UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarter ended June 30, 1994 Commission File Number 0-13030
Trans Financial Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Kentucky 61-1048868
(State or other jurisdiction of (IRS Employer 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
The number of shares outstanding of the issuer's class of common stock on August
8, 1994: 10,125,099 shares.
The Exhibit Index is on page 21. This filing contains 23 pages (including this
facing sheet).
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
In thousands, except share data
June 30 December 31 June 30
1994 1993 1993
Assets
Cash and due from banks $ 68,843 $ 60,532 $ 46,085
Interest bearing deposits with banks 196 3,193 2,182
Federal funds sold and
resale agreements 56,991 26,778 10,412
Mortgage loans held for sale 11,896 45,178 35,886
Securities available for sale (amortized
cost of $228,004 as of June 30, 1994
and $244,821 as of December 31, 1993;
and market value of $49,743 as of
June 30, 1993) 221,488 245,994 48,660
Securities held to maturity (market
value of $75,425 as of June 30, 1994;
$93,242 as of December 31, 1993;
and $270,164 as of June 30, 1993) 77,066 91,345 264,606
Loans, net of unearned income 990,011 941,914 773,723
Less allowance for loan losses 11,582 11,125 8,877
Net loans 978,429 930,789 764,846
Premises and equipment, net 34,346 31,578 26,406
Other assets 36,506 34,013 34,124
Total assets $1,485,761 $1,469,400 $1,233,207
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $ 158,004 $ 154,849 $ 115,081
Interest bearing 1,101,903 1,108,855 961,518
Total deposits 1,259,907 1,263,704 1,076,599
Fed funds purchased and
repurchase agreements 39,800 29,704 32,555
Other short-term borrowings 43,047 15,000 -
Long-term debt 36,973 49,721 17,282
Other liabilities 6,438 9,842 10,195
Total liabilities 1,386,165 1,367,971 1,136,631
Shareholder's equity:
Preferred stock - - -
Common stock, no par value. Authorized
25,0000,000 shares; issued and
outstanding 10,123,019; 10,099,702;
and 10,066,311 shares, respectively 18,981 18,937 18,875
Additional paid-in capital 42,959 42,725 42,350
Retained earnings 45,869 42,910 39,361
Unrealized net gain (loss) on
securities available for sale,
net of tax (4,240) 718 -
Unrealized loss on marketable
equity securities - - (138)
Employee Stock Ownership Plan shares
purchased with debt (3,973) (3,861) (3,872)
Total shareholders' equity 99,596 101,429 96,576
Total liabilities
and shareholders' equity $1,485,761 $1,469,400 $1,233,207
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
In thousands, except per share data
Three Months Six Months
For the periods ended June 30 1994 1993 1994 1993
Interest income
Loans, including fees $21,251 $16,572 $40,735 $32,396
Federal funds sold and resale
agreements 90 127 199 448
Securities 4,574 5,062 9,399 10,507
Interest-bearing deposits with banks 5 18 12 57
Total interest income 25,920 21,779 50,345 43,408
Interest expense
Deposits 9,319 9,076 18,584 18,497
Federal funds purchased
and repurchase agreements 249 151 452 319
Long-term debt and other
borrowings 1,008 201 1,896 396
Total interest expense 10,576 9,428 20,932 19,212
Net interest income 15,344 12,351 29,413 24,196
Provision for loan losses 574 614 1,012 1,210
Net interest income after
provision for loan losses 14,770 11,737 28,401 22,986
Non-interest income
Service charges on deposit accounts 1,834 1,445 3,458 2,710
Loan servicing fees 689 499 1,294 1,087
Gains on sales of securities
available for sale, net 36 6 135 1,057
Gains (losses) on sales of mortgage
loans held for sale, net (264) 246 (172) 610
Trust services 315 274 622 537
Brokerage fees 266 138 536 345
Other 907 764 1,920 1,521
Total non-interest income 3,783 3,372 7,793 7,867
Non-interest expenses
Compensation and benefits 6,083 4,844 12,195 9,587
Net occupancy expense 856 875 1,879 1,823
Furniture and equipment expense 1,199 923 2,315 1,703
Deposit insurance 738 553 1,491 1,108
Professional fees 1,015 633 1,733 1,247
Postage, printing & supplies 848 618 1,645 1,203
Communications 258 364 509 585
Other 3,115 2,362 5,896 4,529
Total non-interest expenses 14,112 11,172 27,663 21,785
Income before income taxes and
cumulative effect of change
in accounting principle 4,441 3,937 8,531 9,068
Income tax expense 1,491 1,311 2,924 2,804
Income before cumulative effect
of change in accounting principle 2,950 2,626 5,607 6,264
Cumulative effect of change in
accounting principle - - - 296
Net income $2,950 $2,626 $5,607 $6,560
Primary earnings per share $0.29 $0.26 $0.55 $0.64
Fully-diluted earnings per share $0.29 $0.26 $0.55 $0.64
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
In thousands, except per share data
For the six months ended June 30 1994 1993
Beginning balance $101,429 $90,641
Net income 5,607 6,560
Issuance of common stock 279 1,335
Cash dividends declared (2,649) (1,985)
Change in unrealized gain (loss) on
securities available for sale and
marketable equity securities,
net of taxes (4,958) 25
ESOP debt reduction 140 -
ESOP shares purchased with debt (252) -
Ending balance $ 99,596 $96,576
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
In thousands, except per share data
For the six months ended June 30 1994 1993
Cash flows from operating activities:
Net income $ 5,607 $ 6,560
Adjustments to reconcile net income to cash
provided be operating activities:
Provision for loan losses 1,012 1,210
Gains on sales of securities available for sale (135) (1,057)
Losses(gains) on sales of mortgage loans
held for sale, net 172 (610)
Gain on sale of premises and equipment (193) -
Depreciation, amortization and accretion, net 3,785 2,438
Proceeds from sale of mortgage loans held for sale 143,651 66,111
Originations of mortgage loans held for sale (110,541) (76,390)
Decrease (increase) in other assets (2,418) 405
Increase (decrease) in other liabilities (673) 1,047
Net cash provided by operating activities 40,267 (286)
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits
with banks 2,997 9,274
Net decrease (increase) in federal funds sold
and resale agreements (30,213) 54,516
Proceeds from sales of securities available for sale 6,989 48,444
Proceeds from maturities, prepayment and call of securities:
Available for sale 45,551 -
Held to maturity 11,640 39,712
Purchases of securities:
Available for sale (19,238) (4,688)
Held to maturity (14,809) (64,277)
Net increase in loans (49,431) (60,402)
Purchases of premises and equipment (5,443) (3,232)
Proceeds from disposals of premises and equipment 885 1,797
Net cash provided by (used in) investing activities (51,072) 21,144
Cash flows from financing activities:
Net increase (decrease) in deposits (3,797) (36,753)
Net increase (decrease) in federal funds purchased
and repurchase agreements 10,096 5,562
Net increase (decrease) in other short-term borrowings 18,047 (600)
Repayment of long-term debt (2,860) (179)
Proceeds from issuance of long-term debt -
Proceeds from issuance of common stock 279 1,335
Dividends paid (2,649) (1,985)
Net cash provided by (used in) financing activities 19,116 (32,620)
Net decrease in cash and cash equivalents 8,311 (11,762)
Cash and cash equivalents at beginning of year 60,532 57,847
Cash and cash equivalents at end of period (note 4) $ 68,843 $ 46,085
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Results of interim periods are not necessarily indicative of results
to be expected for the full year.
The accounting and reporting policies of Trans Financial Bancorp, Inc. and its
subsidiaries ("the company") conform to generally accepted accounting principles
and general practices within the banking industry. The consolidated financial
statements include the accounts of Trans Financial Bancorp, Inc. and its wholly-
owned subsidiaries. All significant inter-company accounts and transactions have
been eliminated in consolidation. A description of other significant accounting
policies is presented in the 1993 annual report to shareholders.
(2) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses follows:
In thousands, except per share data
For the Six Months Ended June 30 1994 1993
Balance at beginning of year $11,125 $8,439
Provision for loan losses 1,012 1,210
Loans charged off (779) (986)
Recoveries of loans previously charged off 224 214
Net charge-offs (555) (772)
Balance at end of period $11,582 $8,877
(3) Business Combinations
a) Combinations consummated through June 30, 1994
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 all shares of KCB
common stock outstanding were converted into 1,374,962 shares of Trans Financial
common stock.
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 all shares of PFS
common stock outstanding were converted into 1,302,254 shares of common stock of
the company. These two transactions have been accounted for as poolings of
interests and, accordingly, all financial data has been restated as if the
entities were combined for all periods presented.
b) Pending Business Combination
On January 28, 1994, Trans Financial entered into a definitive agreement
providing for the acquisition of 100% of FGC Holding Company ("FGC"), in an all
stock transaction. FGC, headquartered in the eastern Kentucky community of
Martin, is a one bank holding company for First Guaranty National Bank, with
approximately $124 million in assets. Under the terms of the agreement, FGC
shareholders will receive 419.83 shares of common stock of the company for each
share of FGC common stock or a total of approximately 1,050,000 shares. It is
anticipated that the transaction will constitute a tax free reorganization and
qualify for the pooling of interests method of accounting. The transaction is
expected to close during the third quarter of 1994.
(4) Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts due from banks. Certain non-cash investing and financing
transactions are summarized as follows:
Six months ended June 30 (Dollars in thousands) 1994 1993
Securities transferred from held to maturity
to available for sale $17,315 $39,808
Increase in unrealized loss on securities
available for sale, net of tax 4,958 25
Loans transferred to other real estate 744 356
Reclassification of debt from long-term
to short-term 10,000 -
Debt transactions of Employee Stock
Ownership Plan (net) 112 -
(5) Accounting Matters
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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Trans Financial Bancorp, Inc. is a bank holding company registered under the
Bank Holding Company Act of 1956, and a savings and loan holding company
registered under the Home Owners' Loan Act. The company has three subsidiary
banks - Trans Financial Bank, N.A., headquartered in Bowling Green, Kentucky,
Trans Financial Bank, located in Pikeville, Kentucky ("TFB-Pikeville"), and
Trans Financial Bank Tennessee, National Association (formerly known as Peoples
Bank and Trust of the Cumberlands ["Peoples Bank"]), headquartered in
Cookeville, Tennessee. As of June 30, 1994, the company had three thrift
subsidiaries - Trans Financial Bank, FSB, located in Russellville, Kentucky,
Trans Financial Bank of Tennessee, FSB, headquartered in Tullahoma, Tennessee
("TFB-Tennessee"), and Citizens Federal Savings Bank, located in Rockwood,
Tennessee ("Citizens"). On July 29, 1994, Citizens was merged into TFB-
Tennessee. Collectively, these six institutions are referred to in this
discussion as "the banks."
The company had total consolidated assets of $1.486 billion on June 30, 1994.
Loans totaled $990 million on that date, deposits were $1.260 billion and
shareholders' equity was $100 million.
On July 6, 1993, in a transaction accounted for as a purchase, the company
acquired Trans Kentucky Bancorp, Pikeville, Kentucky, the holding company for
The Citizens Bank of Pikeville. At the acquisition date, TFB-Pikeville (the
former Citizens Bank of Pikeville) had total assets of $207.2 million, net loans
of $107.6 million and total deposits of $163.9 million. The aggregate cost,
including consideration and acquisition costs, totaled $18.8 million. Because
this acquisition was accounted for under the purchase method, results of
operations prior to the acquisition date have not been included in the company's
results of operations. Therefore, ratios or analyses for periods before and
after that date will not be comparable.
On February 15, 1994, Trans Financial merged with KCB, 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 all
shares of KCB common stock outstanding were converted into 1,374,962 shares of
Trans Financial common stock.
On April 22, 1994, Trans Financial merged with PFS, the holding company for
Peoples Bank and Citizens, with combined assets of approximately $120 million.
Under the terms of the merger all shares of PFS common stock outstanding were
converted into 1,302,254 shares of Trans Financial common stock. These two
transactions have been accounted for as poolings of interests and, accordingly,
all financial data has been restated as if the entities were combined for all
periods presented. See Note 3 to the consolidated financial statements for
additional information regarding business combinations.
The discussion that follows is intended to provide additional insight into the
company's financial condition and results of operations. This discussion should
be read in conjunction with the consolidated financial statements and
accompanying notes presented in Item 1 of Part I of this report.
Results of Operations
Overview
For the three months ended June 30, 1994, the company's net income increased
12%, from $2.6 million, or $.26 per share, to $2.9 million, or $.29 per share,
as compared to the second quarter of 1993. Results for the second quarter
produced an annualized return on assets of 0.81% and a return on average equity
of 11.70%, compared with returns of 0.85% and 10.91%, respectively, for the
comparable period of 1993. For the first six months, net income decreased from
$6.6 million in 1993 to $5.6 million in 1994. The first half of 1993, however,
included $1.1 million in gains on sales of securities and a $296 positive
adjustment for the cumulative effect of adopting Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109").
Securities gains recognized in the first half of 1994 totaled $135 thousand.
Excluding the after-tax effect of these items from both periods, first half net
income decreased 1% from a year ago.
Net Interest Income
Net interest income totaled $15.3 million in the second quarter of 1994,
compared with $12.4 million in the comparable 1993 period - a 21% increase. Net
interest margin for the second quarter also increased from the prior year, to
4.57% from 4.36%, reflecting a more favorable mix of earning assets, primarily
due to loan growth. In addition, recent increases in the prime lending rate
have had a positive impact on net interest margin, since approximately $500
million of the company's commercial and consumer loans are tied to the prime
rate. At the same time, while rates on earning assets have risen, increases in
the company's funding costs have been minimal.
<PAGE>
Average Consolidated Balance Sheets and Net Interest Analysis
<TABLE>
<CAPTION>
For the three months ended June 30
Dollars in thousands
1994 1993
Average Average Average Average
Balance Rate Balance Rate
Interest Interest
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Securities $ 314,898 $ 4,574 5.83% $ 325,500 $ 5,062 6.24%
Federal funds sold
and resale agreements 7,029 90 5.14% 18,210 127 2.80%
Interest-bearing deposits with banks 197 5 10.18% 2,685 18 2.69%
Loans, net of unearned income 1,023,313 21,251 8.33% 789,143 16,572 8.42%
Total interest-earning assets /
interest income 1,345,437 25,920 7.73% 1,135,538 21,779 7.69%
Non-interest-earning assets:
Cash and due from banks 59,516 45,744
Premises and equipment 32,948 27,041
Other assets 26,462 24,245
Total assets $1,464,363 $1,232,568
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $135,139 753 2.23% $105,399 610 2.32%
Savings deposits 143,633 997 2.78% 100,845 702 2.79%
Money market accounts 50,902 322 2.54% 51,256 352 2.75%
TransPlus (SuperNOW) 91,849 537 2.35% 83,926 546 2.61%
Certificates of deposit 586,568 5,751 3.93% 538,666 5,834 4.34%
Other time deposits 90,494 959 4.25% 92,502 1,032 4.47%
Total interest-bearing deposits 1,098,585 9,319 3.40% 972,594 9,076 3.74%
Federal funds purchased
and repurchase agreements 35,657 249 2.80% 25,809 151 2.35%
Long-term debt and
and other borrowings 74,799 1,008 5.41% 22,293 201 3.62%
Total borrowed funds 110,456 1,257 4.56% 48,102 352 2.94%
Total interest-bearing liabilities /
interest expense 1,209,041 10,576 3.51% 1,020,696 9,428 3.70%
Non-interest-bearing liabilities:
Non-interest-bearing deposits 147,046 112,810
Other liabilities 7,155 2,519
Total liabilities 1,363,242 1,136,025
Shareholders' equity 101,121 96,543
Total liabilities
and Shareholders' Equity $1,464,363 $1,232,568
Net interest-rate spread 4.22% 3.99%
Impact of non-interest bearing sources 0.35% 0.37%
Net interest income /
margin on interest-earning assets $15,344 4.57% $12,351 4.36%
</TABLE>
Net interest margin is net interest income divided by average interest-earning
assets. For computational purposes, non-accrual loans are included in interest-
earning assets. Net interest spread is the difference between the average rate
of interest earned on interest-earning assets and the average rate of interest
expensed on interest-bearing liabilities. Average balances are based on daily
balances.
<PAGE>
For the first six months of 1994, net interest income totaled $29.4 million,
compared with $24.2 million in the comparable 1993 period - a 21% increase. The
company's net interest margin for the first half increased 7 basis points from
the prior year, to 4.40% from 4.33%.
Average Consolidated Balance Sheets and Net Interest Analysis
<TABLE>
<CAPTION>
For the six months ended June 30
Dollars in thousands
1994 1993
Average Average Average Average
Balance Rate Balance Rate
Interest Interest
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Securities $ 326,088 $ 9,399 5.81% $ 324,248 $10,507 6.53%
Federal funds sold
and resale agreements 9,698 199 4.14% 30,003 448 3.01%
Interest-bearing deposits with banks 274 12 8.83% 3,129 57 3.67%
Loans, net of unearned income 1,010,649 40,735 8.13% 768,436 32,396 8.50%
Total interest-earning assets /
interest income 1,346,709 50,345 7.54% 1,125,816 43,408 7.78%
Non-interest-earning assets:
Cash and due from banks 58,463 45,210
Premises and equipment 32,353 26,015
Other assets 24,245 24,506
Total assets $1,461,770 $1,221,547
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $135,003 $1,503 2.25% $106,049 $1,245 2.37%
Savings deposits 143,223 1,976 2.78% 99,938 1,429 2.88%
Money market accounts 52,381 655 2.52% 51,270 720 2.83%
TransPlus (SuperNOW) 93,695 1,092 2.35% 82,659 1,122 2.74%
Certificates of deposit 583,140 11,487 3.97% 538,109 11,848 4.44%
Other time deposits 91,447 1,871 4.13% 93,040 2,133 4.62%
Total interest-bearing deposits 1,098,889 18,584 3.41% 971,065 18,497 3.84%
Federal funds purchased
and repurchase agreements 34,025 452 2.68% 24,029 319 2.68%
Long-term debt and
and other borrowings 71,107 1,896 5.38% 18,032 396 4.43%
Total borrowed funds 105,132 2,348 4.50% 42,061 715 3.43%
Total interest-bearing liabilities /
interest expense 1,204,021 20,932 3.51% 1,013,126 19,212 3.82%
Non-interest-bearing liabilities:
Non-interest-bearing deposits 148,295 106,890
Other liabilities 8,221 7,428
Total liabilities 1,360,537 1,127,444
Shareholders' equity 101,233 94,103
Total Liabilities
and Shareholders' Equity $1,461,770 $1,221,547
Net interest-rate spread 4.03% 3.96%
Impact of non-interest bearing sources 0.37% 0.37%
Net interest income /
margin on interest-earning assets $29,413 4.40% $24,196 4.33%
</TABLE>
<PAGE>
Analysis of Changes in Net Interest Income
The following tables show changes in interest income and interest expense
resulting from changes in volume and interest rates for the three-month period
ended June 30, 1994 as compared to the same period in 1993, and for the six-
month period ended June 30, 1994 as compared to the first half of 1993.
Approximately $1.9 million and $3.8 million, respectively, of the increases in
net interest income for the second quarter and six-month periods represent the
effect of the TFB-Pikeville acquisition. Substantially all of these amounts are
reflected in these two tables as changes due to volume.
Second Quarter 1994 vs. 1993 Increase (decrease)
in interest income and expense
In thousands due to changes in:
Volume Rate Total
Interest-earning assets:
Loans $4,865 $(186) $4,679
Securities (161) (327) (488)
Federal funds sold
and resale agreements (106) 69 (37)
Interest-bearing deposits with banks (28) 15 (13)
Total interest-earning assets 4,570 (429) 4,141
Interest-bearing liabilities:
Interest-bearing demand 166 (23) 143
Savings deposits 297 (2) 295
Money market accounts (2) (28) (30)
TransPlus (SuperNOW) 49 (58) (9)
Certificates of deposit 495 (578) (83)
Other time deposits (22) (51) (73)
Total interest-bearing deposits 983 (740) 243
Federal funds purchased
and repurchase agreements 65 33 98
Long-term debt and
and other borrowings 667 140 807
Total borrowed funds 732 173 905
Total interest-bearing liabilities 1,715 (567) 1,148
Increase (decrease)
in net interest income $2,855 $ 138 $2,993
The change in interest due to both rate and volume has been allocated to changes
in average volume and changes in average rates in proportion to the relationship
of absolute dollar amounts of change in each.
<PAGE>
Six Months 1994 vs. 1993 Increase (decrease)
in interest income and expense
In thousands due to changes in:
Volume Rate Total
Interest-earning assets:
Loans $9,817 $(1,478) $8,339
Securities 59 (1,167) (1,108)
Federal funds sold
and resale agreements (376) 127 (249)
Interest-bearing deposits with banks (81) 36 (45)
Total interest-earning assets 9,419 (2,482) 6,937
Interest-bearing liabilities:
Interest-bearing demand 325 (67) 258
Savings deposits 599 (52) 547
Money market accounts 15 (80) (65)
TransPlus (SuperNOW) 140 (170) (30)
Certificates of deposit 945 (1,306) (361)
Other time deposits (36) (226) (262)
Total interest-bearing deposits 1,988 (1,901) 87
Federal funds purchased
and repurchase agreements 133 - 133
Long-term debt and
and other borrowings 1,398 102 1,500
Total borrowed funds 1,531 102 1,633
Total interest-bearing liabilities 3,519 (1,799) 1,720
Increase (decrease)
in net interest income $5,900 $(683) $5,217
Provision for Loan Losses
The provision for loan losses was $574 thousand (.23% of average loans, on an
annualized basis, excluding mortgage loans held for sale) in the second quarter
of 1994, compared with $614 thousand (.32% of average loans) in the second
quarter of 1993. Net loan charge-offs were $259 thousand (.10% of average loans)
for the three months ended June 30, 1994, and $501 thousand (.26% of average
loans) for the comparable period in 1993.
For the first six months of 1994, the provision for loan losses was $1.012
million (.21% of average loans), compared with $1.210 million (.33% of average
loans) in the first half of 1993. Net loan charge-offs were $555 thousand (.11%
of average loans) for the first half of 1994, compared with $772 thousand (.21%
of average loans) for the comparable 1993 period.
The provision for loan losses and the level of the allowance for loan losses
reflect the quality of the loan portfolio and result from management's
evaluation of the risks in the loan portfolio. Further discussion on loan
quality and the allowance for loan losses is included in the Asset Quality
discussion later in this review.
Non-Interest Income
Non-interest income for the first six months of 1994 decreased $74 thousand
over the first half of 1993. For the second quarter of 1994, non-interest income
increased $411 thousand over the second quarter of 1993. These changes were
primarily due to (in thousands):
Increase (decrease) Six Second
Months Quarter
o The TFB-Pikeville acquisition $661 $370
Excluding TFB-Pikeville:
Increase (decrease) in gains on sales
of securities (923) 29
o Lower gains on sales of mortgage loans (782) (510)
o Increased service charges on deposit accounts 328 170
o Increase in loan servicing fees 214 193
o Increase in brokerage fees 189 127
o Increase in trust fees 77 38
o All other, net 162 (6)
Net increase(decrease)
in non-interest income $ (74) $ 411
Non-Interest Expenses
Non-interest expenses increased $5.9 million for the first six months of 1994,
compared to the first half of 1993. For the second quarter of 1994, non-interest
expenses were up $2.9 million over the second quarter of 1993. These changes
were primarily due to (in thousands):
Increase (decrease) Six Second
Months Quarter
o The TFB-Pikeville acquisition $3,128 $1,608
Excluding TFB-Pikeville:
o Increased compensation and benefits 1,112 486
o Increase in postage, printing
and supplies expenses 349 186
o Increase in professional fees 254 257
o Increase (decrease) in occupancy,
furniture & equipment expenses 214 (3)
o Increase in deposit insurance expense 188 89
o All other, net 633 317
Net increase in non-interest expense $5,878 $2,940
During the second quarter, management initiated a plan to eliminate 55
positions, or 8% of the company's workforce. These reductions will come as a
result of consolidating backroom operations of recently acquired affiliates and
a realignment of branch staffing throughout the company's branch system.
Income Taxes
The company adopted effective January 1, 1993, SFAS 109, resulting in a $296
thousand increase in net income in the first quarter of that year. Income tax
expense totaled $2.924 million in the first half of 1994, compared with $2.804
million in the comparable 1993 period, excluding the effect of adopting
Statement 109. These represent effective tax rates of 34.3% and 30.9%,
respectively.
Balance Sheet Review
Overview
Assets at June 30, 1994, totaled $1.486 billion, compared with $1.469 billion
at December 31, 1993, and $1.233 billion a year ago. Average total assets for
the second quarter increased $232 million (19%) over the past year to $1.464
billion. Average interest-earning assets increased $210 million (18%) to $1.345
billion. TFB-Pikeville contributed $188 million of the increase in average total
assets and $178 million of the increase in average earning assets.
Loans
Total loans, net of unearned income, averaged $1.002 billion in the second
quarter of 1994, excluding mortgage loans held for sale of $22 million. For the
comparable period in 1993, loans averaged $760 million, excluding the $29
million of mortgage loans held for sale. The company continues to experience
strong loan growth throughout its markets, with particular strength in middle
market commercial lending products. At June 30, 1994, loans net of unearned
income (excluding mortgage loans held for sale) totaled $990 million, compared
with $942 million at December 31, 1993, and $774 million a year ago. TFB-
Pikeville's loan portfolio represents 58% of the increase between June 30, 1993,
and June 30, 1994.
Asset Quality
With respect to asset quality, management considers three categories of assets
to merit additional scrutiny. These categories include (a) loans which are
currently nonperforming, (b) other real estate and loans classified as
in-substance foreclosures (ISF), and (c) loans which are currently performing
but which management believes require special attention.
Nonperforming loans, which include non-accrual loans, accruing loans past due
over 90 days and restructured loans, totaled $9.1 million at June 30, 1994,
virtually unchanged from December 31, 1993, and up $1.0 million from the end of
the second quarter of 1993. The ratio of nonperforming loans to total loans (net
of unearned income) was .91% at June 30, 1994, compared with .97% at the end of
1993 and 1.04% a year ago. Nonperforming assets, which include nonperforming
loans, other real estate, and loans classified as in-substance foreclosures,
totaled $14.6 million at the end of 1994's second quarter. The ratio of
nonperforming loans and other real estate to total assets decreased from 1.28% a
year ago to .98% at June 30, 1994.
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans. Management classifies a loan as
nonaccrual when principal or interest is past due 90 days or more and the loan
is not adequately collateralized and in the process of collection, or when, in
the opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation. Consumer installment loans are
charged off after 120 days of delinquency unless adequately secured and in the
process of collection. Loans are not reclassified as accruing until principal
and interest payments are brought current and future payments appear certain.
Loans are categorized as restructured if the original interest rate, repayment
terms, or both were restructured due to a deterioration in the financial
condition of the borrower. However, restructured loans that demonstrate
performance under restructured terms and that yield a market rate of interest
are removed from restructured status in the year following the restructure.
Nonperforming Assets
Dollars in thousands
June 30 December 31 June 30
1994 1993 1993
Nonaccrual loans $5,858 $5,518 $4,999
Accruing loans which are contractually
past due 90 days or more 3,154 2,003 2,446
Restructured loans 38 1,591 581
Total nonperforming and restructured loans 9,050 9,112 8,026
Other real estate and in-substance foreclosures 5,519 5,599 7,718
Total nonperforming and restructured loans
and other real estate $14,569 $14,711 $15,744
Nonperforming and restructured loans
as a percentage of net loans 0.91% 0.97% 1.04%
Nonperforming and restructured loans and other
real estate as a percentage of total assets 0.98% 1.00% 1.28%
Three credit relationships account for $3.6 million, or 61%, of the June 30,
1994, nonaccrual balance. The first of these loans is to a manufacturing concern
and is secured by commercial real estate and equipment. The loan has been on
nonaccrual since 1992. During 1993, $775,000 of the loan balance was charged
off, reducing the loan to $1.5 million. In the second quarter of 1994, the
borrower resumed making partial principal payments and, at June 30, 1994, the
loan had a balance of $1,457,000. Appropriate amounts have been specifically
allocated in the evaluation of the allowance for loan losses for this credit
exposure. The second loan was acquired in the TFB-Pikeville acquisition. It has
an outstanding balance of $1,426,000 and is secured by commercial real estate.
The borrower filed for Chapter 11 bankruptcy protection during the third quarter
of 1993, but resumed making payments to the company in the first quarter of
1994. Management believes that the existing credit exposure is adequately
supported by the collateral value. The third loan was also acquired in the TFB-
Pikeville acquisition. The loan is collateralized by a lien on mining equipment
and has a balance at June 30, 1994, of $684,000. The borrower filed Chapter 11
bankruptcy in April 1994, and the credit was placed on nonaccrual. The mining
operation has ceased, and attempts are being made to liquidate the collateral.
Potential loss exposure is not considered significant.
Other real estate and in-substance foreclosures at June 30, 1994, includes two
properties with an aggregate book value of $3.1 million, or 56% of the
outstanding balance. The first property was acquired through foreclosure in 1986
with an unsatisfied loan balance at the time of $1.8 million. In order to
facilitate the disposal of the property, the company entered into a joint
venture with a real estate developer and developed the land for industrial and
other commercial use. In the third quarter of 1993, the company dissolved the
joint venture and retained title to the property. Several parcels have been sold
at a profit. The book value of the property at June 30, 1994, including
development costs, was $1.4 million. Based on a recent appraisal of the property
and previous sales experience, management does not anticipate any significant
losses to be incurred on disposition. The second property included in other real
estate and in-substance foreclosures is carried at a book value of $1.7 million
and relates to a wood products manufacturing facility. The facility was closed
in 1992 and is presently listed for sale with a commercial real estate firm.
Based on an appraisal of the collateral, management is of the opinion that no
significant loss will be incurred in the disposal of the collateral.
As of June 30, 1994, the company had $7.6 million of loans which were not
included in the past due, nonaccrual or restructured categories, but for which
known information about possible credit problems caused management to have
serious doubts as to the ability of the borrowers to comply with the present
loan repayment terms. Based on management's evaluation, including current market
conditions, cash flow generated and recent appraisals, management currently
anticipates no significant losses will be incurred in connection with these
loans. These loans are subject to continuing management attention and are
considered by management in determining the level of the allowance for loan
losses.
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans. At June 30, 1994, the allowance was $11.6 million, compared with $11.1
million at December 31, 1993, and $8.9 million at June 30, 1993. The allowance
as a percentage of nonperforming loans - an indication of the relative ability
to cover problem loans with existing reserves - increased from 111% at June 30,
1993, to 122% at year-end 1993 and to 128% at June 30, 1994. The ratio of the
allowance for loan losses to total loans (excluding mortgage loans held for
sale) at June 30, 1994, was 1.17%, compared with 1.18% at December 31, 1993, and
1.15% at the end of 1993's second quarter.
The adequacy of the allowance for loan losses is determined on an ongoing
basis through analysis of the overall quality of the loan portfolio, historical
loan loss experience, loan delinquency trends and the economic conditions within
the company's market area. Additional allocations from the allowance are based
on specifically identified potential loss situations. These potential loss
situations are identified by account officers' evaluations of their own
portfolios as well as by an independent loan review function.
Securities, Federal Funds Sold and Resale Agreements
Securities, including those classified as held to maturity and available for
sale, increased from $313 million at June 30, 1993, to $337 million at year-end
1993, then declined to $299 million at June 30, 1994. TFB-Pikeville provided an
initial securities portfolio of $61 million, indicating a total decrease of $75
million from a year ago. Due to the declining rate environment over the past two
years, the mortgage-backed securities portfolio experienced a high level of
prepayments. To a large extent, the proceeds of these prepayments were invested
in commercial, consumer loans and mortgages held for sale.
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
beginning December 31, 1993. Unrealized gains and losses on securities available
for sale are reported as a separate component of shareholders' equity (net of
tax).
Federal funds sold and securities purchased under agreements to resell
increased to $57.0 million at June 30, 1994, from $26.8 million at December 31,
1993, and $10.4 million a year ago.
Deposits and Borrowed Funds
Total deposits averaged $1.246 billion in the second quarter of 1994, an
increase of $160 million (15%) over the comparable 1993 period. Interest-bearing
accounts increased $126 million (13%), while non-interest-bearing accounts
increased $34 million (30%) over the past year. Substantially all of the
increases are attributable to the TFB-Pikeville acquisition.
Long-term debt averaged $37 million in the second quarter of 1994, an increase
of $15 million from the second quarter of 1993. This increase is due to the
issuance of $33 million of 7.25% Subordinated Notes in a public offering during
the third quarter of 1993. Average short-term borrowings, including federal
funds purchased and repurchases, increased $48 million period to period, the
result of a $15 million advance from the Federal Home Loan Bank ("FHLB") to TFB-
Tennessee in the third quarter of 1993, an additional $10 million FHLB advance
during the first quarter of 1994 to fund additional loan growth, a $10 million
increase in average federal funds purchased and repurchases, and a $10 million
reclassification of FHLB advances from long-term to short-term during the second
quarter of 1994.
Capital Resources and Liquidity
On September 16, 1993, the company issued $33 million of 7.25% Subordinated
Notes on September 16, 1993, in a public offering. The net proceeds were
approximately $32 million, of which $15 million was used to repay debt incurred
in the TFB-Pikeville and KCB transactions, $5 million was contributed to the
banks as capital, $7 million was used for general corporate purposes, and the
balance is available for financing possible future acquisitions, augmenting the
capital of the banks, as needed, and for general corporate purposes.
The company's capital ratios at June 30, 1994, December 31, 1993, and June 30,
1993 (calculated in accordance with regulatory guidelines) were as follows:
June 30, December 31, June 30,
1994 1993 1993
Tier 1 risk based 8.74% 9.21% 11.03%
Regulatory minimum 4.00 4.00 4.00
Total risk based 12.93 13.51 12.13
Regulatory minimum 8.00 8.00 8.00
Leverage 6.30 6.46 7.27
Regulatory minimum 3.00 3.00 3.00
Capital ratios of all of the company's subsidiaries are in excess of
applicable minimum regulatory capital ratio requirements at June 30, 1994.
In general, the company relies upon net inflows of cash from financing
activities, supplemented by net inflows of cash from operating activities, to
provide cash used in its investing activities. As is typical of most banking
companies, significant financing activities include issuance of common stock,
deposit gathering, use of short-term borrowing facilities, such as federal funds
purchased and repurchase agreements, and the issuance of long-term debt. The
company's primary investing activities include purchases of securities and loan
originations, offset by maturities and sales of securities, and loan payments.
Asset/Liability Management
A primary objective of asset/liability management is to manage the company's
exposure to interest-rate risk. The company's Asset/Liability Committee monitors
and adjusts exposure to interest rates in response to economic conditions and
the flow of loans and deposits, provides oversight to the asset/liability
management process and approves policy guidelines. Further, asset/liability
activity is reviewed by the board of directors.
An earnings simulation model is used to monitor and evaluate the exposure and
impact of changing interest rates on earnings. This dynamic model captures all
interest-earning assets, interest-bearing liabilities and off-balance-sheet
financial instruments. The model combines the various factors affecting rate
sensitivity into an earnings outlook that incorporates management's view of the
most likely interest rate environment for the next 24 months. Rate sensitivity
is determined by assessing the impact on net interest income in multiple rising
and falling interest-rate scenarios. The model is updated at least monthly and
more often if necessary.
The simulation model provides a more dynamic assessment of interest-rate
sensitivity than does a portrayal of the static interest-rate sensitivity gap,
compiled as of a point in time. Static gap analysis does not reflect the
multiple effects of interest rate movements on the whole range of assets,
liabilities, and off-balance-sheet financial instruments. Moreover, in today's
financial environment, which includes a complex array of both on- and off-
balance-sheet financial instruments, static gap analysis does not provide the
most comprehensive and informative disclosures about interest-rate risks.
The model presents a sharper and more complete picture of the company's
interest-rate sensitivity, which allows management to emphasize stable net
interest income throughout rate cycles, with the result that intermediate and
longer-term implications take precedence over short-term profitability.
Because it includes significant variables identified as being affected by
interest rates, the earnings simulation model provides better information to
management. For example, among the factors the model captures which static gap
analysis does not are: 1) rate of change differentials, such as federal funds
rates versus savings account rates; 2) maturity effects, such as calls on
securities; 3) rate barrier effects, such as caps or floors on loans; 4)
changing balance sheet levels, 5) floating rate loans that may be tied or
related to prime, treasury notes, CD rates or other rate indices, which do not
necessarily move identically as rates change; 6) leads and lags that occur as
rates move away from current levels; and 7) the effects of prepayments on
various fixed rate assets such as residential mortgages, mortgage-backed
securities, collateralized mortgage obligations, and consumer loans. These, and
certain other effects, are evaluated to develop multiple scenarios from which
the sensitivity of earnings to changes in interest rates is determined. It
should be noted, however, the model does not take into account future actions
that could be undertaken to reduce this impact if there were a change in
management's interest rate expectations or the actual level of interest rates.
The model combines the pivotal factors that affect interest-rate sensitivity
into a comprehensive outlook for the next 24 months. In assessing multiple rate
scenarios, the following illustrates the effects on net interest income of
varying rate environments compared to a consensus economic forecast (considered
most likely). For example, in the most likely rate scenario, the company assumed
that the federal funds rate and prime rate would increase gradually over the
next year to 4.75% and 7.75%, respectively. Following is a summary of the
assumptions used in the model at the end of the second quarter of 1994, along
with the resultant projected impact on net interest income.
Most Likely Rising Flat Declining
Assumptions:
Federal funds rate, June 1995 4.75% 7.25% 4.31% 3.55%
Prime rate, June 1995 7.75% 10.00% 7.25% 6.60%
Increase (decrease) in net interest income -0-% 3.41% (1.15)% (1.51)%
Management concluded that the company is asset sensitive at June 30, 1994,
which indicates that in a uniformly rising rate environment the company's net
interest income will be impacted positively.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of operations, the company and its subsidiaries are
defendants in various legal proceedings. In the opinion of management, there is
no proceeding pending or, to the knowledge of management, threatened in which an
adverse decision could result in a material adverse change in the business or
consolidated financial position of the company.
Item 2 through 5.
No information is required to be filed for these items.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index on pages 21 through 22 of this Form
10-Q are filed as a part of this report.
(b) Reports on Form 8-K
The registrant filed on May 9, 1994, a report on Form 8-K dated April 22,
1994 reporting the merger of Peoples Financial Services, Inc. with and into
the registrant, and the issuance of approximately 1,302,273 shares of common
stock of the registrant, pursuant to an Agreement and Plan of Reorganization
and Plan of Merger dated December 27, 1993. The following consolidated
financial statements of Peoples Financial Services, Inc., notes related
thereto and reports of independent auditors thereon were filed as a part of
the report:
1. Independent Auditors' Reports;
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 Changes in 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;
6. Notes to Consolidated Financial Statements;
The following pro forma consolidated financial statements of Trans
Financial Bancorp, Inc. and notes related thereto were filed as a part of
the report:
1. Pro Forma Combined Balance Sheet as of December 31, 1993 (unaudited);
2. Pro Forma Combined Income Statement for the year ended December 31,
1993 (unaudited);
3. Pro Forma Combined Income Statement for the year ended December 31,
1992 (unaudited);
4. Pro Forma Combined Income Statement for the year ended December 31,
1991 (unaudited); and
5.Notes to Pro Forma Combined Financial Statements (unaudited).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Trans Financial Bancorp, Inc.
(Registrant)
Principal Executive Officer:
Date: August 12, 1994 /s/ Douglas M. Lester
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
Principal Financial Officer:
Date: August 12, 1994 /s/ Vince A. Berta
Vince A. Berta
Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibits
Sequentially
Numbered Pages
4(a) Restated Articles of Incorporation of the registrant are
incorporated by reference to Exhibit 3 of the registrant's
report on Form 10-Q for the quarter ended March 31, 1992.
4(b) Bylaws of the registrant, as amended, are incorporated by
reference to Exhibit 4(b) of the registrant's report on
Form 10-K for the year ended December 31, 1993.
4(c) Rights Agreement dated January 20, 1992 between Manufacturers
Hanover Trust Company and Trans Financial Bancorp, Inc.
is incorporated by reference to Exhibit 1 to the registrant's
report on Form 8-K dated January 24, 1992.
4(d) Form of Indenture (including Form of Subordinated Note)
dated as of September 1, 1993, between the registrant and
First Tennessee Bank National Association as Trustee,
relating to the issuance of 7.25% Subordinated Notes due 2003,
is incorporated by reference to Exhibit 4 of Registration
Statement on Form S-2 of the registrant (File No. 33-67686).
10(a) Trans Financial Bancorp, Inc. 1987 Stock Option Plan is
incorporated by reference to Exhibit 4(a) of Registration
Statement on Form S-8 of the registrant (File No. 33-43046).*
10(b) Trans Financial Bancorp, Inc. 1990 Stock Option Plan is
incorporated by reference to Exhibit 10(d) of the registrant's
Report on Form 10-K for the year ended December 31, 1990.
10(c) Trans Financial Bancorp, Inc. 1992 Stock Option Plan is
incorporated by reference to Exhibit 28 of the registrant's
Report on Form 10-Q for the quarter ended March 31, 1992.*
10(d) Trans Financial Bancorp, Inc. 1994 Stock Option Plan is
incorporated by reference to the registrant's Proxy
Statement dated March 18, 1994, for the April 25, 1994
Annual Meeting of Shareholders.*
10(e) Employment Agreement between Douglas M. Lester and Trans
Financial Bancorp, Inc. is incorporated by reference to
Exhibit 10(c) of the registrant's Report on Form 10-K
for the year ended December 31, 1990.*
10(f) Employment Agreement between Harold T. Matthews and Trans
Financial Bank, National Association is incorporated by
reference to Exhibit 10(e) of the registrant's Report on
Form 10-K for the year ended December 31, 1992.*
10(g) Description of the registrant's Performance Incentive Plan
is incorporated by reference to Exhibit 10(f) of the
registrant's Report on Form 10-K for the year ended
December 31, 1992.*
10(h) Form of Deferred Compensation Agreement between registrant
and certain officers of the registrant is incorporated by
reference to Exhibit 10(g) of the registrant's Report on
Form 10-K for the year ended December 31, 1992.*
10(i) Trans Financial Bancorp, Inc. Dividend Reinvestment and
Stock Purchase Plan is incorporated by reference to
Registration Statement on Form S-3 of the registrant
dated May 15, 1991 (File No. 33-40606).
10(j) Plan and Agreement of Reorganization dated September 14,
1992 among Trans Financial Bancorp, Inc., Dawson Springs
Bancorp, Inc. and the shareholders of Dawson Springs
Bancorp, Inc. is incorporated by reference to Exhibit 1
of the registrant's Report on Form 8-K dated January 15, 1993.
10(k) Warrant dated as of February 13, 1992 between Morgan
Keegan & Company, Inc. and Trans Financial Bancorp, Inc.
incorporated by reference to Exhibit 10(m) of Registration
Statement on Form S-2 of the registrant (File No. 33-45483).
10(l) Share Exchange Agreement dated March 25, 1993 between
Trans Financial Bancorp, Inc. and Trans Kentucky Bancorp
is incorporated by reference to Exhibit 1 of the
registrant's Report on Form 8-K dated April 8, 1993.
10(m) Loan Agreement dated as of July 6, 1993 between First
Tennessee Bank National Association and Trans Financial
Bancorp, Inc. is incorporated by reference to Exhibit
10(p) to the Registration Statement on Form S-2 of the
registrant (File No. 33-67686).
10(n) Underwriting Agreement dated as of September 9, 1993
among Morgan Keegan & Company, Inc., J.C. Bradford
and Company, and Trans Financial Bancorp, Inc.
incorporated by reference to Exhibit (1) to Registration
Statement on Form S-2 of the registrant (File No. 33-67686).
10(o) Subordinated Note dated as of September 16, 1993, by
Trans Financial Bancorp, Inc. is incorporated by reference
to Exhibit 1 to Registration Statement on Form S-2 of the
registrant (File No. 33-67686).
10(p) Agreement and Plan of Reorganization dated November 9, 1993,
as amended January 6, 1994, among Trans Financial Bancorp,
Inc., Trans Financial Acquisition Corporation and Kentucky
Community Bancorp, Inc. is incorporated by reference to
Exhibit 2 to the Registration Statement on Form S-4 of the
registrant (File No. 33-51575).
10(q) Agreement and Plan of Reorganization and Plan of Merger
dated December 27, 1993 between Trans Financial Bancorp,
Inc. and Peoples Financial Services, Inc. is incorporated
by reference to Exhibit 2 of the registrant's Report on
Form 8-K dated January 10, 1994.
10(r) Agreement and Plan of Reorganization and Plan of Merger
dated January 28, 1994 between Trans Financial Bancorp,
Inc. and FGC Holding Company is incorporated by reference
to Exhibits 2(a) and 2(b) of the registrant's Report on
Form 8-K dated February 18, 1994.
11 Statement Regarding Computation of Per Share Earnings 23
*Denotes a management contract or compensatory plan or arrangement of the
registrant required to be filed as an exhibit pursuant to Item 601 (10) (iii)
of Regulation S-K.
<PAGE>
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
In thousands, except per share amounts
Three Months Six Months
For the periods ended June 30 1994 1993 1994 1993
Primary earnings per common share: (1)
Average common shares outstanding 10,117 10,068 10,112 10,068
Common stock equivalents 76 144 84 129
Average shares and share equivalents 10,193 10,212 10,196 10,197
Income before cumulative effect
of change in accounting principle $2,950 $2,626 $5,607 $6,264
Primary earnings per common share
before cumulative effect of change
in accounting principle $0.29 $0.26 $0.55 $0.61
Net income $2,950 $2,626 $5,607 $6,560
Primary net income per share $0.29 $0.26 $0.55 $0.64
Fully-diluted earnings per common share: (1)
Average common shares outstanding 10,117 10,068 10,112 10,068
Common stock equivalents 85 144 85 129
Average shares and share equivalents 10,202 10,212 10,197 10,197
Income before cumulative effect
of change in accounting principle $2,950 $2,626 $5,607 $6,264
Fully-diluted earnings per common share
before cumulative effect of change
in accounting principle $0.29 $0.26 $0.55 $0.61
Net income $2,950 $2,626 $5,607 $6,560
Fully-diluted net income per share $0.29 $0.26 $0.55 $0.64
(1)All common share and per share data have been adjusted to reflect the 4-for-
3 stock split effected February 1, 1993, and shares issued in acquisitions
accounted for using the pooling-of-interests method of accounting.
