|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the quarterly period ended March 31, 2008
|
|
|
Or
|
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from _____________ to
_____________
|
|
|
Kentucky
|
61-0979818
|
|
(State
or other jurisdiction of incorporation or organization)
|
IRS
Employer Identification No.
|
|
346
North Mayo Trail
Pikeville,
Kentucky
(address
of principal executive offices)
|
41501
(Zip
Code)
|
|
Yes ü
|
No
|
|
Large
accelerated filer
|
Accelerated
filer ü
|
Non-accelerated
filer
|
Smaller
reporting company
|
|
(Do
not check if a smaller reporting company)
|
|
Yes
|
No
ü
|
|
(dollars
in thousands)
|
(unaudited)
March
31
2008
|
December
31
2007
|
||||||
|
Assets:
|
||||||||
|
Cash
and due from banks
|
$ | 89,612 | $ | 105,209 | ||||
|
Federal
funds sold
|
56,000 | 32,041 | ||||||
|
Cash
and cash equivalents
|
145,612 | 137,250 | ||||||
|
Securities
available-for-sale at fair value
|
||||||||
|
(amortized
cost of $296,894 and $325,879, respectively)
|
299,831 | 324,153 | ||||||
|
Securities
held-to-maturity at amortized cost
|
||||||||
|
(fair
value of $31,384 and $32,350, respectively)
|
31,137 | 32,959 | ||||||
|
Loans
held for sale
|
1,310 | 2,334 | ||||||
|
Loans
|
2,251,846 | 2,227,897 | ||||||
|
Allowance
for loan losses
|
(28,599 | ) | (28,054 | ) | ||||
|
Net
loans
|
2,223,247 | 2,199,843 | ||||||
|
Premises
and equipment, net
|
52,823 | 53,391 | ||||||
|
Federal
Reserve Bank and Federal Home Loan Bank stock
|
28,064 | 28,060 | ||||||
|
Goodwill
|
65,059 | 65,059 | ||||||
|
Core
deposit intangible (net of accumulated amortization of $5,746
and
|
||||||||
|
$5,588,
respectively)
|
1,758 | 1,917 | ||||||
|
Bank
owned life insurance
|
23,508 | 23,285 | ||||||
|
Mortgage
servicing rights
|
2,837 | 3,258 | ||||||
|
Other
assets
|
29,298 | 31,175 | ||||||
|
Total
assets
|
$ | 2,904,484 | $ | 2,902,684 | ||||
|
Liabilities
and shareholders’ equity:
|
||||||||
|
Deposits
|
||||||||
|
Noninterest
bearing
|
$ | 434,033 | $ | 449,861 | ||||
|
Interest
bearing
|
1,871,534 | 1,843,303 | ||||||
|
Total
deposits
|
2,305,567 | 2,293,164 | ||||||
|
Repurchase
agreements
|
148,739 | 158,980 | ||||||
|
Federal
funds purchased and other short-term borrowings
|
8,511 | 18,364 | ||||||
|
Advances
from Federal Home Loan Bank
|
40,858 | 40,906 | ||||||
|
Long-term
debt
|
61,341 | 61,341 | ||||||
|
Other
liabilities
|
32,619 | 28,574 | ||||||
|
Total
liabilities
|
2,597,635 | 2,601,329 | ||||||
|
Shareholders’
equity:
|
||||||||
|
Preferred
stock, 300,000 shares authorized and unissued
|
- | - | ||||||
|
Common
stock, $5 par value, shares authorized 25,000,000;
|
||||||||
|
shares outstanding 2008 – 14,979,336; 2007 – 15,044,124
|
74,897 | 75,221 | ||||||
|
Capital
surplus
|
147,586 | 149,005 | ||||||
|
Retained
earnings
|
82,457 | 78,251 | ||||||
|
Accumulated
other comprehensive income (loss), net of tax
|
1,909 | (1,122 | ) | |||||
|
Total
shareholders’ equity
|
306,849 | 301,355 | ||||||
|
Total
liabilities and shareholders’ equity
|
$ | 2,904,484 | $ | 2,902,684 | ||||
|
Three
Months Ended
|
|||||||
|
March
31
|
|||||||
|
(in
thousands except per share data)
|
2008
|
2007
|
||||
|
Interest
income:
|
||||||
|
Interest
and fees on loans, including loans held for sale
|
$ | 39,755 | $ | 42,187 | ||
|
Interest
and dividends on securities
|
||||||
|
Taxable
|
3,412 | 4,645 | ||||
|
Tax
exempt
|
474 | 501 | ||||
|
Interest
and dividends on Federal Reserve and Federal Home Loan Bank
stock
|
509 | 438 | ||||
|
Other,
including interest on federal funds sold
|
530 | 1,407 | ||||
|
Total
interest income
|
44,680 | 49,178 | ||||
|
Interest
expense:
|
||||||
|
Interest
on deposits
|
15,527 | 19,050 | ||||
|
Interest
on repurchase agreements and other short-term borrowings
|
1,468 | 2,158 | ||||
|
Interest
on advances from Federal Home Loan Bank
|
377 | 704 | ||||
|
Interest
on long-term debt
|
1,000 | 1,376 | ||||
|
Total
interest expense
|
18,372 | 23,288 | ||||
|
Net
interest income
|
26,308 | 25,890 | ||||
|
Provision
for loan losses
|
2,369 | 470 | ||||
|
Net
interest income after provision for loan losses
|
23,939 | 25,420 | ||||
|
Noninterest
income:
|
||||||
|
Service
charges on deposit accounts
|
5,099 | 4,804 | ||||
|
Gains
on sales of loans, net
|
546 | 296 | ||||
|
Trust
income
|
1,191 | 1,199 | ||||
|
Loan
related fees
|
299 | 1,021 | ||||
|
Bank
owned life insurance
|
263 | 232 | ||||
|
Securities
losses
|
(50 |
)
|
0 | |||
|
Other
|
1,395 | 946 | ||||
|
Total
noninterest income
|
8,743 | 8,498 | ||||
|
Noninterest
expense:
|
||||||
|
Salaries
and employee benefits
|
10,711 | 11,114 | ||||
|
Occupancy,
net
|
1,626 | 1,760 | ||||
|
Equipment
|
1,053 | 1,229 | ||||
|
Data
processing
|
1,381 | 1,150 | ||||
|
Bank
franchise tax
|
890 | 866 | ||||
|
Legal
and professional fees
|
713 | 753 | ||||
|
Other
|
3,627 | 5,624 | ||||
|
Total
noninterest expense
|
20,001 | 22,496 | ||||
|
Income
before income taxes
|
12,681 | 11,422 | ||||
|
Income
taxes
|
4,136 | 3,400 | ||||
|
Net
income
|
8,545 | 8,022 | ||||
|
Other
comprehensive income, net of tax:
|
||||||
|
Unrealized
holding gains on securities available-for-sale
|
3,031 | 608 | ||||
|
Comprehensive
income
|
$ | 11,576 | $ | 8,630 | ||
|
Basic
earnings per share
|
$ | 0.57 | $ | 0.53 | ||
|
Diluted
earnings per share
|
$
|
0.57 | $ | 0.52 | ||
|
Weighted
average shares outstanding-basic
|
15,000 | 15,191 | ||||
|
Weighted
average shares outstanding-diluted
|
15,116 | 15,437 | ||||
|
Dividends
per share
|
$ | 0.29 | $ | 0.27 | ||
|
Three
months ended
|
||||||||
|
March
31
|
||||||||
|
(in
thousands)
|
2008
|
2007
|
||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$ | 8,545 | $ | 8,022 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
1,292 | 1,475 | ||||||
|
Change
in net deferred tax liability
|
1,492 | (327 | ) | |||||
|
Stock
based compensation
|
186 | 230 | ||||||
|
Excess
tax benefits of stock-based compensation
|
241 | 197 | ||||||
|
Provision
for loan and other real estate losses
|
2,401 | 519 | ||||||
|
Securities
losses
|
50 | 0 | ||||||
|
Gains
on sale of mortgage loans held for sale
|
(547 | ) | (296 | ) | ||||
|
(Gains)
losses on sale of assets, net
|
(37 | ) | 79 | |||||
|
Proceeds
from sale of mortgage loans held for sale
|
26,056 | 15,425 | ||||||
|
Funding
of mortgage loans held for sale
|
(24,485 | ) | (14,591 | ) | ||||
|
Amortization
of securities premiums, net
|
(7 | ) | 166 | |||||
|
Change
in cash surrender value of bank owned life insurance
|
(223 | ) | (199 | ) | ||||
|
Fair
value adjustments of mortgage servicing rights
|
421 | (59 | ) | |||||
|
Amortization/write-off
of debt issuance costs
|
0 | 1,950 | ||||||
|
Changes
in:
|
||||||||
|
Other
liabilities
|
706 | 3,385 | ||||||
|
Other assets
|
1,422 | (688 | ) | |||||
|
Net
cash provided by operating activities
|
17,804 | 15,288 | ||||||
|
Cash
flows from investing activities:
|
||||||||
|
Securities
available-for-sale:
|
||||||||
|
Proceeds
from sales
|
29,950 | 40,000 | ||||||
|
Proceeds
from prepayments and maturities
|
10,425 | 10,857 | ||||||
|
Purchase
of securities
|
(11,443 | ) | (64,800 | ) | ||||
|
Securities
held-to-maturity:
|
||||||||
|
Proceeds
from prepayments and maturities
|
1,832 | 1,829 | ||||||
|
Change
in loans, net
|
(27,383 | ) | (5,237 | ) | ||||
|
Purchase
of premises, equipment, and other real estate
|
(574 | ) | (800 | ) | ||||
|
Additional
investment in equity securities
|
(4 | ) | (5 | ) | ||||
|
Investment
in unconsolidated subsidiaries
|
0 | (1,841 | ) | |||||
|
Proceeds
from sale of other real estate and other repossessed
assets
|
2,155 | 1,174 | ||||||
|
Additional
investment in other real estate owned
|
(76 | ) | 0 | |||||
|
Net
cash provided by (used in) investing activities
|
4,882 | (18,823 | ) | |||||
|
Cash
flows from financing activities:
|
||||||||
|
Change
in deposits, net
|
12,403 | 51,865 | ||||||
|
Change
in repurchase agreements and other short-term borrowings,
net
|
(20,094 | ) | 8,511 | |||||
|
Payments
on advances from Federal Home Loan Bank
|
(48 | ) | (112 | ) | ||||
|
Additional
borrowings
|
0 | 61,341 | ||||||
|
Issuance
of common stock
|
647 | 1,092 | ||||||
|
Purchase
of common stock
|
(2,631 | ) | 0 | |||||
|
Excess
tax benefits of stock-based compensation
|
(241 | ) | (197 | ) | ||||
|
Dividends
paid
|
(4,360 | ) | (4,093 | ) | ||||
|
Net
cash provided by (used in) financing activities
|
(14,324 | ) | 118,604 | |||||
|
Net
increase in cash and cash equivalents
|
8,362 | 114,872 | ||||||
|
Cash
and cash equivalents at beginning of period
|
137,250 | 157,538 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 145,612 | $ | 272,410 | ||||
|
Supplemental
disclosures:
|
||||||||
|
Income
taxes paid
|
$ | 1,254 | $ | 2,500 | ||||
|
Interest
paid
|
16,940 | 19,108 | ||||||
|
Non-cash
activities
|
||||||||
|
Loans
to facilitate the sale of other real estate owned
|
281 | 92 | ||||||
|
Common
stock dividends accrued, paid in subsequent quarter
|
4,339 | 4,105 | ||||||
|
Three
Months Ended
|
||||||||
|
March
31
|
||||||||
|
2008
|
2007
|
|||||||
|
Expected
dividend yield
|
4.10 |
%
|
2.77 |
%
|
||||
|
Risk-free
interest rate
|
3.23 |
%
|
4.81 |
%
|
||||
|
Expected
volatility
|
31.01 |
%
|
33.50 |
%
|
||||
|
Expected
term (in years)
|
7.5 | 7.5 | ||||||
|
Weighted
average fair value of options
|
$
|
6.41 |
$
|
12.74 | ||||
|
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
|
U.S.
Treasury and government agencies
|
$ | 20,311 | $ | 21,050 | ||||
|
State
and political subdivisions
|
42,841 | 43,772 | ||||||
|
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
198,691 | 200,510 | ||||||
|
Collateralized
mortgage obligations
|
1 | 1 | ||||||
| Other debt securities | 20,000 | 19,911 | ||||||
|
Total
debt securities
|
281,844 | 285,244 | ||||||
|
Marketable
equity securities
|
15,050 | 14,587 | ||||||
|
Total
available-for-sale securities
|
$ | 296,894 | $ | 299,831 | ||||
|
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
|
State
and political subdivisions
|
$ | 1,900 | $ | 1,943 | ||||
|
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
29,237 | 29,441 | ||||||
|
Total
held-to-maturity securities
|
$ | 31,137 | $ | 31,384 | ||||
|
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
|
U.S.
Treasury and government agencies
|
$ | 20,307 | $ | 20,736 | ||||
|
State
and political subdivisions
|
40,472 | 41,137 | ||||||
|
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
205,049 | 202,542 | ||||||
|
Collateralized
mortgage obligations
|
1 | 1 | ||||||
|
Other
debt securities
|
20,000 | 19,687 | ||||||
|
Total
debt securities
|
285,829 | 284,103 | ||||||
|
Marketable
equity securities
|
40,050 | 40,050 | ||||||
|
Total
available-for-sale securities
|
$ | 325,879 | $ | 324,153 | ||||
|
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
|
State
and political subdivisions
|
$ | 1,901 | $ | 1,914 | ||||
|
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
31,058 | 30,436 | ||||||
|
Total
held-to-maturity securities
|
$ | 32,959 | $ | 32,350 | ||||
|
(in
thousands)
|
March
31
2008
|
December
31
2007
|
||||||
|
Commercial
construction
|
$ | 148,231 | $ | 143,773 | ||||
|
Commercial
secured by real estate
|
644,787 | 640,574 | ||||||
|
Commercial
other
|
357,425 | 333,774 | ||||||
|
Real
estate construction
|
64,280 | 69,021 | ||||||
|
Real
estate mortgage
|
597,375 | 599,665 | ||||||
|
Consumer
|
433,203 | 435,273 | ||||||
|
Equipment
lease financing
|
6,545 | 5,817 | ||||||
|
Total
loans
|
$ | 2,251,846 | $ | 2,227,897 | ||||
|
Three
Months Ended
|
||||||||
|
March
31
|
||||||||
|
(in
thousands)
|
2008
|
2007
|
||||||
|
Allowance
balance at January 1
|
$ | 28,054 | $ | 27,526 | ||||
|
Additions
to allowance charged against operations
|
2,369 | 470 | ||||||
|
Recoveries
credited to allowance
|
586 | 731 | ||||||
|
Losses
charged against allowance
|
(2,410 | ) | (1,650 | ) | ||||
|
Allowance
balance at March 31, 2008
|
$ | 28,599 | $ | 27,077 | ||||
|
Three
Months Ended
|
||||||||
|
March
31
|
||||||||
|
(in
thousands)
|
2008
|
2007
|
||||||
|
Net
gain on sale of loans held for sale
|
$ | 546 | $ | 296 | ||||
|
Net
loan servicing income (expense)
|
||||||||
|
Servicing
fees
|
213 | 219 | ||||||
|
Late
fees
|
17 | 16 | ||||||
|
Ancillary
fees
|
71 | 50 | ||||||
|
Fair
value adjustments
|
(535 | ) | (18 | ) | ||||
|
Net
loan servicing income (expense)
|
(234 | ) | 267 | |||||
|
Mortgage
banking income
|
$ | 312 | $ | 563 | ||||
|
(in
thousands)
|
Three
Months Ended
March
31
2008
|
|||
|
Fair
value, beginning of period
|
$
|
3,258 | ||
|
New
servicing assets created
|
113 | |||
|
Change
in fair value during the period due to:
|
||||
|
Time
decay (1)
|
(42 | ) | ||
|
Payoffs
(2)
|
(72 | ) | ||
|
Changes
in valuation inputs or assumptions (3)
|
(420 | ) | ||
|
Fair
value, end of period
|
$
|
2,837 | ||
|
(1)
|
Represents
decrease in value due to regularly scheduled loan principal payments and
partial loan paydowns.
|
|
(2)
|
Represents
decrease in value due to loans that paid off during the
period.
|
|
(3)
|
Represents
change in value resulting from market-driven changes in interest rates and
prepayment speeds.
|
|
(in
thousands)
|
March
31
2008
|
December
31
2007
|
||||||
|
Subsidiaries:
|
||||||||
|
Repurchase
agreements
|
$ | 148,739 | $ | 158,980 | ||||
|
Federal
funds purchased
|
8,511 | 18,364 | ||||||
|
Total
short-term debt
|
$ | 157,250 | $ | 177,344 | ||||
|
(in
thousands)
|
March
31
2008
|
December
31
2007
|
||||||
|
Monthly
amortizing
|
$ | 858 | $ | 906 | ||||
|
Term
|
40,000 | 40,000 | ||||||
| $ | 40,858 | $ | 40,906 | |||||
|
Principal
Payments Due by Period at March 31, 2008
|
||||||||||||||||||||||||||||
|
(in
thousands)
|
Total
|
Within
1 Year
|
2
Years
|
3
Years
|
4
Years
|
5
Years
|
After
5 Years
|
|||||||||||||||||||||
|
Outstanding
advances, weighted average interest rate – 3.99%
|
$ | 858 | $ | 154 | $ | 644 | $ | 8 | $ | 8 | $ | 8 | $ | 36 | ||||||||||||||
|
(in
thousands)
|
March
31
2008
|
December
31
2007
|
||||||
|
Advance
#146, 3.70%, due 8/30/08
|
$ | 40,000 | $ | 40,000 | ||||
|
(in
thousands)
|
March
31
2008
|
December
31
2007
|
||||||
|
Junior
subordinated debentures, 6.52%, due 6/1/37
|
$ | 61,341 | $ | 61,341 | ||||
|
Three
Months Ended
|
||||||||
|
March
31
|
||||||||
|
(in
thousands)
|
2008
|
2007
|
||||||
|
Numerator:
|
||||||||
|
Net
income
|
$ | 8,545 | $ | 8,022 | ||||
|
Denominator:
|
||||||||
|
Basic
earnings per share:
|
||||||||
|
Weighted
average shares
|
15,000 | 15,191 | ||||||
|
Diluted
earnings per share:
|
||||||||
|
Effect
of dilutive stock options
|
116 | 246 | ||||||
|
Adjusted
weighted average shares
|
15,116 | 15,437 | ||||||
|
Earnings
per share:
|
||||||||
|
Basic
earnings per share
|
$ | 0.57 | $ | 0.53 | ||||
|
Diluted
earnings per share
|
$ | 0.57 | $ | 0.52 | ||||
|
(in
thousands)
|
Fair
Value Measurements at March 31, 2008 Using
|
|||||||||||||||
|
Fair
Value
March
31
2008
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
|
Available-for-sale
securities
|
$ | 299,831 | $ | 0 | $ | 285,244 | $ | 14,587 | ||||||||
|
Mortgage
servicing rights
|
2,837 | 0 | 0 | 2,837 | ||||||||||||
|
Total
recurring assets measured at fair value
|
$ | 302,668 | $ | 0 | $ | 285,244 | $ | 17,424 | ||||||||
|
(in
thousands)
|
Available-for-Sale
Securities
|
Mortgage
Servicing Rights
|
||||||