UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Date of Report (date of earliest event reported) August 31, 1994
Trans Financial Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Kentucky 0-13030 61-1048868
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation
or organization)
500 East Main Street, Bowling Green, Kentucky 42101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502)781-5000
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits.
A. Financial statements
The following consolidated financial statements of Kentucky Community Bancorp,
Inc., notes related thereto and independent auditors' report thereon are filed
as a part of this report:
1. Independent Auditors' Report;
2. Consolidated Balance Sheets as of December 31, 1993 and 1992;
3. Consolidated Statements of Income for the years ended December 31,
1993, 1992 and 1991;
4. Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1993, 1992 and 1991;
5. Consolidated Statements of Cash Flows for the years ended December
31, 1993, 1992 and 1991; and
6. Notes to Consolidated Financial Statements.
B. Exhibits
The following exhibits are filed as a part of this report:
99. Supplemental Consolidated Financial Statements of Trans
Financial Bancorp, Inc. As of December 31, 1993 and 1992 and for the years ended
December 31, 1993, 1992 and 1991, related notes thereto and report of
independent auditors thereon.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Trans Financial Bancorp, Inc.
(Registrant)
Date: December 6, 1994 By:/s/ Vince A. Berta
Vince A. Berta
Executive Vice President
and Chief Financial Officer
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1993 and 1992
With Independent Auditors' Report Thereon
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Kentucky Community Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Kentucky
Community Bancorp, Inc. and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements on February 15,
1994, the Corporation merged into Trans Financial Bancorp, Inc.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kentucky Community
Bancorp, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Corporation adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
Louisville, Kentucky
March 18, 1994
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1992
(In thousands, except share data)
Assets 1993 1992
Cash and due from banks (note 2) $5,435 5,533
Interest bearing deposits with banks 100 199
Federal funds sold and securities purchased under
agreements to resell 9,234 9,851
Securities available for sale (amortized cost of $40,106
in 1993 and market value of $18,944 in 1992) (note 3) 40,853 18,386
Investment securities (approximate market value $12,237
in 1993 and $26,756 in 1992) (note 3) 12,061 26,158
Loans (note 4) 105,396 102,817
Less:
Allowance for loan losses 1,826 1,980
Unearned income 210 369
Net loans 103,360 100,468
Premises and equipment (note 5) 2,142 2,378
Other assets (note 9) 3,951 4,518
$177,136 167,491
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing $24,777 22,599
Interest bearing (note 6) 134,666 128,290
Total deposits 159,443 150,889
Accrued interest, taxes payable and
other liabilities 1,591 1,050
Notes payable (note 7) 2,860 1,241
Subordinated debentures (note 8) - 2,348
Total liabilities 163,894 155,528
Stockholders' equity (notes 10 and 13):
Preferred stock, without par value, $500 stated value;
authorized 199,981 shares; none issued - -
Common stock, without par value, $2.50 stated
value; authorized 300,000 shares; issued
260,956 shares 1,305 1,305
Additional paid-in capital 943 913
Retained earnings 10,532 9,800
Treasury stock, 2,055 and 3,692 common shares in 1993
and 1992, respectively (31) (55)
Unrealized net gain on securities available for sale,
net of tax (note 3) 493 -
Total stockholders' equity 13,242 11,963
Commitments and contingent liabilities (note 12)
$177,136 167,491
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1993, 1992 and 1991
(In thousands, except share data)
1993 1992 1991
Interest income:
Loans, including fees $8,609 $9,369 $10,365
Interest bearing deposits with banks 16 26 28
Federal funds sold and securities purchased
under agreements to resell 227 270 601
U.S. Treasury and Federal agencies 2,425 2,541 2,740
Obligations of states and political
subdivisions 565 596 695
Other 131 121 167
Total interest income 11,973 12,923 14,596
Interest expense:
Deposits 4,466 5,361 7,606
Federal funds purchased and securities sold
under agreements to repurchase - 17 56
Notes payable 141 108 217
Subordinated debentures 126 235 235
Total interest expense 4,733 5,721 8,114
Net interest income 7,240 7,202 6,482
Provision for loan losses (note 4) 441 838 772
Net interest income after provision
for loan losses 6,799 6,364 5,710
Non-interest income:
Trust income 267 230 198
Service charges on deposit accounts 975 904 881
Securities gains (losses) (notes 3) 28 (8) (16)
Other 382 388 333
Total non-interest income 1,652 1,514 1,396
Non-interest expenses:
Salaries and employee benefits (note 11) 3,409 2,774 2,638
Net occupancy expense 267 294 251
Furniture and equipment expense 792 728 654
Deposit insurance 342 336 302
Other 2,329 2,025 1,903
Total non-interest expense 7,139 6,157 5,748
Income before income taxes and cumulative
effect of change in accounting principle 1,312 1,721 1,358
Income tax expense (note 9) 429 372 293
Income before cumulative effect
of change in accounting for
income taxes 883 1,349 1,065
Cumulative effect of change in accounting for
income taxes (note 9) 81 - -
Net income $964 1,349 1,065
Income per share before cumulative effect of
change in accounting principle $3.43 5.24 4.14
Cumulative effect of change in accounting
for income taxes .31 - -
Net income per common share $3.74 $5.24 $4.14
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1993, 1992 and 1991
(In thousands, except share data)
<TABLE>
<CAPTION>
Preferred Common Unrealized Unrealized
stock stock loss on net gain on
Number Number marketable securities
of of Retained Treasury equity available
shares Amount shares Amount Surplus earnings stock securities for sale
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1990 15 $8 130,478 $1,305 $912 $7,650 $(61) $(91) $-
Net income - - - - - 1,065 - - -
Dividends; $.50 per
common share - - - - - (129) - - -
Repurchase of preferred
stock (7) (4) - - - - - - -
Reissuance of treasury
stock, 50 common shares - - - - 1 - 2 - -
Retirement of treasury
stock, preferred shares(8) (4) - - - - 4 - -
Decrease in unrealized loss
on marketable equity
securities - - - - - - - 44 -
Balance at
December 31, 1991 - - 130,478 1,305 913 8,586 (55) (47) -
Net income - - - - - 1,349 - - -
Dividends; $.525 per
common share - - - - - (135) - - -
Two-for-one common
stock split (note 16) - - 130,478 - - - - - -
Decrease in unrealized loss
on marketable equity
securities - - - - - - - 47 -
Balance at
December 31, 1992 - - 260,956 1,305 913 9,800 (55) - -
Net income - - - - - 964 - - -
Dividends; $.90 per
common share - - - - - (232) - - -
Stock options exercised.
1,590 common shares - - - - 28 - 23 - -
Net unrealized gain on
securities available
for sale, net of tax - - - - - - - - 493
Reissuance of treasury stock,
47 common shares - - - - 2 - 1 - -
Balance at
December 31, 1993 - $- 260,956 $1,305 $943 $10,532 $(31) $- $493
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
(In thousands)
1993 1992 1991
Operating activities:
Net income 964 1,349 1,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 441 838 772
Depreciation, amortization and accretion,
net 757 716 483
Deferred income tax benefit (24) (25) (40)
Loss (gain) on sale of securities (28) 8 16
Decrease (increase) in other assets (25) 430 213
(Decrease) increase in other
liabilities 541 (321) (259)
Net cash provided by operating activities 2,626 2,995 2,250
Lending and investing activities:
Net change in interest bearing deposits
with banks 99 - 151
Net change in Federal funds sold and
securities purchased under agreements
to resell 617 1,634 (2,096)
Net change in other short-term investments - 600 191
Purchases of investment securities (16,324) (18,792) (14,580)
Proceeds from sales of investment
securities - 4,598 3,727
Proceeds from maturities of investment
securities 12,244 12,930 7,917
Purchases of securities available for sale (10,222) - -
Proceeds from sales of securities
available for sale 1,078 - -
Proceeds from maturities of securities
available for sale 5,420 - -
Net increase in loans (3,318) (4,852) (3,025)
Proceeds from sales of reacquired assets 210 810 635
Purchases of premises and equipment (175) (327) (105)
Net cash used in lending and
investing activities (10,371) (3,399) (7,185)
Deposit and financing activities:
Net increase in deposits 8,554 2,661 4,745
Net change in Federal funds purchased and
securities sold under agreements to
repurchase - (1,398) 435
Advances of notes payable 3,374 1,238 -
Repayment of notes payable (1,755) (2,088) (781)
Retirement of subordinated debt (2,348) - -
Cash dividends paid (232) (135) (129)
Reissuance of common stock from treasury 54 - 3
Repurchase of preferred stock - - (4)
Net cash provided by deposit and
financing activities 7,647 278 4,269
Net decrease in cash and cash equivalents (98) (126) (666)
Cash and cash equivalents at beginning of year 5,533 5,659 6,325
Cash and cash equivalents at end of year $5,435 $5,533 $5,659
Income tax payments totaled $725,000 in 1993, $399,000 in 1992 and $321,000 in
1991.
Interest payments totaled $4,597,000 in 1993, $6,042,000 in 1992 and $8,392,000
in 1991.
Non-cash transactions were as follows:
1993 1992 1991
Transfer of loans to reacquired assets $259 $325 $606
Transfer of other assets to loans 274 - -
Decrease in unrealized loss on marketable
equity securities - 47 44
Increase in unrealized gains on securities
available for sale 747 - -
Investment securities transferred to
securities available for sale 18,133 18,386 -
See accompanying notes to consolidated financial statements.
<PAGE>
KENTUCKY COMMUNITY BANCORP, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993, 1992 and 1991
(In thousands, except share data)
(1) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Kentucky
Community Bancorp, Inc. (the Corporation) and its wholly-owned
subsidiaries, The State National Bank of Maysville (State National),
Farmers Liberty Bank (Farmers Liberty) and Peoples First Bank of Morehead
(Peoples), collectively (the Banks). Significant intercompany items have
been eliminated in consolidation. In preparing the consolidated financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of
the balance sheets and revenues and expenses for the period. Actual
results could differ from those estimates. The accounting policies and
methods of applying those policies which have a significant effect on the
financial statements are summarized below. Certain prior year amounts
have been reclassified for comparability with 1993 presentation.
On February 15, 1994, the stockholders of the Corporation approved an
Agreement and Plan of Reorganization and a related Plan of Merger, which
provided for the merger of the Corporation with and into Trans Financial
Bancorp, Inc., in a business combination to be accounted for as a pooling-
of-interests. This transaction was consummated on February 15, 1994, at
which time each outstanding share of the Corporation was converted into
5.3 shares of Trans Financial Bancorp, Inc. common stock.
Securities
Effective December 31, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Accordingly, all debt
securities in which the Corporation does not have the ability or
management does not have the positive intent to hold to maturity and all
marketable equity securities are classified as securities available for
sale and are carried at market value. Unrealized gains and losses on
securities available for sale are reported as a separate component of
stockholders' equity (net of income taxes) beginning December 31, 1993.
Securities classified as available for sale prior to December 31, 1993 are
reported at the lower of aggregate cost or market value. If management
has the intent and the Corporation has the ability at the time of purchase
to hold securities until maturity, they are classified as investments and
carried at amortized historical cost. The Corporation has no securities
classified as trading securities. The specific identification method is
used to determine the cost of securities sold. Amortization of premiums
and accretion of discounts is recorded by a method approximating level
yield. If it is determined that market declines are other than temporary,
losses are recognized as securities losses in the consolidated statement
of income.
Loans
Loans are stated at the unpaid principal balance. Interest income on
loans is recorded on the accrual basis except for those loans in a non-
accrual income status. The accrual of interest income is discontinued on
loans, except consumer loans, which become 90 days past due as to
principal or interest unless they are well secured and in the process of
collection. Such loans remain on a non-accrual status until factors
indicating doubtful collectibility no longer exist. Consumer loans which
become 120 days past due are charged to the allowance for loan losses
unless they are well secured and in the process of collection. Unearned
income, arising principally from consumer installment loans, is reflected
as a reduction of loans and is recognized as income using a method which
approximates the interest method.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level adequate to absorb
probable losses in the loan portfolio. Management determines the adequacy
of the allowance based upon reviews of individual credits, recent loss
experience, current economic conditions, and such other factors that, in
management's judgment, deserve current recognition in estimating loan
losses. The allowance for loan losses is increased by the provision for
loan losses and reduced by net loan charge-offs.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated deprecation.
Depreciation of premises and equipment is computed using the straight-line
method over the estimated useful lives of the assets.
Other Assets
Included in other assets is real estate acquired in settlement of loans
and loans classified as in-substance foreclosures which are carried at the
lower of fair value minus estimated selling costs or cost. Any write
downs to fair value at the date of acquisition are charged to the
allowance for loan losses. Expenses incurred in maintaining assets,
subsequent write downs to reflect declines in value and realized gains or
losses are reflected in income for the period. Also included in other
assets is accrued interest receivable and the excess of cost over fair
value of net assets acquired in business combinations (goodwill) which is
being amortized on a straight-line basis over 20 years. Unamortized
amounts of goodwill were $1,687,000 and $1,824,000 at December 31, 1993
and 1992, respectively.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under the asset and liability method of Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109,
the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Effective January 1, 1993, the Corporation adopted Statement 109 on a
prospective basis and has reported the cumulative effect of that change in
the method of accounting for income taxes in the 1993 consolidated
statement of income.
The Corporation previously used the asset and liability method under
Statement 96. Under the asset and liability method of Statement 96,
deferred tax assets and liabilities were recognized for all events that
had been recognized in the financial statements. Under Statement 96, the
future tax consequences of recovering assets or settling liabilities at
their financial statement carrying amounts were considered in calculating
deferred taxes. Generally, Statement 96 prohibited consideration of any
other future events in calculating deferred taxes.
Net Income Per Share
On December 17, 1991, the Corporation's Board of Directors declared a two-
for-one stock split effected in the form of a 100% stock dividend, payable
January 15, 1992. All per share information in these financial statements
has been restated to give effect to this stock split. The weighted
average number of shares outstanding, after giving effect to this stock
split was 257,821 in 1993, 257,264 in 1992 and 257,226 in 1991.
Statement of Cash Flows
For purposes of the statement of cash flows, the Corporation considers
cash and due from banks to be cash equivalents.
(2) Restrictions on Cash and Due from Banks
The Banks are required to maintain average reserve balances relating to
customer deposits, either with the Federal Reserve Bank or in the Banks'
vaults. At December 31, 1993, the amount of those required and maintained
reserve balances was approximately $1,745,000.
(3) Securities
The book values and approximate market values of investment securities at
December31,1993 and 1992 follows:
1993 Amortized Unrealized Market
(In thousands) cost Gains Losses value
Obligations of states and
political subdivisions $ 10,511 270 91 10,690
Other debt securities 1,550 14 17 1,547
$ 12,061 284 108 12,237
1992 Amortized Unrealized Market
(In thousands) cost Gains Losses value
Federal agencies $ 10,456 216 61 10,611
Asset-backed securities 6,318 193 2 6,509
Obligations of states and
political subdivisions 8,277 264 29 8,512
Marketable equity securities
and other securities 1,107 17 - 1,124
$ 26,158 690 92 26,756
Effective December 31, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". In conjunction with the
adoption of Statement 115, $18,133,000 of investment securities were
transferred to securities available for sale. Securities available for
sale at December 31, 1992, are carried at the lower of aggregate cost or
market value.
Amortized cost and approximate market values of securities available for
sale at December31,1993 and 1992 follows:
1993 Amortized Unrealized Market
(In thousands) cost Gains Losses value
U.S. Treasury $ 21,973 564 13 22,524
Federal agencies 8,641 179 11 8,809
Asset-backed securities 9,109 66 38 9,137
Marketable equity
securities 383 - - 383
40,106 809 62 40,853
1992 Amortized Unrealized Market
(In thousands) cost Gains Losses value
U.S. Treasury $ 18,386 571 13 18,944
A summary of debt securities as of December 31, 1993 based on contractual
maturity is presented in the table below. Actual maturities may differ
from contractual maturities because issuers may have the right to call or
prepay obligations with or without prepayment penalties:
Investment Securities
Securities Available for Sale
Amortized Market Amortized Market
(In thousands) cost value cost value
Due within one year $ 1,571 1,582 7,164 7,286
Due after one year
through five years 5,260 5,442 22,317 22,881
Due after five years
through ten years 4,706 4,697 1,133 1,166
Due after ten years 524 516 - -
12,061 12,237 30,614 31,333
Asset-backed securities - - 9,109 9,137
$ 12,061 12,237 39,723 40,470
Gross gains of $71,000, $49,000 and $33,000 and gross losses of $43,000,
$57,000 and $49,000 were realized on sales of securities in 1993, 1992 and
1991, respectively.
Securities with a par value of approximately $19,094,000 at December 31,
1993 and $12,455,000 at December 31, 1992 were pledged to secure public
and trust deposits and certain borrowings.
(4) Loans
The composition of loans at December 31, 1993 and 1992 follows:
1993 1992
(In thousands)
Commercial $ 9,614 11,421
Real estate mortgage 60,110 56,199
Consumer 18,339 19,895
Agricultural 16,902 15,190
Other 431 112
$ 105,396 102,817
The amount of non-accrual and restructured loans at December 31, 1993 and
1992 totaled approximately $539,000 and $714,000, respectively. Interest
that would have been recorded if all such loans were on a current status
was $58,000 in 1993 and $90,000 in 1992. The amount of interest income
that was recorded for such loans was approximately $5,000 and $33,000 in
1993 and 1992, respectively.
Loans to directors and their associates, including loans to affiliated
companies of which directors are principal owners, and executive officers
amounted to approximately $751,000 and $898,000 at December 31, 1993 and
1992, respectively. These loans were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for other customers, and do not, in the opinion of management,
involve more than normal credit risk.
Loans outstanding and related unfunded commitments are primarily
concentrated within the Banks' markets which encompass Northeast Kentucky.
The Banks' credit exposure is diversified, with secured and unsecured
loans to consumers, small business, farmers and corporations. Although
the Banks have diversified loan portfolios, a customer's ability to honor
contracts is reliant upon the economic stability of the geographic region
and/or industry in which they do business. No single industry
concentration exceeds 10% of loans.
An analysis of the changes in the allowance for loan losses for the years
ended December 31, 1993, 1992 and 1991 follows:
1993 1992 1991
(In thousands)
Balance at January 1 $ 1,980 1,791 1,641
Provision for loan losses 441 838 772
Loans charged-off (818) (775) (689)
Recoveries 223 126 67
Net loan charge-offs (595) (649) (622)
Balance at December 31 $ 1,826 1,980 1,791
(5) Premises and Equipment
A summary of premises and equipment follows:
December 31
1993 1992
(In thousands)
Land and buildings $ 3,254 3,224
Furniture and equipment 3,572 3,428
6,826 6,652
Less accumulated depreciation 4,684 4,274
$ 2,142 2,378
(6) Deposits
Time certificates of deposit outstanding in denominations of $100,000 or
more were approximately $16,003,000 and $12,378,000 at December 31, 1993
and 1992, respectively.
(7) Notes Payable
A summary of notes payable at December 31, 1993 and 1992 follows:
1993 1992
(In thousands)
Secured note payable to bank; payable in
quarterly installments of various amounts
maturing May 1998; interest at 6.7%,
due quarterly $ 2,818 -
Secured note payable to bank; due September
1995; monthly principal payments of
$4,667; interest at the prime interest
rate (6%), due quarterly - 139
Secured note payable to bank; due September
1995; annual principal payments of
$220,000 in 1993 and 1994; interest at
the prime interest rate (6%) , due
quarterly - 1,021
6-5/8% note; payable in annual
installments of $44,000, including
interest, through 1994 42 81
$ 2,860 1,241
The terms of the secured notes paid out in 1993 included a number of
restrictive covenants, including maintaining minimum capital to asset
ratios at the Banks and a minimum net worth on a consolidated basis. If
the terms of the restrictive covenants were not met, the lender may have
declared these notes due and payable. The secured notes at December 31,
1993 and 1992 were collateralized by all the issued and outstanding common
stock of State National.
Maturities of the notes payable for the years ending December 31, are
$482,000 in 1994, $480,000 in 1995, $500,000 in 1996, $520,000 in 1997 and
$878,000 thereafter.
State National has entered into an agreement with the Federal Home Loan
Bank of Cincinnati (FHLB) which enables State National to borrow up to
$2,709,362. Advances from the FHLB would be collateralized by certain
first mortgage loans under a blanket mortgage collateral agreement and
stock in the FHLB.
(8) Subordinated Debentures
The Corporation issued 10% subordinated debentures due December 31, 2009
which were subordinated to all indebtedness of the Corporation to
financial institutions. During 1993, the debentures were paid out with
proceeds provided from the note payable to bank discussed in note 7.
(9) Income Taxes
As discussed in note 1, the Corporation adopted Statement 109 on a
prospective basis as of January 1, 1993. The approximate cumulative
effect of this change in accounting for income taxes of $81,000 is
determined as of January 1, 1993 and is reported separately in the
consolidated statement of income for the year ended December 31, 1993.
Prior years' financial statements have not been restated to apply the
provisions of Statement 109.
Total income tax expense for the year ended December 31, 1993 was
allocated as follows:
Income from continuing operations $ 429
Stockholders' equity for unrealized gain on
securities available for sale 254
$ 683
The components of income tax expense (benefit) from operations were as
follows:
Year ended December 31
(In thousands) 1993 1992 1991
Current $ 453 498 333
Alternative minimum tax credit - (101) -
Deferred (24) (25) (40)
$ 429 372 293
An analysis of the difference between the statutory and effective tax
rates (provision for income taxes as a percentage of income before income
taxes) for income from operations for 1993, 1992 and 1991 follows:
1993 1992 1991
U.S. Federal income tax rate 34.0% 34.0% 34.0%
Changes from statutory rate
resulting from:
Tax exempt interest (17.9) (14.1) (20.1)
Amortization of goodwill 3.5 2.7 3.4
Alternative minimum tax credit - (5.9) -
Expenses of anticipated business
combination 11.3 - -
Other, net 1.8 4.9 4.3
32.7% 21.6% 21.6%
The sources of temporary differences and the resulting deferred income tax
expense (benefit) for 1992 and 1991 follows:
Year ended December 31
(In thousands) 1992 1991
Depreciation $ (21) (5)
Loan loss provision (64) (55)
Accounting differences for securities 3 (33)
Deferred tax adjustment for effect of
alternative minimum tax 44 29
Other 13 24
$ (25) (40)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1993 and 1992 are presented below:
(In thousands) 1993 1992
Deferred tax liabilities:
Premises and equipment $ (148) (138)
Securities available for sale (273) (21)
Other - (48)
Total deferred liabilities (421) (207)
Deferred tax assets:
Allowance for loan losses $ 342 397
Pension and severance liabilities 135 -
Capital loss carryforward 29 -
Other, net 14 -
Total gross deferred tax assets 520 397
Less valuation allowance (58) -
Net deferred tax assets $ 41 190
The valuation allowance for deferred tax assets as of January 1, 1993 was
$58,000. There was no change in the total valuation allowance for the
year ended December 31, 1993. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Corporation will
realize the benefits of these deductible differences, net of the existing
valuation allowances at December 31, 1993.
(10) Stockholders' Equity
The Corporation's principal source of funds for dividend and interest
payments is dividends received from the Banks. Under applicable banking
laws, bank regulatory authorities must approve the declaration of
dividends in any year in an amount in excess of the sum of net income of
that year, as defined, and retained earnings of the preceding two years.
At December 31, 1993, retained earnings of the Corporation's subsidiary
banks were approximately $8,578,000 of which, at January 1, 1994,
approximately $1,552,000 was available for the payment of dividends
without approval by bank regulatory authorities.
(11) Employee Benefit Plans
The Corporation has a non-contributory defined benefit pension plan
covering all full-time employees who meet certain requirements as to age
and length of service. During 1991, the plan was amended to include
employees of all subsidiaries of the Corporation. Prior to the amendment,
only employees of State National were included in the plan. The
Corporation's funding policy is to contribute at least the minimum amount
required by the Employee Retirement Income Security Act of 1974.
On May 31, 1993, the Corporation froze the plan, thereby eliminating the
accrual of benefits for participants after that date. The Corporation has
expressed the intent to terminate the plan during 1994. The consolidated
financial statements for 1993 include the recognition of the curtailment
of the plan for the freezing in 1993 and partial recognition of prior
unrecognized loss in anticipation of plan termination.
The following table sets forth the funded status of the plan and amounts
recognized in the consolidated balance sheet at December 31, 1993 and
1992:
1993 1992
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,300,000 in 1993 and
$684,000 in 1992 $ 1,340 $ 706
Projected benefit obligation for
services rendered to date $ (1,340) (1,092)
Plan assets at fair value 1,080 959
Plan assets less than projected
benefit obligation (260) (133)
Unrecognized net transition asset
being recognized over 17 years (242) (266)
Unrecognized net loss from past
experiencedifferent from that
assumed 247 395
Unrecognized prior service cost - 43
(Accrued) prepaid pension cost
included in other liabilities in
1993 and other assets in 1992 $ (255) 39
Net pension costs for 1993, 1992 and 1991 included the following expense
(income) components:
(In thousands) 1993 1992 1991
Service cost-benefits earned
during the year $ 30 69 41
Interest cost on projected
benefit obligation 71 75 53
Actual return on plan asset (68) (16) (129)
Amortization of transition
asset (24) (24) (24)
Amortization of prior
service cost 1 3 3
Gain (loss) deferred 3 (49) 71
Recognition of prior service
cost due to curtailment 45 - -
Immediate partial recognition of
prior unrecognized loss in
anticipation of plan
termination 309 - -
$ 367 58 15
Plan assets consist of U.S. Treasury Bonds, stocks, corporate bonds and
cash equivalents.
The assumptions used to develop the projected benefit obligation included
a discount rate of 4.5% in 1993 and 7.75% for 1992, and an expected rate
of increase in compensation level of 5.5% in 1992. The expected long-term
rate of return on assets was 8.0% in 1993 and 1992.
Effective June 1, 1989, the Corporation established a 401(k) Plan, in
accordance with the provisions of the Internal Revenue Code, in which all
employees qualify for participation. Participants may elect to make
contributions to the 401(k) Plan up to 15% of compensation. The
Corporation contributes $1 for each $3 contributed by a participant, up to
6% of each participant's compensation. The Corporation's contribution
during 1993, 1992 and 1991 totaled approximately $31,000, $29,000 and
$26,000, respectively.
(12) Commitments and Contingent Liabilities
As of December 31, 1993, the Banks had outstanding various commitments and
contingent liabilities arising in the normal course of business, such as
standby letters of credit and commitments to extend credit, which are
properly not reflected in the consolidated financial statements. In
management's opinion, these commitments to extend credit of $14,821,000,
including standby letters of credit totaling approximately $1,200,000,
represent normal banking transactions and no significant losses are
anticipated to result therefrom. The Banks' exposure to credit loss in
the event of nonperformance by the other party to these commitments is
represented by the contractual amount of these instruments. The Banks use
the same credit and collateral policies in making commitments and
conditional guarantees as they do for on balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Banks
evaluate each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Banks upon
extension of credit, is based on management's credit evaluation of the
customer. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Banks to guarantee a third party. Those
guarantees are primarily issued to support private borrowing arrangements.
Also, as of December 31, 1993 there were various pending legal actions and
proceedings in which claims for damages are asserted. Management, after
discussion with legal counsel and after consideration of possible recourse
to third parties, believes the ultimate result of these legal actions and
proceedings will not have a material adverse effect upon the consolidated
financial statements of the Corporation.
As of December 31, 1993, the Corporation had accrued all known expenses of
the business combination discussed in note 1, including professional fees
and severance liabilities paid on consummation of the transaction of
$328,000 and $142,000, respectively.
(13) Stock Options
The Board of Directors adopted an amended stock option plan effective
September 1, 1992. Stock options remaining under the prior plan expired.
Under the amended stock option plan, options for 2,120 shares of the
common stock of the Corporation were granted to the presidents of the
Corporation and the Banks at $32.50 per share. During 1993, options for
1,590 shares were exercised. The remaining 530 options were exercised in
1994, prior to the merger date as discussed in note 1.
(14) Disclosures About Fair Value of Financial Instruments
The estimated fair value of the Corporation's financial instruments are as
follows:
December 31, 1993 December 31, 1992
Carrying Fair Carrying Fair
(In thousands) amount value amount value
Financial assets:
Cash and short-term
investments $14,769 14,769 15,583 15,583
Securities 52,914 53,090 44,544 45,700
Loans 103,360 104,187 100,468 101,988
Financial liabilities:
Deposits 159,443 160,081 150,889 151,230
Notes payable and
debentures 2,860 2,860 3,589 3,589
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Short-Term Investments
For those short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Securities
For securities, fair value equals quoted market price, if available. If a
quoted market price is not available, fair value is estimated using quoted
market prices for similar securities or dealer quotes.
Loans
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Deposits
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date.
The fair value of fixed maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
Notes Payable and Debentures
Rates currently available to the Corporation for debt with similar terms
and remaining maturities are used to estimate fair value of existing debt.
Limitations
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial
instruments. Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
such other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
The fair value estimates are based on financial instruments without
attempting to estimate the value of assets and liabilities that are not
financial instruments, such as premises and equipment and other assets and
liabilities. Accordingly, the fair value estimates do not represent what
the Corporation is worth on a fair value basis.
Trans Financial Bancorp, Inc.
Supplemental Consolidated Finaincial Statements
December 31, 1993 and 1992
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Trans Financial Bancorp, Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
Trans Financial Bancorp, Inc. and subsidiaries as of December 31, 1993 and 1992,
and the related supplemental consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period then ended. These supplemental consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these supplemental consolidated financial statements based
on our audits. We did not audit the financial statements of certain
consolidated companies whose statements reflect total assets constituting 16
percent and 9 percent and total revenues constituting 17 percent and 9 percent
in 1993 and 1992, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for these
companies, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect to
the merger of Trans Financial Bancorp, Inc. with Kentucky Community Bancorp,
Inc. on February 15, 1994, Peoples Financial Services, Inc. on April 22, 1994,
and FGC Holding Company on August 31, 1994, all of which have been accounted for
as poolings of interest as described in Note 3 to the supplemental consolidated
financial statements. Generally accepted accounting principles proscribe giving
effect to consummated business combinations accounted for by the pooling-of-
interests method in financial statements that do not include the dates of
consummation. However, they will become the historical consolidated financial
statements of Trans Financial Bancorp, Inc. and subsidiaries after financial
statements covering the dates of consummation of the business combinations are
issued.
In our opinion, based on our audits and reports of the other auditors, the
supplemental consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Trans Financial Bancorp,
Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles applicable after financial statements are issued for a period which
includes the dates of consummation of the business combinations.
As discussed in Note 1 to the supplemental consolidated financial statements, in
1993 the Company adopted the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" and No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
KPMG PEAT MARWICK LLP
Louisville, Kentucky
January 25, 1994,
except for Note 3,
which is as of
December 2, 1994
<PAGE>
Trans Financial Bancorp, Inc.
Supplemental Consolidated Balance Sheets
December 31 - In thousands, except share data
1993 1992
Assets
Cash and due from banks $68,533 $65,230
Interest-bearing deposits with banks 447 8,462
Federal funds sold and
resale agreements 32,778 67,678
Mortgage loans held for sale 45,178 24,997
Securities available for sale (amortized
cost of $238,861 as of December 31, 1993;
and market value of $53,298 as of
December 31, 1992) 240,036 51,925
Securities held to maturity (market
value of $148,931 as of December 31, 1993;
and $331,697 as of December 31, 1992) 145,612 326,218
Loans, net of unearned income 1,006,796 780,846
Less allowance for loan losses 12,505 9,596
Net loans 994,291 771,250
Premises and equipment, net 33,393 27,422
Other assets 37,185 37,444
Total assets $1,597,453 $1,380,626
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $169,828 $143,380
Interest bearing 1,206,399 1,078,670
Total deposits 1,376,227 1,222,050
Fed funds purchased and
repurchase agreements 29,704 26,993
Other short-term borrowings 15,000 600
Long-term debt 54,217 21,957
Other liabilities 10,269 9,620
Total liabilities 1,485,417 1,281,220
Shareholders' equity:
Preferred stock 1,010 1,010
Common stock, no par value. Authorized
25,000,000 shares; issued and
outstanding 11,149,722 and
8,191,520 shares, respectively 20,906 20,479
Additional paid-in capital 42,256 40,913
Retained earnings 51,006 41,039
Unrealized net gain (loss) on
securities available for sale,
net of tax 719 -
Unrealized loss on marketable
equity securities - (163)
Employee Stock Ownership Plan shares
purchased with debt (3,861) (3,872)
Total shareholders' equity 112,036 99,406
Total liabilities and shareholders' equity $1,597,453 $1,380,626
See accompanying notes to supplemental consolidated financial statements.
<PAGE>
Trans Financial Bancorp, Inc.
Supplemental Consolidated Statements of Income
Years Ended December 31
In thousands, except per share data 1993 1992 1991
Interest income
Loans, including fees $78,812 $68,683 $59,046
Federal funds sold and resale
agreements 976 867 1,399
U.S. Treasury and Federal agencies 19,856 22,737 16,670
State and municipal obligations 2,211 1,941 2,039
Other securities 844 809 310
Interest-bearing deposits with banks 120 306 263
Total interest income 102,819 95,343 79,727
Interest expense
Deposits 41,486 44,745 43,920
Federal funds purchased
and repurchase agreements 673 982 704
Long-term debt and other
borrowings 2,091 1,036 2,195
Total interest expense 44,250 46,763 46,819
Net interest income 58,569 48,580 32,908
Provision for loan losses 2,794 2,618 2,242
Net interest income after
provision for loan losses 55,775 45,962 30,666
Non-interest income
Service charges on deposit accounts 6,351 4,954 4,232
Loan servicing fees 2,183 1,519 412
Gains on sales of securities, net 1,149 890 204
Gains (losses) on sales of mortgage
loans held for sale, net 949 1,366 691
Trust services 1,133 943 854
Brokerage fees 849 644 338
Other 4,418 3,477 2,506
Total non-interest income 17,032 13,793 9,237
Non-interest expenses
Compensation and benefits 23,218 17,838 13,345
Net occupancy expense 4,071 3,012 2,264
Furniture and equipment expense 4,243 3,205 2,238
Deposit insurance 2,778 2,365 1,563
Professional fees 2,418 1,749 1,287
Postage, printing & supplies 2,957 2,327 1,708
Communications 1,024 690 397
Other 12,121 8,704 6,426
Total non-interest expenses 52,830 39,890 29,228
Income before income taxes and
cumulative effect of change
in accounting principle 19,977 19,865 10,675
Income tax expense 6,223 6,400 3,083
Income before cumulative effect
of change in accounting principle 13,754 13,465 7,592
Cumulative effect of change in
accounting principle 296 - -
Net income $14,050 $13,465 $7,592
Net income applicable
to common stock $13,969 $13,328 $7,198
Primary earnings per share $1.24 $1.25 $1.03
Fully-diluted earnings per share $1.24 $1.25 $0.99
See accompanying notes to consolidated financial statements.
<PAGE>
Trans Financial Bancorp, Inc.
Supplemental Consolidated Statements of Changes in Shareholders' Equity
(In thousands, except share and per share data)
Preferred Stock Common Stock
Additional
Number Number Paid-in
of shares Amount of shares Amount Capital
Balance, December 31, 1990,
as previously reported 39,758 $6,787 1,557,320 $5,187 $5,838
Adjustments for acquisitions accounted
for as using the pooling-of-interests
method of accounting (Note 3):
KCB 15 8 766,670 2,556 (400)
PFS 635,927 2,120 3,019
FGC 1,010 1,010 590,625 1,969 (469)
Balance, December 31, 1990,
as restated 40,783 $7,805 3,550,542 $11,832 $7,988
Net income for the year
Cash dividends declared:
Common stock, $.36 per share
Preferred stock
Redemption of preferred stock:
Class A, 1988 Series (25,000) (2,500)
Class A, 1990 Series (667) (2,001)
Other (21) (5)
Common stock issued in public offering 931,564 3,093 9,361
Conversion of debentures 73,201 213 706
Four-for-three stock split 1,503,816
Retire treasury stock (8) (4) 4
Reissue treasury stock 530 1 2
Decrease in unrealized loss
on marketable equity securities
ESOP debt reduction - - - - -
Balance, December 31, 15,087 $3,295 6,059,653 $15,139 $18,061
1991
Net income for the year
Cash dividends declared:
Common stock, $.44 per share
Preferred stock
Redemption of preferred stock:
Class A, 1990 Series (333) (999)
Other (13,744) (1,286)
Common stock issued in public offering 1,265,000 3,172 13,944
Common stock issued in connection
with business combination accounted
for as a purchase 412,389 1,031 4,984
Stock options exercised 1,914 5 15
Common stock issued in connection
with dividend reinvestment and stock
purchase plans and other issuances 37,102 93 498
Conversion of debentures 415,462 1,039 3,411
Increase in unrealized loss
on marketable equity securities
ESOP shares purchased - - - - -
with debt
Balance, December 31, 1,010 $1,010 8,191,520 $20,479 $40,913
1992
Net income for the year
Cash dividends declared:
Common stock, $.51 per share
Preferred stock
Stock options exercised 8,577 16 36
Common stock issued in connection
with dividend reinvestment and stock
purchase plans and other issuances 47,613 89 738
Four-for-three stock split 2,730,025 (6)
Common stock issued in public offering 171,738 322 572
Decrease in unrealized loss
on marketable equity securities
Net unrealized gain on securities
available for sale, net of tax
ESOP debt reduction
Reissue treasury stock - - 249 - 3
Balance, December 31, 1,010 $1,010 11,149,722 $20,906 $42,256
1993
See accompanying notes to consolidated financial statements.
<PAGE>
Trans Financial Bancorp, Inc.
Supplemental Consolidated Statements of Changes in Shareholders' Equity
(Continued)
(In thousands, except share Unrealized Employee
and per share data) Unrealized Net Gain Stock
Loss on (Loss) on Ownership
Marketable Securities Plan Shares
Retained Equity Available Purchased
Earnings Securities for Sale With Debt Total
Balance, December 31, 1990,
as previously reported $12,315 $(676) $- $(1,405) $28,046
Adjustments for acquisitions accounted
for as using the pooling-of-interests
method of accounting (Note 3):
KCB 7,650 (91) - - 9,723
PFS 2,201 - - - 7,340
FGC 3,179 - - - 5,689
Balance, December 31, 1990,
as restated $25,345 $(767) $- $(1,405) $50,798
Net income for the year 7,592
7,592
Cash dividends declared:
Common stock, $.36 per
share (1,502) (1,502)
Preferred stock (394) (394)
Redemption of preferred stock:
Class A, 1988 Series (2,500)
Class A, 1990 Series (2,001)
Other (5)
Common stock issued in public offering 12,454
Conversion of debentures 919
Four-for-three stock split -
Retire treasury stock -
Reissue treasury stock 3
Decrease in unrealized loss 606 606
on marketable equity securities
ESOP debt reduction - - - 200 200
Balance, December 31, 1991 $31,041 $(161) $- $(1,205) $66,170
Net income for the year 13,465 13,465
Cash dividends declared:
Common stock, $.44
per share (3,330) (3,330)
Preferred stock (137) (137)
Redemption of preferred stock:
Class A, 1990 Series (999)
Other (1,286)
Common stock issued in public offering 17,116
Common stock issued in connection
with business combination accounted
for as a purchase 6,015
Stock options exercised 20
Common stock issued in connection
with dividend reinvestment and stock
purchase plans and other issuances 591
Conversion of debentures 4,450
Increase in unrealized loss
on marketable equity securities (2) (2)
ESOP shares purchased with debt - - (2,667) (2,667)
Balance, December 31, 1992 $41,039 $(163) $- $(3,872) $99,406
Net income for the year 14,050 14,050
Cash dividends declared:
Common stock, $.51 per (4,002) (4,002)
Preferred stock (81) (81)
Stock options exercised 52
Common stock issued in connection
with dividend reinvestment and stock
purchase plans and other issuances 827
Four-for-three stock split (6)
Common stock issued in public offering 894
Decrease in unrealized loss
on marketable equity securities 163 163
Net unrealized gain on securities
available for sale, net of tax 719 719
ESOP debt reduction 11 11
Reissue treasury stock - - - - 3
Balance, December 31, 1993 $51,006 $- $719 $(3,861) $112,036
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Trans Financial Bancorp, Inc.
Supplemental Consolidated Statements of Cash Flows
Years Ended December 31
In thousands, except per share data 1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $14,050 $13,465 $7,592
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 2,794 2,618 2,242
Deferred tax expense (522) (152) (58)
Gains on sales of securities:
Available for sale (1,149) - -
Held to maturity - (890) (204)
Gains on sales of mortgage loans (949) (1,366) (691)
Loss (gain) on sale of premises and equipment 14 (12) (32)
Depreciation and amortization of fixed assets 3,466 2,582 1,863
Amortization of intangible assets 952 688 660
Amortization of premium (accretion of discount)
on securities and loans, net 2,090 668 (336)
Decrease (increase) in accrued interest receivable (1,370) (1,118) (162)
Decrease (increase) in other assets 2,303 2,776 (69)
Increase (decrease) in accrued interest payable (449) (244) (1,004)
Increase (decrease) in other liabilities (2,331) (3,703) 1,325
Decrease (increase) in mortgage loans held for sale (19,232) 4,538 (4,389)
Net cash provided by (used in) operating activities (333) 19,850 6,737
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits
with banks 8,460 13,658 4,409
Net decrease (increase) in federal funds sold
and resale agreements 36,888 (44,384) 19,905
Proceeds from sales of securities:
Available for sale 23,787 8,226 38
Held to maturity - 47,928 9,561
Proceeds from prepayment and call of securities:
Available for sale 3,872 - -
Held to maturity 111,270 75,937 21,641
Proceeds from maturities of securities:
Available for sale 12,920 - -
Held to maturity 44,854 37,990 51,142
Purchases of securities:
Available for sale (49,965) (2,522) (17)
Held to maturity (94,514) (196,896) (165,911)
Net increase in loans (117,798) (56,540) (20,329)
Proceeds from sales of foreclosed assets 2,949 1,302 2,628
Purchases of premises and equipment (5,423) (6,625) (4,338)
Proceeds from disposals of premises and equipment 112 635 319
Net cash and cash equivalents inflow (outflow)
from acquisitions (note 4) (7,996) 39,835 64,706
Net cash provided by (used in) investing activities (30,584) (81,456)
(16,246)
Cash flows from financing activities:
Net increase (decrease) in deposits (9,707) 56,708 30,899
Net increase (decrease) in federal funds purchased
and repurchase agreements (431) 4,111 3,359
Net increase (decrease) in other short-term borrowings 14,400 (1,987) (1,354)
Proceeds from issuance of long-term debt 36,603 11,938 3,496
Repayment of long-term debt (4,332) (6,121) (13,077)
Proceeds from issuance of common stock 1,770 17,727 12,461
Redemption of preferred stock - (2,285) (4,510)
Dividends paid (4,083) (3,467) (1,896)
Net cash provided by (used in) financing activities 34,220 76,624 29,378
Net increase in cash and cash equivalents 3,303 15,018 19,869
Cash and cash equivalents at beginning of year 65,230 50,212 30,339
Cash and cash equivalents at end of year (note 2) $68,533 $65,230 $50,208
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Supplemental Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The supplemental consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, except as described in
the following paragraph. A description of the more significant accounting
policies follows.
Basis of Presentation
The supplemental consolidated financial statements give retroactive effect to
the merger of Trans Financial Bancorp, Inc. ("the company") with Kentucky
Community Bancorp, Inc. on February 15, 1994, Peoples Financial Services, Inc.
on April 22, 1994, and FGC Holding Company on August 31, 1994 all of which have
been accounted for as pooling of interests as described in Note 3 to the
supplemental consolidated financial statements. Generally accepted accounting
principles proscribe giving effect to consummated business combinations
accounted for by the pooling-of-interests method in financial statements that do
not include the dates of consummation. However, they will become the historical
consolidated financial statements the company after financial statements
covering the dates of consummation of the business combinations are issued.
Principles of Consolidation
The supplemental consolidated financial statements include the accounts of
Trans Financial Bancorp, Inc. and its wholly-owned subsidiaries, Trans Financial
Bank, National Association and Trans Financial Bank, Pikeville, Kentucky ("the
banks"), Trans Financial Bank of Tennessee, FSB and Trans Financial Bank,
Federal Savings Bank ("the savings banks"). Also, see Note 3. Significant
intercompany transactions and accounts have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform with 1993
presentations.
Securities
Effective December 31, 1993, the company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Accordingly, all debt securities in which the company does
not have the ability or management does not have the positive intent to hold to
maturity are classified as securities available for sale and are carried at
market value. All equity securities are classified as available for sale at
December 31, 1993. Unrealized gains and losses on securities available for sale
are reported as a separate component of shareholders' equity (net of income
taxes) beginning December 31, 1993. Securities classified as available for sale
prior to December 31, 1993, are reported at the lower of aggregate cost or
market value. Securities classified as held to maturity are carried at amortized
cost. The company has no securities classified as trading securities.
Amortization of premiums and accretion of discounts are recorded by a method
which approximates a level yield and which, in the case of mortgage-backed
securities, considers prepayment risk. The specific identification method is
used to determine the cost of securities sold.
Loans
Loans are stated at the unpaid principal balance. Interest income on loans is
recorded on the accrual basis except for those loans in a nonaccrual income
status. Loans are placed in nonaccrual status when, in the opinion of
management, the prospects for recovering principal or interest is considered
doubtful. Unearned income, arising principally from consumer installment loans
or the deferral of certain loan fees, is recognized as income using a method
that approximates the interest method.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value, as determined by outstanding loan commitments from investors or
current yield requirements.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level that adequately
provides for estimated losses in the loan portfolio. The level of the allowance
is based on an evaluation of the loan portfolio which includes reviews of
individual credits, consideration of past loan loss experience, loan delinquency
trends, changes in the composition of the loan portfolio and the impact of
current economic conditions. The allowance for loan losses is increased by the
provision for loan losses and reduced by net charge-offs. The level of the
allowance and the amount of the provision for loan losses involve uncertainties
and matters of judgment and therefore, cannot be determined with precision.
Premises and Equipment
Premises and equipment are carried at cost, less accumulated depreciation and
amortization. Depreciation of premises and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized on the straight-line method over the term of the
related lease or over the useful life of the improvements, whichever is shorter.
Leasing commitments are insignificant.
Gain or Loss on Sale of Mortgage Loans Held for Sale
The company sells mortgage loans held for sale for cash proceeds equal to the
principal amount of loans sold plus or minus market gains or losses. Gain or
loss is recorded at the time of sale in an amount reflecting the difference
between the contractual interest rates of the loans sold and the current market
rate.
Purchased Mortgage Servicing Rights and Excess Service Fees
The cost of purchased mortgage loan servicing rights ("PMSR's") ($3,050,000
and $2,454,000 at December 31, 1993 and 1992, respectively, net of accumulated
amortization) is amortized against service fee income in proportion to, and over
the period of, estimated net servicing revenues.
The carrying value of PMSR's and the related amortization are periodically
evaluated using a discounted valuation method, in relation to estimated future
net servicing revenues. The company evaluates the carrying value of the PMSR's
by estimating the future net servicing income of the rights based on
management's best estimate of remaining loan lives.
The normal agency (GNMA, FNMA or FHLMC) servicing fee is used in the
capitalization of any excess service fees. When participating interests in loans
sold have an average contractual interest rate, as adjusted for normal servicing
costs, which differs from the agreed yield to the purchaser, gains or losses are
recognized equal to the present value of such differential over the estimated
remaining life of such loans. Amortization of capitalized excess servicing fees
is reflected as a reduction of loan servicing income using the interest method
over the estimated remaining life of such loans, adjusted for actual
prepayments.
Other Assets
Included in other assets is real estate acquired in settlement of loans and
loans classified as in-substance foreclosure, which are carried at the lower of
cost or fair value less estimated selling costs. The excess of cost over fair
value less estimated costs to sell at the time of foreclosure is charged to the
allowance for loan losses. Provisions for subsequent declines in fair value are
included in other non-interest expense. Other costs relating to holding real
estate acquired in settlement of loans and in-substance foreclosures are charged
to other non-interest expense as incurred. Costs related to real estate in the
process of development are capitalized.
Income Taxes
The company adopted as of January 1, 1993, Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Under this statement, a current
or deferred income tax liability is recognized, subject to certain limitations,
for the current or deferred tax consequences of all events that have been
recognized in the financial statements. The deferred income tax liability or
asset is measured by the provisions of enacted tax laws. Income taxes for prior
years were determined in accordance with Accounting Principles Board Opinion No.
11. The cumulative effect of this change in accounting principle, determined as
of January 1, 1993, is reported separately in the consolidated statement of
income for the year ended December 31, 1993.
Earnings Per Common Share
Primary earnings per share is computed by dividing net income applicable to
common stock by the weighted average number of shares of common stock
outstanding during the period. Fully diluted earnings per share is computed
based on the weighted average number of shares of common stock outstanding
during the period, assuming conversion, for 1991, of the convertible
subordinated capital debentures into common stock and giving effect to the
elimination from net income of interest expense related to the debentures (net
of income tax effects). Net income for both calculations is reduced for
dividends on preferred stock.
On December 18, 1992 and December 16, 1991, the company's Board of Directors
authorized 4-for-3 stock splits. All per share information gives effect to the
stock splits. The weighted average number of shares outstanding after giving
effect to these stock splits were as follows:
In thousands 1993 1992 1991
Primary 11,245 10,633 7,004
Fully diluted 11,245 10,633 7,648
(2) Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and amounts due from banks.
The following summarizes supplemental cash flow data for the years ended
December 31, 1993, 1992 and 1991:
In thousands 1993 1992 1991
Cash paid for interest $44,309 $47,225 $47,865
Cash paid for income taxes 7,163 6,609 2,587
Certain non-cash investing and financing transactions are summarized as follows.
See note 4 which summarizes assets and liabilities associated with acquisitions:
Conversion of debentures $ - $4,450 $ 919
Issuance of stock in business
combination - 6,015 -
Change in unrealized loss on
marketable equity securities - (2) 606
Unrealized gain on securities
available for sale, net of tax 882 - -
Debt transactions of Employee Stock
Ownership Plan (net) 11 2,667 200
Loans transferred to other real
estate and in-substance
foreclosure 1,019 4,834 3,241
Other assets transferred
to loans 274 - -
Investment securities transferred
to securities available
for sale 178,889 53,900 1,500
(3) Business Combinations Consummated After December 31, 1993
On February 15, 1994, Trans Financial merged with Kentucky Community Bancorp,
Inc. ("KCB") of Maysville, Kentucky, the holding company for The State National
Bank, Peoples First Bank, and Farmers Liberty Bank, with combined assets of
approximately $175 million. Under the terms of the merger the shares of KCB
common stock outstanding were converted into 1,374,962 shares of common stock of
the company.
On April 22, 1994, Trans Financial merged with Peoples Financial Services,
Inc. ("PFS") of Cookeville, Tennessee, the holding company for Peoples Bank and
Trust of the Cumberlands and Citizens Federal Savings Bank, with combined assets
of approximately $120 million. Under the terms of the merger, the shares of PFS
common stock were converted into 1,302,254 shares of common stock of the
company.
On August 31, 1994, Trans Financial merged with FGC Holding Company ("FGC"),
of Martin, Kentucky, the holding company for First Guaranty National Bank, with
approximately $125 million in assets. Under the terms of the merger, the shares
of FGC common stock were converted into 1,050,000 shares of common stock of the
company and the shares of FGC preferred stock were retired.
The supplemental consolidated financial statements of the company give effect
to these three mergers, which have been accounted for as poolings of interests.
Accordingly, financial statements for current and prior periods have been
restated to reflect the results of operations of these companies on a combined
basis from the earliest period presented, except for dividends per share.
Certain reclassifications of the historical results of these companies have been
made to conform to the current presentation. There were no material intercompany
transactions and no material differences in accounting policies and procedures.
The company's consolidated financial data for the years ended December 31, 1993,
1992 and 1991 have been restated as follows:
In thousands, except per share data
Year ended December 31, 1993
Trans
Financial KCB PFS FGC Restated
Net interest income $40,586 $7,240 $5,230 $5,513 $58,569
Provision for loan losses 1,662 441 241 450 2,794
Net income 9,316 964 1,847 1,923 14,050
Fully diluted earnings
per common share $1.24 $1.24
Year ended December 31, 1992
Net interest income $31,396 $7,202 $4,762 $5,220 $48,580
Provision for loan losses 1,216 838 264 300 2,618
Net income 9,060 1,349 1,229 1,827 13,465
Fully diluted earnings
per common share $1.30 $1.25
Year ended December 31, 1991
Net interest income $18,733 $6,482 $3,466 $4,227 $32,908
Provision for loan losses 750 772 470 250 2,242
Net income 4,540 1,065 576 1,411 7,592
Fully diluted earnings
per common share $1.17 $.99
(4) Business Combinations Consummated Through December 31, 1993
On July 6, 1993, the company acquired all of the outstanding stock of Trans
Kentucky Bancorp, Inc., the holding company for The Citizens Bank of Pikeville,
now Trans Financial Bank. The aggregate costs, including consideration and
acquisition costs were $18.778 million. The excess of the costs over the fair
value of net assets acquired of $117,000 was recorded as goodwill.
This acquisition has been accounted for under the purchase method and,
accordingly, the results of operations and cash flows of this entity have been
included in the consolidated financial statements since the date of acquisition.
The aggregate fair value of net assets acquired included the following:
In thousands
Cash and due from banks $ 10,784
Interest bearing deposits 445
Federal funds sold 1,988
Securities 60,544
Net loans 107,571
Premises and equipment 4,140
Other assets 3,255
Deposits (163,885)
Other borrowings (3,142)
Other liabilities (3,039)
Net assets acquired $ 18,661
Following is a presentation of pro forma financial information of the company
for the years ended December 31, 1993 and 1992, assuming this acquisition had
occurred on January 1, 1992. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred had the
entities been combined throughout those periods.
In thousands, except per share data 1993 1992
Net interest income
after provision for loan losses $58,714 $52,446
Net income 14,592 13,974
Earnings per common share $1.29 $1.30
On February 1, 1993, PFS sold 31,225 shares (equivalent to 171,738 shares of
common stock of the company, based on the exchange ratio) of newly-issued common
stock in connection with its acquisition of Citizens Federal Savings Bank,
Rockwood, Tennessee, ("Citizens") pursuant to a definitive agreement entered
into by PFS and Citizens in May, 1992. In connection with the acquisition, PFS
and Citizens adopted a Plan of Conversion/Acquisition ("Plan") whereby Citizens
was converted from a federally-chartered mutual institution to a federally-
chartered stock institution. Pursuant to the Plan, shares of capital stock of
PFS were offered initially for subscriptions to eligible members of Citizens and
to certain other persons as of specified dates and subject to various
subscription priorities as provided by the Plan. The capital stock was offered
at a price determined by PFS' Board of Directors based upon an appraisal made by
an independent appraisal firm. The offering raised gross proceeds of
approximately $1,405,000, all of which was used in the acquisition of Citizens.
PFS incurred costs of $511,000 associated with the offering. All costs incurred
associated with the sale of stock and acquisition were deducted from the
proceeds of the sale of stock. The transaction was accounted for as a pooling of
interests and, accordingly, all financial data has been restated as if the
entities were combined for all periods presented.
On March 26, 1992, the company acquired First Federal Savings Bank of
Tennessee and its wholly-owned subsidiaries, now Trans Financial Bank of
Tennessee, FSB, for cash and common stock of the company. The aggregate costs,
including consideration and acquisition costs, were $11.270 million. The 412,389
shares of common stock issued were valued at $6.0 million. The excess of costs
over the fair value of net assets acquired of $17,000 was recorded as goodwill.
On March 27, 1992, the company acquired Maury Federal Savings Bank for cash of
$10.989 million. Aggregate consideration and acquisition costs totaled $11.110
million. The excess of the fair value of net assets over costs (negative
goodwill) of $468,000 was allocated to reduce the values assigned to premises
and equipment. On November 27, 1992, this entity was merged with Trans Financial
Bank of Tennessee, FSB.
These two acquisitions have been accounted for under the purchase method and,
accordingly, the results of operations and cash flows of these two entities have
been included in the consolidated financial statements since the dates of
acquisition.
On August 7, 1992, the company acquired five middle Tennessee branches of
Heritage Federal Bank for Savings. In this transaction the company's
wholly-owned subsidiary, Trans Financial Bank of Tennessee, FSB, assumed
approximately $55 million in deposits, acquired approximately $2.3 million in
premises and equipment, and received approximately $52 million in cash, net of a
$.8 million premium.
On December 31, 1992, the company merged with Dawson Springs Bancorp, Inc.
("DSB"), the holding company for Kentucky State Bank and Commercial Bank of
Dawson. Under the terms of the merger all shares of DSB common stock outstanding
were converted into 560,088 shares of Trans Financial Bancorp, Inc. common
stock. The transaction was accounted for as a pooling of interests and,
accordingly, all financial data has been restated as if the entities were
combined for all periods presented. On December 31, 1992 these banks were merged
into Trans Financial Bank, N.A.
On August 30, 1991, in connection with the company's acquisition from the
Resolution Trust Company ("RTC") of certain deposits and assets of Future
Federal Savings Bank, Louisville, Kentucky, the Bank assumed approximately $75.9
million in deposits, acquired approximately $11 million in consumer loans and
received approximately $64.3 million in cash (net of a premium of $1.0 million
paid to the RTC), all related to the Glasgow and Tompkinsville, Kentucky
branches of Future Federal Savings Bank.
On May 31, 1991, Peoples Bank and Trust of the Cumberlands ("Peoples")
acquired and assumed from the RTC certain assets and liabilities of the former
Tennessee Federal Savings Bank, Bartlett, Tennessee ("TFSB") for $414,000. The
aggregate amount of liabilities assumed approximated $18,788,000 and the assets
acquired approximated $15,886,000, including $11,450,000 of net loans. Also
acquired was $2,829,000 in cash equivalents and $1,575,000 in federal funds
sold. As part of the purchase and assumption agreement with the RTC, Peoples'
excess in the fair value of liabilities assumed from the RTC over the fair value
of assets acquired is funded by the RTC. Peoples recorded a receivable of
$2,508,000 at December 31, 1991 due from the RTC to recognize the net
liabilities assumed and other miscellaneous items due from the RTC. Since the
RTC paid cash to Peoples for the difference between the fair value of
liabilities and assets, no goodwill was recorded in connection with this
acquisition. The discount recorded on the loans acquired amounted to $2,053,000.
The discount is being accreted to yield a constant rate over the expected life
of the loans acquired. The amount due from the RTC was received in 1992 and
included $400,000 as consideration for a settlement and release agreement
between the RTC and Peoples with respect to the purchase and assumption
agreement.
This acquisition has been accounted for under the purchase method and,
accordingly, the results of operations and cash flows related to these assets
and liabilities have been included in the consolidated financial statements
since the date of acquisition.
Intangibles (goodwill and deposit base premium) from the above transactions,
as well as acquisitions consummated in 1990 and 1985, are being amortized over
periods ranging from ten to twenty years using straight-line and accelerated
methods and had a combined unamortized balance of $8,373,000 and $7,601,000 at
December 31, 1993 and 1992, respectively.
(5) Cash and Due from Banks
Regulatory authorities require the company's subsidiaries to maintain reserve
balances on customer deposits. The amounts of required reserves totaled
approximately $18,972,000 at December 31, 1993, and $17,866,000 at December 31,
1992.
(6) Securities
Effective December 31, 1993, the company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Accordingly, all debt securities in which the company does
not have the ability or management does not have the positive intent to hold to
maturity are classified as securities available for sale and are carried at
market value. All equity securities are classified as available for sale at
December 31, 1993. In conjunction with the adoption of Statement 115, $171.7
million of investment securities were transferred to securities available for
sale. Unrealized gains and losses on securities available for sale are reported
as a separate component of shareholders' equity (net of tax) beginning December
31, 1993. Securities available for sale at December 31, 1992, are carried at the
lower of aggregate cost or market value.
The following summarizes securities available for sale at December 31, 1993 and
1992.
Amortized Unrealized Market
December 31, 1993 (In thousands) Cost Gains Losses Value
U.S.Treasury and Federal agencies $123,023 $1,109 $454 $123,678
Collateralized mortgage obligations
and mortgage-backed securities 104,633 1,086 446 105,273
Equity securities 11,205 41 161 11,085
Total securities available for sale $238,861 $2,236 $1,061 $240,036
Amortized Unrealized Market
December 31, 1992 (In thousands) Cost Gains Losses Value
U.S.Treasury and Federal agencies $51,925 $1,386 $13 $53,298
Total securities available for sale $51,925 $1,386 $13 $53,298
The amortized cost and approximate market values of securities held to maturity
as of December 31, 1993 and 1992, follows:
Amortized Unrealized Market
December 31, 1993 (In thousands) Cost Gains Losses Value
U.S.Treasury and Federal agencies $51,759 $565 $114 $52,210
Collateralized mortgage obligations
and mortgage-backed securities 45,660 1,121 76 46,705
State and municipal obligations 42,162 1,946 208 43,900
Corporate debt securities 6,031 104 19 6,116
Total securities held to maturity $145,612 $3,736 $417 $148,931
Amortized Unrealized Market
December 31, 1992 (In thousands) Cost Gains Losses Value
U.S.Treasury and Federal agencies $66,525 $1,195 $205 $67,515
Collateralized mortgage obligations
and mortgage-backed securities 217,575 4,449 1,246 220,778
State and municipal obligations 28,318 1,387 159 29,546
Corporate debt securities 1,913 27 - 1,940
Other debt securities 399 13 - 412
Equity securities 11,488 18 - 11,506
Total securities held to maturity $326,218 $7,089 $1,610 $331,697
Included in equity securities at December 31, 1993, are Federal Home Loan Bank
and Federal Reserve Bank stock of $4,572,000 and $1,176,000, respectively. At
December 31, 1992, these stock investments were $4,399,000 and $1,156,000,
respectively.
The amortized cost and approximate market value of debt securities at December
31, 1993, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Mortgage-backed obligations generally have contractual maturities in excess of
ten years, but shorter expected maturities as a result of prepayments.
Securities Held Securities
to Maturity Available for Sale
Amortized Market Amortized Market
In thousands Cost Value Cost Value
Due in one year or less $14,730 $14,902 $14,507 $14,633
Due after on year
through five years 45,170 45,895 74,607 75,060
Due after five years
through ten years 29,170 29,962 33,910 33,985
Due after ten years 10,882 11,467 - -
99,952 102,226 123,024 123,678
Collateralized mortgage
obligations
and mortgage-backed securities 45,660 46,705 104,633 105,273
$145,612 $148,931 $227,657 $228,951
Securities with a par value, which approximates carrying value, of
approximately $147,174,000 and $125,225,000 at December 31, 1993 and 1992,
respectively, were pledged to secure public funds, trust funds and for other
purposes.
Gross gains of $1,236,000, $1,086,000, and $254,000 and gross losses of
$87,000, $196,000, and $50,000 were realized on sales of securities in 1993,
1992, and 1991, respectively.
(7) Loans
The company grants commercial loans, real estate loans, consumer loans and lease
financing to customers primarily in the immediate market areas of its
subsidiaries in western and eastern Kentucky and middle Tennessee. The
composition of loans at December 31, 1993 and 1992 follows:
In thousands 1993 1992
Commercial $247,762 $189,572
Real estate construction 44,705 28,828
Real estate mortgage 511,262 389,375
Agricultural 32,969 37,061
Consumer 144,758 115,605
Other 28,922 22,791
Unearned income (3,582) (2,386)
Loans net of unearned income $1,006,796 $780,846
The principal balance of nonaccrual and restructured loans at December 31, 1993
and 1992 was $6,725,000 and $4,529,000, respectively. The interest that would
have been recorded if all such loans were on a current status in accordance with
their original terms was approximately $452,000 in 1993, $505,000 in 1992 and
$854,000 in 1991. The amount of interest income that was recorded for such loans
was approximately $37,000 in 1993, $134,000 in 1992 and $526,000 in 1991.
Loans to executive officers and directors and their associates, including loans
to affiliated companies for which these individuals are principal owners,
amounted to approximately $27,234,000 at December 31, 1993 and $23,278,000 at
December 31, 1992. During 1993, new loans of $22,018,000 were made and
repayments of $16,491,000 were received. Other changes include increases for
changes in executive officers and directors of $5,338,000 and decreases related
to participations sold of $6,909,000. These loans were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for other customers.
An analysis of the changes in the allowance for loan losses follows:
In thousands 1993 1992 1991
Balance at January 1 $9,596 $7,700 $7,183
Provision for loan losses 2,794 2,618 2,242
Balance of allowance for loan losses
of acquired subsidiaries 2,433 1,016 -
Loans charged off (3,446) (2,499) (2,437)
Recoveries of loans previously charged 1,128 761 712
off
Net charge-offs (2,318) (1,738) (1,725)
Balance at December 31 $12,505 $9,596 $7,700
During 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan ("SFAS 114"). This statement must be adopted on a prospective basis by
January 1995. SFAS 114 requires that impaired loans be measured at the present
value of expected future cash flows, discounted at the loan's effective interest
rate, at the loan's observable market price, or at the fair value of the
collateral if the loan is collateral dependent. The company is currently
evaluating when and how it will adopt SFAS 114, as well as its possible
financial impact on the company.
(8) Premises and Equipment
A summary of premises and equipment at December 31, 1993 and 1992, follows:
In thousands 1993 1992
Land and improvements $5,703 $5,075
Buildings and improvements 31,591 23,271
Furniture and equipment 23,918 17,008
61,212 45,354
Less accumulated depreciation and amortization 27,819 17,932
Total premises and equipment $33,393 $27,422
(9) Long-Term Debt and Other Borrowings
Long-term debt consisted of the following at December 31, 1993 and 1992:
In thousands 1993 1992
7.25% Subordinated Notes; due September 15,
2003; interest payable quarterly $33,000 $-
Advance form the Federal Home Loan Bank;
due May 9, 1994; interest at 4.50%,
payable monthly 10,000 10,000
Employee Stock Ownership Plan (ESOP) note
payable to bank; due July 31, 1994; interest at
the lender's base rate, payable quarterly 3,106 2,957
Secured note payable to bank; due May 1998;
interest at 6.7%, principal and interest payable
quarterly 2,818 -
Subordinated debentures; due December 2009;
interest at 10% - 2,348
Secured note payable to bank; due September 1995;
interest at the prime rate, principal payable
quarterly, interest payable monthly - 139
Secured note payable to bank; due September 1995;
interest at the prime rate, principal payable
annually, interest payable quarterly - 1,021
Unsecured note; due 1994; interest at 6-5/8%,
payable annually 42 81
Debentures payable; due January 2000; interest
at the prime rate, payable quarterly 3,790 3,790
Unsecured demand notes; interest at the
prime rate, payable quarterly 706 706
Employee Stock Ownership Plan (ESOP) note
payable to bank; due July 31, 1996; interest at
82.5% of the prime rate, principal and interest
payable quarterly 755 915
Total long-term debt $54,217 $21,957
Short-term borrowings, other than federal funds purchased and repurchase
agreements, consisted of the following at December 31, 1993 and 1992:
In thousands 1993 1992
Advance form the Federal Home Loan Bank;
due January 20, 1994; interest at 3.45%,
payable monthly $15,000 $-
Operating line of credit; due July 31, 1994;
interest at the lender's base rate, payable
quarterly - 600
Total other short-term borrowings $15,000 $600
The prime interest rate and base rate associated with certain of the above
obligations was 6.0% at December 31, 1993 and 1992.
The company has a $3,000,000 unsecured operating line of credit with an
unaffiliated bank, with an outstanding balance of $600,000 at December 31, 1992.
The line was not in use at December 31, 1993. This obligation has the same
restrictive covenants as the ESOP loan due July 31, 1994, as described below.
The advances from the Federal Home Loan Bank are collateralized by the
company's Federal Home Loan Bank stock and certain first mortgage loans in the
approximate amount of 150% of the debt.
The ESOP note payable due July 31, 1994 is guaranteed by the company and
enables the ESOP to borrow up to $4.0 million. The related loan agreement has a
number of restrictive covenants, including maintaining capital levels of the
company, the banks and savings banks at least at the minimum levels required by
applicable regulatory agencies; maintaining the company's risk-weighted capital
ratio, as defined, at not less than 9.25%; maintaining the company's leverage
ratio, as defined, at not less than 5.25%; maintaining the company's annualized
return on assets at the date of financial reports required by regulations at no
less than .50%; maintaining nonperforming loans, as defined, at less than 2.50%
of gross loans at the date of required financial reports; and maintaining on a
consolidated basis an allowance for loan losses of at least .75% of gross loans.
The ESOP note payable due July 31, 1996 is also guaranteed by the company. The
loan obligations of the ESOP are recorded on the consolidated balance sheet with
a corresponding amount recorded as a reduction of the company's shareholders'
equity. Both the loan obligation and the reduction of shareholders' equity will
be reduced by the amount of any loan repayments made by the ESOP.
Principal payments required for the years 1993 through 1998 on long-term debt
at December 31, 1993, are as follows:
Year ending
December 31 In thousands
1994 $13,868
1995 1,280
1996 1,375
1997 1,270
1998 1,678
(10) Shareholders' Equity
Common Stock
The company has stock option plans which permit options to be granted for a
maximum of 432,889 shares of common stock of the company. Under the terms of the
plans, options with ten-year terms may be granted to certain key employees to
purchase common stock at not less than fair value of the common stock at the
date of grant. A summary of share data related to the option plan, adjusted for
stock splits, follows:
Number Option price
of shares per share
Options outstanding December 31, 1990 107,103 $4.55-$9.375
Granted 123,733 $8.16-11.53
Terminated or canceled (5,779) -
Options outstanding December 31, 1991 225,057 $4.55-$11.53
Granted 11,236 $6.13
Exercised (2,522) $8.44-$9.375
Terminated or canceled (43,144) -
Options outstanding December 31, 1992 190,627 $4.55-$11.53
Granted 79,673 $16.00
Exercised (8,577) $6.13-$8.16
Terminated or canceled (7,890) -
Options outstanding December 31, 1993 253,833 $4.55-$16.00
Of the options outstanding, 84,668 were exercisable as of December 31, 1993.
The company's Employee Stock Ownership Plan is described in Note 13 to the
consolidated financial statements.
Preferred Stock and Rights Plan
During 1992, the company's Articles of Incorporation were amended to eliminate
two series of Class A Preferred Stock, designated the 1988 and 1990 Series, and
to authorize the issue of 5,000,000 shares of Class B Preferred Stock, Series
1992. Series 1992 Class B Preferred Stock is issuable in connection with the
company's Rights Plan and carries the right to cumulative annual dividends of
$6.00 per share or 133 times dividends per common share (subject to adjustment),
whichever is greater.
FGC has authorized, issued and outstanding two classes of preferred stock,
Class A and Class B. Each share of preferred stock is subject to redemption and
may, at the option of FGC on any dividend payment date after January 20, 1993,
be called and retired at par value. At December 31, 1993 and 1992, the were no
dividends in arrears on preferred stock.
On January 20, 1992, the company's Board of Directors adopted a Shareholder
Rights Plan. Under the plan, the Board declared a dividend of one right
(adjusted to 3/4 of a right by virtue of the four-for-three stock split effected
December 18, 1992) for each outstanding share of common stock. In addition, the
company will issue one right with respect to each share of common stock issued
subsequent to that date. Each right, when and if it becomes exercisable, will
entitle the registered holder to purchase from the company 1/100 of a share of
Series 1992 Preferred Stock, subject to adjustment, at an exercise price of $45.
The description and terms of the rights are set forth in a Rights Agreement,
dated as of January 20, 1992, between the company and Chemical Bank, as Rights
Agent. The Board may redeem the rights in whole, but not in part, at a price of
$.01 per right.
The rights become exercisable only if a person or group acquires, or obtains
the right to acquire, beneficial ownership of 15% or more of the company's
outstanding common stock, the Board determines that a beneficial owner of at
least 10% of the company's outstanding common stock has a detrimental effect on
the company or its shareholders, or a tender or exchange offer is commenced for
25% or more of the outstanding common stock.
After the rights become exercisable, if any person becomes the beneficial owner
of more than 15% of the outstanding common stock, or the Board determines that a
beneficial owner of at least 10% of the company's outstanding common stock has a
detrimental effect on the company or its shareholders, then the rights will
entitle each holder of a right to purchase, for the exercise price, the number
of shares of preferred stock which at the time of the transaction would have a
market value twice the exercise price.
(11) Dividend Restrictions
Payment of dividends by the company's subsidiaries is restricted by national
and state banking and thrift laws and regulations. Also, certain notes payable
described in note 9 include restrictive covenants related to the maintenance of
minimum capital ratios by the banks and savings banks, which effectively
restrict the payment of dividends. At December 31, 1993, retained earnings of
the company's subsidiaries were approximately $47.8 million, of which
approximately $20.8 million is available as of January 1, 1994 for the payment
of dividends under the most restrictive of the above restrictions.
Certain notes payable described in note 9 include restrictive covenants related
to the maintenance of minimum capital ratios, which effectively restrict the
payment of dividends by the company. Also, minimum regulatory capital
requirements effectively limit the payment of dividends. At December 31, 1993,
the most restrictive of the covenants limited the payment of dividends by the
company to approximately $20.3 million.
In connection with the conversion of Citizens from a mutual savings bank to a
stock savings bank, Citizens established a liquidation account equal to its
retained earnings (approximately $1,750,000) as of the date of the latest
consolidated balance sheet used in the final conversion offering circular. In
the event of future liquidation of Citizens, and only in such event, an eligible
deposit account holder who continues to maintain his deposit account shall be
entitled to receive a distribution from the liquidation account, in the
proportionate amount of the adjusted balance from deposit accounts held at that
time, before any liquidation distributions may be made with respect to capital
stock. No dividends may be paid to stockholders if such dividends reduce the
retained earnings of Citizens below the amount required for the liquidation
account.
Citizens entered into a supervisory agreement with the Office of Thrift
Supervision ("OTS") dated September 13, 1991. Citizens complied with the
provisions of the agreement and on November 19, 1993, the OTS released Citizens
from the agreement.
(12) Income Taxes
As discussed in note 1, the company adopted in 1993 Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative effect
of this change in accounting for income taxes, determined as of January 1, 1993,
was an increase in net income of $296,000 and is reported separately in the
consolidated statement of income for 1993. Financial statements for prior years
have not been restated to apply the provisions of Statement 109.
Prior purchase business combinations were adjusted to reflect the implementa
tion of Statement 109, however the impact these adjustments was not significant
and is included in income from continuing operations.
Total income tax expense for the year ended December 31, 1993 was allocated as
follows:
In thousands
Income from continuing operations $6,223
Shareholders' equity, for unrealized net
gain on securities available for sale 455
$6,678
The components of income tax expense (benefit) were as follows:
In thousands 1993 1992 1991
Current $6,745 $6,552 $3,141
Deferred (522) (152) (58)
$6,223 $6,400 $3,083
An analysis of the differences between the effective tax rates and the
statutory U.S. federal income tax rate is as follows:
1993 1992 1991
U.S. federal income tax rate 35.0 % 34.0 % 34.0 %
Changes from the statutory rate:
Tax exempt investment income (4.5)% (4.0)% (8.2)%
Amortization of goodwill 0.8 % 0.7 % 1.3 %
Purchase accounting differences 0.0 % (0.1)% 0.3 %
State income taxes, net of
federal tax benefit 1.0 % 1.1 % 0.4 %
Statutory bad debt deduction 0.0 % (0.6)% 0.5 %
Surtax exemption (0.5)% 0.0 % 0.0 %
Other, net (0.6)% 1.1 % 0.6 %
31.2 % 32.2 % 28.9 %
The sources of timing differences and the resulting deferred income tax expense
(benefit) for 1992 and 1991, follows:
In thousands 1992 1991
Loan loss provision in excess of
amount allowed for tax purposes $(308) $(218)
Tax gains on sales of loans (80) -
Loan fees (101) -
Other, net 337 160
$(152) $(58)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1993,
are presented below:
In thousands
Deferred tax assets:
Allowance for loan losses $2,410
Deferred compensation 301
Differences due to purchase accounting
adjustments related to the following:
Accrued expenses 545
Mortgage servicing 179
Other 79
Total gross deferred tax assets 3,514
Less valuation allowance (108)
Net deferred tax asset 3,406
Deferred tax liabilities:
Differences due to purchase accounting
adjustments related to the following:
Investments and other assets 916
Premises and equipment 422
FHLB stock 449
Amortization of intangibles 99
Deferred loan fees 509
Depreciation 209
Investment securities 279
Other 71
Total deferred tax liabilities 2,954
Net deferred tax asset $452
Cumulative net deferred income tax assets were $452,000 at December 31, 1993
and $382,000 at December 31, 1992.
Shareholder's equity of the savings banks at December 31, 1993 and 1992
includes approximately $4,501,000 and $5,086,000 respectively, for which no
deferred federal income tax liability has been recognized. These amounts
represent an allocation of income to bad debt deductions for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt losses or
adjustments arising from carrying back net operating losses to prior years may
create income for tax purposes only, which would be subject to the then current
corporate income tax rate.
(13) Employee Benefit Plans
The company has an employee stock ownership plan ("ESOP") under which the
company and its subsidiaries will contribute to the ESOP an amount determined by
the respective Boards of Directors at their discretion. The company recognized
expenses related to the ESOP based on cash contributions, with such amounts
exceeding the amount computed under the shares allocated method. The interest
incurred on the ESOP note payable, the amount contributed by the company to the
ESOP and the amount of dividends on ESOP shares used for debt service by the
ESOP for 1993, 1992 and 1991 were as follows:
In thousands 1993 1992 1991
Interest incurred $236 $100 $ 96
Contributions 597 400 400
Dividends used for debt service 6 67 44
The company has a profit sharing plan qualified under Section 401(k) of the
Internal Revenue Code. Under the amended profit sharing plan, the company and
its subsidiaries will provide funds to match the contribution made by the
participating employee up to a maximum of 4% of the employee's salary. Contribu
tions in accordance with the profit sharing plan were approximately $360,000 in
1993, $214,000 in 1992, and $173,000 in 1991.
KCB has a profit-sharing plan qualified under Section 401(k) of the Internal
Revenue Code. Under the profit sharing plan, KCB provides funds to match the
contributions made by the participating employees up to a maximum of 6% of the
employee's salary. Contributions in accordance with the profit-sharing plan were
approximately $31,000 in 1993, $29,000 in 1992, and $26,000 in 1991.
Former full-time employees of Kentucky State Bank who meet certain requirements
as to age and length of service are covered by a defined benefit pension plan.
Pension expense for this plan was $2,000 in 1993, $14,000 in 1992, and $15,000
in 1991. The plan's funded status at December 31, 1993 was composed of plan
assets of $503,000 and a projected benefit obligation of approximately $544,000.
Full-time employees of KCB who meet certain requirements as to age and length
of service are covered by a defined benefit pension plan. On May 31, 1993, KCB
froze the plan, thereby eliminating the accrual of benefits for participants
after that date, and KCB has expressed the intent to terminate the plan during
1994. The supplemental consolidated financial statements for 1993 include the
recognition of the cost of curtailment of the plan for the freezing in 1993
($45,000) and partial recognition of prior unrecognized loss in anticipation of
plan termination ($309,000). Net pension expense for this plan was $367,000 in
1993, $58,000 in 1992, and $15,000 in 1991. The plan's funded status at December
31, 1993 was composed of plan assets of $1,080,000 and a projected benefit
obligation of approximately $1,340,000.
Full-time employees of Citizens who meet certain requirements as to age and
length of service are covered by a defined benefit pension plan. Citizens is a
member of the Financial Institutions Retirement Fund, which is a nonprofit
pension trust through which the Federal Home Loan Bank, savings banks and
similar institutions may cooperate in providing for the retirement of their
employees. No contributions were required in 1993, 1992 or 1991.
The company has no significant commitments to pay post-retirement or post-
employment benefits other than as described above.
Stock options granted to key employees are described in Note 10 to the
supplemental consolidated financial statements.
During 1993, AICPA Statement of Position ("SOP") 93-6, Employers' Accounting
for Employee Stock Ownership Plans, was issued. The SOP will change the
accounting for the company's ESOP once all unallocated shares held by the ESOP
on December 31, 1992, are exhausted. Shares acquired after December 31, 1992,
will also be subject to the accounting prescribed in the SOP. The changes
include recognition of compensation cost, accounting for dividends on allocated
and unallocated shares, and the inclusion of committed shares in earnings per
share computations. The company is currently reviewing the SOP to determine the
potential impact it will have on its consolidated financial statements.
(14) Commitments and Contingent Liabilities
Off-Balance-Sheet Financial Instruments
The company's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course of
business to meet the financing needs of customers. These include commitments to
extend credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit, interest rate and liquidity risk in excess
of the amount recognized in the consolidated balance sheet. The extent of the
company's involvement in various commitments is expressed by the contract amount
of such instruments.
Commitments to extend credit, which amounted to $201,634,000 at December 31,
1993, and $205,729,000 at December 31, 1992, are agreements to lend to a
customer as long as all conditions established in the contract are fulfilled.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitments do not necessarily
represent future cash requirements. The company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based upon management's credit
evaluation of the customer. Collateral varies but may include accounts
receivable, inventory, property, plant, equipment, residential properties,
income-producing commercial properties, marketable securities and interest-
bearing time deposits.
Standby letters of credit are conditional commitments issued by the company
guaranteeing the performance of a customer to a third party. Those guarantees
primarily consist of performance assurances made on behalf of customers who have
a contractual commitment to produce or deliver goods or services. Most
guarantees are for one year or less. The risk to the company arises from its
obligation to make payment in the event of the customer's contractual default
and is essentially the same as that involved in extending loan commitments to
customers. The amount of collateral obtained, if deemed necessary, is based upon
management's credit evaluation of the customer. Collateral held varies. The
company had standby letters of credit outstanding totaling $33,776,000 and
$29,432,000 at December 31, 1993 and 1992, respectively.
Commercial letters of credit are short-term commitments generally used to
finance a commercial contract for the shipment of goods from seller to buyer. At
December 31, 1993, the company had $4,861,000 in commercial letters of credit
outstanding.
At year-end 1993, the company was not a party to any off-balance-sheet
derivative contracts.
With respect to mortgage loans sold to investors, such loans are generally
sold with servicing rights retained, with only the normal legal representations
and warranties regarding recourse to the company. Management believes that any
liabilities which may result from such recourse provisions are not significant.
Legal Proceedings
As of December 31, 1993, there were various pending legal actions and
proceedings against the company in which claims for damages are asserted.
Management, after discussion with legal counsel, believes that the ultimate
result of these legal actions and proceedings will not have a material adverse
effect upon the consolidated financial statements of the company.
(15) Fair Value of Financial Instruments
The estimated fair values of the company's financial instruments are as follows:
December 31, 1993 December 31, 1992
In thousands Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and short-term
investments $ 101,758 $ 101,758 $141,370 $141,370
Securities 385,648 388,967 378,143 384,995
Loans 1,039,469 1,050,353 796,247 804,995
Financial liabilities:
Deposits 1,376,227 1,382,549 1,222,050 1,225,848
Federal funds purchased
and repurchases 29,704 29,704 26,993 26,993
Long-term debt and other
short-term borrowings 69,217 69,142 22,557 22,332
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash, Short-Term Investments, Federal Funds Purchased and Repurchases
For these short-term instruments, the financial statement carrying amount
approximates fair value.
Securities
The fair value of securities is estimated by discounting future cash flows
using current rates at which investments would be made in similar instruments
with similar credit ratings and equivalent remaining maturities.
Loans
The fair value of loans is estimated by discounting the future cash flows using
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
Deposits
The fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated by discounting the future
cash flows using the rates currently offered for deposits of similar remaining
maturities.
Long-term Debt and Other Short-term Borrowings
Rates currently available to the company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
Commitments to Extend Credit and Stand-By Letters of Credit
The fair values of loan commitments and letters of credit are estimated using
the fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of the
counterparties. The value of these financial instruments was not material at
December 31, 1993 and 1992.
Limitations on Fair Value Reporting
The fair value estimates are made at a discrete point in time based on relevant
market information and information about the financial instruments. Because no
market exists for a significant portion of the company's financial instruments,
fair value estimates are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
The fair value estimates are based on financial instruments only. The company
has not attempted to estimate the value of assets and liabilities not considered
to be financial instruments, such as premises and equipment, the mortgage
banking operation and the intangible value of its core deposits and branch
system. Accordingly, the fair value estimates do not represent a fair value for
the company as a whole.
(16) Parent Company Financial Statements
Condensed financial data for Trans Financial Bancorp, Inc. (parent company only)
as of December 31, 1993 and 1992 and for the years ended December 31, 1993, 1992
and 1991 are as follows:
Condensed Balance Sheets
December 31 - In thousands 1993 1992
Assets
Cash on deposit with subsidiaries $15,977 $2,122
Investment in subsidiaries 136,055 108,326
Other investments 342 48
Other assets 4,974 2,802
Total assets $157,348 $113,298
Liabilities and Shareholders' Equity
Long-term debt and other notes payable $44,191 $12,476
Other liabilities 1,121 1,416
Shareholders' equity 112,036 99,406
Total liabilities and shareholders' equity $157,348 $113,298
<PAGE>
Condensed Statements of Income
Years Ended December 31
In thousands 1993 1992 1991
Income
Dividends from subsidiaries $12,675 $13,546 $9,398
Other interest and dividends 146 34 31
Management fees from subsidiaries
and other income 4,620 4,359 3,016
Total income 17,441 17,939 12,445
Expenses
Interest on long-term debt
and other notes payable 1,400 883 2,045
Other expenses 8,478 6,362 4,470
Total expenses 9,878 7,245 6,515
Income before income tax benefit
and equity in undistributed
(distributions in excess of)
earnings of subsidiaries 7,563 10,694 5,930
Federal income tax benefit 1,661 774 1,004
Income before equity in undistributed
(distributions in excess of)
earnings of subsidiaries 9,224 11,468 6,934
Equity in undistributed (distributions
in excess of) earnings of subsidiaries 4,826 1,997 660
Net income $14,050 $13,465 $7,594
<PAGE>
Condensed Statements of Cash Flows
Years Ended December 31
In thousands 1993 1992 1991
Cash flows from operating activities:
Net income $14,050 $13,465 $7,592
Adjustments to reconcile net income to cash
provided by operating activities:
Amortization 526 663 669
(Equity in undistributed) distributions in
excess of earnings of subsidiaries (4,826) (1,997) (660)
Gain on sales of investments - (119) -
Decrease (increase) in other assets (2,351) (508) 140
Increase (decrease) in other liabilities (102) 51 190
Net cash provided by operating 7,297 11,555 7,931
activities
Cash flows from investing activities:
Investments in and acquisitions of (22,716) (23,077) (5,209)
subsidiaries
Net decrease (increase) in interest-bearing
deposits with banks - 500 (100)
Purchases of other investments - - 79
Proceeds from maturities and sales
of other investments - 1,946 (49)
Net cash provided by (used in) (22,716) (20,631) (5,279)
investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt 36,129 1,938 3,496
Repayment of long-term debt and other (4,542) (4,716) (12,057)
notes payable
Proceeds from issuance of common stock 1,770 17,727 12,461
Redemption of preferred stock - (2,285) (4,510)
Dividends paid (4,083) (3,467) (1,896)
Net cash provided by (used in) 29,274 9,197 (2,506)
financing activities
Net increase in cash and cash equivalents 13,855 121 146
Cash and cash equivalents at beginning of 2,122 2,001 1,855
year
Cash and cash equivalents at end of year $15,977 $2,122 $2,001
Supplemental information:
Cash paid for interest $1,402 $971 $2,122
Non-cash transactions (note 2) $(893) $13,130 $1,725
