<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarterly period ended March 31, 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 (I.R.S. 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 May
12, 1994: 10,114,865 shares.
The Exhibit Index is on page 19. This filing contains 21 pages (including this
facing sheet).
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- 2 -
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
In thousands, except share data
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
MARCH 31 DECEMBER 31 MARCH 31
1994 1993 1993
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 50,434 $ 54,444 $ 40,026
Interest bearing deposits with banks 196 447 1,308
Federal funds sold and resale agreements 7,650 21,409 42,394
Mortgage loans held for sale 25,400 43,005 17,345
Securities available for sale (amortized cost of $222,828 as of
March 31, 1994 and $234,416 as of December 31, 1993;
and market value of $48,285 as of March 31, 1993) 220,502 235,589 47,208
Securities held to maturity (market value of $74,312 as of
March 31, 1994; $67,872 as of December 31, 1993; and
$250,273 as of March 31, 1993) 74,340 66,347 244,975
Loans, net of unearned income 910,838 874,368 670,477
Less allowance for loan losses 10,231 10,127 7,790
- - ---------------------------------------------------------------------------------------------------------------------
Net loans 900,607 864,241 662,687
Premises and equipment, net 29,343 29,419 23,719
Other assets 31,374 31,723 31,817
- - ---------------------------------------------------------------------------------------------------------------------
Total assets $1,339,846 $1,346,624 $1,111,479
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 146,490 $ 146,220 $ 99,195
Interest bearing 997,208 1,007,375 877,024
- - ---------------------------------------------------------------------------------------------------------------------
Total deposits 1,143,698 1,153,595 976,219
Federal funds purchased and repurchase agreements 28,409 29,704 24,676
Other short-term borrowings 25,094 15,000 1,300
Long-term debt 46,791 49,721 17,332
Other liabilities 7,181 9,063 7,885
- - ---------------------------------------------------------------------------------------------------------------------
Total liabilities 1,251,173 1,257,083 1,027,412
- - ---------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock - - -
Common stock, no par value. Authorized 25,000,000 shares;
issued and outstanding 8,812,611; 8,795,233; and
8,752,997 shares, respectively 16,524 16,491 16,412
Additional paid-in capital 39,275 39,138 38,580
Retained earnings 38,214 37,055 33,092
Unrealized net gain(loss) on securities
available for sale, net of tax (1,549) 718 -
Unrealized loss on marketable equity securities - - (145)
Employee Stock Ownership Plan shares
purchased with debt (3,791) (3,861) (3,872)
- - ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 88,673 89,541 84,067
- - ---------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,339,846 $1,346,624 $1,111,479
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share data
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 17,937 $ 14,209
Federal funds sold and resale agreements 51 290
Securities 4,301 4,884
Interest-bearing deposits with banks 7 28
- - -----------------------------------------------------------------------------------------------------------------------
Total interest income 22,296 19,411
- - -----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 8,343 8,422
Federal funds purchased and repurchase agreements 203 168
Other short-term borrowings 151 18
Long-term debt 735 177
- - -----------------------------------------------------------------------------------------------------------------------
Total interest expense 9,432 8,785
- - -----------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 12,864 10,626
Provision for loan losses 408 534
- - -----------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 12,456 10,092
- - -----------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts 1,507 1,145
Loan servicing fees 576 547
Gains on sales of securities available for sale, net 102 1,036
Gains on sales of mortgage loans held for sale, net 60 342
Trust services 307 263
Brokerage income 270 207
Other 940 725
- - -----------------------------------------------------------------------------------------------------------------------
Total non-interest income 3,762 4,265
- - -----------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSES
Compensation and benefits 5,730 4,376
Net occupancy expense 958 843
Furniture and equipment expense 1,073 780
Deposit insurance 681 485
Professional fees 617 571
Postage, printing & supplies 744 537
Communications 230 221
Other 2,596 1,955
- - -----------------------------------------------------------------------------------------------------------------------
Total non-interest expenses 12,629 9,768
- - -----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 3,589 4,589
Income tax expense 1,195 1,285
- - -----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 2,394 3,304
Cumulative effect of change in accounting principle - (10)
- - -----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,394 $ 3,294
=======================================================================================================================
EARNINGS PER SHARE $ 0.27 $ 0.37
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE> 5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In thousands
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $ 89,541 $ 81,495
Net income 2,394 3,294
Issuance of common stock 170 239
Cash dividends declared 1,235 979
(Decrease)increase in unrealized gain on
securities available for sale, net of taxes (2,267) 18
ESOP debt reduction (shares purchased with debt) 70 -
- - -----------------------------------------------------------------------------------------------------------------------
Ending balance $ 88,673 $ 84,067
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE> 6
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
- - -----------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31 1994 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,394 $ 3,294
Adjustments to reconcile net income to cash
provided by operating activities:
Provision for loan losses 408 534
Gains on sales of securities available for sale (102) (1,036)
Gains on sales of mortgage loans, net (60) (342)
Gain on sale of premises and equipment (219) --
Depreciation, amortization and accretion, net 2,036 1,269
Proceeds from sale of mortgage loans held for sale 62,704 37,721
Originations of mortgage loans held for sale (45,039) (30,404)
Decrease (increase) in other assets (209) 1,343
Increase (decrease) in other liabilities (623) (650)
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,290 11,729
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits with banks 251 7,154
Net decrease (increase) in federal
funds sold and resale agreements 13,759 21,184
Proceeds from sales of securities available for sale 5,221 16,967
Proceeds from maturities, prepayment and call of securities:
Available for sale 25,054 -
Held to maturity 4,918 24,638
Purchases of securities:
Available for sale (19,306) -
Held to maturity (12,841) (31,479)
Net increase in loans (36,495) (23,814)
Purchases of premises and equipment (1,623) (1,306)
Proceeds from disposals of premises and equipment 785 -
- - -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (20,277) 13,344
Cash flows from financing activities:
Net increase (decrease) in deposits (9,897) (35,042)
Net increase (decrease) in federal funds
purchased and repurchase agreements (1,295) (2,317)
Net increase (decrease) in other short-term borrowings 10,094 700
Repayment of long-term debt (2,860) (730)
Proceeds from issuance of long-term debt - 600
Proceeds from issuance of common stock 170 239
Dividends paid (1,235) (979)
- - -----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (5,023) (37,529)
- - -----------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (4,010) (12,456)
Cash and cash equivalents at beginning of year 54,444 52,482
- - -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period (note 4) $50,434 $40,026
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
(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.
("Trans Financial") and its subsidiaries 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:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 (Dollars in thousands) 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $ 10,127 $ 7,517
Provision for loan losses 408 534
Loans charged-off (407) (356)
Recoveries 103 95
- - -----------------------------------------------------------------------------------------------------------------------
Ending balance $ 10,231 $ 7,790
=======================================================================================================================
</TABLE>
(3) BUSINESS COMBINATIONS
A) COMBINATIONS CONSUMMATED THROUGH MARCH 31, 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. 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. 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.
B) COMBINATIONS CONSUMMATED AFTER MARCH 31, 1994
On April 22, 1994, Trans Financial merged with Peoples Financial
Services, Inc. (Peoples) 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 Peoples common stock outstanding were converted into
1,302,254 shares of Trans Financial common stock. The transaction will be
accounted for as a pooling of interests. The following table presents pro forma
financial information for Trans Financial and Peoples as if the entities were
combined for all periods presented.
<TABLE>
<CAPTION>
TRANS FINANCIAL PEOPLES PRO FORMA
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three months ending March 31, 1994
- - ----------------------------------
Net interest income $ 12,864 $ 1,201 $ 14,065
Provision for loan losses 408 30 438
Net income 2,394 263 2,657
Fully diluted earnings per common share $0.27 $0.26
Three months ending December 31, 1993
- - -------------------------------------
Net interest income $ 13,203 $ 1,366 $ 14,569
Provision for loan losses 444 84 528
Net income 1,949 373 2,322
Fully diluted earnings per common share $0.22 $0.23
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
Three months ending March 31, 1993
- - ----------------------------------
<S> <C> <C> <C>
Net interest income $ 10,626 $ 1,219 $ 11,845
Provision for loan losses 534 62 596
Net income 3,294 640 3,934
Fully diluted earnings per common share $0.37 $0.39
</TABLE>
(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:
<TABLE>
<CAPTION>
Three months ending March 31 (Dollars in thousands) 1994 1993
---------------------------------------------------
<S> <C> <C>
Securities transferred from held to maturity to available for sale $ - $11,214
Change in unrealized loss on securities available for sale 3,526 18
Debt transactions of Employee Stock Ownership Plan (net) 70 -
</TABLE>
(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.
- 8 -
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Trans Financial Bancorp, Inc., (the company) 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 two
subsidiary banks - Trans Financial Bank, N.A., headquartered in Bowling Green,
Kentucky, and Trans Financial Bank, located in Pikeville, Kentucky
("TFB-Pikeville") - and two thrift subsidiaries - Trans Financial Bank, F.S.B.,
located in Russellville, Kentucky, and Trans Financial Bank of Tennessee,
F.S.B., headquartered in Tullahoma, Tennessee ("TFB-Tennessee"). Collectively,
these four institutions are referred to in this discussion as the banks.
At March 31, 1994, the company had total consolidated assets of $1.340
billion, total loans of $911 million, total deposits of $1.144 billion and
shareholders' equity of $89 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, the company 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. Under the terms of
the merger, all shares of KCB common stock outstanding were converted into
1,374,962 shares of the company's 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. See Note 3
to the consolidated financial statements for additional information regarding
business combinations.
The discussion that follows is intended to provide 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 March 31, 1994, the company's net income
decreased 27%, from $3.3 million, or $.37 per share, to $2.4 million, or $.27
per share. Results for the first quarter produced an annualized return on
assets of 0.73% and a return on average equity of 10.87%, compared with returns
of 1.22% and 16.32%, respectively, for the comparable periods of 1993. The
first quarter of 1993, however, included $1.0 million in gains on sales of
securities compared with $102 thousand recognized during the first quarter of
1994. Excluding gains from sales of securities from both periods, first quarter
net income decreased 11% from the prior year.
NET INTEREST INCOME
Net interest income totaled $12.9 million in the first three months of
1994, compared with $10.6 million in the comparable 1993 period - a 21%
increase. The company's net interest margin for the first quarter decreased
slightly from the prior year, to 4.22% from 4.27%, but improved from 1993's
fourth quarter margin of 4.20%.
Management expects the recent increase in the prime lending rate to
positively impact the net interest margin in the second quarter of 1994, since
approximately $500 million of the company's commercial and consumer loans are
tied to the prime rate.
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<PAGE> 10
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
For the three months ended March 31
<TABLE>
<CAPTION>
Dollars in thousands 1994 1993
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Securities $ 301,712 $ 4,301 5.78% $ 289,997 $ 4,884 6.83%
Federal funds sold and resale agreements 6,937 51 2.98 38,744 290 3.04
Interest-bearing deposits with banks 352 7 8.07 1,152 28 9.86
Loans, net of unearned income 928,406 17,937 7.84 679,886 14,209 8.48
---------- --------- ---------- -------
TOTAL INTEREST-EARNING ASSETS/INTEREST
INCOME 1,237,407 22,296 7.31 1,009,779 19,411 7.80
------ ------
Less allowance for loan losses 10,183 7,584
---------- ----------
1,227,224 1,002,195
Non-interest-earning assets:
Cash and due from banks 49,040 40,394
Premises and equipment 29,611 22,618
Other assets 30,812 30,974
---------- ----------
TOTAL ASSETS $1,336,687 $1,096,181
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $ 124,468 677 2.21% $ 98,942 572 2.34%
Savings 128,772 865 2.72 84,972 611 2.92
Money market demand accounts 47,313 288 2.47 44,964 322 2.90
TransPlus 95,562 555 2.36 81,378 576 2.87
Certificates of deposit 523,953 5,102 3.95 476,835 5,299 4.51
Other time 85,000 856 4.08 85,404 1,042 4.95
---------- ------ ----------- ------
Total interest-bearing deposits 1,005,068 8,343 3.37 872,495 8,422 3.91
Federal funds purchased and repurchase
agreements 32,403 203 2.54 22,229 168 3.07
Other short-term borrowings 17,762 151 3.45 1,800 18 4.06
Long-term debt 49,612 735 6.01 11,924 177 6.02
---------- ------ ----------- ------
Total borrowed funds 99,777 1,089 4.43 35,953 363 4.09
---------- ------- ----------- ------
TOTAL INTEREST-BEARING LIABILITIES/INTEREST
EXPENSE 1,104,845 9,432 3.46 908,448 8,785 3.92
----- ----- ------ -----
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 134,153 94,432
Other liabilities 8,343 11,422
---------- ----------
Total liabilities 1,247,341 1,014,302
Shareholders' equity 89,346 81,879
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,336,687 $1,096,181
========== ==========
NET INTEREST-RATE SPREAD 3.85 3.88
Impact of non-interest-bearing sources .37 .39
----
NET INTEREST INCOME / MARGIN ON INTEREST-EARNING ASSETS $ 12,864 4.22% $10,626 4.27%
========= ===== ======= =====
</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.
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<PAGE> 11
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table shows changes in interest income and interest expense
resulting from changes in volume and interest rates for the three-month period
ended March 31, 1994 as compared to the same period in 1993.
<TABLE>
<CAPTION>
In thousands FIRST QUARTER 1994 VS. 1993
INCREASE(DECREASE) IN INTEREST
INCOME AND EXPENSE DUE TO
CHANGES IN:
VOLUME RATE TOTAL
------- ---- ------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans $4,869 $(1,141) $3,728
Securities 191 (774) (583)
Federal funds sold and resale agreements (234) (5) (239)
Interest-bearing deposits with banks (17) (4) (21)
------- -------- -------
TOTAL INTEREST-EARNING ASSETS 4,809 (1,924) 2,885
INTEREST-BEARING SOURCES OF FUNDS:
Interest-bearing demand deposits 140 (35) 105
Savings deposits 297 (43) 254
Money market demand accounts 16 (50) (34)
TransPlus 92 (113) (21)
Certificates of deposit 495 (692) (197)
Other time deposits (5) (181) (186)
------- ------- ------
Total interest-bearing deposits 1,035 (1,114) (79)
Federal funds purchased and repurchase agreements 67 (32) 35
Other short-term borrowings 136 (3) 133
Long-term debt 558 - 558
------ ------- ------
Total borrowed funds 761 (35) 726
------ ------- ------
TOTAL INTEREST-BEARING SOURCES OF FUNDS 1,796 (1,149) 647
------ ------- ------
INCREASE (DECREASE) IN NET INTEREST INCOME $3,013 $ (775) $2,238
====== ======= ======
</TABLE>
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.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $408 thousand (.18% of average loans, on
an annualized basis, excluding mortgage loans held for sale) in the first
quarter of 1994, compared with $534 thousand (.32% of average loans, annualized
and excluding mortgage loans held for sale) in the first quarter of 1993. Net
loan charge-offs were $304 thousand (.13% of average loans) for the three
months ended March 31, 1994, and $261 thousand (.16% of average loans) for the
comparable period in 1993.
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 three months of 1994 decreased $503
thousand over the first quarter of 1993. This net decrease was due to (in
thousands):
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
<S> <C>
- The TFB-Pikeville acquisition $ 291
Excluding TFB-Pikeville:
- Increased service charges on deposit accounts 161
- Lower gains on sales of securities (934)
- Lower gains on sales of mortgage loans (282)
- All other, net 261
--------
Net decrease in non-interest income $ (503)
========
</TABLE>
- 11 -
<PAGE> 12
NON-INTEREST EXPENSES
Non-interest expenses increased $2.9 million in the first quarter of 1994
compared with the comparable 1993 quarter, due to (in thousands):
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
<S> <C>
- The TFB-Pikeville acquisition $1,520
Excluding TFB-Pikeville:
- Increased compensation and benefits 612
- Increased furniture & equipment expense 225
- Increased expenses for postage, printing and supplies 159
- All other, net 345
------
Net increase in non-interest expense $2,861
======
</TABLE>
Since the end of the first quarter, management initiated a plan to eliminate
55 positions, or 8% of the company's workforce, by the end of the second
quarter. 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
In the first quarter of 1993 the company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, resulting in a $10
thousand decrease in net income in that quarter. The company had income tax
expense of $1.195 million in the first quarter of 1994, compared with $1.285
million in the comparable 1993 period, excluding the effect of adopting
Statement 109. These represent effective tax rates of 33.3% and 28.0%,
respectively.
BALANCE SHEET REVIEW
OVERVIEW
Assets at March 31, 1994, totaled $1.340 billion, compared with $1.347
billion at December 31, 1993, and $1.111 billion a year ago. Average total
assets increased $241 million (22%) over the past year to $1.337 billion.
Average interest-earning assets increased $228 million (23%) to $1.237 billion.
TFB-Pikeville contributed $190 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 $894 million in the first
quarter of 1994, excluding mortgage loans held for sale of $34 million. For the
comparable period in 1993, loans averaged $659 million, excluding the $21
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 March 31, 1994, loans net of unearned
income (excluding mortgage loans held for sale) totaled $911 million, compared
with $874 million at December 31, 1993, and $670 million a year ago.
TFB-Pikeville's loan portfolio represents over half of the increase between
March 31, 1993, and year-end 1993.
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 $6.9 million at March 31,
1994, a decrease of $1.7 million from December 31, 1993, and virtually
unchanged from the end of the first quarter of 1993. The ratio of nonperforming
loans to total loans (net of unearned income) was .76% at March 31, 1994,
compared with .99% at the end of 1993 and 1.03% a year ago. Nonperforming
assets, which include nonperforming loans, other real estate, and loans
classified as in-substance foreclosures, totaled $11.7 million at the end of
1994's first quarter. The ratio of nonperforming loans and other real estate to
total assets decreased from 1.28% a year ago to .87% at March 31, 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
- 12 -
<PAGE> 13
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
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31 MARCH 31
1994 1993 1993
<S> <C> <C> <C>
Nonaccrual loans $ 5,985 $ 5,517 $ 5,139
Accruing loans which are contractually
past due 90 days or more 886 1,547 1,235
Restructured loans 41 1,591 549
-------- ------- --------
Total nonperforming and restructured loans 6,912 8,655 6,923
Other real estate and in-substance foreclosures 4,784 4,694 7,306
-------- ------- --------
Total nonperforming and restructured loans
and other real estate $ 11,696 $13,349 $ 14,229
======== ======= ========
Nonperforming and restructured loans
as a percentage of net loans .76% .99% 1.03%
Nonperforming and restructured loans and
other real estate as a percentage of total assets .87% .99% 1.28%
</TABLE>
Two credit relationships account for $3 million, or 50%, of the March 31,
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 its present balance of $1.5 million.
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 also has an outstanding principal
balance of $1.5 million and is secured by commercial real estate. The borrower
filed for Chapter 11 bankruptcy protection during the third quarter of 1993.
The borrower 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 balance of the March 31, 1994,
nonaccrual loans consists of various commercial and consumer loans, none of
which individually exceeds $200,000.
Other real estate and in-substance foreclosures at March 31, 1994, includes
two properties with an aggregate book value of $3.5 million, or 73% 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 March 31, 1994, including
development costs, was $1.8 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 March 31, 1994, the company had $6.4 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 March 31, 1994, the allowance was $10.2 million, compared with $10.1
million at December 31, 1993, and $7.8 million at March 31, 1993. The allowance
as a percentage of nonperforming loans - an indication of the relative ability
to cover problem loans with existing reserves - increased from 113% at March
31, 1993, to 117% at year-end 1993 and to 148% at March 31, 1994. The ratio of
the allowance for loan losses to total loans (excluding mortgage loans held for
sale) at March 31, 1994, was 1.12%, compared with 1.16% at December 31, 1993,
and 1.16% at the end of 1993's first 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.
- 13 -
<PAGE> 14
SECURITIES, FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
Securities, including those classified as held to maturity and available
for sale, increased from $292 million at March 31, 1993, to $302 million at
year-end 1993, then declined slightly to $295 million at March 31, 1994.
TFB-Pikeville provided an initial securities portfolio of $61 million,
indicating a total decrease of $58 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
declined to $7.7 million at March 31, 1994, from $21.4 million at December 31,
1993, and $42.4 million a year ago, as the company used these liquid assets to
fund loan growth.
DEPOSITS AND BORROWED FUNDS
Total deposits averaged $1.139 billion in the first quarter of 1994, an
increase of $172 million (18%) over the comparable 1993 period.
Interest-bearing accounts increased $132 million (15%), while
non-interest-bearing accounts increased $40 million (42%) over the past year.
Substantially all of the increases are attributable to the TFB-Pikeville
acquisition.
Long-term debt averaged $50 million in the first quarter of 1994, an
increase of $38 million from the first quarter of 1993. This increase is
primarily 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 $26
million period to period, the result of a $15 million advance from the Federal
Home Loan Bank 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, and a $10 million increase in average federal funds purchased and
repurchases.
CAPITAL RESOURCES AND LIQUIDITY
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 $12 million was used to repay debt incurred in the TFB-Pikeville
transaction. The balance is available for general corporate purposes, including
augmenting the capital of the banks, as needed, and financing possible future
acquisitions.
The company's capital ratios at March 31, 1994 and December 31, 1993
(calculated in accordance with regulatory guidelines) were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
<S> <C> <C>
Tier 1 risk based 8.44% 8.67%
Regulatory minimum 4.00% 4.00%
Total risk based 12.89% 13.20%
Regulatory minimum 8.00% 8.00%
Leverage 6.15% 6.17%
Regulatory minimum 3.00% 3.00%
</TABLE>
Capital ratios of all of the company's subsidiaries are in excess of
applicable minimum regulatory capital ratio requirements at March 31, 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.
- 14 -
<PAGE> 15
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, such as loans and mortgage outstandings; 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 4.50% and 7.25%, respectively. Following is a
summary of the assumptions used in the model at the end of the first quarter of
1994, along with the resultant projected impact on net interest income.
<TABLE>
<CAPTION>
MOST LIKELY RISING FLAT DECLINING
Assumptions:
<S> <C> <C> <C> <C>
Federal funds rate, March 1995 4.50% 6.20% 3.50% 3.00%
Prime rate, March 1995 7.25% 8.50% 6.25% 5.65%
Increase (decrease) in net interest
income -0-% 1.41% (2.33)% (2.34)%
</TABLE>
Management concluded that the company is asset sensitive at March 31, 1994,
which indicates that in a uniformly rising rate environment the company's net
interest income will be impacted positively.
- 15 -
<PAGE> 16
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 AND 3.
No information is required to be filed for these items.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant's 1994 Annual Meeting of Shareholders was held April 25,
1994. Proxies were solicited by the registrant's board of directors pursuant to
Regulation 14 under the Securities Exchange Act of 1934, there was no
solicitation in opposition to the board's nominees as listed in the proxy
statement, and all of the nominees were elected by vote of the shareholders.
Voting results for each nominee were as follows:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
<S> <C> <C>
J. David Francis 6,872,895 238,070
Roy E. Gaddie 7,051,703 59,262
C.C. Howard Gray 7,062,456 48,509
Carroll Knicely 7,063,331 47,634
C. Cecil Martin 7,049,179 61,786
Frank Mastrapasqua 7,059,724 51,241
Joseph I. Medalie 7,058,227 52,738
Thomas R. Wallingford 6,885,063 225,902
</TABLE>
A proposal (Proposal II) to approve the Trans Financial Bancorp, Inc. 1994
Stock Option Plan was approved by a vote of the majority of the outstanding
shares of the registrant's common stock. 6,251,285 shares were voted in favor
of the proposal; 750,210 were voted against; and 150,006 abstained.
A proposal (Proposal III) to amend Article VI of the Articles of
Incorporation to increase from 25,000,000 to 50,000,000 the number of
authorized shares of common stock was approved by a vote of the majority of the
outstanding shares of the registrant's common stock. 6,540,636 shares were
voted in favor of the proposal; 564,931 were voted against; and 45,934
abstained.
The total number of shares of common stock outstanding as of March 1, 1994,
the record date of the Annual Meeting of Shareholders, was 8,804,703.
ITEM 5. OTHER INFORMATION
No information is required to be filed for this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index on pages 19 through 20 of this
Form 10-Q are filed as a part of this report.
(b) Reports on Form 8-K
The registrant filed on January 10, 1994, a report on Form 8-K dated
December 27, 1993, reporting the Agreement and Plan of Reorganization and
related Plan of Merger between the registrant and Peoples Financial
Services, Inc. The following consolidated financial statements of
Peoples Financial Services, Inc., notes related thereto and report of
independent auditors thereon were filed as a part of the report:
1. Independent Auditors' Report;
2. Consolidated Balance Sheets as of December 31, 1992 and 1991;
3. Consolidated Statements of Earnings 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. Consolidated Balance Sheet as of September 30, 1993 (unaudited)
and December 31, 1992 (unaudited);
8. Consolidated Statements of Operations for the three months ended
September 30, 1993 and 1992 (unaudited) and the nine months
ended September 30, 1993 and 1992 (unaudited);
9. Consolidated Statements of Stockholders' Equity for the nine
months ended September 30, 1993 and 1992 (unaudited);
- 16 -
<PAGE> 17
10. Consolidated Statements of Cash Flows for the nine months ended
September 30, 1993 and 1992 (unaudited);
11. Notes to Consolidated Financial Statements.
The following consolidated financial statements of Citizens Federal
Savings Bank, notes related thereto and report of independent auditors
thereon were filed as a part of the report:
12. Independent Auditors' Report;
13. Consolidated Balance Sheets as of December 31, 1992 and 1991;
14. Consolidated Statements of Operations for the years ended
December 31, 1992, 1991 and 1990;
15. Consolidated Statements of Retained Earnings for the years ended
December 31, 1992, 1991 and 1990;
16. Consolidated Statements of Cash Flows for the years ended
December 31, 1992, 1991 and 1990;
17. Notes to Consolidated Financial Statements;
The registrant filed on February 18, 1994, a report on Form 8-K dated
January 28, 1994 reporting the execution of an Agreement and Plan of
Reorganization and related Plan of Merger between the registrant and FGC
Holding Company. The following consolidated financial statements of FGC
Holding Company., notes related thereto and report of independent
auditors thereon were filed as a part of the report:
1. Independent Auditors' Report;
2. Consolidated Balance Sheet as of December 31, 1992;
3. Consolidated Statement of Income for the year ended December 31,
1992;
4. Consolidated Statement of Changes in Stockholders' Equity for
the year ended December 31, 1992;
5. Consolidated Statement of Cash Flows for the year ended December
31, 1992;
6. Notes to Consolidated Financial Statements;
7. Consolidated Balance Sheet as of September 30, 1993 (unaudited);
8. Consolidated Statement of Income for the period ended September
30, 1993 (unaudited).
The registrant filed on March 2, 1994, a report on Form 8-K dated
February 15, 1994, reporting the merger of Kentucky Community Bancorp,
Inc. with and into the registrant. The following consolidated financial
statements of Kentucky Community Bancorp, Inc., notes related thereto and
report of independent auditors thereon were filed as a part of the report:
1. Independent Auditors' 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).
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 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);
5. Pro Forma Condensed Consolidated Income Statement for the year
ended December 31, 1990 (unaudited);
6. Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited).
The following exhibits were filed as a part of the report:
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
Statement of Changes in Stockholders' Equity for the nine
months ended September 30, 1993 (unaudited); Supplemental
Consolidated Statement 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).
- 17 -
<PAGE> 18
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: May 16, 1994
/s/ Douglas M. Lester
--------------------------------
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
Principal Financial Officer:
Date: May 16, 1994
/s/ Vince A. Berta
--------------------------------
Vince A. Berta
Executive Vice President
and Chief Financial Officer
- 18 -
<PAGE> 19
EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered Pages
--------------
<S> <C> <C>
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).
</TABLE>
- 19 -
<PAGE> 20
<TABLE>
<CAPTION>
Sequentially
Numbered Pages
--------------
<S> <C> <C>
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 . . . . . 21
</TABLE>
* 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.
- 20 -
<PAGE> 1
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
THREE MONTHS ENDED MARCH 31,
----------------------------
1994 1993
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:(1)
Average common shares outstanding 8,896 8,843
Income before cumulative effect of change in accounting principle $2,394 $3,304
PRIMARY EARNINGS PER COMMON SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ .27 $ .37
====== ======
Net income $2,394 $3,294
PRIMARY NET INCOME PER COMMON SHARE $ .27 $ .37
====== ======
FULLY DILUTED EARNINGS PER COMMON SHARE:(1)
Average common shares outstanding 8,896 8,843
Income before cumulative effect of change in accounting principle $2,394 $3,304
FULLY DILUTED EARNINGS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ .27 $ .37
====== ======
Net income $2,394 $3,294
FULLY DILUTED NET INCOME PER COMMON SHARE $ .27 $ .37
====== ======
</TABLE>
(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.
- 21 -
