þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Kentucky
|
61-1206757
|
|
(State
or other jurisdiction of incorporation organization)
|
(I.R.S.
Employer Identification No.)
|
|
2883
Fifth Avenue
Huntington,
West Virginia
|
25702
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant’s
telephone number (304)
525-1600
|
Large
accelerated filer o.
|
Accelerated
filer o.
|
Non-accelerated
filer þ
|
Part
I - Financial Information
|
|
Part
II - Other Information
|
29
|
(UNAUDITED)
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
17,135
|
$
|
16,080
|
|||
Federal
funds sold
|
19,776
|
18,812
|
|||||
Securities
available for sale
|
131,070
|
137,419
|
|||||
Loans
|
342,133
|
328,717
|
|||||
Allowance
for loan losses
|
(7,198
|
)
|
(7,892
|
)
|
|||
Net
loans
|
334,935
|
320,825
|
|||||
Federal
Home Loan Bank and Federal Reserve Bank stock
|
3,181
|
3,060
|
|||||
Premises
and equipment, net
|
7,008
|
7,126
|
|||||
Real
estate and other property acquired through foreclosure
|
537
|
2,049
|
|||||
Interest
receivable
|
2,596
|
2,661
|
|||||
Goodwill
|
15,816
|
15,816
|
|||||
Other
assets
|
4,314
|
4,476
|
|||||
Total
assets
|
$
|
536,368
|
$
|
528,324
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Deposits
|
|||||||
Non-interest
bearing
|
$
|
76,087
|
$
|
69,856
|
|||
Time
deposits, $100,000 and over
|
47,754
|
42,169
|
|||||
Other
interest bearing
|
321,183
|
323,818
|
|||||
Total
deposits
|
445,024
|
435,843
|
|||||
Securities
sold under agreements to repurchase
|
9,476
|
9,317
|
|||||
Federal
Home Loan Bank advances
|
7,924
|
8,334
|
|||||
Other
borrowed funds
|
6,745
|
-
|
|||||
Notes
payable
|
-
|
1,402
|
|||||
Guaranteed
junior subordinated interest debentures
|
8,505
|
15,722
|
|||||
Interest
payable
|
848
|
724
|
|||||
Other
liabilities
|
1,113
|
2,695
|
|||||
Total
liabilities
|
479,635
|
474,037
|
|||||
Stockholders'
equity
|
|||||||
Preferred
stock, no par value; 1,000,000 shares authorized;
|
|||||||
none
issued or outstanding
|
-
|
-
|
|||||
Common
stock, no par value; 10,000,000 shares authorized;
|
|||||||
5,233,730
shares issued and outstanding
|
1,108
|
1,105
|
|||||
Additional
paid-in capital
|
43,549
|
43,458
|
|||||
Retained
earnings
|
14,810
|
11,442
|
|||||
Accumulated
other comprehensive income (loss)
|
(2,734
|
)
|
(1,718
|
)
|
|||
Total
stockholders' equity
|
56,733
|
54,287
|
|||||
Total
liabilities and stockholders' equity
|
$
|
536,368
|
$
|
528,324
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Interest
income
|
|||||||||||||
Loans,
including fees
|
$
|
6,404
|
$
|
5,706
|
$
|
12,493
|
$
|
11,342
|
|||||
Securities
available for sale
|
|||||||||||||
Taxable
|
1,288
|
1,269
|
2,555
|
2,512
|
|||||||||
Tax-exempt
|
22
|
24
|
45
|
49
|
|||||||||
Federal
funds sold and other
|
300
|
173
|
597
|
314
|
|||||||||
Total
interest income
|
8,014
|
7,172
|
15,690
|
14,217
|
|||||||||
Interest
expense
|
|||||||||||||
Deposits
|
2,140
|
1,609
|
4,089
|
3,126
|
|||||||||
Repurchase
agreements and other
|
58
|
42
|
115
|
78
|
|||||||||
FHLB
advances and other borrowings
|
251
|
126
|
455
|
269
|
|||||||||
Debentures
|
205
|
502
|
467
|
1,124
|
|||||||||
Total
interest expense
|
2,654
|
2,279
|
5,126
|
4,597
|
|||||||||
Net
interest income
|
5,360
|
4,893
|
10,564
|
9,620
|
|||||||||
Provision
for loan losses
|
(819
|
)
|
191
|
(1,013
|
)
|
434
|
|||||||
Net
interest income after provision for loan losses
|
6,179
|
4,702
|
11,577
|
9,186
|
|||||||||
Non-interest
income
|
|||||||||||||
Service
charges on deposit accounts
|
713
|
715
|
1,313
|
1,296
|
|||||||||
Electronic
banking income
|
126
|
99
|
237
|
185
|
|||||||||
Secondary
market mortgage income
|
38
|
65
|
89
|
91
|
|||||||||
Other
|
129
|
112
|
265
|
325
|
|||||||||
1,006
|
991
|
1,904
|
1,897
|
||||||||||
Non-interest
expenses
|
|||||||||||||
Salaries
and employee benefits
|
2,270
|
2,372
|
4,532
|
4,699
|
|||||||||
Occupancy
and equipment expenses
|
491
|
564
|
974
|
1,165
|
|||||||||
Outside
data processing
|
517
|
340
|
987
|
574
|
|||||||||
Professional
fees
|
121
|
245
|
255
|
379
|
|||||||||
Taxes,
other than payroll, property and income
|
145
|
124
|
282
|
206
|
|||||||||
Write-downs,
expenses, sales of other
real estate owned, net
|
3
|
48
|
(22
|
)
|
60
|
||||||||
Supplies
|
90
|
109
|
175
|
192
|
|||||||||
Other
expenses
|
530
|
849
|
1,230
|
1,609
|
|||||||||
4,167
|
4,651
|
8,413
|
8,884
|
||||||||||
Income
before income taxes
|
3,018
|
1,042
|
5,068
|
2,199
|
|||||||||
Provision
for income taxes
|
1,018
|
315
|
1,701
|
669
|
|||||||||
Net
income
|
$
|
2,000
|
$
|
727
|
$
|
3,367
|
$
|
1,530
|
|||||
Weighted
average shares outstanding:
|
|||||||||||||
Basic
|
5,237
|
5,232
|
5,236
|
5,232
|
|||||||||
Diluted
|
5,264
|
5,242
|
5,268
|
5,243
|
|||||||||
Net
income per share:
|
|||||||||||||
Basic
|
$
|
0.38
|
$
|
0.14
|
$
|
0.64
|
$
|
0.29
|
|||||
Diluted
|
0.38
|
0.14
|
0.64
|
0.29
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
income
|
$
|
2,000
|
$
|
727
|
$
|
3,367
|
$
|
1,530
|
|||||
Other
comprehensive income (loss):
|
|||||||||||||
Unrealized
gains and (losses) arising during the period
|
(897
|
)
|
1,453
|
(1,539
|
)
|
(395
|
)
|
||||||
Reclassification
of realized amount
|
-
|
-
|
-
|
-
|
|||||||||
Net
change in unrealized gain (loss) on securities
|
(897
|
)
|
1,453
|
(1,539
|
)
|
(395
|
)
|
||||||
Less
tax impact
|
(305
|
)
|
494
|
(523
|
)
|
(134
|
)
|
||||||
Other
comprehensive income (loss):
|
(592
|
)
|
959
|
(1,016
|
)
|
(261
|
)
|
||||||
Comprehensive
income (loss)
|
$
|
1,408
|
$
|
1,686
|
$
|
2,351
|
$
|
1,269
|
|||||
2006
|
2005
|
||||||
Cash
flows from operating activities
|
|||||||
Net
income
|
$
|
3,367
|
$
|
1,530
|
|||
Adjustments
to reconcile net income to net cash from operating
activities
|
|||||||
Depreciation
and impairment of real estate
|
408
|
541
|
|||||
Provision
for loan losses
|
(1,013
|
)
|
434
|
||||
Amortization,
net
|
33
|
151
|
|||||
FHLB
stock dividends
|
(68
|
)
|
(52
|
)
|
|||
Investment
securities losses (gains), net
|
-
|
-
|
|||||
OREO
writedowns (gains on sales), net
|
(15
|
)
|
14
|
||||
Stock
compensation expense
|
68
|
- | |||||
Changes
in :
|
|||||||
Interest
receivable
|
65
|
201
|
|||||
Other
assets
|
469
|
(152
|
)
|
||||
Interest
payable
|
124
|
(4,789
|
)
|
||||
Other
liabilities
|
(1,582
|
)
|
(170
|
)
|
|||
Net
cash from operating activities
|
1,856
|
(2,292
|
)
|
||||
Cash
flows from investing activities
|
|||||||
Purchases
of securities available for sale
|
(11,012
|
)
|
(12,542
|
)
|
|||
Proceeds
from maturities and calls of securities available for sale
|
15,788
|
14,688
|
|||||
Purchase
of FHLB stock, net of redemptions
|
(53
|
)
|
(265
|
)
|
|||
Net
change in federal funds sold
|
(964
|
)
|
(502
|
)
|
|||
Net
change in loans
|
(13,451
|
)
|
(3,149
|
)
|
|||
Purchases
of premises and equipment, net
|
(290
|
)
|
(512
|
)
|
|||
Proceeds
from sale of other real estate acquired through
foreclosure
|
1,881
|
948
|
|||||
Net
cash from investing activities
|
(8,101
|
)
|
(1,334
|
)
|
|||
Cash
flows from continuing financing activities
|
|||||||
Net
change in deposits
|
9,181
|
6,170
|
|||||
Repayment
of Federal Home Loan Bank advances
|
(410
|
)
|
(430
|
)
|
|||
Repayment
of other borrowed funds
|
(255
|
)
|
(800
|
)
|
|||
Proceeds
from other borrowings
|
7,000
|
-
|
|||||
Early
redemption of Trust Preferred Securities
|
(7,000
|
)
|
-
|
||||
Repayment
of subordinated notes
|
(1,402
|
)
|
-
|
||||
Proceeds
from stock option exercises
|
27
|
-
|
|||||
Net
change in federal funds purchased
|
-
|
(1,544
|
)
|
||||
Net
change in agreements to repurchase securities
|
159
|
148
|
|||||
Net
cash from financing activities
|
7,300
|
3,544
|
|||||
Net
change in cash and cash equivalents
|
1,055
|
(82
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
16,080
|
14,474
|
|||||
Cash
and cash equivalents at end of period
|
$
|
17,135
|
$
|
14,392
|
2006
|
2005
|
||||||
Supplemental
disclosures of cash flow information:
|
|||||||
Cash
paid during period for interest
|
$
|
5,002
|
$
|
9,386
|
|||
Loans
transferred to real estate acquired through foreclosure
|
354
|
1,060
|
|||||
June
30, 2006
|
||||||
Year
|
Total
|
Net
Income
|
||||
Subsidiary
|
Location
|
Acquired
|
Assets
|
Qtr
|
YTD
|
|
Citizens
Deposit Bank & Trust
|
Vanceburg,
Kentucky
|
1991
|
$119,688
|
$536
|
$1,137
|
|
Farmers
Deposit Bank
|
Eminence,
Kentucky
|
1996
|
81,819
|
511
|
847
|
|
Ohio
River Bank
|
Ironton,
Ohio
|
1998
|
80,764
|
223
|
454
|
|
First
Central Bank, Inc.
|
Philippi,
West Virginia
|
1998
|
100,562
|
541
|
913
|
|
Boone
County Bank, Inc.
|
Madison,
West Virginia
|
1998
|
152,965
|
569
|
995
|
|
Mt.
Vernon Financial Holdings, Inc.
|
Huntington,
West Virginia
|
1999
|
1,637
|
(12)
|
(15)
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||
Available
for sale
|
|||||||||||||
U.
S. Treasury securities
|
$
|
6,442
|
$
|
-
|
$
|
(153
|
)
|
$
|
6,289
|
||||
U.
S. agency securities
|
92,107
|
-
|
(2,326
|
)
|
89,781
|
||||||||
Obligations
of states and political
subdivisions
|
2,123
|
15
|
(16
|
)
|
2,122
|
||||||||
Mortgage-backed
securities
|
34,516
|
-
|
(1,663
|
)
|
32,853
|
||||||||
Corporate
securities
|
25
|
-
|
-
|
25
|
|||||||||
Total
available for sale
|
$
|
135,213
|
$
|
15
|
$
|
(4,158
|
)
|
$
|
131,070
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||
Available
for sale
|
|||||||||||||
U.
S. Treasury securities
|
$
|
3,952
|
$
|
3
|
$
|
(14
|
)
|
$
|
3,941
|
||||
U.
S. agency securities
|
97,209
|
-
|
(1,909
|
)
|
95,300
|
||||||||
Obligations
of states and political
subdivisions
|
2,487
|
31
|
(4
|
)
|
2,514
|
||||||||
Mortgage-backed
securities
|
36,349
|
2
|
(712
|
)
|
35,639
|
||||||||
Corporate
securities
|
25
|
-
|
-
|
25
|
|||||||||
Total
available for sale
|
$
|
140,022
|
$
|
36
|
$
|
(2,639
|
)
|
$
|
137,419
|
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
U.S.
treasury securities
|
$
|
6,289
|
$
|
(153
|
)
|
$
|
-
|
$
|
-
|
$
|
6,289
|
$
|
(153
|
)
|
|||||
U.S.
agency securities
|
19,973
|
(456
|
)
|
69,808
|
(1,870
|
)
|
89,781
|
(2,326
|
)
|
||||||||||
Obligations
of states and
political
subdivisions
|
551
|
(13
|
)
|
233
|
(3
|
)
|
784
|
(16
|
)
|
||||||||||
Mortgage-backed
securities
|
18,170
|
(744
|
)
|
14,565
|
(919
|
)
|
32,735
|
(1,663
|
)
|
||||||||||
Total
temporarily impaired
|
$
|
44,983
|
$
|
(1,366
|
)
|
$
|
84,606
|
$
|
(2,792
|
)
|
$
|
129,589
|
$
|
(4,158
|
)
|
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
U.S.
treasury securities
|
$
|
968
|
$
|
(14
|
)
|
$
|
-
|
$
|
-
|
$
|
968
|
$
|
(14
|
)
|
|||||
U.S.
agency securities
|
22,096
|
(332
|
)
|
73,204
|
(1,577
|
)
|
95,300
|
(1,909
|
)
|
||||||||||
Obligations
of states and
political
subdivisions
|
397
|
(4
|
)
|
-
|
-
|
397
|
(4
|
)
|
|||||||||||
Mortgage-backed
securities
|
22,328
|
(341
|
)
|
11,968
|
(371
|
)
|
34,296
|
(712
|
)
|
||||||||||
Total
temporarily impaired
|
$
|
45,789
|
$
|
(691
|
)
|
$
|
85,172
|
$
|
(1,948
|
)
|
$
|
130,961
|
$
|
(2,639
|
)
|
2006
|
2005
|
||||||
Commercial,
secured by real estate
|
$
|
102,295
|
$
|
85,989
|
|||
Commercial,
other
|
39,511
|
49,362
|
|||||
Real
estate construction
|
12,895
|
11,070
|
|||||
Residential
real estate
|
138,333
|
134,570
|
|||||
Agricultural
|
2,202
|
1,670
|
|||||
Consumer
and home equity
|
42,580
|
42,092
|
|||||
Other
|
4,317
|
3,964
|
|||||
$
|
342,133
|
$
|
328,717
|
2006
|
2005
|
||||||
Impaired
loans at period end with an allowance
|
$
|
8,520
|
$
|
7,926
|
|||
Impaired
loan at period end with no allowance
|
-
|
291
|
|||||
Amount
of allowance for loan losses allocated
|
1,679
|
1,921
|
2006
|
2005
|
||||||
Non-accrual
loans
|
$
|
5,314
|
$
|
3,751
|
|||
Accruing
loans which are contractually past due 90 days or more
|
1,445
|
853
|
|||||
Restructured
loans
|
1,501
|
1,540
|
|||||
Total
|
$
|
8,260
|
$
|
6,144
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Balance,
beginning of period
|
$
|
7,579
|
$
|
9,267
|
$
|
7,892
|
$
|
9,384
|
|||||
Gross
charge-offs
|
(334
|
)
|
(660
|
)
|
(761
|
)
|
(1,210
|
)
|
|||||
Recoveries
|
772
|
129
|
1,080
|
319
|
|||||||||
Provision
for loan losses
|
(819
|
)
|
191
|
(1,013
|
)
|
434
|
|||||||
Balance,
end of period
|
$
|
7,198
|
$
|
8,927
|
$
|
7,198
|
$
|
8,927
|
June
30,
2006
|
December
31,
2005
|
Regulatory
Minimum
Requirements
|
To
Be Considered
Well
Capitalized
|
|
Tier
I Capital (to Risk-Weighted Assets)
|
16.4%
|
17.8%
|
4.0%
|
6.0%
|
Total
Capital (to Risk-Weighted Assets)
|
17.7%
|
19.1%
|
8.0%
|
10.0%
|
Tier
I Capital (to Average Assets)
|
10.0%
|
10.6%
|
4.0%
|
5.0%
|
2006
|
2005
|
2004
|
||||||||
Risk-free
interest rate
|
4.62
|
%
|
3.70
|
%
|
3.15
|
%
|
||||
Expected
option life (yrs)
|
5.00
|
5.00
|
5.00
|
|||||||
Expected
stock price volatility
|
0.26
|
0.25
|
0.25
|
|||||||
Dividend
yield
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||
Weighted
average fair value of
options
granted during the year
|
$
|
5.21
|
$
|
3.48
|
$
|
2.64
|
Three
Months Ended
|
Six
Months Ended
|
||||||
June
30, 2005
|
June
30, 2005
|
||||||
Net
income, as reported
|
$
|
727
|
$
|
1,530
|
|||
Deduct:
Stock-based compensation expense determined under fair value based
method,
net of tax
|
(17
|
)
|
(32
|
)
|
|||
Pro
forma income
|
$
|
710
|
$
|
1,498
|
|||
Basic
earnings per share, as reported
|
$
|
0.14
|
$
|
0.29
|
|||
Pro
forma basic earnings per share
|
0.14
|
0.29
|
|||||
Diluted
earnings per share, as reported
|
$
|
0.14
|
$
|
0.29
|
|||
Pro
forma diluted earnings per share
|
0.14
|
0.29
|
-
- - - - - 2006 - - - - - -
|
-
- - - - - 2005 - - - - - -
|
||||||||||||
Weighted
Average
Exercise
|
Weighted
Average
Exercise
|
||||||||||||
Options
|
Price
|
Options
|
Price
|
||||||||||
Outstanding
at beginning of year
|
111,750
|
$
|
11.05
|
83,650
|
$
|
10.65
|
|||||||
Grants
|
35,250
|
16.00
|
35,000
|
11.62
|
|||||||||
Exercises
|
(3,002
|
)
|
9.02
|
-
|
-
|
||||||||
Forfeitures
|
(21,000
|
)
|
13.00
|
(2,400
|
)
|
8.63
|
|||||||
Outstanding
at June 30,
|
122,998
|
$
|
12.29
|
116,250
|
$
|
10.98
|
|||||||
-
- - - - - - - - - - Outstanding - - - - - - - - - - -
|
-
- - - Currently Exercisable - - - -
|
|||||||||||||||||||||
Range
of Exercise Prices
|
Number
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
Number
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
|||||||||||||||
$7.50
to $10.00
|
43,249
|
7.2
|
$
|
8.70
|
$
|
261
|
34,924
|
$
|
8.56
|
$
|
216
|
|||||||||||
$10.01
to $12.50
|
33,499
|
8.6
|
11.62
|
105
|
10,508
|
11.62
|
33
|
|||||||||||||||
$15.01
to $17.50
|
46,250
|
7.9
|
16.12
|
0
|
11,000
|
16.50
|
0
|
|||||||||||||||
Outstanding
at June 30, 2006
|
122,998
|
7.8
|
12.29
|
$
|
366
|
56,432
|
10.68
|
$
|
249
|
|||||||||||||
(In
Thousands)
|
|||||||
2006
|
2005
|
||||||
Non-accrual
loans
|
$
|
5,314
|
$
|
3,751
|
|||
Accruing
loans which are contractually
past
due 90 days or more
|
1,445
|
853
|
|||||
Restructured
|
1,501
|
1,540
|
|||||
Total
non-performing loans
|
8,260
|
6,144
|
|||||
Other
real estate acquired through
foreclosure
|
537
|
2,049
|
|||||
Total
non-performing assets
|
$
|
8,797
|
$
|
8,193
|
|||
Non-performing
loans as a percentage
of
total loans
|
2.41
|
%
|
1.87
|
%
|
|||
Non-performing
assets as a percentage
of
total assets
|
1.64
|
%
|
1.55
|
%
|
1.
|
Core
deposits consisting of both consumer and commercial deposits and
certificates of deposit of $100,000 or more. Management believes
that the
majority of its $100,000 or more certificates of deposit are no more
volatile than its other deposits. This is due to the nature of the
markets
in which the subsidiaries operate.
|
2.
|
Cash
flow generated by repayment of loans and
interest.
|
3.
|
Arrangements
with correspondent banks for purchase of unsecured federal
funds.
|
4.
|
The
sale of securities under repurchase agreements and borrowing from
the
Federal Home Loan Bank.
|
5.
|
Maintenance
of an adequate available-for-sale security portfolio. The Company
owns
$131.0 million of securities at market value as of June 30, 2006.
|
(a) |
Annual
meeting of the Shareholders was held June 21,
2006.
|
(b) |
All
director nominees were elected.
|
(c) |
Certain
matters voted upon at the meeting and the votes cast with respect
to such
matters are as follows:
|
Director
|
Votes
Received
|
Votes
Withheld
|
1. Toney
K. Adkins
|
4,751,864
|
63,225
|
2. Hosmer
A. Brown, III
|
4,770,755
|
44,334
|
3. Edsel
R. Burns
|
4,771,161
|
43,928
|
4. E.
V. Holder, Jr.
|
4,771,141
|
43,948
|
5. Keith
F. Molihan
|
4,770,765
|
44,324
|
6. Marshall
T. Reynolds
|
4,735,081
|
80,008
|
7. Neal
Scaggs
|
4,750,971
|
64,118
|
8. Robert
W. Walker
|
4,770,752
|
44,337
|
9. Thomas
W. Wright
|
4,771,561
|
43,528
|