<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993 Commission File Number 0-13030
TRANS FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: (502)781-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
------------------------------------
(Title of Class)
Preferred Stock Purchase Rights
-------------------------------
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _
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 aggregate market value of the voting stock held by nonaffiliates of the
registrant on March 25, 1994: $102,581,000.
The number of shares outstanding of the issuer's class of common stock on March
25, 1994: 8,812,611 shares.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 25, 1994 are incorporated by reference into
Part III of this report.
The Exhibit Index is on page 49. This filing contains 85 pages (including this
facing sheet).
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
PART I
<S> <C> <C>
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . 6
4a. Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II
5. Market for the Registrant's Common Stock and Related Shareholder Matters . . . . . . . . . . . . . 7
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 7
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 8
PART III
10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 8
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . 8
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
- 2 -
<PAGE> 3
PART I
ITEM 1. BUSINESS
THE COMPANY AND THE BANKS
Incorporated in Kentucky in 1981, 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 commercial bank subsidiaries, Trans
Financial Bank, National Association, located in Bowling Green, Kentucky
("TFBNA"), and Trans Financial Bank, located in Pikeville, Kentucky
("TFB-Pikeville"), and two thrift subsidiaries, Trans Financial Bank, Federal
Savings Bank, located in Russellville, Kentucky ("TFBFSB"), and Trans Financial
Bank of Tennessee, FSB, located in Tullahoma, Tennessee ("TFB of TN")
(collectively referred to as the" banks").
The company acquired its first thrift subsidiary, TFBFSB, in November 1990.
Effective January 1, 1991, the company's two former bank subsidiaries were
consolidated into one national banking institution, TFBNA. On August 30, 1991,
as the result of a joint bid with PNC Bank for certain deposits and assets of
Future Federal Savings Bank, Louisville, Kentucky, under the Accelerated
Resolution Program of the Resolution Trust Corporation, TFBNA assumed
approximately $75.9 million in deposits and acquired approximately $11 million
in consumer loans and received approximately $64.3 million in cash (net of a
$1.0 million premium), all related to the Glasgow, Kentucky and Tompkinsville,
Kentucky branches of Future Federal Savings Bank. Effective March 26, 1992, the
company acquired First Federal Savings Bank of Tennessee, Tullahoma, Tennessee,
and effective March 27, 1992, the company acquired Maury Federal Savings Bank,
Columbia, Tennessee. These two Tennessee thrift institutions were merged on
November 27, 1992, to form TFB of TN. On August 7, 1992, the company acquired
(through First Federal Savings Bank of Tennessee) the deposits and branch
operations of five middle Tennessee branches of Heritage Federal Bank for
Savings, a Tennessee-based savings bank. In this transaction, the company's
Tullahoma-based affiliate 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 premium). On December 31, 1992, the
company merged with Dawson Springs Bancorp, Inc. (DSB), the holding company for
Kentucky State Bank, Scottsville, Kentucky, and Commercial Bank of Dawson
Springs, Dawson Springs, Kentucky. These banks were merged into TFBNA on
December 31, 1992. 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
$188.7 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.
On December 31, 1993, the company had total consolidated assets of $1.169
billion, total loans of $769 million, total deposits of $994 million and
shareholders' equity of $76 million.
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 of Morehead, and Farmers Liberty Bank, with combined
assets of approximately $175 million. Under the terms of the merger, all shares
of KCB common stock outstanding were converted into 1,374,962 shares of company
common stock. The transaction was accounted for as a pooling of interests.
On December 27, 1993, the company entered into a definitive agreement
providing for the acquisition of Peoples Financial Services, Inc. ("Peoples
Financial") in an all stock transaction. Peoples Financial, headquartered in
the middle Tennessee community of Cookeville, is a two bank 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
agreement, Peoples Financial shareholders will receive 5.5 shares of company
common stock for each share of Peoples Financial stock or a total of
approximately 1,315,770 shares. The transaction is subject to regulatory and
Peoples Financial shareholder approval.
On January 28, 1994, the company entered into a definitive agreement
providing for the acquisition of FGC Holding Company ("FGC") in an all stock
transaction. FGC, headquartered in the eastern Kentucky community of Martin, is
a one bank holding company for First Guaranty National Bank, with $126 million
in assets. Under the terms of the agreement, FGC shareholders will receive
419.83 shares of company common stock for each share of FGC common stock, or a
total of approximately 1,050,000 shares. The transaction is subject to
regulatory and FGC shareholder approval.
It is anticipated these two pending acquisitions will constitute tax free
reorganizations and qualify for the pooling of interests method of accounting.
Interest on domestic, commercial and mortgage loans constitutes the largest
contribution to the operating revenues of the banks. TFBNA and TFB-Pikeville
provide a full range of corporate and retail banking services, including the
acceptance of deposits for checking, savings and time deposit accounts; making
of secured and unsecured loans to corporations, individuals and others;
issuance of letters of credit; rental of safe deposit boxes; and financial
counseling for individuals and institutions. In addition, TFBNA is an equity
partner in Quest, a partnership of several Kentucky banks engaged in the
development and operation of a regional automated teller machine network.
- 3 -
<PAGE> 4
TFBNA provides a wide variety of personal and corporate trust and
trust-related services, including serving as executor of estates; as trustee
under testamentary and inter vivos trusts; as guardian of the estates of minors
and incompetents; as escrow agent under various agreements; and as financial
advisor to and custodian for individuals, corporations and others. Corporate
trust services include serving as registrar and transfer agent for corporate
securities and as corporate trustee under corporate trust indentures. At
December 31, 1993, approximately $294 million in assets were managed by the
trust department of TFBNA.
Historically, the principal business of TFBFSB and TFB of TN has been the
acceptance of savings deposits from the general public and the origination and
purchase of mortgage loans for the purpose of constructing, financing or
refinancing one- to four-family dwellings. Since its acquisition of TFBFSB in
November 1990, the company has introduced a variety of additional products and
services designed to attract a more diverse customer base, including checking
accounts, consumer, installment and commercial loans, trust and brokerage
services. Similar products are now being offered at TFB of TN since its
acquisition in March 1992.
TFBNA has thirteen offices, six located in Bowling Green, Kentucky, two
located in Glasgow, Kentucky, two located in Scottsville, Kentucky and one
located in each of Dawson Springs, Tompkinsville and Barren County in Kentucky.
TFB-Pikeville has seven offices - three located in Pikeville, Kentucky, and one
each in Elkhorn City, Meta, Belfry and Virgie, Kentucky. TFBFSB has two offices
- - one located in Russellville, Kentucky, and one in Auburn, Kentucky. TFB of TN
has 14 branch locations - two in Columbia, Tennessee, and one each in the
Tennessee communities of Tullahoma, Mt. Pleasant, Clarksville, Cookeville,
Franklin, Lebanon, Manchester, McMinnville, Murfreesboro, Shelbyville, Sparta
and Winchester. In addition to its full service branches, TFB of TN has a
mortgage operations center in Tullahoma and loan production offices in
Nashville and Chattanooga.
COMPETITION
The deregulation of the banking industry and the enactment in Kentucky and
other states of legislation permitting multi-bank holding companies as well as
interstate banking has created a highly competitive environment for banking in
the company's market area.
TFBNA competes in the Bowling Green area with four commercial banks and
two savings associations, in the Glasgow/Cave City area with two commercial
banks and one savings association, in the Scottsville area with one commercial
bank and one savings association, in the Dawson Springs area with three
commercial banks and two savings associations, and in the Tompkinsville area
with two larger commercial banks. TFB-Pikeville competes with two commercial
banks and two savings associations in the Pikeville area. In the Russellville
area, TFBFSB competes with five commercial banks located in the county. TFB of
TN's primary market area is middle Tennessee. Based on assets at June 30, 1993,
(the latest date for which competitive infomation is available) TFBNA was the
largest financial institution in Bowling Green and Glasgow, the second largest
financial institution in Scottsville and the 6th largest financial institution
in Dawson Springs. TFB-Pikeville was the third largest financial institution
in Pikeville as of June 30, 1993, TFBFSB was the third largest financial
institution in Russellville, and TFB of TN was the fourth largest of the 34
thrift institutions headquartered in the state of Tennessee.
The company actively competes in its markets with other commercial banks
and financial institutions for all types of deposits, loans, trust accounts and
the provision of financial, trust and other services. The company also competes
generally with insurance companies, savings and loan associations, credit
unions, other financial institutions, and institutions which have expanded into
the quasi-financial market. Many of these competitors have resources
substantially in excess of those of the company, have broader geographic
markets and higher lending limits than the banks and, therefore, are able to
make larger loans, sell a broader product line, and make more effective use of
advertising than can the company or the banks.
SUPERVISION AND REGULATION
Bank holding companies, commercial banks and savings banks are extensively
regulated under both federal and state law. Any change in applicable law or
regulation may have a material effect on the businesses and prospects of the
company and the banks.
The company, as a registered bank holding company, is subject to the
supervision of and regulation by the Federal Reserve Board under the Bank
Holding Company Act of 1956. Also, as a registered savings and loan holding
company, the company is subject to the supervision of and regulation by the
Office of Thrift Supervision (OTS).
In addition, the company is subject to the provisions of Kentucky's and
Tennessee's banking laws regulating bank acquisitions and certain activities of
controlling bank shareholders.
TFBNA is subject to the supervision of, and regular examination by, the
Office of the Comptroller of the Currency. TFB-Pikeville is subject to the
supervision of, and regular examination by, the Federal Deposit Insurance
Corporation and, as a state-chartered bank, it is subject to Kentucky's banking
laws. TFBFSB and TFB of TN are subject to the supervision of, and regular
examination by, the OTS. The FDIC insures the deposits of the banks to the
current maximum of $100,000
- 4 -
<PAGE> 5
per depositor.
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"),
signed into law in 1989, amended provisions of the Bank Holding Company Act to
specifically authorize a bank holding company, upon receipt of appropriate
approvals from the Federal Reserve Board and the Director of the OTS, to
acquire control of any savings association or holding company thereof wherever
located. Similarly, a savings and loan holding company may now acquire control
of a bank. Pursuant to rules promulgated pursuant to FIRREA, a savings
association acquired by a bank holding company (i) may, so long as it continues
to meet the qualified thrift lender test, continue to branch to the same extent
as permitted to other nonaffiliated savings associations similarly chartered in
the state, and (ii) may not continue any non-banking activities not authorized
for bank holding companies. Savings associations acquired by a banking holding
company may, if located in a state where the bank holding company is legally
authorized to acquire a bank, be converted, to the extent permitted by state
law, to the status of a bank but deposit insurance assessments and payments
continue to be paid by the association to the Savings Association Insurance
Fund of the FDIC. A savings association so converted to a bank becomes subject
to the branching restrictions applicable to banks. Under certain circumstances,
a savings association acquired by a bank holding company may be merged with an
existing bank subsidiary of a holding company.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), effective December 19, 1991, has resulted in extensive changes to
the federal banking laws. A primary purpose of the law is to authorize
additional borrowings by the FDIC in order to provide funds for the resolution
of failing financial institutions. FDICIA instituted certain changes to the
supervisory process and contains various provisions that affect the operations
of banks and savings institutions. Not all of the regulations implementing
FDICIA have been adopted. As a result, the full effect of FDICIA on the
operation of the company cannot be determined.
STATISTICAL INFORMATION
Certain statistical information is included in a separate section of the
report on pages 17 through 29 and on page 40, and those pages are incorporated
herein by reference.
<TABLE>
<CAPTION>
Description of Statistical Information Page
-------------------------------------- ----
<S> <C>
Average Consolidated Balance Sheets and Net Interest Analysis . . . . . . . . . . . . . . . . . . . . 17
Analysis of Year-to-Year Changes in Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . 18
Loans Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Loan Maturities and Interest Sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Potential Problem Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Summary of Loan Loss Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Allocation of Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of Year-End Allowance for Loan Losses and Percentage of Each Type of Loan to Total Loans . 24
Carrying Value of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Maturity Distribution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Maturity of Time Deposits of $100,000 or More . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Federal Funds Purchased and Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Consolidated Statistical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Impact of Nonaccrual Loans on Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
ITEM 2. PROPERTIES
The main banking office of TFBNA, which also serves as the principal office
of the company, is located at 500 East Main Street, Bowling Green, Kentucky
42101. In addition, TFBNA operates twelve branches. Each branch offers a full
range of banking services and is equipped with an automated teller machine for
24-hour banking services. TFBNA owns all of the properties at which it conducts
its business except the Ashley Circle, Nashville Road and Tompkinsville
branches.
TFBFSB owns its main banking office at 135 West Fourth Street,
Russellville, Kentucky and leases its branch facility at 107 West Main, Auburn,
Kentucky.
TFB of TN owns all the properties at which it conducts business except the
Chattanooga and Nashville loan production offices and the Blythewood branch
office.
TFB-Pikeville owns all the properties at which it conducts business except
the Virgie branch and one of its Pikeville branches (the North Mayo Trail
branch).
- 5 -
<PAGE> 6
Note 7 to the company's consolidated financial statements included on page
41 of this report contains additional information relating to amounts invested
in premises and equipment.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of operations, the banks 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 or the banks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of the period covered by this report.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position with the company
and the banks of the executive officers of the company as of December 31, 1993.
Officers of the company and the banks are elected annually.
<TABLE>
<CAPTION>
Served as
an Executive Position with the
Name Officer Since Age Company and the Banks
---- ------------- --- ---------------------
<S> <C> <C> <C>
Douglas M. Lester 1984 51 Chairman of the Board, President and Chief Executive Officer of the
company; Chairman of the Board and Chief Executive Officer of TFBNA;
Director of TFBNA and TFB-Pikeville
Vince A. Berta 1993 35 Executive Vice President and Chief Financial Officer of the company;
Chief Financial Officer of TFBNA, TFB-Pikeville, TFBFSB, and TFB of
TN; Director of TFB of TN
Barry D. Bray 1984 47 Executive Vice President, Chief Credit Officer and Director of the
company; President, Chief Operating Officer and Director of TFBNA;
Director of TFBFSB and TFB of TN
Roger E. Lundin 1987 49 Senior Vice President and Director of Human Resources of the company
Harold T. Matthews 1987 59 Vice President of the company; President of the Glasgow Division of
TFBNA; Director of TFBNA
John T. Perkins 1984 50 Senior Vice President and Chief Operations Officer of the company
Dena R. Schaaf 1992 37 Senior Vice President of Risk Management and Compliance of the
company
Jay B. Simmons 1993 37 Senior Vice President, General Counsel and Secretary of the company
</TABLE>
Mr. Lester joined TFBNA as its President and Chief Executive Officer in
1984, prior to the time the company became the holding company of TFBNA.
Mr. Berta joined the company in April 1993. Prior to that, he was Vice
President and Manager of Functional Control with PNC Bank.
Mr. Bray joined TFBNA in 1982 and has served as Chief Credit Officer since
1984. Mr. Bray was elected President of TFBNA in December, 1991. He was elected
Executive Vice President of the company in 1988.
Mr. Lundin, until joining TFBNA in 1986, was employed by a division of
PACCAR, Inc., an automotive-related company, as Manager of Employee Relations.
Mr. Matthews joined Citizens Bank and Trust Company (a predecessor of
TFBNA) in 1972, and continued as President of Citizens Bank and Trust Company
until his election as Chief Executive Officer in 1987. In January 1991,
Citizens Bank and Trust Company was merged with TFBNA and Mr. Matthews was
elected President of the Glasgow Division of TFBNA. He became Vice President of
the company in 1987.
- 6 -
<PAGE> 7
Mr. Perkins joined TFBNA in 1973 and has served as Chief Operations Officer
since 1981.
Ms. Schaaf joined the company in November 1992. Prior to that, she was
Examiner-In-Charge of Asset Quality for regional banks with the Office of
Comptroller of Currency.
Mr. Simmons joined the company in November 1993. Prior to that, he was a
partner in a Denver law firm, specializing in financial institutions law, and
was a vice president on the legal staff of Colorado National Bankshares, Inc.
None of the above officers is related to another and there are no
arrangements or understandings between them and any other person pursuant to
which any of them was elected as an officer, other than arrangements or
understandings with directors or officers of the company acting solely in their
capacities as such, and other than the employment agreements of Messrs. Lester
and Matthews. Mr. Lester's employment agreement with the company and TFBNA
became effective January 1, 1991. Mr. Matthews' employment agreement with TFBNA
was also effective January 1, 1991.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The registrant's common stock is traded on the NASDAQ National Market
System under the symbol TRFI. As of December 31, 1993, there were 1,253
shareholders of record.
Following is a summary of market prices and dividends declared for the
registrant's common stock for the quarterly periods indicated (adjusted for the
4-for-3 stock split effected February 1, 1993):
<TABLE>
<CAPTION>
STOCK PRICE
-----------
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
First quarter, 1992 $12.375 $10.875 $.105
Second quarter, 1992 14.0625 11.25 .1125
Third quarter, 1992 14.25 12.1875 .1125
Fourth quarter, 1992 15.1875 12.00 .1125
First quarter, 1993 24.00 14.625 .1275
Second quarter, 1993 23.75 19.25 .1275
Third quarter, 1993 20.25 17.00 .1275
Fourth quarter, 1993 18.75 14.50 .1275
</TABLE>
Additional information for this item is included in Note 10 to the
consolidated financial statements on page 43 of this report.
ITEM 6. SELECTED FINANCIAL DATA
The information for this item is included in the section entitled
"Consolidated Statistical Information" on page 29 of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS The information for this item is included in the section
entitled "Management's Discussion and Analysis," on pages 13 through 28
of this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and
report of independent auditors are included in a separate section of this
report on pages 30 through 48:
Report of KPMG Peat Marwick, Independent Auditors
Consolidated Balance Sheets - December 31, 1993 and 1992
Consolidated Statements of Income - Years ended December 31, 1993, 1992 and
1991
Consolidated Statements of Changes in Shareholders' Equity - Years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows - Years ended December 31, 1993, 1992
and 1991
- 7 -
<PAGE> 8
Notes to Consolidated Financial Statements
Additional information for this item is included in the section entitled
"Quarterly Results" on page 28 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set out in the section entitled "Voting Securities and
Ownership Thereof," "Election of Directors," "Compensation Committee Interlocks
and Insider Participation," and "Transactions with Management and Others" of
the registrant's Proxy Statement on pages 2 through 9 and 14 through 16, and
the information set out in the section entitled "Executive Officers of the
Registrant" on pages 6 and 7 of Part I of this report are incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set out in the section entitled "Executive Compensation
and Other Information," of the registrant's Proxy Statement at pages 9 through
15 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set out in the section entitled "Voting Securities and
Ownership Thereof" of the registrant's Proxy Statement at pages 2 through 4 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set out in the sections entitled "Transactions with
Management and Others" and "Compensation Committee Interlocks and Insider
Participations" of the registrant's Proxy Statement on pages 14 through 16 is
incorporated herein by reference.
- 8 -
<PAGE> 9
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial statements filed
The list of consolidated financial statements together with the
report thereon of KPMG Peat Marwick, as set forth in Part II, Item 8
of this report is incorporated herein by reference.
(2) Financial statement schedules
Schedules to the consolidated financial statements are omitted, as
the required information is not applicable.
(3) List of exhibits
The list of exhibits listed on the Exhibit Index on pages 49 through
51 of this report is incorporated herein by reference.
The management contracts and compensatory plans or arrangements
required to be filed as exhibits to this Form 10-K pursuant to Item
14(c) are noted by asterisk (*) in the Exhibit Index.
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
(c) Exhibits
The exhibits listed on the Exhibit Index on pages 49 through 51 of this
Form 10-K are filed as a part of this report.
(d) Financial statement schedules
No financial statement schedules are required to be filed as a part of
this report.
- 9 -
<PAGE> 10
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)
By: /s/ Douglas M. Lester
--------------------------
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
Date: March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 31, 1994, by the following persons on
behalf of the registrant and in the capacities indicated.
(a) Principal Executive Officer:
/s/ Douglas M. Lester
----------------------
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
(b) Principal Financial Officer:
/s/ Vince A. Berta
----------------------
Vince A. Berta
Executive Vice President
and Chief Financial Officer
(c) Principal Accounting Officer:
/s/ Edward R. Matthews
----------------------
Edward R. Matthews
Controller
- 10 -
<PAGE> 11
(c) Directors:
<TABLE>
<S> <C>
/s/ Barry D. Bray /s/ Charles A. Hardcastle
-------------------------------------- -----------------------------------
Barry D. Bray Charles A. Hardcastle
/s/ Mary D. Cohron
------------------------------------ -------------------------------------
Mary D. Cohron Carroll F. Knicely
/s/ Floyd H. Ellis /s/ Douglas M. Lester
--------------------------------------- ------------------------------------
Floyd H. Ellis Douglas M. Lester
/s/ Noel Ennis /s/ C. Cecil Martin
--------------------------------------- -------------------------------------
Noel Ennis C. Cecil Martin
/s/ J. David Francis
-------------------------------------- -----------------------------------
J. David Francis Frank Mastrapasqua
/s/ Roy E. Gaddie /s/ Joseph I. Medalie
------------------------------------- -------------------------------------
Roy E. Gaddie Joseph I. Medalie
/s/ John B. Gaines
-------------------------------------- -----------------------------------
John B. Gaines Charles M. Stewart
/s/ David B. Garvin /s/ William B. Van Meter
------------------------------------- ----------------------------------
David B. Garvin William B. Van Meter
------------------------------------ ----------------------------------
Wayne Gaunce Thomas R. Wallingford
/s/ Roland D. Willock
----------------------------------- ------------------------------------
C.C. Howard Gray Roland D. Willock
</TABLE>
- 11 -
<PAGE> 12
TRANS FINANCIAL BANCORP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1993
ITEMS 1, 2, 5, 6, 7, 8 AND 14 (A)(1)
Financial Statements and Supplementary Data
Market for the Registrant's Common Equity and Related Shareholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- 12 -
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL OVERVIEW
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. ("Trans
Financial Bank") and Trans Financial Bank, Pikeville, Kentucky
("TFB-Pikeville") - and two thrift subsidiaries - Trans Financial Bank, FSB
and Trans Financial Bank of Tennessee, FSB ("TFB-Tennessee"). Collectively,
these four institutions are referred to in this report as the banks.
The company has achieved its earnings growth by expanding
through acquisitions, streamlining operations and building non-interest
income. At December 31, 1993, the company had total consolidated assets of
$1.169 billion, total loans of $769 million, total deposits of $994 million
and shareholders' equity of $76 million. For the year ended December 31,
1993, the company's net income increased 2.8%, from $9.1 million to $9.3
million, although earnings per share decreased 4.6%, from $1.30 to $1.24 per
common share.
During 1992 and 1993, the company completed several acquisitions
without compromising overall asset quality. Effective March 26, 1992, the
company acquired First Federal Savings Bank of Tennessee, Tullahoma,
Tennessee, in a combination stock and cash purchase valued at $11.3 million.
On March 27, 1992, the company acquired Maury Federal Savings Bank, Columbia,
Tennessee, for $11.1 million in cash. These two Tennessee thrift institutions
had combined assets of $279 million, net loans of $185 million and deposits of
$252 million when they were merged on November 27, 1992. On August 7,
1992, the company acquired the deposits and branch operations of five
middle Tennessee branches of Heritage Federal Bank for Savings ("Heritage
Federal"). TFB-Tennessee 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 premium). These acquisitions have
been accounted for under the purchase method of accounting. On December 31,
1992, the company merged with Dawson Springs Bancorp, Inc. (DSB), the
holding company for Kentucky State Bank, Scottsville, Kentucky, and
Commercial Bank of Dawson, Dawson Springs, Kentucky, by issuing 560,088 shares
of its common stock. These two banks, with combined assets of approximately
$73 million, were merged into Trans Financial Bank on December 31, 1992. The
DSB merger was accounted for on a pooling of interests basis and,
accordingly, all financial data for prior periods have been restated as if
the entities were combined for all periods prior to the merger.
On July 6, 1993, in a transaction accounted for as a purchase,
the company acquired Trans Kentucky Bancorp, Inc., 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 $188.7 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.
Over the last three years, the company has emphasized investment
in infrastructure in order to control operating risks, support future
acquisitions and internal growth and allow the company to introduce new
products. Investments have been made primarily in data processing hardware
and software upgrades which enable the company to process transactions more
efficiently and to accommodate growth in transaction volume and product
array, while realizing economies of scale and maintaining quality control.
Management believes that these expenditures have enhanced the company's
franchise and positioned it for future acquisitions.
13
<PAGE> 14
The discussion that follows is intended to provide insight into the
results of operations and financial condition of the company. This discussion
should be read in conjunction with the Consolidated Financial Statements and
accompanying notes presented elsewhere in this report. As previously
discussed, the company consummated several business combinations which were
accounted for under the purchase method. Accordingly, the results of
operations of those acquired entities prior to the acquisition dates have not
been included in the results of operations. Therefore, ratios or analyses for
periods before and after these purchase acquisitions will not be comparable.
The DSB merger was accounted for as a pooling of interests and, accordingly,
all financial data for prior periods were restated as if the entities had
been combined for all periods prior to the merger. See Note 3 to the
Consolidated Financial Statements for additional information regarding
business combinations. All per share data in this report give effect to
stock splits.
INCOME STATEMENT REVIEW
GENERAL
Net income was $9.3 million ($1.24 per share) in 1993, compared
with $9.1 million ($1.30 per share) for 1992, and $4.5 million ($1.17 per
share fully diluted) in 1991. The higher net income in 1993 was due to (in
thousands):
- The TFB-Pikeville acquisition (net of the
related interest on debt) $ 791
Excluding TFB-Pikeville:
- Increased net interest income 5,904
- Increased non-interest income 1,930
- Lower income taxes 652
- Increased non-interest expense (8,575)
- Increased provision for loan losses (446)
----------------------------------------------------------
Total increase in net income $ 256
==========================================================
The increase in non-interest expense was spread over several
categories, particularly compensation and benefits ($3.1 million, excluding
TFB-Pikeville), occupancy, furniture and equipment ($1.2 million),
professional fees ($.9 million), and postage and express charges ($.4
million). The majority of increases are related to the purchase acquisitions
consummated in 1992 and 1993. In general, the remaining increases are related
to an effort to build the company's infrastructure to accommodate future
growth, requiring investments in staff as well as in buildings, equipment and
information systems.
Earnings per share decreased in 1993 because of the increased
number of average shares outstanding - a result of the full-year impact of
1) the 1992 public stock offering, 2) conversion to common stock of the
remaining debentures, and 3) stock issued in connection with the TFB-Tennessee
acquisition.
The increase in earnings in 1992 versus 1991 was attributable to an
increase in net interest income ($12.7 million), due to growth in
interest-earning assets from the TFB-Tennessee acquisition, coupled with a
higher net interest margin. Also contributing to the increase in earnings in
1992 were increases in fee income generated from deposit accounts ($.6
million), loan servicing fees ($1.1 million), securities gains ($.7 million),
and gains on mortgage loan sales ($.6 million). These increases were
partially offset by higher non-interest expenses ($9.5 million).
14
<PAGE> 15
TRANS FINANCIAL BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
=====================================================================================================================
For the year ended December 31 Change
Dollars in thousands, except per share data 1993 1992 Amount %
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $72,617 $63,407 $9,210 14.5 %
Interest expense 32,031 32,011 20 .1
- ---------------------------------------------------------------------------------------------------------------------
Net interest income 40,586 31,396 9,190 29.3
Provision for loan losses 1,662 1,216 446 36.7
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 38,924 30,180 8,744 29.0
Non-interest income 13,759 11,064 2,695 24.4
Non-interest expense 39,027 27,498 11,529 41.9
- ---------------------------------------------------------------------------------------------------------------------
Interest before income taxes and cumulative
effect of accounting change 13,656 13,746 (90) (.7)
Income taxes 4,249 4,686 (437) (9.3)
- ---------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 9,407 9,060 347 3.8
Cumulative effect of change in accounting principle (91) -- (91) NM
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 9,316 $ 9,060 $ 256 2.8 %
=====================================================================================================================
Earnings per common share $ 1.24 $ 1.30 $ (.06) (4.6)%
=====================================================================================================================
NM = not meaningful
</TABLE>
NET INTEREST INCOME
Net interest income - the difference between interest income on
interest-earning assets and interest expense on interest-bearing
liabilities - totaled $40.6 million in 1993, compared with $31.4
million in 1992. This represents a 29.3% increase over 1992. The
increase from 1991 to 1992 was 67.6%.
The increase in net interest income in both 1992 and 1993 was primarily a
result of an increase in average interest-earning assets, which was further
enhanced by an increase in the net interest margin. Average interest-earning
assets for 1993 increased $206 million, while net interest margin increased 7
basis points.
The increase in average interest-earning assets in 1993 was due to the
TFB-Pikeville acquisition (providing an $89 million increase in the company's
average interest-earning assets), loan growth ($86 million excluding
TFB-Pikeville) and the full-year impact of investment securities purchased from
funds provided in the Heritage Federal branch acquisition.
In 1992, average interest-earning assets increased $293 million and the
net interest margin increased 12 basis points. TFB-Tennessee, acquired at the
end of the first quarter of 1992, added approximately $217 million to average
interest-earning assets during 1992, while the Future Federal branch
acquisition of August 1991 and the Heritage Federal branch acquisition of
August 1992 together contributed approximately $72 million to average earning
asset growth in 1992. Average loans increased $174 million in 1992 as a result
of the addition of TFB-Tennessee's loan portfolio, combined with the increase
in loans associated with significant residential mortgage and corporate loan
demand. Average securities increased $115 million with the addition of
TFB-Tennessee's securities and the increased investment in mortgage-backed
securities associated with funds available from the Heritage Federal branch
acquisition.
15
<PAGE> 16
NET INTEREST MARGIN AND SPREAD COMPARISON
<TABLE>
<CAPTION>
===========================================================================================================
Basis Point
For the year ended December 31 1993 1992 Change
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average yield on interest-
earning assets 7.51% 8.34% (83)
Average rate on interest-bearing
liabilities 3.67 4.62 (95)
- -----------------------------------------------------------------------------------------------------------
Net interest-rate spread(1) 3.84 3.72 12
Impact of non-interest-bearing
sources of funds .36 .41 (5)
- -----------------------------------------------------------------------------------------------------------
Net interest margin(2) 4.20% 4.13% 7
===========================================================================================================
</TABLE>
(1) 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.
(2) Net interest margin is net interest income divided by average interest-
earning assets.
The net interest margin and net interest-rate spread increased over the
past two years due to the company's interest-bearing liabilities repricing
downward more rapidly than yields on interest-earning assets. During that time,
the market spread between the prime rate and the federal funds rate has
increased. A significant amount of Trans Financial Bank's loans are tied to the
prime rate and a significant amount of its deposits are relatively short term.
Short-term deposits tend to follow movements in short-term U.S. Treasury
securities, rates which move up or down more quickly than the prime rate.
Accordingly, as the spread between the prime rate and shorter-term rates has
widened, so has the company's net interest margin and net interest-rate spread.
One factor which partially offsets the widening interest spread effect
noted above has been the inclusion of TFB-Tennessee in the company's
consolidated financial statements since the first quarter of 1992.
TFB-Tennessee's interest-earning assets are concentrated in relatively low
yielding residential mortgage loans and investment securities. TFB-Tennessee's
deposit base also has a larger proportion of higher-rate certificates of
deposit. The interest spread increase was also lessened by the Tennessee branch
acquisition in August 1992, which added approximately $51 million of
interest-earning assets at an initial net interest spread of approximately 60
basis points.
16
<PAGE> 17
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
<TABLE>
<CAPTION>
====================================================================================================================================
1993 1992 1991
For the year ended December 31 Average Average Average Average Average Average
Dollars in thousands Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Securities held to maturity:
U.S. Treasury, Federal agencies and
mortgage-backed securities $ 214,424 $ 12,879 6.01% $214,171 $15,749 7.35% $107,196 $ 9,031 8.42%
State and municipal obligations 12,442 712 5.72 5,675 392 6.91 5,694 429 7.53
Other securities 11,798 622 5.27 11,092 553 4.99 2,660 122 4.59
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 238,664 14,213 5.96 230,938 16,694 7.23 115,550 9,582 8.29
Securities available for sale 17,290 640 3.70 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities 255,954 14,853 5.80 230,938 16,694 7.23 115,550 9,582 8.29
Federal funds sold and resale agreements 18,044 484 2.68 9,802 383 3.91 7,440 408 5.48
Interest-bearing deposits with banks 819 70 8.55 3,154 231 7.32 2,147 115 5.36
Loans, net of unearned income 691,143 57,210 8.28 515,938 46,099 8.93 341,750 35,858 10.49
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS/
INTEREST INCOME 965,960 72,617 7.51 759,832 63,407 8.34 466,887 45,963 9.84
Less allowance for loan losses 7,018 4,988 4,265
- -----------------------------------------------------------------------------------------------------------------------------------
958,942 754,844 462,622
Non-interest-earning assets:
Cash and due from banks 39,970 33,679 19,313
Premises and equipment 23,496 16,058 9,944
Other assets 28,404 23,565 18,275
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,050,812 $828,146 $510,154
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $ 89,963 2,008 2.23% $ 81,229 2,424 2.98% $ 47,476 2,092 4.41%
Savings 87,178 2,428 2.79 54,330 1,853 3.41 24,435 1,185 4.85
Money market demand accounts 37,672 911 2.42 28,103 882 3.14 39,704 2,069 5.21
TransPlus 75,428 1,917 2.54 56,751 1,808 3.19 40,647 2,106 5.18
Certificates of deposit 444,895 18,597 4.18 376,092 20,122 5.35 221,661 15,572 7.03
Other time 76,129 3,949 5.19 65,108 3,733 5.73 34,369 2,537 7.38
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 811,265 29,810 3.67 661,613 30,822 4.66 408,292 25,561 6.26
Federal funds purchased and
repurchase agreements 28,084 673 2.40 26,039 902 3.46 8,087 466 5.76
Other short-term borrowings 6,481 238 3.67 -- -- -- -- -- --
Long-term debt 26,239 1,310 4.99 4,525 287 6.34 12,770 1,203 9.42
- -----------------------------------------------------------------------------------------------------------------------------------
Total borrowed funds 60,804 2,221 3.65 30,564 1,189 3.89 20,857 1,669 8.00
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-BEARING LIABILITIES/
INTEREST EXPENSE 872,069 32,031 3.67 692,177 32,011 4.62 429,149 27,230 6.35
- -----------------------------------------------------------------------------------------------------------------------------------
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits 98,673 61,353 43,129
Other liabilities 7,135 10,001 6,373
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 977,877 763,531 478,651
Shareholders' equity 72,935 64,615 31,503
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,050,812 $828,146 $510,154
===================================================================================================================================
NET INTEREST-RATE SPREAD 3.84 3.72 3.49
Impact of non-interest-bearing sources .36 .41 .52
--- --- ---
NET INTEREST INCOME/
MARGIN ON INTEREST-EARNING ASSETS $ 40,586 4.20% $ 31,396 4.13% $ 18,733 4.01%
===================================================================================================================================
</TABLE>
Net interest margin is net interest income divided by average interest-earning
assets. For computational purposes, nonaccrual loans are included in
interest-earning assets. Loan fees are included in interest income on loans.
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 for
all periods, except that for 1992 averages, the average balances related to one
affiliate comprising approximately 28% of average interest-earning assets are
computed based on month-end balances.
17
<PAGE> 18
ANALYSIS OF YEAR-TO-YEAR 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 years ended
December 31, 1993 and 1992, as compared to the previous year.
<TABLE>
<CAPTION>
===============================================================================================================================
1993 VS. 1992 1992 VS. 1991
Increase/(decrease) in Increase/(decrease) in
income/expense due to income/expense due to
changes in: changes in:
In thousands Volume Rate Total Volume Rate Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $14,708 $(3,597) $11,111 $16,176 $(5,935) $10,241
Securities held to maturity 543 (3,024) (2,481) 8,481 (1,369) 7,112
Securities available for sale 640 -- 640 -- -- --
Federal funds sold
and resale agreements 248 (147) 101 110 (135) (25)
Interest-bearing deposits with banks (194) 33 (161) 65 51 116
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 15,945 (6,735) 9,210 24,832 (7,388) 17,444
Interest-bearing sources of funds:
Interest-bearing demand deposits 241 (657) (416) 1,157 (825) 332
Savings deposits 963 (388) 575 1,104 (436) 668
Money market demand accounts 259 (230) 29 (503) (684) (1,187)
TransPlus 520 (411) 109 671 (969) (298)
Certificates of deposit 3,314 (4,839) (1,525) 8,922 (4,372) 4,550
Other time deposits 593 (377) 216 1,864 (668) 1,196
Federal funds purchased and
repurchase agreements 66 (295) (229) 677 (241) 436
Other short-term borrowings 238 -- 238 -- -- --
Long-term debt 1,097 (74) 1,023 (613) (303) (916)
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing sources of funds 7,291 (7,271) 20 13,279 (8,498) 4,781
- -------------------------------------------------------------------------------------------------------------------------------
Increase in net interest income $ 8,654 $ 536 $ 9,190 $11,553 $ 1,110 $12,663
===============================================================================================================================
</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 $1.7 million (.25% of average loans)
in 1993 compared with $1.2 million (.24% of average loans) in 1992 and $.8
million (.22% of average loans) in 1991. Net loan charge-offs increased to $1.3
million in 1993, from $.9 million in 1992 and $.7 million in 1991. As a
percentage of average loans, net charge-offs were .20% in 1993, compared with
.17% for 1992, .19% for 1991 and .22% for the five year period 1989-1993. 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. In 1992, the ratio of the allowance for loan losses
to period-end loans declined to 1.01% from 1.21% in 1991. The decline was a
reflection of the change in the loan portfolio to a higher proportion of
traditionally lower risk residential mortgage loans as a result of the
acquisition of TFB-Tennessee. In 1993 that ratio increased to 1.08% as
commercial loans increased from 26% of total loans at year-end 1992 to 28% at
December 31, 1993.
Further discussion on loan quality and the allowance for loan losses is
included later in this review in the Asset Quality discussion.
NON-INTEREST INCOME
Non-interest income for 1993 increased $2.7 million over 1992, including
$.8 million from the TFB-Pikeville acquisition, $.8 million in increased
deposit account service charges (excluding TFB-Pikeville), $.6 million in
increased mortgage loan servicing fees and $.2 million in increased INVEST
18
<PAGE> 19
securities brokerage revenues. These increases were partially offset by a $.4
million decline in gains on sales of securities and mortgage loans. In 1992,
non-interest income increased $4.5 million compared with 1991. TFB-Tennessee
contributed $3.5 million of this increase, of which $.6 million was due to
nonrecurring security gains arising from the restructuring of the acquired
investment portfolio. INVEST revenues increased $.3 million (91%) in 1992.
INVEST is a third-party non-affiliate which provides access to full-service
brokerage services and a wide variety of complementary investment products,
including financial planning.
Revenues generated from mortgage-banking activities (loan servicing fees
and mortgage loan sale gains) increased in 1993 and 1992, attributable to the
mortgage-banking activities of TFB-Tennessee. The portfolio of loans serviced
for others has grown to $690 million, which increased mortgage servicing fees
from $.4 million in 1991, to $1.5 million in 1992, and $2.0 million in 1993.
Gains on sales of mortgage loans increased from $.7 million in 1991, to $1.3
million in 1992 as a result of the increased activity related to mortgage loan
originations, related loan sales and the sale of other residential portfolio
mortgage loans. Substantially all the 1992 increase in gains on sales of
mortgages and loan servicing fees is attributable to the Tennessee operation.
In 1993 gains on sales of mortgages declined to $.7 million due to the absence
of any substantial residential portfolio mortgage sales.
Service charges on deposits increased $1.2 million in 1993 compared with
1992, a result of deposit growth and the assessment of fees for formerly
complimentary services. Service charges increased $.6 million in 1992 over
1991, $.4 million of which was from TFB-Tennessee.
Other non-interest income, which includes credit card fees, data
processing revenue, QUEST (ATM network) income, credit life insurance
commissions, and other miscellaneous income, increased $.9 million in 1993 and
$1.2 million in 1992.
NON-INTEREST EXPENSES
Non-interest expenses increased $11.5 million from 1992 to 1993, after
increasing $9.5 million from 1991 to 1992. The increases in 1993 are due
primarily to the Tennessee thrift acquisitions during 1992 and to the
TFB-Pikeville acquisition early in the third quarter of 1993. Professional
fees, principally related to acquisitions, increased $.9 million. This
increase, coupled with other expenses related to the opening of an operation
center, were the underlying causes of the higher non-interest expenses in 1993.
Non-interest expenses of TFB-Tennessee caused 65% of the increase from 1991 to
1992.
Compensation and benefits increased $4.4 million, or 35%, from 1992 to
1993 ($3.1 million excluding TFB-Pikeville) - the result of an expansion of the
professional staff as well as 1993 being the first full year of TFB-Tennessee
being included in the company's operating results. The 1992 increase in
compensation and benefits was $4.1 million, or 48%. Personnel expenses
attributable to TFB-Tennessee's operations were $2.9 million of this increase.
Other increases came from merit/promotional increases ($1.0 million), group
insurance ($.2 million), and incentive pay ($.2 million).
Occupancy and furniture and equipment costs increased $1.9 million in 1993
compared with 1992. TFB-Pikeville accounted for $.7 million of this increase,
with depreciation, the renovation of the Russellville and corporate offices,
and the opening of an operation center comprising the remaining portion of the
increase. In 1992, these costs were up $1.6 million compared with 1991, with
TFB-Tennessee making up 58% of the increase and the remainder primarily due to
maintenance and depreciation associated with facility enhancements and computer
equipment purchases.
FDIC deposit insurance expense increased $.7 million from 1991 to 1992.
Fifty-nine percent of this increase was attributable to TFB-Tennessee and the
remainder to the increase in the premium combined with deposit growth at Trans
Financial Bank. In 1993, deposit insurance expense increased 23% - a rate
approximating the rate of increase in average deposits.
Other non-interest expenses were up $3.1 million in 1993, including $.7
million due to the TFB-Pikeville acquisition, $.5 million attributable to the
consolidation and conversion of mortgage loan operations, $.2 million of
amortization of intangible assets related to purchase acquisitions, $.3 million
of insurance (other than deposit insurance), $.2 million related to the
prepayment of mortgage loans serviced for others, and $.2 million of expenses
related to foreclosed and repossessed assets. In 1992 other non-interest
expenses increased $3.2 million over 1991 due to Tennessee operations ($2
million), professional fees ($.3 million), advertising and public relations
($.1 million), postage ($.1 million) and other general operating expenses
attributable to the general increase in business activity, none of which
individually increased more than $.1 million.
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 $91
thousand decrease in net income in 1993. Excluding the effect of adopting
Statement 109, the company had income tax expense of $4.2 million in 1993,
compared with $4.7 million in 1992 and $2.0 million in 1991. These represent
effective tax rates of 31.1%, 34.1% and
19
<PAGE> 20
30.9%, respectively. The higher effective income tax rate for 1992 resulted
from non-taxable sources of income making up a smaller proportion of income and
the effects of state income taxes associated with TFB-Tennessee. Further
information on the company's income tax position can be found in Note 11 to the
consolidated financial statements.
BALANCE SHEET REVIEW
Assets at year-end 1993 totaled $1.169 billion, compared with $978 million
at December 31, 1992, and $587 million at the end of 1991. Average total
assets increased $223 million in 1993 to $1.051 billion. Average
interest-earning assets increased 27% to $966 million, after increasing 63% in
1992. The TFB-Pikeville acquisition contributed $193 million to total assets at
year-end 1993 and $89 million to the increase in average interest-earning
assets for the year. The acquisition of TFB-Tennessee contributed $217 million
to the increase in average interest-earning assets in 1992.
LOANS
Total loans, net of unearned income, averaged $691 million in 1993,
compared with $516 million in 1992. At year-end 1993, loans net of unearned
income totaled $769 million, compared with $546 million at December 31, 1992.
TFB-Pikeville's loan portfolio at December 31, 1993, represents $121 million of
the increase from year-end 1992 to 1993. Much of the remaining increase in both
commercial and mortgage loans represents loans to finance the operations of
corporate customers. While many of these loans are structured as mortgages,
very few are dependent on the collateral to service the loan. The growth in the
corporate loan portfolio reflects the strength of the regional market.
TFB-Tennessee's loans made up $175 million of the 1992 increase, with corporate
loan growth at Trans Financial Bank contributing $11 million of the increase.
The following table presents a summary of the loan portfolio by category
for each of the last five years. Other than the categories noted, there is no
concentration of loans in any industry greater than 5% in the portfolio. Trans
Financial has no foreign loans or highly leveraged transactions in its loan
portfolio.
LOANS OUTSTANDING
<TABLE>
<CAPTION>
=======================================================================================================================
December 31
Dollars in thousands 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $217,159 $140,367 $116,151 $113,287 $105,195
Real estate construction 35,904 22,989 14,385 17,964 14,467
Real estate mortgage 375,114 273,602 134,627 120,492 96,389
Agricultural 28,374 21,320 19,315 20,470 43,123
Consumer 88,642 66,421 48,104 47,163 20,918
Other 25,158 21,692 15,473 9,968 10,760
- -----------------------------------------------------------------------------------------------------------------------
Total loans 770,351 546,391 348,055 329,344 290,852
Less unearned income (1,169) (633) (1,000) (1,465) (1,829)
- -----------------------------------------------------------------------------------------------------------------------
Total loans net of unearned income $769,182 $545,758 $347,055 $327,879 $289,023
=======================================================================================================================
</TABLE>
The following table sets forth the maturity distribution and interest
sensitivity of selected loan categories at December 31, 1993. Maturities are
based upon contractual terms. The company's policy is to specifically review
and approve any loan renewed; no loans are automatically rolled over. The table
excludes real estate mortgage loans, consumer loans and other loans.
20
<PAGE> 21
LOAN MATURITIES AND INTEREST SENSITIVITY
<TABLE>
<CAPTION>
===================================================================================================================================
December 31, 1993 One Year One Through Over Total
In thousands or Less Five Years Five Years Loans
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $159,636 $36,730 $20,793 $217,159
Real estate construction 28,448 3,990 3,466 35,904
Agricultural 20,963 3,171 4,240 28,374
- -----------------------------------------------------------------------------------------------------------------------------------
Total $209,047 $43,891 $28,499 $281,437
===================================================================================================================================
Fixed rate loans $ 16,898 $42,233 $28,493 $ 87,624
Floating rate loans 192,149 1,658 6 193,813
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 209,047 $43,891 $28,499 $281,437
===================================================================================================================================
</TABLE>
ASSET QUALITY
With respect to asset quality, management considers three categories of
assets to merit constant 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 nonaccrual loans, accruing loans past
due over 90 days and restructured loans, totaled $6.6 million at the end of
1993, an increase of $.6 million from 1992. The ratio of nonperforming loans to
year-end loans was .86% compared with 1.11% at year-end 1992 and 2.06% at
December 31, 1991. Nonperforming assets, which include nonperforming loans,
other real estate, and loans classified as in-substance foreclosures, totaled
$11.2 million at year-end 1993. The ratio of nonperforming loans and other real
estate to total assets decreased from 1.38% to .96% at year-end 1993.
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans. Management classifies a loan as
nonaccrual when principal or interest is past due 90 days or more and the loan
is not adequately collateralized and in the process of collection, or when, in
the opinion of management, principal or interest is not likely to be paid in
accordance with the terms of the obligation. Consumer installment loans are
charged off after 120 days of delinquency unless adequately secured and in the
process of collection. Loans are not reclassified as accruing until principal
and interest payments are brought current and future payments appear certain.
Loans are categorized as restructured if the original interest rate, repayment
terms, or both were restructured due to a deterioration in the financial
condition of the borrower. However, restructured loans that demonstrate
performance under restructured terms and that yield a market rate of interest
are removed from restructured status in the year following the restructure.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
==================================================================================================================================
December 31
Dollars in thousands 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 4,943 $ 2,750 $ 2,090 $3,547 $1,724
Accruing loans which are contractually
past due 90 days or more 1,210 2,643 1,177 1,440 413
Restructured loans 444 655 3,891 494 972
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming and restructured loans 6,597 6,048 7,158 5,481 3,109
Other real estate and in-substance foreclosures 4,628 7,410 4,104 3,400 3,818
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonperforming and restructured loans
and other real estate $11,225 $13,458 $11,262 $8,881 $6,927
==================================================================================================================================
Nonperforming and restructured loans
as a percentage of net loans .86% 1.11% 2.06% 1.67% 1.08%
Nonperforming and restructured loans and
other real estate as a percentage of total assets .96 1.38 1.92 1.83 1.61
</TABLE>
21
<PAGE> 22
Included in the $4.9 million in nonaccrual loans at December 31, 1993, is
$1.8 million attributable to the TFB-Pikeville acquisition.
Two credit relationships account for $3 million, or 61%, of the December
31, 1993, nonaccrual balance. The first of these loans is to a manufacturing
concern and is secured by commercial real estate and equipment. The loan was
first placed on nonaccrual in 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. It is management's opinion that the existing credit exposure
is adequately supported by the collateral value and no future losses are
anticipated. The remaining December 31, 1993, nonaccrual balance consists of
various commercial and consumer loans.
A significant portion of accruing loans contractually past due 90 days or
more is comprised of residential mortgage loans at TFB-Tennessee. The past-due
loans, making up .33% and .96% of TFB-Tennessee's mortgage portfolio as of
December 31, 1993 and 1992, respectively, are generally well secured and no
significant losses are expected.
The balance of other real estate and in-substance foreclosures as of
December 31, 1993, includes two properties with an aggregate book value of $3.5
million, or 76% 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 as of
December 31, 1993 and 1992, including development costs, was $1.8 million and
$2.1 million, respectively. 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. The carrying
value of the property at the beginning of 1993 was $2.4 million. During the
year, $400,000 was converted via negotiation to a restructured loan and
continues to be reported as such at year-end 1993, approximately $140,000 was
reduced by the sale of collateral, and $146,000 was written off. 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 December 31, 1993, the company had $5.9 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 December 31, 1993, the allowance was $8.3 million, compared with $5.5
million at December 31, 1992, and $4.2 million at December 31, 1991. The
allowance as a percentage of nonperforming loans - an indication of the
relative ability to cover problem loans with existing reserves - increased from
59% at December 31, 1991, to 92% at December 31, 1992, and to 126% at year-end
1993. The ratio of the allowance for loan losses to total loans at year-end
1993 was 1.08% versus 1.01% at December 31, 1992, and 1.21% at December 31,
1991.
22
<PAGE> 23
Following is a summary of the changes in the allowance for loan losses for
each of the past five years.
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
================================================================================================================================
For the year ended December 31
Dollars in thousands 1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 5,537 $ 4,192 $ 4,106 $ 3,389 $ 2,878
Balance of allowance for loan losses of acquired
subsidiaries at acquisition date 2,439 1,016 -- 48 --
Amounts charged off:
Commercial 1,252 857 481 798 542
Real estate construction -- -- 127 -- --
Real estate mortgage 54 15 30 9 106
Agricultural -- -- -- 9 49
Consumer 682 355 346 346 270
Other -- 30 13 10 13
- --------------------------------------------------------------------------------------------------------------------------------
Total loans charged off 1,988 1,257 997 1,172 980
Recoveries on amounts previously charged off:
Commercial 367 188 272 251 105
Real estate construction -- -- -- -- --
Real estate mortgage 10 17 6 11 14
Agricultural -- -- 1 4 12
Consumer 274 148 50 45 35
Other -- 17 4 1 1
- --------------------------------------------------------------------------------------------------------------------------------
Total recoveries 651 370 333 312 167
- --------------------------------------------------------------------------------------------------------------------------------
Net charge-offs 1,337 887 664 860 813
Provision for loan losses 1,662 1,216 750 1,529 1,324
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 8,301 $ 5,537 $ 4,192 $ 4,106 $ 3,389
================================================================================================================================
Total loans, net of unearned income:
Average $ 660,529 $ 515,938 $ 341,750 $ 301,746 $ 280,459
At December 31 769,182 545,758 347,055 327,879 289,023
As a percentage of average loans:
Net charge-offs .20% .17% .19% .29% .29%
Provision for loan losses .25 .24 .22 .51 .47
Allowance as a percentage of year-end net loans 1.08 1.01 1.21 1.25 1.17
Allowance as a multiple of net charge-offs 6.21X 6.24X 6.31X 4.77X 4.17X
</TABLE>
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' evaluation of their own
portfolios as well as by an independent loan review function.
The tables below set forth an allocation of the allowance for loan losses
by category of loan and a percentage distribution of the allowance allocation.
In making the allocation, consideration was given to such factors as
management's evaluation of risk in each category, current economic conditions
and charge-off experience. An allocation of the allowance for loan losses is an
estimate of the portion of the allowance which will be used to cover future
charge-offs in each loan category, but it does not preclude any portion of the
allowance allocated to one type of loan from being used to absorb losses of
another loan type.
23
<PAGE> 24
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
=======================================================================================================================
December 31
In thousands 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $6,054 $4,049 $3,035 $2,915 $1,959
Real estate construction 154 55 22 23 16
Real estate mortgage 265 225 447 559 479
Agricultural 166 110 106 -- 67
Consumer 1,662 1,098 582 567 814
Other -- -- -- 42 54
- -----------------------------------------------------------------------------------------------------------------------
Total $8,301 $5,537 $4,192 $4,106 $3,389
=======================================================================================================================
</TABLE>
ALLOCATION OF YEAR-END ALLOWANCE FOR LOAN LOSSES
AND PERCENTAGE OF EACH TYPE OF LOAN TO TOTAL LOANS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
December 31 Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 72.9% 28.2% 73.1% 25.7% 72.4% 33.4% 71.0% 34.4% 57.8% 36.2%
Real estate construction 1.9 4.6 1.0 4.2 .5 4.1 .6 5.5 .5 5.0
Real estate mortgage 3.2 48.7 4.1 50.1 10.7 38.7 13.6 36.6 14.1 33.1
Agricultural 2.0 3.7 2.0 3.9 2.5 5.5 -- 6.2 2.0 14.8
Consumer 20.0 11.5 19.8 12.1 13.9 13.8 13.8 14.3 24.0 7.2
Other -- 3.3 -- 4.0 -- 4.5 1.0 3.0 1.6 3.7
- -------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=========================================================================================================================
</TABLE>
SECURITIES, FEDERAL FUNDS SOLD AND RESALE AGREEMENTS
Securities, including those classified as held to maturity and available
for sale, decreased from $257 million at December 31, 1992, to $249 million at
year-end 1993. TFB-Pikeville provided an initial securities portfolio of $61
million, indicating a total decrease of $69 million. Due to the declining rate
environment over the past two years, the mortgage-backed securities portfolio
has 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. In conjunction with the adoption of Statement 115, $153.4
million of investment securities were transferred to securities available for
sale. All equity securities are classified as available for sale at December
31, 1993. Unrealized gains and losses on securities available for sale are
reported as a separate component of shareholders' equity (net of tax) beginning
December 31, 1993.
In the fourth quarter of 1992, the company reclassified $33.5 million of
investment securities to securities available for sale. This reclassification
had no impact on results of operations as the reclassified portfolio's
aggregate market value exceeded book value and securities classified as
available for sale prior to December 31, 1993, were carried at the lower of
aggregate cost or market value. Securities in this classification before
year-end 1993 were those that management intended to use as part of its
asset/liability strategy and that could be sold in response to changes in
interest rates and repayment risk and other factors related to these changes.
Securities increased from $167 million at December 31, 1991, to $257
million in 1992. TFB-Tennessee provided an initial securities portfolio of $64
million and the Heritage Federal branch acquisition in Tennessee provided
funding for an additional $51 million of mortgage-backed securities purchases.
Average securities increased from $116 million in 1991 to $231 million in 1992.
The excess of the average increase over the actual increase in securities of
$25 million is due to the full-year effect of the securities funded by the
September 1991 Future Federal deposit acquisition being included for the entire
period in 1992.
The percentage of collateralized mortgage obligations and mortgage-backed
securities to total securities declined
24
<PAGE> 25
to 51% at December 31,1993, from 75% at December 31,1992. This decline was due
to significant refinancing of residential mortgages and the resulting
prepayment of mortgage-related securities, coupled with management's desire to
decrease the company's exposure to mortgage-related securities. Due to the
unpredictable nature of residential mortgage prepayments, the average and final
maturities of the related securities vary. In a rising rate environment this
will result in securities of a longer than expected life, while in a declining
rate environment the securities will have a shorter than expected life.
Management limits this prepayment and payment extension risk principally by
investing in planned amortization class CMO's, which have less volatility than
other mortgage-backed securities and have an average life of three to five
years.
The tables below present the carrying value of securities for each of the
past three years and the maturities and yield characteristics of securities as
of December 31, 1993.
CARRYING VALUE OF SECURITIES
<TABLE>
<CAPTION>
====================================================================================================================
December 31
In thousands 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and Federal agencies:
Available for sale $ 90,525 $ 33,539 $ --
Held to maturity 500 12,310 34,915
Collateralized mortgage obligations and mortgage-backed securities:
Available for sale 93,884 -- --
Held to maturity 32,848 193,860 121,031
State and municipal obligations:
Available for sale -- -- --
Held to maturity 16,762 5,439 5,045
Other securities:
Available for sale 10,327 -- --
Held to maturity 4,176 11,990 5,786
- --------------------------------------------------------------------------------------------------------------------
Total securities:
Available for sale 194,736 33,539 --
Held to maturity 54,286 223,599 166,777
- --------------------------------------------------------------------------------------------------------------------
Total $ 249,022 $ 257,138 $ 166,777
====================================================================================================================
</TABLE>
MATURITY DISTRIBUTION OF SECURITIES
<TABLE>
<CAPTION>
===============================================================================================================================
Over Over
One Year Five Years
One Through Through Over
December 31, 1993 Year Five Ten Ten Equity Market
Dollars in thousands or Less Years Years Years Securities Total Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Federal agencies:
Available for sale $ 7,095 $ 50,611 $32,819 $ -- $ -- $ 90,525 $ 90,525
Held to maturity 500 -- -- -- -- 500 501
Collateralized mortgage obligations
and mortgage-backed securities:(1)
Available for sale 37,043 50,512 6,329 -- -- 93,884 93,884
Held to maturity -- 26,341 6,507 -- -- 32,848 33,616
State and municipal obligations:
Available for sale -- -- -- -- -- -- --
Held to maturity 496 4,762 4,975 6,529 -- 16,762 17,265
Other securities:
Available for sale -- -- -- -- 10,327 10,327 10,327
Held to maturity -- 536 3,310 330 -- 4,176 4,253
- -------------------------------------------------------------------------------------------------------------------------------
Total securities:
Available for sale 44,138 101,123 39,148 -- 10,327 194,736 194,736
Held to maturity 996 31,639 14,792 6,859 -- 54,286 55,635
- -------------------------------------------------------------------------------------------------------------------------------
Total $45,134 $132,762 $53,940 $6,859 $10,327 $249,022 $250,371
===============================================================================================================================
Percent of total 18.12% 53.31% 21.66% 2.75% 4.15% 100.00%
Weighted average yield(2) 5.70% 5.98% 5.77% 6.18% 4.85% 5.84%
</TABLE>
(1) Collateralized mortgage obligations and mortgage-backed securities are
grouped into average lives based on December 1993 prepayment projections.
(2) The weighted average yields are based on carrying value and effective yields
weighted for the scheduled maturity of each security.
25
<PAGE> 26
Federal funds sold and securities purchased under agreements to resell
declined to $12.2 million at December 31, 1993, from $53.7 million at December
31, 1992. On the last day of 1991, these short-term assets totaled $1.8
million. Average federal funds sold and resale agreements, however, were $18.0
million for 1993, $9.8 million for 1992 and $7.4 million for 1991. The
unusually high balance at December 31, 1992, was attributed to a large inflow
of short-term deposits at year end.
DEPOSITS AND BORROWED FUNDS
Total deposits averaged $910 million in 1993, a 26% increase over 1992.
Most of the increase was in interest-bearing accounts, which increased $150
million, or 23%. Non-interest-bearing accounts increased $37 million, or 61%,
year-to-year. Substantially all of the increase in interest-bearing accounts is
attributable to acquisitions consummated during 1992 and 1993, while $23
million of the increase in non-interest-bearing accounts was due to
acquisitions. The TransPlus checking account introduced in 1989, which pays
interest on a tiered deposit balance structure, continued to grow in popularity
during 1993, increasing $19 million.
Total deposits averaged $723 million in 1992, an increase of $272 million,
or 60%, over 1991. Most of the increase is attributable to interest-bearing
accounts, as in 1993. In 1992, interest-bearing accounts increased $253
million, or 62%, on average. Non-interest-bearing accounts increased $18
million, or 42%, compared to the 1991 average. As was the case in 1993,
virtually all the increase was a result of the company's acquisition activity.
In both 1993 and 1992, the company experienced heavy redemption of certificates
of deposit, with average decreases of $37 million and $47 million,
respectively, net of acquisitions. These decreases appear to be the result of
today's lower-interest-rate environment and retail customers' unwillingness to
invest long term at the lower rates. Instead, they have chosen shorter-term
interest-bearing accounts, as evidenced by increases in interest-bearing demand
accounts, net of acquisitions, of $31 million in 1993 and $47 million in 1992.
Long-term debt and other borrowings averaged $32.7 million in 1993, an
increase of $28.2 million from 1992. This increase is the result of the
issuance of $33 million of 7.25% Subordinated Notes in a public offering and a
$15 million advance from the Federal Home Loan Bank to the company's
TFB-Tennessee subsidiary. Both borrowings occurred in the third quarter.
In 1992, average borrowings were $4.5 million, a decrease of $8.2 million
from 1991. The company's 8.5% Convertible Subordinated Debentures of $4.9
million were called December 15, 1991, and were converted in January 1992 into
common stock, decreasing the company's long-term debt by 60%. The payoff of a
$5 million term loan in September 1991 and a secured note payable of $2.4
million in December 1992 further reduced the company's borrowings. Offsetting
these decreases, Trans Financial Bank received a $10 million advance from the
Federal Home Loan Bank to fund fixed-rate commercial loans. The advance bears
interest at a rate of 4.5% payable monthly with principal due May 9, 1994.
The company has a $3 million unsecured operating line of credit with an
unaffiliated commercial bank that is used from time-to-time to supplement the
company's cash requirements. At year-end 1992, $600,000 was outstanding under
the line of credit. The line was not in use at December 31, 1993.
The company's leveraged ESOP obtained additional financing from an
unaffiliated commercial bank in 1992. Total ESOP debt was $3.9 million at both
December 31, 1993 and 1992.
See Note 8 to the consolidated financial statements for a further
description of the terms of these borrowings.
Time deposits of $100,000 or more totaled $119,533,000 at December 31,
1993, and $70,725,000 at December 31, 1992. Interest expense on time deposits
of $100,000 or more was $4,818,000 in 1993 and $4,656,000 in 1992. The table
below provides information on the maturities of time deposits of $100,000 or
more at December 31, 1993.
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
=======================================================================
December 31, 1993
In thousands
- -----------------------------------------------------------------------
<S> <C>
Three months or less $ 43,734
Over three through six months 22,537
Over six through twelve months 24,029
Over twelve months 29,233
- -----------------------------------------------------------------------
Total $119,533
=======================================================================
</TABLE>
Information regarding federal funds purchased and repurchase agreements is
presented below. Substantially all of these short-term borrowings mature in one
business day.
FEDERAL FUNDS PURCHASED AND REPURCHASED AGREEMENTS
<TABLE>
<CAPTION>
===============================================================================
Dollars in thousands 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at year end $29,704 $26,993 $21,484
Weighted average rate
at year end 2.38% 2.87% 4.55%
Average during the year 28,085 26,039 8,087
Weighted average rate
during the year 2.40% 3.46% 5.76%
Maximum month-end balance 35,784 43,073 21,484
</TABLE>
26
<PAGE> 27
CAPITAL RESOURCES AND LIQUIDITY
At December 31, 1993, retained earnings of the banks were $23.4 million,
of which $12.2 million were available for the payment of dividends to the
parent company.
The company issued on September 16, 1993, $33 million of 7.25%
Subordinated Notes 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 and the balance is available for general corporate
purposes, including augmenting the capital of the banks, as needed, and
financing possible future acquisitions.
On March 10, 1992, the company issued 1.265 million shares of common stock
in a public stock offering. The offering price was $14.75 per share and the net
proceeds were approximately $17.1 million. The net proceeds were used in
connection with the acquisitions of Maury Federal and First Federal, now
TFB-Tennessee. Also during 1992, the company redeemed the remaining shares of
its Class A Preferred Stock, 1990 Series ($999,000) and all of the outstanding
shares of other preferred stock, which was related to Dawson Springs Bancorp,
Inc. ($1.286 million).
The company's capital ratios at December 31, 1993 and 1992 (calculated in
accordance with regulatory guidelines) were as follows:
<TABLE>
<CAPTION>
========================================================================
December 31 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C>
Tier 1 risk based 8.37% 10.50%
Regulatory minimum 4.00% 4.00%
Total risk based 13.24% 11.41%
Regulatory minimum 8.00% 8.00%
Leverage 6.10% 6.54%
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 December 31, 1993.
The increase in equity capital during 1992 was due to the common stock
issuance in connection with the acquisition of TFB-Tennessee, the underwritten
public stock offering, the debenture conversion, and retained earnings. The
increase during 1993 was nearly all provided by retained earnings and
reinvested dividends.
Generally speaking, the company relies upon net inflows of cash from
financing activities, supplemented by net inflows of cash from operating
activities, to provide cash used in its investing activities. As is typical of
most banking companies, significant financing activities include issuance of
common stock, deposit gathering, use of short-term borrowing facilities, such
as federal funds purchased and repurchase agreements, and the issuance of
long-term debt. The company's primary investing activities include purchases of
securities and loan originations, offset by maturities and sales of securities,
and loan payments.
ASSET/LIABILITY MANAGEMENT
A primary objective of asset/liability management is to manage the
company's exposure to interest-rate risk. The company's Asset/Liability
Committee monitors and adjusts exposure to interest rates in response to
economic conditions and the flow of loans and deposits, provides oversight to
the asset/liability management process and approves policy guidelines. Further,
asset/liability activity is reviewed by the Board of Directors.
An earnings simulation model is used to monitor and evaluate the exposure
and impact of changing interest rates on earnings. This dynamic model captures
all interest-earning assets, interest-bearing liabilities and off-balance-sheet
financial instruments. The model combines the various factors affecting rate
sensitivity into an earnings outlook that incorporates management's view of the
most likely interest rate environment for the next 24 months. Rate sensitivity
is determined by assessing the impact on net interest income in multiple rising
and falling interest-rate scenarios. The model is updated at least monthly and
more often if necessary.
The simulation model provides a more dynamic assessment of interest-rate
sensitivity than does a portrayal of the static interest-rate sensitivity gap,
compiled as of a point in time. Static gap analysis does not reflect the
multiple effects of interest rate movements on the whole range of assets,
liabilities, and off-balance-sheet financial instruments. Moreover, in today's
financial environment, which includes a complex array of both on- and
off-balance-sheet financial instruments, static gap analysis does not provide
the most comprehensive and informative disclosures about interest-rate risks.
The model presents a sharper and more complete picture of the company's
interest-rate sensitivity, which allows management to emphasize stable net
interest income throughout rate cycles, with the result that intermediate and
longer-term implications take precedence over short-term profitability.
Because it includes significant variables identified as being affected by
interest rates, the earnings simulation model provides better information to
management. For example, among the factors the model captures which static gap
analysis does not are 1) rate of change differentials, such as federal funds
rates versus savings account rates; 2) maturity effects, such as calls on
securities; 3) rate barrier effects, such
27
<PAGE> 28
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 3.75% and 6.50%, respectively. Following is a
summary of the assumptions used in the model at the end of 1993, along with the
resultant projected impact on net interest income.
<TABLE>
<CAPTION>
===========================================================================
Most Likely Rising Flat Declining
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assumptions:
Federal funds rate,
December 1994 3.75% 6.50% 3.00% 2.50 %
Prime rate,
December 1994 6.50% 9.35% 6.00% 5.45 %
Increase (decrease) in
net interest income -0-% 3.66% .30% (.03)%
</TABLE>
Management concludes that the company is asset sensitive at December 31,
1993, which indicates that in a uniformly rising rate environment the company's
net interest income will be impacted positively.
QUARTERLY RESULTS
Following is a summary of the company's operating results for the past
eight quarters.
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
====================================================================================================================
1993 1992
4th 3rd 2nd 1st 4th 3rd 2nd 1st
In thousands, except per share data Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $20,132 $19,688 $16,383 $16,414 $17,555 $16,849 $17,164 $11,839
Interest expense 8,703 8,511 7,240 7,577 8,173 8,681 9,086 6,071
- --------------------------------------------------------------------------------------------------------------------
Net interest income 11,429 11,177 9,143 8,837 9,382 8,168 8,078 5,768
Provision for loan losses 341 491 414 416 304 212 450 250
Non-interest income 3,776 3,277 2,831 3,875 2,809 3,291 3,079 1,885
Non-interest expenses 11,128 10,756 8,826 8,317 8,336 7,435 6,746 4,981
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes
and cumulative effect of
accounting change 3,736 3,207 2,734 3,979 3,551 3,812 3,961 2,422
Income taxes 1,260 967 905 1,117 1,184 1,286 1,475 741
- --------------------------------------------------------------------------------------------------------------------
Income before cumulative effect
of accounting change 2,476 2,240 1,829 2,862 2,367 2,526 2,486 1,681
Cumulative effect of change in
accounting principle -- -- -- (91) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Net income $ 2,476 $ 2,240 $ 1,829 $ 2,771 $ 2,367 $ 2,526 $ 2,486 $ 1,681
====================================================================================================================
Earnings per common share $ .33 $ .30 $ .24 $ .37 $ .32 $ .34 $ .34 $ .30
</TABLE>
The large increase in non-interest income in the first quarter of 1993 was
due to the realization of $1.0 million of gains on the sale of securities
available for sale.
The $2,034,000 increase in net interest income from the second to third
quarters of 1993 was primarily due to the TFB-Pikeville acquisition.
In the fourth quarter of 1993, continued growth in earning assets were the
driving force for the $252,000 increase in net interest income. The company
experienced strong fee income related to mortgage banking - due to heavy
mortgage loan origination activity and large gains on sale of mortgage loans -
in the fourth quarter as well. These increases in fourth quarter income were
partially offset, however, by continued growth in non-interest expenses.
28
<PAGE> 29
CONSOLIDATED STATISTICAL INFORMATION (1)(2)
<TABLE>
<CAPTION>
===================================================================================================================================
For the year ended December 31
Dollars in thousands, except per-share data 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 72,617 $ 63,407 $ 45,963 $ 41,949 $ 40,703
Interest expense 32,031 32,011 27,230 25,460 25,152
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income 40,586 31,396 18,733 16,489 15,551
Provision for loan losses 1,662 1,216 750 1,529 1,324
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 38,924 30,180 17,983 14,960 14,227
Non-interest income 13,759 11,064 6,542 5,179 4,323
Non-interest expenses 39,027 27,498 17,957 14,873 13,560
Income tax expense 4,249 4,686 2,028 1,412 1,197
- -----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 9,407 9,060 4,540 3,854 3,793
Cumulative effect of change in accounting principle (91) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 9,316 $ 9,060 $ 4,540 $ 3,854 $ 3,793
===================================================================================================================================
Per common share:(3)
Earnings:
Primary $ 1.24 $ 1.30 $ 1.29 $ 1.28 $ 1.27
Fully diluted 1.24 1.30 1.17 1.14 1.13
Shareholders' equity at year-end 10.28 9.42 8.44 7.68 6.90
Cash dividends declared .51 .44 .36 .34 .31
At year-end:
Total assets $1,169,488 $978,481 $586,680 $485,725 $ 430,510
Total loans, net of unearned income 769,182 545,758 347,055 327,879 289,023
Total deposits 994,152 860,338 509,301 418,048 378,391
Long-term debt 46,861 13,872 8,655 16,481 13,972
Total shareholders' equity 76,299 69,532 40,533 28,046 22,831
Allowance for loan losses 8,301 5,537 4,192 4,106 3,389
Selected Ratios:
Return on average assets .89% 1.09% .89% .90% .92%
Return on average shareholders' equity 12.77 14.02 14.41 15.52 17.42
Average shareholders' equity to average total assets 6.94 7.80 6.18 5.77 5.31
Leverage ratio 6.10 6.54 6.17 5.01 --
Tier one risk-based capital ratio 8.37 10.50 8.42 6.41 --
Total risk-based capital ratio 13.24 11.41 10.55 8.81 --
Dividend payout ratio 41.13 34.04 27.62 26.47 24.08
Allowance for loan losses as a percentage
of year-end net loans 1.08 1.01 1.21 1.25 1.17
Nonperforming loans as a percent of year-end net loans .86 1.11 2.06 1.67 1.08
Net charge-offs as a percentage of average net loans .20 .17 .19 .29 .29
Net interest margin 4.20 4.13 4.01 4.22 4.20
Other data:
Number of common shareholders of record at year end 1,273 1,031 603 572 569
Number of full-time-equivalent employees at year end 593 486 310 265 253
</TABLE>
(1) During 1993, 1992, 1991 and 1990, the company acquired one commercial bank,
three thrift institutions and certain branches of two other thrift
institutions in transactions accounted for using the purchase method.
Financial data pertaining to the acquired entities since the acquisition
dates have been included in the consolidated financial statements. See Note
3 to the consolidated financial statements.
(2) On December 31, 1992, the company merged with Dawson Springs Bancorp,
Inc. in a transaction accounted for as a pooling-of-interests.
Accordingly, all financial data has been restated as if the entities were
combined for all periods presented. See Note 3 to Consolidated Financial
Statements.
(3) All per common share data has been adjusted to reflect the 4-for-3
stock splits effected December 18, 1992, and December 16, 1991 and the
3-for-2 stock split effected February 13, 1989.
29
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Trans Financial Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Trans
Financial Bancorp, Inc. and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1993. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Trans
Financial Bancorp, Inc., and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in
1993 the company adopted the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" and No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
KPMG PEAT MARWICK
Louisville, Kentucky
January 25, 1994,
except as to Note 3(b),
which is as of
February 15, 1994
30
<PAGE> 31
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
======================================================================================================
December 31
In thousands, except share data 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks (note 4) $49,009 $46,949
Interest bearing deposits with banks 347 8,263
Federal funds sold and resale agreements 12,175 53,727
Mortgage loans held for sale 43,005 24,238
Securities available for sale (amortized cost of $194,310 in 1993 and
market value of $34,354 in 1992) (note 5) 194,736 33,539
Securities held to maturity (market value of $55,635 and
$226,241, respectively) (note 5) 54,286 223,599
Loans, net of unearned income (notes 6 and 8) 769,182 545,758
Less allowance for loan losses 8,301 5,537
- ------------------------------------------------------------------------------------------------------
Net loans 760,881 540,221
Premises and equipment, net (note 7) 27,277 20,667
Other assets (note 3) 27,772 27,278
- ------------------------------------------------------------------------------------------------------
Total assets $1,169,488 $978,481
======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 121,443 $ 98,567
Interest bearing 872,709 761,771
- ------------------------------------------------------------------------------------------------------
Total deposits 994,152 860,338
Federal funds purchased and repurchase agreements 29,704 26,993
Other short-term borrowings (note 8) 15,000 600
Long-term debt (note 8) 46,861 13,872
Other liabilities 7,472 7,146
- ------------------------------------------------------------------------------------------------------
Total liabilities 1,093,189 908,949
Commitments and contingencies (notes 3, 12 and 13)
Shareholders' equity:
Preferred stock (note 9) -- --
Common stock, no par value. Authorized 25,000,000 shares;
issued and outstanding 7,425,273 and 5,533,361 shares,
respectively (note 9) 13,922 13,833
Additional paid-in capital 39,490 38,757
Retained earnings (note 10) 26,523 20,977
Unrealized net gain on securities available for sale, net of tax (note 5) 225 --
Unrealized loss on marketable equity securities -- (163)
Employee Stock Ownership Plan shares
purchased with debt (notes 8 and 12) (3,861) (3,872)
- ------------------------------------------------------------------------------------------------------
Total shareholders' equity 76,299 69,532
- ------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,169,488 $978,481
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 32
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
==============================================================================================================
Year ended December 31
In thousands, except per share data 1993 1992 1991
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Loans, including fees $57,210 $46,099 $35,858
Federal funds sold and resale agreements 484 383 408
U.S. Treasury and Federal agencies 13,519 15,749 9,031
State and municipal obligations 712 392 429
Other securities 622 553 122
Interest-bearing deposits with banks 70 231 115
- --------------------------------------------------------------------------------------------------------------
Total interest income 72,617 63,407 45,963
Interest expense
Deposits 29,810 30,822 25,561
Federal funds purchased and repurchase agreements 673 902 466
Other short-term borrowings 238 -- --
Long-term debt (note 8) 1,310 287 1,203
- --------------------------------------------------------------------------------------------------------------
Total interest expense 32,031 32,011 27,230
- --------------------------------------------------------------------------------------------------------------
Net interest income 40,586 31,396 18,733
Provision for loan losses (note 6) 1,662 1,216 750
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 38,924 30,180 17,983
- --------------------------------------------------------------------------------------------------------------
Non-interest income
Service charges on deposit accounts 4,602 3,390 2,794
Loan servicing fees 2,037 1,452 359
Gains on sales of securities, net (note 5) 1,034 873 202
Gains on sales of mortgage loans, net 718 1,285 665
Trust services 866 713 656
Brokerage income 846 644 338
Other 3,656 2,707 1,528
- --------------------------------------------------------------------------------------------------------------
Total non-interest income 13,759 11,064 6,542
Non-interest expenses
Compensation and benefits (note 12) 16,879 12,467 8,417
Net occupancy expense 3,362 2,261 1,574
Furniture and equipment expense 2,935 2,134 1,253
Deposit insurance 1,902 1,545 856
Professional fees 1,840 987 599
Postage and express charges 1,169 757 468
Stationery, printing and supplies 842 611 406
Communications 815 507 216
Other 9,283 6,229 4,168
- --------------------------------------------------------------------------------------------------------------
Total non-interest expenses 39,027 27,498 17,957
- --------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect
of change in accounting principle 13,656 13,746 6,568
Income tax expense (note 11) 4,249 4,686 2,028
- --------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting principle 9,407 9,060 4,540
Cumulative effect of change in accounting principle (note 11) (91) -- --
- --------------------------------------------------------------------------------------------------------------
Net income $ 9,316 $ 9,060 $ 4,540
==============================================================================================================
Net income applicable to common stock $ 9,316 $ 9,004 $ 4,227
==============================================================================================================
Primary earnings per common share (note 1):
Before cumulative effect of change in accounting principle $1.25 $1.30 $1.29
Based on net income 1.24 1.30 1.29
Fully diluted earnings per common share (note 1):
Before cumulative effect of change in accounting principle 1.25 1.30 1.17
Based on net income 1.24 1.30 1.17
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 33
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Preferred Stock Common Stock
--------------- ----------------- Additional
Number Number Paid-in Retained
In thousands, except share and per share data of shares Amount of shares Amount Capital earnings
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 39,758 $ 6,787 1,557,320 $5,187 $5,838 $12,315
Net income -- -- -- -- -- 4,540
Cash dividends declared:
Common stock, $.36 per share -- -- -- -- -- (1,373)
Preferred stock (note 9) -- -- -- -- -- (313)
Redemption of Class A Preferred Stock, 1988 Series (25,000) (2,500) -- -- -- --
Redemption of Class A Preferred Stock, 1990 Series (667) (2,001) -- -- -- --
Redemption of other preferred stock (14) (1) -- -- -- --
Issuance of common stock in public offering -- -- 931,564 3,093 9,361 --
Conversion of debentures -- -- 73,201 213 706 --
Four-for-three stock split -- -- 839,409 -- -- --
Decrease in unrealized loss on marketable equity securities -- -- -- -- -- --
Employee Stock Ownership Plan debt reduction -- -- -- -- -- --
==================================================================================================================================
Balance, December 31, 1991 14,077 $ 2,285 3,401,494 $8,493 $15,905 $15,169
Net income -- -- -- -- -- 9,060
Cash dividends declared:
Common stock, $.44 per share -- -- -- -- -- (3,196)
Preferred stock (note 9) -- -- -- -- -- (56)
Redemption of Class A Preferred Stock, 1990 Series (333) (999) -- -- -- --
Redemption of other preferred stock (13,744) (1,286) -- -- -- --
Issuance of common stock in public offering -- -- 1,265,000 3,172 13,944 --
Issuance of common stock in business combination (note 3) -- -- 412,389 1,031 4,984 --
Stock options exercised -- -- 1,914 5 15 --
Issuance of common stock in connection with dividend
reinvestment and stock purchase plans and other issuances -- -- 37,102 93 498 --
Conversion of debentures -- -- 415,462 1,039 3,411 --
Increase in unrealized loss on marketable equity securities -- -- -- -- -- --
Employee Stock Ownership Plan shares purchased with debt -- -- -- -- -- --
==================================================================================================================================
Balance, December 31, 1992 -- $ -- 5,533,361 $13,833 $38,757 $20,977
Net income -- -- -- -- -- 9,316
Cash dividends declared on common stock, $.51 per share -- -- -- -- -- (3,770)
Stock options exercised -- -- 150 -- 1 --
Issuance of common stock in connection with dividend
reinvestment and stock purchase plans and other issuances -- -- 47,613 89 738 --
Four-for-three stock split -- -- 1,844,149 -- (6) --
Decrease in unrealized loss on marketable equity securities -- -- -- -- -- --
Net unrealized gain on securities available for sale, net of tax -- -- -- -- -- --
Employee Stock Ownership Plan debt reduction -- -- -- -- -- --
==================================================================================================================================
Balance, December 31, 1993 -- $ -- 7,425,273 $13,922 $39,490 $26,523
<CAPTION>
Unrealized Employee
Unrealized Net Gain Stock
Loss on (Loss) on Ownership
Marketable Securities Plan Shares
Equity Available Purchased
In thousands, except share and per share data Securities for Sale With Debt Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 $(676) $ -- $(1,405) $28,046
Net income -- -- -- 4,540
Cash dividends declared:
Common stock, $.36 per share -- -- -- (1,373)
Preferred stock (note 9) -- -- -- (313)
Redemption of Class A Preferred Stock, 1988 Series -- -- -- (2,500)
Redemption of Class A Preferred Stock, 1990 Series -- -- -- (2,001)
Redemption of other preferred stock -- -- -- (1)
Issuance of common stock in public offering -- -- -- 12,454
Conversion of debentures -- -- -- 919
Four-for-three stock split -- -- -- --
Decrease in unrealized loss on marketable equity securities 562 -- -- 562
Employee Stock Ownership Plan debt reduction -- -- 200 200
=========================================================================================================================
Balance, December 31, 1991 $(114) $ -- $(1,205) $40,533
Net income -- -- -- 9,060
Cash dividends declared:
Common stock, $.44 per share -- -- -- (3,196)
Preferred stock (note 9) -- -- -- (56)
Redemption of Class A Preferred Stock, 1990 Series -- -- -- (999)
Redemption of other preferred stock -- -- -- (1,286)
Issuance of common stock in public offering -- -- -- 17,116
Issuance of common stock in business combination (note 3) -- -- -- 6,015
Stock options exercised -- -- -- 20
Issuance of common stock in connection with dividend
reinvestment and stock purchase plans and other issuances -- -- -- 591
Conversion of debentures -- -- -- 4,450
Increase in unrealized loss on marketable equity securities (49) -- -- (49)
Employee Stock Ownership Plan shares purchased with debt -- -- (2,667) (2,667)
==========================================================================================================================
Balance, December 31, 1992 $(163) $ -- $(3,872) $69,532
Net income -- -- -- 9,316
Cash dividends declared on common stock, $.51 per share -- -- -- (3,770)
Stock options exercised -- -- -- 1
Issuance of common stock in connection with dividend
reinvestment and stock purchase plans and other issuances -- -- -- 827
Four-for-three stock split -- -- -- (6)
Decrease in unrealized loss on marketable equity securities 163 -- -- 163
Net unrealized gain on securities available for sale, net of tax -- 225 -- 225
Employee Stock Ownership Plan debt reduction -- -- 11 11
==========================================================================================================================
Balance, December 31, 1993 $ -- $225 $(3,861) $76,299
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 34
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
=======================================================================================================================
Year ended December 31
In thousands 1993 1992 1991
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,316 $ 9,060 $ 4,540
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan losses 1,662 1,216 750
Deferred tax expense (361) 24 (61)
Gain on sales of securities:
Available for sale (1,034) -- --
Held to maturity -- (873) (202)
Gains on sales of mortgage loans (718) (1,285) (665)
Loss (gain) on sale of premises and equipment 11 (11) (6)
Depreciation and amortization of fixed assets 2,595 1,804 1,174
Amortization of intangible assets 748 509 477
Amortization of premium on securities, net 2,076 837 107
Decrease (increase) in accrued interest receivable (1,400) (1,238) 88
Decrease in other assets 3,089 2,506 855
Increase (decrease) in accrued interest payable (109) 302 (520)
Increase (decrease) in other liabilities (2,686) (2,949) 1,538
Decrease (increase) in mortgage loans held for sale (18,049) 5,216 (4,415)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (4,860) 15,118 3,660
Cash flows from investing activities:
Net decrease (increase) in interest-bearing deposits with banks 8,361 12,636 1,157
Proceeds from sales of securities:
Available for sale 21,129 -- --
Held to maturity -- 43,330 2,689
Proceeds from prepayment and call of securities:
Available for sale 3,873 -- --
Held to maturity 106,014 72,698 20,457
Proceeds from maturities of securities:
Available for sale 7,500 -- --
Held to maturity 10,123 4,555 19,325
Purchases of securities:
Available for sale (33,841) -- --
Held to maturity (47,285) (146,801) (116,703)
Net decrease (increase) in federal funds sold and resale agreements 43,540 (51,743) 19,935
Net increase in loans (113,372) (40,673) (11,358)
Purchases of premises and equipment (5,081) (5,238) (3,025)
Proceeds from disposals of premises and equipment 5 634 31
Net cash and cash equivalents inflow (outflow) from acquisitions (note 3) (7,996) 37,327 64,306
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (7,030) (73,275) (3,186)
Cash flows from financing activities:
Net increase (decrease) in deposits (30,071) 43,561 15,575
Net increase (decrease) in federal funds purchased and repurchase agreements (431) 5,509 4,924
Net increase (decrease) in other short-term borrowings 14,400 (1,987) (1,354)
Repayment of long-term debt (229) (2,665) (10,120)
Proceeds from issuance of long-term debt 33,229 10,700 3,496
Proceeds from issuance of common stock 822 17,727 12,454
Redemption of preferred stock -- (2,285) (4,502)
Dividends paid (3,770) (3,252) (1,686)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 13,950 67,308 18,787
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,060 9,151 19,261
Cash and cash equivalents at beginning of year 46,949 37,798 18,537
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year (note 2) $ 49,009 $ 46,949 $ 37,798
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 35
NOTES TO CONSOLIDATED FIANANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The 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 consolidated financial statements include the accounts of Trans
Financial Bancorp, Inc. (the company) and its wholly-owned subsidiaries, Trans
Financial Bank, National Association and Trans Financial Bank, Pikeville,
Kentucky (the "banks"), Trans Financial Bank of Tennessee, FSB and Trans
Financial Bank, Federal Savings Bank (the "savings banks"). Significant
intercompany transactions and accounts have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform with 1993
presentations.
SECURITIES
Effective December 31, 1993, the company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Accordingly, all debt securities in which the company does
not have the ability or management does not have the positive intent to hold to
maturity are classified as securities available for sale and are carried at
market value. All equity securities are classified as available for sale at
December 31, 1993. Unrealized gains and losses on securities available for sale
are reported as a separate component of shareholders' equity (net of income
taxes) beginning December 31, 1993. Securities classified as available for sale
prior to December 31, 1993, are reported at the lower of aggregate cost or
market value. Securities classified as held to maturity are carried at
amortized cost. The company has no securities classified as trading securities.
Amortization of premiums and accretion of discounts are recorded by a
method which approximates a level yield and which, in the case of
mortgage-backed securities, considers prepayment risk. The specific
identification method is used to determine the cost of securities sold.
LOANS
Loans are stated at the unpaid principal balance. Interest income on
loans is recorded on the accrual basis except for those loans in a nonaccrual
income status. Loans are placed in nonaccrual status when, in the opinion of
management, the prospects for recovering principal or interest is considered
doubtful. Unearned income, arising principally from consumer installment loans
or the deferral of certain loan fees, is recognized as income using a method
that approximates the interest method.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of aggregate cost
or market value, as determined by outstanding loan commitments from investors
or current yield requirements.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that adequately
provides for estimated losses in the loan portfolio. The level of the allowance
is based on an evaluation of the loan portfolio which includes reviews of
individual credits, consideration of past loan loss experience, loan
delinquency trends, changes in the composition of the loan portfolio and the
impact of current economic conditions. The allowance for loan losses is
increased by the provision for loan losses and reduced by net charge-offs. The
level of the allowance and the amount of the provision for loan losses involve
uncertainties and matters of judgment and therefore, cannot be determined with
precision.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost, less accumulated
depreciation and amortization. Depreciation of premises and equipment is
computed using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized on the straight-line method over
the term of the related lease or over the useful life of the improvements,
whichever is shorter. Leasing commitments are insignificant.
35
<PAGE> 36
GAIN OR LOSS ON SALE OF MORTGAGE LOANS HELD FOR SALE
The company sells mortgage loans held for sale for cash proceeds equal
to the principal amount of loans sold plus or minus market gains or losses.
Gain or loss is recorded at the time of sale in an amount reflecting the
difference between the contractual interest rates of the loans sold and the
current market rate.
PURCHASED MORTGAGE SERVICING RIGHTS
AND EXCESS SERVICE FEES
The cost of purchased mortgage loan servicing rights ("PMSR's")
($3,049,000 and $2,454,000 at December 31,1993 and 1992, respectively, net of
accumulated amortization) is amortized against service fee income in proportion
to, and over the period of, estimated net servicing revenues.
The carrying value of PMSR's and the related amortization are
periodically evaluated using a discounted valuation method, in relation to
estimated future net servicing revenues. The company evaluates the carrying
value of the PMSR's by estimating the future net servicing income of the rights
based on management's best estimate of remaining loan lives.
The normal agency (GNMA, FNMA or FHLMC) servicing fee is used in the
capitalization of any excess service fees. When participating interests in
loans sold have an average contractual interest rate, as adjusted for normal
servicing costs, which differs from the agreed yield to the purchaser, gains or
losses are recognized equal to the present value of such differential over the
estimated remaining life of such loans. Amortization of capitalized excess
servicing fees is reflected as a reduction of loan servicing income using the
interest method over the estimated remaining life of such loans, adjusted for
actual prepayments.
OTHER ASSETS
Included in other assets is real estate acquired in settlement of loans
and loans classified as in-substance foreclosure, which are carried at the
lower of cost or fair value less estimated selling costs. The excess of cost
over fair value less the estimated costs to sell at the time of foreclosure is
charged to the allowance for loan losses. Provisions for subsequent declines in
fair value are included in other non-interest expense. Other costs relating to
holding real estate acquired in settlement of loans and in-substance
foreclosures are charged to other non-interest expense as incurred. Costs
related to real estate in the process of development are capitalized.
INCOME TAXES
The company adopted as of January 1, 1993, Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this
statement, a current or deferred income tax liability is recognized, subject to
certain limitations, for the current or deferred tax consequences of all events
that have been recognized in the financial statements. The deferred income tax
liability or asset is measured by the provisions of enacted tax laws. Income
taxes for prior years were determined in accordance with Accounting Principles
Board Opinion No. 11. The cumulative effect of this change in accounting
principle, determined as of January 1, 1993, is reported separately in the
consolidated statement of income for the year ended December 31, 1993.
EARNINGS PER COMMON SHARE
Primary earnings per share is computed by dividing net income
applicable to common stock by the weighted average number of shares of common
stock outstanding during the period. Fully diluted earnings per share is
computed based on the weighted average number of shares of common stock
outstanding during the period, assuming conversion, for 1991, of the
convertible subordinated capital debentures into common stock and giving effect
to the elimination from net income of interest expense related to the
debentures (net of income tax effects). Net income for both calculations is
reduced for dividends on preferred stock.
On December 18, 1992 and December 16, 1991, the company's Board of
Directors authorized 4-for-3 stock splits effected in the form of a 33.3% stock
dividend. All per share information gives effect to the stock splits. The
weighted average number of shares outstanding after giving effect to these
stock splits were as follows:
<TABLE>
<CAPTION>
========================================================================
In thousands 1993 1992 1991
--------------------------------------------------------------------
<S> <C> <C> <C>
Primary 7,518 6,906 3,277
Fully diluted 7,518 6,906 3,921
</TABLE>
36
<PAGE> 37
(2) STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and amounts due from banks.
The following summarizes supplemental cash flow data for the years
ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
========================================================================
In thousands 1993 1992 1991
--------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $32,140 $31,709 $27,753
Cash paid for income taxes 4,510 4,460 1,975
</TABLE>
Certain non-cash investing and financing transactions are summarized
as follows. See note 3 which summarizes assets and liabilities associated with
acquisitions:
<TABLE>
<S> <C> <C> <C>
Conversion of debentures $ -- $ 4,450 $ 919
Issuance of stock in
business combination -- 6,015 --
Change in unrealized loss on
marketable equity securities
and securities available for sale 388 49 562
Debt transactions of
Employee Stock
Ownership Plan (net) 11 2,667 200
Loans transferred to other real
estate and in-substance
foreclosure 685 4,509 2,565
Investment securities
transferred to securities
available for sale 159,465 33,539 --
</TABLE>
(3) BUSINESS COMBINATIONS
a) COMBINATIONS CONSUMMATED THROUGH DECEMBER 31, 1993
On July 6, 1993, the company acquired all of the outstanding stock of
Trans Kentucky Bancorp, Inc., the holding company for The Citizens Bank of
Pikeville, now Trans Financial Bank. The aggregate costs, including
consideration and acquisition costs were $18.778 million. The excess of the
costs over the fair value of net assets acquired of $117,000 was recorded as
goodwill.
This acquisition has been accounted for under the purchase method and,
accordingly, the results of operations and cash flows of this entity have been
included in the consolidated financial statements since the date of
acquisition.
The aggregate fair value of net assets acquired included the following:
<TABLE>
<CAPTION>
==================================================
In thousands
----------------------------------------------
<S> <C>
Cash and due from banks $ 10,784
Interest bearing deposits 445
Federal funds sold 1,988
Securities 60,544
Net loans 107,571
Premises and equipment 4,140
Other assets 3,255
Deposits (163,885)
Other borrowings (3,142)
Other liabilities (3,039)
- -------------------------------------------------
Net assets acquired $18,661
=================================================
</TABLE>
Following is a presentation of pro forma financial information of the
company for the years ended December 31, 1993 and 1992, assuming this
acquisition had occurred on January 1, 1992. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the entities been combined throughout those periods.
<TABLE>
<CAPTION>
====================================================================
In thousands, except per share data 1993 1992
----------------------------------------------------------------
<S> <C> <C>
Net interest income
after provision for loan losses $41,863 $36,664
Net income 9,858 9,569
Earnings per common share $ 1.31 $ 1.37
</TABLE>
On March 26, 1992, the company acquired First Federal Savings Bank of
Tennessee and its wholly-owned subsidiaries, now Trans Financial Bank of
Tennessee, FSB, for cash and common stock of the company. The aggregate costs,
including consideration and acquisition costs, were $11.270 million. The
412,389 shares of common stock issued were valued at $6.0 million. The excess
of costs over the fair value of net assets acquired of $17,000 was recorded as
goodwill.
On March 27, 1992, the company acquired Maury Federal Savings Bank for
cash of $10.989 million. Aggregate consideration and acquisition costs totaled
$11.110 million. The excess of the fair value of net assets over costs
(negative goodwill) of $468,000 was allocated to reduce the values assigned to
premises and equipment. On November 27, 1992, this entity was merged with Trans
Financial Bank of Tennessee, FSB.
37
<PAGE> 38
These two acquisitions have been accounted for under the purchase
method and, accordingly, the results of operations and cash flows of these two
entities have been included in the consolidated financial statements since the
dates of acquisition.
On August 7, 1992, the company acquired five middle Tennessee branches
of Heritage Federal Bank for Savings. In this transaction the company's
wholly-owned subsidiary, Trans Financial Bank of Tennessee, FSB, assumed
approximately $55 million in deposits, acquired approximately $2.3 million in
premises and equipment, and received approximately $52 million in cash, net of
a $.8 million premium.
On December 31, 1992, the company merged with Dawson Springs Bancorp,
Inc. (DSB), the holding company for Kentucky State Bank and Commercial Bank of
Dawson. Under the terms of the merger all shares of DSB common stock
outstanding were converted into 560,088 shares of Trans Financial Bancorp, Inc.
common stock. The transaction was accounted for as a pooling of interests and,
accordingly, all financial data has been restated as if the entities were
combined for all periods presented. On December 31, 1992 these banks were
merged into Trans Financial Bank, N.A.
On August 30, 1991, in connection with the company's acquisition from
the Resolution Trust Company (RTC) of certain deposits and assets of Future
Federal Savings Bank, Louisville, Kentucky, the Bank assumed approximately
$75.9 million in deposits, acquired approximately $11 million in consumer loans
and received approximately $64.3 million in cash (net of a premium of $1.0
million paid to the RTC), all related to the Glasgow and Tompkinsville,
Kentucky branches of Future Federal Savings Bank.
Intangibles (goodwill and deposit base premium) from the above
transactions, as well as acquisitions consummated in 1990 and 1985, are being
amortized over periods ranging from ten to twenty years using straight-line and
accelerated methods and had a combined unamortized balance of $5,234,000 and
$5,925,000 at December 31, 1993 and 1992, respectively.
b) COMBINATION CONSUMMATED AFTER DECEMBER 31, 1993
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 Trans Financial Bancorp, Inc. common stock. The transaction
will be accounted for as a pooling of interests.
The following tables present pro forma financial information for the
company and KCB as if this transaction had been consummated as of December 31,
1993.
<TABLE>
<CAPTION>
========================================================================
In thousands, except per share data
Trans Financial
Bancorp, Inc. KCB Combined
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1993
Net interest income $40,586 $7,521 $48,107
Provision for loan losses 1,662 441 2,103
Net income 9,316 1,164 10,480
Fully diluted earnings
per common share $ 1.24 $ 1.18
Year ended December 31, 1992
Net interest income $31,396 $7,202 $38,598
Provision for loan losses 1,216 838 2,054
Net income 9,060 1,349 10,409
Fully diluted earnings
per common share $ 1.30 $ 1.25
Year ended December 31, 1991
Net interest income $18,733 $6,482 $25,215
Provision for loan losses 750 772 1,522
Net income 4,540 1,065 5,605
Fully diluted earnings
per common share $ 1.17 $ 1.07
</TABLE>
c) PENDING BUSINESS COMBINATIONS
On December 27, 1993, Trans Financial entered into a definitive
agreement providing for the acquisition of 100% of Peoples Financial Services,
Inc. in an all stock transaction. Peoples Financial, headquartered in the
middle Tennessee community of Cookeville, is a two bank 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
agreement, Peoples Financial shareholders will receive 5.5 shares of Trans
Financial Bancorp common stock for each share of Peoples Financial stock or a
total of approximately 1,315,770 shares. It is anticipated that the transaction
will constitute a tax free reorganization and qualify for the pooling of
interests method of accounting. The transaction is subject to regulatory and
Peoples Financial shareholder approval.
On January 28, 1994, Trans Financial entered into a definitive
agreement providing for the acquisition of 100% of FGC Holding Company, in an
all stock transaction. FGC Holding Company, headquartered in the eastern
Kentucky community of Martin, is a one bank holding company for First Guaranty
National Bank with $126 million in assets. Under the terms of
38
<PAGE> 39
the agreement, FGC Holding Company shareholders will receive 419.83 shares of
Trans Financial Bancorp common stock for each share of FGC Holding Company
common stock, or a total of approximately 1,050,000 shares. It is anticipated
that the transaction will constitute a tax free reorganization and qualify for
the pooling of interests method of accounting. The transaction is subject to
regulatory and FGC Holding Company shareholder approval.
(4) CASH AND DUE FROM BANKS
Regulatory authorities require the company's subsidiaries to maintain
reserve balances on customer deposits. The amounts of required reserves totaled
$14,880,000 at December 31,1993, and $14,208,000 at December 31,1992.
(5) SECURITIES
Effective December 31, 1993, the company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Accordingly, all debt securities in which the
company does not have the ability or management does not have the positive
intent to hold to maturity are classified as securities available for sale and
are carried at market value. All equity securities are classified as available
for sale at December 31, 1993. In conjunction with the adoption of Statement
115, $153.4 million of investment securities were transferred to securities
available for sale. Unrealized gains and losses on securities available for
sale are reported as a separate component of shareholders' equity (net of tax)
beginning December 31, 1993. Securities available for sale at December 31,
1992, are carried at the lower of aggregate cost or market value.
The following summarizes securities available for sale at December 31,
1993 and 1992.
<TABLE>
<CAPTION>
============================================================================================================================
Unrealized
Amortized --------------------- Market
December 31, 1993 (In thousands) Cost Gains Losses Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 90,597 $ 358 $ 430 $ 90,525
Collateralized mortgage obligations and mortgage-backed securities 93,267 1,020 403 93,884
Equity securities 10,446 42 161 10,327
- ----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $ 194,310 $ 1,420 $ 994 $ 194,736
============================================================================================================================
<CAPTION>
Unrealized
Amortized --------------------- Market
December 31, 1992 (In thousands) Cost Gains Losses Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 33,539 $ 815 $ -- $ 34,354
- ----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $ 33,539 $ 815 $ -- $ 34,354
============================================================================================================================
</TABLE>
The amortized cost and approximate market values of securities held to
maturity as of December 31, 1993 and 1992, follows:
<TABLE>
<CAPTION>
Unrealized
Amortized --------------------- Market
December 31, 1993 (In thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 500 $ 1 $ -- $ 501
Collateralized mortgage obligations and mortgage-backed securities 32,848 817 49 33,616
State and municipal obligations 16,762 607 104 17,265
Corporate debt securities 4,176 79 2 4,253
- ----------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 54,286 $ 1,504 $ 155 $ 55,635
============================================================================================================================
<CAPTION>
Unrealized
Amortized --------------------- Market
December 31, 1992 (In thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and Federal agencies $ 12,310 $ 38 $ 8 $ 12,340
Collateralized mortgage obligations and mortgage-backed securities 193,860 3,574 1,204 196,230
State and municipal obligations 5,439 304 92 5,651
Corporate debt securities 1,608 16 -- 1,624
Other debt securities 399 13 -- 412
Equity securities 9,983 1 -- 9,984
- ----------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 223,599 $ 3,946 $ 1,304 $ 226,241
============================================================================================================================
</TABLE>
39
<PAGE> 40
Included in equity securities at December 31, 1993, are Federal Home
Loan Bank and Federal Reserve Bank stock of $4,325,000 and $744,000,
respectively. At December 31, 1992, these stock investments were $4,130,000 and
$744,000, respectively.
The amortized cost and approximate market value of debt securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties. Mortgage-backed obligations generally have contractual maturities in
excess of ten years, but shorter expected maturities as a result of
prepayments.
<TABLE>
<CAPTION>
============================================================================================================================
Securities Securities
Held to Maturity Available For Sale
---------------- ------------------
Amortized Market Amortized Market
In thousands cost value cost value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 996 $ 997 $ 7,092 $ 7,095
Due after one year through five years 5,298 5,305 50,728 50,611
Due after five years through ten years 8,285 8,572 32,777 32,819
Due after ten years 6,859 7,145 -- --
- ----------------------------------------------------------------------------------------------------------------------------
21,438 22,019 90,597 90,525
Collateralized mortgage obligations and mortgage-backed securities 32,848 33,616 93,267 93,884
- ----------------------------------------------------------------------------------------------------------------------------
$54,286 $55,635 $183,864 $184,409
============================================================================================================================
</TABLE>
Securities with a par value, which approximates carrying value, of
approximately $110,229,000 and $94,671,000 at December 31, 1993 and 1992,
respectively, were pledged to secure public funds, trust funds and for other
purposes.
Gross gains of $1,054,000, $923,000, and $202,000 and gross losses of
$20,000, $50,000, and $-0- were realized on sales of securities in 1993, 1992,
and 1991, respectively.
(6) LOANS
The company grants commercial loans, real estate loans, consumer loans
and lease financing to customers primarily in the immediate market areas of its
subsidiaries in western and eastern Kentucky and middle Tennessee. The
composition of loans at December 31, 1993 and 1992 follows:
<TABLE>
<CAPTION>
============================================================
In thousands 1993 1992
--------------------------------------------------------
<S> <C> <C>
Commercial $217,159 $140,367
Real estate construction 35,904 22,989
Real estate mortgage 375,114 273,602
Agricultural 28,374 21,320
Consumer 88,642 66,421
Other 25,158 21,692
Unearned income (1,169) (633)
- ------------------------------------------------------------
Loans net of unearned
income $769,182 $545,758
============================================================
</TABLE>
The principal balance of nonaccrual and restructured loans at December
31, 1993 and 1992 was $5,387,000 and $3,405,000, 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 $365,000 in 1993,
$390,000 in 1992 and $683,000 in 1991. The amount of interest income that was
recorded for such loans was approximately $32,000 in 1993, $101,000 in 1992 and
$428,000 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 $24,566,000 at December 31, 1993
and $19,953,000 at December 31, 1992. During 1993, new loans of $18,132,000
were made and repayments of $11,948,000 were received. Other changes include
increases for changes in executive officers and directors of $5,338,000 and
decreases related to participations sold of $6,909,000. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for other customers.
40
<PAGE> 41
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
=========================================================================
In thousands 1993 1992 1991
---------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $5,537 $4,192 $4,106
Provision for loan losses 1,662 1,216 750
Balance of allowance for loan losses
of acquired subsidiaries
at acquisition date 2,439 1,016 --
- -------------------------------------------------------------------------
9,638 6,424 4,856
Deductions:
Loans charged off 1,988 1,257 997
Less recoveries 651 370 333
- -------------------------------------------------------------------------
Net loans charged off 1,337 887 664
- -------------------------------------------------------------------------
Balance at December 31 $8,301 $5,537 $4,192
=========================================================================
</TABLE>
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.
(7) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1993 and 1992,
follows:
<TABLE>
<CAPTION>
============================================================
In thousands 1993 1992
--------------------------------------------------------
<S> <C> <C>
Land and improvements $ 4,331 $ 3,593
Buildings and improvements 25,604 17,328
Furniture and equipment 17,407 10,794
- ------------------------------------------------------------
47,342 31,715
Less accumulated depreciation
and amortization 20,065 11,048
- ------------------------------------------------------------
Total premises and equipment $27,277 $20,667
============================================================
</TABLE>
(8) LONG-TERM DEBT AND OTHER BORROWINGS
Long-term debt consisted of the following at December 31, 1993 and
1992:
<TABLE>
<CAPTION>
===================================================================
In thousands 1993 1992
---------------------------------------------------------------
<S> <C> <C>
7.25% Subordinated Notes;
due September 15, 2003,
interest payable quarterly $33,000 $ --
Advance from the Federal Home
Loan Bank; due May 9, 1994;
interest at 4.50%, payable monthly 10,000 10,000
Employee Stock Ownership Plan
(ESOP) note payable to bank; due
July 31, 1994; interest at lender's base
rate, interest payable quarterly 3,106 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 755 915
- -------------------------------------------------------------------
Total long-term debt $46,861 $13,872
===================================================================
</TABLE>
Short-term borrowings, other than federal funds purchased and
repurchase agreements, consisted of the following at December 31, 1993 and
1992:
===================================================================
<TABLE>
<CAPTION>
In thousands 1993 1992
- -------------------------------------------------------------------
<S> <C> <C>
Advance from the Federal Home
Loan Bank; due January 20, 1994;
interest at 3.45%, payable monthly $15,000 $ --
Operating line of credit; due July 31,
1994; interest at the lender's base rate,
payable quarterly -- 600
- -------------------------------------------------------------------
Total other short-term borrowings $15,000 $600
===================================================================
</TABLE>
The prime interest rate and base rate associated with certain of the
above obligations was 6.0% at December 31, 1993 and 1992.
The company has a $3,000,000 unsecured operating line of credit with
an unaffiliated bank, with an outstanding balance of $600,000 at December 31,
1992. The line was not in use at December 31, 1993. This obligation has the
same restrictive covenants as the ESOP loan due July 31, 1994, as described
below.
The advances from the Federal Home Loan Bank are collateralized by the
company's Federal Home Loan Bank stock and certain first mortgage loans in the
approximate amount of 150% of the debt.
41
<PAGE> 42
The ESOP note payable due July 31, 1994 is guaranteed by the company
and enables the ESOP to borrow up to $4.0 million. The related loan agreement
has a number of restrictive covenants, including maintaining capital levels of
the company, the banks and savings banks at least at the minimum levels
required by applicable regulatory agencies; maintaining the company's
risk-weighted capital ratio, as defined, at not less than 9.25%; maintaining
the company's leverage ratio, as defined, at not less than 5.25%; maintaining
the company's annualized return on assets at the date of financial reports
required by regulations at no less than .50%; maintaining nonperforming loans,
as defined, at less than 2.50% of gross loans at the date of required financial
reports; and maintaining on a consolidated basis an allowance for loan losses
of at least .75% of gross loans. The ESOP note payable due July 31, 1996 is
also guaranteed by the company. The loan obligations of the ESOP are recorded
on the consolidated balance sheet with a corresponding amount recorded as a
reduction of the company's shareholders' equity. Both the loan obligation and
the reduction of shareholders' equity will be reduced by the amount of any loan
repayments made by the ESOP.
Principal payments required for the years 1993 through 1998 on
long-term debt at December 31, 1993, are as follows:
<TABLE>
<CAPTION>
=================================================
Year ending
December 31 In thousands
---------------------------------------------
<S> <C>
1994 $13,386
1995 300
1996 175
1997 --
1998 --
</TABLE>
(9) SHAREHOLDERS' EQUITY
COMMON STOCK
The company has stock option plans which permit options to be granted
for a maximum of 432,889 shares of common stock of the company. Under the terms
of the plans, options with ten-year terms may be granted to certain key
employees to purchase common stock at not less than fair value of the common
stock at the date of grant. A summary of share data related to the option plan,
adjusted for stock splits, follows:
<TABLE>
<CAPTION>
========================================================================
Number Option price
of shares per share
- ------------------------------------------------------------------------
<S> <C> <C>
Options outstanding December 31, 1990 78,756 $ 8.44-$9.375
Granted 123,733 $ 8.16-$11.53
Terminated or canceled (5,779) --
- ------------------------------------------------------------------------
Options outstanding December 31, 1991 196,710 $ 8.16-$11.53
Granted -- --
Exercised (2,522) $ 8.44-$9.375
Terminated or canceled (31,908) --
- ------------------------------------------------------------------------
Options outstanding December 31, 1992 162,280 $ 8.16-$11.53
Granted 79,673 $16.00
Exercised (150) $8.16
Terminated or canceled (7,890) --
- ------------------------------------------------------------------------
Options outstanding December 31, 1993 233,913 $ 8.16-$16.00
- ------------------------------------------------------------------------
</TABLE>
Of the options outstanding, 81,859 were exercisable as of December 31,
1993.
The company's Employee Stock Ownership Plan (ESOP) is described in
Note 12 to the consolidated financial statements.
PREFERRED STOCK AND RIGHTS PLAN
During 1992, the company's Articles of Incorporation were amended to
eliminate two series of Class A Preferred Stock, designated the 1988 and 1990
Series, and to authorize the issue of 5,000,000 shares of Class B Preferred
Stock, Series 1992. Series 1992 Class B Preferred Stock is issuable in
connection with the company's Rights Plan and carries the right to cumulative
annual dividends of $6.00 per share or 133 times dividends per common share
(subject to adjustment), whichever is greater.
On January 20, 1992, the company's Board of Directors adopted a
Shareholder Rights Plan. Under the plan, the Board declared a dividend of one
right (adjusted to 3/4 of a right by virtue of the four-for-three stock split
effected December 18, 1992) for each outstanding share of common
42
<PAGE> 43
stock. In addition, the company will issue one right with respect to each share
of common stock issued subsequent to that date. Each right, when and if it
becomes exercisable, will entitle the registered holder to purchase from the
company 1/100 of a share of Series 1992 Preferred Stock, subject to adjustment,
at an exercise price of $45. The description and terms of the rights are set
forth in a Rights Agreement, dated as of January 20, 1992, between the company
and Chemical Bank, as Rights Agent. The Board may redeem the rights in whole,
but not in part, at a price of $.01 per right.
The rights become exercisable only if a person or group acquires, or
obtains the right to acquire, beneficial ownership of 15% or more of the
company's outstanding common stock, the Board determines that a beneficial
owner of at least 10% of the company's outstanding common stock has a
detrimental effect on the company or its shareholders, or a tender or exchange
offer is commenced for 25% or more of the outstanding common stock.
After the rights become exercisable, if any person becomes the
beneficial owner of more than 15% of the outstanding common stock, or the Board
determines that a beneficial owner of at least 10% of the company's outstanding
common stock has a detrimental effect on the company or its shareholders, then
the rights will entitle each holder of a right to purchase, for the exercise
price, the number of shares of preferred stock which at the time of the
transaction would have a market value twice the exercise price.
(10) 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 8 include restrictive covenants related to the
maintenance of minimum capital ratios by the banks and savings banks, which
effectively restrict the payment of dividends. At December 31, 1993, retained
earnings of the company's subsidiaries were approximately $23.4 million, of
which approximately $12.2 million is available as of January 1, 1994 for the
payment of dividends under the most restrictive of the above restrictions.
Certain notes payable described in note 8 include restrictive
covenants related to the maintenance of minimum capital ratios, which
effectively restrict the payment of dividends by the company. Also, minimum
regulatory capital requirements effectively limit the payment of dividends. At
December 31, 1993, the most restrictive of the covenants limited the payment of
dividends by the company to approximately $9.9 million.
(11) INCOME TAXES
As discussed in note 1, the company adopted in 1993 Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". The
cumulative effect of this change in accounting for income taxes, determined as
of January 1, 1993, was a reduction in net income of $91,000 and is reported
separately in the consolidated statement of income for 1993. Financial
statements for prior years have not been restated to apply the provisions of
Statement 109.
Prior purchase business combinations were adjusted to reflect the
implementation of Statement 109, however the impact of these adjustments was not
significant and is included in income from continuing operations.
Total income tax expense for the year ended December 31, 1993 was
allocated as follows:
<TABLE>
<CAPTION>
======================================================
In thousands
--------------------------------------------------
<S> <C>
Income from continuing operations $4,249
Shareholders' equity, for unrealized net
gain on securities available for sale 201
- ------------------------------------------------------
$4,450
======================================================
</TABLE>
The components of income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
==============================================================
In thousands 1993 1992 1991
----------------------------------------------------------
<S> <C> <C> <C>
Current $4,610 $4,662 $2,089
Deferred (361) 24 (61)
- --------------------------------------------------------------
$4,249 $4,686 $2,028
==============================================================
</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>
=======================================================================
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 34.0% 34.0%
Changes from statutory rate:
Tax exempt investment income (2.9) (2.1) (5.4)
Amortization of goodwill .8 .7 1.6
Purchase accounting differences -- (.1) .5
State income taxes, net of
federal tax benefit .8 1.0 --
Statutory bad debt deduction -- (1.1) --
Surtax exemption (.7) -- --
Other, net (1.9) 1.7 .2
- -----------------------------------------------------------------------
31.1% 34.1% 30.9%
=======================================================================
</TABLE>
43
<PAGE> 44
The sources of timing differences and the resulting deferred income
tax expense (benefit) for 1992 and 1991, follows:
<TABLE>
<CAPTION>
===========================================================
In thousands 1992 1991
-------------------------------------------------------
<S> <C> <C>
Loan loss provision in excess
of amount allowed for tax purposes $(128) $(150)
Tax gains on sales of loans (80) --
Loan fees (101) --
Other, net 333 89
- -----------------------------------------------------------
$ 24 $ (61)
===========================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993, are presented below:
<TABLE>
<CAPTION>
=====================================================
In thousands
-------------------------------------------------
<S> <C>
DEFERRED TAX ASSETS:
Allowance for loan losses $1,328
Deferred compensation 301
Differences due to purchase accounting
adjustments related to the following:
Accrued expenses 388
Mortgage servicing 172
Other 13
- -----------------------------------------------------
Total gross deferred tax assets 2,202
Less valuation allowance --
- -----------------------------------------------------
Net deferred tax asset 2,202
DEFERRED TAX LIABILITIES:
Differences due to purchase accounting
adjustments related to the following:
Investments and other assets 537
Premises and equipment 154
FHLB stock 449
Amortization of acquired intangibles 99
Deferred loan fees 523
Depreciation 209
Investment securities 78
Other 71
- -----------------------------------------------------
Total deferred tax liabilities 2,120
- -----------------------------------------------------
Net deferred tax asset $ 82
=====================================================
</TABLE>
Cumulative deferred income taxes were an asset of $82,000 at December
31, 1993, and a liability of $238,000 at December 31, 1992.
Shareholder's equity of the savings banks at December 31, 1993 and
1992 includes approximately $3,768,000 and $4,536,000 respectively, for which
no deferred Federal income tax liability has been recognized. These amounts
represent an allocation of income to bad debt deductions for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt losses
or adjustments arising from carrying back net operating losses to prior years
may create income for tax purposes only, which would be subject to the then
current corporate income tax rate.
(12) EMPLOYEE BENEFIT PLANS
The company has an employee stock ownership plan (ESOP) under which
the company and its subsidiaries will contribute to the ESOP an amount
determined by the respective Boards of Directors at their discretion. The
company recognized expenses related to the ESOP based on cash contributions,
with such amounts exceeding the amount computed under the shares allocated
method. The interest incurred on the ESOP note payable, the amount contributed
by the company to the ESOP and the amount of dividends on ESOP shares used for
debt service by the ESOP for 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
=======================================================================
In thousands 1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C>
Interest incurred $236 $100 $ 96
Contributions 597 400 400
Dividends used for debt service 6 67 44
</TABLE>
The company has a profit sharing plan qualified under Section 401(k)
of the Internal Revenue Code. Under the amended profit sharing plan, the
company and its subsidiaries will provide funds to match the contribution made
by the participating employee up to a maximum of 4% of the employee's salary.
Contributions in accordance with the profit sharing plan were approximately
$360,000 in 1993, $214,000 in 1992, and $173,000 in 1991.
Former full-time employees of Kentucky State Bank who meet certain
requirements as to age and length of service are covered by a defined benefit
pension plan. Pension expense for this plan was $2,000 in 1993, $14,000 in
1992, and $15,000 in 1991. The plan's funded status at December 31, 1993 was
composed of plan assets of $503,000 and a projected benefit obligation of
approximately $544,000.
The company has no significant commitments to pay post-retirement or
post-employment benefits other than as described above.
Stock options granted to key employees are described in Note 9 to the
consolidated financial statements.
44
<PAGE> 45
During 1993, AICPA Statement of Position ("SOP") 93-6, Employers'
Accounting for Employee Stock Ownership Plans, was issued. The SOP will change
the accounting for the company's ESOP once all unallocated shares held by the
ESOP on December 31, 1992, are exhausted. Shares acquired after December 31,
1992, will also be subject to the accounting prescribed in the SOP. The changes
include recognition of compensation cost, accounting for dividends on allocated
and unallocated shares, and the inclusion of committed shares in earnings per
share computations. The company is currently reviewing the SOP to determine the
potential impact it will have on its consolidated financial statements.
(13) COMMITMENTS AND CONTINGENT LIABILITIES
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
The company's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course of
business to meet the financing needs of customers. These include commitments to
extend credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit, interest rate and liquidity risk in excess
of the amount recognized in the consolidated balance sheet. The extent of the
company's involvement in various commitments is expressed by the contract
amount of such instruments.
Commitments to extend credit, which amounted to $174,793,000 at
December 31, 1993, and $187,402,000 at December 31,1992 are agreements to lend
to a customer as long as all conditions established in the contract are
fulfilled. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitments do not necessarily represent future cash requirements. The company
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary upon extension of credit, is based
upon management's credit evaluation of the customer. Collateral varies but may
include accounts receivable, inventory, property, plant, equipment, residential
properties, income-producing commercial properties, marketable securities and
interest-bearing time deposits.
Standby letters of credit are conditional commitments issued by the
company guaranteeing the performance of a customer to a third party. Those
guarantees primarily consist of performance assurances made on behalf of
customers who have a contractual commitment to produce or deliver goods or
services. Most guarantees are for one year or less. The risk to the company
arises from its obligation to make payment in the event of the customer's
contractual default and is essentially the same as that involved in extending
loan commitments to customers. The amount of collateral obtained, if deemed
necessary, is based upon management's credit evaluation of the customer.
Collateral held varies. The company had standby letters of credit outstanding
totaling $32,196,000 and $28,232,000 at December 31, 1993 and 1992,
respectively.
Commercial letters of credit are short-term commitments generally used
to finance a commercial contract for the shipment of goods from seller to
buyer. At December 31, 1993, the company had $4,861,000 in commercial letters
of credit outstanding.
At year-end 1993, the company was not a party to any off-balance-sheet
derivative contracts.
With respect to mortgage loans sold to investors, such loans are
generally sold with servicing rights retained, with only the normal legal
representations and warranties regarding recourse to the company. Management
believes that any liabilities which may result from such recourse provisions
are not significant.
LEGAL PROCEEDINGS
As of December 31, 1993, there were various pending legal actions and
proceedings against the company in which claims for damages are asserted.
Management, after discussion with legal counsel, believes that the ultimate
result of these legal actions and proceedings will not have a material adverse
effect upon the consolidated financial statements of the company.
45
<PAGE> 46
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the company's financial instruments are
as follows:
<TABLE>
<CAPTION>
==============================================================================================
DECEMBER 31, 1993 December 31, 1992
----------------- -----------------
CARRYING FAIR Carrying Fair
In thousands AMOUNT VALUE Amount Value
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 61,531 $ 61,531 $108,939 $108,939
Securities 249,022 250,371 257,138 260,595
Loans 803,886 809,975 564,459 568,532
Financial liabilities:
Deposits 994,152 998,204 860,338 862,289
Federal funds purchased and repurchases 29,704 29,704 26,993 26,993
Long-term debt and other short-term borrowings 61,861 61,926 14,472 14,422
</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, FEDERAL FUNDS PURCHASED
AND REPURCHASES
For these short-term instruments, the financial statement carrying
amount approximates fair value.
SECURITIES
The fair value of securities is estimated by discounting future cash
flows using current rates at which investments would be made in similar
instruments with similar credit ratings and equivalent remaining maturities.
LOANS
The fair value of loans is estimated by discounting the future cash
flows using current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated by discounting the
future cash flows using the rates currently offered for deposits of similar
remaining maturities.
LONG-TERM DEBT AND OTHER SHORT-TERM BORROWINGS
Rates currently available to the company for debt with similar terms
and remaining maturities are used to estimate fair value of existing debt.
COMMITMENTS TO EXTEND CREDIT AND STAND-BY
LETTERS OF CREDIT
The fair values of loan commitments and letters of credit are
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. The value of these financial
instruments was not material at December 31, 1993 and 1992.
LIMITATIONS ON FAIR VALUE REPORTING
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial instruments.
Because no market exists for a significant portion of the company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
The fair value estimates are based on financial instruments only. The
company has not attempted to estimate the value of assets and liabilities not
considered to be financial instruments, such as premises and equipment, the
mortgage banking operation and the intangible value of its core deposits and
branch system. Accordingly, the fair value estimates do not represent a fair
value for the company as a whole.
46
<PAGE> 47
(15) PARENT COMPANY FINANCIAL STATEMENTS
Condensed financial data for Trans Financial Bancorp, Inc. (parent
company only) as of December 31, 1993 and 1992 and for the years ended December
31, 1993, 1992 and 1991 are as follows:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
=======================================================================
December 31
In thousands 1993 1992
-------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash on deposit with subsidiaries $ 15,685 $ 1,677
Investment in subsidiaries 94,254 72,443
Other investments 73 48
Other assets 3,273 757
- -----------------------------------------------------------------------
Total assets $113,285 $74,925
=======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt and other notes payable $ 36,861 $ 4,472
Other liabilities 125 921
Shareholders' equity 76,299 69,532
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $113,285 $74,925
=======================================================================
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
====================================================================================================================
Years ended December 31
In thousands 1993 1992 1991
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $11,000 $11,819 $ 7,594
Other interest and dividends 146 34 31
Management fees from subsidiaries and other income 3,602 3,428 2,103
- --------------------------------------------------------------------------------------------------------------------
Total income 14,748 15,281 9,728
Expenses:
Interest on long-term debt and other notes payable 860 141 1,178
Other expenses 6,057 4,850 3,019
- --------------------------------------------------------------------------------------------------------------------
Total expenses 6,917 4,991 4,197
Income before income tax benefit and equity in undistributed
(distributions in excess of) earnings of subsidiaries 7,831 10,290 5,531
Federal income tax benefit 1,306 427 624
- --------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed (distributions in excess of)
earnings of subsidiaries 9,137 10,717 6,155
Equity in undistributed (distributions in excess of) earnings of subsidiaries 179 (1,657) (1,615)
- --------------------------------------------------------------------------------------------------------------------
Net income $ 9,316 $ 9,060 $ 4,540
====================================================================================================================
</TABLE>
47
<PAGE> 48
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
================================================================================================================================
Years ended December 31
In thousands 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,316 $ 9,060 $ 4,540
Adjustments to reconcile net income to cash from operating activities:
Amortization 445 327 341
(Equity in undistributed) distributions in excess of earnings of subsidiaries (179) 1,657 1,615
Gains on sales of investments -- (119) --
Decrease (increase) in other assets (2,600) (402) 411
Increase (decrease) in other liabilities (604) 96 (153)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,378 10,619 6,754
Cash flows from investing activities:
Investments in and acquisitions of subsidiaries (21,822) (23,270) (5,032)
Net decrease (increase) in interest bearing deposits with banks -- 500 (100)
Purchases of other investments -- -- (46)
Proceeds from maturities and sales of other investments -- 2,026 --
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,822) (20,744) (5,178)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 33,229 700 3,496
Repayment of long-term debt and other notes payable (829) (2,665) (10,111)
Proceeds from issuance of common stock 822 17,727 12,454
Redemption of preferred stock -- (2,285) (4,502)
Dividends paid (3,770) (3,252) (1,686)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 29,452 10,225 (349)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 14,008 100 1,227
Cash and cash equivalents at beginning of year 1,677 1,577 350
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 15,685 $ 1,677 $ 1,577
================================================================================================================================
Supplemental Information:
Cash paid for interest $ 862 $ 139 $ 1,255
Non-cash transactions (note 2) $ (399) $ 13,181 $ 1,681
</TABLE>
48
<PAGE> 49
EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered Pages
--------------
<S> <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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 52-59
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>
-49-
<PAGE> 50
<TABLE>
<CAPTION>
Sequentially
Numbered Pages
--------------
<S> <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) Underwriting Agreement dated as of March 3, 1992 between Morgan Keegan & Company, Inc.
and Trans Financial Bancorp, Inc. incorporated by reference to Exhibit (1) to
Registration Statement on Form S-2 of the registrant (File No. 33-45483).
10(m) 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(n) 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(o) 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(p) 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(q) 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(r) 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(s) 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
Exhibit 2(a) and 2(b) of the registrant's Report on Form 8-K dated February 18, 1994.
11 Statement of Computation of Per Share Earnings . . . . . . . . . . . . . . . . . . . . . . . 60
21 List of Subsidiaries of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23 Consent of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
23(a) Consent of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
99 Annual Report on Form 11-K for the Trans Financial Bancorp Savings Investment Plan . . . . 64-84
</TABLE>
-50-
<PAGE> 51
* 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.
-51-
<PAGE> 1
EXHIBIT 4(B)
RESTATED BYLAWS OF
TRANS FINANCIAL BANCORP, INC.
ARTICLE I
OFFICES
The principal office of the corporation in the Commonwealth of Kentucky shall
be located in the City of Bowling Green. The corporation may have such other
offices, either within or without the Commonwealth of Kentucky, as the business
of the corporation may require from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held in the month of April, on such date and at such time as shall be
designated by resolution of the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the election of directors shall not be held on the day designated
for any annual meeting, or at any adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the shareholders to
be held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of the
corporation may be called in accordance with the articles of incorporation or
applicable law.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place
within or without the Commonwealth of Kentucky as the place of meeting for any
annual meeting, or any place within or without the Commonwealth of Kentucky as
the place of meeting for any special meeting called by the Board of Directors.
If no designation is made or if a special meeting be called by other than the
Board of Directors, the place of the meeting shall be the principal office of
the corporation in the Commonwealth of Kentucky, except as provided in Section
5 of this Article.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less than
ten nor more than sixty days before the date of the meeting, either personally
or by telegraph, teletype or other form of wire or wireless communication, or
by mail or private carrier, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting, except when a longer period of
time is required by statute. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail in a sealed envelope
addressed to the shareholder at his or her address as it appears on the records
of the corporation, with first class postage thereon prepaid.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders meet at
any time and place, either within or without the Commonwealth of Kentucky, and
consent to the holding of a meeting, such meeting shall be valid without call
or notice, and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. If no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders, or shareholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided herein, such determination shall apply
to any adjournment thereof unless the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting, in which case the Board
of Directors shall fix a new record date.
-52-
<PAGE> 2
SECTION 7. VOTING LISTS AND SHARE LEDGER. The secretary shall prepare a
complete list of the shareholders entitled to notice of any meeting, or any
adjournment thereof, arranged by voting group (and within each voting group by
class of series of shares) in alphabetical order, with the address of and the
number of shares held by each shareholder, which list, for a period of five
business days prior to any meeting and continuing through the meeting, shall be
kept on file at the principal office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the meeting and shall be subject
to the inspection of any shareholder during the meeting or any adjournment
thereof. The original share ledger or stock transfer book, or a duplicate
thereof kept in the Commonwealth of Kentucky, shall be prima facie evidence as
to the shareholders entitled to examine such list or share ledger or stock
transfer book, or the shareholders entitled to vote at any meeting of
shareholders or to receive any dividend.
SECTION 8. QUORUM. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, The shareholders present at a duly organized meeting can
continue to do business for the remainder of the meeting and for any
adjournment thereof until final adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, unless a new record date is or
must be set for that adjourned meeting.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his or her duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. A shareholder may
revoke his or her proxy at any time prior to the establishment of a quorum at
any meeting of shareholders. Such revocation shall be in writing and delivered
to the secretary of the corporation prior to the time the presence of a quorum
has been determined and declared.
SECTION 10. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting and without prior notice if one or more consents in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed under the direction of a Board of Directors.
SECTION 2. NUMBER AND TENURE. The number of directors of the corporation
shall be not less than 9 nor more than 20. Prior to each annual meeting of
shareholders, the Board shall determine (1) the total number of directors of
the corporation (within the limits stated herein) to be elected at the annual
meeting, and (2) the number of directors to serve in Class I, Class II and
Class III (subject to the terms of office of incumbent directors); provided,
however, that at any meeting of the Board, the Board of Directors (A) may
increase the number of directors but never more than two in any year, and
always within the limits stated in this Section 2, and (B) shall apportion the
vacancies created among the Classes so as to maintain the number of directors
in each Class as equal as possible, and (C) may elect persons to serve in the
vacancies so created. Any additional director or directors elected to fill a
vacancy shall be elected by the vote of 80% of the directors then in office,
although less than a quorum, and any director so chosen shall hold office for a
term that shall expire at the time of the next annual meeting of shareholders
at which director are elected. Each director elected by the shareholders shall
hold office for the term for which he is elected or until his successor shall
have been elected and qualifies for office, whichever period is longer.
SECTION 3. QUALIFICATIONS OF DIRECTORS. The following are the conditions
under which directors shall serve: [a] Each director shall own in his own
right, at least one thousand five hundred (1,500) shares of common stock of the
corporation; [b] The term of office of any director who attends less than
seventy-five percent (75%) of all regular meetings during any calendar year, or
who misses three (3) consecutive meetings (whether regular of special) shall
expire on the date that the Board makes such a determination; provided,
however, that the Board may, in its discretion, excuse certain absences for
illness or extenuating circumstances; [c] The term of office of any director
whose loan or any extension of credit (including any loan or extension of
credit guaranteed by such director) with any of the subsidiary banks of the
corporation
-53-
<PAGE> 3
was classified by any bank examination shall expire on the date that the Board
makes such a determination; [d] Upon attaining the age of 70 years, a director
shall not be eligible to stand for re-election at the next following meeting of
the shareholders for the purpose of electing directors; provided, however, that
the foregoing directors' age limitation shall not apply to any person who was
elected as a director prior to April 23, 1973, and who has served continuously
as a director of the corporation or any predecessor bank or corporation since
that date.
Any vacancies which occur pursuant to this Section shall be filled in
accordance with the provisions of Section 10 of Article III of these Bylaws.
SECTION 4. TERM OF OFFICE. The directors shall hold office for a term of
three (3) years and shall be so elected that, to the extent possible, the term
of one-third (1/3) of the directors will expire at each annual shareholders'
meeting.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held on such dates and at such times, and either within or without the
Commonwealth of Kentucky, as provided by resolution of the Board of Directors,
without notice other than such resolution.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the President of the corporation or of a
majority of the directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place either within or without
the Commonwealth of Kentucky, as the place for holding any special meeting of
the Board of Directors called by them.
SECTION 7. NOTICE. Notice of any special meeting shall be given at least
two days prior thereto by telephone, by written notices delivered personally or
mailed to each director at his or her address on file with the corporation, or
by telegram. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail in a sealed envelope so addressed, with
postage thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company.
Any director may waive notice of any meeting. The attendance of a director at
any meeting shall constitute a waiver of notice of such meeting, unless the
director at the beginning of the meeting (or promptly upon his or her arrival)
objects to the transaction of any business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 8. QUORUM. A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors, provided that if less than a majority of the directors are present
at said meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
SECTION 9. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, however, that the Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members an Executive Committee and one or more other committees, each of
which, to the extent provided in such resolution, shall have and may exercise
all the authority of the Board of Directors, but no such committee shall have
the authority of the Board of Directors to authorize distributions; approve or
propose to shareholders action required by Kentucky law to be approved by
shareholders; fill vacancies on the Board of Directors or on any of its
committees; amend the articles of incorporation; adopt, amend or repeal bylaws;
approve a plan of merger not requiring shareholder approval; authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; or authorize or approve the issuance or
sale or contract of sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares, unless the
Board of Directors has authorized such committee to do so within limits
prescribed by the Board of Directors.
SECTION 10. VACANCIES. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall serve until the next shareholders' meeting at which
directors are elected.
SECTION 11. COMPENSATION. The Board of Directors shall have authority to
fix the compensation of directors.
SECTION 12. INFORMAL ACTION. Any action required or permitted to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or of a committee, may be taken without
-54-
<PAGE> 4
a meeting if a consent, in writing, setting forth the action so taken shall be
signed by all of the directors, or all of the members of the committee, as the
case may be, and included in minutes or filed with the corporate records. Such
consent shall be the same effect as a unanimous vote.
SECTION 13. EXECUTIVE COMMITTEE. The Executive Committee shall represent
the Board in the interim between meetings of the Board and shall act for the
Board except in such acts as only the Board, by law, is authorized to perform.
Any Executive Committee appointed by the Board shall consist of the President
of the corporation and four or more directors who are not officers or employees
of the corporation. A majority of the directors on the Executive Committee
shall constitute a quorum. The Executive Committee shall meet on 24 hours
notice. The Executive Committee shall keep minutes of its meetings, and such
minutes shall be submitted to the Board of Directors for approval.
SECTION 14. OTHER COMMITTEES. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the corporation shall be a President,
one or more Vice Presidents, a Treasurer, a Secretary, and such other officers
as may be provided by the Board of Directors and elected in accordance with the
provisions of this Article.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the Board of Directors at the first regular
meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Vacancies may be
filled or new offices created and filled at any meeting of the Board of
Directors. Each officer shall hold office until his or her successor shall
have been duly elected and shall have qualified or until his or her death or
until he of she shall resign or shall have been removed from office in the
manner hereinafter provided.
SECTION 3. REMOVAL. Any officer elected by the Board of Directors may be
removed by the Board of Directors, with or without cause, whenever in its
judgement the best interest of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
SECTION 4. CHAIRMAN OF THE BOARD. The Board of Directors shall appoint one
of its members to be Chairman of the Board to serve at the pleasure of the
Board. The Chairman shall preside at all meetings of the Board of Directors.
The Chairman shall supervise the carrying out of the policies adopted or
approved by the Board. He or she shall have general executive powers, as well
as the specific powers conferred by these Bylaws. He or she shall also have
and may exercise such further powers and duties as from time to time may be
conferred upon, or assigned to him or her by the Board of Directors.
SECTION 5. PRESIDENT. The Board of Directors shall appoint the President of
the corporation, who shall preside at all meetings of the shareholders. The
President may sign, with the Secretary, or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed except
in cases where the signing and execution thereof shall be expressly delegated
by the Board of Directors or by these bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise signed or
executed. The President shall be authority to vote all shares of stock in
other corporations owned by the corporation, unless the Board of Directors
designates and appoints another person as proxy for the corporation; and in
general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors from time to time.
In the event the Board does not appoint a Chief Executive Officer, or in the
absence or inability or refusal to act of the Chief Executive Officer, the
President shall perform the duties of Chief Executive Officer. The Board in
its discretion may appoint the same member to the office of Chairman of the
Board and President. When a member of the Board holds the offices of Chairman
of the Board and President, a Vice Chairman of the Board shall be appointed to
preside at any meeting of the Board at which the Chairman is not present.
-55-
<PAGE> 5
SECTION 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
the principal executive officer of the corporation and shall in general
supervise and control all of the business and affairs of the corporation and
perform all duties incident to the office of chief executive officer and such
other duties as may be prescribed by the Board of Directors from time to time.
The Board in its discretion may appoint the same member to the office of Chief
Executive Officer and Chairman of the Board and/or President.
SECTION 7. VICE PRESIDENT. The Board shall appoint as many Vice Presidents
as it deems necessary and may designate one or more Vice Presidents as
Executive Vice President of the corporation. The Executive Vice President
shall, in the absence or inability or refusal to act of the President and Chief
Executive Officer, perform the duties of such office(s) and, when so acting,
shall have all the powers of and be subject to all the restrictions upon such
office(s). The Vice Presidents may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the corporation and shall perform such
other duties as from time to time may be assigned to them by the President or
by the Board of Directors.
SECTION 8. TREASURER. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board of Directors shall determine.
The Treasurer: [a] have charge and custody of and be responsible for all funds
and securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of these
Bylaws; [b] in general, perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him or
her by the President or the Board of Directors.
SECTION 9. SECRETARY. The Secretary shall: [a] keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; [b] see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; [c] be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in accordance with
the provisions of these Bylaws; [d] keep a register of the post office address
of each shareholder which shall be furnished to the Secretary by such
shareholder; [e] in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him or
her by the President or the Board of Directors. The Secretary may also be
designated as Registrar of the corporation. Both the Secretary and the
Registrar of the corporation shall have authority to sign with the President,
or Vice President, certificates for shares of the corporation, the issue of
which shall have been authorized by resolution of the Board of Directors, have
general charge of the stock transfer books of the corporation and take all
actions necessary for transfer of shares on the books of the corporation.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers, if any, shall respectively, if required by the Board of Directors,
give bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries, if any, may sign with the President or Vice President certificates
for shares of the corporation, the issue of which shall have been authorized by
a resolution of the Board of Directors. The Assistant Treasurers and Assistant
Secretaries in general shall perform such duties as shall be assigned to them
by the Treasurer or the Secretary, respectively, or by the President or the
Board of Directors.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver
any instruments in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation, and no evidences of indebtedness shall be issued in its name
unless authorized in advance or by ratification, by a resolution of the Board
of Directors. Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ORDERS, ETC. All checks, drafts, or other orders
for the payment or money, notes
-56-
<PAGE> 6
or other evidences of indebtedness issued in the name of the corporation shall
be signed by such officer or officers, agent or agents, of the corporation and
in such manner as shall from time to time be determined by resolution of the
Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the President or Vice
President and by the Secretary or an Assistant Secretary and may be sealed with
the seal of the corporation or a facsimile thereof. All certificates
surrendered to the corporation for transfer shall be cancelled, and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in case of a
lost, destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the books of the corporation by the registered holder thereof
or by his or her attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name
shares stand on the books of the corporation shall be deemed the owner thereof
for all purposes as regards the corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
and end on the last day of December of each calendar year.
ARTICLE VIII
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions of
these Bylaws, or under the provisions of the Articles of Incorporation, or
under the provisions of the corporation laws of the Commonwealth of Kentucky,
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE IX
AMENDMENT OF BYLAWS
The Board of Directors may alter, amend or rescind the Bylaws, subject to the
rights of shareholders to replace or modify such actions.
ARTICLE X
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. DIRECTORS' AND OFFICERS' RIGHT TO INDEMNIFICATION. Each person
who was or is made a party or is threatened to be made
-57-
<PAGE> 7
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director of officer, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by Kentucky law,
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said law permitted the corporation
to provide prior to such amendment), against all expenses, liability and loss
(including attorneys' fees, judgements, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith; provided, however, that the corporation
shall indemnify any such person seeking indemnity in connection with an action,
suit or proceeding (or part thereof) initiated by such person only if such
action, suit or proceeding (or part thereof) was authorized by the Board of
Directors of the corporation. Such right shall be a contract right and shall
include the right to be paid by the corporation for expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, the payment of such expenses incurred by a director or officer
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or officer,
including without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery
to the corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it should be determined ultimately
that such director or officer is not entitled to be indemnified under this
Section or otherwise.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1 of
this Article is not paid in full by the corporation within ninety days after a
written claim has been received by the corporation, the claimant may at any
time thereafter bring suit and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under Kentucky law for the corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set in the Kentucky law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
SECTION 3. EMPLOYEES' AND AGENTS' RIGHT TO INDEMNIFICATION. Each person who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he or she, or a
person of whom he of she is the legal representative, is or was an employee or
agent of the corporation or is or was serving at the request of the corporation
as an employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as an employee or agent or in any other capacity while
serving as an employee or agent, may, by action of the Board of Directors, be
indemnified and held harmless by the corporation to the fullest extent
authorized by Kentucky law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment), against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that the corporation may, by action of the Board of
Directors, indemnify any such person seeking indemnity in connection with an
action, suit or proceeding (or part thereof) initiated by such person only if
such action, suit or proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation. The Board of Directors may, in its
discretion, advance the payment of expenses.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
Sections 1, 2 and 3) of this Article shall not be exclusive of any other right
which such person may have or hereafter acquire under any statute, provision of
the articles of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
-58-
<PAGE> 8
ARTICLE XI
AUDITORS
The corporation's books of account shall be examined annually by an
independent firm of public accountants whose selection shall be made by the
Board of Directors after recommendation by management. Upon completion of the
examination by the auditors, a report shall be prepared and submitted to the
Board of Directors.
CERTIFICATE
We hereby certified (i) that on this date we are, respectively, the duly
elected and qualified President and Secretary of Trans Financial Bancorp, Inc.,
(ii) that on the 21st day of February, 1994, the foregoing Restated Bylaws were
adopted by unanimous action of the Board of Directors of Trans Financial
Bancorp, Inc., and (iii) as of this date the foregoing Restated Bylaws continue
unmodified and in full force and effect.
/s/ Douglas M. Lester
----------------------------
Douglas M. Lester, President
/s/ Jay B. Simmons
- -------------------------
Jay B. Simmons, Secretary
COMMONWEALTH OF KENTUCKY )
) : SS
COUNTY OF WARREN )
Subscribed and sworn to before me, a Notary Public, by Douglas M. Lester and
Jay B. Simmons, on this 21st day of March, 1994.
My commission expires: April 1, 1996
[SEAL]
/s/ Melissa (Miller) Carrier
----------------------------
-59-
<PAGE> 1
EXHIBIT 11
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:(1)
Average common shares outstanding 7,518 6,906 3,277
Income before cumulative effect of change in accounting principle $9,407 $9,060 $4,540
Less preferred stock dividends - 56 313
------ ------ ------
Income available to common shares before cumulative effect
of change in accounting principle $9,407 $9,004 $4,227
PRIMARY EARNINGS PER COMMON SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ 1.25 $ 1.30 $ 1.29
====== ====== ======
Net income $9,316 $9,060 $4,540
Less preferred stock dividends - 56 313
------ ------ ------
Net income available to common shares $9,316 $9,004 $4,227
PRIMARY NET INCOME PER COMMON SHARE $1.24 $ 1.30 $ 1.29
====== ====== ======
FULLY DILUTED EARNINGS PER COMMON SHARE:(1)
Average common shares outstanding 7,518 6,906 3,277
Assumed conversion of convertible debt - - 644
------ ------ ------
Total shares for computation of fully diluted earnings per common share 7,518 6,906 3,921
Income before cumulative effect of change in accounting principle $9,407 $9,060 $4,540
Interest on convertible debt (net of income taxes) - - 354
Dividends on non-convertible preferred stock - (56) (313)
------ ------ ------
Income available to common shares before cumulative effect
of change in accounting principle $9,407 $9,004 $4,581
FULLY DILUTED EARNINGS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $1.25 $ 1.30 $ 1.17
====== ====== ======
Net income $9,316 $9,060 $4,540
Interest on convertible debt (net of income taxes) - - 354
Dividends on non-convertible preferred stock - (56) (313)
------ ------ ------
Net income available to common shares $9,316 $9,004 $4,581
FULLY DILUTED NET INCOME PER COMMON SHARE $ 1.24 $ 1.30 $ 1.17
====== ====== ======
</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 the 4-for-3 stock
split effected December 16, 1991.
-60-
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
Trans Financial Bank, N.A.
Trans Financial Bank, FSB
Trans Financial Bank of Tennessee, FSB
Trans Financial Bank
-61-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Trans Financial Bancorp, Inc.:
We consent to incorporation by reference in the Registration Statements
No. 33-40606 and 33-60844 on Form S-3, Regisration Statement No. 33-52365 on
Form S-4 and Registration Statements No. 33-43046, No. 33-53960 and No.
33-72492 on Forms S-8 of Trans Financial Bancorp, Inc. of our report dated
January 25, 1994, except as to Note 3 (b), which is as of February 15, 1994,
relating to the consolidated balance sheets of Trans Financial Bancorp, Inc.
and subsidiaries as of December 31, 1993 and 1992 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1993, which report
appears in the December 31, 1993 annual report on Form 10-K of Trans Financial
Bancorp, Inc.
Our report refers to changes in the methods of accounting for income
taxes and certain investments in debt and equity securities in 1993.
KPMG PEAT MARWICK
Louisville, Kentucky
March 31, 1994
-62-
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Trans Financial Bancorp, Inc.:
We consent to incorporation by reference in the Registration Statement
No.33-53960 on Form S-8 of our report dated March 11, 1994, relating to the
statements of net assets available for benefits of the Trans Financial
Bancorp Savings Investment Plan as of December 31, 1993 and 1992 and the related
statements of changes in net assets available for benefits for the years then
ended, which report appears in the December 31, 1993 annual report on Form 11-K
of the Trans Financial Bancorp Savings Investment Plan.
KPMG Peat Marwick
Louisville, Kentucky
March 31, 1994
63
<PAGE> 1
TRANS FINANCIAL BANCORP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1993
EXHIBIT 99
ANNUAL REPORT ON FORM 11-K FOR THE TRANS FINANCIAL BANCORP SAVINGS
INVESTMENT PLAN
-64-
<PAGE> 2
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 Commission File Number 0-13030
TRANS FINANCIAL BANCORP SAVINGS INVESTMENT PLAN
-----------------------------------------------
(Exact name of plan)
TRANS FINANCIAL BANCORP, INC.
------------------------------------
(Exact name of issuer of securities)
500 East Main Street
Bowling Green, KY 42101
-65-
<PAGE> 3
EXHIBIT 99
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Financial Statements and Schedules
December 31, 1993 and 1992
With Independent Auditors' Report Thereon
66
<PAGE> 4
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Index to Financial Statements and Schedules
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditors' Report 68
Statements of Net Assets Available for Benefits - Combined Funds,
as of December 31, 1993 and 1992 69
Statements of Changes in Net Assets Available for Benefits - Combined Funds,
for the years ended December 31, 1993 and 1992 70
Statements of Net Assets Available for Benefits - Employer Stock Fund,
as of December 31, 1993 and 1992 71
Statements of Changes in Net Assets Available for Benefits - Employer Stock
Fund, for the years ended December 31, 1993 and 1992 72
Statements of Net Assets Available for Benefits - Growth Equity Funds,
as of December 31, 1993 and 1992 73
Statements of Changes in Net Assets Available for Benefits - Growth Equity
Fund, for the years ended December 31, 1993 and 1992 74
Statements of Net Assets Available for Benefits - Bond Fund,
as of December 31, 1993 and 1992 75
Statements of Changes in Net Assets Available for Benefits - Bond
Fund, for the years ended December 31, 1993 and 1992 76
Statements of Net Assets Available for Benefits - Guaranteed Investment
Contract Fund, as of December 31, 1993 and 1992 77
Statements of Changes in Net Assets Available for Benefits - Guaranteed
Investment Contract Fund, for the years ended December 31, 1993 and 1992 78
Notes to Financial Statements 79 - 83
Schedule
--------
Item 27a - Schedule of Assets Held for Investment Purposes -
December 31, 1993 A
Item 27d - Schedule of Reportable Transactions - Year ended
December 31, 1993 D
</TABLE>
Other schedules as required by Items 27(b), (c), (e) and (f) of Form 5500 have
been omitted because they are not applicable.
67
<PAGE> 5
Independent Auditors' Report
The Plan Committee
Trans Financial Bancorp
Savings Investment Plan:
We have audited the financial statements of the Trans Financial Bancorp Savings
Investment Plan (Plan) as of December 31, 1993 and 1992, and for the years then
ended, as listed in the accompanying index. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Trans
Financial Bancorp Savings Investment Plan as of December 31, 1993 and 1992, and
the changes in net assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
Held for Investment Purposes and Reportable Transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Louisville, Kentucky
March 11, 1994
68
<PAGE> 6
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Net Assets Available
for Benefits - Combined Funds
<TABLE>
<CAPTION>
December 31
-----------
Assets 1993 1992
------ ---- ----
<S> <C> <C>
Investments, at fair value (note 4):
Common stock of Trans Financial Bancorp, Inc. $4,224,331 $3,188,934
Common trust funds 1,621,468 1,560,735
--------- ---------
5,845,799 4,749,669
Accrued interest and dividends receivable 32,953 23,920
Due from Trans Financial Bancorp, Inc.
Employee Stock Ownership Plan - 356
Due from Plan Trustee - 584
Contribution receivable from employers 4,082 87,132
--------- ---------
Total assets 5,882,834 4,861,661
--------- ---------
Liabilities
-----------
Total liabilities - -
--------- ---------
Net assets available for benefits $5,882,834 $4,861,661
========= =========
</TABLE>
See accompanying notes to financial statements.
69
<PAGE> 7
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Changes in Net Assets Available
for Benefits - Combined Funds
<TABLE>
<CAPTION>
Year ended
December 31
-------------------------
1993 1992
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Dividends on Trans Financial Bancorp,
Inc. common stock $ 118,431 $ 91,326
Common trust fund distributions 44,355 29,278
--------- ---------
162,786 120,604
Net appreciation in fair value of investments (note 4) 225,470 707,024
--------- ---------
388,256 827,628
--------- ---------
Contributions:
Participants 522,945 303,793
Employers 350,163 213,984
--------- ---------
873,108 517,777
--------- ---------
Total additions 1,261,364 1,345,405
--------- ---------
Deductions from net assets attributed to:
Benefits paid to participants (217,759) (235,421)
Administrative fees (22,432) (18,332)
--------- ---------
Total deductions (240,191) (253,753)
--------- ---------
Net increase 1,021,173 1,091,652
Net assets available for benefits at beginning of year 4,861,661 3,770,009
--------- ---------
Net assets available for benefits at end of year $5,882,834 $4,861,661
========= =========
</TABLE>
See accompanying notes to financial statements.
70
<PAGE> 8
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Net Assets Available
for Benefits - Employer Stock Fund
<TABLE>
<CAPTION>
December 31
-----------
ASSETS 1993 1992
------ ---- ----
<S> <C> <C>
Investments, at fair value (note 4):
Common stock of Trans Financial Bancorp, Inc. $4,224,331 $3,188,934
Common trust fund 22,306 33,516
--------- ---------
4,246,637 3,222,450
Accrued interest and dividends receivable 31,613 23,517
Due from Trans Financial Bancorp, Inc.
Employee Stock Ownership Plan - 356
Due from Plan Trustee - 584
Contribution receivable from (payable to) employers (5,944) 81,365
--------- ---------
Total assets 4,272,306 3,328,272
--------- ---------
Liabilities
-----------
Due to Growth Equity Fund - 130
Due to Bond Fund - 85
Due to Guaranteed Investment Contract Fund 4,003 -
--------- ---------
Total liabilities 4,003 215
--------- ---------
Net assets available for benefits $4,268,303 $3,328,057
========= =========
</TABLE>
See accompanying notes to financial statements.
71
<PAGE> 9
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Changes in Net Assets Available
for Benefits - Employer Stock Fund
<TABLE>
<CAPTION>
Year ended
December 31
-------------------------
1993 1992
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Dividends on Trans Financial Bancorp, Inc.
common stock $ 118,431 $ 91,326
Common trust fund distributions 2,148 2,282
--------- ---------
120,579 93,608
Net appreciation in fair value of investments (note 4) 176,429 647,185
--------- ---------
297,008 740,793
--------- ---------
Contributions:
Participants 293,352 172,066
Employers 350,163 213,984
--------- ---------
643,515 386,050
--------- ---------
Total additions 940,523 1,126,843
--------- ---------
Deductions from net assets attributed to:
Benefits paid to participants (103,748) (117,772)
Administrative fees (15,728) (11,153)
--------- ---------
Total deductions (119,476) (128,925)
--------- ---------
Participant election transfers 119,199 56,110
--------- ---------
Net increase 940,246 1,054,028
Net assets available for benefits at beginning of year 3,328,057 2,274,029
--------- ---------
Net assets available for benefits at end of year $4,268,303 $3,328,057
========= =========
</TABLE>
See accompanying notes to financial statements.
72
<PAGE> 10
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Net Assets Available
for Benefits - Growth Equity Fund
<TABLE>
<CAPTION>
December 31
-----------
Assets 1993 1992
------ ---- ----
<S> <C> <C>
Investments, at fair value - Common trust funds (note 4) $838,733 $821,500
Accrued interest receivable 658 22
Due from Employer Stock Fund - 130
Contribution receivable from employers 5,696 3,361
------- -------
Total assets 845,087 825,013
------- -------
Liabilities
-----------
Total liabilities - -
------- -------
Net assets available for benefits $845,087 $825,013
======= =======
</TABLE>
See accompanying notes to financial statements.
73
<PAGE> 11
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Changes in Net Assets Available
for Benefits - Growth Equity Fund
<TABLE>
<CAPTION>
Year ended
December 31
-------------------------
1993 1992
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Common trust fund distributions $ 16,568 $ 816
Net appreciation in fair value of investments (note 4) 25,540 40,644
------- -------
42,108 41,460
------- -------
Contributions - participants 124,923 75,245
------- -------
Total additions 167,031 116,705
------- -------
Deductions from net assets attributed to:
Benefits paid to participants (74,391) (84,003)
Administrative fees (3,362) (3,614)
------- -------
Total deductions (77,753) (87,617)
------- -------
Participant election transfers (69,204) (12,758)
------- -------
Net increase 20,074 16,330
Net assets available for benefits at beginning of year 825,013 808,683
------- -------
Net assets available for benefits at end of year $845,087 $825,013
======= =======
</TABLE>
See accompanying notes to financial statements.
74
<PAGE> 12
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Net Assets Available
for Benefits - Bond Fund
<TABLE>
<CAPTION>
December 31
-----------
Assets 1993 1992
------ ---- ----
<S> <C> <C>
Investments, at fair value - Common trust funds (note 4) $331,875 $277,386
Accrued interest receivable 206 13
Due from Employer Stock Fund - 85
Contribution receivable from employers 2,578 1,562
------- -------
Total assets 334,659 279,046
------- -------
Liabilities
-----------
Total liabilities - -
------- -------
Net assets available for benefits $334,659 $279,046
======= =======
</TABLE>
See accompanying notes to financial statements.
75
<PAGE> 13
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Changes in Net Assets Available
for Benefits - Bond Fund
<TABLE>
<CAPTION>
Year ended
December 31
--------------------------
1993 1992
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Common trust fund distributions $ 23,783 $ 19,737
Net appreciation in fair value of investments (note 4) 3,200 1,034
------- -------
26,983 20,771
------- -------
Contributions - participants 64,773 34,242
------- -------
Total additions 91,756 55,013
------- -------
Deductions from net assets attributed to:
Benefits paid to participants (6,498) (18,396)
Administrative fees (1,444) (1,477)
------- -------
Total deductions (7,942) (19,873)
------- -------
Participant election transfers (28,201) (30,733)
------- -------
Net increase 55,613 4,407
Net assets available for benefits at beginning of year 279,046 274,639
------- -------
Net assets available for benefits at end of year $334,659 $279,046
======= =======
</TABLE>
See accompanying notes to financial statements.
76
<PAGE> 14
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Net Assets Available
for Benefits - Guaranteed Investment Contract Fund
<TABLE>
<CAPTION>
December 31
-----------
Assets 1993 1992
------ ---- ----
<S> <C> <C>
Investments, at fair value - Common trust funds (note 4) $428,554 $428,333
Accrued interest receivable 476 368
Due from Employer Stock Fund 4,003 -
Contribution receivable from employers 1,752 844
------- -------
Total assets 434,785 429,545
------- -------
Liabilities
-----------
Total liabilities - -
------- -------
Net assets available for benefits $434,785 $429,545
======= =======
</TABLE>
See accompanying notes to financial statements.
77
<PAGE> 15
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Statements of Changes in Net Assets Available
for Benefits Guaranteed Investment Contract Fund
<TABLE>
<CAPTION>
Year ended
December 31
------------------------
1993 1992
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Common trust fund distributions $ 1,856 $ 6,443
Net appreciation in fair value of investments (note 4) 20,301 18,161
------- -------
22,157 24,604
------- -------
Contributions - participants 39,897 22,240
------- -------
Total additions 62,054 46,844
------- -------
Deductions from net assets attributed to:
Benefits paid to participants (33,122) (15,250)
Administrative fees (1,898) (2,088)
------- -------
Total deductions (35,020) (17,338)
------- -------
Participant election transfers (21,794) (12,619)
------- -------
Net increase 5,240 16,887
Net assets available for benefits at beginning of year 429,545 412,658
------- -------
Net assets available for benefits at end of year $434,785 $429,545
======= =======
</TABLE>
See accompanying notes to financial statements.
78
<PAGE> 16
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
December 31, 1993 and 1992
(1) Information About the Plan and Accounting Principles
The accompanying financial statements have been prepared on the accrual
basis of accounting. Certain prior year amounts have been reclassified
to conform with 1993 presentations.
The Trans Financial Bancorp Savings Investment Plan (Plan) is a profit
sharing thrift plan which is intended to meet the requirements of
Section 401(k) and related provisions of the Internal Revenue Code of
1986. The Plan is self-administered by Trans Financial Bancorp, Inc.
(the Corporation) through a Plan Committee. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Assets of the Plan are valued at fair value based on quoted market prices,
if available. Investments in common trust funds are valued at
withdrawal value from the fund. The specific identification cost basis
is used in determining the cost of investment securities sold.
(2) Participants and Eligibility
The Plan is a pooled fund of assets for participating employees of Trans
Financial Bancorp, Inc., Trans Financial Bank, N.A., Trans Financial
Bank, F.S.B. and Trans Financial Bank of Tennessee, F.S.B.
Participation in the Plan is open to any employee of the Corporation
and its subsidiaries who is not a member of a collective bargaining
unit, who is at least 21 years of age and who has completed at least
six months of employment starting with his or her first hour of service
(as defined in the Plan). An employee will be admitted to participation
in the Plan as of the earliest January 1 or July 1 after the employee
has met these requirements. Transfer of employment from one company to
another company, within the Corporation, will not be deemed an
interruption in employment. If an employee leaves the Corporation as
a Plan participant and is later rehired, the employee will come back
into the Plan immediately. Employees who are covered by a collective
bargaining agreement may not join the Plan until membership has been
negotiated and agreed to in writing.
Executive officers and diretors of the Corporation who are also employed
in the subsidiaries of the Corporation are, like all other employees of
the participating employers, eligible to participate in the Plan. On
December 31, 1993, the participating employers had 530 full and part-time
employees, each of whom will be eligible to participate in the Plan upon
their completion of the eligibility requirements described above.
(3) Income Tax Status
On July 11, 1989, the Trans Financial Bancorp Savings Investment Plan
received a favorable determination letter from the Internal
Revenue Service and as such, the Plan is exempt from Federal income tax,
and amounts contributed by the employers as well as dividends, interest
or gains realized by the Plan are not taxed to the employee until a
distribution from the Plan is made. In addition, any shares of the
Corporation's common stock distributed to an employee upon termination
of employment are not taxed to the employee until the time of
disposition of such shares.
(Continued)
79
<PAGE> 17
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
(4) Investments
Investments of the Plan are summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------
1993 1992
---- ----
Fair Value Fair Value
---------- ----------
<S> <C> <C>
Investments with fair value determined by quoted
market price:
Common stock - Trans Financial Bancorp, Inc.;
256,020 in 1993 and 157,478 in 1992 (A) $4,224,331 $3,188,934
Investments with fair value determined by withdrawal
value from common trust funds:
PNC Institutional Bond Fund - 271,184
PNC Employee Benefit Trust Growth Equity Fund - 812,647
PNC Guaranteed Investment Contract Fund - 334,542
Employee Benefit Short-Term Investment Fund
of PNC Bank (A) 1,621,468 142,362
--------- ---------
$5,845,799 $4,749,669
========= =========
</TABLE>
(A) This investment individually represents 5% or more of the Plan's
net assets at December 31, 1993 and 1992.
The investments are summarized by fund as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------
1993 1992
---- ----
Fair Value Fair Value
---------- ----------
<S> <C> <C>
Employer Stock Fund:
Common stock - Trans Financial Bancorp, Inc. $4,224,331 $3,188,934
Employee Benefit Short-Term Investment Fund
of PNC Bank 22,306 33,516
--------- ---------
4,246,637 3,222,450
--------- ---------
Growth Equity Fund:
PNC Employee Benefit Trust Growth Equity Fund - 812,647
Employee Benefit Short-Term Investment Fund
of PNC Bank 838,733 8,853
--------- ---------
838,733 821,500
--------- ---------
Bond Fund:
PNC Institutional Bond Fund - 271,184
Employee Benefit Short-Term Investment Fund
of PNC Bank 331,875 6,202
--------- ---------
331,875 277,386
--------- ---------
Guaranteed Investment Contract (GIC) Fund:
PNC Guaranteed Investment Contract Fund - 334,542
Employee Benefit Short-Term Investment Fund
of PNC Bank 428,554 93,791
--------- ---------
428,554 428,333
--------- ---------
$5,845,799 $4,749,669
========= =========
(Continued)
</TABLE>
80
<PAGE> 18
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
(4) Investments (Continued)
During 1993 and 1992, the Plan's investments (including investments
bought, sold and held) appreciated in value as follows. The appreciation
indicated for individual funds is attributed to the investment type for
each fund as previously indicated.
<TABLE>
<CAPTION>
Employer Growth
Stock Equity Bond GIC Combined
Fund Fund Fund Fund Funds
-------- ------ ----- ---- --------
<S> <C> <C> <C> <C> <C>
Appreciation for the year - 1993 $176,429 $25,540 $3,200 $20,301 $225,470
======= ====== ===== ====== =======
Appreciation for the year - 1992 $647,185 $40,644 $1,034 $18,161 $707,024
======= ====== ===== ====== =======
</TABLE>
(5) Investment Programs, Contributions to the Plan, and Benefit Payments
Participants' Contributions
Upon enrollment or re-enrollment, each participant shall direct that
their contributions be invested in one or more of the following
investment options with a division of investment options permitted in
increments of 25%, such that the total equals 100%. Participants are
immediately 100% vested in their voluntary contributions.
- Employer Stock Fund
Primarily invested in common stock of the Corporation.
- Growth Equity Fund
Primarily invested in high quality, well diversified, large
capitalization stocks, or common trust funds investing in similar
securities.
- Bond Fund
Primarily invested in high quality corporate and United States
Government securities with maturities of ten years or less, or common
trust funds investing in similar securities.
- Guaranteed Investment Contract Fund
Primarily invested in guaranteed investment contracts offered by large,
top performing insurance companies, with maturities staggered within
five years, or common trust funds investing in similar securities.
Participants may revise the direction of their contributions on
January 1 or July 1 of any year. Participants may contribute up to 10%
of their salary, to a maximum of $8,994 in 1993, to the Plan.
(Continued)
81
<PAGE> 19
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
(5) Investment Programs, Contributions to the Plan, and Benefit Payments
(Continued)
Employer Contributions
Participating employers match employee contributions up to 4% of the
employee's salary. Participating employer contributions are invested,
to the extent possible, in the Employer Stock Fund. Employees have a
vested interest in the participating employers' matching contribution
in accordance with the following schedule:
<TABLE>
<CAPTION>
Years Vested
of service percentage
---------- ----------
<S> <C>
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
Employer contributions, earnings and other changes in assets of the Plan
are allocated to participants' accounts as of June 30 and December 31
of each year. Plan earnings are allocated to each participant's
account based on the participant's account balance in proportion to
the total balances of all participants in the Plan.
Benefit Payments
Upon termination of service, a participant may elect to receive the
value of their account in a lump-sum distribution or periodic payments
over a period not to exceed the life expectancy of the participant or
their beneficiary.
The number of participants in each fund was as follows:
<TABLE>
<CAPTION>
December 31
--------------------
1993 1992
---- ----
<S> <C> <C>
Employer Stock Fund 248 153
Growth Equity Fund 191 132
Bond Fund 133 85
GIC Fund 99 93
=== ===
</TABLE>
The total number of participants in the Plan was less than the sum of
the number of participants shown above because many were participating
in more than one fund.
Upon termination of employment of a participant who was not fully vested
in their employer account, the non-vested portion of their employer
account shall be segregated in a separate account until the
participant has a period of break in service of five years or they
receive a distribution for the vested portion of their accounts, if
earlier. If the former participant is not reemployed by the Company or
an affiliated company before they have a period of break in service of
five years or receives such a distribution, the non-vested portion of
their employer account, so segregated, shall be forfeited. Any amounts
forfeited shall be applied to reduce Company contributions.
(Continued)
82
<PAGE> 20
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
(6) Plan Termination
Although it has not expressed any intent to do so, the
Corporation has the right under the Plan to discontinue
its contributions at any time and to terminate the Plan
subject to the provisions of the Employee Retirement
Income Security Act of 1974. In the event of Plan
termination, participants' balances in all accounts
shall immediately vest and become nonforfeitable.
(7) Reconciliation of Form 5500
The Department of Labor requires that amounts allocated to accounts of
persons who have elected to withdraw from the Plan but have not
yet been paid be reported as a liability on Form 5500. Under
generally accepted accounting principles, these amounts are not
accrued as a liability and are not included in distributions
paid. The reconciliation of the net increase in net assets
available for benefits for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Form 5500, item 32, line i $ 982,637 $1,027,208
Reversal of benefits payable included
in Form 5500:
1993 167,695 -
1992 (129,159) 129,159
1991 - (64,715)
--------- ---------
Financial statements, net increase $1,021,173 $1,091,652
========= =========
</TABLE>
83
<PAGE> 21
Item 27a - Schedule of Assets Held for Investment Purposes
Employer Identification Number: 61-0156617
Plan Year Ending: December 31, 1993
Plan Number: 001
<TABLE>
<CAPTION>
Schedule A
----------
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Number of
Shares or Current
Issuer and Description Units Cost value
---------------------- --------- ----- -------
<S> <C> <C> <C>
EMPLOYER STOCK FUND
- -------------------
* Trans Financial Bancorp, Inc. - Common Stock 256,020 $2,834,394 $4,224,331
Employee Benefit Short-Term Investment
Fund of PNC Bank 22,306 22,306 22,306
======= --------- ---------
Total Employer Stock Fund 2,856,700 4,246,637
--------- ---------
GROWTH EQUITY FUND
- ------------------
Employee Benefit Short-Term Investment
Fund of PNC Bank 838,733 838,733 838,733
======= --------- ---------
Total Growth Equity Fund 838,733 838,733
--------- ---------
BOND FUND
- ---------
Employee Benefit Short-Term Investment
Fund of PNC Bank 331,875 331,875 331,875
======= --------- ---------
Total Bond Fund 331,875 331,875
--------- ---------
GUARANTEED INVESTMENT CONTRACT FUND
- -----------------------------------
Employee Benefit Short-Term Investment
Fund of PNC Bank 428,554 428,554 428,554
======= --------- ---------
Total Guranteed Investment Contract Fund 428,554 428,554
--------- ---------
Total Investments $4,455,862 $5,845,799
========= =========
</TABLE>
* Party-in-interest to the Plan
84
<PAGE> 22
Item 27d - Schedule of Reportable Transactions
Employer Identification Number: 61-0156617
Plan Year Ending: December 31, 1993
Plan Number: 001
<TABLE>
<CAPTION>
Schedule D
----------
TRANS FINANCIAL BANCORP
SAVINGS INVESTMENT PLAN
Current Value of
Identity of Description Purchase Selling Asset on Net Gain
Party Involved of Asset Price Price Cost of Asset Transaction Date or (Loss)
-------------- -------- ----- ----- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Trans
Financial
Bancorp, Inc. Common Stock $ 884,873 (15) - 884,873 884,873 -
PNC Bank Employee Benefit
Short-Term
Investment Fund 2,312,322 (31) - 2,312,322 2,312,322 -
PNC Bank Employee Benefit
Short-Term
Investment Fund - 833,217 (17) 833,217 833,217 -
PNC Bank PNC Employee
Benefit Trust
Growth Equity
Fund 1,869,388 (21) - 1,869,388 1,869,388 -
PNC Bank PNC Employee
Benefit Trust
Growth Equity
Fund - 1,855,639 (10) 1,869,388 1,855,639 (13,749)
PNC Bank PNC Institutional
Bond Fund - 1,264,841 (4) 1,014,885 1,264,841 249,956
PNC Bank PNC Guaranteed
Investment
Contract Fund - 491,621 (3) 435,191 491,621 56,430
</TABLE>
Amounts in parentheses indicate the number of transactions.
85
