UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported) July 16, 1996
TRANS FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Kentucky 0-13030 61-1048868
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
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
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On July 16, 1996, Trans Financial, Inc. (the "Company") announced its
financial results for the quarter ended June 30, 1996. The Company announced a
net loss of $5.2 million for the quarter ended June 30, 1996. The loss reflects
pre-tax charges totaling $5.8 million related to the Company's commitment to
refocus on its core financial services business, reduce expenses and exit from
less profitable business lines. The Company also increased its provision for
loan losses by $7.2 million over the first quarter of 1996. The full text of the
Company's press release is attached hereto as Exhibit 99.1, and the discussion
herein is qualified in its entirety by reference to such exhibit.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit 99.1 Press Release issued July 16, 1996.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
Trans Financial, Inc.
(Registrant)
Date: July 17, 1996 By: /s/ Vince A. Berta
Acting President
and Chief Executive Officer
Exhibit 99.1 Trans Financial Second Quarter Results
TRANS FINANCIAL ANNOUNCES SECOND QUARTER RESULTS
Bowling Green, Kentucky (July 16, 1996) -- Trans Financial, Inc. (NASDAQ:
TRFI) today announced a net loss of $5.2 million, or $0.45 per common share, for
the quarter ended June 30, 1996. The loss reflects pre-tax charges totaling $5.8
million related to the company's commitment to refocus on its core financial
services business, reduce expenses and exit from less profitable business lines.
The company also increased its provision for loan losses by $7.2 million over
the first quarter of the year, after taking partial charge-offs totaling $7.0
million on three non-performing loans.
The impact of the charges and increased provision for loan losses resulted
in a year-to-date net loss of $1.4 million, or $0.13 per common share, compared
with net income of $7.9 million, or $0.70 per common share, for the same period
a year ago. Excluding the aforementioned charges and the increased provision,
year-to-date net income for 1996 would have been approximately $0.65 per common
share.
The charges taken during the second quarter provide for the cost of exiting
several initiatives entered in recent years which were outside the company's
core financial services or which have generated disappointing financial results.
These initiatives include human resources consulting and venture capital. Also
included in the charges are expenses associated with closing the Louisville,
Kentucky office; mortgage loan production offices in Chattanooga, Jackson, and
Knoxville, Tennessee; and consolidation of operations in Nashville, Tennessee
and Bowling Green, Kentucky. Severance expense was also recognized related to
changes designed to reduce costs in the retail delivery system and investment
management. The company has sold its corporate jet, with the cost of its
disposition included in second quarter expenses.
Vince Berta, Acting President and Chief Executive Officer, said, "The
company's second quarter results reflect the decisions and subsequent actions
which the Board of Directors and management felt were necessary to refocus the
company on its fundamental strengths and reduce operating costs. We believe our
initial efforts should primarily focus on cost containment. Based on our
analyses and projections, the cost containment steps already in progress and
scheduled to be fully implemented by the beginning of the fourth quarter of 1996
represent an expected annual reduction of operating expense of approximately
$0.30 per common share. Reducing expenses is anticipated to have minimal impact
on revenues. We continue to identify other cost reduction opportunities and
expect more announcements concerning these actions during the next few months."
The $7.0 million partial charge-off of the three non-accrual commercial
loans, of which $4.8 million had been previously provided in the allowance for
loan losses, is due to the continued deterioration of the collateral and
financial condition of the borrowers. Two of the credits, totaling $5.4 million,
were placed on non-accrual during the second quarter of 1995 and the third
credit, totaling $5.6 million, was placed on non-accrual during the fourth
quarter of 1995.
Management believes it is necessary to increase the allowance for loan
losses to a level reflecting the risk associated with the loan portfolio and the
company's continuing loan growth. The net change in the allowance results in an
allowance for loan losses to loans ratio of 1.20%, down from 1.22% at March 31,
1996. The coverage ratio of the allowance for loan losses to nonperforming loans
has increased at June 30, 1996 to 147% from 101% at March 31, 1996.
The total risk-based capital ratio was 10.99% at June 30, 1996, compared to
12.00% at March 31, 1996. For the same periods, the leverage ratio decreased to
6.24% from 6.77%. The ratio of shareholder's equity to total assets decreased 61
basis points to 6.63% at June 30, 1996, from 7.24% at March 31, 1996.
Excluding the aforementioned charges and the increase in the provision for
loan losses, the company's earnings would have been approximately $3.6 million,
or $0.32 per common share for the second quarter. This represents a 13% decline
in net income from the $4.1 million earned during the second quarter of 1995.
Return on average assets and return on average equity would have been 0.79% and
10.96%, respectively, for the second quarter of 1996, compared to 1.00% and
13.68%, respectively, for the second quarter of 1995.
Loan growth continued to be strong during the second quarter. Loans, net of
unearned income, were $1,363 million at June 30, 1996, compared to $1,311
million at March 31, 1996, a 16% growth on an annualized basis.
Net interest income was $18.3 million for the second quarter of 1996, a
$1.1 million, or 6%, increase over the second quarter of 1995. This increase was
due to loan growth, partially offset by a contracting net interest margin. The
net interest margin for the second quarter of 1996 decreased 17 basis points, to
4.39%, from the second quarter of 1995. Comparing the second quarter of 1996 to
the first quarter of 1996, the net interest margin was virtually flat,
increasing one basis point.
Total non-interest income for the second quarter of 1996 was $7.3 million,
a $380 thousand increase over the second quarter of 1995. The second quarter of
1995, however, included a $1.7 million pre-tax gain from the sale of mortgage
servicing rights. Excluding this gain from the second quarter of 1995,
non-interest income increased 40% or $2.1 million. This reflects a $1.2 million
improvement in mortgage banking income and a $364 thousand increase in trust and
investment income. Non-interest income for the second quarter was essentially
flat compared to the first quarter of 1996.
Total non-interest expense for the second quarter of 1996 was $24.8
million, which includes $5.8 million of the previously noted charges. These
charges represent $1.8 million of severance expense, $500 thousand of occupancy
expense and $325 thousand of furniture and equipment expense associated with
closing offices, $340 thousand of professional fees for services associated with
discontinuing certain activities, $1.0 million associated with consolidating
operational offices, $600 thousand from the sale of the corporate jet, $225
thousand for the write-down of other real estate owned, and approximately $1.0
million in other associated costs and the disposition of related assets.
Trans Financial, Inc. is a financial services holding company
headquartered in Bowling Green, Kentucky, operating primarily in Kentucky and
Tennessee. Trans Financial stock is traded on the Nasdaq Stock Market under
the symbol TRFI.
This press release contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties.
Although the company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included herein will prove to be accurate.
Factors that could cause actual results to differ from the results discussed in
the forward-looking statements include, but are not limited to: economic
conditions (both generally and more specifically in the markets in which the
company and its banks operate); competition for the company's customers from
other providers of financial services; government legislation and regulation
(which changes from time to time and over which the company has no control);
changes in interest rates; delays in, customer reactions to, and other
unforeseen complications with respect to, the implementation of the cost
containment measures; and other risks detailed in the company's filings with the
Securities and Exchange Commission, all of which are difficult to predict and
many of which are beyond the control of the company.
<PAGE>
Contact :EDWARD R. MATTHEWS
CFO
502-793-7717
<TABLE>
TRANS FINANCIAL, INC.
QUARTERLY STATISTICS
June 30, 1996
($ in thousands)
<CAPTION>
QTD QTD QTD YTD YTD
6/30/96 3/31/96 6/30/95 6/30/96 6/30/95
AVERAGE BALANCE SHEET:
<S> <C> <C> <C> <C> <C>
SECURITIES ............................. $ 294,674 $ 293,206 $ 307,123 $ 293,940 $ 310,199
LOANS, net of unearned income .......... 1,328,652 1,276,598 1,172,831 1,302,625 1,156,785
EARNING ASSETS ......................... 1,674,948 1,609,518 1,513,702 1,642,233 1,496,038
ASSETS ................................. 1,841,008 1,774,106 1,650,991 1,807,557 1,635,893
DEPOSITS ............................... 1,463,305 1,423,507 1,404,614 1,443,406 1,382,151
SHAREHOLDERS' EQUITY ................... 132,063 130,807 120,756 131,435 117,213
END OF PERIOD BALANCE SHEET:
SECURITIES, available for sale ......... $ 287,481 $ 292,762 $ 227,435 $ 287,481 $ 227,435
SECURITIES, held to maturity ........... -- -- 83,359 -- 83,359
LOANS,net of unearned income ........... 1,363,137 1,310,999 1,193,338 1,363,137 1,193,338
MORTGAGE LOANS HELD FOR SALE ........... 42,001 43,564 21,824 42,001 21,824
EARNING ASSETS ......................... 1,692,717 1,647,423 1,537,928 1,692,717 1,537,928
ALLOWANCE FOR LOAN LOSSES .............. 16,344 16,051 13,429 16,344 13,429
ASSETS ................................. 1,866,696 1,816,065 1,679,461 1,866,696 1,679,461
DEPOSITS ............................... 1,507,333 1,432,175 1,419,879 1,507,333 1,419,879
SHAREHOLDERS' EQUITY ................... 123,683 131,494 122,044 123,683 122,044
GOODWILL ............................... 9,804 10,104 10,164 9,804 10,164
INCOME STATEMENT:
INTEREST INCOME ........................ $ 36,215 $ 34,829 $ 33,236 $ 71,044 $ 64,909
INTEREST EXPENSE ....................... 17,940 17,285 16,039 35,225 30,669
----------- ------------- --------- --------- ---------
NET INT. INCOME ........................ 18,275 17,544 17,197 35,819 34,240
LOAN LOSS PROVISION .................... 8,421 1,221 780 9,642 1,300
NON-INT. INCOME ........................ 7,304 7,235 6,925 14,539 11,585
NON-INT. EXPENSE ....................... 24,765 18,119 17,185 42,884 32,748
----------- ------------- -------- -------- --------
PRETAX INCOME .......................... (7,607) 5,439 6,157 (2,168) 11,777
INCOME TAXES ........................... (2,424) 1,703 2,038 (721) 3,863
=========== ============= ======== ========= =========
NET INCOME ............................. $ (5,183) $ 3,736 $ 4,119 $ (1,447) $ 7,914
=========== ============= ======== ========= =========
PRIMARY EPS ............................ (0.45) 0.33 0.36 (0.13) 0.70
FULLY-DILUTED EPS ...................... (0.45) 0.33 0.36 (0.13) 0.70
DIVIDENDS PER SHARE .................... 0.16 0.16 0.15 0.32 0.30
BOOK VALUE ............................. 10.93 11.63 10.85 10.93 10.85
BOOK VALUE EXCLUDING FAS No. 115 ADJ.... 11.12 11.71 11.12 11.12 11.12
CREDIT QUALITY:
NONACCRUAL AND RESTRUCTURED LOANS....... $ 5,576 $ 12,404 $ 10,054 $ 5,576 $ 10,054
90 DAYS PAST DUE ....................... 5,517 3,548 2,609 5,517 2,609
----------- ------------- ----------- ------------- -------------
TOTAL NONPERFORMING LOANS ........... 11,093 15,952 12,663 11,093 12,663
OREO ................................... 3,342 3,328 4,367 3,342 4,367
OTHER FORECLOSED PROPERTY .............. 303 847 307 303 307
=========== ============= =========== ============= ===========
TOTAL NONPERFORMING ASSETS .......... $ 14,738 $ 20,127 $ 17,337 $ 14,738 $ 17,337
=========== ============= =========== ============= ===========
NET CHARGE-OFFS ........................ $ 8,128 $ 949 $ 231 $ 9,077 $ 400
NET CHARGE OFF RATIO ................... 2.46% 0.30% 0.08% 1.40% 0.07%
NPL'S / LOANS .......................... 0.81% 1.22% 1.06% 0.81% 1.06%
NPA'S / ASSETS ......................... 0.79% 1.11% 1.03% 0.79% 1.03%
ALLOWANCE FOR LOAN LOSSES / LOANS ...... 1.20% 1.22% 1.13% 1.20% 1.13%
ALLOWANCE / NONPERFORMING LOANS ........ 147.34% 100.62% 106.05% 147.34% 106.05%
PERFORMANCE RATIOS:
RETURN ON AVG. ASSETS .................. -1.13% 0.85% 1.00% -0.16% 0.98%
RETURN ON AVG. EQUITY .................. -15.78% 11.49% 13.68% -2.21% 13.62%
YIELD ON EARNING ASSETS ................ 8.70% 8.70% 8.81% 8.70% 8.75%
COST OF INTEREST-BEARING DEPOSITS ...... 4.69% 4.68% 4.64% 4.69% 4.47%
COST OF INTEREST-BEARING LIABILITIES ... 4.87% 4.84% 4.76% 4.86% 4.61%
NET INTEREST MARGIN (Non-Tax Equivalent) 4.39% 4.38% 4.56% 4.39% 4.62%
EFFICIENCY RATIO ....................... 96.82% 73.12% 71.24% 85.16% 71.46%
NET NON-INTEREST EXPENSE / AVG. ASSETS . 3.81% 2.47% 2.49% 3.15% 2.61%
OUTSTANDING SHARES (End of period) ..... 11,313 11,305 11,245 11,313 11,245
AVG. SHARES AND SHARE EQUIVALENTS ...... 11,431 11,424 11,328 11,421 11,311
</TABLE>
<PAGE>
<TABLE>
TRANS FINANCIAL, INC. Contact :
QUARTERLY STATISTICS EDWARD R. MATTHEWS
June 30, 1996 CFO
($ in thousands) 502-793-7717
<CAPTION>
QTD QTD QTD QTD QTD QTD
6/30/96 3/31/96 12/31/95 9/30/95 6/30/95 3/31/95
AVERAGE BALANCE SHEET:
<S> <C> <C> <C> <C> <C> <C>
SECURITIES .................................... $ 294,674 $ 293,206 $ 300,111 $ 298,359 $ 307,123 $ 313,309
LOANS,net of unearned ......................... 1,328,652 1,276,598 1,243,935 1,204,297 1,172,831 1,140,559
EARNING ASSETS ................................ 1,674,948 1,609,518 1,580,539 1,538,574 1,513,702 1,478,176
ASSETS ........................................ 1,841,008 1,774,106 1,739,439 1,679,296 1,650,991 1,620,626
DEPOSITS ...................................... 1,463,305 1,423,507 1,424,809 1,413,043 1,404,614 1,359,438
SHAREHOLDERS' EQUITY .......................... 132,063 130,807 129,919 123,682 120,756 113,631
END OF PERIOD BALANCE SHEET:
SECURITIES, available for sale ................ $ 287,481 $ 292,762 $ 298,222 $ 209,357 $ 227,435 $ 224,522
SECURITIES, held to maturity -- -- -- 78,478 83,359 85,725
LOANS, net of unearned ........................ 1,363,137 1,310,999 1,259,071 1,237,038 1,193,338 1,153,935
MORTGAGE LOANS HELD FOR SALE 42,001 43,564 45,751 30,631 21,824 7,680
EARNING ASSETS ................................ 1,692,717 1,647,423 1,603,241 1,556,276 1,537,928 1,501,234
ALLOWANCE FOR LOAN LOSSES 16,344 16,051 15,779 13,659 13,429 12,880
ASSETS ........................................ 1,866,696 1,816,065 1,795,649 1,715,150 1,679,461 1,654,502
DEPOSITS ...................................... 1,507,333 1,432,175 1,444,483 1,412,209 1,419,879 1,415,745
SHAREHOLDERS' EQUITY 123,683 131,494 129,767 126,729 122,044 117,177
GOODWILL 9,804 10,104 10,409 10,239 10,164 10,479
CREDIT QUALITY:
NONACCRUAL AND
RESTRUCTURED LOANS ............. $ 5,576 $ 12,404 $ 12,722 $ 9,514 $ 10,054 $ 5,419
90 DAYS PAST DUE 5,517 3,548 4,617 3,625 2,609 2,103
--------- --------- --------- --------- --------- ---------
TOTAL NONPERFORMING LOANS 11,093 15,952 17,339 13,139 12,663 7,522
OREO 3,342 3,328 4,329 4,115 4,367 4,951
OTHER FORECLOSED PROPERTY
303 847 677 569 307 305
============ ========= =========== ======== =========== ========
TOTAL NONPERFORMING ASSETS ................. $ 14,738 $ 20,127 $ 22,345 $ 17,823 $ 17,337 $ 12,778
============ ========= =========== ======== =========== ========
NET CHARGE-OFFS ............................. $ 8,128 $ 949 $ 1,060 550 231 169
NET CHARGE OFF RATIO .......................... 2.46% 0.30% 0.34% 0.18% 0.08% 0.06%
NPL'S / LOANS ................................. 0.81% 1.22% 1.38% 1.06% 1.06% 0.65%
NPA'S / ASSETS ................................ 0.79% 1.11% 1.24% 1.04% 1.03% 0.77%
ALLOWANCE FOR LOAN LOSSES / LOANS ............. 1.20% 1.22% 1.25% 1.10% 1.13% 1.12%
ALLOWANCE FOR LOAN LOSSES / NONPERFORMING LOANS 147.34% 100.62% 91.00% 103.96% 106.05% 171.23%
</TABLE>
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<TABLE>
TRANS FINANCIAL, INC. Contact :
QUARTERLY STATISTICS EDWARD R. MATTHEWS
June 30, 1996 CFO
($ in thousands) (502)793-7717
<CAPTION>
QTD QTD QTD QTD QTD QTD
6/30/96 3/31/96 12/31/95 9/30/95 6/30/95 3/31/95
INCOME STATEMENT:
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME ........................... $ 36,215 $ 34,829 $ 35,097 $ 34,222 $ 33,236 $31,673
INTEREST EXPENSE
17,940 17,285 17,244 16,686 16,039 14,630
--------- ------- --------- ------- --------- -------
NET INT. INCOME
18,275 17,544 17,853 17,536 17,197 17,043
LOAN LOSS PROVISION ....................... 8,421 1,221 3,180 780 780 520
SERVICE CHARGES ON
DEPOSIT ACCOUNTS 2,419 2,236 2,200 2,127 2,254 1,891
MORTGAGE BANKING INCOME 2,331 2,653 2,318 1,658 1,171 862
GAIN ON SALE OF MORTGAGE
SERVICING RIGHTS -- -- -- -- 1,687 --
GAIN ON SALE OF SECURITIES,
NET (21) 15 221 (21) -- --
TRUST AND INVESTMENT SERVICES
INCOME 1,108 1,122 826 767 744 784
OTHER 1,467 1,209 1,497 1,233 1,069 1,123
--------- ------- --------- ------- --------- -------
TOTAL NON-INTEREST INCOME 7,304 7,235 7,062 5,764 6,925 4,660
COMPENSATION AND BENEFITS 10,910 9,233 8,004 7,891 7,470 7,223
NET OCCUPANCY EXPENSE 1,734 1,204 1,282 1,266 1,200 1,088
FURNITURE AND EQUIPMENT EXPENSE 2,172 1,667 1,591 1,529 1,523 1,483
DEPOSIT INSURANCE 267 244 341 215 777 762
PROFESSIONAL FEES &
ACQUISITION COSTS 1,220 696 1,020 685 789 930
OTHER 8,462 5,075 5,262 4,215 5,426 4,077
--------- ------- -------- ------- --------- -------
TOTAL NON-INTEREST EXPENSE 24,765 18,119 17,500 15,801 17,185 15,563
--------- ------- -------- ------- --------- -------
PRETAX INCOME (7,607) 5,439 4,235 6,719 6,157 5,620
INCOME TAXES (2,424) 1,703 1,378 2,175 2,038 1,825
--------- ------- -------- ------- --------- -------
NET INCOME ................................ (5,183) 3,736 2,857 4,544 4,119 3,795
========= ========= ======== ========= ======== =========
PRIMARY EPS (0.45) 0.33 0.25 0.40 0.36 0.34
DIVIDENDS PER SHARE
0.16 0.16 0.15 0.15 0.15 0.15
BOOK VALUE PER SHARE
10.93 11.63 11.49 11.23 10.85 10.45
BOOK VALUE EXCLUDING FAS
No. 115 ADJUSTMENT 11.12 11.71 11.53 11.40 11.12 10.89
PERFORMANCE RATIOS:
RETURN ON AVG. ASSETS ..................... -1.13% 0.85% 0.65% 1.07% 1.00% 0.95%
RETURN ON AVG. EQUITY ..................... -15.78% 11.49% 8.72% 14.58% 13.68% 13.54%
YIELD ON EARNING ASSETS ................... 8.70% 8.70% 8.81% 8.82% 8.81% 8.69%
COST OF INTEREST-BEARING DEPOSITS ......... 4.69% 4.68% 4.73% 4.73% 4.64% 4.28%
COST OF INTEREST-BEARING LIABILITIES ...... 4.87% 4.84% 4.90% 4.83% 4.76% 4.45%
NET INTEREST MARGIN (Non-Tax Equivalent) .. 4.39% 4.38% 4.48% 4.52% 4.56% 4.68%
EFFICIENCY RATIO .......................... 96.82% 73.12% 70.24% 67.82% 71.24% 71.71%
FEES AS A % OF REVENUES ................... 28.55% 29.20% 28.34% 24.74% 28.71% 21.47%
OUTSTANDING SHARES (End of period) 11,313 11,305 11,293 11,285 11,245 11,213
AVG. SHARES AND SHARE EQUIVALENTS 11,431 11,424 11,433 11,385 11,328 11,298
</TABLE>
<PAGE>
