UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarter ended June 30, 1995 Commission File Number 0-13030
Trans Financial, Inc.
(Exact name of registrant as specified in its charter)
Kentucky 61-1048868
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 East Main Street, Bowling Green, Kentucky 42101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (502)781-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
The number of shares outstanding of the issuer's class of common stock on August
9, 1995: 11,249,396 shares.
The Exhibit Index is on page 21. This filing contains 23 pages (including this
facing sheet).
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
(Unaudited)
In thousands, except share data June 30 December 31 June 30
1995 1994 1994
Assets
Cash and due from banks $66,446 $80,828 $72,909
Interest-bearing deposits with banks 197 197 196
Federal funds sold and
resale agreements 11,775 - 60,491
Mortgage loans held for sale 21,824 6,541 11,896
Securities available for sale (amortized
cost of $232,088 as of June 30, 1995;
$242,079 as of December 31, 1994;
and $228,518 as of June 30, 1994) 227,435 229,643 222,002
Securities held to maturity (market
value of $83,503 as of June 30, 1995;
$81,209 as of December 31, 1994;
and $124,904 as of June 30, 1994) 83,359 84,758 126,081
Loans, net of unearned income 1,193,338 1,143,716 1,055,235
Less allowance for loan losses 13,429 12,529 12,836
Net loans 1,179,909 1,131,187 1,042,399
Premises and equipment, net 37,622 36,440 36,040
Other assets 50,894 48,241 39,301
Total assets $1,679,461 $1,617,835 $1,611,315
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $183,940 $192,433 $172,209
Interest bearing 1,235,939 1,143,076 1,195,610
Total deposits 1,419,879 1,335,509 1,367,819
Federal funds purchased and
repurchase agreements 49,382 74,553 39,800
Other short-term borrowings 38,024 48,033 44,398
Long-term debt 36,991 37,334 41,469
Other liabilities 13,141 10,774 6,713
Total liabilities 1,557,417 1,506,203 1,500,199
Shareholders' equity:
Preferred stock - - 1,010
Common stock, no par value. Authorized
50,000,000 shares; issued and
outstanding 11,244,793; 11,203,247;
and 11,173,019 shares, 21,084 21,006 20,481
respectively
Additional paid-in capital 43,227 42,810 42,959
Retained earnings 64,136 59,587 54,879
Unrealized net gain (loss) on
securities available for sale,
net of tax (3,023) (8,073) (4,240)
Employee Stock Ownership Plan shares
purchased with debt (3,380) (3,698) (3,973)
Total shareholders' equity 122,044 111,632 111,116
Total liabilities
and shareholders' equity $1,679,461 $1,617,835 $1,611,315
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
(Unaudited)
In thousands, except per share Three Months Six Months
data
For the periods ended June 30 1995 1994 1995 1994
Interest income
Loans, including fees $28,148 $22,770 $54,829 $43,756
Federal funds sold and resale
agreements 312 141 553 310
Securities available for sale 3,193 2,821 6,498 5,565
Securities held to maturity 1,293 2,044 2,578 4,212
Mortgage loans held for sale 285 346 442 895
Interest-bearing deposits with 5 15 9 24
banks
Total interest income 33,236 28,137 64,909 54,762
Interest expense
Deposits 14,317 10,114 26,970 20,185
Federal funds purchased
and repurchase agreements 392 249 857 452
Long-term debt and other
borrowings 1,330 1,104 2,842 2,063
Total interest expense 16,039 11,467 30,669 22,700
Net interest income 17,197 16,670 34,240 32,062
Provision for loan losses 780 574 1,300 1,012
Net interest income after
provision for loan losses 16,417 16,096 32,940 31,050
Non-interest income
Service charges on deposit 2,254 1,898 4,145 3,578
accounts
Mortgage banking income 1,171 425 2,033 1,122
Gains on sales of securities
available for sale, net - 11 - 88
Gain on sale of mortgage 1,687 - 1,687 -
servicing
Trust services 332 315 650 622
Brokerage income 412 266 878 536
Other 1,069 952 2,192 2,009
Total non-interest income 6,925 3,867 11,585 7,955
Non-interest expenses
Compensation and benefits 7,470 6,426 14,693 12,891
Net occupancy expense 1,200 960 2,288 2,078
Furniture and equipment 1,523 1,250 3,006 2,415
expense
Deposit insurance 777 799 1,539 1,614
Professional fees 789 1,036 1,719 1,793
Postage, printing & supplies 1,003 899 1,833 1,765
Communications 417 267 790 526
Other 4,006 3,263 6,880 6,119
Total non-interest expenses 17,185 14,900 32,748 29,201
Income before income taxes 6,157 5,063 11,777 9,804
Income tax expense 2,038 1,638 3,863 3,242
Net income $4,119 $3,425 $7,914 $6,562
Net income available
for common stock $4,119 $3,405 $7,914 $6,522
Primary earnings per share $0.36 $0.30 $0.70 $0.58
Fully-diluted earnings per share $0.36 $0.30 $0.70 $0.58
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
In thousands
For the six months ended June 30 1995 1994
Balance January 1 $111,632 $112,036
Net income 7,914 6,562
Issuance of common stock 496 278
Cash dividends declared:
Common stock (3,366) (2,650)
Preferred stock - (40)
Change in unrealized gain (loss) on
securities available for sale,
net of taxes 5,050 (4,958)
ESOP debt reduction 318 140
ESOP shares purchased with debt - (252)
Balance June 30 $122,044 $111,116
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(Unaudited)
In thousands
For the six months ended June 30 1995 1994
Cash flows from operating activities:
Net income $7,914 $6,562
Adjustments to reconcile net income to cash
provided be operating activities:
Provision for loan losses 1,300 1,012
Gains on sales of securities available for sale - (88)
Losses on sales of mortgage loans
held for sale, net 21 172
Gain on sale of mortgage loan servicing rights (1,687) -
Gain on sale of premises and equipment (174) (193)
Depreciation, amortization and accretion, net 4,017 3,785
Proceeds from sale of mortgage loans held for sale 28,553 143,651
Originations of mortgage loans held for sale (43,857) (110,541)
Decrease (increase) in other assets 1,358 (2,041)
(Decrease) in other liabilities (700) (825)
Net cash provided by operating activities (3,255) 41,494
Cash flows from investing activities:
Net decrease in interest-bearing deposits
with banks - 251
Net (increase) in federal funds sold
and resale agreements (11,775) (27,713)
Proceeds from sales of securities available for - 6,989
sale
Proceeds from maturities, prepayment and call of securities:
Available for sale 21,735 45,551
Held to maturity 4,224 11,640
Purchases of securities:
Available for sale (12,249) (20,505)
Held to maturity (3,000) (14,809)
Net increase in loans (49,572) (49,899)
Purchases of premises and equipment (3,803) (5,322)
Proceeds from disposals of premises and equipment 644 885
Net cash and cash equivalents inflow from 37,479 -
acquisition
Net cash (used in) investing activities (16,317) (52,932)
Cash flows from financing activities:
Net increase (decrease) in deposits 43,265 (8,408)
Net increase (decrease) in federal funds purchased
and repurchase agreements (25,171) 10,096
Net increase (decrease) in other short-term (10,009) 19,398
borrowings
Repayment of long-term debt (25) (2,860)
Proceeds from issuance of common stock 496 278
Dividends paid (3,366) (2,690)
Net cash provided by financing activities 5,190 15,814
Net decrease in cash and cash equivalents (14,382) 4,376
Cash and cash equivalents at beginning of year 80,828 68,533
Cash and cash equivalents at end of period (note 3) $66,446 $72,909
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been reflected in the accompanying financial
statements. Results of interim periods are not necessarily indicative of results
to be expected for the full year.
The accounting and reporting policies of Trans Financial, Inc. and its
subsidiaries ("the company") conform to generally accepted accounting principles
and general practices within the banking industry. The consolidated financial
statements include the accounts of Trans Financial, Inc. and its wholly-owned
subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation. A description of other significant accounting
policies is presented in the 1994 annual report to shareholders.
Results for the first six months of 1994 have been restated to include FGC
Holding Company, which was acquired during the third quarter of 1994 and
accounted for using the pooling of interests method of accounting.
(2) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses follows:
In thousands Three Months Six Months
For the periods ended June 1995 1994 1995 1994
30
Balance beginning of period $12,880 $12,640 $12,529 $12,505
Provision for loan losses 780 574 1,300 1,012
Loans charged off (313) (521) (632) (961)
Recoveries of loans 82 143 232 280
previously charged off
Net charge-offs (231) (378) (400) (681)
Balance June 30 $13,429 $12,836 $13,429 $12,836
(3) Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and amounts due from banks. Certain non-cash investing and financing
transactions are summarized as follows:
Six months ended June 30 (Dollars in thousands) 1995 1994
Securities transferred from held to maturity
to available for sale $ - $22,657
Increase (decrease) in unrealized loss
on securities available for sale, net of tax (5,050) 4,958
Loans transferred to foreclosed property 186 744
Reclassification of debt from long-term to short-term - 10,000
Debt transactions of Employee Stock Ownership Plan (net) 318 (112)
(4) Impaired Loans
The company adopted on a prospective basis effective January 1, 1995,
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"). 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
accrues interest income daily on impaired loans classified as accruing. Cash
receipts on impaired loans are applied to the recorded investment in the loan,
including accrued interest receivable. The adoption of SFAS 114 did not have a
material effect on the company's consolidated financial statements.
The company's recorded investment in impaired loans was $8,813,000 at June 30,
1995. Of that amount, $8,653,000 represents loans for which an allowance for
loan losses, in the amount of $1,670,000, has been established under SFAS 114.
The average recorded investment of impaired loans was $6,986,000 for the three
months ended June 30, 1995, and $5,810,000 for the six months then ended.
Interest income recognized on impaired loans totaled $23,000 for the three
months ended June 30, 1995, and $59,000 for the six-month period ended June 30,
1995.
<PAGE>
(5) Mortgage Servicing Rights
The company adopted on a prospective basis effective January 1, 1995,
Statement of Financial Accounting Standards No. 122, Accounting for Mortgage
Servicing Rights ("SFAS 122"). SFAS 122 requires that rights to service mortgage
loans for others be recognized as assets, without regard to whether those assets
were acquired in purchase transactions or were acquired through loan
originations. SFAS 122 also eliminates the previous requirement that gains on
mortgage loan sales be offset against the related mortgage servicing right
asset. The adoption of this statement resulted in a $274,000 increase in
mortgage banking income in the first six months of 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Incorporated in 1981, Trans Financial, Inc. ("the company") is a bank and
savings and loan holding company registered under the Bank Holding Company Act
of 1956 and the Home Owners' Loan Act, which has two commercial bank
subsidiaries and one thrift subsidiary: Trans Financial Bank, National
Association, headquartered in Bowling Green, Kentucky ("TFB-KY"); Trans
Financial Bank Tennessee, National Association, headquartered in Cookeville,
Tennessee; and Trans Financial Bank, Federal Savings Bank, headquartered in
Russellville, Kentucky.
In addition, the company operates, as subsidiaries of TFB-KY, a full-service
securities broker/dealer, Trans Financial Investment Services, Inc.; a mortgage
banking company, Trans Financial Mortgage Company; and a full-service travel
agency, Trans Travel, Inc.
On August 31, 1994, the company merged with FGC Holding Company ("FGC") of
Martin, Kentucky, the holding company for First Guaranty National Bank, with
approximately $125 million in assets. Under the terms of the merger, the shares
of FGC common stock outstanding were converted into 1,050,000 shares of common
stock of the company and the shares of FGC preferred stock were retired. First
Guaranty became Trans Financial Bank of Martin, National Association, on
September 30, 1994, and was consolidated with TFB-KY on March 23,1995. The FGC
transaction has been accounted for using the pooling of interests method of
accounting and, accordingly, all financial data has been restated as if the
entities were combined for all periods presented.
The company had total consolidated assets of $1.679 billion on June 30, 1995.
Loans totaled $1.193 billion on that date, deposits were $1.420 billion and
shareholders' equity was $122 million.
The discussion that follows is intended to provide additional insight into the
company's financial condition and results of operations. This discussion should
be read in conjunction with the consolidated financial statements and
accompanying notes presented in Item 1 of Part I of this report.
Results of Operations
Overview
For the six months ended June 30, 1995, the company's net income increased
21%, from $6.6 million, or $.58 per common share, to $7.9 million, or $.70 per
share, as compared to the first half of 1994. Results for the first half of 1995
produced an annualized return on average assets of .98% and a return on average
common equity of 13.62%, compared with returns of 0.83% and 11.82%,
respectively, for the comparable period of 1994.
For the second quarter of 1995, net income increased from $3.4 million, or
$.30 per common share, to $4.1 million, or $.36 per share, as compared to the
second quarter of 1994. Return on average assets for the second three months of
1995 was 1.00% and a return on average common equity was 13.68%, compared with
returns of 0.86% and 12.27%, respectively, for the second quarter of 1994.
Net Interest Income
Net interest income totaled $34.2 million in the first six months of 1995,
compared with $32.1 million in the comparable 1994 period - a 7% increase. For
the first half of this year, net interest margin (net interest income as a
percentage of average interest-earning assets) increased 21 basis points, from
4.41% to 4.62%. This reflects the positive impact of prime rate increases during
1994 and a more favorable mix of earning assets, primarily due to continued loan
growth and the redeployment of funds from matured investment securities.
Increases in the prime lending rate had a positive impact on net interest margin
because approximately $575 million of the company's commercial and consumer
loans are tied to the prime rate. At the same time, while rates on earning
assets rose, increases in the company's funding costs had not kept pace with the
increase in loan yields.
In the second quarter of 1995, net interest income increased to $17.2 million
- a 3% increase from the $16.7 million reported for the second quarter of 1994.
Net interest margin for the second quarter was unchanged, at 4.56%, from the
comparable quarter of the prior year. As the prime rate leveled off in the
second quarter of 1995, increases in the company's funding costs, which had
lagged behind the increases in loan yields, continued to rise. As a result, the
company's net interest spread (the difference between the gross yield on
interest-earning assets and the rate paid on interest-bearing liabilities)
decreased, negatively impacting the net interest margin. This negative impact
was offset by increased net interest income due to growth in the balance sheet.
The following tables show, for the six- and three-month periods ended June
30, 1995 and 1994, the relationships between interest income and expense and the
levels of interest-earning assets and interest-bearing liabilities.
<PAGE>
<TABLE>
Average Consolidated Balance Sheets and Net Interest Analysis
For the six months ended June 30
Dollars in thousands
<CAPTION>
1995 1994
Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans, net of unearned income $1,156,785 $54,829 9.56% $1,047,582 $43,756 8.42%
Securities available for sale 224,491 6,498 5.84% 228,502 5,565 4.91%
Securities held to maturity 85,708 2,578 6.07% 146,619 4,212 5.79%
Mortgage loans held for sale 9,963 442 8.95% 28,169 895 6.41%
Federal funds sold
and other interest income 19,091 562 5.94% 16,592 334 4.06%
Total interest-earning assets /
interest income 1,496,038 64,909 8.75% 1,467,464 54,762 7.53%
Non-interest-earning assets:
Cash and due from banks 65,797 63,872
Premises and equipment 37,357 34,116
Other assets 36,701 25,707
Total assets $1,635,893 $1,591,159
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand(NOW) $136,997 $1,748 2.57% $144,165 $1,691 2.37%
TransPlus (SuperNOW) 93,909 1,288 2.77% 102,346 1,194 2.35%
Savings deposits 135,130 1,963 2.93% 159,290 2,210 2.80%
Money market accounts 47,638 742 3.14% 57,127 724 2.56%
Certificates of deposit 715,782 18,962 5.34% 635,910 12,427 3.94%
Other time deposits 88,328 2,267 5.18% 94,860 1,939 4.12%
Total interest-bearing 1,217,784 26,970 4.47% 1,193,698 20,185 3.41%
deposits
Federal funds purchased
and repurchase agreements 42,041 857 4.11% 34,025 452 2.68%
Long-term debt and
other borrowings 82,031 2,842 6.99% 76,489 2,063 5.44%
Total borrowed funds 124,072 3,699 6.01% 110,514 2,515 4.59%
Total interest-bearing liabilities /
interest expense 1,341,856 30,669 4.61% 1,304,212 22,700 3.51%
Non-interest-bearing liabilities:
Non-interest-bearing 164,367 166,153
deposits
Other liabilities 12,457 8,529
Total liabilities 1,518,680 1,478,894
Shareholders' equity 117,213 112,265
Total liabilities
and shareholders' equity $1,635,893 $1,591,159
Net interest-rate spread 4.14% 4.02%
Impact of non-interest bearing
sources and other changes in
balance sheet composition 0.48% 0.39%
Net interest income /
margin on interest-earning assets $34,240 4.62% $32,062 4.41%
Net interest margin is net interest income divided by average interest-earning
assets. For computational purposes, non-accrual loans are included in interest-
earning assets. Net interest spread is the difference between the average rate
of interest earned on interest-earning assets and the average rate of interest
expensed on interest-bearing liabilities. Average balances are based on daily
balances.
</TABLE>
<PAGE>
<TABLE>
Average Consolidated Balance Sheets and Net Interest Analysis
For the three months ended June 30
Dollars in thousands
<CAPTION>
1995 1994
Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans, net of unearned income $1,172,831 $28,148 9.63% $1,067,323 $22,770 8.56%
Securities available for sale 222,425 3,193 5.76% 221,712 2,821 5.10%
Securities held to maturity 84,698 1,293 6.12% 142,665 2,044 5.75%
Mortgage loans held for sale 12,994 285 8.80% 21,573 346 6.43%
Federal funds sold
and other interest income 20,754 317 6.13% 12,577 156 4.98%
Total interest-earning assets /
interest income 1,513,702 33,236 8.81% 1,465,850 28,137 7.70%
Non-interest-earning assets:
Cash and due from banks 61,530 64,486
Premises and equipment 37,738 34,682
Other assets 38,021 27,947
Total assets $1,650,991 $1,592,965
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand(NOW) $137,539 $892 2.60% $146,206 $844 2.32%
TransPlus (SuperNOW) 92,830 650 2.81% 100,684 589 2.35%
Savings deposits 134,187 975 2.91% 160,097 1,117 2.80%
Money market accounts 46,143 372 3.23% 55,405 355 2.57%
Certificates of deposit 737,486 10,214 5.56% 638,281 6,216 3.91%
Other time deposits 89,567 1,214 5.44% 93,933 993 4.24%
Total interest-bearing deposits 1,237,752 14,317 4.64% 1,194,606 10,114 3.40%
Federal funds purchased
and repurchase agreements 37,499 392 4.19% 35,657 249 2.80%
Long-term debt and
and other borrowings 75,192 1,330 7.09% 80,569 1,104 5.50%
Total borrowed funds 112,691 1,722 6.13% 116,226 1,353 4.67%
Total interest-bearing liabilities /
interest expense 1,350,443 16,039 4.76% 1,310,832 11,467 3.51%
Non-interest-bearing liabilities:
Non-interest-bearing deposits 166,862 162,225
Other liabilities 12,930 7,570
Total liabilities 1,530,235 1,480,627
Shareholders' equity 120,756 112,338
Total liabilities
and shareholders' equity $1,650,991 $1,592,965
Net interest-rate spread 4.05% 4.19%
Impact of non-interest bearing
sources and other changes in
balance sheet composition 0.51% 0.37%
Net interest income /
margin on interest-earning assets $17,197 4.56% $16,670 4.56%
Net interest margin is net interest income divided by average interest-earning
assets. For computational purposes, non-accrual loans are included in interest-
earning assets. Net interest spread is the difference between the average rate
of interest earned on interest-earning assets and the average rate of interest
expensed on interest-bearing liabilities. Average balances are based on daily
balances.
</TABLE>
<PAGE>
Analysis of Changes in Net Interest Income
Shown in the following tables are changes in interest income and interest
expense resulting from changes in volumes (average balances) and changes in
interest rates for the six- and three-month periods ended June 30, 1995, as
compared to the same periods in 1994.
Six Months 1995 vs. 1994 Increase (decrease)
in interest income and expense
In thousands due to changes in:
Volume Rate Total
Interest-earning assets:
Loans $4,829 $6,244 $11,073
Securities available for sale (99) 1,032 933
Securities held to maturity (1,824) 190 (1,634)
Mortgage loans held for sale (721) 268 (453)
Federal funds sold
and other interest income 56 172 228
Total interest-earning assets 2,241 7,906 10,147
Interest-bearing liabilities:
Interest-bearing demand (NOW) (87) 144 57
TransPlus (SuperNOW) (104) 198 94
Savings deposits (347) 100 (247)
Money market accounts (132) 150 18
Certificates of deposit 1,706 4,829 6,535
Other time deposits (141) 469 328
Total interest-bearing deposits 895 5,890 6,785
Federal funds purchased
and repurchase agreements 124 281 405
Long-term debt and
and other borrowings 158 621 779
Total borrowed funds 282 902 1,184
Total interest-bearing liabilities 1,177 6,792 7,969
Increase (decrease)
in net interest income $1,064 $1,114 $2,178
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 the change in each.
<PAGE>
Second Quarter 1995 vs. 1994 Increase (decrease)
in interest income and
expense
In thousands due to changes in:
Volume Rate Total
Interest-earning assets:
Loans $2,375 $3,003 $5,378
Securities available for sale 9 363 372
Securities held to maturity (877) 126 (751)
Mortgage loans held for sale (164) 103 (61)
Federal funds sold
and other interest income 119 42 161
Total interest-earning assets 1,462 3,637 5,099
Interest-bearing liabilities:
Interest-bearing demand (NOW) (52) 100 48
TransPlus (SuperNOW) (49) 110 61
Savings deposits (187) 45 (142)
Money market accounts (65) 82 17
Certificates of deposit 1,076 2,922 3,998
Other time deposits (48) 269 221
Total interest-bearing deposits 675 3,528 4,203
Federal funds purchased
and repurchase agreements 13 130 143
Long-term debt and
and other borrowings (78) 304 226
Total borrowed funds (65) 434 369
Total interest-bearing liabilities 610 3,962 4,572
Increase (decrease)
in net interest income $852 $(325) $527
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 the change in each.
The preceding tables reflect the general increase in interest rates over the
past year. The tables also reflect increased volumes of loans and certificates
of deposit, while nearly all other categories of interest-bearing assets and
liabilities have decreased.
Provision for Loan Losses
The provision for loan losses was $1,300 thousand (.23% of average loans, on
an annualized basis, excluding mortgage loans held for sale) in the first six
months of 1995, compared with $1,012 thousand (.19% of average loans) in the
comparable period of 1994. Net loan charge-offs were $400 thousand (.07% of
average loans) for the first half of 1995, compared with $681 thousand (.13% of
average loans) for the first half of 1994.
For the second quarter of 1995, the provision for loan losses was $780
thousand (.27% of average loans, on an annualized basis, excluding mortgage
loans held for sale), compared with $574 thousand (.22% of average loans) in the
comparable period of 1994. Net loan charge-offs were $231 thousand (.08% of
average loans) for the second quarter of 1995, and $378 thousand (.14% of
average loans) for the second three months of 1994.
The provision for loan losses and the level of the allowance for loan losses
reflect the quality of the loan portfolio and result from management's
evaluation of the risks in the loan portfolio. Further discussion on loan
quality and the allowance for loan losses is included in the Asset Quality
discussion later in this review.
<PAGE>
Non-Interest Income
Non-interest income for the first six months of 1995 increased $3.6 million
over the first half of 1994. Comparing the second quarter of 1995 to the
comparable period of 1994, non-interest income increased $3.1 million. During
the second quarter of 1995, the company realized a $1.7 million pre-tax gain on
the sale of servicing rights related to $168 million of mortgage loans serviced
for others. Other mortgage banking income increased $911 thousand for the six
months ($746 thousand for the second quarter), which includes $274 thousand
related to the adoption of Statement of Financial Accounting Standards No. 122,
Accounting for Mortgage Servicing Rights. Brokerage revenues increased $342
thousand for the six months ($146 thousand for the second quarter), while
service charges on deposit accounts increased $567 thousand ($356 thousand for
the second quarter). The 1995 increases reflect the company's expanding
mortgage banking and brokerage businesses, as well as continued improvement in
its traditional line of banking products and services.
Non-Interest Expenses
Non-interest expenses increased $3.5 million for the first six months of 1995,
compared to the first six months of 1994. Comparing the second quarter of 1995
to the comparable period of 1994, non-interest expense increased $2.3 million.
In the second quarter of 1995, the company recognized the following expenses
which are in excess of their normal levels: a $550 thousand writedown of
foreclosed real estate, $200 thousand for outside sales training, $185 thousand
of consulting fees for the development of technology improvement strategies and
alternative delivery systems, $235 for advertising to promote new financial
products and services and to improve name recognition, and $165 thousand for
sales incentives and the termination of an acquired benefit plan. Expenses
directly associated with the development and operation of new financial services
(such as the securities broker/dealer and the travel agency) increased $264
thousand from the second quarter of 1994 to the second quarter of 1995.
Excluding these expenses, second quarter 1995 compensation and benefits
increased $833 thousand, and occupancy, furniture and equipment expense
increased $494 thousand. These increases reflect the company's continued
investment in new technology, product lines, distribution channels and people,
to provide enhanced customer service and support future growth.
The efficiency ratio (non-interest expenses as a percentage of net interest
income before provision for loan losses plus non-interest income) for the second
quarter of 1995 was 74.2%, versus 72.6% for the same period in 1994. Excluding
the writedown of foreclosed property, the efficiency ratio for the second
quarter of 1995 was 69.0%.
Income Taxes
Income tax expense totaled $3.9 million in the first six months of 1995,
compared with $3.2 million in the comparable 1994 period. These represent
effective tax rates of 32.8% and 33.1%, respectively. For the second quarter of
1995, income tax expense was $2.0 million, versus $1.6 million in the second
quarter of 1994, reflecting effective tax rates of 33.1% and 32.4%,
respectively.
Balance Sheet Review
Overview
Assets at June 30, 1995, totaled $1.679 billion, compared with $1.618 billion
at December 31, 1994, and $1.611 billion a year ago. Average total assets for
the second quarter increased $58 million (4%) over the past year to $1.651
billion. Average interest-earning assets increased $47.9 million to $1.514
billion.
Loans
Total loans, net of unearned income, averaged $1.173 billion in the second
quarter of 1995, excluding mortgage loans held for sale of $13.0 million. For
the comparable period in 1994, loans averaged $1.067 million, excluding the
$21.6 million of mortgage loans held for sale.
The company continues to experience strong loan growth. At June 30, 1995,
loans net of unearned income (excluding mortgage loans held for sale) totaled
$1.193 billion, compared with $1.144 billion at December 31, 1994, and
$1.055 billion a year ago. During the first quarter of 1995, the company sold to
a non-affiliate bank $16 million of participations in its commercial loan
portfolio. Excluding the impact of these participations, loans increased at an
annualized rate of 11% from year-end 1994 to June 30, 1995.
Asset Quality
With respect to asset quality, management considers three categories of assets
to merit additional scrutiny. These categories include (a) loans which are
currently nonperforming, (b) foreclosed real estate, and (c) loans which are
currently performing but which management believes require special attention.
<PAGE>
Nonperforming loans, which include nonaccrual loans, accruing loans past due
90 days or more and restructured loans, totaled $12.7 million at June 30, 1995,
up $4.8 million from December 31, 1994, and up $2.3 million from the end of the
second quarter of 1994. The ratio of nonperforming loans to total loans (net of
unearned income) was 1.06% at June 30, 1995, compared with .69% at the end of
1994 and .99% a year ago. Nonperforming assets, which include nonperforming
loans and foreclosed property, totaled $17.3 million at June 30, 1995. The ratio
of nonperforming assets to total assets increased to 1.03% at June 30, 1995,
from 1.02% a year ago.
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
may be removed from restructured status in the year following the restructure.
Nonperforming Assets
Dollars in thousands
June 30 December 31 June 30
1995 1994 1994
Nonaccrual loans $10,032 $4,375 $6,338
Accruing loans which are contractually
past due 90 days or more 2,609 3,514 4,036
Restructured loans 22 30 38
Total nonperforming and restructured 12,663 7,919 10,412
loans
Foreclosed real estate 4,367 4,998 5,909
Other foreclosed property 307 199 63
Total nonperforming assets and $17,337 $13,116 $16,384
restructured loans
Nonperforming and restructured loans
as a percentage of net loans 1.06% 0.69% 0.99%
Total nonperforming assets and restructured loans
as a percentage of total assets 1.03% 0.81% 1.02%
Five credit relationships account for $7.9 million, or 79%, of the June 30,
1995, nonaccrual balance. The first of these loans is to a manufacturing firm
in the amount of $3,475,000 and is secured by all the real estate, equipment,
receivables and inventory of the company, as well as the personal guarantee of
the owner and the pledge of some non-business related real estate. The firm
experienced cash flow problems due to declining sales and rising costs and has
been unable to meet scheduled payments in a timely manner. The loan was placed
on nonaccrual during the second quarter. The firm's management has initiated a
plan to reduce operating expenses and to improve cash flow. Opportunities to
raise additional capital are also being explored. The second loan is a
$1,575,000 credit to a coal mining company secured by real estate and equipment.
The company experienced operating problems and, when the owner had severe health
problems, it ceased operations. The loan was placed on nonaccrual in the second
quarter and the borrower has subsequently filed a Chapter 11 Bankruptcy
Petition. An orderly liquidation of all collateral as well as personal assets
of the principal is planned in an effort to satisfy the debt. An actual
assessment of loss is difficult to determine at this time. The third loan is to
a manufacturing concern and is secured by commercial real estate and equipment.
The loan has been on nonaccrual since 1992. During 1993, $775,000 of the loan
balance was charged off, reducing the carrying value of the loan to $1.5
million. In the second quarter of 1994, the borrower resumed making partial
principal payments and, at June 30, 1995, the loan had a balance of $1,462,000.
The fourth loan has an outstanding balance of $783,000 and is secured by a first
mortgage on an apartment complex. The borrower experienced cash flow
difficulties due to high vacancy rates, and the loan was placed on nonaccrual in
1994, when it became apparent that payments would not remain timely. The
property is expected to be sold at a price sufficient to liquidate the principal
balance. The fifth credit, with a balance of $595,000, represents a 13.3%
participation in a loan secured by a first mortgage on an apartment complex.
Increasing vacancy rates and unusually high maintenance expenses adversely
affected cash flow. The credit was placed on nonaccrual in February 1995, when
the borrower was no longer able to make timely payments. Foreclosure
proceedings were instituted, but have been delayed by the borrower filing a
bankruptcy petition. The estimated value of the collateral is expected to
provide for the full repayment of the principal balance. Appropriate amounts
<PAGE>
have been specifically allocated in the evaluation of the allowance for loan
losses for the above credit exposures. The remaining June 30, 1995 nonaccrual
balance consists of various commercial and consumer loans, with no single loan
exceeding $150,000.
Foreclosed real estate at June 30, 1995 includes two properties with an
aggregate book value of $2.1 million, or 48% 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. During 1993, the
company dissolved the joint venture and retained title to the property. Several
parcels have been sold above carrying value. The book value of the property at
June 30, 1995, including development costs, was $1.1 million. Based on an
appraisal of the property and previous sales experience, management does not
anticipate any significant loss to be incurred on disposition. The second
property included in foreclosed real estate relates to a wood products
manufacturing facility. Based on an appraisal of the property, the company wrote
down its carrying value by $210 thousand in the third quarter of 1994 and by
another $550 thousand in the second quarter of 1995, reducing it to its current
balance of $1.0 million. The facility was closed in 1992 and is presently listed
for sale with a commercial real estate firm. Management is of the opinion that
no significant additional loss will be incurred in the disposal of the facility.
As of June 30, 1995, the company had $5.3 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 appraisals, no significant losses are
anticipated to be incurred in connection with these loans. These loans are
subject to continuing management attention and are considered in determining the
level of the allowance for loan losses.
The allowance for loan losses is established through a provision for loan
losses charged to expense. The allowance represents an amount which, in
management's judgment, will be adequate to absorb probable losses on existing
loans. At June 30, 1995, the allowance was $13.4 million, up from $12.5 million
at December 31, 1994, and $12.8 million at June 30, 1994. The allowance as a
percentage of nonperforming loans (an indication of the relative ability to
cover problem loans with existing reserves) declined to 106% at June 30, 1995,
from 158% at year-end 1994 and 123% at June 30, 1994. The ratio of the allowance
for loan losses to total loans (excluding mortgage loans held for sale) at June
30, 1995, was 1.13%, compared with 1.10% at December 31, 1994, and 1.22% at the
end of 1994's second quarter.
The adequacy of the allowance for loan losses is determined on an ongoing
basis through analysis of the overall quality of the loan portfolio, historical
loan loss experience, loan delinquency trends and the economic conditions within
the company's market area. Additional allocations from the allowance are based
on specifically identified potential loss situations. These potential loss
situations are identified by account officers' evaluations of their own
portfolios as well as by an independent loan review function.
Securities, Federal Funds Sold and Resale Agreements
Securities, including those classified as held to maturity and available for
sale, decreased from $348 million at June 30, 1994, to $314 million at year-end
1994, and $311 million at June 30, 1995 - the result of maturities, prepayments
and calls. Funds provided by the reduction in securities were utilized to fund
growth in the loan portfolio.
Federal funds sold and securities purchased under agreements to resell totaled
$11.8 million at June 30, 1995, compared with $-0- at December 31, 1994, and
$60.5 million a year ago. The increase in the balance of these short-term assets
since year-end 1994 is due to the purchase during the first quarter of
approximately $40 million of deposits from Fifth Third Bank of Kentucky, Inc., a
portion of which has been utilized to fund growth in the loan portfolio.
Deposits and Borrowed Funds
Total deposits averaged $1.405 billion in the second quarter of 1995, an
increase of $47.8 million (4%) from the comparable 1994 period. Interest-bearing
accounts increased $43.2 million, while non-interest-bearing accounts increased
$4.6 million over the past year. During the first quarter of 1995, the company
issued $30 million of 24-month brokered certificates of deposit. Long-term
debt averaged $37.1 million in the second quarter of 1995, a decrease of $4.2
million from the second quarter of 1994.
Capital Resources and Liquidity
The company's capital ratios at June 30, 1995, December 31, 1994, and June 30,
1994 (calculated in accordance with regulatory guidelines) were as follows:
<PAGE>
June 30, December 31, June 30,
1995 1994 1994
Tier 1 risk based 9.05% 9.50% 9.39%
Regulatory minimum 4.00 4.00 4.00
Total risk based 12.70 13.35 13.43
Regulatory minimum 8.00 8.00 8.00
Leverage 6.87 6.97 6.66
Regulatory minimum 3.00 3.00 3.00
Capital ratios of all of the company's subsidiaries are in excess of
applicable minimum regulatory capital ratio requirements at June 30, 1995.
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 and
long-term debt, deposit gathering, and the use of short term borrowing
facilities, such as federal funds purchased, repurchase agreements, advances
from the Federal Home Loan Bank and lines of credit. The company's primary
investing activities include loan originations, offset by maturities,
prepayments and sales of securities, and loan payments.
Asset/Liability Management
Managing interest rate risk is fundamental to the financial services industry.
The company manages the inherently different maturity and repricing
characteristics of the lending and deposit acquisition lines of business to
achieve a desired interest sensitivity position and to limit exposure to
interest rate risk. The maturity and repricing characteristics of the company's
lending and deposit activities create a naturally asset-sensitive structure. By
using a combination of on- and off-balance-sheet financial instruments, the
company manages interest rate sensitivity within established policy guidelines.
The company's Asset/Liability Committee approves policy guidelines, provides
oversight to the asset/liability management process, and monitors and adjusts
exposure to interest rates in response to loan and deposit flows.
Asset/liability activity is reviewed monthly by the company's board of
directors.
An earnings simulation model is used to monitor and evaluate the exposure and
impact of changing interest rates on earnings. In today's interest rate
environment, which includes a complex array of both on- and off-balance-sheet
financial instruments, traditional static interest rate gap tables do not
provide the most comprehensive and informative disclosures about interest-rate
risks. The simulation model used by the company reflects the dynamics of all
interest-earning assets, interest-bearing liabilities and off-balance-sheet
financial instruments. It combines the various factors affecting rate
sensitivity into a two-year earnings outlook that incorporates management's view
of the most likely interest rate environment. The model is updated monthly for
multiple interest rate scenarios, projecting changes in balance sheet categories
and other relevant assumptions. In developing multiple rate scenarios, an
econometric model is employed to forecast key rates, based on the cyclical
nature of those rates, with a probability assigned to potential future events
which might affect those rates.
Among the factors the model utilizes which traditional interest rate gap
tables do not are rate of change differentials, such as federal funds rates
versus savings account rates, maturity effects, such as calls on securities, and
rate barrier effects, such as caps or floors on loans. It also captures changing
balance sheet levels, such as loans and investment securities, and 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. In
addition, it captures leads and lags that occur as rates move away from current
levels, and the effects of prepayments on various fixed rate assets such as
residential mortgages, mortgage-backed securities 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.
The following illustrates the effects on net interest income of multiple rate
environments compared to the rate environment of June 1995 (the "flat"
scenario). For example, in the scenario considered "most likely" the company
assumed that the federal funds rate and prime rate would be 4.50% and 7.25%,
respectively, in June of 1996, and would be higher for eight of the twelve
months from June 30, 1995 to June 30, 1996.
Flat Most Likely Rising Declining
Assumptions:
Federal funds rate,
June 1996 6.00% 4.50% 8.50% 3.50%
Prime rate, June 1996 9.00 7.25 11.50% 6.50%
Increase (decrease) in
net interest income -0-% (1.63)% 2.33% (2.30)%
<PAGE>
Management concludes that the company is asset sensitive at June 30, 1995,
which indicates that net interest income is expected to be positively impacted
during a period of rising interest rates; however a uniform period of decreasing
rates would adversely impact the company. It should be noted, however, these
results do not take into account any future actions which could be undertaken to
reduce an adverse impact if there were a change in interest rate expectations or
in the actual level of interest rates.
To assist in achieving a desired level of interest rate sensitivity the
company has entered into off-balance-sheet interest rate swap transactions which
effectively convert fixed-rate certificates of deposit to floating rate
instruments. The company pays a variable interest rate on each swap and receives
a fixed rate, as shown below (as of June 30, 1995):
Notional Fixed Rate Floating Rate
Amount (Receiving) (Paying)
$20,000,000 4.38% 6.20% (LIBOR)
30,000,000 10.40 9.00 (Prime)
50,000,000 9.58 9.00 (Prime)
50,000,000 9.25 9.00 (Prime)
50,000,000 8.33 9.00 (Prime)
In a higher interest rate environment, the increased contribution to net
interest income from on-balance-sheet assets will substantially offset any
negative impact on net interest income from these swap transactions. Conversely,
if interest rates decline, these off-balance-sheet transactions will mitigate
the company's exposure to reduced net interest income.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
In the ordinary course of operations, the company and its subsidiaries are
defendants in various legal proceedings. In the opinion of management, there is
no proceeding pending or, to the knowledge of management, threatened in which an
adverse decision could result in a material adverse change in the business or
consolidated financial position of the company.
Item 2 through 5.
No information is required to be filed for these items.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index on pages 21 through 22 of this Form
10-Q are filed as a part of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Trans Financial, Inc.
(Registrant)
Principal Executive Officer:
Date: August 14, 1995 /s/ Douglas M. Lester
Douglas M. Lester
Chairman of the Board, President
and Chief Executive Officer
Principal Financial Officer:
Date: August 14, 1995 /s/ Edward R. Matthews
Edward R. Matthews
Chief Financial Officer
<PAGE>
Exhibits
Sequentially
Numbered Pages
4(a)Restated Articles of Incorporation of the registrant are incorporated
by reference to Exhibit 4(a) of the registrant's report on Form 10-Q for
the quarter ended March 31, 1995.
4(b)Articles of Amendment to the Restated Articles of Incorporation of the
registrant are incorporated by reference to Exhibit 4(b) of the
registrant's report on Form 10-Q for the quarter ended March 31, 1995.
4(c)Restated Bylaws of the registrant are incorporated by reference to
Exhibit 4(b) of the registrant's report on Form 10-K for the year
ended December 31, 1993.
4(d)Rights Agreement dated January 20, 1992 between Manufacturers Hanover
Trust Company (subsequently assigned to First Union National Bank of
North Carolina) and the registrant is incorporated by reference to
Exhibit 1 to the registrant's report on Form 8-K dated January 24, 1992.
4(e)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
the Registration Statement on Form S-2 of the registrant
(File No. 33-67686).
10(a)1987 Stock Option Plan is incorporated by reference to Exhibit 4(a)
of the Registration Statement on Form S-8 of the registrant
(File No. 33-43046).*
10(b)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)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)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 the registrant 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(g) of the registrant's Report on
Form 10-K for the year ended December 31, 1994.*
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)Dividend Reinvestment and Stock Purchase Plan is incorporated by
reference to the Registration Statement on Form S-3 of the registrant
dated May 15, 1991 (File No. 33-40606).
<PAGE>
Sequentially
Numbered Pages
10(j)Warrant dated as of February 13, 1992 between Morgan Keegan &
Company, Inc. and the registrant is incorporated by reference to
Exhibit 10(m) of the Registration Statement on Form S-2 of the
registrant (File No. 33-45483).
10(k)Loan Agreement dated as of July 6, 1993 between First Tennessee Bank
National Association and the registrant is incorporated by reference to
Exhibit 10(p) to the Registration Statement on Form S-2 of the registrant
(File No. 33-67686).
10(l)Underwriting Agreement dated as of September 9, 1993 among Morgan
Keegan & Company, Inc., J.C. Bradford and Company, and the registrant
is incorporated by reference to Exhibit (1) to the Registration
Statement on Form S-2 of the registrant (File No. 33-67686).
10(m)Subordinated Note dated as of September 16, 1993, by the registrant
is incorporated by reference to Exhibit 1 to the Registration Statement on
Form S-2 of the registrant (File No. 33-67686).
10(n)Agreement and Plan of Reorganization dated November 9, 1993, as
amended January 6, 1994, among the registrant, 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(o)Agreement and Plan of Reorganization and Plan of Merger dated
December 27, 1993 between the registrant 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(p)Agreement and Plan of Reorganization and Plan of Merger dated January
28, 1994 between the registrant 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.
10(q)1995 Executive Stock Option Plan is incorporated by reference to the
registrant's Proxy Statement dated March 9, 1995, for the April 24, 1995
Annual Meeting of Shareholders.*
11 Statement Regarding Computation of Per Share Earnings 23
*Denotes a management contract or compensatory plan or arrangement of the
registrant required to be filed as an exhibit pursuant to Item 601 (10) (iii)
of Regulation S-K.
<PAGE>
Exhibit 11.
Statement Regarding Computation of Per Share Earnings
In thousands, except per share amounts
Three Months Six Months
For the periods ended June 30 1995 1994 1995 1994
Primary earnings per common share: (1)
Average common shares outstanding 11,233 11,167 11,220 11,162
Common stock equivalents 95 76 91 84
Average shares and share 11,328 11,243 11,311 11,246
equivalents
Net income $4,119 $3,425 $7,914 $6,562
Less preferred stock dividends - (20) - (40)
Income available for common stock $4,119 $3,405 $7,914 $6,522
Primary net income per share $0.36 $0.30 $0.70 $0.58
Fully-diluted earnings per common share: (1)
Average common shares outstanding 11,233 11,167 11,220 11,162
Common stock equivalents 107 85 107 85
Average shares and share 11,340 11,252 11,327 11,247
equivalents
Net income $4,119 $3,425 $7,914 $6,562
Less preferred stock dividends - (20) - (40)
Income available for common stock $4,119 $3,405 $7,914 $6,522
Fully-diluted net income per share $0.36 $0.30 $0.70 $0.58
(1)All common share and per share data have been adjusted to reflect shares
issued in acquisitions accounted for using the pooling-of-interests method of
accounting.
<PAGE>
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<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
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<ALLOWANCE> 13429 13429
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<DEPOSITS> 1419879 1419879
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<EXPENSE-OTHER> 32748 17185
<INCOME-PRETAX> 11777 6157
<INCOME-PRE-EXTRAORDINARY> 7914 4119
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7914 4119
<EPS-PRIMARY> .70 .36
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<YIELD-ACTUAL> 4.62 4.56
<LOANS-NON> 10032 10032
<LOANS-PAST> 2609 2609
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