QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_____________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _____to _____
____________
Commission file number 2-78658
INTRUST Financial Corporation
(Exact name of registrant as specified in its charter)
Kansas 48-0937376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
105 North Main Street 67201
Box One (Zip Code)
Wichita, Kansas
(Address of principal (316) 383-1111
executive offices) (Registrant's
telephone number)
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. X Yes No
At April 20, 1994, there were 2,380,220 shares of the registrant's common
stock, par value $5 per share, outstanding.
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Part 1. Financial Information
INTRUST Financial Corporation
Consolidated Condensed Balance Sheets
(Unaudited)
(in thousands of dollars)
March 31, December 31,
ASSETS 1994 1993
Cash and due from banks $72,426 $74,722
Investment securities (market value, $318,213
for 1994 and $347,980 for 1993) 311,068 341,561
Federal funds sold and securities purchased
under agreements to resell 73,975 71,725
Loans 988,400 974,901
Less: Unearned discount 279 299
Allowance for loan losses 20,839 21,793
Net loans 967,282 952,809
Land, buildings and equipment 29,874 30,032
Other assets 51,304 53,019
$1,505,929 $1,523,868
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $1,277,384 $1,283,284
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 45,422 64,315
Other 10,112 11,739
Total short-term borrowings 55,534 76,054
Accounts payable and accrued liabilities 15,690 11,421
Notes payable 25,580 25,580
Convertible subordinated capital notes 12,000 12,000
Total liabilities 1,386,188 1,408,339
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,400,000 shares issued 12,000 12,000
Capital surplus 12,000 12,000
Retained earnings 96,581 92,312
120,581 116,312
Less: Treasury stock, at cost; 19,780 shares
in 1994 and 18,640 shares in 1993 (840) (783)
Total stockholders' equity 119,741 115,529
$1,505,929 $1,523,868
See accompanying notes to consolidated financial statements.
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INTRUST Financial Corporation
Consolidated Condensed Statements of Income
(Unaudited - In Thousands of Dollars Except per Share Data)
Three Months
Ended March 31
Interest income: 1994 1993
Interest on loans $21,405 $17,427
Interest on investment securities 4,259 5,279
Interest on Federal funds sold and securities
purchased under agreements to resell 707 412
Other interest income 0 10
Total interest income 26,371 23,128
Interest expense:
Interest on deposits 7,964 7,305
Interest on Federal funds
purchased and securities sold
under agreement to repurchase 398 246
Interest on capital notes 270 270
Interest on other borrowings 428 79
Total interest expense 9,060 7,900
Net interest income 17,311 15,228
Provision for loan losses 83 2,480
Net interest income after
provision for loan losses 17,228 12,748
Other income:
Service charges on deposit accounts 2,226 1,907
Trust department fees 1,399 1,225
Bankcard fees 1,086 799
Securities gains and losses 0 48
Other service charges, fees and income 1,704 1,388
Total other income 6,415 5,367
Other expenses:
Salaries and employee benefits 7,213 5,772
Net occupancy and equipment expense 1,908 1,330
Advertising and promotional activities 1,317 826
Data processing expense 1,100 956
FDIC assessemnt 718 590
Goodwill 357 102
Other 3,440 2,921
Total other expenses 16,053 12,497
Income before income taxes 7,590 5,618
Provision for income taxes 2,726 1,647
Net income $4,864 $3,971
Per share data:
Net income - assuming no dilution $2.04 $1.67
Net income - assuming full dilution $1.81 $1.49
Cash Dividends $0.25 $0.25
See accompanying notes to consolidated financial statements.
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INTRUST Financial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of dollars)
Three Months Ended
March 31,
1994 1993
Operating activities:
Net Income $4,864 $3,971
Adjustments to reconcile net income to net
cash flows from operations:
Provision for loan losses 83 2,480
Provision for depreciation and amortization 1,477 904
Amortization of premium and discount on
investment securities 647 279
Changes in assets and liabilities:
Prepaid expenses and other assets (835) (769)
Income taxes 2,421 1,655
Interest receivable 1,454 967
Interest payable 1,627 972
Other liabilities 442 705
Other (44) (69)
Net cash provided by operating activities 12,136 11,095
Investing activities:
Purchase of investment securities (11,053) (9,076)
Investment securities matured or called 40,899 41,058
Proceeds from sale of investment securites 0 177
Net (increase) decrease in loans (14,845) 23,818
Purchases of land, buildings and equipment (841) (635)
Proceeds from sales of equipment 5 14
Proceeds from sales of other real estate and
repossessions 741 539
Other (15) (23)
Net cash provided by investing activities 14,890 55,872
Financing activities:
Net decrease in deposits (5,900) (58,731)
Net increase (decrease) in short-term borrowings (20,520) (12,633)
Cash dividends (595) (596)
Net increase in treasury stock (57) (132)
Net cash used by financing activities (27,072) (72,092)
Increase (Decrease) in cash and cash equivalents (46) (5,125)
Cash and cash equivalents at beginning of period 146,447 142,267
Cash and cash equivalents at end of period $146,401 $137,142
See accompanying notes to consolidated financial statements.
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INTRUST Financial Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the
accounts of INTRUST Financial Corporation and subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. In the opinion of management the consolidated
financial statements reflect all normal recurring adjustments
necessary for a fair presentation of the financial position and
results of operations for the periods presented.
The significant accounting policies followed in the preparation
of the quarterly financial statements are the same as those
disclosed in the 1993 INTRUST Financial Corporation Annual
Report to Stockholders. Reference is made to the 1993 Annual
Report for additional disclosure.
2. Loans
As of April 18, 1994, Paul Seymour, Jr., a director of the
Company was indebted to INTRUST Bank, N.A. in the principal
amount of $2,117,952 and $295,000 for personal and business
loans, respectively. Mr Seymour has filed for relief under
Chapter 11 of the United States Bankruptcy Code. The case is
still pending.
3. Allowance for Loan Losses
The following is a summary of the allowance for loan losses for
the three months ended March 31, 1994 and 1993 (in thousands):
1994 1993
Balance, January 1 $21,793 $16,099
Additions:
Provision for loan losses 83 2,480
21,876 18,579
Deductions:
Loans charged off 1,504 1,437
Less recoveries on loans
previously charged off 467 480
Net loan losses 1,037 957
Balance, March 31 $20,839 $17,622
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INTRUST Financial Corporation
Notes to Consolidated Financial Statements
(Unaudited)
5. Investment Securities
Investment securities consisted of the following at March 31,
1994 and December 31, 1993 (in thousands):
Mar. 31 Dec. 31
1994 1993
U.S. Government and Federal Agencies $245,625 $269,842
Obligations of state and political
subdivisions 58,594 63,971
Other 6,849 7,748
$311,068 $341,561
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRUST Financial Corporation's operating results for the
quarter ended March 31, 1994 reflected a 22.5% increase in net
income over the corresponding period of the preceding year, to
$4,864,000. First quarter 1994 results were favorably impacted
by the volume increases associated with the Kansas State Bank &
Trust Company merger during the third quarter of 1993, as well
as a reduction in the Company's provision for loan losses.
Net Interest Income. First quarter net interest income amounts
have increased $2,083,000, or 13.7% over the comparable 1993
period. This increase is attributable to volume increases, as
average interest-earning assets in the first quarter of 1994
exceeded those of the same period in 1993 by approximately
$312,000,000. The increase in average interest-bearing
liabilities for similar periods was $217,000,000. These
increases are principally attributable to assets acquired and
liabilities assumed in the KSB&T merger.
While the volume increases referred to above did positively
impact net interest income, they were offset by compression in
the Company's interest margin. The yield on earning assets for
the quarter ended March 31, 1994 declined 57 basis points from
that experienced in the first quarter of 1993. The cost of
interest-bearing liabilities for the first quarter of 1994
declined by three basis points from that experienced in 1993.
The Company anticipates that interest margins will continue to
contract during 1994.
The shift out of interest-bearing time deposits to more liquid
noninterest-bearing deposit instruments experienced during much
of 1993 moderated during the first quarter of 1994.
Noninterest-bearing demand deposits averaged 20.2% of total
deposits during 1993, as compared to 20.0% during the first
quarter of 1994.
Loans, as a percentage of deposits, were 76.0% at December 31,
1993, compared to 77.4% at March 31, 1994. Loan demand has
remained reasonably consistent during the quarter ended March
31, 1994. During the first quarter of 1994, 69.2% of INTRUST's
average interest-earning assets were invested in loans, compared
to 67.4% for the year ended December 31, 1993.
Provision for Loan Losses. The Provision for Loan Losses for
the quarter ended March 31, 1994 was $83,000, compared to a
provision of $2,480,000 for the corresponding period of the
preceding year. Net charge-offs during the first quarter of
1994 were $1,037,000. Net charge-offs during the corresponding
period of 1993 were $957,000. At March 31, 1994, nonaccrual,
past due and restructured loans totaled $4,709,000, compared to
$5,179,000 at December 31, 1993.
The Allowance for Loan Losses at March 31, 1994 was 2.11% of
total loans (net of unearned discount) compared with 2.24% at
December 31, 1993. Management is not aware of issues that would
significantly impact the overall credit quality of the loan
portfolio during the remainder of 1994. As both the local and
national economies strengthen, the Company believes that the
loan loss provision during the remainder of 1994 will continue
to reflect the general improvement in the credit quality of its
loan portfolio.
Liquidity and Capital Resources. Consolidated liquidity
remained strong at March 31, 1994. The average maturity of
United States government and agency securities in the investment
portfolio was 1 year, 7 months, and the average maturity of
municipal securities was 4.2 years.
The Company has thoroughly reviewed its investment security
portfolio and has determined that at March 31, 1994, it has the
ability and intent to hold all securities in the portfolio until
maturity. The Company believes the regularly scheduled
maturities of those securities presently held in its investment
portfolio, along with other funding alternatives, provide
sufficient liquidity to meet depositors' needs and make
available lendable funds within its service area.
The Company's capital position substantially exceeds regulatory
capital requirements. The Company must maintain a minimum ratio
of total capital to risk-weighted assets of 8%, of which at
least 4% must qualify as Tier 1 capital. At March 31, 1994, the
Company's total capital to risk-weighted assets ratio was 11.7%
and its Tier 1 capital to risk-weighted assets ratio was 9.3%.
In addition to the aforementioned regulatory requirements, each
of the Company's subsidiary banks met all capital ratios
required at the individual bank level.
Other Income and Other Expense. Other income for the first
three months of 1994 increased $1,048,000 or 19.5% from prior
year levels. The acquisition of KSB&T has resulted in increased
account volumes, which has served to increase both trust fees
and service charge income. As noted in the Company's 1993
annual report, certain programs were put into place in the last
quarter of 1993 that were designed to increase bankcard loan
outstandings. These programs have resulted in a number of new
accounts and additional fee income.
Other expenses for the first quarter of 1994 have increased
28.5%, or $3,556,000 over the comparable prior year period.
1994 employment expenses have increased $1,441,000, or 25%, over
1993 levels. This increase is attributable to increased
staffing levels arising from the KSB&T acquisition. At March
31, 1994, the Company had a total staff of 878 (on a full-time
equivalent basis) compared to a total staff of 704 at March 31,
1993.
Occupancy expenses have increased 43.5% or $578,000, over 1993
levels. Approximately one-half of this increase arises from
costs incurred at facilities that were acquired in the KSB&T
transaction. Additionally, the Company has made certain
investments in technology equipment and software in 1993 and
1994, resulting in increased amortization and depreciation.
Goodwill amortization incurred during the first quarter of 1994
has increased substantially over 1993, as the Company's 1994
financial statements reflect the amortization of the excess of
cost over net assets acquired in the KSB&T acquisition. 1994
data processing and FDIC assessment expenses have increased over
1993 levels by 15.1% and 21.7%, respectively, as increased
account volumes realized with the KSB&T acquisition have
resulted in additional costs. Previously mentioned
promotional activities in the bankcard area and new marketing
campaigns undertaken by the Company in 1994 account for the
increase in advertising and promotional costs. Other expenses
in 1994 have increased $519,000 over the comparable period of
the preceding year, as increased volumes have resulted in
increases in item processing and postage costs.
New Accounting Standards. Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" is effective for fiscal years beginning after December 15,
1994. This Statement specifies how the allowance for credit
losses related to certain loans should be determined. The
Statement does not apply to large groups of smaller-balance
homogeneous loans that are collectively evaluated for
impairment. In the Company's case, approximately 41% of the
loan portfolio would not be subject to the provisions of this
Statement. While there may be certain procedural issues to be
addressed by the Company relative to the recognition and
measurement of impairment so as to comply with the provisions of
the Statement, the relative quality of the loan portfolio and
the loss coverage presently existing in the allowance for loan
losses appear, in the Company's opinion, to indicate that
adoption of Statement 114 will not have a material effect on its
financial statements.
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PART 2. OTHER INFORMATION
Item 6(b). Exhibits and Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
INTRUST Financial Corporation
Date: May 9, 1994 By: /s/ C.Q. Chandler IV
C. Q. Chandler IV
President
(Principal Executive Officer)
Date: May 9, 1994 By: /s/ Jay L. Smith
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)