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, 1995
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 7, 1995, there were 2,342,760 shares of the
registrant's common stock, par value $5 per share, outstanding.
Part 1. Financial Information
INTRUST Financial Corporation
Consolidated Condensed Balance Sheets
(Unaudited)
(in thousands of dollars except per share data)
June 30, December 31,
Assets 1995 1994
Cash and cash equivalents:
Cash and due from banks $78,792 $81,084
Federal funds sold and securities purchased
under agreements to resell 62,990 33,805
Total cash and cash equivalents 141,782 114,889
Investment securities (market value, $299,572
for 1995 and $280,759 for 1994) 294,940 276,779
Loans 1,055,397 1,058,085
Less: Unearned discount 189 255
Allowance for loan losses 22,545 19,886
Net loans 1,032,663 1,037,944
Land, buildings and equipment 31,221 31,994
Other assets 62,466 57,511
Total assets $1,563,072 $1,519,117
Liabilities and Stockholders' Equity
Liabilities:
Deposits $1,282,056 $1,276,076
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 85,702 56,987
Other 10,258 10,806
Total short-term borrowings 95,960 67,793
Accounts payable and accrued liabilities 17,611 12,708
Notes payable 22,950 22,950
Convertible subordinated capital notes 12,000 12,000
Total liabilities 1,430,577 1,391,527
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 111,375 105,366
Less: Treasury stock, at cost (57,240 shares in
1995 and 37,780 shares in 1994) 2,880 1,776
Total stockholders' equity 132,495 127,590
Total liabilities and stockholders' equity $1,563,072 $1,519,117
See accompanying notes to consolidated financial statements.
INTRUST Financial Corporation
Consolidated Condensed Statements of Income
(Unaudited - In Thousands of Dollars Except per Share Data)
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
Interest income:
Interest on loans $26,570 $22,250 $51,099 $43,655
Interest on investment securities 4,701 4,021 8,900 8,281
Interest on Federal funds sold and
securities purchased under
agreements to resell 1,030 615 2,194 1,322
Other interest income 0 0 1 0
Total interest income 32,301 26,886 62,194 53,258
Interest expense:
Interest on deposits 11,527 8,011 21,930 15,975
Interest on Federal funds purchased and
securities sold under agreement
to repurchase 1,077 384 2,075 782
Interest on capital notes 270 270 540 540
Interest on other borrowings 455 475 1,154 903
Total interest expense 13,329 9,140 25,699 18,200
Net interest income 18,972 17,746 36,495 35,058
Provision for loan losses 4,180 57 6,461 140
Net interest income after
provision for loan losses 14,792 17,689 30,034 34,918
Other income:
Service charges on deposit accounts 2,362 2,252 4,597 4,478
Trust department fees 1,328 1,389 2,797 2,788
Bankcard fees 604 1,346 1,397 2,432
Securities gains and losses 0 0 0 0
Other service charges, fees and income 3,615 1,797 7,357 3,501
Total other income 7,909 6,784 16,148 13,199
Other expenses:
Salaries and employee benefits 7,197 7,183 14,707 14,396
Net occupancy and equipment expense 2,036 1,988 4,108 3,896
Advertising and promotional activities 790 1,273 1,625 2,589
Data processing expense 1,080 1,008 2,221 2,108
FDIC assessment 711 718 1,420 1,436
Goodwill 399 354 798 711
Other 5,146 3,667 9,775 7,107
Total other expenses 17,359 16,191 34,654 32,243
Income before income taxes 5,342 8,282 11,528 15,874
Provision for income taxes 2,002 3,032 4,342 5,758
Net income $3,340 $5,250 $7,186 $10,116
Per share data:
Net income - assuming no dilution $1.43 $2.21 $3.06 $4.25
Net income - assuming full dilution $1.28 $1.95 $2.74 $3.77
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,
1995 1994
Cash provided (absorbed) by operating activities:
Net Income $7,186 $10,116
Adjustments to reconcile net income to net
cash flows from operations:
Provision for loan losses 6,461 140
Provision for depreciation and amortization 3,462 2,982
Amortization of premium and discount on
investment securities 535 1,222
Changes in assets and liabilities:
Prepaid expenses and other assets (3,428) (179)
Income taxes (695) 199
Interest receivable (766) 797
Interest payable 4,572 2,269
Other liabilities (357) (209)
Other (88) (86)
Net cash provided by operating activities 16,882 17,251
Cash provided (absorbed) by investing activities:
Purchase of investment securities (91,764) (19,228)
Investment securities matured or called 73,069 67,346
Net increase in loans (3,059) (24,331)
Purchases of land, buildings and equipment (1,524) (1,746)
Proceeds from sales of equipment 32 8
Proceeds from sales of other real estate and
repossessions 1,587 1,201
Other (196) (34)
Net cash provided (absorbed) by investing activities (21,855) 23,216
Cash provided (absorbed) by financing activities:
Net increase (decrease) in deposits 5,980 (48,653)
Net increase (decrease) in short-term borrowings 28,167 (16,975)
Cash dividends (1,177) (1,190)
Purchase of treasury stock (1,104) (57)
Net cash provided (absorbed) by financing activities 31,866 (66,875)
Increase (Decrease) in cash and cash equivalents 26,893 (26,408)
Cash and cash equivalents at beginning of period 114,889 146,447
Cash and cash equivalents at end of period $141,782 $120,039
Supplemental disclosures
Interest paid $21,330 $15,931
Income tax paid $5,037 $5,559
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 1994 INTRUST Financial Corporation Annual
Report on Form 10-K. Reference is made to the "Notes to
Consolidated Financial Statements" under Item 8 of the 1994 Form
10-K for additional disclosure.
2. LOANS
As of August 3, 1995, 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.
3. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the allowance for loan losses for
the six months ended June 30, 1995 and 1994 (in thousands):
1995 1994
Balance, January 1 $19,886 $21,793
Additions:
Provision for loan losses 6,461 140
26,347 21,933
Deductions:
Loans charged off 5,624 3,161
Less recoveries on loans
previously charged off 1,822 1,073
Net loan losses 3,802 2,088
Balance, June 30 $22,545 $19,845
4. INVESTMENT SECURITIES
Investment securities consisted of the following at June 30,
1995 and December 31, 1994 (in thousands):
1995 1994
U.S. Government and Federal Agencies $241,605 $216,387
Obligations of state and political subdivisions 47,582 54,973
Other 5,753 5,419
Total $294,940 $276,779
5. EARNINGS PER SHARE CALCULATIONS
Net income per share, assuming no dilution, is computed based
upon the weighted average number of shares outstanding. Net
income per share, assuming full dilution, is computed based upon
the assumption that the 9% convertible subordinated capital
notes had been converted into common stock as of the beginning
of each respective period presented with related adjustments to
interest and income tax expense. The weighted average number of
shares outstanding for the three months ended June 30, 1995 and
1994 were 2,343,472 and 2,380,220 respectively. The weighted
average number of shares outstanding for the six months ended
June 30, 1995 and 1994 were 2,347,959 and 2,380,220 respectively.
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, 1995 was
$7,186,000, a 29.0% decline from the corresponding period of the
prior year. As discussed below, the Company's 1994 provision
for loan losses was much less than it normally experiences. The
1995 provision represents a return to more traditional
provisions, along with 1995's somewhat higher losses in the
consumer lending portion of the Company's loan portfolio.
NET INTEREST INCOME. Second quarter net interest income amounts
have increased $1,226,000, or 6.9% over the comparable 1994
period. On a same-bank basis, 1995 average interest-earning
assets increased 2.4% over comparable amounts in 1994, with
assets obtained in the First Bank-Moore acquisition accounting
for an additional 1.6% increase in average interest-earning
assets. Similarly, year-to-date average interest-earning
assets and interest-bearing liabilities have increased only
nominally from 1994 levels, 2.6% and 0.9%, respectively.
The Company's interest spread during the second quarter of 1995
increased slightly from first quarter levels. Interest income
increased $5,415,000, or 20.1% over prior year levels, and has
increased 16.8% on a year-to-date basis. Second quarter
interest expense increased $4,189,000 over comparable 1994
amounts. During the last half of 1994 and the first quarter of
1995, interest rate increases resulted in customers investing in
longer-term, higher interest-bearing deposits. As the increase
in rates moderated in the second quarter, this movement slowed.
Year-to-date, the Company has seen its interest costs increase
41.2%, or $7,499,000, over prior year levels. However, its
spread during the second quarter increased approximately 25
basis points, as average noninterest-bearing demand deposits as
a percentage of total deposits increased from 20.2% in the first
quarter to 20.5%. In addition, the Company experienced yield
increases arising from the repricing of credit card accounts
after the expiration of introductory interest rates.
Loans, as a percentage of deposits, were 82.3% at June 30, 1995,
compared to 82.9% at December 31, 1994 . Loans comprised 74.0%
of average interest-earning assets for the quarter ended June
30, 1995, compared to a level of 72.9% for the same period of
the preceding year.
PROVISION FOR LOAN LOSSES. The provision for loan losses for
the three month period ended June 30, 1995 was $4,180,000,
compared to a provision of $57,000 for the corresponding period
of the preceding year. As noted in previous filings, the
Company anticipated that its provision for loan losses would
return to more traditional levels, causing some reduction in the
Company's net interest income after provision for loan losses.
During the five year period ended December 31, 1993, the
Company's provision for loan losses averaged 1.2% of average
loans outstanding. On an annualized basis, the provision for
loan losses recognized by the Company through the first half of
1995 would equal 1.26% of average loans outstanding. Net
charge-offs during the second quarter and first six months of
1995 were $2,138,000 and $3,802,000, respectively. Comparable
amounts for the same time periods of the preceding year were
$1,051,000 and $2,088,000.
The consumer lending segment of the Company's loan portfolio has
continued to grow, resulting in somewhat higher levels of loan
losses. The Company has increased its allowance for loan losses
in recognition of this fact. The allowance for loan losses at
June 30, 1995 was 2.14% of total loans (net of unearned
discount) compared with 1.88% at December 31, 1994. Management
intends to actively review the activity in its loan portfolio to
ensure that the provision for loan losses and resultant
allowance for loan losses remain adequate to appropriately
address the credit risk existing in the portfolio.
LIQUIDITY AND CAPITAL RESOURCES. Consolidated liquidity
remained strong at June 30, 1995. The average maturity of
United States government and agency securities in the investment
portfolio was 1 year and 10 months, and the average maturity of
municipal securities was 3 years, 11 months.
The Company has thoroughly reviewed its investment security
portfolio and has determined that at June 30, 1995, 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, such as the
securitization of credit card receivables, 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, 1995, the
Company's total capital to risk-weighted assets ratio was 11.66%
and its Tier 1 capital to risk-weighted assets ratio was 9.58%.
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. Second quarter other income
increased $1,125,000 or 16.6% over prior year levels. For the
first six months of the year, this income category has increased
$2,949,000, or 22.3% over comparable prior year amounts. The
majority ($3,500,000) of this increase is attributable to the
securitization of credit card receivables that occurred in the
fourth quarter of 1994 and the first quarter of 1995. The
Company continues to service the $100,000,000 in credit card
receivables that it has securitized and sold. However, it no
longer recognizes net interest income and certain fee revenue,
nor does it provide for loan losses on the securitized
portfolio. Instead, servicing fee income is received by the
Company.
Service charges on deposit accounts recognized during the
quarter ended June 30, 1995 have not changed appreciably from
the same period of 1994, as there have not been significant
year-over-year changes in the volumes of those accounts that
typically carry a service charge. Trust fees are flat when
compared to 1994, and bankcard fees have been impacted by the
securitization mentioned above, as well as general competitive
pressures, as no annual fee credit cards are becoming more
common.
Other expenses have increased 7.2%, or $1,168,000 over the
comparable second quarter prior year period. Much of this
increase has arisen in the form of increased operational costs
and fraud losses associated with increased credit card
outstandings as well as costs related to the credit card
receivables securitization.
Second quarter employment expenses increased $14,000 over those
of the comparable period in 1994. Year-to-date employment costs
have increased by only 2.2%, as the consolidation of the
Company's Kansas banks in February, 1995 has resulted in
staffing efficiencies. At June 30, 1995 the Company had 890
full-time equivalent employees, compared to 892 at December 31,
1994.
Occupancy and equipment expenses for the quarter ended June 30
increased 2.4% or $48,000, over 1994 levels. During the first
six months of 1995, these costs have increased $212,000 or 5.4%,
when compared to the same period of the preceding year. Much of
this increase is due to depreciation on technology investments
the Company has made within the past twelve months. Data
processing expenses have increased nominally compared to 1994
levels. The Company anticipates that reductions in these costs
will begin to be realized during the fourth quarter, as the
conversion to a different data processor is completed.
Advertising and promotional activities have declined from 1994
levels as the Company has entered into fewer credit card
promotions during 1995 when compared to 1994. Other expenses
have increased 37.5% in 1995 over the comparable prior year
period. Much of this increase has come about because promotions
generated in 1994 resulted in increased volumes in the credit
card area, and these additional volumes have resulted in
increased credit card operational costs and increased fraud
losses.
NEW ACCOUNTING STANDARDS. Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" was 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 43% of the
loan portfolio is not subject to the provisions of this
Statement. The adoption of Statement 114 did not have a
material effect on the financial statements due to the relative
quality of the loan portfolio and the loss coverage existing in
the allowance for loan losses.
PART 2. OTHER INFORMATION
Item 6(b). Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) 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, 1995 By: /s/ C.Q. Chandler IV
C. Q. Chandler IV
President
(Principal Executive Officer)
Date: August 10, 1995 By: /s/ Jay L. Smith
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)
EXHIBIT INDEX
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 78,792
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 62,990
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 294,940
<INVESTMENTS-MARKET> 299,572
<LOANS> 1,032,663
<ALLOWANCE> 22,545
<TOTAL-ASSETS> 1,563,072
<DEPOSITS> 1,282,056
<SHORT-TERM> 95,960
<LIABILITIES-OTHER> 17,611
<LONG-TERM> 34,950
<COMMON> 12,000
0
0
<OTHER-SE> 120,495
<TOTAL-LIABILITIES-AND-EQUITY> 1,563,072
<INTEREST-LOAN> 51,099
<INTEREST-INVEST> 8,900
<INTEREST-OTHER> 2,195
<INTEREST-TOTAL> 62,194
<INTEREST-DEPOSIT> 21,930
<INTEREST-EXPENSE> 25,699
<INTEREST-INCOME-NET> 36,495
<LOAN-LOSSES> 6,461
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 34,654
<INCOME-PRETAX> 11,528
<INCOME-PRE-EXTRAORDINARY> 7,186
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,186
<EPS-PRIMARY> 3.06
<EPS-DILUTED> 2.74
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,886
<CHARGE-OFFS> 5,624
<RECOVERIES> 1,822
<ALLOWANCE-CLOSE> 22,545
<ALLOWANCE-DOMESTIC> 22,545
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
