1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,2006
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 333-67435
CITIZENS FIRST CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
KENTUCKY 61-0912615
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification No.)
1065 ASHLEY STREET 42103
BOWLING GREEN, KENTUCKY (Zip Code)
(Address of principal executive offices)
(270) 393-0700
(Issuer's telephone number)
1805 CAMPBELL LANE, BOWLING GREEN, KENTUCKY 42101
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes ___No X
Indicated the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT MAY 10, 2006
Common Stock, no par value per share 893,643 shares
Transitional Small Disclosure Format: Yes ___ No X
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EXPLANATORY NOTE
This amendment No. 1 on Form 10-QSB/A (the "Amended Report") is being filed by
the Registrant to amend its quarterly report on Form 10-QSB for the period ended
March 31, 2006 filed with the Securities and Exchange Commission on May 10 ,2006
(the "Initial Report"). The Amended Report is being filed to restate the
Registrant's previously reported financial information for the period ended
March 31, 2006 to correct errors related to the 5% stock dividend issued by the
Registrant in May 2005. A reclassification in stockholders' equity from retained
earnings to common stock to reflect the value of the stock dividend issued was
not recorded in the Initial Report. As a result, in the Registrant's
consolidated balance sheet as of March 31, 2006 and December 31, 2005, included
in the Initial Report, retained earnings was overstated by $649,000 and common
stock was understated by $649,000 for both periods. These accounts have been
properly reclassified on the accompanying Consolidated Balance Sheets as of
March 31, 2006 and December 31, 2005 in the Amended Report. Total stockholders'
equity was not affected by the reclassification.
In addition, all references to earnings per share have been restated to reflect
the 5% stock dividend that was issued on June 30, 2006 to record holders of the
common stock on May 31, 2006.
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CITIZENS FIRST CORPORATION
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 4-12
ITEM 2. Management's Discussion and Analysis or Plan of
Operation 13-19
PART II. OTHER INFORMATION
ITEM 6. Exhibits 20
Signatures 21
Exhibits 22
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PART 1. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
CITIZENS FIRST CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
AS RESTATED AS RESTATED
MARCH 31, 2006 DECEMBER 31, 2005
-------------- -----------------
ASSETS
Cash and due from banks .................................... $ 4,289,240 $ 4,062,402
Federal funds sold ......................................... 14,794,000 11,681,000
------------- -------------
Cash and cash equivalents ............................... 19,083,240 15,743,402
Available-for-sale securities ............................... 12,581,992 12,057,724
Loans held for sale ......................................... 71,900 621,085
Loans, net of allowance for loan losses of
$1,905,896 and $1,957,220 at March 31, 2006
and December 31, 2005, respectively ......................... 160,009,513 155,611,776
Premises and equipment ..................................... 7,978,279 7,608,072
Federal Home Loan Bank (FHLB) stock ........................ 623,800 615,100
Accrued interest receivable ................................ 1,103,658 1,085,723
Deferred income taxes ...................................... 699,732 612,573
Goodwill ................................................... 1,264,516 1,264,516
Other assets ............................................... 391,284 281,573
------------- -------------
Total assets ............................................ $ 203,807,914 $ 195,501,544
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non interest bearing ..................................... $ 16,639,237 $ 15,060,574
Savings, NOW and money market deposits ................... 53,850,383 55,612,009
Time deposits ............................................ 94,497,126 85,704,604
------------- -------------
Total deposits ......................................... 164,986,746 156,377,187
Securities sold under repurchase agreements ................ 2,666,590 2,919,629
FHLB advances .............................................. 14,448,336 14,500,000
Income taxes payable ....................................... 401,190 113,607
Accrued interest and other liabilities ..................... 1,002,213 1,632,758
------------- -------------
Total liabilities ....................................... 183,505,075 175,543,181
Stockholders' equity:
6.5% cumulative preferred stock; no par value;
500 shares; issued and outstanding 250 shares
at March 31, 2006 and at and December 31, 2005,
respectively ............................................. 7,659,340 7,659,340
Common stock, no par value; authorized 2,000,000
shares; issued and outstanding 893,643 shares at
March 31, 2006 and December 31, 2005, respectively ....... 10,775,480 10,728,966
Retained earnings ........................................ 2,341,027 1,919,925
Accumulated other comprehensive income (loss) ............ (473,008) (349,868)
------------- -------------
Total stockholders' equity ............................ 20,302,839 19,958,363
------------- -------------
Total liabilities
and stockholders' equity ............................ $ 203,807,914 $ 195,501,544
============= =============
See accompanying notes to consolidated financial statements
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CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31: 2006 2005
----- ----
INTEREST INCOME
Loans, including fees ........................ $2,987,649 $2,279,683
Available-for-sale securities ................ 121,388 119,863
Federal funds sold ........................... 115,495 7,225
Dividends on FHLB stock ...................... 8,721 6,000
---------- ----------
Total interest and dividend income ........... 3,233,253 2,412,771
INTEREST EXPENSE
Deposits ..................................... 1,018,267 581,683
Securities sold under agreements to repurchase 6,357 7,942
FHLB advances ................................. 122,310 65,890
Federal funds purchased ....................... 40 10,545
---------- ----------
Total interest expense ....................... 1,146,974 666,060
---------- ----------
NET INTEREST INCOME .......................... 2,086,279 1,746,711
Provision for loan losses .................... -- 35,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES .................... 2,086,279 1,711,711
---------- ----------
NON-INTEREST INCOME
Service charges on deposit accounts .......... 176,801 192,146
Other service charges and fees ............... 20,340 34,434
Title insurance premiums and closing costs ... 14,901 14,845
Sale of mortgage loans ....................... 54,470 82,782
Lease income ................................. 52,468 4,689
Trust referral fees .......................... 1,000 3,000
---------- ----------
Total non-interest income ..................... 319,980 331,896
NON-INTEREST EXPENSES
Salaries and employee benefits ............... 885,865 670,476
Net occupancy expense ........................ 138,196 87,812
Equipment expense ............................ 98,947 94,639
Advertising .................................. 53,665 38,032
Professional fees ............................ 59,097 94,855
Data processing services ..................... 106,226 90,178
FDIC and other insurance ..................... 16,245 30,731
Franchise shares and deposit tax ............. 56,175 51,150
Postage and office supplies .................. 30,256 27,733
Telephone and other communication ............ 28,302 30,978
Other ........................................ 100,137 143,307
---------- ----------
Total non-interest expenses .................. 1,573,111 1,359,891
---------- ----------
INCOME BEFORE INCOME TAXES ..................... 833,148 683,716
Provision for income tax ...................... 283,859 232,500
---------- ----------
NET INCOME ................................... $ 549,289 $ 451,216
PREFERRED DIVIDENDS........................... $ 128,187 $ 128,187
---------- ----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS..... $ 421,102 $ 323,029
========== ==========
BASIC EARNINGS PER SHARE ....................... $ 0.45 $ 0.35
DILUTED EARNINGS PER SHARE ..................... $ 0.36 $ 0.29
See accompanying notes to consolidated financial statements.
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CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31: 2006 2005
---- ----
Balance January 1 ............................. $ 19,958,363 $ 18,176,640
Net income .................................. 549,289 451,216
Issuance of common stock .................... -- 104,856
Stock-based Compensation .................... 46,514 --
Payment of preferred dividends,
$512.75 per share for 2006 and for 2005....... (128,187) (128,187)
Other comprehensive income (loss), net of tax (123,140) (138,623)
------------ ------------
Balance at end of period ...................... $ 20,302,839 $ 18,456,902
============ ============
See accompanying notes to consolidated financial statements.
CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31:
2006 2005
---- ----
Net income ................................................. $ 549,289 $ 451,216
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available for sale
securities, net of income taxes (benefits) of $(63,436) and
$(71,412), arising during the period, respectively ........ (123,140) (138,623)
--------- ---------
Comprehensive income .................................... $ 426,149 $ 312,593
========= =========
See accompanying notes to consolidated financial statements.
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CITIZENS FIRST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31: 2006 2005
---- ----
OPERATING ACTIVITIES:
Net income ............................................. $ 549,289 $ 451,216
Items not requiring (providing) cash:
Depreciation and amortization ......................... 115,018 86,842
Stock-based Compensation expense ..................... 46,514 --
Provision for loan losses ............................. -- 35,000
Amortization of premiums and discounts on securities .. (7,609) 4,525
Deferred income taxes ................................. (87,159) 86,947
Sale of mortgage loans held for sale .................. 3,855,554 5,533,606
Origination of mortgage loans for sale ................ (3,251,899) (5,943,435)
Gains on sales of loans ............................... (54,470) (82,782)
FHLB stock dividend received .......................... (8,700) (6,000)
Changes in:
Interest receivable ................................... (17,935) (77,106)
Income taxes receivable(payable) ...................... (42,207) (20,545)
Other assets .......................................... (245,411) (214,288)
Interest payable and other liabilities ................ 8,740 (66,647)
------------ -----------
Net cash from operating activities ............ 859,725 (212,667)
INVESTING ACTIVITIES:
Net (increase) decrease in loans ........................ (4,262,037) (1,380,069)
Purchases of premises and equipment ..................... (485,225) (369,758)
Purchase of available-for-sale securities ............... (830,000) --
Proceeds from maturities of available-for-sale securities 126,766 275,123
Payment related to purchase of Commonwealth Mortgage .... (246,060) (251,717)
------------ -----------
Net cash from investing activities ............ (5,696,556) (1,726,421)
FINANCING ACTIVITIES:
Net decrease in demand deposits, money market, NOW, and . (182,963) (4,433,145)
savings accounts
Net increase (decrease) in time deposits ................ 8,792,522 9,231,975
Proceeds from FHLB advances ............................. 5,000,000 --
Repayment of FHLB advances .............................. (5,051,664) --
Net increase (decrease) in fed funds purchased
and repurchase agreements ............................... (253,039) (2,073,401)
Issuance of common stock ................................ -- 20,950
Dividends paid on preferred stock ....................... (128,187) (131,036)
------------ -----------
Net cash from financing activities ...................... 8,176,669 2,615,343
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 3,339,838 676,255
Cash and cash equivalents, Beginning of year ............ 15,743,402 4,079,707
------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR .................. $ 19,083,240 $ 4,755,962
============ ===========
Supplemental Cash Flows Information:
Interest paid ........................................... $ 1,133,887 $ 625,025
Income taxes paid ....................................... $ 20,000 $ 250,500
Loans transferred to other real estate .................. $ 135,700 $ 155,000
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Citizens First Corporation (the
"Company") and its subsidiary, Citizens First Bank, Inc. (the "Bank"), conform
to accounting principles generally accepted in the United States of America and
general practices within the banking industry. The consolidated financial
statements include the accounts of the Company and the Bank. All significant
intercompany transactions and accounts have been eliminated in consolidation.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's 2005 Annual Report on Form 10-KSB/A filed with the Securities and
Exchange Commission.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Estimates used in the preparation of the financial
statements are based on various factors including the current interest rate
environment and the general strength of the local economy. Changes in the
overall interest rate environment can significantly affect the Company's net
interest income and the value of its recorded assets and liabilities. Actual
results could differ from those estimates used in the preparation of the
financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been reflected in the accompanying unaudited financial
statements. Results of interim periods are not necessarily indicative of results
to be expected for the full year. Those adjustments consist only of normal
recurring adjustments. The consolidated balance sheet of the Company as of
December 31, 2005, has been derived from the audited consolidated balance sheet
of the Company as of that date.
All references to stock options, earnings per share and the amount of common
stock issued and outstanding have been adjusted to reflect the 5% common stock
dividend that was distributed on May 30, 2005, to record holders of common stock
on April 29, 2005. In addition, all references to earnings per share have been
restated to reflect the 5% stock dividend that was issued on June 30, 2006
to record holders of common stock on May 31, 2006.
STOCK OPTION PLANS
In 2002, the board of directors adopted the employee stock option plan, which
became effective upon the approval of the Company's shareholders at the annual
meeting in April 2003. The purpose of the plan is to afford key employees an
incentive to remain in the employ of the Company and its subsidiaries and to use
their best efforts on its behalf. 126,000 shares of Company common stock have
been reserved for issuance under the plan. Options expire after ten years, and
vest ratably over a three year period.
In 2003, the board of directors adopted the non-employee director stock option
plan for non-employee directors, which became effective subject to the approval
of the Company's shareholders at the annual meeting in April 2003. The purpose
of the plan is to assist the Company in promoting a greater identity of interest
between the Company's non-employee directors and shareholders, and in attracting
and retaining non-employee directors by affording them an opportunity to share
in the Company's future successes. 42,000 shares of common stock have been
reserved for issuance under the plan. Options granted expire after ten years,
and are immediately vested.
The Company accounts for these plans under the recognition and measurement
principles of FASB Statement No. 123 Revised (SFAS 123R), Accounting for
Stock-Based Compensation, effective January 1, 2006. In 2005 and previous years,
these plans were measured under the recognition and measurement principles of
APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. Prior to 2006, no stock-based employee compensation cost was
reflected in net income, as all options granted under this plan had an exercise
price equal to the market value of the underlying common stock on the grant
date. The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value provisions of FASB 123 (revised)
for the quarter ended March 31, 2005.
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Quarter Ended
March 31,2005
---------------------
Net income, as reported $ 451,216
Less: Total stock-based employee compensation cost
determined under the fair value based method, net of
income taxes, not expensed during the quarter 26,747
Pro forma net income $ 424,469
Earnings per share:
Basic - as reported $ 0.35
Basic - pro forma $ 0.32
Diluted - as reported $ 0.29
Diluted - pro forma $ 0.27
The fair value of options granted is estimated on the date of the grant using a
Black-Scholes option-pricing model with the following weighted-average
assumptions:
2006 2005
-------- --------
Dividend yields .............................................. 0% 0%
Volatility factors of expected market price of common stock .. 21.39% 21.17%
Risk-free interest rates ..................................... 4.58% 3.97%
Expected life of options ..................................... 7 Years 6 Years
Weighted-average fair value of options granted during the year $ 7.08 $ 4.69
* The dividend yield was estimated using historical dividends paid and market
value information for the Company's stock. An increase in dividend yield will
decrease compensation expense.
* The volatility was estimated using historical volatility for periods
approximating the expected option life.
* The risk-free interest rate was developed using the U.S. Treasury yield curve
for periods equal to the expected life of the options on the grant date. An
increase in the risk-free interest rate will increase stock compensation
expense.
SFAS 123R requires the recognition of stock-based compensation for the number of
awards that are ultimately expected to vest. For the quarter end March 31, 2006,
compensation expense recorded was $46,514. As of March 31, 2006, unrecognized
compensation expense associated with stock options was $504,011 which is
expected to be recognized over a weighted average period of 3 years.
A summary of the status of the plans at March 31, 2006 and 2005, and changes
during the periods then ended is presented below:
2006 2005
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
-------------------------------------------------------------------------------
Outstanding, beginning of year 95,603 $ 14.33 51,030 $ 13.50
Granted 40,000 19.76 42,000 14.33
Exercised -- -- (1,575) 13.30
Forfeited -- -- (735) 13.57
Expired -- -- -- --
Outstanding, end of period 135,603 $ 15.93 90,720 $ 14.58
Options exercisable, end of period 49,157 21,832
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The weighted average remaining term for outstanding stock options was 8.93 years
at March 31, 2006. The aggregate intrinsic value at March 31, 2006 was $755,368
for stock options outstanding and $374,106 for stock options exercisable. The
intrinsic value for stock options is calculated based on the exercise price of
the underlying awards and the market price of the Company's common stock as of
the reporting date.
Options outstanding at March 31, 2006 were as follows:
Options Outstanding Options Exercisable
Range of Exercise Number Weighted-Average Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------------------------------------------------------------------------------------------------------------
$0-$13.57 41,790 7.87 years $13.49 30,660 $13.46
$13.58-$14.33 38,168 8.83 years $14.33 12,722 $14.33
$14.34-$19.76 55,645 9.79 years $18.86 5,775 $15.19
As of December 31, 2005, there were no options that were antidilutive. The
number of options have been adjusted to reflect the 2005 stock dividend, in
accordance with plan provisions. There have been no adjustments to the tables
in this note related to the 2006 5% stock dividend.
(2) RECLASSIFICATIONS
Certain reclassifications have been made to the 2005 financial statements to
conform to the 2006 financial statement presentation. These reclassifications
had no effect on net earnings.
(3) ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses for the stated periods was as follows:
March 31, March 31,
---------- ---------
2006 2005
Balance, beginning of year ............................ $1,957,220 $1,720,565
Provision charged to expense ........................ -- 35,000
Loans charged off, net of recoveries of $244
for March 31, 2006 and $67,669 for March 31, 2005 .... 51,324 11,149
---------- ---------
Balance, March 31, 2006 and March 31, 2005,
respectively ......................................... $1,905,896 $1,766,714
========== ==========
(4) ACQUISITION OF COMMONWEALTH MORTGAGE AND SOUTHERN KENTUCKY LAND TITLE
On January 2, 2003, the Bank acquired all of the outstanding stock of
Commonwealth Mortgage of Bowling Green, Inc. and Southern Kentucky Land Title,
Inc. Commonwealth Mortgage originates 1-4 family residential mortgages for sale
in the secondary mortgage market, while Southern Kentucky Land Title provides
title insurance agency services for real estate purchase contracts. The purchase
price for Commonwealth Mortgage and Southern Kentucky Land Title consisted of
$400,000 in cash plus a deferred contingent purchase price of up to $1,350,000
payable upon the combined entities' achievement of specified annual earnings
targets over a five year period, plus 25% of the amount, if any, by which their
earnings exceed such targets. 25% of the deferred purchase price will be paid by
the issuance of the Company's common stock, valued at the average of the closing
sales price of the stock over the last ten trading days of the applicable
calendar year. At the former Commonwealth shareholders' option, an additional
25% of such deferred purchase price, if any, may be paid in shares of the
Company's common stock. The deferred contingent purchase price is accounted for
as additional purchase price at the time the contingency is resolved. The Bank
also purchased the .2 acre site on which the main office of Commonwealth
Mortgage is located for a purchase price of $272,500 in cash. Goodwill
recognized in the initial transaction amounted to $380,000. In January 2004, the
Bank paid $162,401 in cash, and in April 2004 the Company issued 3,790 shares of
the Company's common stock, to the former Commonwealth shareholders as the first
installment of the deferred contingent purchase price. In January 2005, the Bank
paid $251,717 in cash, and in March 2005 the Company issued 5,778 shares of the
Company's common stock to the former Commonwealth shareholders as the second
installment of the deferred contingent purchase price. In January 2006, the Bank
paid $246,060 in cash to the former Commonwealth shareholders as the third
installment of the deferred contingent purchase price. At March 31, 2006,
goodwill from this transaction totaled $1,264,516.
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The acquisition of Commonwealth Mortgage and Southern Kentucky Land Title was
completed to give the Bank an expanded presence in the local mortgage
origination market, to further expand the Bank's customer service offerings and
to supplement the Bank's non-interest fee income.
(5) CUMULATIVE CONVERTIBLE PREFERRED STOCK OFFERING
The Company completed during the third quarter of 2004 the private placement of
250 shares of Cumulative Convertible Preferred Stock, stated value $31,992 per
share (Preferred Stock), for an aggregate purchase price of $7,998,000. The
Preferred Stock was sold for $31,992 per share, is entitled to quarterly
cumulative dividends at an annual fixed rate of 6.5% and is convertible into
shares of common stock of the Company at an initial conversion price per share
of $15.50 on and after three years from the date of issuance. The sale of the
Preferred Stock netted proceeds to the Company of $7,659,340, of which
$3,011,970 (including $3,000,000 in principal and $11,970 in accrued interest)
was used to repay the outstanding balance under the Company's line of credit,
and $3,800,000 was contributed to the capital of the Bank. The remaining
proceeds from the issuance of the Preferred Stock are being used for general
corporate purposes, including the contribution of capital to the Bank.
(6) EARNINGS PER SHARE
All references to earnings per share have been restated to reflect the
stock dividends issued in 2005 and 2006.
There are no anti-dilutive stock options. Basic earnings per share have
been computed by dividing net income available for common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share have been computed the same as basic earnings per share, and
assumes the conversion of outstanding vested stock options and convertible
preferred stock. The following table reconciles the basic and diluted earnings
per share computations for the quarters ending March 31, 2006 and 2005.
QUARTER ENDED MARCH 31, 2006 QUARTER ENDED MARCH 31, 2005
------------------------------------- ----------------------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES PER SHARE SHARES PER SHARE
INCOME AMOUNT INCOME AMOUNT
------------------------------------- ----------------------------------------
BASIC EARNINGS PER SHARE
Net income .............. $ 549,289 $ 451,216
Less: Dividends on ......
preferred stock ....... (128,187) (128,187)
---------- ---------
Net income available
to common shareholders . 421,102 938,325 $ 0.45 323,029 933,222 $ 0.35
======== =======
EFFECT OF DILUTIVE
SECURITIES
Convertible preferred ...
stock ................. 128,187 568,890 128,187 568,890
Stock options ........... -- 31,448 -- 46,393
---------- ---------- --------- --------
DILUTED EARNINGS (LOSS)
PER SHARE
Net income available to
common shareholders and
assumed conversions
$ 549,289 1,538,663 $ 0.36 $ 451,216 1,548,505 $ 0.29
=========== ========== ======== ========== ---------- ======
(7) EMPLOYEE BENEFIT PLAN
Effective January 1, 2006, the Company has adopted a 401(k) plan covering
substantially all employees. Employees may contribute a portion of their
compensation (based on regulatory limitations) with the Company matching 100% of
the employee's contribution on 4% of the employee's compensation. Employer
contributions charged to expense for the three months ended March 31, 2006, were
$26,874.
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Prior to January 1, 2006, the Company had a defined contribution pension plan
(SIMPLE plan) covering substantially all employees. Employees may contribute a
portion of their compensation (based on regulatory limitations) with the Company
matching 100% of the employee's contribution on 3% of the employee's
compensation. Employer contributions charged to expense for the three months
ended March 31, 2005 were $15,865.
(8) COMMON STOCK DIVIDEND
On April 20, 2005, the Board of Directors of the Company declared a 5% stock
dividend on each share of common stock of the Corporation outstanding, payable
to the record holders of the common stock on April 29, 2005. The dividend was
issued and payable May 30, 2005 in the form of 0.05 share of common stock for
each one share of common stock outstanding on the record date. Any fractional
share of common stock which a shareholder would be entitled to receive was
rounded up to a whole share of common stock. A total of 42,584 shares of common
stock were issued as a result of the common stock dividend.
(9)RESTATEMENT OF STOCKHOLDERS' EQUITY
A reclassification in stockholders' equity on the Condensed Consolidated Balance
Sheet from retained earnings to common stock has been made to reflect the value
of the 2005 stock dividend issued. These accounts have been properly classified
on the Condensed Consolidated Baalance Sheet as of March 31, 2006 and
December 31, 2005. Total stockholders' equity was not affected by the
reclassification.
MARCH 31, 2006 BALANCE SHEET
AS PREVIOUSLY REPORTED AS RESTATED DIFFERENCE
Common Stock $10,126,500 $10,775,480 $ 648,980
Retained Earnings $ 2,990,007 2,341,027 $(648,980)
DECEMBER 31, 2005 BALANCE SHEET
AS PREVIOUSLY REPORTED AS RESTATED DIFFERENCE
Common Stock $10,079,986 $10,728,966 $ 648,980
Retained Earnings $ 2,568,905 1,919,925 $(648,980)
(10)SUBSEQUENT EVENT
On May 17, 2006, the Board of Directors of the Company declared a second 5%
stock dividend on each share of common stock of the Company, payable to the
record holders of the common stock on May 31, 2006. The dividend was issued and
payable June 30, 2006. A total of 45,132 shares of common stock were issued as
a result of this common stock dividend. All references to earnings per share
have been restated to reflect the stock dividend issued in 2006.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Citizens First Corporation ("the Company") was incorporated in Kentucky on
December 24, 1975 for the purpose of conducting business as an investment club,
and is headquartered in Bowling Green, Kentucky. In late 1998 and early 1999,
the Company received regulatory approval to become a bank holding company under
the Bank Holding Company Act of 1956, as amended, through its organization and
ownership of its subsidiary, Citizens First Bank, Inc. (the "Bank"). The
Company, through the Bank, is now involved in the banking business, primarily
serving customers in the Bowling Green/Warren County market and in the
Franklin/Simpson County market. As of March 31, 2006, the Company and Bank
employed seventy-two employees (sixty-three full-time equivalent employees).
The Bank commenced operations in February 1999 at 1805 Campbell Lane, Bowling
Green, Kentucky. The Bank opened a branch office at 901 Lehman Avenue, Bowling
Green, Kentucky in March 1999. In January 2003 the Bank acquired Commonwealth
Mortgage and Southern Kentucky Land Title, Inc. located at 1301U.S. Highway 31-W
Bypass in Bowling Green, Kentucky. The Bank opened branch offices at 2451
Fitzgerald-Industrial Drive, Bowling Green, Kentucky and at 1200 South Main
Street, Franklin, Kentucky in February 2003. During the first quarter of 2006,
the Bank moved its main office headquarters to, and opened a retail branch at
1065 Ashley Street in Bowling Green, Kentucky. Approximately 15,000 square feet
of the first floor of this building is leased. The bank offices are primarily
occupied by senior management, commercial lenders, deposit operations, loan
accounting, finance, and information systems personnel. The Bank's mortgage
company operations have relocated to the Campbell Lane location, which also
houses a branch office of the Bank.
The Bank was organized as a community oriented, full service alternative to the
super-regional financial institutions which dominate its primary service area.
The Bank's mission is to firmly establish itself in its primary service area as
a community owned and operated full-service bank providing traditional products
and services typically offered by commercial banks. The Bank believes that its
ability to compete is enhanced by its local management and its base of local
shareholders and directors. The Bank has emphasized and intends to continue
emphasizing its Bowling Green and southern Kentucky roots, and the Bank has a
philosophy of giving its customers prompt and responsive personal service.
The Company's corporate strategy focuses on providing the Bank's customers with
high quality, personal banking services. The Bank offers products designed to
meet the needs of its customers that include individuals, small businesses,
partnerships and corporations. The Bank provides a full range of corporate and
retail banking services that include checking, savings, and time deposit
accounts; secured and unsecured loans to corporations, individuals, and others;
letters of credit; rental of safe deposit boxes; and cash management services.
The Bank also offers, through affiliations with third parties, trust services,
investment management services, and business and personal insurance products.
The Bank offers a full range of deposit services. Checking account services
include regular non-interest bearing checking accounts as well as interest
bearing negotiable order of withdrawal ("NOW") accounts. Savings and certificate
of deposit accounts include accounts ranging from a daily maturity (regular
savings and also money market accounts) to longer-term certificates as
authorized by law. In addition, retirement accounts such as IRA's (Individual
Retirement Accounts) are available. All deposit accounts are insured by the
Federal Deposit Insurance Corporation to the full amount permitted by law.
Deposit accounts are solicited from individuals, businesses, professional
organizations and governmental authorities.
Lending services include a full range of commercial, personal, and mortgage
loans. The Bank's primary focus is on business lending. The types of commercial
loans that are available include both secured and unsecured loans for working
capital (including inventory and receivables), business expansion (including
acquisition of real estate and improvements) and purchase of machinery and
equipment. The Bank does not emphasize real estate lending for land acquisition,
land development or open-end construction loans. The types of personal loans
that are available include secured and unsecured loans for such purposes as
financing automobiles, home improvements, education and personal investments.
The Bank originates, processes and closes residential real estate loans that are
then primarily sold on the secondary market (each individually) to a
correspondent.
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The Bank offers credit cards (through correspondent banking services) including
MasterCard (TM) and Visa(TM) as well as a personal checking account related line
of credit. The line of credit is available for both protection against
unexpected overdrafts and also for the convenience of having a pre-arranged loan
that can be activated simply by a check drawn on a personal checking account.
Other services offered include, but are not limited to, safe deposit boxes,
letters of credit, travelers checks, direct deposit of payroll, social security
and dividend payments and automatic payment of insurance premiums and mortgage
loans. The Bank does not have a proprietary automated teller machine network but
participates in a national ATM network through the FiServ EFT network, and
through the Visa Debit Card Program.
The Kentucky counties of Warren and Simpson are designated as the Bank's primary
service area. This area economy is diversified, with financial and other service
industries representing the largest industry segment. In the recent past the
area's unemployment rate has been consistent with the national unemployment
rate. The Company's competition in the local market consists of community,
regional and national financial institutions. In the Bank's primary service
area, there are 16 commercial banks, of which four are considered to have their
headquarters in the Bank's service area. As of June 30, 2005, these institutions
have combined deposits of $1.57 billion, according to data compiled by the
Federal Deposit Insurance Corporation. In addition, there are various credit
unions, mortgage companies, and other commercial banks that have loan production
offices in the area. The Bank encounters strong competition from these financial
institutions, for deposits, loans, and other financial services, as well as from
insurance companies, brokerage firms and other financial institutions, some of
which are not subject to the same degree of regulation and restrictions as the
Bank. Several of these competitors have greater resources and lending limits
than the Bank has to offer, and may provide certain services, such as
international banking services, which the Bank is not providing.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The Company's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States and follow general
practices within the financial services industry. The most significant
accounting policies followed by the Company are presented in Note 1 of the Notes
to the Consolidated Financial Statements included in this report. These
policies, along with the disclosures presented in the other financial statement
notes and in this financial review, provide information on how significant
assets and liabilities are valued in the financial statements and how those
values are determined. Based on the valuation techniques used and the
sensitivity of financial statement amounts to the methods, assumptions, and
estimates underlying those amounts, management has identified the determination
of the allowance for loan losses to be the accounting area that requires the
most subjective or complex judgments, and as such could be most subject to
revision as new information becomes available.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents management's estimate of probable
credit losses inherent in the loan portfolio. Determining the amount of the
allowance for loan losses is considered a critical accounting estimate because
it requires significant judgment and the use of estimates related to the amount
and timing of expected future cash flows on impaired loans, estimated losses on
loans based on historical loss experience, and consideration of current economic
trends and conditions, all of which may be susceptible to significant change.
The loan portfolio also represents the largest asset type on the consolidated
balance sheet. Note 1 of the Notes to the Consolidated Financial Statements
included in the Company's 2005 Annual Report on Form 10-KSB describes the
methodology used to determine the allowance for loan losses, and a discussion of
the factors driving changes in the amount of the allowance for loan losses is
included under "Asset Quality" below.
Loans that exhibit probable or observed credit weaknesses are subject to
individual review. Where appropriate, reserves are allocated to individual loans
based on management's estimate of the borrower's ability to repay the loan given
the availability of collateral, other sources of cash flow and legal options
available to the Company. Included in the review of individual loans are those
that are impaired as provided in SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." The Company evaluates the collectibility of both
principal and interest when assessing the need for a loss accrual. Historical
loss rates are applied to other loans not subject to reserve allocations. These
historical loss rates may be adjusted for significant factors that, in
management's judgment, reflect the impact of any
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current conditions on loss recognition. Factors which management considers
in the analysis include the effects of the national and local economies, trends
in the nature and volume of loans (delinquencies, charge-offs and nonaccrual
loans), changes in mix, asset quality trends, risk management and loan
administration, changes in internal lending policies and credit standards, and
examination results from bank regulatory agencies and the Company's internal
credit examiners.
An unallocated reserve is maintained to recognize the imprecision in estimating
and measuring losses when evaluating reserves for individual loans or pools of
loans. Reserves on individual loans and historical loss rates are reviewed
quarterly and adjusted as necessary based on changing borrower and/or collateral
conditions and actual collection and charge-off experience.
The Company has not substantively changed any aspect to its overall approach in
the determination of the allowance for loan losses. There have been no material
changes in assumptions or estimation techniques as compared to prior periods
that impacted the determination of the current period allowance.
Based on the procedures discussed above, management is of the opinion that the
reserve of $1,905,896 was adequate, but not excessive, to absorb estimated
credit losses associated with the loan portfolio at March 31, 2006.
RESULTS OF OPERATIONS
For the three months ended March 31, 2006, the Company reported net income of
$549,289, or $0.45 and $0.36 per basic and diluted common share, respectively,
compared to net income of $451,216, or $.35 and $0.29 per basic and diluted
common share, respectively, for the same period ended March 31, 2005.
NET INTEREST INCOME
Net interest income was $2,086,279 in the first quarter of 2006, compared with
$1,746,711 in the comparable period in 2005. First quarter 2006 interest income
of $3,233,253, an increase of $820,482 or 34.0% over the same period total of
$2,412,771 in 2005, includes $2,987,649 income on loans, $121,388 income on
securities, and $124,216 income on federal funds sold and other interest-bearing
accounts. Interest income of $2,412,771 during the first quarter of 2005
included $2,279,683 of income on loans, $119,863 income on investment
securities, and $13,225 income on federal funds sold and other interest-bearing
accounts. Interest expense of $1,146,974 for the first quarter of 2006, up
$480,914 or 72.2% from the same period in 2005, consists of interest on deposits
of $1,018,267, and on other borrowings of $128,707. First quarter 2005 interest
expense of $666,060 consisted of interest on deposits of $581,683, and interest
on other borrowings of $84,377. An increase in yields on interest earning
assets, coupled with an increase in the amount of interest earning assets,
contributed to the increase in net interest income in the first quarter of 2006,
compared to the same quarter of 2005. The increase in yields on interest earning
assets during the first quarter of 2006, compared to the same period of 2005, is
primarily attributable to the increase by 275 basis points of short-term
interest rates since the beginning of 2005. The Bank is asset sensitive, meaning
assets reprice faster to changes in short-term rates than do liabilities. In a
rising short-term rate environment, such as occurred during the first quarter of
2006, more of the Bank's interest earning assets, primarily loans, reprice up
faster than do the liabilities, specifically certificates of deposit. The
increase in interest expense in the first quarter of 2006, compared to the same
period of 2005, was due to both the increased average cost of deposits during
2006, as short term rates have increased by 275 basis points since the beginning
of 2005, the increased average amount of interest bearing deposits compared to
the first quarter of 2005 and the increase in long-term debt.
PROVISION FOR LOAN LOSSES
The Company did not record a provision for loan loss expense for the quarter
ended March 31, 2006. The provision for loan losses expense for the quarter
ended March 31, 2005 was $35,000. As shown in the table in Footnote 3, the
Company had net charge-offs of loans totaling $51,324 for the first quarter of
2006, compared to net charge-offs of loans totaling $11,149 for the first
quarter of 2005. See a discussion of asset quality included in the Asset Quality
section of the Balance Sheet Review.
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NON-INTEREST INCOME
Non-interest income for the three months ended March 31, 2006 and 2005,
respectively, was $319,980 and $331,896, a decrease of $11,916 or 3.6%. Income
from service charges on deposit accounts decreased $15,345, or 8.0%, to $176,801
during the first quarter of 2006 from $192,146 for the first quarter of 2005.
Despite an overall increase in deposit accounts for the periods, fee income from
insufficient fund charges decreased, offsetting other account fees. Other
service charges and fees decreased $14,094 from $34,434 during the first quarter
of 2005 to $20,340 for the first quarter of 2006. Income from the sale of
mortgage loans decreased $28,312, to $54,470 during the first quarter of 2006
from $82,782 in the same period of 2005. The decrease in the sale of mortgage
loans in 2006 is primarily due to less activity in the refinancing market as
interest rates have risen. Lease income increased $47,779 in the first quarter
of 2006 reflecting the lease to third parties of unused office space in the
Company's recently acquired headquarter building.
NON-INTEREST EXPENSE
Non-interest expense was $1,573,111 in the first quarter of 2006, up from
$1,359,891 in the same quarter of 2005, an increase of $213,220 or 15.7%.
Salaries and employee benefits increased $215,389 for the quarter ended March
31, 2006 as compared to the quarter ended March 31, 2005. The Company recorded a
stock option expense for the first time in the first quarter in the amount of
$46,514. In addition, an increase in the number of employees in the first
quarter of 2006 as compared to 2005 caused salary costs and related benefit
costs to increase for 2006 approximately $140,000 as compared to 2005. The 401K
plan established as of January 1, 2006 increased benefit costs by $14,646. Net
occupancy expense increased $50,384 from $87,812 for the three months ended
March 31, 2005 to $138,196 for the three months ended March 31, 2006. This
increase is primarily related to costs associated with the new headquarters
building. Professional fees decreased $35,758 from $94,855 for the period ending
March 31, 2005 to $59,097 for the period ending March 31, 2006 as a lawsuit
associated with the recovery of a large commercial loan was completed. Other
expense decreased $43,173 from $143,307 for the three months ended March 31,
2005 to $100,134 for the three months ended March 31, 2006.
INCOME TAXES
Income tax expense has been calculated based on the Company's expected annual
rate for 2006. During the first quarter of 2006, income tax expense totaled
$283,859 compared to $232,500 for the same period of 2005. Deferred tax
liabilities and assets are recognized for the tax effects of differences between
the financial statement and tax bases of assets and liabilities.
BALANCE SHEET REVIEW
OVERVIEW
Total assets at March 31, 2006 were $203,807,914, up from $195,501,544 at
December 31, 2005 and up from $172,098,548 a year ago. Average total assets for
the first quarter of 2006 were $196,149,375, up $25,349,003 from the first
quarter of 2005 average of $170,800,372.
LOANS
At March 31, 2006, loans (excluding mortgage loans held for sale) totaled
$161,915,409, compared with $157,568,996 at December 31, 2005 and $148,341,645 a
year ago, an increase of $4,346,413 and $13,573,764 respectively. Loans averaged
$159,036,866 during the first quarter of 2006, an increase of $12,341,937 or
8.4%, over the average total of $146,694,929 for the first quarter of 2005.
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ASSET QUALITY
Non-performing loans are defined as non-accrual loans, loans accruing but past
due 90 days or more, and restructured loans. Management classifies commercial
and commercial real estate loans as non-accrual when principal or interest is
past due 90 days or more and the loan is not adequately collateralized and is in
the process of collection, or when, in the opinion of management, principal or
interest is not likely to be paid in accordance with the terms of the
obligation. Consumer loans are charged off after 120 days of delinquency unless
adequately secured and in the process of collection. Non-accrual loans are not
reclassified as accruing until principal and interest payments are brought
current and future payments appear reasonably certain. Loans are categorized as
restructured if the original interest rate, repayment terms, or both were
restructured due to deterioration in the financial condition of the borrower.
However, restructured loans that demonstrate performance under the restructured
terms and that yield a market rate of interest may be removed from restructured
status in the year following the restructure.
The Bank had non-performing loans totaling $284,274 at March 31, 2006, compared
to $256,993 at December 31, 2005 and $612,365 at March 31, 2005. The
non-performing loan total at March 31, 2006 includes one loan in the amount of
$177,944 that was added to non-performing loans in the third quarter of 2005.
The loan is to an electrical contractor who has filed Chapter 7 Bankruptcy. The
loan is 75% guaranteed by the Small Business Administration. Also included are
four loans on non-accrual that total $58,438 and three loans totaling $47,891
that were greater than 90 days past due.
Non-performing assets are defined as non-performing loans, foreclosed real
estate, and other foreclosed property. The Bank had non-performing assets of
$427,221 at the end of the first quarter of 2006, comprised of the above
mentioned non-performing loans and $142,947 of other real estate owned and
repossessed assets. The Bank had non-performing assets of $256,993 at December
31, 2005, comprised entirely of non-performing loans.
The allowance for loan losses is established through a provision for loan losses
charged to expense. The allowance for loan losses was $1,905,896 at March 31,
2006, a decrease of $51,324, or 2.6% over the December 31, 2005 level of
$1,957,220. The allowance represents 1.18% of period-end loans, compared to
1.24% of period-end loans at December 31, 2005. The allowance as a percentage of
period-end loans decreased at March 31, 2006, compared to December 31, 2005,
because no provision for loan losses was recorded for the period. During the
first quarter of 2006, the dollar amout of loans internally classified as
substandard or doubtful was reduced, resulting in a lower allocated portion of
the allowance for loan losses. The level of the allowance is based on
management's monthly review and evaluation of the loan portfolio and general
economic conditions; followed by a quarterly review with the Board of Directors.
Management's review and evaluation of the allowance for loan losses is based on
an analysis of historical trends, significant problem loans, current market
value of real estate or collateral and certain economic and other factors
affecting loans and real estate or collateral securing these loans. Where
appropriate, reserves are allocated to individual loans based on management's
estimate of the borrower's ability to repay the loan given the availability of
collateral, other sources of cash flow and legal options available to the
Company. Historical loss rates are applied to other loans not subject to reserve
allocations. An unallocated reserve is maintained to recognize the imprecision
in estimating and measuring losses when evaluating reserves for individual loans
or pools of loans. These historical loss rates may be adjusted for significant
factors that, in managements judgment, reflect the impact of any current
conditions on loss recognition, including the effects of the national and local
economies, trends in the nature and volume of loans (delinquencies, charge-offs
and nonaccrual loans), changes in mix, asset quality trends, risk management and
loan administration, changes in internal lending policies and credit standards,
and examination results from bank regulatory agencies and the Company's internal
credit examiners. Loans are charged off when, in the opinion of management, they
are deemed to be uncollectible. Recognized losses are charged against the
allowance and subsequent recoveries are added to the allowance. While management
uses the best information available to make evaluations, future adjustments to
the allowance may be necessary if economic conditions differ substantially from
the assumptions used in making the evaluation. The allowance for loan losses is
reviewed internally by personnel independent of the loan department. In
addition, the allowance is subject to periodic evaluation by various regulatory
authorities and may be subject to adjustment based upon information that is
available to them at the time of their examination.
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SECURITIES
Securities (all classified as available for sale) increased from $12,057,724 at
December 31, 2005 to $12,581,992 at March 31, 2006. At March 31, 2005,
securities totaled $12,399,301 .
DEPOSITS AND BORROWED FUNDS
Total deposits averaged $157,583,965 in the first quarter of 2006, an increase
of $24,908,762 from the comparable 2005 quarter average of $132,675,203. As of
March 31, 2006, total deposits were $164,986,746, and included $148,347,509 of
interest bearing deposits. This compares to total deposits of $156,377,187 at
December 31, 2005, which included $141,316,613 of interest bearing deposits.
Total deposits at March 31, 2005, were $135,327,567, and included interest
bearing deposits of $122,448,413.
The Bank had $2,666,590 of deposits secured by securities sold under agreements
to repurchase on March 31, 2006. These obligations, which mature in one business
day, are swept daily from customers' demand deposit accounts. These balances
averaged $3,006,519 during the first quarter of 2006.
Other Borrowings. The Bank utilizes Federal Home Bank of Cincinnati (FHLB)
advances for funding and liability management. Advances are secured borrowings
with terms ranging from overnight to thirty years. Rates vary based on the term
to repayment, and are summarized below as of March 31, 2006:
TYPE MATURITY RATE AMOUNT
Fixed .............. May 26, 2006 3.90% $ 2,000,000
Fixed .............. June 9, 2006 2.03% 4,000,000
Fixed .............. May 2, 2007 4.19% 3,000,000
Fixed .............. October 27, 2008 4.83% 500,000
Variable ........... January 31,2007 -- 2,000,000
Variable ........... January 31,2007 -- 1,000,000
Fixed .............. January 31,2007 5.02% 1,000,000
Fixed .............. February 01,2009 5.07% 948,336
-----------
$14,448,336
The Company has a line of credit with a total availability of $3,000,000. The
line matures August 12, 2006, and bears interest at New York Prime with interest
payable monthly. The line of credit is secured by the Bank's common stock. As of
March 31, 2006, the line had not been drawn upon.
CAPITAL RESOURCES AND LIQUIDITY
The Board of Governors of the Federal Reserve System has adopted risk based
capital and leverage ratio requirements for banks and bank holding companies.
The table below sets forth the Bank's capital ratios as of March 31, 2006,
December 31, 2005, and March 31, 2005, the regulatory minimum capital ratios,
and the regulatory minimum capital ratios for well-capitalized companies:
March 31, December 31, March 31,
2006 2005 2005
----- ---- ----
Tier 1 risk based ....................... 11.61% 11.87% 11.95%
Regulatory minimum ................. 4.00 4.00 4.00
Well-capitalized minimum ........... 6.00 6.00 6.00
Total risk based ........................ 12.75% 13.09% 13.18%
Regulatory minimum ................. 8.00 8.00 8.00
Well-capitalized minimum ........... 10.00 10.00 10.00
Leverage ................................ 9.96% 10.06% 10.14%
Regulatory minimum ................. 4.00 4.00 4.00
Well-capitalized minimum ........... 5.00 5.00 5.00
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The table below sets forth the Company's ratios as of March 31, 2006, December
31, 2005, and March 31, 2005, the regulatory minimum capital ratios, and the
regulatory minimum capital ratios for well-capitalized companies:
March 31, December 31, March 31,
2006 2005 2005
----- ---- ----
Tier 1 risk based ....................... 9.75% 9.91% 9.59%
Regulatory minimum ................. 4.00 4.00 4.00
Well-capitalized minimum ........... 6.00 6.00 6.00
Total risk based ........................ 12.85% 13.27% 13.70%
Regulatory minimum ................. 8.00 8.00 8.00
Well-capitalized minimum ........... 10.00 10.00 10.00
Leverage ................................ 8.36% 8.40% 8.14%
Regulatory minimum ................. 4.00 4.00 4.00
Well-capitalized minimum ........... 5.00 5.00 5.00
All capital ratios at the Bank and Company decreased from December 31, 2005 to
March 31, 2006, as the assets of the Bank and the Company grew at a more rapid
pace than capital. All ratios for the Bank and the Company are greater than the
minimum capital ratios for well-capitalized companies as of March 31, 2006.
Liquidity is the measure of the Bank's ability to fund customer's needs for
borrowings and deposit withdrawals. In the first quarter of 2006, the Company's
principal sources of funds have been the acquisition of customers' deposits,
repayments of loans, use of Federal Home Loan advances and other funds from bank
operations.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements, which are based on assumptions and
estimates and describe the Company's future plans, strategies and expectations,
are generally identifiable by the use of the words "anticipate," "will,"
"believe," "estimate," "expect," "intend," "seek," or similar expressions. These
forward-looking statements may address, among other things, the Company's
business plans, objectives or goals for future operations, our forecasted
revenues, earnings, assets or other measures of performance. These
forward-looking statements are subject to risks, uncertainties and assumptions.
Important factors that could cause actual results to differ materially from the
forward-looking statements made or incorporated by reference in this report
include, but are not limited to:
- the strength of the United States economy in general and the strength of the
Bowling Green economy in particular;
- changes in interest rates, yield curves and interest rate spread
relationships;
- deposit flows, cost of funds, and cost of deposit insurance on premiums;
- changes in the quality or composition of the Company's loan or investment
portfolios, including adverse developments in borrower industries or in the
repayment ability of individual borrowers or issuers;
- increased competition or market concentration;
- changes in tax or accounting principles;and
- new state or federal legislation, regulations or the initiation or outcome of
litigation.
If one or more of these risks or uncertainties materialize, or if any of the
Company's underlying assumptions prove incorrect, the Company's actual results,
performance or achievements may vary materially from future results, performance
or achievements expressed or implied by these forward-looking statements. In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I in our Annual Report on Form 10-KSB for
the year ended December 31, 2005, which could materially affect our business,
financial condition or future results. The risks described in our Annual Report
on Form 10-KSB are not the only risks facing the Company. Additional risks and
uncertainties not currently known to the Company or that it currently deems to
be immaterial also may materially adversely affect the Company's business,
financial condition and/or operating results.
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PART II - OTHER INFORMATION
Item 6. Exhibits
The exhibits listed on the Exhibit Index of this Form 10-QSB/A are filed as a
part of this report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CITIZENS FIRST CORPORATION
Date: September 5, 2006 /s/ Mary D. Cohron
------------------
Mary D. Cohron
President and Chief Executive Officer
(Principal Executive Officer)
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EXHIBITS
3.1 Restated Articles of Incorporation of Citizens First Corporation
(incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form SB-2 (No. 333-103238)).
3.2 Amended and Restated Bylaws of Citizens First Corporation (incorporated
by reference to Exhibit 3 of the Company's Form 8-K dated April 24,
2006.).
3.3 Articles of Amendment to Amended and Restated Articles of Incorporation
of Citizens First Corporation (incorporated by reference to Exhibit 3.3
of the Company's Form 10-QSB dated June 30, 2004.)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act.
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350.
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