Chief Executive Officer and Chief Financial Officer have also concluded that
there were no changes in the Registrant's internal control over financial
reporting or in other factors that occurred during the Registrant's most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Registrant's internal control over financial reporting or
any corrective actions with regard to significant deficiencies and material
weaknesses in internal control over financial reporting.
Management's Report on Internal Control Over Financial Reporting and the related
report of Crowe Chizek and Company LLC, is hereby incorporated by reference to
the Registrant's 2004 audited consolidated financial statements on pages 38 and
39 of its 2004 Annual Report to shareholders.
Item 9B. Other Information
- ---------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
Positions and Years of Service
Offices With With the
Executive Officer1 Age the Registrant Registrant
- ------------------------------------------------------------------------------
G. Anthony Busseni 56 President and CEO, 20*
Director2
Allison B. Gordon 41 Senior Vice President3 18*
The Registrant has adopted a Code of Ethics that applies to the Registrant's
directors, officers and employees, including the Registrant's chief executive
officer and chief financial officer. The Registrant makes available its Code of
Ethics on its Internet website at www.farmerscapital.com.
Additional information required by Item 10 is hereby incorporated by reference
from the Registrant's definitive proxy statement in connection with its annual
meeting of shareholders scheduled for May 10, 2005 which will be filed with the
Commission on or about April 1, 2005, pursuant to Regulation 14A.
* Includes years of service with the Registrant and its subsidiaries.
1 For Regulation O purposes, Frank W. Sower, Jr., Chairman of the
Registrant's board of directors, is considered an executive officer in name
only.
2 Also a director of Farmers Bank, Ky. Banking Centers, Farmers Georgetown,
United Bank, Lawrenceburg Bank, First Citizens Bank, FCB Services, Farmers
Insurance (Chairman), Leasing One (Chairman), and Kentucky General
(Chairman).
3 Also a director of Farmers Bank, Farmers Georgetown, and FCB Services.
Item 11. Executive Compensation
- -------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management and
- -------------------------------------------------------------------------------
Related Stockholder Matters
---------------------------
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Item 14. Principal Accountant Fees and Services
- ------------------------------------------------
The information required by Items 11 through 14 is hereby incorporated by
reference from the Registrant's definitive proxy statement in connection with
its annual meeting of shareholders scheduled for May 10, 2005 which will be
filed with the Commission on or about April 1, 2005, pursuant to Regulation 14A.
PART IV
Item 15. Exhibits, Financial Statement Schedules
- ------------------------------------------------
(a)1. Financial Statements
- -----------------------------
Reference is made to Part II, Item 8, of this Annual Report on Form
10-K
(a)2. Financial Statement Schedules
- --------------------------------------
All schedules are omitted for the reason they are not required, or are
not applicable, or the required information is disclosed elsewhere in
the financial statements and related notes thereto.
(a)3. Exhibits:
- ---------------
3.1 Amended and Restated Articles of Incorporation of the Registrant
(incorporated by reference to Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998).
3.2 Amended and Restated Bylaws of the Registrant (incorporated by
reference to Annual Report of Form 10-K for the fiscal year ended
December 31, 1997).
3.3 Amendments to Bylaws of the Registrant (incorporated by reference
to Quarterly Report of Form 10-Q for the quarterly period ended
March 31, 2003).
4 Articles of Incorporation and Bylaws of the Registrant
(incorporated by reference to Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998, the Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and the
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2003).
13 2004 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23.1 Consent of Independent Registered Public Accounting Firm (Crowe
Chizek)
23.2 Consent of Independent Registered Public Accounting Firm (KPMG)
31.1 CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32 CEO and CFO Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FARMERS CAPITAL BANK CORPORATION
By: /s/ G. Anthony Busseni
--------------------------------------
G. Anthony Busseni
President and Chief Executive Officer
Date: March 3, 2005
-------------------------------------
- -
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ G. Anthony Busseni President, Chief Executive Officer March 3, 2005
- ---------------------------and Director (principal executive ------------------
G. Anthony Busseni officer of the Registrant)
/s/ Frank W. Sower, Jr. Chairman 3-3-2005
- --------------------------- ------------------
Frank W. Sower, Jr.
/s/ Gerald R. Hignite Director March 4, 2005
- --------------------------- ------------------
Gerald R. Hignite
/s/ Lloyd C Hillard, Jr. Director March 3, 2005
- --------------------------- ------------------
Lloyd C. Hillard, Jr.
/c/ Cecil D. Bell, Jr. Director 3-5-05
- --------------------------- ------------------
Cecil D. Bell, Jr.
/s/ Shelley S. Sweeney Director 3/6/05
- --------------------------- ------------------
Shelley S. Sweeney
Director
- --------------------------- ------------------
Dr. Donald J. Mullineaux
/s/ Harold G. Mays Director 3/9/05
- --------------------------- ------------------
Harold G. Mays
/s/ John D. Sutterlin Director 3/7/05
- --------------------------- ------------------
Dr. John D. Sutterlin
/s/ Michael M Sullivan Director 3/4/05
- --------------------------- ------------------
Michael M. Sullivan
/s/ J. Barry Banker Director 3-8-05
- --------------------------- ------------------
J. Barry Banker
Director
- --------------------------- ------------------
Robert Roach, Jr.
/s/ C Douglas Carpenter Vice President, Secretary and 3-3-05
- ---------------------------CFO (principal financial and ------------------
C. Douglas Carpenter accounting officer)
INDEX OF EXHIBITS
Exhibit Page
13. 2004 Annual Report to Shareholders Enclosed
21. Subsidiaries of the Registrant 18
23.1 Consent of Independent Registered Public Accounting
Firm (Crowe Chizek) 20
23.2 Consent of Independent Registered Public Accounting
Firm (KPMG) 21
31.1 CEO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 22
31.2 CFO Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 23
32 CEO and CFO Certifications Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 24