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 June 30, 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 August 4, 1994, there were 2,362,220 shares of the
registrant's common stock, par value $5 per share, outstanding.
Part 1. Financial Information
INTRUST Financial Corporation
Consolidated Condensed BalanceSheets
(Unaudited)
(in thousands of dollars)
June 30, December 31,
ASSETS 1994 1993
Cash and due from banks $74,504 $74,722
Investment securities (market value, $292,137
for 1994 and $347,980 for 1993) 292,221 341,561
Federal funds sold and securities purchased
under agreements to resell 45,535 71,725
Loans 996,614 974,901
Less: Unearned discount 254 299
Allowance for loan losses 19,845 21,793
Net loans 976,515 952,809
Land, buildings and equipment 29,750 30,032
Other assets 50,334 53,019
$1,468,859 $1,523,868
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $1,234,631 $1,283,284
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 48,799 64,315
Other 10,280 11,739
Total short-term borrowings 59,079 76,054
Accounts payable and accrued liabilities 13,173 11,421
Notes payable 25,580 25,580
Convertible subordinated capital notes 12,000 12,000
Total liabilities 1,344,462 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 101,237 92,312
125,237 116,312
Less: Treasury stock, at cost; 19,780 shares in
1994 and 18,640 shares in 1993 (840) (783)
Total stockholders' equity 124,397 115,529
$1,468,859 $1,523,868
See accompanying notes to consolidated financial statements.
INTRUST Financial Corporation
Consolidated Condensed Statements of Income
(Unaudited - In Thousands of Dollars Except per Share
Three Months Six Months
Ended June 30, Ended June 30,
Interest income: 1994 1993 1994 1993
Interest on loans $22,250 $17,572 $43,655 $34,999
Interest on investment securities 4,021 4,328 8,281 9,607
Interest on Federal funds sold and
securities purchased under agreements
to resell 615 430 1,322 842
Other interest income 0 5 0 15
Total interest income 26,886 22,335 53,258 45,463
Interest expense:
Interest on deposits 8,011 6,876 15,975 14,181
Interest on Federal funds
purchased and securities sold
under agreement to repurchase 384 242 782 488
Interest on capital notes 270 270 540 540
Interest on other borrowings 475 73 903 152
Total interest expense 9,140 7,461 18,200 15,361
Net interest income 17,746 14,874 35,058 30,102
Provision for loan losses 57 2,361 140 4,841
Net interest income after
provision for loan losses 17,689 12,513 34,918 25,261
Other income:
Service charges on deposit accounts 2,252 2,045 4,478 3,952
Trust department fees 1,389 1,272 2,788 2,497
Bankcard fees 1,346 992 2,432 1,791
Securities gains and losses 0 9 0 57
Other service charges, fees and income 1,797 1,572 3,501 2,960
Total other income 6,784 5,890 13,199 11,257
Other expenses:
Salaries and employee benefits 7,183 6,445 14,396 12,217
Net occupancy and equipment expense 1,988 1,452 3,896 2,782
Advertising and promotional activities 1,273 1,105 2,590 1,931
Data processing expense 1,008 1,254 2,108 2,210
FDIC assessement 718 590 1,436 1,180
Goodwill 354 102 711 204
Other 3,667 3,092 7,107 6,013
Total other expenses 16,191 14,040 32,244 26,537
Income before income taxes 8,282 4,363 15,874 9,981
Provision for income taxes 3,032 1,266 5,758 2,913
Net income $5,250 $3,097 $10,116 $7,068
Per share data:
Net income - assuming no dilution $2.21 $1.30 $4.25 $2.97
Net income - assuming full dilution $1.95 $1.18 $3.77 $2.67
Cash Dividends $0.25 $0.25 $0.50 $0.50
See accompanying notes to consolidated financial statements.
INTRUST Financial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of dollars)
Six Months Ended
June 30,
1994 1993
Operating activities:
Net Income $10,116 $7,068
Adjustments to reconcile net income to net
cash flows from operations:
Provision for loan losses 140 4,841
Provision for depreciation and amortization 2,982 1,828
Amortization of premium and discount on
investment securities 1,222 818
Changes in assets and liabilities:
Prepaid expenses and other assets (179) (261)
Income taxes 199 (2,970)
Interest receivable 797 605
Interest payable 2,269 1,258
Other liabilities (209) 1,133
Other (86) (153)
Net cash provided by operating activities 17,251 14,167
Investing activities:
Purchase of investment securities (19,228) (21,181)
Investment securities matured or called 67,346 78,615
Proceeds from sale of investment securites 0 177
Net (increase) decrease in loans (24,331) 7,094
Purchases of land, buildings and equipment (1,746) (2,172)
Proceeds from sales of equipment 8 16
Proceeds from sales of other real estate and
repossessions 1,201 1,600
Other (34) (36)
Net cash provided by investing activities 23,216 64,113
Financing activities:
Net decrease in deposits (48,653) (74,035)
Net decrease in short-term borrowings (16,975) (9,128)
Cash dividends (1,190) (1,192)
Net increase in treasury stock (57) (139)
Net cash used by financing activities (66,875) (84,494)
Increase (Decrease) in cash and cash equivalents (26,408) (6,214)
Cash and cash equivalents at beginning of period 146,447 142,267
Cash and cash equivalents at end of period $120,039 $136,053
See accompanying notes to consolidated financial statements.
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. Proposed Acquisition
An application was filed by INTRUST Financial Corporation with
the Federal Reserve on July 12, 1994 to acquire First Moore
Bancshares for a purchase price of $6.1 million. It is
anticipated the transaction will be consummated in the third or
fourth quarter of 1994.
3. Loans
As of August 3, 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 $254,197 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.
4. Allowance for Loan Losses
The following is a summary of the allowance for loan losses for
the six months ended June 30, 1994 and 1993 ( in thousands):
1994 1993
Balance, January 1 $21,793 $16,099
Additions:
Provision for loan losses 140 4,841
21,933 20,940
Deductions:
Loans charged off 3,161 2,853
Less recoveries on loans
previously charged off 1,073 1,009
Net loan losses 2,088 1,844
Balance, June 30 $19,845 $19,096
5. Investment Securities
Investment securities consisted of the following at June 30, 1994 and
December 31, 1993 (in thousands):
June 30 Dec. 31
1994 1993
U.S. Government and Federal Agencies $229,594 $269,842
Obligations of state and political
subdivisions 55,778 63,971
Other 6,849 7,748
Total Investment Securities $292,221 $341,561
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unaudited consolidated net income of INTRUST Financial
Corporation for the six months ended June 30, 1994 was
$10,116,000, a 43.1% increase over the corresponding period of
the prior year. Net income for the second quarter increased
7.9% over that realized in the quarter ended March 31, 1994.
1994 results were favorably impacted by the volume increases
associated with the Kansas State Bank & Trust Company merger
that was consummated in the third quarter of 1993, as well as a
reduction in the Company's provision for loan losses.
NET INTEREST INCOME. Second quarter net interest income amounts
have increased $2,872,000, or 19.3% over the comparable 1993
period, and year-to-date amounts have increased $4,956,000 over
those of the prior period. This increase is attributable to
volume increases, as year-to-date average interest-earning
assets in 1994 exceeded those of the same period in 1993 by
approximately $278,000,000. The increase in average
interest-bearing liabilities for the same period was
$230,000,000. 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 Company's interest spread
has declined 34 basis points from the levels of a year ago.
Although both yields and costs of funds have increased during
the second quarter of 1994, IFC anticipates that interest
margins will continue to experience contraction during the
remainder of 1994.
The shift out of interest-bearing time deposits to more liquid
deposit instruments experienced during much of 1993 has
moderated. Transaction accounts aggregated 35.1% of total
deposits at June 30, 1994, as compared to 35.9% at December 31,
1993.
Loans, as a percentage of deposits, were 80.7% , 77.4% and 76.0%
at June 30, 1994, March 31, 1994 and December 31, 1993,
respectively. Total deposits of the Company have declined
$48.7 million from December 31, 1993 levels. A portion of this
decline is seasonal and expected, and another component, the
normal deposit run-off that occurs during an in-market
acquisition, was anticipated. The Company has funded its new
loan growth during 1994 principally through funds that have been
generated by the normal contractual maturities of securities in
its investment portfolio. Loans comprised 72.9% of average
interest-earning assets during the second quarter of 1994,
compared to levels of 70.1% and 68.9% for the quarter ending
March 31, 1994 and year ended December 31, 1993, respectively.
PROVISION FOR LOAN LOSSES. The Provision for Loan Losses for
the six month period ended June 30, 1994 was $140,000, compared
to a provision of $4,841,000 for the corresponding period of the
preceding year. Net charge-offs during the second quarter of
1994 were $1,051,000. This compares to net charge-offs of
$1,037,000 and $887,000 during the first quarter of 1994 and
second quarter of 1993, respectively. At June 30, 1994,
nonaccrual, past due and restructured loans totaled $5,069,000,
compared to $5,085,000 and $5,179,000 at March 31, 1994 and
December 31, 1993, respectively.
The Allowance for Loan Losses at June 30, 1994 was 1.99% 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 June 30, 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 years.
The Company has thoroughly reviewed its investment security
portfolio and has determined that at June 30, 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 June 30, 1994, the
Company's total capital to risk-weighted assets ratio was 12.1%
and its Tier 1 capital to risk-weighted assets ratio was 9.8%.
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 increased
$1,942,000 or 17.3% 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 have increased 21.5%, or $5,707,000 over the
comparable prior year period. 1994 employment expenses have
increased $2,179,000, or 17.8%, over 1993 levels. This increase
is attributable to increased staffing levels arising from the
KSB&T acquisition. At June 30, 1994, the Company had a total
staff of 875 (on a full-time equivalent basis) compared to a
total staff of 699 at June 30, 1993.
Occupancy expenses have increased 40% or $1,114,000, 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 six months 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
FDIC assessment expenses have increased over 1993 levels by
21.6%, 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 $1,094,000 over the comparable
period of the preceding year, as increased volumes have resulted
in increases in item processing and postage costs. The Company
has also experienced increases in credit investigation costs as
new bankcard accounts have been added to the loan portfolio.
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.
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: August 10, 1994 By: /s/ C.Q. Chandler IV
C. Q. Chandler IV
President
(Principal Executive Officer)
Date: August 10, 1994 By: /s/ Jay L. Smith
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)
