<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) February 15, 1994
-------------------------------
Trans Financial Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kentucky 0-13030 61-1048868
- --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
500 East Main Street, Bowling Green, Kentucky 42101
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(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> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
The following consolidated financial statements of Kentucky Community,
notes related thereto and report of independent auditors thereon are filed as a
part of this Report:
* (1) Independent Auditor's Report;
* (2) Consolidated Balance Sheets as of December
31, 1992 and 1991;
* (3) Consolidated Statements of Income for the
years ended December 31, 1992, 1991 and 1990;
* (4) Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1992, 1991 and 1990;
* (5) Consolidated Statements of Cash Flows for the
years ended December 31, 1992, 1991 and 1990;
* (6) Notes to Consolidated Financial Statements;
* (7) Condensed Consolidated Balance Sheet as of
September 30, 1993 (unaudited);
* (8) Condensed Consolidated Income Statements
for the periods ended September 30, 1993 and 1992 (unaudited);
* (9) Condensed Consolidated Statements of Cash
Flows for the periods ended September 30, 1993 and 1992 (unaudited);
and
* (10) Notes to Condensed Consolidated Financial
Statements (unaudited).
B. Pro Forma Financial Statements
The following pro forma consolidated financial statements of Trans
Financial Bancorp, Inc, and notes related thereto are filed as a part of this
Report:
* (1) Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1993 (unaudited);
* (2) Pro Forma Condensed Consolidated Income
Statement for the nine months ended September 30, 1993 (unaudited);
* (3) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1992 (unaudited);
* (4) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1991 (unaudited); and
2
<PAGE> 3
* (5) Pro Forma Condensed Consolidated Income Statement
for the year ended December 31, 1990 (unaudited); and
* (6) Notes to Pro Forma Condensed Consolidated
Financial Statements (unaudited).
__________________
* Previously Filed.
C. Exhibits
The following exhibits are filed as a part of this report:
2(a) Agreement and Plan of Reorganization between Trans Financial
Bancorp, Inc. and Kentucky Community Bancorp, Inc. dated as of November 9,
1993, as amended January 6, 1994, is incorporated by reference to Exhibit (2)
of the Registration Statement on Form S-4 (File No. 33-51575) filed by Trans
Financial with the Commission.
2(b) Plan of Merger between Trans Financial Bancorp, Inc. and
Kentucky Community Bancorp, Inc. dated as of November 9, 1993, as amended
January 6, 1994, is incorporated by reference to Exhibit (2) of the
Registration Statement on Form S-4 (File No. 33-51575) filed by Trans
Financial with the Commission.
99(a) Supplemental Consolidated Financial Statements of
Trans Financial Bancorp, Inc. as of December 31, 1992 and 1991 and for the
years ended December 31, 1992, 1991 and 1990, related notes thereto and report
of independent auditors thereon.
99(b) Trans Financial Bancorp, Inc. and subsidiaries Supplemental
Consolidated Balance Sheets as of September 30, 1993 and December 31, 1992
(unaudited); Supplemental Consolidated Statements of Income for the nine
months ended September 30, 1993 and 1992 (unaudited); Supplemental
Consolidated Statements of Income for the three months ended September 30,
1993 and 1992 (unaudited); Supplemental Consolidated Statements of Changes in
Stockholders' Equity for the nine months ended September 30, 1993 (unaudited);
Supplemental Consolidated Statements of Changes in Stockholders' Equity for
the nine months ended September 30, 1992 (unaudited); and Supplemental
Consolidated Statements of Cash Flows for the nine months ended September 30,
1993 and 1992 (unaudited).
3
<PAGE> 4
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.
By: /s/ Vince Berta
--------------------------
Vince Berta
Title: Executive Vice President and
Chief Financial Officer
Date: March 8, 1994
5
<PAGE> 5
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBERED PAGE
2(a) Agreement and Plan of Reorganization between Trans
Financial Bancorp, Inc. and Kentucky Community Bancorp,
Inc. dated as of November 9, 1993, as amended January 6,
1994, is incorporated by reference to Exhibit (2) of the
Registration Statement on Form S-4 (File No. 33-51575)
filed by Trans Financial with the Commission.
2(b) Plan of Merger between Trans Financial Bancorp, Inc. and
Kentucky Community Bancorp, Inc. dated as of November 9,
1993, as amended January 6, 1994, is incorporated by
reference to Exhibit (2) of the Registration Statement
on Form S-4 (File No. 33-51575) filed by Trans Financial
with the Commission.
99(a) Supplemental Consolidated Financial Statements of Trans Financial
Bancorp, Inc. as of December 31, 1992 and 1991 and for the years
ended December 31, 1992, 1991 and 1990, related notes thereto and
report of independent auditors thereon.
99(b) Trans Financial Bancorp, Inc. and subsidiaries Supplemental
Consolidated Balance Sheets as of September 30, 1993 and December 31,
1992 (unaudited); Supplemental Consolidated Statements of Income
for the nine months ended September 30, 1993 and 1992 (unaudited);
Supplemental Consolidated Statements of Income for the three months
ended September 30, 1993 and 1992 (unaudited); Supplemental
Consolidated Statements of Changes in Stockholders' Equity for the
nine months ended September 30, 1993 (unaudited); Supplemental
Consolidated Statements of Changes in Stockholders' Equity for the
nine months Ended September 30, 1992 (unaudited); and Supplemental
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1993 and 1992 (unaudited).
<PAGE> 1
EXHIBIT 99(a)
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992 AND 1991
<PAGE> 2
Independent Auditors' Report
The Board of Directors and Stockholders
Trans Financial Bancorp, Inc.:
We have audited the accompanying supplemental consolidated balance sheets of
Trans Financial Bancorp, Inc. and subsidiaries as of December 31, 1992 and
1991, and the related supplemental consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1992. 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 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.
The supplemental consolidated financial statements give retroactive effect to
the merger of Trans Financial Bancorp, Inc. and Kentucky Community Bancorp,
Inc. on February 15, 1994, which has been accounted for as a pooling of
interests as described in Note 3 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect
to a consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
Trans Financial Bancorp, Inc. and subsidiaries after financial statements
covering the date of consummation of the business combination are issued.
In our opinion, 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, 1992 and 1991, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1992, in conformity with generally
accepted accounting principles applicable after financial statements are issued
for a period which includes the date of consummation of the business
combination.
/s/ KPMG Peat Marwick
Louisville, Kentucky
February 28, 1993,
except as to Note 3,
which is as of
February 15, 1994
<PAGE> 3
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
December 31
In thousands, except share data
<TABLE>
<CAPTION>
ASSETS 1992 1991
---- ----
<S> <C> <C>
Cash and due from banks (note 5) $ 52,482 $ 43,457
Interest bearing deposits with banks 8,462 2,960
Federal funds sold and resale agreements 63,578 13,844
Mortgage loans held for sale 24,238 5,080
Securities available for sale (market value of $53,298) (note 6) 51,925 -
Investment securities (market value of $252,997 and
$216,711, respectively) (note 6) 249,757 210,185
Loans, net of unearned income (note 7) 648,206 445,625
Less allowance for loan losses 7,517 5,983
----------- --------
Net loans 640,689 439,642
Premises and equipment (note 8) 23,045 14,480
Other assets 31,796 23,170
----------- --------
Total assets $ 1,145,972 $752,818
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 121,166 $ 69,359
Interest bearing 890,061 588,170
----------- --------
Total deposits 1,011,227 657,529
Federal funds purchased and repurchase agreements 26,993 22,882
Other short-term borrowings - 87
Other liabilities 8,196 7,991
Long-term debt and other notes payable (note 9) 18,061 13,094
----------- --------
Total liabilities 1,064,477 701,583
----------- --------
Stockholders' equity:
Preferred stock (note 10) - 2,285
Common stock, no par value. Authorized
25,000,000 and 10,000,000 shares, respectively;
issued and outstanding 6,555,985 and
4,424,118 shares, respectively (notes 10 and 13) 16,391 11,051
Additional paid-in capital 38,362 15,510
Retained earnings (note 11) 30,777 23,755
Unrealized loss on marketable equity securities (163) (161)
Employee Stock Ownership Plan shares purchased
with debt (note 9) (3,872) (1,205)
----------- --------
Total stockholders' equity 81,495 51,235
----------- --------
Total liabilities and stockholders' equity $ 1,145,972 $752,818
=========== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
<PAGE> 4
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31
In thousands, except per share data
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans, including fees $55,468 $ 46,223 $45,279
Federal funds sold and resale agreements 653 1,009 1,344
U.S. Treasury and Federal agencies 18,290 11,771 8,727
State and municipal obligations 988 1,124 1,186
Other securities 674 289 216
Interest bearing deposits with banks 257 143 127
------- ------- ------
Total interest income 76,330 60,559 56,879
------- ------- ------
Interest expense:
Deposits 36,183 33,167 31,539
Federal funds purchased and repurchase agreements 919 506 901
Other short-term borrowings - 16 176
Long-term debt and other borrowings 630 1,655 1,820
------- ------- ------
Total interest expense 37,732 35,344 34,436
------- ------- ------
Net interest income 38,598 25,215 22,443
Provision for loan losses (note 7) 2,054 1,522 2,581
------- ------- ------
Net interest income after provision
for loan losses 36,544 23,693 19,862
------- ------- ------
Non-interest income:
Service charges on deposit accounts 4,294 3,675 3,146
Loan servicing fees 1,452 359 359
Securities gains (note 6) 865 186 171
Gains on sales of mortgage loans 1,795 665 193
Trust services 943 854 821
Other 3,229 2,199 1,727
------- ------- ------
Total non-interest income 12,578 7,938 6,417
------- ------- ------
Non-interest expense:
Compensation and benefits (note 13) 15,241 11,055 9,845
Net occupancy expense 2,555 1,825 1,707
Furniture and equipment expense 2,862 1,907 1,752
Deposit insurance 1,881 1,158 600
Other 11,116 7,760 6,361
------- ------- ------
Total non-interest expense 33,655 23,705 20,265
------- ------- ------
Income before income taxes 15,467 7,926 6,014
Income tax expense (note 12) 5,058 2,321 1,532
------- ------- ------
Net income $10,409 $ 5,605 $4,482
======= ======= ======
Net income applicable to
common stock $10,353 $ 5,292 $4,164
======= ======= ======
Earnings per common share (note 1):
Primary $ 1.25 $ 1.14 $ 1.00
======= ======= ======
Fully diluted $ 1.25 $ 1.07 $ 0.95
======= ======= ======
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
<PAGE> 5
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
In thousands, except share data
<TABLE>
<CAPTION>
Employee
Unrealized Stock
Preferred Stock Common Stock Loss on Ownership
---------------- ---------------- Additional Marketable Plan Shares
Number of Number of Paid-in Retained Equity Purchased
Shares Amount Shares Amount Capital Earnings Securities With Debt Total
-------- ------ ------- ------ ------- -------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1990,
as previously reported 38,776 $3,789 1,551,923 $5,169 $ 5,787 $9,908 $(188) $(1,634) $22,831
Acquisition accounted for as a
pooling-of-interests (note 3) 17 9 766,402 2,552 (399) 7,150 (99) - 9,213
------ ------ --------- ------ ----- ------ ----- ------- -------
Balance, January 1, 1990 38,793 3,798 2,318,325 7,721 5,388 17,058 (287) (1,634) 32,044
Net income - - - - - 4,482 - - 4,482
Cash dividends declared:
Common stock - - - - - (1,257) - - (1,257)
Preferred stock (note 10) - - - - - (318) - - (318)
Issuance of Class A Preferred Stock,
1990 Series (note 10) 1,000 3,000 - - - - - - 3,000
Redemption of other preferred stock (20) (3) - - - - - - (3)
Issuance of common stock - - 5,397 18 51 - - - 69
Increase in unrealized loss on
marketable equity securities - - - - - - (480) - (480)
Employee Stock Ownership Plan
debt reduction - - - - - - - 229 229
Other - - 268 1 2 - - - 3
------ ------ --------- ------ ------ ------ ----- ------- -------
Balance, December 31, 1990 39,773 6,795 2,323,990 7,740 5,441 19,965 (767) (1,405) 37,769
Net income - - - - - 5,605 - - 5,605
Cash dividends declared:
Common stock - - - - - (1,502) - - (1,502)
Preferred stock - - - - - (313) - - (313)
Redemption of Class A Preferred
Stock, 1988 Series (25,000) (2,500) - - - - - - (2,500)
Redemption of Class A Preferred
Stock, 1990 Series (667) (2,001) - - - - - - (2,001)
Redemption of other preferred
stock (14) (1) - - - - - - (1)
Redemption of preferred stock (7) (4) - - - - - - (4)
Issuance of common stock in
public offering - - 931,564 3,093 9,361 - - - 12,454
</TABLE>
(Continued)
<PAGE> 6
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(CONTINUED) In thousands, except share data
<TABLE>
<CAPTION>
Employee
Unrealized Stock
Preferred Stock Common Stock Loss on Ownership
----------------- ---------------- Additional Marketable Plan Shares
Number of Number of Paid-in Retained Equity Purchased
Shares Amount Shares Amount Capital Earnings Securities With Debt Total
------ -------- ------- ------ ------- -------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conversion of debentures - $ - 73,201 $ 213 $ 706 $ - $ - $ - $ 919
Four-for-three stock split - - 1,095,065 - - - - - -
Retire treasury stock (8) (4) - 4 - - - - -
Decrease in unrealized loss on
marketable equity securities - - - - - - 606 - 606
Employee Stock Ownership Plan
debt reduction - - - - - - - 200 200
Other - - 298 1 2 - - - 3
------- ------- --------- ------ ------- ------- -------- -------- ------
Balance, December 31, 1991 14,077 2,285 4,424,118 11,051 15,510 23,755 (161) (1,205) 51,235
Net income - - - - - 10,409 - - 10,409
Cash dividends declared:
Common stock - - - - - (3,331) - - (3,331)
Preferred stock - - - - - (56) - - (56)
Redemption of Class A Preferred
Stock, 1990 Series (333) (999) - - - - - - (999)
Redemption of other preferred stock (13,744) (1,286) - - - - - - (1,286)
Issuance of common stock in
public offering - - 1,265,000 3,172 13,944 - - - 17,116
Issuance of common stock in
business combination (note 4) - - 412,389 1,031 4,984 - - - 6,015
Stock options exercised - - 1,914 5 15 - - - 20
Issuance of common stock in
connection with dividend
reinvestment and stock
purchase plans and other
issuances - - 37,102 93 498 - - - 591
Conversion of debentures (note 9) - - 415,462 1,039 3,411 - - - 4,450
Increase in unrealized loss on
marketable equity securities - - - - - - (2) - (2)
Employee Stock Ownership Plan
shares purchased with debt - - - - - - - (2,667) (2,667)
-------- ------- --------- -------- -------- -------- --------- -------- --------
Balance, December 31, 1992 - $ - 6,555,985 $ 16,391 $ 38,362 $ 30,777 $ (163) $ (3,872) $ 81,495
======== ======= ========= ======== ======== ======== ========= ======== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
<PAGE> 7
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
In thousands
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,409 $ 5,605 $ 4,482
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 2,054 1,522 2,581
Provision for deferred taxes (1) (101) (481)
Gain on sales of securities (865) (186) (171)
Gain on sale of premises and equipment (11) (6) 20
Depreciation, amortization and accretion, net 3,866 2,241 1,734
Decrease (increase) in accrued interest receivable (1,238) 88 85
Decrease in other assets 3,746 1,703 568
Increase (decrease)in accrued interest payable 302 (520) (245)
Increase (decrease) in other liabilities (3,270) 1,279 697
Decrease (increase) in mortgage loans held for sale 3,931 (5,080) -
-------- -------- --------
Net cash provided by operating activities 18,923 6,545 9,270
-------- -------- --------
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits
with banks 12,636 1,308 (127)
Proceeds from sales of securities 47,928 6,416 12,762
Proceeds from maturities of securities 90,183 47,699 43,404
Purchases of securities (165,593) (131,283) (62,453)
Net (increase) decrease in federal funds
sold and resale agreements (49,509) 18,030 2,967
Net increase in loans (45,525) (14,383) (20,595)
Purchases of premises and equipment (5,565) (3,130) (1,637)
Proceeds from disposals of premises and equipment 634 31 35
Net cash and cash equivalents inflow (outflow) from
acquisitions (note 4) 37,327 64,306 (7,216)
-------- -------- --------
Net cash used in investing activities (77,484) (11,006) (32,860)
-------- -------- --------
Cash flows from financing activities:
Net increase in deposits 46,222 20,320 9,663
Net increase in federal funds purchased and
repurchase agreements 4,111 5,359 7,408
Net decrease in short-term borrowings (1,987) (1,354) (358)
Repayment of long-term debt and other notes payable (4,753) (10,901) (7,173)
Proceeds from issuance of long-term debt and other
notes payable 11,938 3,496 9,331
Proceeds from issuance of common stock 17,727 12,457 72
Redemption of preferred stock (2,285) (4,506) (3)
Issuance of preferred stock - - 3,000
Dividends paid (3,387) (1,815) (1,470)
-------- -------- --------
Net cash provided by financing activities 67,586 23,056 20,470
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 9,025 18,595 (3,120)
Cash and cash equivalents at beginning of year 43,457 24,862 27,982
-------- -------- --------
Cash and cash equivalents at end of year (note 2) $ 52,482 $ 43,457 $ 24,862
======== ======== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
<PAGE> 8
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1992 and 1991
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The supplemental consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. A description of the
more significant accounting policies follows.
Principles of Consolidation
The supplemental consolidated financial statements include the accounts of
Trans Financial Bancorp, Inc. (the Company) and its wholly-owned subsidiaries,
Trans Financial Bank, N.A. (Bank), Trans Financial Bank of Tennessee, F.S.B.
and Trans Financial Bank, F.S.B. (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 1992 presentations.
Securities
Management determines the appropriate classification of securities at the time
of purchase. If Management has the intent and the Company has the ability at
the time of purchase to hold securities until maturity or on a long-term basis,
they are classified as investments and carried at amortized historical cost.
Securities to be held for indefinite periods of time and not intended to be
held to maturity or on a long-term basis are classified as available for sale
and carried at the lower of aggregate cost or market value. Securities held
for indefinite periods of time include securities that management intends to
use as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment risk and other
factors related to interest rate and prepayment risk changes. Marketable
equity securities are carried at the lower of aggregate cost or market value
and unrealized losses are recorded as a reduction of stockholders' equity
unless it is determined that market declines are other than temporary, in which
case, losses are recognized in operations. Amortization of premiums and
accretion of discounts is recorded by a method approximating level yield which
considers prepayment risks in the case of mortgage-backed securities. 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 on nonaccrual status when in the opinion of
management the prospects for recovering both principal and accrued interest are
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 cost or market value
as determined by outstanding loan commitments from investors or current yield
requirements calculated on the aggregate loan basis.
(Continued)
1
<PAGE> 9
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses
The allowance for loan losses is maintained at a level that adequately provides
for potential losses in the loan portfolio and 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.
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 and Mortgage-Backed Securities
The Savings Banks sell mortgage loans and participations in mortgage loans and
mortgage-backed participation certificates 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. Additionally, 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, 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.
Loan Servicing Rights Purchased
The cost of loan servicing rights acquired is amortized against service fee
income in proportion to, and over the period of, estimated net servicing
revenues.
The cost of loan servicing rights acquired and the amortization thereon is
periodically evaluated in relation to estimated future net servicing revenues.
The Savings Banks evaluate the carrying value of the purchased servicing rights
by estimating the future net servicing income of the rights based on
Management's best estimate of remaining loan lives.
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 minus estimated selling costs, and real estate under
development, which is carried at the lower of cost or net realizable value.
Costs relating to holding real estate acquired in settlement of loans are
charged against income as incurred. Costs related to real estate in the
process of development are capitalized.
(Continued)
2
<PAGE> 10
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Deferred Federal income taxes are provided on certain transactions which are
reported for financial statement purposes in different periods than for income
tax purposes, using the deferred method. The FASB has issued Statement 109,
"Accounting for Income Taxes", which supersedes Statement 96, "Accounting for
Income Taxes". The Company currently accounts for income taxes under APB 11,
having elected not to adopt Statement 96 prior to its required effective date.
Statement 109 will change the Company's method of accounting for income taxes
from the deferred method required under APB 11 to the asset and liability
method. Under the deferred method, annual income tax expense is matched with
pretax accounting income by providing deferred taxes at current tax rates for
timing differences between the determination of net income for financial
reporting and tax purposes. The objective of the asset and liability method is
to establish deferred tax assets and liabilities for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities at enacted tax rates expected to be in effect when such amounts
are realized or settled. The Company will adopt Statement 109 in 1993 on a
prospective basis in which case the effect of initially applying this new
pronouncement shall be reported as the cumulative effect of a change in
accounting principle in the results of operations. The Company expects that
the impact of adopting Statement 109 will not be significant to consolidated
financial conditions or results of operations.
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 of the convertible subordinated capital
debentures into common stock and giving effect to the elimination of interest
expense, less income tax effects, related to the debentures from net income.
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 effected in the form of a 33.3% stock dividend.
All per share information has been restated to give effect to the stock splits.
The 1992 split has a record date of January 20, 1993 and a distribution date of
February 1, 1993. The weighted average number of shares outstanding after
giving effect to these stock splits were as follows:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Primary 8,281 4,652 4,148
Fully diluted 8,281 5,296 4,815
===== ===== =====
</TABLE>
(Continued)
3
<PAGE> 11
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(2) STATEMENTS 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, 1992, 1991 and 1990:
<TABLE>
<CAPTION>
In thousands 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $37,751 $36,145 $34,784
Cash paid for Federal income taxes 4,859 2,296 1,356
Certain noncash investing and financing
transactions are summarized as follows:
Also, see note 4 which summarizes assets
and liabilities associated with acquisitions.
Conversion of debentures 4,450 919 -
Exchange of subordinated debentures - - 2,348
Issuance of stock in business combination 6,015 - -
Change in unrealized loss on marketable
equity securities (2) 606 (480)
Debt transactions of Employee Stock
Ownership Plan (net) 2,667 200 229
Loans transferred to other real estate and
in-substance foreclosure 4,834 3,171 1,719
Investment securities transferred to securities
available for sale 51,925 - -
======= ======= =======
</TABLE>
(3) MERGER
On February 15, 1994, Trans Financial Bancorp, Inc. and Kentucky
Community Bancorp, Inc. merged. Each outstanding share of Kentucky Community
Bancorp Inc. (KCB) common stock was converted into 5.3 shares of Company common
stock, which resulted in the issuance of 1,374,962 shares of Company common
stock. The supplemental consolidated financial statements of the Company give
effect to this merger, which has been accounted for as a pooling 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. 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, 1992,
1991 and 1990 have been restated as follows (dollars in thousands, except per
share information):
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------------------------------------------------------------------
1992 1991 1990
Previously Reported Previously Reported Previously Reported
------------------- ------------------- ---------------------
Trans Kentucky Trans Kentucky Trans Kentucky
Financial Community Financial Community Financial Community
Bancorp, Bancorp, Bancorp, Bancorp, Bancorp, Bancorp,
Inc. Inc. Restated Inc. Inc. Restated Inc. Inc. Restated
--- --- -------- --- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income after
provision for
loan losses $30,180 $6,364 $36,544 $17,983 $5,710 $23,693 $14,960 $4,902 $19,862
Net income 9,060 1,349 10,409 4,540 1,065 5,605 3,854 628 4,482
Net income per
equivalent
common share 1.30 5.24 1.25 1.17 4.14 1.07 1.14 2.44 0.95
</TABLE>
(Continued)
4
<PAGE> 12
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(4) BUSINESS COMBINATIONS
On March 26, 1992, the Company acquired First Federal Savings Bank of Tennessee
and its wholly-owned subsidiaries, now Trans Financial Bank of Tennessee,
F.S.B., 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 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, F.S.B.
The aggregate fair value of net assets acquired in the above described
acquisitions included the following:
<TABLE>
<CAPTION>
In thousands
<S> <C>
Cash and due from banks $ 1,799
Interest bearing deposits 18,138
Federal funds sold 225
Investment securities 64,380
Mortgage loans held for sale 23,089
Net loans 162,410
Premises and equipment 3,491
Other assets 5,688
Deposits (251,789)
Other borrowings (1,900)
Other liabilities (3,149)
-------
Net assets acquired $22,382
=======
</TABLE>
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.
The unaudited pro forma financial information of the Company for the years
ended December 31, 1992 and 1991, assuming these acquisitions had occurred on
January 1, 1991, and the offering of common stock used to finance these
acquisitions had also occurred at that date, is as follows. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had these entities constituted a single entity during
such periods.
<TABLE>
<CAPTION>
In thousands, except per share data 1992 1991
---- ----
<S> <C> <C>
Net interest income after provision for loan losses $ 38,412 $ 31,310
Net income $ 11,027 $ 7,941
Earnings per common share:
Primary $ 1.24 $ 1.11
Fully diluted $ 1.24 $ 1.06
</TABLE>
On August 7, 1992, the Company acquired five Central Tennessee branches of
Heritage Federal Bank for Savings. In this transaction the Company's wholly-
owned subsidiary, Trans Financial Bank of Tennessee, F.S.B., 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 $800,000 premium.
(Continued)
5
<PAGE> 13
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(4) BUSINESS COMBINATIONS (Continued)
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. The following tables present selected
financial information for the separate entities. The amounts set forth for
Trans Financial Bancorp, Inc. include the financial impact of the KCB merger
discussed in Note 3.
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------------------------------------
1992 1991 1990
------------------------------- ------------------------------- -------------------------------
(In thousands, except per share data)
-------------------------------------------------------------------------------------------------
Trans Dawson Trans Dawson Trans Dawson
Financial Springs Financial Springs Financial Springs
Bancorp, Bancorp, Bancorp, Bancorp, Bancorp, Bancorp,
Inc. Inc. Combined Inc. Inc. Combined Inc. Inc. Combined
--- --- -------- --- --- -------- --- --- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income after
provision for
loan losses $33,409 $3,135 $36,544 $20,747 $2,946 $23,693 $16,989 $2,873 $19,862
Net income 9,461 948 10,409 4,721 884 5,605 3,500 982 4,482
Fully diluted
earnings per
common share 1.22 1.25 1.01 1.07 0.84 0.95
</TABLE>
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.
The Company acquired First Financial of Russellville, Inc. (First Financial)
and its wholly-owned subsidiary, First Federal Savings and Loan Association of
Russellville (now Trans Financial Bank, F.S.B.) effective November 15, 1990 for
cash of $7,717,000. At the time of the acquisition, the Company held shares of
common stock of First Financial with a cost of $170,000. The purchase price
plus direct costs of the acquisition exceeded the fair value of the net assets
acquired of $8,041,000 by $5,000.
The acquisition of Trans Financial Bank, F.S.B. was accounted for under the
purchase method and accordingly, the results of operations and cash flows of
Trans Financial Bank, F.S.B. have been included in the consolidated financial
statements since the date of acquisition.
Intangibles (goodwill and deposit base premium) from these transactions and an
acquisition consummated in 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 $5,925,000 and $4,593,000 at December 31, 1992
and 1991, respectively.
(Continued)
6
<PAGE> 14
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(5) CASH AND DUE FROM BANKS
Regulatory authorities require the Company's subsidiaries to maintain reserve
balances on customer deposits. At December 31, 1992 the amounts of required
reserves were $15,903,000.
(6) SECURITIES
The book values and approximate market values of investment securities as
of December 31, 1992 and 1991 follows:
<TABLE>
<CAPTION>
Unrealized
Book ------------- Market
1992 value Gains Losses value
---- ----- ----- ------ ------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal
agencies $ 22,766 254 69 22,951
Mortgage-backed and similar
securities 200,178 3,767 1,206 202,739
State and municipal obligations 13,716 568 121 14,163
Other securities 13,097 47 - 13,144
-------- ----- ----- -------
$249,757 4,636 1,396 252,997
======== ===== ===== =======
1991
----
U.S. Treasury and Federal
agencies $ 60,279 2,150 4 62,425
Mortgage-backed and similar
securities 128,505 4,182 365 132,322
State and municipal obligations 14,321 469 60 14,730
Other securities 7,080 218 64 7,234
-------- ----- ----- -------
$210,185 7,019 493 216,711
======== ===== ===== =======
</TABLE>
Included in other securities is $5,318,000 and $1,875,000 at December 31,
1992 and 1991, respectively, of government securities mutual funds accounted
for at the lower of cost or market value. Also, included in other securities
are equity securities of financial institutions of $48,000 and $2,179,000 at
December 31, 1992 and 1991, respectively, which are carried at the lower of
cost or market value.
Securities classified as available for sale are carried at the lower of
aggregate cost or market value. The following summarizes securities available
for sale at December 31, 1992.
<TABLE>
<CAPTION> Unrealized
Book --------------- Market
value Gains Losses Value
----- ----- ------ ------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and Federal
agencies $51,925 1,386 13 53,298
======= ===== == ======
</TABLE>
(Continued)
7
<PAGE> 15
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(6) SECURITIES (Continued)
The book value and approximate market value of debt securities at December 31,
1992, 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 on prepayment penalties.
Mortgage-backed obligations generally have contractual maturities in excess of
ten years, however, they have shorter expected maturities as a result of
prepayments.
<TABLE>
<CAPTION>
Securities
Investment Securities Available for Sale
--------------------- ------------------
Book Market Book Market
value value value value
----- ------ ----- ------
(In thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 10,085 10,056 15,750 16,004
Due after one year through five years 21,105 21,466 30,122 31,073
Due after five years through ten years 5,461 5,723 6,053 6,221
Due after ten years 1,838 1,907 - -
-------- ------- ------ ------
38,489 39,152 51,925 53,298
Mortgage-backed and similar securities 200,178 202,739 - -
-------- ------- ------ ------
$238,667 241,891 51,925 53,298
======== ======= ====== ======
</TABLE>
Securities with a par value, which approximates carrying value, of
approximately $107,126,000 and $80,647,000 at December 31, 1992 and 1991,
respectively, were pledged to secure public funds, trust funds and for other
purposes.
Gross gains of $972,000, $235,000 and $178,000 and gross losses of $107,000,
$49,000 and $7,000 were realized on sales of securities in 1992, 1991 and 1990,
respectively.
(7) LOANS
The composition of loans at December 31, 1992 and 1991 follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Commercial $ 151,788 128,480
Real estate 352,790 204,108
Agricultural 36,510 32,853
Consumer 86,316 66,050
Other 21,804 15,653
Unearned income (1,002) (1,519)
--------- -------
$ 648,206 445,625
========= =======
</TABLE>
(Continued)
8
<PAGE> 16
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(7) LOANS (Continued)
The principal balance of nonaccrual and restructured loans at December 31, 1992
and 1991 was approximately $4,119,000 and $7,741,000, 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 $480,000 in
1992 and $822,000 in 1991. The amount of interest income that was recorded for
such loans was approximately $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 $20,851,000 at December 31, 1992 and $15,547,000 at
December 31, 1991. 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:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Balance at January 1 $5,983 5,747 4,866
Provision for loan losses 2,054 1,522 2,581
Balance of allowance for loan losses
of acquired subsidiaries at acquisition date 1,016 - 48
------ ----- -----
9,053 7,269 7,495
------ ----- -----
Deductions:
Loans charged-off 2,032 1,686 2,152
Less recoveries 496 400 404
------ ----- -----
Net loans charged-off 1,536 1,286 1,748
------ ----- -----
Balance at December 31 $7,517 5,983 5,747
====== ===== =====
</TABLE>
(8) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1992 and 1991 follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Land and improvements $ 3,999 2,239
Buildings and improvements 20,146 14,728
Furniture and equipment 14,222 10,647
------- ------
38,367 27,614
Less accumulated depreciation and amortization 15,322 13,134
------- ------
$23,045 14,480
======= ======
</TABLE>
(Continued)
9
<PAGE> 17
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(9) LONG-TERM DEBT AND OTHER NOTES PAYABLE
Long-term debt and other notes payable consisted of the following at
December 31, 1992 and 1991:
<TABLE>
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Operating line of credit; due July 31, 1993; interest at the
lender's base rate, payable quarterly $ 600 -
Advance from the Federal Home Loan Bank; due May 9,
1994; interest at 4.5%, payable monthly 10,000 -
Employee Stock Ownership Plan (ESOP) note payable
to bank; due July 31, 1994; interest at lender's base rate,
interest payable quarterly 2,957 -
Employee Stock Ownership Plan (ESOP) note payable to
bank; due July 31, 1996; interest at 82.5% of the prime
interest rate, principal and interest payable quarterly 915 1,205
8.5% Convertible Subordinated Capital Debentures;
due December 1, 1999 - 4,885
10.0% subordinated notes; due December 31, 2009 2,348 2,348
Unsecured revolving note payable to bank; due
October 31, 1995; interest at the prime interest rate,
payable quarterly - 150
Unsecured note payable to bank; due September 1992 - 1,160
Secured note payable to bank; due January 1, 1992; interest
at the prime interest rate, payable quarterly - 2,415
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 -
Secured note payable to bank; due September 1992 - 813
6-5/8% note; payable in annual installments of $44,000,
including interest, through 1994 81 118
------- ------
$18,061 13,094
======= ======
</TABLE>
The prime interest rate and base rate associated with certain of the above
obligations was 6.0% at December 31, 1992 and 6.5% at December 31, 1991.
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. This obligation has the same restrictive covenants as the ESOP loan due
July 31, 1994, as described below.
The advance from the Federal Home Loan Bank is collateralized by Federal Home
Loan Bank Stock and certain first mortgage loans.
(Continued)
10
<PAGE> 18
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(9) LONG-TERM DEBT AND OTHER NOTES PAYABLE (Continued)
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, Bank 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 Company's balance sheet with a corresponding amount recorded as a reduction
of the Company's stockholders' equity. Both the loan obligation and the
reduction of stockholders' equity will be reduced by the amount of any loan
repayments made by the ESOP.
The 8.5% Convertible Subordinated Capital Debentures were converted into
415,462 shares of common stock of the Company during January 1992. The
Debentures were convertible at $11.758 per share of common stock. The
unsecured revolving note payable was paid and canceled during 1992. The
secured note payable to bank due January 1, 1992, secured by the common stock
of Kentucky State Bank and Commercial Bank of Dawson, was paid during 1992.
The terms of the secured notes payable include 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 are not met, the lender may declare those notes due and
payable. The secured notes are collateralized by all the issued and
outstanding common stock of State National, a subsidiary of Kentucky Community
Bancorp, Inc.
State National has entered into an agreement with the Federal Home Loan Bank of
Cincinnati (FHLB) which enables State National to borrow up to $2,228,000.
Advances from the FHLB would be collateralized by certain first mortgage loans
under a blanket mortgage collateral agreement and stock in the FHLB.
On October 30, 1989, KCB made an offer to exchange on 10% subordinated
debenture due December 31, 2009 (new debenture) in exchange for each 25-year
escalating rate debenture due December 31, 2007 (old debenture). The purpose
of the exchange was to restructure KCB's $3,509,000 subordinated
debenture debt and to reduce KCB's total debt service obligations
by a reduction in the interest rate. Effective January 1, 1990, the exchange
occurred and debentures which were not exchanged were called on February 1,
1990. Repayment of these debentures was financed by the unsecured note
payable, due in September 1992. The new debentures are subordinated to all
indebtedness of KCB to financial institutions as were the old debentures.
(Continued)
11
<PAGE> 19
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(9) LONG-TERM DEBT AND OTHER NOTES PAYABLE (Continued)
Principal payments required for the years 1993 through 1997, and thereafter, on
long-term debt and other notes payable at December 31, 1992 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31 In thousands
----------- ------------
<S> <C>
1993 $ 1,155
1994 13,555
1995 908
1996 95
1997 -
Thereafter 2,348
======
</TABLE>
(10) STOCKHOLDERS' EQUITY
Preferred Stock
The Company's preferred stock at December 31, 1992 and 1991 is summarized as
follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Class B Preferred Stock; 5,000,000 and 500,000 shares
authorized and unissued, respectively; no par value:
Series 1992; no stated value, 350,000 shares
authorized and unissued in 1992 $ - -
Class A Preferred Stock; 50,000 shares authorized; no par
value:
1990 Series; stated value $3,000 per share; 333 shares
issued and outstanding in 1991; adjustable dividend
rate - 999
Other preferred stock, no par value; 13,744 shares issued
and outstanding in 1991 - 1,286
----- -----
$ - 2,285
===== =====
</TABLE>
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
create Class B Preferred Stock Series 1992.
(Continued)
12
<PAGE> 20
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(10) STOCKHOLDERS' EQUITY (Continued)
Preferred Stock (Continued)
Class B Preferred Stock Series 1992, issuable in connection with the Company's
Rights Plan, carries the right to cumulative annual dividends in an amount of
the greater of $6.00 per share or the sum of the Formula Amounts for each
quarterly payment of dividends. The Formula Amount is the Formula Number (133,
subject to adjustment) times cash dividends per common share and the value of
noncash distributions per common share during each quarter. Each share of
Series 1992 Preferred Stock entitled the holder to vote the number of votes
equal to the Formula Number for each share of Series 1992 Preferred Stock held
on all matters submitted to a vote of the shareholders of the Company. The
stock is not redeemable, except in the case of the Company entering into a
consolidation, merger or other share exchange. Series 1992 Preferred Stock
ranks junior to the Company's Class A Preferred Stock. Upon liquidation,
dissolution or winding up of the Company, holders of Series 1992 Preferred
Stock are entitled to receive the greater of $12.00 per share or an amount per
share equal to the Formula Number times the distribution per share to holders
of common shares.
Class A Preferred Stock, 1990 Series carried the right to cumulative annual
dividends at an adjustable rate based on the bond equivalent yield for AA
commercial paper rates. Dividends were payable quarterly. The stock was
redeemable by the Company at $3,000 per share plus accrued dividends. On March
10, 1992, 333 shares were redeemed and on September 13, 1991, 667 shares were
redeemed. Also, other preferred stock consisting of Dawson Springs Bancorp,
Inc. preferred stock was redeemed during 1992.
Dividends per share on preferred stock for the years ended December 31, 1992,
1991 and 1990 were as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Class A Preferred Stock, 1988 Series $ - $ 5.77 $ 9.72
Class A Preferred Stock, 1990 Series 43.40 249.61 34.00
Other preferred stock 3.00 3.00 3.00
====== ======= ======
</TABLE>
Rights Plan
On January 20, 1992, the Board of Directors of the Company 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 of the Company (Common Stock). In addition, the Company
will issue one Right with respect to each share of Common Stock that becomes
outstanding between the record date and the earliest of the Distribution Date,
the Redemption Date and the Expiration Date. Each Right, when and if it become
exercisable, will entitle the registered holder to purchase from the Company
one one-hundredth of a share of Series 1992 Preferred Stock, subject to
adjustment. The exercise price with respect to each whole Right shall be $45
(the "Exercise Price"). The description and terms of the Rights are set forth
in a Rights Agreement, dated as of January 20, 1992 (the "Rights Agreement"),
between the Company and Chemical Bank, as Rights Agent.
(Continued)
13
<PAGE> 21
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(10) STOCKHOLDERS' EQUITY (Continued)
Rights Plan (Continued)
Until the Distribution Date, the Rights will be transferred with and only with
the Common Stock. The "Distribution Date" is defined as the earlier of (i) the
tenth business day after the first public disclosure that a person or group
(including any affiliate or associate of such person or group) acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Common Stock (such person or group being called an "Acquiring
Person"), (ii) the tenth business day after the Disinterested Directors of the
Company (as defined in the Rights Agreement) determine that a shareholder's
beneficial ownership, such beneficial ownership being at least greater than 10%
of the outstanding Common Stock of the Company, has a detrimental effect on the
Company or its shareholders (such person or group being called an "Adverse
Person") (such dates provided in (i) or (ii) above being called the "Share
Acquisition Date") or (iii) the tenth business day after the commencement of,
or first public disclosure of an intention to commence, a tender or exchange
offer for 25% or more of the outstanding Common Stock.
The Rights are not exercisable until the Distribution Date and will expire on
January 20, 2002 (the "Expiration Date"), unless earlier redeemed by the
Company as described below. The number of shares of Preferred Stock issuable
upon exercise of the Rights, and the number of Rights associated with each
share of Common Stock, is subject to adjustment from time to time. The number
and kind of stock issuable upon exercise of the Rights is also subject to
adjustment as provided in the Rights Agreement. If at any time following the
Distribution Date, a Person becomes the beneficial owner of more than 15% of
the then outstanding Common Stock without the prior approval of two-thirds of
the Disinterested Directors or a Person, who is beneficial owner of more than
10% of the then outstanding Common Stock, is deemed by the Disinterested
Directors to be an Adverse Person (such events being called "Triggering
Events"), then the Rights will entitle each holder of a Right to purchase, for
the Exercise Price, that number of shares of Preferred Stock which at the time
of the transaction would have a market value twice the Exercise Price.
At any time prior to the earliest of (i) the close of Business on the tenth
Business Day following the Share Acquisition Date or (ii) the Expiration Date,
the Board of Directors of the Company may redeem the Rights in whole, but not
in part, at a price of $.01 per whole Right (the "Redemption Price"); however,
immediately upon the date that an Acquiring Person becomes an Acquiring Person
or an Adverse Person becomes an Adverse Person, and thereafter until the
earliest of (1) the close of Business on the tenth Business Day following the
Share Acquisition Date or (2) the Expiration Date, the Rights may be redeemed
only if a majority of the Disinterested Directors then in office determine that
such redemption is, in their judgment, in the best interest of the Company and
its shareholders.
(Continued)
14
<PAGE> 22
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(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 Bank and Savings Banks, which effectively
restrict the payment of dividends. At December 31, 1992, retained earnings of
the Company's subsidiaries were approximately $21.9 million, of which
approximately $12.4 million is available as of January 1, 1993 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, 1992,
the most restrictive of the covenants limited the payment of dividends by the
Company to approximately $16.4 million.
(12) INCOME TAXES
The components of income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current $5,059 2,422 2,013
Deferred (1) (101) (481)
------ ----- ----
$5,058 2,321 1,532
====== ===== =====
</TABLE>
An analysis of the differences between the effective tax rates and
the statutory U.S. Federal income tax rate is as follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(In thousands)
<S> <C> <C> <C>
U.S. federal income tax rate 34.0% 34.0% 34.0%
Changes from statutory rate:
Tax exempt investment income (3.4) (7.9) (10.4)
Amortization of goodwill .9 1.9 2.4
Purchase accounting differences (.1) .4 (.4)
State income taxes, net of federal tax benefit .9 - -
Statutory bad debt reduction (1.0) - -
Investment tax credit carryforwards - - (2.0)
Other, net 1.4 .9 1.9
---- ---- ----
32.7% 29.3% 25.5%
==== ==== ====
</TABLE>
(Continued)
15
<PAGE> 23
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(12) INCOME TAXES (Continued)
The sources of timing differences and the resulting deferred income tax
expense (benefit) for 1992, 1991 and 1990 follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loan loss provision in excess of amount
allowed for tax purposes $(192) (205) (317)
Tax gains on sales of loans (80) - -
Loan fees (101) - -
Other, net 372 104 (164)
----- ---- ----
$ (1) (101) (481)
===== ==== ====
</TABLE>
Cumulative deferred income taxes were a liability of $48,000 at December 31,
1992 and an asset of $519,000 at December 31, 1991. Deferred income tax
liabilities of $568,000 were recorded in connection with purchase accounting
related to the acquisition of Trans Financial Bank of Tennessee, F.S.B., and
arose as a result of the tax consequences for different book and tax bases for
items not reported on the balance sheet, principally tax deferred loan fees.
Stockholder's equity of the Savings Banks at December 31, 1992 and 1991
includes approximately $4,536,000 and $1,590,000, 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 carryback of net operating losses 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 Plan) under which the
Company and its subsidiaries will contribute to the ESOP Plan an amount
determined by the respective Boards of Directors at their discretion. The
Company recognized expenses related to the ESOP Plan 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 Plan and the amount of dividends on ESOP
shares used for debt service by the ESOP Plan for 1992, 1991 and 1990 were as
follows:
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Interest incurred $100 96 134
Contributions 400 400 300
Dividends used for debt service 67 44 51
</TABLE>
The Company has a profit sharing plan qualified under Section 401(k) of the
Internal Revenue Code 1954, as amended. 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. Contributions in accordance with the profit sharing plan were
approximately $214,000 in 1992, $173,000 in 1991 and $159,000 in 1990.
(Continued)
16
<PAGE> 24
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(13) EMPLOYEE BENEFIT PLANS (Continued)
Kentucky Community Bancorp, Inc. has a profit sharing plan qualified under
Section 401(k) of the Internal Revenue Code. Under the profit sharing plan,
Kentucky Community provides funds to match the contributions made by
participating employees, up to a maximum of 6% of the employee's salary.
Contributions during 1992, 1991 and 1990 were approximately $29,000, $26,000
and $20,000, respectively.
A defined benefit pension plan that covers former full-time employees of
Kentucky State Bank who meet certain requirements as to age and length of
service exists. Pension expense for this plan was $14,000 in 1992, $15,000 in
1991 and $16,000 in 1990. The plan's funded status at December 31, 1992 was
composed of plan assets of approximately $500,000 and a projected benefit
obligation of approximately $475,000.
A defined benefit plan that covers full-time employees of Kentucky Community
Bancorp, Inc. who meet certain requirements as to age and length of service
exists. Pension expense for this plan was $58,000 for 1992, $15,000 for 1991
and $(25,000) for 1990. The plan's funded status at December 31, 1992 was
composed of plan assets of approximately $959,000 and a projected benefit
obligation of approximately $1,092,000.
The Company has no significant commitments to pay post-retirement benefits
other than as described above.
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 plan's options, 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 the 4-for-3 stock split authorized December 18, 1992 follows:
<TABLE>
<CAPTION>
Number Option price
of shares per share
--------- ------------
<S> <C> <C>
Options outstanding at January 1, 1990 58,738 $6.13 - $9.375
Granted 45,156 $6.13 - $8.44
Terminated or canceled (13,902) $ -
--------
Options outstanding at December 31, 1990 89,992 $6.13 - $9.375
Granted 123,733 $8.16 - $11.53
Terminated or canceled (5,779) $ -
--------
Options outstanding at December 31, 1991 207,946 $6.13 - $11.53
Granted 11,236 $6.13
Exercised (2,522) $8.44 - $9.375
Terminated or canceled (43,144) $ -
--------
Options outstanding at December 31, 1992 173,516 $6.13 - $11.53
========
</TABLE>
At December 31, 1992, 40,667 options were exercisable.
(Continued)
17
<PAGE> 25
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(14) COMMITMENTS AND CONTINGENT LIABILITIES
The Company's supplemental 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 supplemental 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 $199,040,000 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 commitment amounts 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 held 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.
At December 31, 1992, the Company had $29,290,000 in standby letters of credit
outstanding.
The Company grants commercial loans, real estate loans, consumer loans and
lease financing to customers primarily in the immediate market areas of its
affiliates in Kentucky and Central Tennessee and has a diversified loan
portfolio.
Also, as of December 31, 1992, 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 that the ultimate result of these legal actions and
proceedings will not have a material adverse effect upon the supplemental
consolidated financial position of the Company.
(Continued)
18
<PAGE> 26
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(15) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1992 Carrying Fair
In thousands Amount Value
-------- -------
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 124,522 124,522
Securities 301,682 306,295
Loans 664,927 670,520
Financial liabilities:
Deposits 1,011,227 1,013,519
Short-term borrowings 26,993 26,993
Notes payable 18,061 18,011
========= =========
</TABLE>
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, and Short-Term Borrowings
For those short-term instruments, the financial statement 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
For certain homogeneous categories of loans, such as some residential mortgage
loans, fair value is estimated using quoted market prices for securities backed
by similar loans, adjusted for differences in loan characteristics. The fair
value of other 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
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
(Continued)
19
<PAGE> 27
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(15) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Commitments to Extend Credit and Stand-By Letters of Credit
The fair value of commitments is 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. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit is based on fees currently charged for similar agreements or
on the estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date.
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 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 without attempting
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 like. Accordingly, the fair value estimates do not represent what the
Company is worth on a fair value basis.
(16) TRANS FINANCIAL BANCORP, INC. (Parent Company Only)
Condensed financial data for Trans Financial Bancorp, Inc. (parent company
only) as of December 31, 1992 and 1991 and for the years ended December 31,
1992, 1991 and 1990 are as follows:
Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31
In thousands 1992 1991
---- ----
<S> <C> <C>
Assets:
Cash on deposit with subsidiaries $ 1,994 1,856
Interest bearing deposits with banks - 500
Investment in subsidiaries 87,535 59,702
Other investments 48 2,179
Other assets 1,185 1,211
------- ------
$90,762 65,448
======= ======
Liabilities and Stockholders' Equity:
Long-term debt and other notes payable $7,980 12,976
Other liabilities 1,287 1,237
Stockholders' equity 81,495 51,235
------- ------
$90,762 65,448
======= ======
</TABLE>
(Continued)
20
<PAGE> 28
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(16) TRANS FINANCIAL BANCORP, INC. (Parent Company Only) (Continued)
Condensed Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
In thousands 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $13,099 9,045 5,359
Other interest and dividends 34 31 18
Management fees from subsidiaries and
other income 4,358 3,016 2,570
-------- ------ ------
Total income 17,491 12,092 7,947
-------- ------ ------
Expenses:
Interest on long-term debt and other notes
payable 477 1,621 1,752
Other 6,206 4,330 3,904
-------- ------ ------
Total expenses 6,683 5,951 5,656
-------- ------ ------
Income before income tax benefit
and equity in undistributed
(distributions in excess of)
earnings of subsidiaries 10,808 6,141 2,291
Federal income tax benefit 618 840 939
-------- ------ ------
Income before equity in
undistributed (distributions
in excess of) earnings of
subsidiaries 11,426 6,981 3,230
Equity in undistributed (distributions in
excess of) earnings of subsidiaries (1,017) (1,376) 1,252
-------- ------ ------
Net income $ 10,409 5,605 4,482
======== ====== ======
</TABLE>
(Continued)
21
<PAGE> 29
TRANS FINANCIAL BANCORP, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(16) TRANS FINANCIAL BANCORP, INC. (Parent Company Only) (Continued)
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
In thousands 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $10,409 5,605 4,482
Adjustments to reconcile net income to cash from
operating activities:
Amortization and depreciation 577 584 554
(Equity in undistributed) distributions in
excess of earnings of subsidiaries 1,017 1,376 (1,252)
Gains on sales of investments (119) - -
Provision for deferred taxes 18 25 25
Decrease (increase) in other assets (442) 406 (24)
Increase (decrease) in other liabilities 32 (118) 738
------- ------- -------
Net cash provided by
operating activities 11,492 7,878 4,523
------- ------- -------
Cash flows from investing activities:
Investments in and acquisitions of subsidiaries (23,077) (5,209) (8,082)
Net decrease (increase) in interest bearing deposits
with banks 500 (100) (100)
Purchases of other investments - 79 (1,027)
Proceeds from maturities and sales of other
investments 2,026 - 440
Other (80) (49) (81)
------- ------- -------
Net cash used in
investing activities (20,631) (5,279) (8,850)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 17,727 12,457 72
Repayment of long-term debt and other notes
payable (4,716) (10,857) (6,992)
Proceeds from issuance of long-term debt 1,938 3,496 9,331
Issuance of preferred stock - - 3,000
Redemption of preferred stock (2,285) (4,506) (3)
Dividends paid (3,387) (1,815) (1,470)
------- ------- -------
Net cash provided by
(used in) financing activities 9,277 (1,225) 3,938
------- ------- -------
Net increase in cash
and cash equivalents 138 1,374 (389)
Cash and cash equivalents at beginning of year 1,856 482 871
------- ------- -------
Cash and cash equivalents at end of year $ 1,994 1,856 482
======= ======= =======
Supplemental information:
Cash paid for interest $ 475 1,698 1,922
Noncash transactions (note 2) 13,130 1,725 2,097
======= ======= =======
</TABLE>
22
<PAGE> 1
EXHIBIT 99(b)
TRANS FINANCIAL BANCORP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
September 30, 1993 and December 31, 1992
In thousands, except per share data
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1993 1992
---- ----
<S> <C> <C>
Cash and due from banks $ 50,757 $ 52,482
Interest bearing deposits with banks 747 8,462
Federal funds sold and resale agreements 34,019 63,578
Mortgage loans held for sale 35,129 24,238
Securities available for sale (market value of $49,140 at
September 30, 1993 and $53,298 at December 31, 1992) 48,264 51,925
Investment securities (market value of $275,228 at
September 30, 1993 and $252,997 at December 31, 1992) 270,751 249,757
Loans, net of unearned income 857,031 648,206
Less allowance for loan losses 10,251 7,517
----------- ----------
Net loans 846,780 640,689
Premises and equipment 28,801 23,045
Other assets 34,791 31,796
----------- ----------
Total assets $ 1,350,039 $1,145,972
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 143,818 $ 121,166
Interest bearing 1,013,032 890,061
----------- ----------
Total deposits 1,156,850 1,011,227
Federal funds purchased and repurchase agreements 32,720 26,993
Other liabilities 8,059 8,196
Long-term debt and other notes payable 64,882 18,061
----------- ----------
Total liabilities 1,262,511 1,064,477
----------- ----------
Stockholders' equity:
Preferred stock - -
Common stock, no par value. Authorized
25,000,000 shares; issued and outstanding
8,696,744 at September 30, 1993 and 6,555,985
at December 31, 1992 16,468 16,391
Additional paid-in capital 38,949 38,362
Retained earnings 36,011 30,777
Unrealized loss on marketable equity securities (128) (163)
Employee Stock Ownership Plan shares purchased with debt (3,772) (3,872)
----------- ----------
Total stockholders' equity 87,528 81,495
----------- ----------
Total liabilities and stockholders' equity $ 1,350,039 $1,145,972
=========== ==========
</TABLE>
<PAGE> 2
TRANS FINANCIAL BANCORP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended September 30, 1993 and 1992
In thousands, except per share data
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1993 1992
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $46,183 $40,750
U.S. Treasury and Federal agencies 12,620 13,716
Other 2,920 1,515
------- -------
Total interest income 61,723 55,981
------- -------
Interest expense:
Deposits 25,497 27,185
Federal funds purchased and repurchase agreements 498 786
Long-term debt and other borrowings 916 340
------- -------
Total interest expense 26,911 28,311
------- -------
Net interest income 34,812 27,670
Provision for loan losses 1,659 1,552
------- -------
Net interest income after provision
for loan losses 33,153 26,118
------- -------
Non-interest income:
Service charges on deposit accounts 3,929 3,134
Loan servicing fees 1,569 888
Investment securities gains 30 753
Gains on sales of securities available for sale 1,017 -
Gains on sales of mortgage loans 496 1,230
Trust services 832 700
Other 3,057 2,331
------- -------
Total non-interest income 10,930 9,036
------- -------
Non-interest expenses:
Compensation and benefits 14,283 10,744
Occupancy expense 2,830 1,922
Furniture and equipment expense 2,134 2,007
Deposit insurance 1,637 1,298
Other 11,489 7,610
------- -------
Total non-interest expenses 32,373 23,581
------- -------
Income before income taxes and cumulative
effect of accounting change 11,710 11,573
Income tax expense 3,471 3,798
------- -------
Income before cumulative effect of accounting
change 8,239 7,775
Cumulative effect of adoption of FASB Statement No. 109 (11) -
------- -------
Net income $ 8,228 $ 7,775
======= =======
Earnings per common share:
Before cumulative effect of accounting change $ .93 $ .96
Cumulative effect of adoption of FASB Statement No. 109 - -
------- -------
$ .93 $ .96
======= =======
</TABLE>
<PAGE> 3
TRANS FINANCIAL BANCORP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
For the three months ended September 30, 1993 and 1992
In thousands, except per share data
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------
1993 1992
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $ 17,354 $ 14,229
U.S. Treasury and Federal agencies 3,943 5,257
Other 1,496 563
-------- --------
Total interest income 22,793 20,049
-------- --------
Interest expense:
Deposits 8,986 9,651
Federal funds purchased and repurchase agreements 190 253
Long-term debt and other borrowings 520 98
-------- --------
Total interest expense 9,696 10,002
-------- --------
Net interest income 13,097 10,047
Provision for loan losses 599 492
-------- --------
Net interest income after provision
for loan losses 12,498 9,555
-------- --------
Non-interest income:
Service charges on deposit accounts 1,486 1,115
Loan servicing fees 481 476
Investment securities gains - 164
Gains on sales of securities available for sale 19 -
Gains on sales of mortgage loans 287 868
Trust services 295 242
Other 1,067 735
-------- --------
Total non-interest income 3,635 3,600
-------- --------
Non-interest expenses:
Compensation and benefits 5,432 3,670
Occupancy expense 1,155 771
Furniture and equipment expense 956 835
Deposit insurance 643 467
Other 4,086 3,216
-------- --------
Total non-interest expenses 12,272 8,959
-------- --------
Income before income taxes 3,861 4,196
Income tax expense 1,147 1,368
-------- --------
Net income $ 2,714 $ 2,828
======== ========
Earnings per common share $ .31 $ .32
======== ========
</TABLE>
<PAGE> 4
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1993
In thousands, except share data
(unaudited)
<TABLE>
<CAPTION> Employee
Unrealized Stock
Preferred Stock Common Stock Loss on Ownership
------------------ ------------------ Additional Marketable Plan Shares
Number of Number of Paid-in Retained Equity Purchased
Shares Amount Shares Amount Capital Earnings Securities With Debt Total
--------- ------ --------- ------ --------- -------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 - $ - 6,555,985 $16,391 $ 38,362 $ 30,777 $ (163) $(3,872) $81,495
Net income - - - - - 8,228 - - 8,228
Stock options excercised - - 150 - 1 - - - 1
Cash dividends declared
on common stock - - - - - (2,994) - - (2,994)
Issuance of common stock in
connection with dividend
reinvestment and stock
purchase plan and other
issuances - - 40,834 77 592 - - - 669
Four-for-three stock split - - 2,099,805 - (6) - - - (6)
Decrease in unrealized loss on
marketable equity securities - - - - - - 35 - 35
Employee Stock Ownership
Plan shares purchased debt
reduction - - - - - - - 100 100
----- ------ --------- ------- --------- --------- -------- ------- -------
Balance, September 30, 1993 - $ - 8,696,774 $16,468 $ 38,949 $ 36,011 $ (128) $(3,772) $87,528
===== ====== ========= ======= ========= ========= ======== ======= =======
</TABLE>
<PAGE> 5
TRANS FINANCIAL BANCORP, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1992
In thousands, except share data
(unaudited)
<TABLE>
<CAPTION>
Employee
Unrealized Stock
Preferred Stock Common Stock Loss on Ownership
------------------- ------------------ Additional Marketable Plan Shares
Number of Number of Paid in Retained Equity Purchased
Shares Amount Shares Amount Capital Earnings Securities With Debt Total
------ ------ ------ ------ ------- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1992 14,077 $ 2,285 4,424,118 $ 11,051 $ 15,510 $ 23,755 $ (161) $ (1,205) $ 51,235
Net income - - - - - 7,775 - - 7,775
Cash dividends declared:
Common stock - - - - - (2,223) - - (2,223)
Preferred stock - - - - - (35) - - (35)
Redemption of Class A
Preferred Stock, 1990
Series (333) (999) - - - - - - (999)
Issuance of common stock in
public offering - - 1,265,000 3,172 13,944 - - - 17,116
Issuance of common stock in
business combination - - 412,389 1,031 4,984 - - - 6,015
Stock options exercised - - 1,914 5 15 - - - 20
Issuance of common stock in
connection with dividend
reinvestment and stock
purchase plans and other
issuances - - 27,260 68 339 - - - 407
Conversion of debentures - - 415,462 1,039 3,411 - - - 4,450
Increase in unrealized loss
on marketable equity
securities - - - - - - (1) - (1)
Employee Stock Ownership
Plan shares purchased with
debt - - - - - - - (1,648) (1,648)
------ ------- --------- -------- -------- --------- -------- --------- --------
Balance, September 30, 1992 13,744 $ 1,286 6,546,143 $ 16,366 $38,203 $ 29,272 $ (162) $ (2,853) $ 82,112
====== ======= ========= ======== ======== ========= ======== ========= ========
</TABLE>
<PAGE> 6
TRANS FINANCIAL BANCORP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1993 and 1992
In thousands
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,228 $ 7,775
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 1,659 1,552
Gains on sale of investment securities (30) (753)
Gains on sale of securities available for sale (1,017) -
Depreciation, amortization and accretion, net 4,205 2,654
(Increase) decrease in other assets 2,264 (2,509)
Increase in mortgage loans held for resale (10,891) (5,336)
Decrease in other liabilities (21,654) (4,301)
Proceeds from sale of securities available for sale 21,110 -
Proceeds from maturities of securities available for sale 6,000 -
Purchases of securities available for sale (12,009) -
-------- --------
Net cash used in operating activities (2,135) (918)
-------- --------
Cash flows from investing activities:
Proceeds from maturities of investment securities 90,931 53,510
Proceeds from sales of investment securities 5,394 49,872
Purchases of investment securities (68,638) (144,924)
Net decrease in interest-bearing deposits with banks 8,160 4,392
Net decrease in federal funds sold and resale agreements 50,059 8,573
Net increase in loans (102,814) (33,767)
Purchases of premises and equipment (5,515) (3,843)
Proceeds from disposals of premises and equipment 1,800 16
Net cash and cash equivalents inflow (outflow) from
acquisitions (7,996) 45,495
-------- --------
Net cash used in investing activities (28,619) (20,676)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (18,147) 720
Net increase in federal funds purchased and repurchase
agreements 2,585 6,776
Repayment of other borrowings - (2,269)
Repayment of long-term debt and other notes payable (17,948) (1,182)
Proceeds from issuance of long-term debt 64,869 260
Preferred stock redemptions - (999)
Dividends paid (2,994) (2,258)
Proceeds from issuance of common stock 664 17,543
-------- --------
Net cash provided by financing activities 29,029 18,591
--------- ---------
Net decrease in cash and
cash equivalents (1,725) (3,003)
Cash and cash equivalents at January 1 52,482 43,835
-------- --------
Cash and cash equivalents at September 30 $ 50,757 $ 40,832
======== ========
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 26,793 $ 27,192
Cash paid for Federal income taxes 3,684 3,559
Non-cash financing and investing
activities:
Conversion of debentures - 4,211
Issuance of common stock
in connection with acquisition - 6,165
Debt transactions of Employee
Stock Ownership Plan (net) 100 (1,648)
Change in unrealized loss on
marketable equity securities 35 (1)
Transfer of loans to other real
estate 2,533 1,337
Transfer of investment securities
to securities available for sale 6,068 0
======== ========
</TABLE>
