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, 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 May 3, 1995, there were 2,343,260 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)
March 31, December 31,
Assets 1995 1994
Cash and cash equivalents:
Cash and due from banks $85,079 $81,084
Federal funds sold and securities purchased
under agreements to resell 78,140 33,805
Total cash and cash equivalents 163,219 114,889
Investment securities (market value, $301,745
for 1995 and $280,759 for 1994) 300,978 276,779
Loans 1,026,603 1,058,085
Less: Unearned discount 218 255
Allowance for loan losses 20,503 19,886
Net loans 1,005,882 1,037,944
Land, buildings and equipment 31,560 31,994
Other assets 59,918 57,511
Total assets $1,561,557 $1,519,117
Liabilities and Stockholders' Equity
Liabilities:
Deposits $1,301,347 $1,276,076
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 70,100 56,987
Other 7,296 10,806
Total short-term borrowings 77,396 67,793
Accounts payable and accrued liabilities 17,997 12,708
Notes payable 22,950 22,950
Convertible subordinated capital notes 12,000 12,000
Total liabilities 1,431,690 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 108,621 105,366
Less: Treasury stock, at cost; 55,080 shares in
1995 and 37,780 shares in 1994 2,754 1,776
Total stockholders' equity 129,867 127,590
Total liabilities and stockholders' equity $1,561,557 $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
Ended March 31
1995 1994
Interest income:
Interest on loans $24,529 $21,405
Interest on investment securities 4,199 4,259
Interest on Federal funds sold and securities
purchased under agreements to resell 1,164 707
Other interest income 1 0
Total interest income 29,893 26,371
Interest expense:
Interest on deposits 10,403 7,964
Interest on Federal funds purchased and securities
sold under agreement to repurchase 998 398
Interest on capital notes 270 270
Interest on other borrowings 699 428
Total interest expense 12,370 9,060
Net interest income 17,523 17,311
Provision for loan losses 2,281 83
Net interest income after provision for
loan losses 15,242 17,228
Other income:
Service charges on deposit accounts 2,235 2,226
Trust department fees 1,469 1,399
Bankcard fees 793 1,086
Other service charges, fees and income 3,742 1,704
Total other income 8,239 6,415
Other expenses:
Salaries and employee benefits 7,510 7,213
Net occupancy and equipment expense 2,072 1,908
Advertising and promotional activities 835 1,317
Data processing expense 1,141 1,100
Deposit insurance assessment 709 718
Goodwill 399 357
Other 4,629 3,440
Total other expenses 17,295 16,053
Income before income taxes 6,186 7,590
Provision for income taxes 2,340 2,726
Net income $3,846 $4,864
Per share data:
Net income - assuming no dilution $1.63 $2.04
Net income - assuming full dilution $1.46 $1.81
Cash Dividends $0.25 $0.25
See accompanying notes to consolidated financial statements.
INTRUST Financial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of dollars)
Three Months
Ended March 31,
1995 1994
Cash provided (absorbed) by operating activities:
Net Income $3,846 $4,864
Adjustments to reconcile net income to net
cash flows from operations:
Provision for loan losses 2,281 83
Provision for depreciation and amortization 1,722 1,477
Amortization of premium and discount on
investment securities 304 647
Changes in assets and liabilities:
Prepaid expenses and other assets (2,031) (835)
Income taxes 2,323 2,421
Interest receivable (195) 1,454
Interest payable 2,509 1,627
Other liabilities (99) 442
Other (68) (44)
Net cash provided by operating activities 10,592 12,136
Cash provided (absorbed) by investing activities:
Purchase of investment securities (71,114) (11,053)
Investment securities matured or called 46,611 40,899
Net (increase) decrease in loans 29,073 (14,845)
Purchases of land, buildings and equipment (693) (842)
Proceeds from sales of equipment 2 5
Proceeds from sales of other real estate and
repossessions 600 741
Other (47) (15)
Net cash provided by investing activities 4,432 14,890
Cash provided (absorbed) by financing activities:
Net increase (decrease) in deposits 25,271 (5,900)
Net increase (decrease) in short-term borrowings 9,603 (20,520)
Cash dividends (590) (595)
Purchase of treasury stock (978) (57)
Net cash provided (absorbed) by
financing activities 33,306 (27,072)
Increase (Decrease) in cash and cash equivalents 48,330 (46)
Cash and cash equivalents at beginning of period 114,889 146,447
Cash and cash equivalents at end of period $163,219 $146,401
Supplemental disclosures
Interest paid $ 9,861 $ 7,433
Income tax paid $ 17 $ 305
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 May 5, 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 three months ended March 31, 1995 and 1994 (in thousands):
1995 1994
Balance, January 1 $19,886 $21,793
Additions:
Provision for loan losses 2,281 83
22,167 21,876
Deductions:
Loans charged off 2,448 1,504
Less recoveries on loans
previously charged off 784 467
Net loan losses 1,664 1,037
Balance, March 31 $20,503 $20,839
4. INVESTMENT SECURITIES
Investment securities consisted of the following at March 31,
1995 and December 31, 1994 (in thousands):
1995 1994
U.S. Government and Federal Agencies $245,903 $216,387
Obligations of state and political
subdivisions 49,285 54,973
Other 5,790 5,419
Total investment securities $300,978 $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 March 31, 1995 and
1994 were 2,352,496 and 2,381,158 respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unaudited consolidated net income of INTRUST Financial
Corporation for the three months ended March 31, 1995 was
$3,846,000, a 20.9% decline from the corresponding period of the
prior year. 1994 net earnings were influenced by a loan loss
provision that was significantly less than that which is
normally experienced by the Company. The 1995 first quarter
provision for loan losses more closely corresponds to the
Company's actual experience in years preceding 1994.
NET INTEREST INCOME. First quarter net interest income amounts
have increased $212,000, or 1.2% over the comparable 1994
period. Volume changes had little impact on the Company's net
interest income. Consolidated average interest-earning assets
in the first quarter of 1995 did not differ appreciably from the
average amount of comparable assets in the same period of 1994.
Similarly, 1995 average interest-bearing liabilities declined
only a very minor amount from 1994 levels.
The Company's interest spread during the first quarter of 1995
continued the compression experienced during much of 1994.
Interest income increased $3,522,000, or 13.4% over prior year
levels. This increase is attributable to interest rate
increases, as yields on interest-earning assets increased
approximately 105 basis points over prior year levels. Interest
expense increased $3,310,000, or 36.5% over 1994 levels, as the
Company saw deposits shift out of more liquid transaction
accounts into higher rate interest-bearing certificates of
deposit. This overall increase in funding costs served to lower
the Company's interest spread by 20 basis points.
Loans, as a percentage of deposits, were 78.9% at March 31,
1995, compared to 82.9% at December 31, 1994 and 77.4% at March
31, 1994. During January, 1995, one of the Company's subsidiary
banks securitized and sold $50,000,000 of credit card
receivables, bringing to $100,000,000 the amount of credit card
receivables securitized and sold. Total deposits of the Company
have increased $25.3 million over December 31, 1994 levels. The
present interest rate environment appears to be more attractive
to the Company's depositors. Deposits began increasing during
the last half of 1994, and that trend has continued during the
first quarter of 1995. The Company's loan demand remains good,
as loans would have increased during the first quarter of 1995
at an annualized rate of 7%, excluding the impact of the
aforementioned securitization of credit card receivables. Loans
comprised 73.4% of average interest-earning assets for the
quarter ended March 31, 1995, compared to a level of 69.2% for
the same period of the preceding year.
PROVISION FOR LOAN LOSSES. The provision for loan losses for
the three month period ended March 31, 1995 was $2,281,000,
compared to a provision of $83,000 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 in the first quarter of
1995 would equal .89% of average loans outstanding. Net
charge-offs during the first quarter of 1995 were $1,664,000,
compared to $1,037,000 for the first quarter of 1994. At March
31, 1995, nonaccrual, past due and restructured loans comprised
.52% of total loans, as compared to .59% at December 31, 1994.
The allowance for loan losses at March 31, 1995 was 2.00% of
total loans (net of unearned discount) compared with 1.88% at
December 31, 1994. While management is not aware of issues that
would significantly impact the overall credit quality of the
loan portfolio during the remainder of 1995, 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 March 31, 1995. The average maturity of
United States government and agency securities in the investment
portfolio was 2 years, and the average maturity of municipal
securities was 4 years, 3 months.
The Company has thoroughly reviewed its investment security
portfolio and has determined that at March 31, 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 March 31, 1995, the
Company's total capital to risk-weighted assets ratio was 11.72%
and its Tier 1 capital to risk-weighted assets ratio was 9.61%.
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
$1,824,000 or 28.4% over prior year levels. The majority of
this increase is attributable to the aforementioned
securitization of credit card receivables. The Company
continues to service the $100,000,000 in credit card receivables
that it has securitized and sold. The Company 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. This
revenue is included in other service charges, fees and income in
the accompanying financial statements.
Service charges on deposit accounts recognized during the
quarter ended March 31, 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 have increased 5%,
reflecting appreciation in the stock market. 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 7.7%, or $1,242,000 over the
comparable prior year period. Much of this increase has arisen
in the form of increased operational costs associated with
increased credit card outstandings.
The rate of growth in employment expenses slowed during the
first quarter of 1995 to 4.1%. In February, 1995, the Company
consolidated the operations of its five Kansas banks into a
single entity. This consolidation resulted in some staffing
efficiencies, which were offset in part by nonrecurring
severance costs recognized in the first quarter.
Occupancy and equipment expenses have increased 8.6% or
$164,000, over 1994 levels. 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 second half of the year, 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 bankcard promotions
during the first quarter of 1995 when compared to 1994. Other
expenses have increased 34.6% 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. 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 does not have a material effect on its
financial statements.
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: May 12, 1995 By: /s/ C.Q. Chandler IV
C. Q. Chandler IV
President
(Principal Executive Officer)
Date: May 12, 1995 By: /s/ Jay L. Smith
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)
EXHIBIT INDEX
Number Description
27 Financial Data Schedule
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 85079
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 78140
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 300978
<INVESTMENTS-MARKET> 301745
<LOANS> 1005882
<ALLOWANCE> 20503
<TOTAL-ASSETS> 1561557
<DEPOSITS> 1301347
<SHORT-TERM> 77396
<LIABILITIES-OTHER> 17997
<LONG-TERM> 34950
<COMMON> 12000
0
0
<OTHER-SE> 117867
<TOTAL-LIABILITIES-AND-EQUITY> 1561557
<INTEREST-LOAN> 24529
<INTEREST-INVEST> 4199
<INTEREST-OTHER> 1165
<INTEREST-TOTAL> 29893
<INTEREST-DEPOSIT> 10403
<INTEREST-EXPENSE> 12370
<INTEREST-INCOME-NET> 17523
<LOAN-LOSSES> 2281
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17295
<INCOME-PRETAX> 6186
<INCOME-PRE-EXTRAORDINARY> 3846
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3846
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.46
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19886
<CHARGE-OFFS> 2448
<RECOVERIES> 784
<ALLOWANCE-CLOSE> 20503
<ALLOWANCE-DOMESTIC> 20503
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
