SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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
Box One
Wichita, Kansas 67202
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (316)383-1111
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ X ]
At February 9, 1996, there were 2,331,670 shares of the registrant's common
stock, par value $5 per share, outstanding. There is no established public
trading market for the registrant's common stock. Registrant is aware that
quotations for its common stock have become available through the National
Quotation Bureau, Inc. As reported by the National Quotation Bureau, Inc. as of
March 4, 1996, the bid price of $61.00 per share would indicate an aggregate
market value of $93,295,169 for shares held by nonaffiliates.
EXHIBIT INDEX: Part IV hereof.
<PAGE>
PART I
ITEM 1. BUSINESS.
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GENERAL
INTRUST Financial Corporation, a Kansas corporation (the "Company"), is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. The mailing address of the Company's only office is 105 North Main,
Box One, Wichita, Kansas 67202.
On February 11, 1995, four of the Company's direct wholly-owned banking
subsidiaries (INTRUST Bank, El Dorado, N.A., INTRUST Bank, Haysville, N.A.,
INTRUST Bank, Johnson County, N.A., INTRUST Bank, Valley Center) were merged
into INTRUST Bank, N.A., also a wholly-owned banking subsidiary of the Company.
The assets and liabilities transferred in the combination were accounted for at
historical cost. Income and expenses, from before and after the combination, are
included in the Company's consolidated income statement for 1995.
KSB Building Corporation ("KSBBC"), a wholly-owned subsidiary of INTRUST
Bank, N.A. that owned and operated an office building, was liquidated as of
November 30, 1995. The assets and liabilities of KSBBC were transferred to
INTRUST Bank, N.A. at historical cost. Income and expenses, from before and
after the combination, are included in the Company's consolidated income
statement for 1995.
As of the close of business on December 1, 1995, INTRUST Bank, N.A.
purchased all of the outstanding common stock of The First National Bank of
Ottawa ("FNBO"), a financial institution located in Ottawa, Kansas, for cash
consideration of $3.5 million. FNBO was immediately merged with and into INTRUST
Bank, N.A. The acquisition was accounted for by the purchase method of
accounting, and accordingly, the acquired assets and liabilities have been
recorded at their fair value at acquisition date and the operating results of
this acquisition are included in the Company's consolidated income statement
from the date of acquisition. At the time of purchase, FNBO had $44 million in
assets and $40 million in deposits.
DESCRIPTION OF BUSINESS
As of December 31, 1995, the Company's direct wholly-owned banking
subsidiaries were INTRUST Bank, N.A. ("IB"), Wichita, Kansas, Will Rogers Bank
("WRB"), Oklahoma City, Oklahoma, and The First Bank ("TFB"), Moore, Oklahoma
(collectively, the "Subsidiary Banks"). IB is a national banking associations
organized under the laws of the United States. WRB and TFB are state banking
associations organized under the laws of Oklahoma. The Subsidiary Banks provide
a broad range of banking services to customers, including checking and savings
accounts, NOW accounts, money market deposit accounts, certificates of deposit,
Individual Retirement Accounts, personal loans, real estate and commercial
loans, investment services, credit cards, automated teller machines, and safe
deposit facilities. In addition, IB offers fiduciary and trust services,
equipment and automobile leasing, cash management, data processing, and
correspondent bank services to its customers.
The direct and indirect non-banking subsidiaries of the Company are:
First Moore Insurance Agency, Inc. ("FMIA"), INTRUST Mortgage Corporation of
Kansas ("IMC"), KSB Properties, Inc. ("KSBP") and WRB Insurance Agency, Inc.
("WRBIA") (collectively, the "Non-Banking Subsidiaries"). FMIA is a wholly-owned
subsidiary of the Company; IMC, and KSBP are wholly-owned subsidiaries of IB;
and WRBIA is a wholly-owned subsidiary of WRB. IMC, located in Wichita, Kansas,
is engaged in the business of mortgage banking. KSBP owned partial interests in
oil and gas leases that were acquired through foreclosure, all of which
properties were sold in 1994. FMIA and WRBIA, which are organized under Oklahoma
insurance laws, are conduits for selling credit life insurance to customers of
TFB and WRB respectively.
The Subsidiary Banks and the Non-Banking Subsidiaries are collectively
referred to as the "Subsidiaries".
At December 31, 1995, IB's trust division managed assets with a market
value of $1,186,000,000 in various fiduciary capacities.
As of December 31, 1995, the Company had 21 full-time employees. The
Subsidiaries collectively had approximately 787 full-time and 137 part-time
employees. None of the employees of the Company or the Subsidiaries are subject
to a collective bargaining agreement. The Company generally considers its
relationships with its employees and the employees of the Subsidiaries to be
good.
The Company and the Subsidiaries do not engage in any other business.
COMPETITION
The Company offers a wide range of financial services through its
Subsidiary Banks (IB, WRB and TFB). The Company and its Subsidiary Banks
encounter intense competition in all of their activities. As lenders, the
Subsidiary Banks compete not only with other banks, but also with savings
associations, credit unions, finance companies, factoring companies, insurance
companies and other non-banking financial institutions. They compete for savings
and time deposits with other banks, savings associations, credit unions, mutual
funds, money market funds, and issuers of commercial paper and other securities.
In addition, large regional and national corporations have in recent years
become increasingly visible in offering a broad range of financial services to
all types of commercial and consumer customers. Many of such competitors have
greater financial resources available for lending and acquisitions as well as
higher lending limits than the Subsidiary Banks and may provide services which
the Company or its Subsidiaries may not offer. In addition, non-banking
financial institutions are generally not subject to the same regulatory
restraints applicable to banks.
The Company is predominantly a retail bank committed to serving the
financial needs of customers in the local communities where the Subsidiary Banks
and their branches are located. IB's primary service areas are Sedgwick County
(including Wichita), Johnson County, El Dorado and Ottawa, Kansas; WRB's primary
service area is Oklahoma City, Oklahoma; and TFB's primary service areas are
Moore and Mustang, Oklahoma. The Company believes that the primary source of
competition comes from approximately thirteen other banks with locations in
Sedgwick County, eight in Johnson County, three in El Dorado, three in Ottawa,
six in Oklahoma City, and five in Mustang and Moore. However, competition can
also come from institutions that do not have offices located in the Subsidiary
Banks' service areas. The Company believes that the principal competitive
factors in its markets for deposits and loans are, respectively, interest rates
paid and interest rates charged.
As discussed more fully below, in September 1994, the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 was enacted. This
legislation facilitates the interstate expansion and consolidation of banking
organizations by (i) permitting bank holding companies that are adequately
capitalized and managed to acquire banks located in states outside their home
state regardless of whether such acquisitions are authorized under the law of
the host state, (ii) permitting the interstate merger of banks after June 1,
1997, subject to the right of individual states to "opt in" or to "opt out" of
this authority before that date, (iii) permitting banks to establish new
branches on an interstate basis provided that such action is specifically
authorized by the law of the host state, (iv) permitting foreign banks to
establish, with approval of the regulators in the United States, branches
outside their home state to the same extent that national or state banks located
in the home state would be authorized to do so, and (v) permitting banks to
receive deposits, renew time deposits, close loans, service loans and receive
payments on loans and other obligations as agent for any bank or thrift
affiliate, whether the affiliate is located in the same state or a different
state. Overall, this legislation is likely to have the effect of increasing
competition and promoting geographic diversification in the banking industry.
See "Federal Regulation of Bank Holding Companies" below.
Generally, increased competition in the banking industry has the effect
of requiring banks to accept lower interest rates on loans and to pay interest
on a larger percentage of deposits.
SUPERVISION AND REGULATION
The Company and the Subsidiary Banks are subject to extensive regulation
by federal and state authorities. Such regulation is generally intended to
protect depositors, not shareholders.
FEDERAL REGULATION OF BANK HOLDING COMPANIES
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Act"), and is registered as such
with the Board of Governors of the Federal Reserve System (the "Board of
Governors"). The Board of Governors may make examinations of the Company and its
subsidiaries, and the Company is required to file with the Board of Governors an
annual report and such other additional information as the Board of Governors
may require pursuant to the Act.
The Act requires every bank holding company to obtain the prior approval
of the Board of Governors before (i) acquiring direct or indirect ownership or
control of more than 5% of the outstanding shares of any class of the voting
shares or all or substantially all of the assets of any bank, or (ii) merging or
consolidating with another bank holding company. In determining whether to
approve such a proposed acquisition, merger or consolidation, the Board of
Governors is required to take into account the competitive effects of the
proposed transaction, the convenience and needs of the community to be served,
and the financial and managerial resources and future prospects of the bank
holding companies and banks concerned. The Act provides that the Board of
Governors shall not approve any acquisition, merger or consolidation which would
result in a monopoly, or which would be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in any
part of the United States, or any other proposed acquisition, merger or
consolidation, the effect of which may be substantially to lessen competition or
tend to create a monopoly in any section of the country, or which in any other
manner would be in restraint of trade, unless the anti-competitive effects of
the proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank holding
companies by qualifying bank holding companies without geographic limitation
beginning September 29, 1995. In addition, beginning June 1, 1997, the IBBEA
also authorizes a bank to merge with a bank in another state as long as neither
of the states has opted out of interstate branching between the date of
enactment of the IBBEA and May 31, 1997. The IBBEA further provides that states
may enact laws permitting interstate bank merger transactions prior to June 1,
1997. Such acquisitions and mergers may be subject to such contingencies as
compliance with state age laws and nationwide and statewide concentration
limits. A bank may establish and operate a de novo branch in a state in which
the bank does not maintain a branch if that state expressly permits de novo
branching. Once a bank has established branches in a state through an interstate
merger transaction, the bank may establish and acquire additional branches at
any location in the state where any bank involved in the interstate merger
transaction could have established or acquired branches under applicable federal
or state law. A bank that has established a branch in a state through de novo
branching may establish and acquire additional branches in such state in the
same manner and to the same extent as a bank having a branch in such state as a
result of an interstate merger. If a state opts out of interstate branching
within the specified time period, no bank in any other state may establish a
branch in the opting out state, whether through an acquisition or de novo.
The Act also prohibits, with certain exceptions, a bank holding company
from engaging in and from acquiring direct or indirect ownership or control of
more than 5% of the outstanding shares of any class of the voting shares of any
company engaged in a business other than banking, managing and controlling
banks, or furnishing services to its affiliated banks. One of the exceptions to
this prohibition provides that a bank holding company may engage in, and may own
shares of companies engaged in, certain businesses that the Board of Governors
has determined to be so closely related to banking as to be a proper incident
thereto. In making such determination, the Board of Governors is required to
weigh the expected benefit to the public, such as greater convenience, increased
competition, or gains in efficiency, against the risks of possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
A bank holding company and its subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with the extension of credit or the
lease or sale of any property or the furnishing of any service. Subsidiary banks
of a bank holding company are also subject to certain restrictions imposed by
the Federal Reserve Act on extensions of credit to the bank holding company or
any of its subsidiaries, investments in the stock or other securities thereof,
the taking of such stocks or securities as collateral for loans and otherwise
engaging in transactions with the bank holding company and its subsidiaries.
These restrictions may limit the Company's ability to obtain funds from the
Subsidiary Banks. In addition, the amount of loans or extensions of credit that
IB, WRB or TFB may make to the Company or to third parties secured by securities
or obligations of the Company are substantially limited by the Federal Reserve
Act and the Federal Deposit Insurance Act. The Board of Governors possesses
cease and desist and other administrative sanction powers over bank holding
companies if their actions represent unsafe or unsound practices or violations
of the law.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") established a cross guarantee provision pursuant to which the Federal
Deposit Insurance Corporation ("FDIC") may recover from a depository institution
losses that the FDIC incurs in providing assistance to or paying off the
depositors of any of such depository institution's affiliated insured banks. The
cross guarantee provision thus enables the FDIC to assess a holding company's
healthy insured subsidiaries for the losses of any of the holding company's
failed insured members. Cross guarantee liabilities are generally superior in
priority to obligations of the depository institution to its shareholders due
solely to their status as shareholders and obligations to other affiliates.
The Board of Governors has promulgated "capital adequacy guidelines" for
use in its examination and supervision of bank holding companies. These
guidelines are described in detail below. A holding company's ability to pay
dividends and expand its business through the establishment or acquisition of
new subsidiaries can be restricted if its capital falls below levels established
by these guidelines. In addition, holding companies whose capital falls below
specified levels can be required to implement a plan to increase capital.
STATE BANK HOLDING COMPANY REGULATION
Kansas statutes prohibit any bank holding company from acquiring and
voting shares of a bank in Kansas if it would cause the aggregate deposits held
by all of the banks in Kansas in which a single bank holding company has an
interest to exceed 15% of the total deposits of banks and savings institutions
in the state. Such limitation does not apply in situations where the Kansas
state banking commissioner, in the case of a state bank, or the Comptroller of
the Currency ("OCC"), in the case of a national bank, determines that an
emergency exists and the acquisition is appropriate in order to protect the
public interest against the failure or probable failure of a bank. Acquisitions
by bank holding companies of control of state banks in Kansas require the
approval of the Kansas state banking commissioner. Kansas statutes authorize
out-of-state bank holding companies located in states contiguous to Kansas and
in Arkansas and Iowa to acquire voting shares of banks or bank holding companies
domiciled in Kansas.
Subject to certain limited exceptions, Oklahoma law prohibits a
multi-bank holding company from acquiring ownership or control of any insured
financial institution located in Oklahoma if such acquisition would result in
the holding company owning or controlling banks located in Oklahoma with total
deposits in excess of 11% of the aggregate deposits of all financial
institutions in Oklahoma with deposits insured by the FDIC or the National
Credit Union Administration as determined by the Oklahoma Bank Commissioner
("OBC"). A bank whose application for charter was filed, received, or granted
after July 1, 1983 cannot be acquired by a multi-bank holding company for a
period of five years; such restriction does not prevent a multi-bank holding
company from acquiring a bank whose charter was granted for the purpose of
purchasing the assets and liabilities of a bank located in Oklahoma closed by
regulators due to insolvency or impairment of capital. Bank holding companies
not located in Oklahoma may acquire an unlimited number of Oklahoma banks and
bank holding companies upon approval of the Federal Reserve Board. As of July 1,
1987, any Oklahoma bank or Oklahoma bank holding company that becomes a
subsidiary of a foreign bank holding company may acquire direct or indirect
ownership or control of additional Oklahoma banks or bank holding companies,
establish additional branches or convert to a branch of an Oklahoma bank if (i)
the principal place of business of the foreign bank holding company is a
reciprocal state, as determined by the Oklahoma Banking Department ("OBD"), or
(ii) four years have expired since the date of acquisition by the foreign bank
holding company.
Under Oklahoma law, each bank holding company that controls 25% or more
of the voting shares of a bank located in Oklahoma must furnish a copy of its
annual report to the Board of Governors to the OBC.
FEDERAL REGULATION OF SUBSIDIARY BANKS
IB is a national bank. National banks are subject to regulation,
supervision and examination primarily by the OCC. They are also regulated, in
certain respects, by the Board of Governors and the FDIC. WRB is an Oklahoma
state nonmember (of the Federal Reserve System) bank, subject to regulation and
examination primarily by the OBD, and by the FDIC. TFB, which is an Oklahoma
chartered state bank and member of the Federal Reserve System, is regulated
primarily by the OBD and the Board of Governors. Regulation by these agencies is
generally designed to protect depositors rather than stockholders.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Improvement Act") provides for, among other things, the strengthening of
internal control and auditing systems, the enhancement of credit underwriting
and loan documentation standards (particularly with respect to real estate), the
accounting for interest rate exposure and other off-balance sheet items,
restrictions on the compensation of officers and directors, and the adoption of
a risk-based deposit insurance system.
The FDIC Improvement Act also authorizes the regulator of an insured
depository institution to assess all costs and expenses of any regular or
special examination of the insured depository institution.
Under the Federal Reserve Act, extensions of credit by a bank to the
executive officers, directors, or principal shareholders of the bank or its
affiliates or any related interest of such persons must be on substantially the
same terms as, and following credit underwriting procedures that are not less
stringent than, those applicable to comparable transactions with nonaffiliated
persons and must not involve more than the normal risk of repayment or present
other unfavorable features.
The rate of interest a bank may charge on certain classes of loans is
limited by state and federal law. At certain times in the past, these
limitations, in conjunction with national monetary and fiscal policies which
affect the interest rates paid by banks on deposits and borrowings, have
resulted in reductions of net interest margins on certain classes of loans. Such
circumstances may recur in the future, although the trend of recent federal and
state legislation has been to eliminate restrictions on the rates of interest
which may be charged on some types of loans and to allow maximum rates on other
types of loans to be determined by market factors.
In addition to limiting the rate of interest charged by banks on certain
loans, federal law imposes additional restrictions on a national bank's lending
activities. For example, federal law regulates the amount of credit a national
bank may extend to an individual borrower and has in the past subjected real
estate lending activities to rigid statutory requirements. The Garn-St Germain
Depository Institutions Act of 1982 (the "1982 Act") liberalized federal law
with respect to both of these types of lending activities by increasing the
maximum amount of credit a national bank may extend to an individual borrower
and by simplifying the statutory framework pursuant to which national banks may
extend real estate loans.
The 1982 Act also authorizes banks to invest in service corporations
that can offer the same services as the banking related services which bank
holding companies are authorized to provide. However, the approval of the OCC
must be obtained before a national bank may make such an investment or perform
such services.
The Board of Governors has issued Community Reinvestment Act ("CRA")
regulations, pursuant to its authorization to conduct examinations and to
consider applications for the formation and merger of bank holding companies and
member banks, to encourage banks to help meet the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. The OCC has issued similar
regulations with respect to applications of national banks, and the FDIC has
also issued similar regulations with respect to applications of banks which are
incorporated under state law and are not members of the Federal Reserve System.
STATE REGULATION OF SUBSIDIARY BANKS
Kansas law permits a Kansas bank to install remote service units, also
known as automatic teller machines, throughout the state. Remote service units
which are not located at the principal place of business of the bank or at a
branch location of the bank must be available for use by other banks and their
customers on a non-discriminatory basis. Federal law generally allows national
banks to establish branches in locations which do not violate state law.
All limitations and restrictions of the Oklahoma Banking Code applicable
to Oklahoma chartered banks apply to such banks that become subsidiaries of a
foreign bank holding company. In addition, Oklahoma chartered banks that are
subsidiaries of foreign bank holding companies are required to maintain current
reports showing the bank's record of meeting the credit needs of its entire
community with the OBD. Subject to approval of the Oklahoma Banking Board
("OBB"), any Oklahoma bank may maintain and operate outside attached facilities
and two detached facilities with tellers' windows for drive-in or walk-up
service. Of the two detached facilities, one may be located less than one
thousand feet from the bank's main building and one may be located less than
three miles from the main bank building. Subject to the approval of the OBB, any
branch may maintain and operate one outside attached facility with tellers'
windows for drive-in or walk-up service. Upon written notice to the OBC, an
Oklahoma state bank may also install and operate consumer banking electronic
facilities. An Oklahoma bank offering such services to a bank which establishes
or maintains a consumer banking electronic facility must make the use thereof
available to banks located in Oklahoma on a fair and equitable basis of
non-discriminatory access and rates.
Oklahoma banks that are not members of the Federal Reserve System are
required to maintain reserves against deposits as may be required by the
Depository Institutions Deregulation and Monetary Control Act of 1980 as
prescribed by the Board of Governors. The Oklahoma State Banking Board may
change the reserve requirements of banks which are not members of the Federal
Reserve System if it is determined that the maintenance of sound banking
practices or the prevention of injurious credit expansion or contraction makes
such action advisable.
Oklahoma banks that are members of the Federal Reserve System are
required to maintain such reserves against deposits as may be required by the
Federal Reserve Act, as amended, or by the Board of Governors.
Notwithstanding any provision of state law, the FDIC Improvement Act
provides that an insured state chartered bank generally may not make an
investment or engage in an activity that is not permissible for a national bank,
unless the FDIC determines that such investment or activity would not pose a
significant risk to the applicable insurance fund.
CAPITAL REQUIREMENTS
The Board of Governors together with the other federal regulatory
agencies jointly promulgated guidelines defining regulatory capital requirements
based upon the level of risk associated with holding various categories of
assets (the "Guidelines"). The Guidelines, which are applicable to all bank
holding companies and federally supervised banking organizations, took effect on
March 15, 1989, and were fully phased into the existing supervisory system as of
the end of 1992. Under the Guidelines, balance sheet assets are assigned to
various risk weight categories (i.e., 0, 20, 50, or 100 percent), and
off-balance sheet items are first converted to on-balance sheet "credit
equivalent" amounts that are then assigned to one of the four risk-weight
categories. For risk-based capital purposes, capital is divided into two
categories: core capital ("Tier 1 capital") and supplementary capital ("Tier 2
capital"). Tier 1 capital generally consists of the sum of: common stock,
additional paid-in capital, retained earnings, qualifying perpetual preferred
stock (within certain limitations), minority interest in equity accounts of
consolidated subsidiaries; less intangibles, including goodwill (within certain
limitations). Tier 2 capital generally includes: reserve for possible loan
losses (within certain limitations), perpetual preferred stock not included in
Tier 1 capital, perpetual debt, mandatory convertible instruments, hybrid
capital instruments, and subordinated debt and intermediate-term preferred stock
(within certain limitations). The total amount of Tier 2 capital under the
Guidelines is limited to 100% of Tier 1 capital. The sum of Tier 1 and Tier 2
capital comprises total capital ("Total Capital"). The Guidelines require
minimum ratios of Tier 1 and Total Capital to risk weighted assets, on a
consolidated basis. The minimum ratios required by the Guidelines are shown
below in comparison with the consolidated ratios of the Company and for each of
the Subsidiary Banks at December 31, 1995. Based on this financial data, the
Company's capital ratios exceed the Guidelines on a consolidated basis. All of
the Subsidiary Banks also exceeded the minimum guidelines at the individual bank
level.
Company IB WRB TFB
Guidelines Ratios Ratios Ratios Ratios
Tier 1 Ratio 4.0% 8.75% 9.15% 14.07% 12.12%
Total Capital Ratio 8.0% 10.58% 10.41% 15.17% 13.46%
In addition to the Guidelines, the Board of Governors requires a minimum
leverage ratio ("leverage ratio") of Tier 1 capital (as described above) to
total assets of 3 percent. For all but the most highly rated bank holding
companies, the leverage ratio is to be 3 percent plus an additional cushion of
at least 100 to 200 basis points. The Company's consolidated leverage ratio at
December 31, 1995 was 6.69%. Similar requirements also apply to the Subsidiary
Banks. At December 31, 1995 the leverage ratio for IB, WRB and TFB were 7.08%,
8.72% and 6.08% respectively.
The FDIC Improvement Act requires all regulators of insured depository
institutions to classify such institutions according to the following "prompt
corrective action" categories: (1) well capitalized, (2) adequately capitalized,
(3) undercapitalized, (4) significantly undercapitalized or (5) critically
undercapitalized. Undercapitalized, significantly undercapitalized and
critically undercapitalized institutions may be required to take or to refrain
from taking certain actions, such as, among other things, requiring a
recapitalization or divestiture of subsidiaries or restricting transactions with
affiliates, interest rates on deposits, asset growth or distributions to parent
bank holding companies, until such institution becomes adequately capitalized.
As of the last classification, all of the Subsidiary Banks were categorized as
"well capitalized".
The Kansas Banking Code requires a minimum capital level of $250,000 for
a state bank in existence on July 1, 1975, which is applicable to all banks
chartered in Kansas. All of the Kansas-chartered Subsidiary Banks exceeded this
minimum capital requirement.
The minimum capital level for an Oklahoma state bank is based on the
population of the community in which the bank is located. TFB and WRB exceed the
applicable minimum capital requirements for their communities of $750,000 and
$900,000, respectively.
DIVIDENDS
The National Bank Act restricts the payment of dividends by a national
bank generally as follows: (i) no dividends may be paid which would impair the
bank's capital, (ii) until the surplus fund of a national banking association is
equal to its capital stock, no dividends may be declared unless there has been
carried to the surplus fund not less than one-tenth of the bank's net profits of
the preceding half year in the case of quarterly or semi-annual dividends, or
not less than one-tenth of the net profits of the preceding two consecutive
half-year periods in the case of annual dividends, and (iii) the approval of the
OCC is required if dividends declared by a national banking association in any
year exceed the total of net profits for that year combined with retained net
profits for the preceding two years, less any required transfers to surplus or a
fund for the retirement of any preferred stock.
Kansas law permits dividends to be declared from undivided profits after
first deducting its losses. Before declaration of any dividend, the bank must
transfer 25% of its net profits since the last preceding dividend to its surplus
fund, until the surplus fund equals the total capital stock of the bank.
No Oklahoma bank may permit the withdrawal, in the form of dividends
or otherwise, of any portion of its capital or surplus. If losses equal or
exceed a bank's undivided profits, no dividends shall be made and no dividends
shall ever be made by any Oklahoma bank in an amount greater than its net
profits then on hand less its losses and bad debts. The directors of any
Oklahoma bank may declare dividends of so much of the net profits as they judge
expedient, except that until the surplus fund of a bank equals its common
capital, no cash dividends shall be declared unless there has been carried to
the surplus fund not less than 1/10th of the Bank's net profits of the preceding
half year in the case of quarterly or semi-annual dividends, or not less then
1/10th of its net profits of the preceding two consecutive half-year periods in
the case of annual dividends. The approval of the OBC is required if the total
of all dividends declared by a bank in any calendar year exceeds the total of
its net profits of that year combined with its retained net profits of the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
DEPOSIT INSURANCE PREMIUMS
On October 1, 1992, the FDIC Board of Directors adopted a new risk-based
deposit insurance system to provide for a transition between the previous
flat-rate system and the risk-related premium system of the FDIC Improvement
Act. On June 17, 1993, the FDIC adopted the transitional system in permanent
form, with only limited changes.
The permanent risk-based system, which became effective on January 1,
1994, charges higher insurance rates to those banks and savings associations
that pose greater risks to the deposit insurance funds. The FDIC places each
bank and thrift in one of nine risk categories using a two step process based on
capital ratios and other relevant information. Each institution is assigned to
one of three groups (well capitalized, adequately capitalized or
undercapitalized) based on its capital ratios. A well-capitalized institution is
one that has at least a ten percent "total risk-based capital" ratio (the ratio
of qualifying total capital to risk-weighted assets), a six percent "Tier-1
risk-based capital" ratio (the ratio of Tier 1 or "core" capital to
risk-weighted assets) and a five percent "Tier-1 leverage capital" ratio (the
ratio of Tier 1 capital to average total assets). An adequately capitalized
institution must have at least an eight percent total risk-based capital ratio,
a four percent Tier-1 risk-based capital ratio and a four percent Tier-1
leverage capital ratio. An institution that does not meet any of the above
requirements is considered undercapitalized.
The FDIC Improvement Act requires the FDIC to set semi-annual assessment
rates that are sufficient to increase the reserve ratio for the Bank Insurance
Fund ("BIF") to the designated reserve ratio not later than one year from the
date of determination of the assessment rates.
The FDIC Improvement Act contains a long-term funding plan for the BIF
that will (i) significantly increase the FDIC's authority to borrow; (ii) expand
the sources from which the FDIC can borrow; and (iii) raise deposit insurance
premiums to pay for such additional borrowing through the imposition of
emergency special assessments.
On August 16, 1995, the FDIC lowered the assessment made for most BIF
members, by establishing a new assessment rate schedule of 0.04% to 0.31% of
insured deposits. On the same date, the FDIC published a final rule that retains
the existing assessment rate of 0.23% to 0.31% of insured deposits for members
of the Savings Association Insurance Fund ("SAIF"). On November 14, 1995, the
FDIC further reduced insurance premiums on BIF deposits by $.04 per $100 of
insured deposits, subject to the statutory requirement that all institutions pay
at least $2,000 annually. The revised BIF schedule will create a significant
disparity in the amount of deposit assessments paid by well-capitalized BIF
members and well-capitalized SAIF members, for an undetermined period of time.
MONETARY POLICY
The earnings of the Company are affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities in the U.S. and abroad. In particular, the Federal Reserve Board
regulates the national supply of money and credit in order to influence general
economic conditions, primarily through open market operations in U.S. Government
securities, varying the discount rate on member bank borrowings and setting
reserve requirements against deposits. Federal Reserve monetary policies have
had a significant effect on the operating results of financial institutions in
the past and are expected to continue to do so in the future.
ITEM 2. PROPERTIES.
- ------- -----------
INTRUST FINANCIAL CORPORATION AND INTRUST BANK, N.A.
The Company's principal offices and IB's main banking offices are
located at 105 North Main Street and 100 North Main Street, Wichita, Kansas.
Both offices are located in three office buildings owned by IB. These three
buildings together with the adjacent six-story garage and two-story garage owned
by IB, occupy approximately one city block in downtown Wichita. The sixth
through tenth floors of the building at 105 North Main Street and fifth through
tenth floors of the building at 100 North Main are presently leased by IB to
others. The Company rents office space from IB on the third floor of the
building at 100 North Main.
As of December 31, 1995, IB had ten detached branch facilities in
Wichita, Kansas. IB owns the facilities and the land at six offices. With
respect to the four other detached offices, IB owns the facilities and leases
the land on which such offices are located from unaffiliated parties.
IB had two small branch offices which serve residents and staff members
of retirement communities located in Wichita, Kansas.
IB also had offices in nine Dillon supermarkets in Wichita. The office
space at each of these locations is leased from an unaffiliated party.
In addition to the above Wichita locations, IB had offices in the
following communities:
A branch owned and a Dillon supermarket office leased by IB in El
Dorado, Kansas
A branch owned by IB in Haysville, Kansas.
A branch owned by IB in Ottawa, Kansas.
A main banking office, one detached facility and a Dillon supermarket
office in Johnson County, Kansas. IB owns the main office building and leases
the land where the main office building is located as well as the other two
offices.
A branch owned by IB in Valley Center, Kansas.
IB had loan production offices in Oklahoma City, Oklahoma and Tulsa,
Oklahoma. Both offices are leased from unaffiliated parties.
Total square footage of all facilities owned and occupied by IB, as of
December 31, 1995, was approximately 251,400 square feet.
WILL ROGERS BANK
WRB's main banking office is located at 5100 Northwest Tenth, Oklahoma
City, Oklahoma. Total square footage of the facility, which is owned by WRB, is
approximately 23,550 square feet.
THE FIRST BANK
TFB'S main banking office is located at 100 S. Broadway, Moore,
Oklahoma. TFB also has a detached branch facility in Mustang, Oklahoma. TFB owns
both buildings, the total square footage of which is approximately 19,000 square
feet.
All facilities owned by the Company and the Subsidiary Banks are
maintained in good operating condition and are adequately insured. The Company
considers its properties and those of the Subsidiary Banks to be satisfactory
for their current operations.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
There are no legal proceedings pending against the Company. Certain of
the subsidiaries of the Company are parties in a variety of legal proceedings,
none of which is considered to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------- ----------------------------------------------------------------------
The common stock of the Company is traded in the local over-the-counter
market on a limited basis. Transactions in the common stock are relatively
infrequent. The following table sets forth the per share high and low bid
quotations for the periods indicated as reported by the National Quotation
Bureau, Incorporated (NQB).
1995 1994
------------- ------------
High Low High Low
---- --- ---- ---
1st Quarter $56 $54 $48 $48
2nd Quarter 58 56 50 48
3rd Quarter 59 58 54 50
4th Quarter 59 59 54 54
The quotations in the above table reflect inter-dealer quotations, without
retail mark-up, mark-down, or commission and may not necessarily represent
actual transactions. On February 9, 1996, there were 463 stockholders of record
for the 2,331,670 shares of outstanding common stock. Approximately 77% of the
shares are held by Kansas resident individuals, institutions or trusts, with the
remainder held by residents of thirty-two other states, with no singular
concentrations. In 1995, the Company received cash dividends in the amount of
$24,500,000, and $750,000 from two of its subsidiaries, IB and WRB,
respectively. The Company declared cash dividends of $3,517,895, or $1.50 per
share during 1995 and $5,914,835, or $2.50 per share during 1994. During 1995,
dividend declaration dates were January 10, April 11, July 11, October 10 and
December 12. During 1994, dividend declaration dates were January 11, April 12,
July 12, October 11 and December 13. The payment of dividends by the Company is
dependent upon receipt of cash dividends from the Subsidiary Banks. Regulatory
authorities can restrict the payment of dividends by national and state banks
when such payments might, in their opinion, impair the financial condition of
the bank or otherwise constitute unsafe and unsound practices in the conduct of
banking business. Additional information concerning dividend restrictions may be
found in the "Notes to Consolidated Financial Statements" (note 13) and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under topic titled "Liquidity and Asset/Liability Management". The
priorities for use of cash dividends paid to the Company will be the quarterly
interest payments to holders of $11,853,800 in 9% Convertible Subordinated
Capital Notes due 1999, and the quarterly interest payments and annual principal
payment on the variable rate note payable to Boatmen's First National Bank of
Kansas City. Additional information concerning the Capital Notes and Boatmen's
note may be found in the "Notes to Consolidated Financial Statements" (notes 8
and 9). The Company's Board of Directors will continue to review the cash
dividends on the Company's common stock each quarter with consideration given to
the earnings, business conditions, financial position of the Company and such
other factors as may be relevant at the time.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------
INTRUST Financial Corporation and Subsidiaries
Five Year Summary of Selected Financial Data
Dollars in thousands except per share data
Years Ended December 31, 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Operations:
<S> <C> <C> <C> <C> <C>
Interest income $ 127,919 $ 110,383 $ 98,825 $ 96,313 $ 104,727
Interest expense 53,460 38,267 34,253 38,368 55,130
---------- ---------- ---------- ---------- ----------
Net interest income 74,459 72,116 64,572 57,945 49,597
Provision for loan losses 18,118 2,962 5,596 8,906 10,800
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 56,341 69,154 58,976 49,039 38,797
Noninterest income 33,620 26,888 24,224 20,565 17,089
Noninterest expenses 71,195 66,189 57,420 47,224 43,499
---------- ---------- ---------- ---------- ----------
Income before income taxes 18,766 29,853 25,780 22,380 12,387
Provision for income taxes 6,379 10,884 8,154 6,546 3,290
---------- ---------- ---------- ---------- ----------
Income before cumulative effect of
accounting change 12,387 18,969 17,626 15,834 9,097
Cumulative effect of accounting change 0 0 0 1,679 0
---------- ---------- ---------- ---------- ----------
Net income $ 12,387 $ 18,969 $ 17,626 $ 17,513 $ 9,097
========== ========== ========== ========== ==========
Average shares outstanding 2,344,762 2,371,377 2,381,859 2,395,694 2,399,844
========== ========== ========== ========== ==========
Per share data assuming no dilution:
Income before cumulative effect of
accounting change $ 5.28 $ 8.00 $ 7.40 $ 6.61 $ 3.79
Cumulative effect of accounting change 0 0 0 0.7 0
---------- ---------- ---------- ---------- ----------
Net income $ 5.28 $ 8.00 $ 7.40 $ 7.31 $ 3.79
========== ========== ========== ========== ==========
Per share data assuming full dilution:
Income before cumulative effect of
accounting change $ 4.77 $ 7.10 $ 6.59 $ 5.92 $ 3.50
Cumulative effect of accounting change 0 0 0 0.6 0
---------- ---------- ---------- ---------- ----------
Net income $ 4.77 $ 7.10 $ 6.59 $ 6.52 $ 3.50
========== ========== ========== ========== ==========
Cash dividends per share $ 1.50 $ 2.50 $ 1.50 $ 2.00 $ 1.25
========== ========== ========== ========== ==========
Balance sheet data at year-end:
Total assets $1,666,984 $1,519,117 $1,523,868 $1,251,610 $1,214,315
Total deposits 1,367,141 1,276,076 1,283,284 1,066,323 1,027,273
Long-term notes payable 20,310 22,950 25,580 700 815
Convertible capital notes 11,854 12,000 12,000 12,000 12,000
Stockholders' equity 135,163 127,590 115,529 101,616 89,470
Book value per share 57.81 54.01 48.51 42.62 37.30
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ------------ ---------- ------------------------- -------------
RESULTS OF OPERATIONS.
----------------------
FINANCIAL OVERVIEW
INTRUST Financial Corporation's 1995 net earnings of $12,387,000 declined
$6,582,000, or 34.7%, from 1994 levels. The principal cause of this decline was
the significant increase in the Company's provision for loan losses in 1995. The
1995 provision exceeded that recognized in 1994 by over $15,000,000.
As more fully discussed in "ASSET QUALITY AND PROVISION FOR LOAN LOSSES", the
Company experienced greater than anticipated loan losses in its consumer sector,
primarily in its credit card portfolio. As noted in previous filings, the
Company elected in late 1993 and 1994 to more aggressively market its credit
card products. The Company charged-off a much higher level of accounts obtained
in this marketing campaign than it had experienced in previous marketing
efforts.
In addition to the credit quality issues experienced in 1995, the Company
elected to adopt Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" in 1995. Adoption of the provisions of this Statement, which is
required to be adopted in 1996, resulted in the recognition of a $2.5 million
impairment loss during the fourth quarter of 1995.
ASSET QUALITY AND PROVISION FOR LOAN LOSSES
The amount charged to the Company's earnings to provide for an adequate
allowance for loan losses is determined after giving consideration to a number
of factors. These include, but are not limited to, management's assessment of
the quality of existing loans, changes in economic conditions, evaluation of
specific industry risks, the need to support projected loan volumes and a
provision for the timely elimination of uncollectible receivables. A detailed
analysis of the allowance for loan losses is conducted quarterly.
The Company experienced an increased level of loan charge-offs in 1995. Net
charge-offs in 1995 were $12,300,000, as compared to $5,000,000 and $3,500,000
in 1994 and 1993, respectively. Net charge-offs in the credit card portfolio
totaled $10,900,000 (or 88.6% of total net charge-offs) in 1995. Comparable net
charge-offs in the credit card portfolio in 1994 and 1993 were $4,900,000 and
$3,900,000, respectively. The increasing level of charge-offs in the credit card
sector were the principal reason the Company's provision for loan losses
increased from $5,596,000 in 1993 and $2,962,000 in 1994 to $18,118,000 in 1995.
The provision for loan losses as a percentage of average net loans was 1.79% in
1995, compared to .30% in 1994 and .69% in 1993.
As previously mentioned, the Company entered into national marketing
campaigns in 1993 and 1994 to increase its level of credit card outstandings.
During 1995, the Company's losses arising from accounts acquired in these
national campaigns significantly exceeded the Company's previous experience. As
a result, the Company substantially increased its provision for loan losses and
corresponding allowance for loan losses.
While the Company did experience unfavorable performance in its credit card
portfolio, other lines of business in the lending area generally continued to
perform favorably. At December 31, 1995, approximately one-half of the Company's
loan portfolio was represented by commercial loans and one-half was comprised of
consumer lending (when including securitized credit card receivables). In 1994
and 1993, approximately 47% and 38%, respectively of the Company's total loan
portfolio was comprised of consumer loans. Net charge-offs (recoveries) in the
commercial lending area (including real estate) in 1995, 1994 and 1993 were
$791,000, ($302,000) and ($889,000) respectively. In the non-credit card
consumer sector net charge-offs were $607,000 in 1995 compared to $393,000 in
1994 and $429,000 in 1993.
Nonperforming loans in the Company's credit card operations comprise a
somewhat higher percentage of total credit card outstandings than are
experienced in the remainder of the loan portfolio. Nonperforming credit card
loans increased from $2,535,000 at December 31, 1994 to $4,839,000 at December
31, 1995. Total nonaccrual, past due and restructured loans at December 31, 1995
increased $3,118,000 from 1994 levels, and represented .88% of total year-end
loans. Comparable percentages in 1994 and 1993 were .59% and .53%, respectively.
The Company's allowance for loan losses at year-end was equal to 276% of
nonaccrual , past due and restructured loans. The comparable percentages in 1994
and 1993 were 318% and 421%, respectively. The allowance for loan losses equaled
2.43%, 1.88% and 2.24% of total loans outstanding at December 31, 1995, 1994,
and 1993, respectively.
The largest single net charge-off during 1995 was to a commercial enterprise.
No trends were noted during the year that would point to particular exposure
issues with respect to a given industry or segment of the loan portfolio, other
than the increased losses experienced in the credit card accounts acquired in
the national solicitations in 1993 and 1994. Management believes the allowance
for loan losses to be adequate at this time. Please refer to Table 9, Summary of
Loan Loss Experience, for additional information.
Management is not aware of issues that would significantly impact the overall
credit quality of the loan portfolio in 1996. The Company does not anticipate a
substantial decline in the level of net credit card charge-offs next year, and
does not believe there will be a significant reduction in the Company's
provision for loan losses.
NET INTEREST INCOME
The Company's net interest income increased $2,343,000, or 3.2% over the
1994 amount, to $74,459,000. This follows an 11.7% increase in 1994's net
interest income over comparable 1993 amounts. During 1994 and 1993 the Company
experienced modest compression in its net yield on interest-earning assets, but
increased volumes resulted in increases in net interest income. In 1995, the
Company's net yield on interest-earning assets increased five basis points to
5.30%, while the net differential between its interest-earning assets and its
interest-bearing liabilities declined 2%. Net interest income in 1995 was
influenced by the Company's securitization and sale of a total of $100,000,000
of credit card receivables in December 1994 and January 1995 and the reduction
in non-interest bearing deposit accounts as a percentage of total funding
sources (18.2% in 1995, 19.2% in 1994 and 18.9% in 1993).
As noted in previous filings, net interest income in 1994 and 1993 was
heavily influenced by the acquisition of Kansas State Bank & Trust ("KSB&T") in
mid-1993. This acquisition resulted in a significant increase in average
interest-earning assets in those years. Similar acquisition activity at this
level was not present in 1995, and the 2.3% increase in interest-earning assets
reflects internally-generated growth. Had the Company not securitized and sold
the aforementioned credit card receivables, average interest-earning assets
would have increased approximately 9.5% over 1994 levels.
The interest rate environment present in 1995 was markedly different from
that experienced in 1994. A significant flattening of the yield curve occurred
in 1995, resulting in a modest inversion in the curve at the end of the year. At
year-end 1995, the spread between Federal Funds and the thirty-year Treasury
rate was approximately 50 basis points. The corresponding differential at
year-end 1994 was approximately 240 basis points. During the first half of 1995,
the Company saw its deposit base invest in somewhat longer-term instruments,
while this trend reversed during the second half of the year.
The overall yield on average total interest-earning assets increased 103
basis points from 1994 levels. This contrasts with a decline in 1994 of 22 basis
points from 1993 levels. The increasing interest rate environment present in
1994 and early 1995 resulted in many of the Company's interest-earning assets
carrying higher average rates during 1995. The largest component change in
earning asset yields occurred in Federal funds sold, as short-term yields in
1995 remained high compared to other maturity ranges. The Company's cost of
interest-bearing liabilities increased 119 basis points over 1994 levels, as
customers elected to invest in somewhat longer-term instruments early in 1995 to
take advantage of relatively high interest rates. As rates began to decline
during the year, many of the Company's customers elected to invest in short-term
repurchase agreements. This resulted in a $36 million increase in average
short-term debt, with the Company investing these funds in Federal funds sold.
Yields on average interest-earning assets declined in 1994 from 1993 levels,
as the investment portfolio continued to be impacted by the marking of the
acquired KSB&T portfolio to market at mid-year 1993. This resulted in a
significant portion of the Company's investment portfolio being carried at
yields that were present in July 1993, which was a relatively low interest rate
environment.
Given the investment alternatives present in the securities market, the
Company continued to actively generate loans. Even after securitizing $100
million in credit card loans, 72.2% of total average interest-earning assets in
1995 were comprised of loans, compared with 72.3% in 1994 and 67.4% in 1993.
This resulted in loans as a percentage of deposits and short-term debt averaging
72.9% in both 1995 and 1994.
As previously noted, the Company experienced a shift out of short-term time
deposits and interest-bearing demand deposits into short-term repurchase
agreements (which are classified as short-term debt). Average total deposits and
short-term debt increased 2.2% over the comparable amounts of 1994. Although the
percentage increase is modest, it does represent the reversal of a trend, as
average deposits and short-term debt declined in both 1994 and 1993 (excluding
the impact of the KSB&T acquisition).
The Company currently does not expect significant changes in the interest
rate environment in 1996, although uncertainty associated with the Federal
budget process and other political considerations could influence interest rates
in 1996. In addition, competitive changes in its principal marketplace are
expected to result in continued pressure on the interest margin. Management will
continue to place a major emphasis on the maintenance of net interest margins
within the overall framework of sound interest-rate risk management.
NONINTEREST INCOME
Noninterest income increased 25.0%, or $6,732,000, in 1995 to $33,620,000.
This compares to an 11.0% increase in 1994. In 1994 much of the increase
realized in noninterest income was volume related, arising from increased
service charge and other income on deposit accounts acquired in mid-year 1993,
with the KSB&T merger, and, to a larger extent, from a 23% increase in credit
card outstandings resulting in increased fee income in both the cardholder and
merchant portions of the credit card business.
In 1995, the majority of the increase in noninterest income can be attributed
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. This resulted in credit card
fees increasing by $5,629,000 or 106.8% over 1994 amounts. The growth in this
income statement line item in 1994 as compared to 1993 was 38.7%. As previously
mentioned, a substantial increase in credit card outstandings, due to certain
marketing programs put into place in the fourth quarter of 1993, resulted in the
fee increases in 1994. The Company expects the credit card business to remain
very competitive, as new pricing mechanisms continue to be introduced in the
marketplace.
In October 1995, approximately $10,000,000 in credit card loans were sold,
generating a one-time, nonrecurring gain of $2,018,000. It is not the policy of
the Company to sell components of its credit card portfolio. This transaction
arose because the Company ceased to provide services to one of its affinity
groups, and that affinity group elected to repurchase the accounts of its
members.
The Company's trust fee revenue is driven principally by the dollar value
of assets under management. The Company did not experience a significant change
in managed assets in 1995, resulting in a 2% increase in annual trust fee
revenue. During 1994, trust fee revenue increased $363,000 or 6.9%, due
primarily to the establishment of new account relationships and the full-year
impact of the former KSB&T trust customers.
Service charges on deposit accounts recognized during 1995 did not change
appreciably from 1994, as there have not been significant changes in the volumes
of those accounts that typically carry a service charge. The $84,000 decline
would have been greater however, if not for the approximately $500,000 in
additional fees generated by The First Bank ("TFB"), following its acquisition
in December of 1994.
The 1995 decrease in other service charges, fees, and income was $945,000,
with the majority of this decline attributable to the Company's decision to
discontinue much of its data processing service to downstream correspondent
banks. During 1994, the Company introduced the sale of non-deposit investment
instruments, with this activity responsible for much of the increase over 1993
levels in other service charges, fees and income.
NONINTEREST EXPENSE
Noninterest expenses in 1995 increased $5,006,000, or 7.6% over 1994 levels.
This follows increases of 15.3% and 21.6% in 1994 and 1993, respectively. The
principal causes of the 1995 increase were the incurring of a full year of
operational support of the assets acquired and liabilities assumed in the TFB
acquisition, a write-down in value of the former KSB&T bank building, increased
expense due to the credit card securitization and higher credit card fraud and
other losses. Areas that resulted in decreased expenses to the Company were
lower deposit insurance assessments, and decreased promotional and marketing
efforts in the credit card business.
Salaries and employee benefits increased $1,054,000, or 3.7% in 1995, as the
Company made certain enhancements to its employee benefit plans, resulting in
additional expense. Employment levels were lower in 1995 when compared to the
prior year due to reductions following the consolidation of the Company's Kansas
banking entities into a single charter, and continuing efforts to control this
area of noninterest expense. At the end of 1995, the Company had a total staff
(on a full-time equivalent basis) of 877, as compared to 892 and 861 at the end
of 1994 and 1993, respectively.
The increase in 1994 year-end staffing levels is attributable to the
Company's acquisition of TFB, in December 1994. Total compensation costs were
nominally impacted by the TFB acquisition (less than $100,000) and also by
certain severance costs paid to employees in conjunction with the Company's
consolidation of its Kansas banking entities.
Salary and employee benefit costs in 1995 represented 1.87% of average total
assets, as compared to a 1994 percentage of 1.85%. The comparable 1993
percentage was 1.89% (excluding merger-related severance costs).
Net occupancy expenses increased $3,257,000, to $10,856,000 in 1995 after
increasing $872,000 to $7,599,000 in 1994. $2,500,000 of the 1995 increase is
due to early adoption of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" which resulted in the recognition of an impairment loss of an
office building acquired in the 1993 KSB&T merger. The remainder of the 1995
increase was mostly because of a full year of TFB expenses and increased
depreciation on fixed assets, as the Company has continued to invest in
technology equipment and software. The majority of the 1994 increase is
attributable to depreciation recognized on fixed assets acquired during 1993 and
1994 (including the fixed assets acquired in the KSB&T merger).
Data processing expenses decreased $279,000, or 5.6% from 1994 levels. During
1994, the Company elected to make certain changes in its data processing
activities and to change its existing data processing provider. The Company
began to realize increased efficiencies resulting from the change in data
processing platforms during the latter half of 1995, but cost savings in data
processing should be more evident in 1996. The $732,000 increase in data
processing expense in 1994 resulted from increased account volumes realized
after the KSB&T acquisition, and certain conversion costs incurred related to
the change in data processing vendors.
Beginning in June of 1995, the Company's subsidiary banks received a
reduction in deposit insurance assessments, lowering the expense for the year by
$1,197,000 compared to 1994. The Company is uncertain of the exact impact this
reduction in deposit insurance assessment will have in 1996. The Company has
SAIF insured deposits obtained in prior years when it acquired the deposits of
two failed savings and loan institutions. If the current proposals relating to
the recapitalization of the Savings Insurance Fund are passed by Congress, the
Company estimates it will incur a one-time charge of $800,000 - $900,000 on its
SAIF insured deposits. In addition, the legislation would require BIF-insured
institutions to share in the payment of interest on the Financing Corporation
("FICO") bonds. Prospective assessments are dependent on the Congressional
resolution of the funding of the deposit insurance funds and underlying debt
instruments.
Advertising and promotional expenses in 1995 declined $1,821,000 from 1994
levels, as the Company suspended much of its national credit card marketing
efforts. The Company anticipates resuming very selective national marketing of
its credit card products in 1996. This expense category increased $2,704,000 in
1994 compared to 1993, as the Company engaged in national marketing of its
credit card business.
Other noninterest expenses increased $3,720,000, or 36.1% from 1994 levels.
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. Other factors contributing to the increase in other noninterest
expenses were costs associated with the Company's securitization of credit card
receivables and a full year of operational support for TFB following its
acquisition by the Company in December of 1994.
Included in other noninterest expenses are the Company's payments to
Systematics, Inc. and M&I Data Services for data processing services and to
First Data Resources, Inc. for bankcard processing.
Just as is the increase in noninterest income and the maintenance of net
interest income, the control of noninterest expense is a significant goal of the
Company's management.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk are monitored on a continuous basis by the
Company. The Company's principal service area has been identified as the Wichita
MSA. Credit risk is therefore dependent on the economic vitality of this region.
Within the region, credit risk is widely diversified and does not rely upon a
particular industry, segment or borrower. A relatively stable economic
environment was present in the region during 1995. The Company believes a
similar climate will be present in 1996. To a lesser extent, the Company is also
actively involved in certain areas of Oklahoma and the Kansas City area through
the operations of its subsidiary locations in Oklahoma City, Oklahoma and
Prairie Village, Kansas.
The Company does not believe there are any significant concentrations of risk
in the commercial, financial and agricultural loan portfolio. Food service
industry customers are the largest single class of borrowers. That risk is
spread among a number of borrowers who are involved in a variety of types of
food service in a number of geographic markets throughout the United States.
Each loan is analyzed independently based upon the financial risk in that
particular situation.
Consumer credit is comprised of credit card and installment loans, and
represents the largest concentration of overall risk in the loan portfolio. The
company experienced decreases in this portion of its loan portfolio in 1995,
although credit card totals declined primarily because of securitization of
$50,000,000, and the sale of $10,000,000, of these loans during the year. In
large part, installment receivables represent loans made to acquire automobiles
and are secured by the automobile. Credit card receivables are represented by
Mastercard and VISA customers, and are unsecured. The majority of consumer
credit is extended in the service areas previously described, although the
Company has marketed its credit card products to a wider geographic area. As
previously mentioned, the credit quality of accounts obtained in the Company's
recent credit card marketing campaign resulted in higher than expected
charge-offs in this category of consumer credit. INTRUST suspended much of its
national marketing of credit card accounts in 1995, and has determined that its
marketing efforts in this area in 1996 will be substantially different than its
efforts in 1993 and 1994. The Company believes its charge-offs in the credit
card sector will continue to run above its historical averages in 1996, but it
does not believe this category represents an excessive concentration of risk.
The volume and risk in these loans is continuously evaluated and reflected in
the allowance for loan losses.
During the past two years, and as a matter of general credit policy, the
Company has not participated in either real estate mortgage loans (either
construction or permanent loans) outside the service area described above or
loans defined as highly leveraged transactions (HLT's).
OFF-BALANCE-SHEET RISK
Off-balance-sheet risk of the Company consists principally of the issuance of
commitments to extend credit and the issuance of letters of credit. During the
past two years, the Company has not entered into any financial instruments of a
derivative nature that involve other off-balance-sheet market or credit risks,
such as interest rate swaps, futures, options or similar types of instruments.
However, the Company has entered into two credit card securitization
transactions. The securitization of credit card receivables allows the Company
to free up capital for other uses and to more effectively manage its balance
sheet. One floating rate transaction, in the amount of $50,000,000, was
consummated in December 1994. A second fixed rate transaction, also for
$50,000,000, was concluded in January 1995. Neither the credit card receivables
sold or the securities outstanding are defined as financial instruments of the
Company, but the Company continues to service the related credit card accounts.
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.
At December 31, 1995, the aggregate amount of commitments to extend credit
outstanding was $320,116,000, excluding credit card lines of $1,186,961,000.
Comparable amounts at December 31, 1994 and 1993 were $230,190,000 and
$171,966,000, respectively. At December 31, 1995, the aggregate amount of
letters of credit outstanding was $30,846,000 compared to $29,573,000 at
December 31, 1994 and $24,220,000 at December 31, 1993.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company upon extension
of credit, is based on management's credit evaluation of the counter-party.
Letters of credit consist of two principal types: commercial and standby.
Commercial letters of credit are generally issued to facilitate the flow of
commercial transactions, generally to finance goods in transit. Standby letters
of credit are used to ensure the performance of obligations in some future
period. Letter of credit expirations generally do not run beyond one year from
the date of issuance.
The issuance of letters of credit is governed by the same underwriting
standards as are applicable in any other credit transaction. Some are secured,
others are supported by the general credit standing of the obligor. Liabilities
under letters of credit are evaluated on a continuing basis, as are all other
loans in the credit review process.
INVESTMENT PORTFOLIO RISK
Analysis of the investment portfolio is included in Table 4, Investment
Portfolio, and Table 5, Maturities and Yield Analysis. Except for a small
portion of its portfolio (less than 1%) classified as available-for-sale, the
Company has the ability, and management has the intent, to hold investment
securities to maturity. The Company does not maintain a trading account or
engage in trading activities. On occasion, maturities will be pre-funded.
Pre-funding occurs within a short period prior to the maturity of the maturing
obligations.
Management believes the average maturity of the Company's investment
security portfolio to be shorter than peer group averages and that maintenance
of a portfolio of this duration substantially reduces interest rate risk. The
Company maintains a conservative investment strategy and believes the
diversification of the portfolio results in very little credit risk existing in
the portfolio.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The principal functions of asset/liability management are to provide
adequate liquidity, maintaining a reasonable and prudent relationship between
rate sensitive assets and liabilities and to continuously evaluate risks,
including interest-rate risks. Adequate liquidity is described as "the ability
of the Company to provide funds to appropriately meet normal loan extensions,
and at the same time, meet deposit withdrawals." A variety of funding sources
are available to the Company, including core deposit acquisition, Federal funds
purchases, acquisition of public funds and the normal run-off of
interest-earning assets.
The day-to-day liquidity needs of the Company are primarily met by the
management of the Federal funds position. Adjustments in the Company's net
Federal funds position have historically been sufficient to meet liquidity
needs. As previously noted, and as described in Table 5, the Company's
investment portfolio carries a relatively short weighted-average maturity. the
Company has contractual maturities of investment securities, including
mortgage-backed securities, in the next year of $109,754,000. Interest rate
risks are minimized by the maintenance of this relatively short-term investment
position, and the normal run-off of these investment securities provides a
secondary source of liquidity for the Company. In addition, a significant
portion of the loan portfolio is comprised of installment instruments that
provide an additional source of liquidity through their normal run-off. As
previously discussed in this analysis, the Company securitized and sold certain
credit card receivables in December 1994 and January 1995. Proceeds from these
transactions provide additional sources of liquidity.
A major component of the asset/liability management process is the focus on
the control of interest rate exposure. Emphasis is placed on maintenance of
acceptable net interest margins in various interest rate environments, and in
providing the Company the ability to change interest rates should market
circumstances warrant. The following table presents, at December 31, 1995, the
Company's interest rate sensitivity based on contractual maturities. Management
believes the sensitivity and gap ratios reflected in this table result in
acceptable management of interest rate exposure.
<PAGE>
<TABLE>
INTEREST RATE SENSITIVITY
December 31, 1995 1 to 90 91 to 180 181 to 365 1 to 2 Over
(Dollars in thousands) Days Days Days Years 2 Years Total
---------- ---------- ---------- ---------- ---------- ----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Net Loans $ 480,551 $ 112,228 $ 124,037 $ 120,276 $ 200,293 $1,037,385
Investment Securities 27,421 23,910 58,424 121,513 88,978 320,246
Federal funds sold 112,020 0 0 0 0 112,020
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets $ 619,992 $ 136,138 $ 182,461 $ 241,789 $ 289,271 $1,469,651
========== ========== ========== ========== ========== ==========
Interest-bearing liabilities:
Interest-bearing deposits $ 626,155 $ 85,019 $ 97,027 $ 121,312 $ 143,709 $1,073,222
Federal funds purchased 107,775 0 0 0 0 107,775
Other borrowings 30,038 0 150 160 11,854 42,202
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities $ 763,968 $ 85,019 $ 97,177 $ 121,472 $ 155,563 $1,223,199
========== ========== ========== ========== ========== ==========
Interest rate sensitivity ($ 143,976) $ 51,119 $ 85,284 $ 120,317 $ 133,708
Cumulative interest rate sensitivity ($ 143,976) ($ 92,857) ($ 7,573) $ 112,744 $ 246,452
Cumulative interest rate sensitivity gap
as a percentage of total assets (8.64)% (5.57)% (0.45)% 6.76% 14.78%
Cumulative ratio of interest-sensitive
assets to interest-sensitive liabilities
81.15% 89.06% 99.2% 110.56% 120.15%
</TABLE>
The following information should be read in conjunction with the consolidated
statement of cash flows, which appears under item 8 of this report.
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks, Federal funds sold and securities purchased
under agreements to resell. Cash and cash equivalents increased $100,094,000 for
the year ended December 31, 1995, as the net cash provided by operating and
financing activities exceeded the net cash used in investing activities. The
$24,037,000 of net cash provided by operating activities resulted from
$40,899,000 in earnings, adjusted for noncash charges and credits, offset in
part by adjustment for gain on sale of loans ($2,018,000) and changes in
noninvestment assets and nonfinancing liabilities ($14,844,000). Cash outflows
from investing activities resulted primarily from purchases of investment
securities ($169,124,000) net of securities matured or called ($146,596,000).
Cash was provided by financing activities mainly because of increases in
deposits of $50,725,000 and short-term borrowings of $50,020,000.
For the year ended December 31, 1994, cash and cash equivalents decreased
$31,558,000, as the net cash absorbed by financing activities exceeded the net
cash provided by operating and investing activities . Cash was absorbed by
financing activities primarily because of a decrease in deposits of $51,774,000.
Net cash, of $29,254,000, provided by operating activities resulted from
$30,343,000 in earnings, adjusted for noncash charges and credits. Within
investing activities, cash inflows, largely produced by securities matured or
called ($122,787,000), were partially offset by purchases of investment
securities ($36,780,000) and a net increase in loans ($78,426,000).
The Company's ability to pay dividends on its common stock and interest on
its capital notes is primarily dependent upon funds provided by dividends from
the Subsidiary Banks. The payment of dividends by the Subsidiaries is restricted
only by regulation. At December 31, 1995, approximately $3,486,000 was available
from the Subsidiaries' retained earnings for distribution as dividends to the
Company in future periods without regulatory approval. The availability of
dividends from the Subsidiary Banks combined with cash balances maintained by
the parent company at December 31, 1995 provide the parent company with
sufficient liquidity to meet its needs.
CAPITAL ADEQUACY
Capital strength is important to the success of INTRUST Financial
Corporation. Capital strength promotes depositor and investor confidence and
provides a solid foundation for future growth. At December 31, 1995, the
Company's capital position exceeded all regulatory 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 December 31, 1995, the
Company's total capital to risk-weighted assets was 10.6% and its Tier 1 capital
to risk-weighted assets ratio was 8.8%. These ratios were 11.3% and 9.2%,
respectively in 1994. While the Company's total year-end stockholders' equity
has increased 5.9% from 1994 levels, there has been slight decline in the
aforementioned capital ratios. This is primarily caused by a regulatory rule
change, effective April 1, 1995, that limits the amount of deferred tax assets
dependent upon future taxable income that the Company may include in regulatory
capital.
Capital ratios of the Company's subsidiary banks are as follows:
INTRUST Will Rogers The First
Bank, N.A. Bank Bank
Leverage Ratio 7.08% 8.72% 6.08%
Core Capital/Risk Weighted Assets 9.15% 14.07% 12.12%
Total Capital/Risk Weighted Assets 10.41% 15.17% 13.46%
Dividends declared in 1995 were $3,518,000 ($1.50 per share). Dividends of
$5,915,000 ($2.50 per share) and $3,574,000 ($1.50 per share) were declared in
1994 and 1993, respectively. The Company, over the last three years, has
retained $33.5 million in net earnings, adding substantially to its strength and
capital position.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As discussed in the accompanying financial statements, the Company has
disclosed estimated fair values for its financial instruments. As noted in the
financial statements, no ready market exists for a significant portion of the
Company's financial instruments, and a precise determination of the fair
value of these instruments, in the absence of a ready market, cannot be made.
The estimated fair value (as computed) of its financial assets exceeded the
book value of those assets by approximately $15.2 million. The estimated book
value of financial assets exceeded its fair value by $1.1 million in 1994. The
year-over-year change is due to the decreasing interest rate environment present
in 1995. As interest rates declined during 1995, the fair value of the Company's
interest-earning assets increased. The fair value of investment securities that
had been purchased during a period of higher interest rates increased, as did
loans which reprice at intervals that lag the actual 1995 interest rate
movements. As previously noted, a significant portion (34.3%) of the Company's
investment portfolio will mature during 1996. The fair value of loans is based
on discounting scheduled cash flows. The declining interest rate environment
experienced in 1995 resulted in the fair value of the loan portfolio exceeding
book value because a number of the Company's loans were made during periods when
interest rates exceeded those presently being charged.
The estimated fair value of financial liabilities at December 31, 1995
exceeded their book value by $18.9 million. This difference was $6.9 million in
1994. The amount that the fair value of time deposits exceeds book value, of
approximately $7.5 million, arises because certain time deposits were obtained
during a period of higher interest rates, and as interest rates have declined,
the scheduled cash flows of these instruments are more than the cash flows that
would be anticipated at current market rates. The difference in the fair value
and book value of the Company's convertible capital notes, of approximately
$11.5 million, reflects the fact that the coupon on the debt is currently above
market interest rates and that the common stock conversion price is
significantly below the current market price of the Company's common stock.
INFLATION AND CHANGING PRICES
The impact of inflation on financial institutions differs from that exerted
on other types of commercial enterprises. INTRUST Financial Corporation has a
relatively small portion of its resources invested in capital or fixed assets.
The majority of its assets are monetary in nature. For this reason, changes in
interest rates are a primary factor in determining their value. Fluctuations in
interest rates and efforts by the Federal Reserve Board to regulate money and
credit conditions have a greater effect on the Company's profitability than do
the effects of higher costs for goods and services.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" is
effective for fiscal years beginning after December 15, 1995. This Statement
establishes accounting standards for the impairment of long-lived assets. The
Company elected to adopt this Statement in 1995. Adoption of the provisions of
this Statement resulted in the Company recording an impairment loss in the
fourth quarter of $2,500,000 on an office building that was acquired in the
KSB&T merger transaction. This impairment loss was computed based on the
difference between the building's previous carrying value and the total of the
projected discounted cash flows to be received from the operation of the
building. This loss is reflected in net occupancy and equipment expense in the
accompanying consolidated statements of income.
Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights" amends Statement of Financial Accounting Standards
No. 65, "Accounting for Certain Mortgage Banking Activities" to eliminate the
accounting distinction between purchased mortgage servicing rights and
originated mortgage servicing rights. The provisions of Statement No. 122 are
effective for fiscal years beginning after December 15, 1995. Because the
Company is not actively engaged in the origination of mortgage servicing rights,
it does not anticipate that the adoption of Statement No. 122 will have a
material impact on its financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-based Compensation", establishes financial accounting and reporting
standards for stock-based employee compensation. The Statement, which is
effective for transactions entered into in fiscal years that begin after
December 15, 1995, defines a fair value based method of accounting for an
employee stock option or similar equity instrument, but it does allow an entity
to continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees". As noted in footnote 13 to the financial
statements, during 1995 the Company granted, subject to shareholder approval,
options to acquire 32,500 shares of the Company's common stock. The Company
anticipates that it will account for these stock options using the intrinsic
value based method of accounting, and will provide pro forma disclosures as if
the fair value based method of accounting as defined in SFAS No. 123 had been
applied.
CONSOLIDATED STATISTICAL INFORMATION
The following tables, charts and comments present selected financial information
relating to INTRUST Financial Corporation in compliance with the statistical
disclosure requirements of the Securities and Exchange Commission for bank
holding companies.
The scope of the Company does not include foreign operations
<PAGE>
<TABLE>
Average Balance Sheet (Table 1)
- --------------------- ---------
The daily average amounts by condensed categories for the past three years is presented below (Dollars in thousands):
Year Ended December 31 1995 1994 1993
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
---------- -------- ---------- -------- ---------- --------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and Due from Banks $ 80,204 5.1% $ 82,525 5.4% $ 78,681 5.8%
Taxable Investment Securities 249,407 15.8 257,270 16.7 248,620 18.4
Nontaxable Investment
Securities 45,152 2.9 61,427 4.0 73,711 5.5
Federal Funds Sold 95,718 6.1 61,425 4.0 71,498 5.3
Loans (net of allowance
for loan losses) 1,014,339 64.3 993,521 64.5 814,469 60.4
Building and Equipment 31,390 2.0 31,446 2.0 23,219 1.7
Other 60,395 3.8 52,891 3.4 39,247 2.9
---------- --- ---------- --- ---------- ---
Total $1,576,605 100.0% $1,540,505 100.0% $1,349,445 100.0%
========== ===== ========== ===== ========== =====
Liabilities and Stockholders' Equity:
Demand Deposits $ 258,844 16.4% $ 268,184 17.4% $ 231,985 17.2%
Savings and Interest-Bearing
Demand Deposits 497,746 31.6 542,468 35.2 475,198 35.2
Time Deposits 535,061 33.9 487,759 31.7 441,555 32.7
Short-Term Debt 99,695 6.3 63,631 4.1 56,096 4.2
Long-Term Debt 33,822 2.2 36,495 2.4 24,787 1.8
Other Liabilities 18,866 1.2 14,766 1.0 13,878 1.0
Stockholders' Equity 132,571 8.4 127,202 8.2 105,946 7.9
---------- --- ---------- --- ---------- ---
Total $1,576,605 100.0% $1,540,505 100.0% $1,349,445 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
<PAGE>
<TABLE>
Net Interest-Earnings Analysis (Table 2)
- ------------------------------ ---------
The following table presents an analysis of the average yields on earning assets, average rates paid on
interest bearing liabilities, and the net interest differential for each of the past three years. Loans on
nonaccrual basis and overdrafts are included in the average loan amounts.
The Net Yield on Interest-Earning Assets is net interest income divided by average interest-earning assets.
<CAPTION>
Year Ended December 31 1995 1994 1993
--------------------------- -------------------------- ---------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Income or Rate Balance Income or Rate Balance Income or Rate
---------- -------- ------- ---------- -------- ------- ---------- ------- -------
Taxable Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities $ 249,407 $ 14,892 5.97% $ 257,270 $ 11,639 4.52% $ 248,620 $13,495 5.43%
Nontaxable Invest-
ment Securities* 45,152 3,329 10.98 61,427 4,299 10.52 73,711 5,604 11.44
---------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total Investment Securities* 294,559 18,221 6.74 318,697 15,938 5.68 322,331 19,099 6.80
Federal Funds Sold 95,718 5,581 5.83 61,425 2,315 3.77 71,498 2,233 3.12
Net Loans 1,014,339 104,117 10.26 993,521 92,130 9.27 814,469 77,493 9.51
---------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total Interest-Earning
Assets* $1,404,616 $127,919 9.22% $1,373,643 $110,383 8.19% $1,208,298 $98,825 8.41%
========== ======== ==== ========== ======== ==== ========== ======= ====
<FN>
* Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
<CAPTION>
Year Ended December 31 1995 1994 1993
--------------------------- -------------------------- ---------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Expense or Rate Balance Expense or Rate Balance Expense or Rate
---------- -------- ------- ---------- -------- ------- ---------- ------- -------
Savings and Interest-
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bearing Demand Deposits $ 497,746 $14,347 2.88% $ 542,468 $11,828 2.18% $475,198 $11,062 2.33%
Other Time Deposits 535,061 30,843 5.76 487,759 21,336 4.37 441,555 19,872 4.50
---------- -------- ------- ---------- -------- ------- ---------- ------- -------
Total Deposits 1,032,807 45,190 4.38 1,030,227 33,164 3.22 916,753 30,934 3.37
Short-Term Debt 99,695 5,504 5.52 63,631 2,030 3.19 56,096 1,518 2.71
Long-Term Debt 33,822 2,766 8.18 36,495 3,073 8.42 24,787 1,801 7.27
---------- -------- ------- ---------- -------- ------- ---------- ------- -------
Total Interest-Bearing
Liabilities $1,166,324 $53,460 4.58% $1,130,353 $38,267 3.39% $997,636 $34,253 3.43%
========== ======== ==== ========== ======== ==== ========== ======= ====
Net Differential $ 238,292 $74,459 $ 243,290 $72,116 $210,662 $64,572
========== ======== ========== ======== ========== =======
Net Yield on Interest-
Earning Assets 5.30% 5.25% 5.34%
==== ==== ====
</TABLE>
<PAGE>
<TABLE>
Change in Interest Income and Interest Expense (Table 3)
- ---------------------------------------------- ---------
Further insight into year-to-year changes in net interest income may be gained by segregating the rate and volume
components of the increases in interest income and expense associated with earning assets and interest-bearing
liabilities.
The following table presents this rate/volume analysis comparing changes in net interest income from 1995 to 1994
and from 1994 to 1993.
Net interest income increased in 1995 as a result of positive rate variances .
The increase in 1995 due to rate changes is primarily because of an increase in
yields on net loans. Overall increases in yields on earning assets exceeded
increases in interest-bearing liabilities. Average interest-earning assets grew,
but to a lesser extent than interest- bearing liabilities, resulting in a
decrease in net interest income due to volume changes.
1995 vs. 1994 1994 vs. 1993
------------------------------ ------------------------------
Due to Changes in Due to Changes in
-------------------- ---------------------
Increase Increase
(Dollars in thousands) (Decrease) Volume Rates (Decrease) Volume Rates
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable Investment Securities $ 3,253 $ (366) $ 3,619 $(1,856) $ 456 $(2,312)
Nontaxable Investment Securities (970) (1,190) 220 (1,305) (884) (421)
------- ------ ------- ------- ------- -------
Total Investment Securities 2,283 (1,556) 3,839 (3,161) (428) (2,733)
Federal Funds Sold 3,266 1,650 1,616 82 (341) 423
Net Loans 11,987 1,964 10,023 14,637 16,648 (2,011)
------- ------ ------- ------- ------- -------
Total Interest-Earning Assets $17,536 $2,058 $15,478 $11,558 $15,879 $(4,321)
======= ====== ======= ======= ======= =======
Savings and Interest-Bearing Demand Deposits 2,519 (1,039) 3,558 766 1,497 (731)
Other Time Deposits 9,507 2,223 7,284 1,464 2,033 (569)
Total Deposits 12,026 1,184 10,842 2,230 3,530 (1,300)
------- ------ ------- ------- ------- -------
Short-Term Debt 3,474 1,518 1,956 512 220 292
Long-Term Debt (307) (221) (86) 1,272 952 320
------- ------ ------- ------- ------- -------
Total Interest-Bearing Liabilities 15,193 2,481 12,712 4,014 4,702 (688)
------- ------ ------- ------- ------- -------
Net Interest Income $ 2,343 $ (423) $ 2,766 $ 7,544 $11,177 $(3,633)
======= ====== ======= ======= ======= =======
</TABLE>
<PAGE>
Investment Portfolio (Table 4)
- -------------------- ---------
The book value of investment securities at December 31 for the past three years
is presented below (Dollars in thousands):
1995 1994 1993
-------- -------- --------
U.S. Treasury Securities $151,268 $119,215 $139,496
U.S. Agency Securities 132,723 97,172 130,346
State, County and Municipal Securities 33,043 54,973 63,971
Other Securities 3,212 5,419 7,748
-------- -------- --------
Total $320,246 $276,779 $341,561
-------- -------- --------
======== ======== ========
Except for total U.S. Treasury and U.S. Agency obligations, no investment in a
single issuer exceeds 10 percent of stockholders' equity.
<TABLE>
Maturities and Yield Analysis (Table 5)
- ----------------------------- ---------
The distribution of maturities and weighted average yields of investment securities at
December 31, 1995 is as follows (Dollars in thousands):
Total Within 1 Year 1-5 Years 5-10 Years After 10 Years Average
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Maturity
-------- ----- -------- ----- -------- ----- ------- ----- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year,
U.S.Treasury $151,268 6.1% $ 66,059 5.6% $ 85,209 6.5% $ 0 0.0% $ 0 0.0% 2.5 mos.
2 years,
U.S. Agencies 132,723 6.3 37,451 5 78,883 6.7 15,395 7.2 994 8.6 7.3 mos.
State, County and 3 years,
Municipal Securities* 33,043 10.5 6,244 11.7 14,160 10.6 9,849 9.8 2,790 10.2 1.0 mo.
9 years,
Other Securities 3,212 4.3 0 0 47 11.3 0 0 3,165 4.2 10.6 mos.
-------- --- -------- --- -------- ---- ------- --- ------ --- ---------
2 years,
Total $320,246 6.6% $109,754 5.7% $178,299 7.0% $25,244 8.2% $6,949 7.2% .9 mos.
======== === ======== === ======== === ======= === ====== === ========
*Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</TABLE>
<PAGE>
<TABLE>
Loan Portfolio (Table 6)
- -------------- ---------
A breakdown of outstanding loans, by type, at year-end for the past five years is as follows (Dollars in thousands):
1995 1994 1993 1992 1991
------------------- ------------------- ----------------- ----------------- ------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
---------- -------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Financial
and Agricultural $ 416,428 39.2% $ 377,553 35.7% $389,513 39.9% $295,392 39.1% $240,489 35.2%
Real Estate-Construction 25,491 2.4 21,415 2.0 17,725 1.8 10,070 1.3 11,839 1.7
Real Estate-Mortgage 189,375 17.8 185,105 17.5 200,406 20.6 133,250 17.6 124,900 18.3
Installment, excluding
credit card 259,047 24.3 261,961 24.8 201,236 20.7 152,227 20.2 138,982 20.3
Credit card 173,270 16.3 212,051 20.0 166,021 17.0 165,071 21.8 167,239 24.5
---------- ----- ---------- ----- -------- ----- -------- ----- -------- -----
Total $1,063,611 100.0% $1,058,085 100.0% $974,901 100.0% $756,010 100.0% $683,449 100.0%
========== ===== ========== ===== ======== ===== ======== ===== ======== =====
</TABLE>
<TABLE>
Maturities and Sensitivity to Interest Rate Changes (Table 7)
- --------------------------------------------------- ---------
The maturity distribution of loans outstanding at December 31, 1995 (excluding Real Estate- Mortgage,
and Installment) by type and sensitivity to interest rate changes is as follows (Dollars in thousands):
Due Loans Due After One Year
One Year After 1 Year After Within After
or Less thru 5 Years 5 Years 5 Years 5 Years
-------- ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Commercial, Financial Fixed Rates $26,674 $1,298
and Agricultural $296,856 $91,858 $27,714
Real Estate- Floating or
Construction 10,935 6,680 7,876 Adjustable Rate 71,864 34,292
-------- ------- ------- ------- -------
Total $307,791 $98,538 $35,590 Total $98,538 $35,590
======== ======= ======= ======= =======
Note: Demand loans, past due loans and overdrafts are reported in "One Year or Less."
Loans are renewed only after consideration of the borrower's creditworthiness at maturity, except for installment
loans which are written on a fully amortized basis. Loans are not written on the basis of guaranteed renewals.
Those loans which are renewed are generally renewed for similar terms at market interest rates.
</TABLE>
<PAGE>
Risk Elements (Table 8)
- ------------- ---------
Loans considered risk elements include those which are accounted for on a
nonaccrual basis, loans which are contractually past due 90 days or more as to
interest or principal payments, and those renegotiated to provide a reduction of
interest or principal which would not otherwise be considered except in cases of
deterioration in the financial position of the borrower. The following is a
table of nonaccrual, past due and restructured loans at December 31 for each of
the past five years (Dollars in thousands):
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Loan Categories
Nonaccrual Loans $3,988 $2,843 $2,756 $3,001 $6,886
Past Due Loans 5,383 3,074 2,053 1,654 985
Restructured Loans 0 336 370 1,589 296
------ ------ ------ ------ ------
Total $9,371 $6,253 $5,179 $6,244 $8,167
====== ====== ====== ====== ======
Gross interest income that would have been recorded in 1995 on nonaccrual and
restructured loans, if the loans had been current in accordance with their
original terms and had been outstanding throughout the period or since
origination if held for part of the period, was $302,000. The amount of interest
on those loans that was actually included in income for the period was $3,000.
Loans are reported as being in nonaccrual status if: (a) they are maintained on
a cash basis because of deterioration in the financial position of the borrower,
(b) payment in full of interest or principal is not expected, or (c) principal
or interest has been in default for a period of 90 days or more unless the
obligation is both well secured and in the process of collection. Any accrued
but unpaid interest previously recorded on such loans is reversed against
current period interest income.
The classification of a loan as nonaccrual or reduced rate does not necessarily
indicate that the ultimate collection of the loan principal and interest is
doubtful. In fact, the Company's experience suggests that a significant
percentage of both principal and interest on loans so classified, particularly
commercial and real estate loans, is eventually recovered. Interest income on
nonaccrual loans is recognized only in the period when realized. At the same
time, however, management recognizes the lower quality and above normal risk
characteristics of these loans and, therefore, considers the potential risk of
principal loss on loans included in this category in evaluating the adequacy of
the allowance for possible loan losses.
Management has identified additional problem loans in the portfolio which are
not stated in Table 8. These loans are reviewed on a continuous basis. They
comprise less than 0.7 percent of the loan portfolio. The Company has developed
a credit risk rating system in which a high percentage of loans in each bank are
evaluated by Credit Review staff.
<PAGE>
<TABLE>
Summary of Loan Loss Experience (Table 9)
- ------------------------------- ---------
The table below presents, in summary form, for the past five years the year-end and average loans outstanding;
the changes in the allowance for loan losses, with loans charged off and recoveries on loans previously
charged off by loan category; the ratio of net charge-offs to average loans; and the ratio of the
allowance for losses to year-end loans outstanding (Dollars in thousands):
1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Amount of loans at year-end $1,063,611 $1,058,085 $974,901 $756,010 $683,449
Average loans outstanding $1,037,067 $1,013,831 $834,412 $678,398 $646,201
Beginning balance of allowance for loan
losses $19,886 $21,793 $16,099 $13,767 $10,637
Allowance of banks acquired 172 164 3,579 685 0
Loans charged-off:
Commercial, Financial and Agricultural 2,672 845 211 3,241 1,547
Real Estate-Construction 0 0 50 50 530
Real Estate-Mortgage 85 248 56 455 897
Installment 999 662 680 649 719
Credit Cards 12,089 5,779 4,682 5,641 5,805
---------- ---------- -------- -------- --------
Total loans charged off 15,845 7,534 5,679 10,036 9,498
---------- ---------- -------- -------- --------
Recoveries on charge-offs:
Commercial, Financial and Agricultural 1,926 1,261 1,031 1,680 434
Real Estate-Construction 0 0 0 0 499
Real Estate-Mortgage 40 134 175 202 204
Installment 392 269 251 158 215
Credit Cards 1,203 837 741 737 476
---------- ---------- -------- -------- --------
Total recoveries 3,561 2,501 2,198 2,777 1,828
---------- ---------- -------- -------- --------
Net loans charged off 12,284 5,033 3,481 7,259 7,670
Provision charged to expense 18,118 2,962 5,596 8,906 10,800
---------- ---------- -------- -------- --------
Ending balance of allowance for loan losses $25,892 $19,886 $21,793 $16,099 $13,767
========== ========== ======== ======== ========
Net charge-offs/average loans 1.18% 0.50% 0.42% 1.07% 1.19%
Allowance for loan losses/loans at year-end 2.43% 1.88% 2.24% 2.13% 2.01%
</TABLE>
<TABLE>
A breakdown of the allowance for loan losses, at the end of the past five years, is presented below (Dollars
in thousands):
Allocation of the Allowance for Loan Losses
Balance at end of period applicable to: 1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $ 7,613 $ 6,694 $ 8,638 $ 4,911 $ 4,513
Real Estate-Construction 221 339 271 491 53
Real Estate-Mortgage 2,621 4,104 4,680 2,973 1,704
Installment 868 1,414 1,624 1,539 1,494
Credit Cards 14,569 7,335 6,580 6,185 6,003
---------- ---------- -------- -------- --------
Ending balance of allowance for loan losses $25,892 $19,886 $21,793 $16,099 $13,767
========== ========== ======== ======== ========
Percent of loans in each category to total loans 1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 39.2% 35.7% 39.9% 39.1% 35.2%
Real Estate-Construction 2.4 2.0 1.8 1.3 1.7
Real Estate-Mortgage 17.8 17.5 20.6 17.6 18.3
Installment 24.3 24.8 20.7 20.2 20.3
Credit Cards 16.3 20.0 17.0 21.8 24.5
---------- ---------- -------- -------- --------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ======== ======== ========
</TABLE>
The Company's determinations of the level of the allowance and, correspondingly,
the provision for loan losses rests upon various judgments and assumptions
including, but not necessarily limited to, general economic conditions, loan
portfolio composition and prior loan loss experience. The Company considers the
allowance for loan losses of $25,892,000 adequate to cover losses inherent in
loans outstanding at December 31, 1995. While it is the Company's policy to
write off in the current period those loans or portions of loans on which a loss
is certain or probable, no assurance can be given that the Company will not in
any particular period sustain loan losses that are sizeable in relation to the
amount reserved, or that subsequent evaluations of the loan portfolio, in light
of conditions and factors then prevailing, will not require significant changes
in the allowance for loan losses. Credit card charge-offs constitute a
significant portion of total charge-offs. It is management's opinion that the
loan portfolio is well diversified. There are no concentrations of loans (in
excess of 10 percent of the total loan portfolio) to multiple borrowers engaged
in similar activities. You are encouraged to refer to the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of this report, in which the provision for loan losses is discussed
further. Among the factors considered in establishing the provision for loan
losses are historical charge-offs, the level and composition of nonperforming
loans, the condition of industries experiencing particular financial pressures,
the review of specific loans involving more than a normal risk of collectability
and evaluation of underlying collateral for secured lending. Aided by a
specialized loan review process, senior management and the entire lending staff
continually review the entire loan portfolio to identify and manage loans
believed to possess unusually high degrees of risk. A portion of this review
involves the Board of Directors on a regular basis. Also taken into
consideration are classification judgments of bank regulators and the Company's
independent certified public accountants.
<PAGE>
<TABLE>
Deposits (Table 10)
- -------- ----------
A breakdown of average deposits by type for the past three years is as follows (Dollars in thousands):
Year Ended December 31 1995 1994 1993
--------------------- --------------------- --------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
---------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Demand Deposits $ 258,844 -- $ 268,184 -- $ 231,985 --
Interest-Bearing Demand 421,296 2.98% 455,410 2.30% 385,153 2.31%
Savings Deposits 76,450 2.33 87,058 2.17 90,045 2.40
Time Deposits 535,061 5.76 487,759 4.37 441,555 4.50
---------- ---------- ----------
Total $1,291,651 $1,298,411 $1,148,738
========== ========== ==========
</TABLE>
Time Deposits (Table 11)
- ------------- ----------
The following table sets forth, by remaining time to maturity, time
deposits in amounts of $100,000 or more at year-end (Dollars in thousands):
At December 31 1995
----------------------------------------------------------------------------
Time deposits in amounts of $100,000 or more maturing in:
3 months or less $ 29,787
Over 3 months through 6 months 20,707
Over 6 months through 12 months 30,218
Over 12 months 38,689
--------
Total $119,401
========
Return on Equity and Assets (Table 12)
- --------------------------- ----------
The following table presents a three year history of certain operating ratios:
Year Ended December 31 1995 1994 1993
---- ---- ----
Return on Average Assets 0.79 1.23 1.31
Return on Average Equity 9.34 14.91 16.64
Dividend Payout Ratio 28.4 31.25 20.27
Average Equity to Average Assets Ratio 8.41 8.26 7.85
<PAGE>
Short-Term Borrowings (Table 13)
- --------------------- ----------
Information for each category of short-term borrowings for which the
average balance outstanding for the period was at least 30 percent of
stockholders' equity at the end of the period is presented below (Dollars in
thousands):
Year Ended December 31 1995 1994 1993
------- ------- -------
Federal Funds Purchased:
Ending Balance $46,545 $17,685 $27,835
Ending Balance Rate 5.63% 4.67% 2.70%
Largest Month-End Balance $54,070 $64,605 $34,120
Average Balance $34,703 $30,667 $25,401
Average Interest Rate 5.76% 3.53% 2.72%
Federal funds purchased transactions are borrowings of immediately available
bank funds, for one business day, at a specified interest rate.
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ --------------------------------------------
INTRUST FINANCIAL CORPORATION
Consolidated Balance Sheets
December 31, 1995 and 1994
Dollars in thousands except per share data 1995 1994
---------- ----------
Assets
Cash and cash equivalents:
Cash and due from banks $ 102,963 $ 81,084
Federal funds sold and securities purchased under
agreements to resell 112,020 33,805
---------- ----------
Total cash and cash equivalents 214,983 114,889
---------- ----------
Investment securities:
Held-to-maturity 315,430 274,253
Available-for-sale 1,923 0
Equity, at cost 2,893 2,526
---------- ----------
Total investment securities 320,246 276,779
---------- ----------
Loans 1,063,611 1,058,085
Less:
Unearned discount 334 255
Allowance for loan losses 25,892 19,886
---------- ----------
Net loans 1,037,385 1,037,944
---------- ----------
Land, buildings and equipment, net 28,684 31,994
Accrued interest receivable 12,548 10,372
Other assets 53,138 47,139
---------- ----------
Total assets $1,666,984 $1,519,117
========== ==========
<PAGE>
Liabilities and Stockholders' Equity
Deposits:
Demand $ 293,919 $ 268,351
Savings and interest-bearing demand 528,570 494,448
Time 544,652 513,277
---------- ----------
Total deposits 1,367,141 1,276,076
---------- ----------
Short-term borrowings:
Federal funds purchased and securities sold under
agreements to repurchase 107,775 56,987
Other 10,038 10,806
---------- ----------
Total short-term borrowings 117,813 67,793
---------- ----------
Accounts payable and accrued liabilities 14,703 12,708
Notes payable 20,310 22,950
Convertible capital notes 11,854 12,000
---------- ----------
Total liabilities 1,531,821 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 114,235 105,366
Treasury stock, at cost (61,770 shares in 1995 and
37,780 shares in 1994) (3,156) (1,776)
Unrealized securities gains, net of tax 84 0
---------- ----------
Total stockholders' equity 135,163 127,590
---------- ----------
Total liabilities and stockholders' equity $1,666,984 $1,519,117
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Income
Years Ended December 31, 1995, 1994 and 1993
Dollars in thousands except per share data 1995 1994 1993
- ------------------------------------------ ---- ---- ----
Interest income:
Loans $104,117 $92,130 $77,493
Investment securities:
Taxable 14,892 11,639 13,495
Nontaxable 3,329 4,299 5,604
Federal funds sold, securities purchased under
agreements to resell, and other 5,581 2,315 2,233
-------- ------- -------
Total interest income 127,919 110,383 98,825
-------- ------- -------
Interest expense:
Deposits:
Savings and interest-bearing demand 14,347 11,828 11,062
Time 30,843 21,336 19,872
Federal funds purchased and securities sold
under agreements to repurchase 5,041 2,030 1,272
Convertible capital notes 1,076 1,080 1,080
Other borrowings 2,153 1,993 967
-------- ------- -------
Total interest expense 53,460 38,267 34,253
-------- ------- -------
Net interest income 74,459 72,116 64,572
Provision for loan losses 18,118 2,962 5,596
-------- ------- -------
Net interest income after provision
for loan losses 56,341 69,154 58,976
-------- ------- -------
Noninterest income:
Service charges on deposit accounts 9,053 9,137 8,712
Trust department fees 5,718 5,604 5,241
Credit card fees 10,898 5,269 3,799
Gain on sale of credit card loans 2,018 0 0
Securities gains 0 0 60
Other service charges, fees and income 5,933 6,878 6,412
-------- ------- -------
Total noninterest income 33,620 26,888 24,224
-------- ------- -------
Noninterest expenses:
Salaries and employee benefits 29,554 28,500 26,361
Net occupancy and equipment expense 10,856 7,599 6,727
Data processing expense 4,686 4,965 4,233
Supplies 2,841 2,735 2,515
Deposit insurance assessment 1,638 2,835 2,650
Postage and dispatch 2,387 2,380 2,084
Advertising and promotional activities 3,609 5,430 2,726
Goodwill amortization 1,596 1,437 886
Other 14,028 10,308 9,238
-------- ------- -------
Total noninterest expenses 71,195 66,189 57,420
-------- ------- -------
Income before provision for income taxes 18,766 29,853 25,780
Provision for income taxes 6,379 10,884 8,154
-------- ------- -------
Net income $12,387 $18,969 $17,626
======== ======= =======
Per share data:
Net income - assuming no dilution $5.28 $8.00 $7.40
Net income - assuming full dilution $4.77 $7.10 $6.59
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1995, 1994 and 1993
Unrealized Total
Dollars in thousands except Common Capital Retained Treasury Securities Stockholders'
per share data Stock Surplus Earnings Stock Gains Equity
-------- -------- --------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 $12,000 $12,000 $ 78,260 $ (644) $ 0 $101,616
Net income 0 0 17,626 0 0 17,626
Cash dividends ($1.50 per share) 0 0 (3,574) 0 0 (3,574)
Purchase of treasury stock 0 0 0 (139) 0 (139)
------- ------- -------- ------- ------ --------
Balances, December 31, 1993 12,000 12,000 92,312 (783) 0 115,529
Net income 0 0 18,969 0 0 18,969
Cash dividends ($2.50 per share) 0 0 (5,915) 0 0 (5,915)
Purchase of treasury stock 0 0 0 (993) 0 (993)
------- ------- -------- ------- ------ --------
Balances, December 31, 1994 12,000 12,000 105,366 (1,776) 0 127,590
Net income 0 0 12,387 0 0 12,387
Cash dividends ($1.50 per share) 0 0 (3,518) 0 0 (3,518)
Purchase of treasury stock 0 0 0 (1,380) 0 (1,380)
Net change in unrealized gains
on available-for-sale securities 0 0 0 0 84 84
------- ------- -------- ------- ------ --------
Balances, December 31, 1995 $12,000 $12,000 $114,235 $(3,156) $ 84 $135,163
======= ======= ======== ======= ====== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
Dollars in thousands 1995 1994 1993
- -------------------- --------- --------- ---------
Cash provided (absorbed) by operating activities:
<S> <C> <C> <C>
Net Income $ 12,387 $ 18,969 $ 17,626
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 18,118 2,962 5,596
Provision for depreciation and amortization 7,022 6,228 4,827
Amortization of premium and accretion of
discount on investment securities 788 2,179 2,750
Write-down of real estate to estimated market value 2,584 5 120
Gain on sale of loans (2,018) 0 0
Changes in assets and liabilities, net of effect
from purchase of acquired entity:
Loans held for sale (6,889) 788 (1,380)
Prepaid expenses and other assets (3,679) (3,656) 237
Income taxes (3,888) 218 (3,043)
Interest receivable (1,625) 560 1,808
Interest payable 809 549 (595)
Other liabilities 429 528 650
Other (1) (76) (191)
--------- --------- ---------
Net cash provided by operating activities 24,037 29,254 28,405
--------- --------- ---------
Cash provided (absorbed) by investing activities:
Purchase of banks, net of cash and cash
equivalents acquired 5,783 3,073 (3,642)
Purchase of investment securities (169,124) (36,780) (96,371)
Investment securities matured or called 146,596 122,787 178,677
Proceeds from sale of investment securities 0 0 177
Net increase in loans (11,952) (78,426) (38,586)
Proceeds from sale of loans 12,108 0 0
Purchases of land, buildings and equipment (3,485) (4,640) (6,065)
Proceeds from sale of equipment 44 102 93
Proceeds from sale of other real estate and repossessions 3,396 3,306 2,955
Other (370) (661) (583)
--------- --------- ---------
Net cash provided (absorbed) by investing activities (17,004) 8,761 36,655
--------- --------- ---------
Cash provided (absorbed) by financing activities:
Net increase (decrease) in deposits 50,725 (51,774) (89,991)
Net increase (decrease) in short-term borrowings 50,020 (8,261) 7,944
Payments on notes payable (2,640) (2,630) (120)
Retirement of convertible capital notes (146) 0 0
Proceeds from notes payable 0 0 25,000
Cash dividends (3,518) (5,915) (3,574)
Purchase of treasury stock (1,380) (993) (139)
--------- --------- ---------
Net cash provided (absorbed) by financing activities 93,061 (69,573) (60,880)
--------- --------- ---------
Increase (Decrease) in cash and cash equivalents 100,094 (31,558) 4,180
Cash and cash equivalents at beginning of year 114,889 146,447 142,267
--------- --------- ---------
Cash and cash equivalents at end of year $ 214,983 $ 114,889 $ 146,447
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
INTRUST FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
Dollars in thousands except per share data
1) Summary of Significant Accounting Policies
INTRUST Financial Corporation (the "Company"), is a bank holding company
incorporated under the laws of the state of Kansas and is registered under the
Bank Holding Company Act of 1956, as amended. The Company is the sole
shareholder of INTRUST Bank, N.A., Wichita, Kansas; Will Rogers Bank, Oklahoma
City, Oklahoma; The First Bank, Moore, Oklahoma; and First Moore Insurance
Agency, Inc., Moore, Oklahoma (the subsidiaries). The Company's primary business
is providing customers in Kansas and Oklahoma with personal and commercial
banking services, fiduciary services and real estate and other mortgage
services.
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and general practices within the banking
industry. The following is a description of the more significant policies:
a) Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
Intercompany accounts and transactions have been eliminated in consolidation.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions. Those estimates relate principally to the
determination of the allowance for loan losses income taxes and the fair value
of financial instruments. Actual results could differ from those estimates.
Certain reclassifications have been made to provide consistent financial
statement classifications in the periods presented herein. Such
reclassifications had no effect on net income or total assets.
b) Investment Securities - Debt securities and equity securities which have a
readily determinable market value that may be sold in response to changes in
interest rates or prepayment risk are classified as available-for-sale and are
carried at estimated market value with unrealized gains and losses reported as a
separate component of stockholders' equity, net of income taxes. Debt securities
that management has the ability and intent to hold to maturity are classified as
held-to-maturity and are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Equity securities which do not have a readily
determinable market value are carried at cost. Gains and losses on the sale of
investment securities are included as a component of noninterest income.
Applicable income taxes, if any, are included in income taxes. The basis of the
securities sold is determined by the specific identification of each security.
c) Loans - Certain loans are made on a discount basis. The unearned discount
applicable to such loans is taken into income on scheduled payment dates by use
of the straight-line method. Income so recognized does not differ materially
from income which would be recognized under the interest method of accounting.
Loans are reported as being in nonaccrual status if: (a) they are maintained
on a cash basis because of deterioration in the financial position of the
borrower, (b) payment in full of interest or principal is not expected, or (c)
principal or interest has been in default for a period of 90 days or more unless
the obligation is both well secured and in the process of collection. Any
accrued but unpaid interest previously recorded on such loans is reversed
against current period interest income.
Loans are charged-off whenever the loan is considered uncollectible. Credit
card loans are charged-off at the earlier of that time when they are considered
uncollectible or are 210 days past the contractual due date. Other installment
loans are charged-off at the time they are considered uncollectible or are 120
days past due, whichever is earlier.
d) Provision for Loan Losses - The provision for loan losses is the amount
required to maintain the allowance for loan losses at a level adequate to
provide for inherent loan losses. The balance in the allowance for loan losses
is based on management's analysis of the loan portfolio, prior bank experience,
economic conditions and such other factors which, in management's opinion,
require consideration. Management believes that the allowance for loan losses is
adequate.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions. The subsidiary banks are subject to the regulations of certain
Federal agencies and undergo periodic examinations by those regulatory
authorities. As an integral part of those examinations, the various regulatory
agencies periodically review the subsidiary banks' allowances for loan losses.
Such agencies may require the subsidiary banks to recognize changes to the
allowances based on their judgments about information available to them at the
time of their examination.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures." SFAS No. 114 requires that certain
impaired loans, as defined, be measured based on the present value of expected
future cash flows discounted at the loan's original effective interest rate. As
a practical expedient, impairment may be measured based on the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance. The initial adoption of SFAS No. 114 had no impact on the
consolidated financial statements.
e) Land, Buildings and Equipment - Land is stated at cost, and buildings and
equipment are stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line or declining balance method depending upon the
type of asset and year of acquisition. The following useful lives have been
established:
Buildings and improvements 15 to 40 years
Furniture, fixtures and equipment 3 to 20 years
f) Other Real Estate Owned - Other real estate owned and repossessed assets
may include assets acquired from loan settlements, foreclosure, or abandonment
of plans to use real estate previously acquired for future expansion of banking
premises. These assets are recorded at the lower of cost or fair market value
and are included in "Other assets" in the consolidated balance sheets. Any
initial write-downs on assets acquired from loan settlements and foreclosures
are charged to the allowance for loan losses. Subsequent write-downs, due to a
decline in fair value, are charged to current expense. Revenues and expenditures
related to the operation or maintenance of these assets are recorded in
operating income as incurred.
g) Goodwill - The excess of cost over fair value of net assets acquired is
amortized using the straight-line method over 15 years. Core deposit premiums
are amortized using accelerated methods over the estimated life of the deposit
relationship. These assets are included as a component of other assets and
amounted to $18,030 and $19,809, net of accumulated amortization, at December
31, 1995 and 1994, respectively.
h) Income Taxes - The Company and its subsidiaries file a consolidated
Federal income tax return on an accrual basis.
Deferred tax assets and liabilities are recognized for the future income tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the period in
which the deferred tax assets and liabilities are expected to be realized or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
i) Net Income Per Share - Net income per share assuming no dilution is
computed based upon the weighted average number of shares outstanding (
2,344,762 in 1995, 2,371,377 in 1994 and 2,381,859 in 1993). Net income per
share, assuming full dilution, is computed based upon the assumption that the 9%
convertible subordinated capital notes (note 9) had been converted into common
stock (398,545 shares in 1995 and 400,000 shares in 1994 and 1993) as of the
beginning of each respective period presented with related adjustments to
interest and income tax expense.
j) Statements of Cash Flows - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, Federal funds
sold and securities purchased under agreements to resell. Generally, Federal
funds are purchased and sold for one-day periods and securities purchased under
agreements to resell mature within 90 days. The following amounts of cash were
paid for interest and income taxes:
1995 1994 1993
------- ------- --------
Interest $52,651 $37,719 $34,848
Income taxes 10,267 10,666 11,185
Noncash investing and financing activities
included the following:
1995 1994 1993
------- ------- --------
Acquisitions (note 2):
Assets acquired $34,794 $42,619 $318,522
Liabilities assumed 40,577 45,692 314,880
------- ------- --------
Assets net of liabilities acquired (5,783) (3,073) 3,642
Loans transferred to other assets 3,512 1,372 1,856
Sale of other real estate owned financed
by the Company 0 335 209
Investments transferred from held-to-maturity
at amortized cost (1,630) 0 0
Investments transferred to available-for-sale
at estimated market value 1,714 0 0
2) Acquisitions
The following acquisitions were made during 1995, 1994 and 1993:
Company Acquired Acquisition Date Purchase Price
- ---------------- ---------------- --------------
The First National Bank of Ottawa (FNBO) December 1, 1995 $ 3,500
First Moore Bancshares, Inc. (First Moore) November 30, 1994 6,399
Kansas State Bank and Trust Company (KSB&T) July 9, 1993 36,000
The above transactions have been accounted for as purchases, and
accordingly, the acquired assets and liabilities have been recorded at their
fair value at acquisition date and the operating results of these acquisitions
are included in the Company's consolidated income statement from the date of
acquisition. Excess of cost over fair value of the net assets acquired arising
from these transactions is amortized using the straight-line method over a
15-year period.
The effect on results of operations, had the FNBO and First Moore
transactions occurred at the beginning of the respective years of acquisition
was not significant.
Summarized below are the unaudited consolidated results of operation of the
Company and KSB&T on a pro forma basis as though the merger transaction had been
consummated at the beginning of 1993. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of the results
of operations that would actually have resulted had the combination been in
effect on the dates indicated or that may result in the future:
(unaudited) 1993
- ----------- --------
Interest and other income $136,455
Net income 18,401
Net income per common share 7.73
3) Investment Securities
The amortized cost and estimated market values of investment securities are
as follows at December 31:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
1995 Cost Gains Losses Value
- ---- -------- -------- -------- --------
U.S. Treasury Securities:
Held-to-maturity $151,268 $ 2,030 $ 81 $153,217
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 104,265 1,058 123 105,200
U.S. Government Agency
mortgage-backed securities:
Held-to-maturity 28,458 1,199 91 29,566
Obligations of state and
political subdivisions:
Held-to-maturity 31,329 1,735 18 33,046
Available-for-sale 1,630 86 2 1,714
Equity and other:
Held-to-maturity 110 2 0 112
Available-for-sale 209 0 0 209
-------- -------- -------- --------
Total held-to-maturity $315,430 $ 6,024 $ 313 $321,141
======== ======== ======== ========
Total available-for-sale $ 1,839 $ 86 $ 2 $ 1,923
======== ======== ======== ========
1994
- ----
U.S. Treasury Securities:
Held-to-maturity $119,215 $ 0 $ 2,139 $117,076
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 64,080 0 1,217 62,863
U.S. Government Agency
mortgage-backed securities:
Held-to-maturity 33,092 88 1,336 31,844
Obligations of state and
political subdivisions:
Held-to-maturity 54,973 1,805 132 56,646
Other:
Held-to-maturity 2,893 15 33 2,875
-------- -------- -------- --------
Total held-to-maturity $274,253 $ 1,908 $ 4,857 $271,304
======== ======== ======== ========
The amortized cost and estimated market value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
-------- --------
Due in one year or less:
Held-to-maturity $102,957 $103,164
Available-for-sale 135 136
Due after one year through five years:
Held-to-maturity 171,827 175,346
Available-for-sale 212 213
Due after five years through ten years:
Held-to-maturity 10,554 11,255
Available-for-sale 135 145
Due after ten years:
Held-to-maturity 1,634 1,811
Available-for-sale 1,148 1,220
Mortgage-backed securities:
Held-to-maturity 28,458 29,565
Equity securities:
Available-for-sale 209 209
-------- --------
Total held-to-maturity $315,430 $321,141
======== ========
Total available-for-sale $ 1,839 $ 1,923
======== ========
Proceeds from sales of investment securities during 1995, 1994 and 1993 were
$0, $0 and $177, respectively. No significant gains or losses were realized on
these sales.
Investment securities with a book value of $190,323 and $194,247 at December
31, 1995 and 1994, respectively, were pledged as collateral for public and trust
deposits and for other purposes as required by law.
In the fourth quarter of 1995, concurrent with the adoption of its
implementation guide on SFAS No. 115, the Financial Accounting Standards Board
allowed a one-time reassessment of the SFAS No. 115 classifications of all
securities currently held. Any reclassifications would be accounted for at fair
value in accordance with SFAS No. 115 and any reclassifications from the
held-to-maturity portfolio that resulted from this one-time reassessment would
not call into question the intent of the Company to hold other debt securities
to maturity in the future. The Company used the opportunity under this one-time
reassessment to reclassify $1,630 in obligations of state and political
subdivisions from held-to-maturity to the available-for-sale portfolio. In
connection with this reclassification, gross unrealized gains of $86 and gross
unrealized losses of $2 were recorded in available-for-sale securities and in
stockholders' equity (on a net-of-tax basis).
In October 1994, the Financial Accounting Standards Board issued SFAS No.
119, "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments." SFAS No. 119 was effective for fiscal years ending after
December 15, 1994. SFAS No. 119 requires disclosures about off-balance sheet
derivative financial instruments such as futures, forwards, swaps, option
contracts and other off-balance sheet financial instruments with similar
characteristics. The Company does not engage in these types of transactions;
therefore, the adoption of SFAS No. 119 had no impact on the consolidated
financial statements.
4) Loans
The composition of the loan portfolio at December 31, is as follows:
1995 1994
---------- ----------
Commercial, financial and agricultural $ 416,428 $ 377,553
Real estate-construction 25,491 21,415
Real estate-mortgage 189,375 185,105
Installment, excluding credit card 259,047 261,961
Credit card 173,270 212,051
---------- ----------
Total $1,063,611 $1,058,085
========== ==========
Included in real estate mortgage loans at December 31, 1995 and 1994, were
approximately $7,481 and $592 of loans held-for-sale, accounted for at cost
which approximated estimated market value.
Certain directors of the Company or related parties of these directors had
loans from the subsidiaries aggregating $42,405 and $27,025 at December 31, 1995
and 1994, respectively. Such loans were made in the ordinary course of business
and on substantially the same terms as those prevailing at the time for
comparable loans to other borrowers.
Transactions involving loans to directors or related parties of these
directors were as follows:
Loans at December 31, 1994 $ 27,025
Additions 133,442
Repayments (118,062)
---------
Loans at December 31, 1995 $ 42,405
=========
Nonaccrual, past due and restructured loans
at December 31, are as follows:
1995 1994
------ ------
Nonaccrual $3,988 $2,843
Past due 90 days or more 5,383 3,074
Restructured 0 336
------ ------
Total $9,371 $6,253
====== ======
Restructured loans include those loans which have been renegotiated to
provide a reduction of interest or principal which would not otherwise be
considered except in cases of deterioration in the financial position of the
borrower.
At December 31, 1995, the Company classified $6,745 of loans as impaired
consisting of $4,473 which had an associated valuation allowance of $467 and
$2,272 for which no valuation allowance is needed. The average recorded
investment in impaired loans for the year ended December 31, 1995, was $9,477.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining recorded investment is doubtful at which time
payments received are recorded as reductions of principal. The Company
recognized interest income on impaired loans of $85 for the year ended December
31, 1995.
Gross interest income that would have been recorded in 1995, 1994 and 1993 on
nonaccrual and restructured loans if the loans had been current in accordance
with their original terms and had been outstanding throughout the period or
since origination, if held for part of the period, was $302, $279 and $214,
respectively. The amount of interest on those loans that was actually included
in income for the years ended December 31, 1995, 1994 and 1993 was $3, $48 and
$80, respectively.
5) Allowance for Loan Losses
Transactions in the allowance for loan losses were as follows:
1995 1994 1993
-------- ------- -------
Balance at beginning of year $ 19,886 $21,793 $16,099
Provision charged to expense 18,118 2,962 5,596
Allowance of banks acquired 172 164 3,579
Loans charged off (15,845) (7,534) (5,679)
Recoveries 3,561 2,501 2,198
-------- ------- -------
Balance at end of year $ 25,892 $19,886 $21,793
======== ======= =======
The Company recorded net charge-offs in its credit card portfolio in
1995, 1994 and 1993 of $10,900, $4,900 and $3900, respectively. The 1995
provision for loan losses was increased in recognition of this increased
level of charge-offs.
6) Land, Buildings and Equipment
A summary of land, buildings and equipment is as follows:
December 31,
1995 1994
------- -------
Land $ 5,376 $ 5,081
Buildings and improvements 31,468 32,425
Furniture, fixtures and equipment 23,040 21,327
------- -------
59,884 58,833
Less-accumulated depreciation 31,200 26,839
------- -------
Total $28,684 $31,994
======= =======
Depreciation expense for the years 1995, 1994 and 1993 was approximately
$4,630, $4,161 and $3,338, respectively.
7) Time Deposits
Time certificates of deposit and other time deposits of $100 or more included
in total deposit liabilities at December 31, 1995 and 1994 were $119,401 and
$117,933, respectively. Interest expense on this classification of time deposits
for the years ended December 31, 1995, 1994 and 1993 totaled $6,736, $4,548 and
$4,007, respectively.
8) Short-Term Borrowings and Notes Payable
All short-term borrowings generally mature in less than 30 days. The maximum
amount of these borrowings at any month-end for the years ended December 31,
1995, 1994 and 1993, was $126,763, $75,923 and $76,054, respectively. For the
years ended December 31, 1995, 1994 and 1993, the weighted average interest rate
on these borrowings was 5.1%, 3.2% and 2.7%, respectively, on average balances
outstanding of $99,695, $63,631 and $56,096, respectively.
Notes payable at December 31, 1995 consist of a term loan to another
financial institution with an unpaid principal balance of $20,000 and industrial
revenue bonds with an unpaid principal balance of $310. The term loan carries a
floating rate of interest (payable quarterly) and is repayable in annual
principal installments of $2,500, with the final payment due in 2003. The
Company may, at its option, fix the interest rate and term. Should the term and
interest rate be fixed, the rate on the indebtedness will be computed based on a
premium to the rate of interest on a U.S. Treasury obligation of a similar term.
The indebtedness is secured by the outstanding common stock of one of the
Company's subsidiaries. At December 31, 1995, the interest rate on the term loan
was 7.24%.
The industrial revenue bonds are payable in annual installments through
October 1997 and are guaranteed by a subsidiary of the Company.
The Company has a $10,000 line of credit agreement with the financial
institution that has issued the term loan. At December 31, 1995, there were no
outstanding borrowings under this credit facility.
9) Convertible Capital Notes
The convertible subordinated capital notes (the notes) bear interest at 9%.
The notes are convertible, at the note holder's option, into the Company's
common stock at a conversion price of $30 per share. The principal amount of the
notes matures on December 22, 1999, and may be redeemed, at the option of the
Company, at any time at par. At maturity, to the extent that the notes have not
been previously retired through redemption or conversion, the principal amount
of the notes will be repaid either in cash, if the note holder so elects, but
only to the extent the Company has qualified funds (as defined) to do so or by
exchange for the Company's common stock based upon the market value (as defined)
of the Company's common stock at the maturity date of the notes.
At December 31, 1995, 400,000 shares of the Company's unissued common stock
were reserved for conversion of the convertible capital notes. Convertible
capital notes, with a face value of $146, were redeemed, for cash, in 1995.
10) Employees' Retirement Plans
The Company has two employee retirement plans covering substantially all
full-time employees who meet eligibility requirements as to age and tenure. One
plan provides retirement benefits which are a function of the years of service.
The other plan provides retirement benefits which are a function of both the
years of service and the highest level of compensation during any consecutive
five-year period during the ten-year period preceding retirement. The Company's
funding policy is to fund the amount necessary to meet the minimum funding
requirements set forth by the Employee Retirement Income Security Act of 1974,
plus such additional amounts, if any, as the Company may determine to be
appropriate from time to time. Plan assets are invested primarily in U.S.
Government and Federal agency securities, corporate obligations, mutual funds
and listed stocks. Pension expense for 1995, 1994 and 1993 was $601, $366 and
$402, respectively.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated financial statements.
December 31,
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 6,041 $ 5,181
Non-vested 136 237
------- -------
Total $ 6,177 $ 5,418
======= =======
Projected benefit obligation $ 7,785 $ 7,230
Plan assets at fair value (8,125) (6,953)
------- -------
Plan assets greater (less) than projected
benefit obligation 340 (277)
Unrecognized net transition asset being
amortized over 15 years (571) (666)
Unrecognized net loss due from assumptions made 729 1,398
Unrecognized prior service cost (472) 0
------- -------
Prepaid pension cost $ 26 $ 455
======= =======
Pension expense is comprised of the following:
1995 1994 1993
----- ----- -----
Service cost-benefits earned during the year $ 607 $ 524 $ 477
Interest cost on projected benefit obligation 482 460 394
Return on plan assets (556) (566) (499)
Net amortization and deferral (88) (52) (114)
Net loss from settlement 156 0 144
----- ----- -----
Total $ 601 $ 366 $ 402
===== ===== =====
The weighted average discount rate used was 7.00% for each of the past three
years. The expected long-term rate of return on plan assets and increase in
compensation levels used in determining the projected benefit obligation were
8.25% and 4.00%, respectively, for each of the past three years.
During 1995 and 1993, the Company recognized $156 and $144, respectively,
in pension expense arising from an early retirement program that was offered to
employees that met certain eligibility requirements as to age. No such program
was offered in 1994.
Effective January 1996, the two employee retirement plans were combined into
a single plan. The Company anticipates no financial impact arising from this
action.
The Company has entered into deferred compensation agreements with certain
officers and directors. Under the provisions of these agreements, the officers
and directors will receive monthly payments for specified periods. The
liabilities under these agreements are being accrued over the officers'
remaining periods of employment or the directors' assumed retirement ages so
that, on the date of their retirement, the then-present value of the payments
will have been accrued. The liabilities are being accrued at interest rates that
exceed market rates at the times the plans were adopted with the above market
spread varying between 3% and 9% depending on individual agreements. At December
31, 1995 and 1994, $3,716 and $3,487 had been accrued for the liability under
these agreements and is included in accounts payable and accrued liabilities in
the accompanying consolidated balance sheets. Expense recognized in 1995, 1994
and 1993 was $516, $535 and $510, respectively, and is included in salaries and
employee benefits in the accompanying consolidated statements of income.
11) Income Taxes
The provision for income taxes from operations includes the following
components:
1995 1994 1993
-------- -------- --------
Current:
Federal $ 8,649 $ 7,685 $ 8,031
State 2,001 2,066 1,950
-------- -------- --------
10,650 9,751 9,981
-------- -------- --------
Deferred:
Federal (3,230) 988 (1,592)
State (1,041) 145 (235)
-------- -------- --------
(4,271) 1,133 (1,827)
-------- -------- --------
Total $ 6,379 $ 10,884 $ 8,154
======== ======== ========
The provision for income taxes noted above produced effective income tax
rates of 34.0%, 36.5% and 31.6% for the years ended December 31, 1995, 1994 and
1993, respectively. The reconciliations of these effective income tax rates to
the Federal statutory rates are shown below:
1995 1994 1993
---- ---- ----
Total income tax as reported 34.0% 36.5% 31.6%
Tax exempt income 5.9 4.8 7.3
Amortization of excess purchase price over
net assets acquired (1.3) (1.6) (1.1)
State income tax, net of Federal income
tax benefit (3.4) (4.8) (4.4)
Effect of 1% increase in Federal income
tax rate 0.0 0.0 1.2
Other (.2) .1 .4
---- ---- ----
Federal statutory rate 35.0% 35.0% 35.0%
==== ==== ====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1994 are presented below:
1995 1994
------- -------
Deferred tax assets:
Allowance for loan losses $ 9,534 $ 6,859
Buildings and equipment 3,969 2,881
Other real estate owned 434 411
Deferred compensation 1,426 1,329
Net operating loss carryforwards 2,302 2,132
Investment securities 657 598
Deposits 2,075 2,136
Other 270 540
------- -------
Total gross deferred tax assets 20,667 16,886
Less valuation allowances 1,875 1,836
------- -------
Deferred tax assets, net of valuation allowances 18,792 15,050
------- -------
Deferred tax liabilities:
Pension (240) (178)
Prepaid deposit insurance (60) (527)
Core deposit premium (119) (186)
Loans (214) (292)
Other (285) (264)
------- -------
Total gross deferred tax liabilities (918) (1,447)
------- -------
Net deferred tax assets $17,874 $13,603
======= =======
At December 31, 1995 and 1994, current income taxes payable of $1,396 and
$818, respectively, were included in accounts payable and accrued liabilities.
The net deferred tax assets noted above were included in other assets.
At December 31, 1995, the Company had net operating loss deductions available
to carryforward of approximately $26,554 for state purposes which expire in
varying amounts from 1997 through 2006 and $1,000 for Federal purposes which
expire from 2003 through 2009.
The valuation allowance at December 31, 1995 is attributable to net operating
loss carryforwards for state tax purposes.
12) Commitments and Contingent Liabilities
At December 31, 1995, the subsidiaries were required to have $14,589 held as
reserves with the Federal Reserve Bank.
At December 31, 1995, the Company was committed to make future payments under
several long-term lease and data processing agreements. The minimum payments
required by these agreements are summarized below:
Minimum
Payments
-------
1996 $ 2,757
1997 2,918
1998 2,640
1999 2,532
2000 2,539
Remainder 11,034
-------
Total $24,420
=======
Lease rentals included in net occupancy and equipment expense for the years
ended December 31, 1995, 1994 and 1993 amounted to $829, $634 and $425,
respectively.
One of the Company's data processing agreements has a term of eight years.
The Company has the option to terminate this data processing agreement by paying
a cancellation fee that is based on the number of months remaining under the
original contract term.
The Company or its subsidiaries are involved in certain claims and suits
arising in the ordinary course of business. In the opinion of management, based
in part on the advise of legal counsel, potential liabilities arising from these
claims, if any, would not have a significant effect on the Company's
consolidated financial position or results of operations.
13) Stockholders' Equity
Dividend Restriction
The equity in undistributed earnings of the subsidiaries at December 31, 1995
was $65,022. The Company's ability to pay dividends on its common stock and
interest on its indebtedness is primarily dependent upon funds provided by
dividends from the subsidiaries. The payment of dividends by the subsidiaries is
restricted only by regulatory authority. At December 31, 1995, approximately
$3,486 was available from the subsidiaries' retained earnings for distribution
as dividends to the Company without regulatory approval.
Regulatory Capital
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
contains "prompt corrective action" provisions in which banks are classified
into one of five categories based primarily upon capital adequacy, ranging from
"well capitalized" to "critically undercapitalized" and which require, subject
to certain exceptions the appropriate federal banking agency to take prompt
corrective action with respect to an institution which becomes
"undercapitalized" and to take additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized." At December
31, 1995, the regulatory capital ratios of the Company's subsidiary banks were
in excess of those necessary to be considered "well capitalized".
Stock Option Plan
The Board of Directors of the Company on May 9, 1995, adopted, subject to
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price, of any options granted under the Plan, cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. At December 31, 1995, there were options granted and
unexercised for a total of 32,500 shares at a price of $58 per share. Of the
32,500 shares granted, none were exercisable at December 31, 1995.
14) Business and Credit Concentrations
The Company provides a wide range of banking services to individual and
corporate customers through its Kansas and Oklahoma subsidiaries. The Company
makes a variety of loans including commercial, agricultural, real estate
construction, real estate mortgage, installment and credit card loans. The
majority of the loans are made to borrowers located in Kansas, although some
loans are made to out-of-state borrowers. Credit risk is therefore dependent
upon economic conditions in Kansas: however, loans granted within the Company's
trade area have been granted to a wide variety of borrowers and management does
not believe that any significant concentrations of credit exist with respect to
individual borrowers or groups of borrowers which are engaged in similar
activities that would be similarly affected by changes in economic or other
conditions. Approximately 41% of the Company's total loan portfolio is comprised
of unsecured credit card loans and installment loans (a large part of which are
collateralized by automobiles). Consequently, the Company's credit risk with
respect to these loans is dependent upon the ability of consumers in general to
repay their indebtedness. The Company considers the composition of the loan
portfolio in establishing the allowance for loan losses as described in note 1.
15) Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the balance sheet. The
following summarizes those financial instruments, excluding credit card lines of
$1,186,961, with contract amounts representing credit risk:
Commitments to extend credit $320,116
Commercial and standby letters of credit $ 30,846
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon extension
of credit is based on management's credit evaluation of the counter-party.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
In December 1994 and January 1995, the Company securitized and sold a total
of $100,000 of credit card receivables. Neither the credit card receivables sold
or the securities outstanding are defined as financial instruments of the
Company, but the Company continues to service the related credit card accounts
which have an outstanding balance of $100,000 at December 31, 1995. 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. During 1995, the Company recognized $6,971 in
servicing fee income, which is included in credit card fees in the accompanying
consolidated statement of income.
16) Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires that the Company disclose estimated fair values for its financial
instruments. The following methods and assumptions were used to estimate the
fair value of each class of financial instruments:
Cash and Cash Equivalents
The carrying amounts for cash and cash equivalents are considered reasonable
estimates of fair value.
Investment Securities
The fair values of investment securities are based on quoted market price or
dealer quotations, if available. The fair value of certain state and municipal
obligations is not readily available through market sources. Fair value
estimates for these instruments are based on quoted market prices for similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued.
Loans
Fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type, and then further broken down into
fixed and adjustable rate components, and by performing and non-performing
categories.
The fair value of loans is estimated by discounting scheduled cash flows
through the estimated maturity using the current rates at which similar loans
could be made to borrowers with similar credit ratings and for similar
maturities.
Accrued Interest Receivable and Accrued Interest Payable
The carrying amount for accrued interest receivable and accrued interest
payable are considered reasonable estimates of fair value.
Deposit Liabilities
The fair value of demand deposits, savings and interest-bearing demand
deposits is the amount payable on demand at December 31, 1995 and 1994. The fair
value of time deposits is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates offered for deposits of
similar remaining maturities as of each valuation date.
Short-Term Borrowings
The carrying amount approximates fair value because of the short maturity of
these instruments.
Notes Payable
Interest rates currently available to the Company for debt instruments with
similar terms and remaining maturities are used to estimate the fair value of
notes payable as of each valuation date.
Convertible Capital Notes
The fair value of the convertible capital notes is based on market price
quotations obtained from securities dealers.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreement and the present creditworthiness of the counterparties. The fair value
of letters of credit is based on fees currently charged to enter into similar
agreements. The fees associated with the commitments and letters of credit
currently outstanding reflect a reasonable estimate of fair value. For further
discussion concerning financial instruments with off-balance-sheet risk, refer
to note 15.
The estimated fair values of the Company's financial instruments are as
follows:
December31, 1995 December 31, 1994
---------------------- ----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
- --------------------------------------------------------------------------------
Financial assets:
Cash and due from banks $ 102,963 $ 102,963 $ 81,084 $ 81,084
Federal funds sold and
securities purchased under
agreements to resell 112,020 112,020 33,805 33,805
Investment securities 320,246 325,957 276,779 273,830
Loans, net 1,037,385 1,046,912 1,037,944 1,039,825
Accrued interest receivable 12,548 12,548 10,372 10,372
- --------------------------------------------------------------------------------
Financial liabilities:
Deposits:
Demand $ 293,919 $ 293,919 $ 268,351 $ 268,351
Savings and interest-bearing
demand 528,570 528,570 494,448 494,448
Time 544,652 552,120 513,277 510,537
Short-term borrowings 117,813 117,813 67,793 67,793
Accrued interest payable 4,544 4,544 3,556 3,556
Notes payable 20,310 20,310 22,950 22,950
Convertible capital notes 11,854 23,312 12,000 21,600
Limitations
No ready market exists for a significant portion of the Company's financial
instruments. It is necessary to estimate the fair value of these financial
instruments based on a number of subjective factors, including expected future
loss experience, risk characteristics and economic performance. Because of the
significant amount of judgment involved in the estimation of the accompanying
fair value information, the amounts disclosed cannot be determined with
precision.
The fair value of a given financial instrument may change substantially over
time as a result of, among other things, changes in scheduled or forecasted cash
flows, movement of current interest rates, and changes in management's estimates
of the related credit risk or operational costs. Consequently, significant
revisions to fair value estimates may occur during future periods. Management
believes it has taken reasonable efforts to ensure that fair value estimates
presented are accurate. However, adjustments to fair value estimates may occur
in the future and actual amounts realized from financial instruments may differ
from the amounts presented herein.
The fair values presented apply only to financial instruments and, as such,
do not include such items as fixed assets, other real estate and assets owned,
other assets and liabilities as well as other intangibles which have resulted
over the course of business. As a result, the aggregation of the fair value
estimates presented herein do not represent, and should not be construed to
represent, the underlying value of the Company.
17) New Accounting Standards
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" is
effective for fiscal years beginning after December 15, 1995. This Statement
establishes accounting standards for the impairment of long-lived assets. The
Company elected to adopt this Statement in 1995. Adoption of the provisions of
this Statement resulted in the Company recording an impairment loss in the
fourth quarter of $2,500 on an office building that was acquired in the KSB&T
merger transaction. This impairment loss was computed based on the difference
between the building's previous carrying value and the total of the projected
discounted cash flows to be received from the operation of the building. This
loss is reflected in net occupancy and equipment expense in the accompanying
consolidated statements of income.
Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights" amends Statement of Financial Accounting Standards
No. 65, "Accounting for Certain Mortgage Banking Activities" to eliminate the
accounting distinction between purchased mortgage servicing rights and
originated mortgage servicing rights. The provisions of Statement No. 122 are
effective for fiscal years beginning after December 15, 1995. Because the
Company is not actively engaged in the origination of mortgage servicing rights,
it does not anticipate that the adoption of Statement No. 122 will have a
material impact on its financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-based Compensation", establishes financial accounting and reporting
standards for stock-based employee compensation. The Statement, which is
effective for transactions entered into in fiscal years that begin after
December 15, 1995, defines a fair value based method of accounting for an
employee stock option or similar equity instrument, but it does allow an entity
to continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees". As noted in footnote 13 to the financial
statements, during 1995 the Company granted, subject to shareholder approval,
options to acquire 32,500 shares of the Company's common stock. The Company
anticipates that it will account for these stock options using the intrinsic
value based method of accounting, and will provide pro forma disclosures as if
the fair value based method of accounting as defined in SFAS No. 123 had been
applied.
<PAGE>
18)Parent Company Only Financial Statements
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Balance Sheets
December 31, 1995 and 1994
Dollars in thousands except per share data 1995 1994
-------- --------
Assets
Cash $ 21,967 $ 8,113
Investment securities, held-to-maturity 700 811
Equipment 1,206 1,656
Investment in subsidiaries 142,993 151,846
Other 1,810 1,822
-------- --------
Total assets $168,676 $164,248
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 993 $ 1,402
Accrued interest payable 332 388
Current and deferred income taxes 334 368
Notes payable 20,000 22,500
Convertible capital notes payable 11,854 12,000
-------- --------
Total liabilities 33,513 36,658
-------- --------
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 114,235 105,366
Treasury Stock (3,156) (1,776)
Unrealized securities gains, net of tax 84 0
-------- --------
Total stockholders' equity 135,163 127,590
-------- --------
Total liabilities and stockholders' equity $168,676 $164,248
======== ========
<PAGE>
18) Parent Company Only Financial Statements (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Income
Years Ended December 31, 1995, 1994 and 1993
Dollars in thousands except per share data 1995 1994 1993
------- ------- -------
Dividends from subsidiaries $25,250 $17,450 $ 9,380
Interest income 221 245 201
Fees charged subsidiary banks 1,574 1,631 1,513
Other income 0 0 42
------- ------- -------
Total income 27,045 19,326 11,136
------- ------- -------
Operating expenses:
Interest expense 2,734 2,688 1,753
Salaries and employee benefits 1,546 1,482 1,493
Other expense 1,231 1,237 871
------- ------- -------
Total operating expenses 5,511 5,407 4,117
------- ------- -------
Income before income tax benefit and equity
in undistributed net income of subsidiaries 21,534 13,919 7,019
Income tax benefit 1,289 1,187 836
------- ------- -------
Income before equity in undistributed net
income of subsidiaries 22,823 15,106 7,855
Equity in undistributed net income of subsidiaries (10,436) 3,863 9,771
------- ------- -------
Net income $12,387 $18,969 $17,626
======= ======= =======
Note: Parent Company Only Statements of Stockholders' Equity are the
same as the Consolidated Statements of Stockholders' Equity.
<PAGE>
18) Parent Company Only Financial Statements (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
Dollars in thousands 1995 1994 1993
------- ------- -------
Cash provided (absorbed) by operating activities:
Net income $12,387 $18,969 $17,626
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income
of subsidiaries 10,436 (3,863) (9,771)
Depreciation 474 472 276
Accretion of discount on investment securities (52) (64) (75)
Gain on sale of investment securities 0 0 (42)
(Increase) decrease in other assets 12 (252) (407)
Increase (decrease) in accounts payable and
accrued liabilities (465) 1,143 484
Decrease in current and deferred income taxes (34) (478) (274)
------- ------- -------
Net cash provided by operating activities 22,758 15,927 7,817
------- ------- -------
Cash provided (absorbed) by investing activities:
Capital expenditures (23) (25) (1,976)
Proceeds from sale of equipment 0 7 5
Investment securities matured or called 163 160 164
Proceeds from sale of investment securities 0 0 177
Investment in subsidiaries (1,500) (6,377) (20,025)
------- ------- -------
Net cash absorbed by investing activities (1,360) (6,235) (21,655)
------- ------- -------
Cash provided (absorbed) by financing activities:
Proceeds from notes payable 0 0 25,000
Payments on notes payable (2,500) (2,500) 0
Retirement of capital notes (146)
Dividends paid (3,518) (5,915) (3,574)
Purchase of treasury stock, net (1,380) (993) (139)
------- ------- -------
Net cash provided (absorbed) by
financing activities (7,544) (9,408) 21,287
------- ------- -------
Increase in cash 13,854 284 7,449
Cash at beginning of year 8,113 7,829 380
------- ------- -------
Cash at end of year $21,967 $ 8,113 $ 7,829
======= ======= =======
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To INTRUST Financial Corporation:
We have audited the accompanying consolidated balance sheets of INTRUST
Financial Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INTRUST Financial Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
February 16, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
INTRUST Financial Corporation:
We have audited the accompanying consolidated statements of income,
stockholders' equity, and cash flows of INTRUST Financial Corporation and
subsidiaries for the year ended December 31, 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards required that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of INTRUST Financial Corporation and subsidiaries for the year ended December
31, 1993, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Wichita, Kansas
February 4, 1994
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- -------------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
This item is not applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
Set forth below are the names of the directors, nominees for director,
executive officers as designated by the Board of Directors, and nominees for
executive officer of the Company, together with certain related information. All
of the executive officers of the Company will hold office until the next annual
meeting of directors. The directors of the Company are divided into three
classes; the terms of office of the first class, second class and third class
expire at the 1996, 1997 and 1998 annual meetings of stockholders, respectively.
Directors will be elected for a full three year term to succeed those whose
terms expire. The year in which each director's term expires is indicated after
his name and age. Directors and executive officers will serve as indicated or
until their successors are duly elected and qualified, unless sooner terminated
by death, resignation, removal or otherwise. There are no arrangements or
understandings between any of the directors, executive officers or any other
persons pursuant to which any of the directors or executive officers have been
selected to their respective positions.
C. ROBERT BUFORD, 62, 1997, has been a director of the Company since 1982.
During the past five years, he has been President and owner of Zenith Drilling
Corporation, an oil and gas drilling and exploration firm, managing partner of
Grand Bluffs Development Co., a real estate development firm, and a director of
Barrett Resources Corporation, an oil and gas production and operation firm. In
1992, Mr. Buford became a director of Lone Star Steakhouse & Saloon, Inc.
WILLIAM D. BUNTEN, 64, 1996, has been a director and Vice Chairman of the
Company since 1982. Mr. Bunten has been President of IB since December 1982 and
has been employed by IB since 1982.
FRANK L. CARNEY, 57, 1998, has been a director of the Company since 1982.
Since 1979 he has been self-employed in a private investment company, Carney
Enterprises. On September 27, 1991, the District Court of Sedgwick County,
Kansas appointed a receiver to take possession of an office building owned by
Mr. Carney. The case was settled and dismissed in November 1991. From November
1988 to December 1993, Mr. Carney was Chairman of Western Sizzlin, Inc. a food
service franchise. On October 27, 1992, Western Sizzlin, Inc. and its related
entities filed Petitions under Chapter 11 of the United States Bankruptcy Code
and subsequently emerged from bankruptcy on December 13, 1993. From January 1994
to December 1994, Mr. Carney was vice-chairman of Turbochef, Inc.. Since January
1994, Mr. Carney's principal position has been with Houston Pizza Venture
L.L.C., as President and Manager. In June 1995, he became President and Manager
of Devlin Partners, L.L.C., a development stage company.
RICHARD G. CHANCE, 48, 1996, has been a director of the Company since 1990.
During the past five years, he has been President and Chief Executive Officer of
Chance Industries, Inc., producer of amusement rides and manufacturer of transit
coaches, trams, and replica trolleys.
CHARLES Q. CHANDLER, 69, 1998, has been an officer and director of the
Company since 1971. He is Chairman of the Board and Chief Executive Officer of
the Company and of IB. Mr. Chandler has been employed by IB since 1950. In 1992,
he became a director of Western Resources, Inc., a Kansas utility company. Mr.
Chandler is the father of Charles Q. Chandler IV and the nephew of George T.
Chandler.
CHARLES Q. CHANDLER IV, 42, 1997, has been a director of the Company since
1985. Since April 1990, he has been President of the Company. From January 1988
through March 1990, he was Executive Vice President of the Company. He was
Executive Vice President of IB from January 1988 until July 1993 when he was
elected Vice Chairman. Mr. Chandler is the son of Charles Q. Chandler.
GEORGE T. CHANDLER, 74, 1997, has been a director of the Company since
1982. During the past five years, Mr. Chandler has been Chairman of the Board of
First National Bank, Pratt, Kansas. Mr. Chandler is an uncle of Charles Q.
Chandler.
JAMIE B. COULTER, 55, 1998, has been a director of the Company since 1983.
During the past five years, he has been Chairman of the Board, Chief Executive
Officer and President of Coulter Enterprises, Inc., managing various businesses
and personal investments in restaurant management, oil and gas exploration and
real estate. Mr. Coulter owns and operates numerous Pizza Hut restaurants. In
1992, Mr. Coulter became the Chairman of the Board and Chief Executive Officer
of Lone Star Steakhouse & Saloon, Inc.
ROBERT L. DARMON, 71, 1997, has been a director of the Company since 1982.
He was President of the Company from 1982 until April 1990, and Vice Chairman of
the Board of IB until his retirement January 31, 1990. He had been employed by
IB since 1970.
CHARLES W. DIEKER, 60, 1998, has been a director of the Company since 1982.
Mr. Dieker had been Executive Vice President-Marketing of Beech Aircraft
Corporation from 1985 until his retirement January 1, 1992.
W.J. EASTON Jr., 70, 1998, has been a director of the Company since 1982.
During the past five years, Mr. Easton has been President, Chairman of the
Board, and Chief Operating Officer of The Easton Manufacturing Co. Inc., which
manufactures auto parts, and Ferroloy Foundry, Inc.
MARTIN K. EBY Jr., 61, 1997, has been a director of the Company since 1982.
During the past five years, Mr. Eby has been President and Chairman of the Board
of Eby Corporation, which is the parent company of Martin K. Eby Construction
Co. Inc. He is Chairman of the Company's Audit Committee. In 1992, Mr. Eby
became a director of SBC Communications, Inc.
ERIC T. KNORR, 53, 1996, has been a director of the Company since 1990. He
was Chairman of the Board of Dulaney, Johnston & Priest, general insurance
(property and casualty) independent agents, for ten years until January 1996
when he became Chairman Emeritus.
CHARLES G. KOCH, 60, 1998, has been a director of the Company since 1982.
For the past five years, Mr. Koch has been Chairman of the Board and Chief
Executive Officer of Koch Industries Inc., an integrated oil company.
J.V. LENTELL, 57, 1996, has been a director of the Company since April
1994. Mr. Lentell has been Vice Chairman of IB since July 1993. He was Chairman
and Chief Executive Officer of Kansas State Bank and Trust from 1981 to July
1993.
PAUL A. SEYMOUR Jr., 72, 1996, has been a director of the Company since
1982. For the past five years Mr. Seymour has been President of Arrowhead
Petroleum Inc. Petitions under Chapter 11 of the United States Bankruptcy Code
were filed in December 1990 in the United States Bankruptcy Court for the
District of Kansas by Paul A. Seymour, Jr., an individual, and by Arrowhead
Petroleum, Inc., a corporation. Bankruptcy proceedings by Mr. Seymour, as an
individual, were dismissed, effective December 27, 1995.
DONALD C. SLAWSON, 62, 1996, has been a director of the Company since 1982.
During the past five years, Mr. Slawson has been the Chairman of the Board and
President of Slawson Companies, Inc., a group of companies involved in the
acquisition of oil and gas properties, exploration and production of oil and
gas, purchasing and reselling of crude oil and natural gas, and real estate
activities.
JOHN T. STEWART III, 60, 1997, has been a director of the Company since
1982. During the past five years, Mr. Stewart has been Chairman of the Board and
Director of First National Bank, Medford, Oklahoma, and Caldwell State Bank,
Caldwell, Kansas; and Chairman, Chief Executive Officer, and Director of First
National Bank, Wellington, Kansas.
PATRICK H. THIESSEN, 68, 1997, has been a director of the Company since
1982. Mr. Thiessen was Southwestern Regional Manager of Cargill Inc., Flour
Milling Division, a grain merchandising and processing company, for 11 years
until his retirement in 1993.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and each of the Company's other three executive officers during each of
the last three fiscal years.
<TABLE>
Long Term
Compensation
Awards
Annual Compensation
(a) (b) (c) (d) (e) (f) (g)
Other Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Options (#) ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 1995 $325,002 $132,000 $22,360 20,000 $61,920
COB & CEO of the Company 1994 300,000 135,000 22,360 0 47,516
and IB 1993 295,833 118,992 22,360 0 42,824
W.D. Bunten 1995 $250,000 $ 75,000 $ 0 0 $53,334
Vice Chairman of the Company 1994 249,132 87,500 0 0 38,421
President of IB 1993 241,666 74,370 0 0 31,379
C.Q. Chandler IV 1995 $215,000 $ 64,500 $ 490 10,000 $14,264
President of the Company, 1994 214,829 75,250 490 0 6,098
Vice Chairman of IB 1993 206,929 63,958 1,030 0 5,702
J.V. Lentell 1995 $215,000 $ 64,500 $ 0 2,500 $ 9,240
Vice Chairman of IB 1994 215,000 75,250 0 0 3,442
1993 107,500 0 0 0 0
<FN>
J.V. Lentell became an employee and executive officer of IB in July of 1993; the
table reflects compensation paid to Mr. Lentell subsequent to such time. There
were no other individuals who were considered executive officers of the Company
during 1995.
(1) The amounts shown represent the above-market amounts paid on distributions
from the 1983, 1984, 1986, or 1990 Executive Deferred Compensation Plans during
each of the last three fiscal years. Does not include perquisites which certain
of the executive officers received, the aggregate amount of which did not exceed
the lessor of $50,000 or 10% of any such officer's salary and bonus.
(2) The amounts shown for "All other Compensation" include the following for the
current year:
C.Q. W.D. C.Q. J.V.
Chandler Bunten Chandler IV Lentell
------- ------- ------- -------
Above-market amounts earned on
deferred compensation plans $52,680 $46,404 $ 7,334 $ 0
Company contributions to 401(k) plan 9,240 6,930 6,930 9,240
------- ------- ------- -------
$61,920 $53,334 $14,264 $ 9,240
======= ======= ======= =======
</FN>
</TABLE>
<TABLE>
STOCK OPTION PLAN
-----------------
The Board of Directors of the Company on May 9, 1995, adopted, subject to
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price of any options granted under the Plan cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. At December 31, 1995, there were options granted, subject to
shareholder approval, and unexercised for a total of 32,500 shares at a price of
$58 per share (which represents the fair market value on the date of grant. Of
the 32,500 shares granted, none were exercisable at December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
- --------------------------------------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price
Name (#) Fiscal Year ($/Sh) Expiration Date 5%($) 10%($)
- ----------------- ---------- ------------ -------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 20,000 61.5% $58 6/12/05 $730,000 $1,849,000
C.Q. Chandler IV 10,000 30.8% $58 6/12/05 $365,000 $ 924,000
J.V. Lentell 2,500 7.7% $58 6/12/05 $ 91,000 $ 231,000
The options were granted on June 13, 1995 and vested immediately. The options are exercisable on the
anniversary of the date of grant in five year annual 20% increments commencing on June 13, 1996.
</TABLE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
---------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at December 31, 1995 at December 31, 1995
-------------------- --------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
C.Q. Chandler none/20,000 none/$20,000
C.Q. Chandler IV none/10,000 none/$10,000
J.V. Lentell none/2,500 none/$2,500
The fair market value of the Company's common stock, used to calculate the
value of in-the-money options, was $59 per share as determined in the local
over-the-counter market by the National Quotation Bureau, Incorporated.
DEFINED BENEFIT PLANS
The Company has adopted a defined benefit retirement plan for all of its
employees. Employees become participants in the plan on the next January first
or July first following the satisfaction of the following requirements: (i)
twelve consecutive months of employment in which the employee worked 1,000 or
more hours, and (ii) attainment of age 21, provided that the employee was less
than 60 years of age on the date of his employment. Although benefits under the
plan are payable in a variety of ways, the normal form of benefit payment
provides monthly payments to an employee for fifteen years. An employee's Normal
Retirement Benefit (as defined in the plan) is a monthly benefit equal to 1.0%
of such employee's Final Average Monthly Compensation (as defined in the plan),
plus 0.5% of his Final Average Monthly Compensation in excess of his Social
Security Covered Compensation (as defined in the plan), and multiplied by such
employee's number of completed years of Benefit Service (as defined in the plan)
not to exceed 35 years. Final Average Monthly Compensation is equal to the
average of an employee's monthly cash compensation (exclusive of bonuses) during
the five-year period prior to such employee's Normal or Early Retirement, or
termination of employment prior to Normal Retirement Date (as defined in the
plan).
As an addition to the defined benefit retirement plan, IB maintains a
supplemental retirement plan which is an unfunded excess benefit plan. The
purpose of this plan is to provide retirement benefits to its employees that
cannot be provided through its defined benefit retirement plan due to the
benefit limits imposed by Internal Revenue Code Section 415. Code Section 415
places a limit on the amount of annual benefits which can be provided to
individual employee participants in the defined benefit retirement plan.
The following table illustrates combined estimated annual benefits payable
upon retirement or upon written election of the participant if the participant
continues to work after his Normal Retirement Date, under the Company's defined
benefit retirement and IB's supplemental retirement plan, to persons in the
specified remuneration and years of service classifications. Because the covered
remuneration equals cash compensation, excluding bonuses, the remuneration
categories below reflect the base salary amounts in the summary compensation
table. The amounts presented are straight life annuity amounts and are not
subject to any deduction for social security or other offset amounts. The
following amounts are overstated to the extent that social security covered
compensation for an individual may exceed $15,000.
PENSION PLAN TABLE
REMUNERATION YEARS OF CREDITED SERVICE
------------ --------------------------------------------------------
15 20 25 30 35
$200,000 $42,932 $ 57,242 $ 71,553 $ 85,864 $100,174
250,000 54,182 72,242 90,303 108,364 126,424
300,000 65,432 87,242 109,053 130,864 152,674
350,000 76,682 102,242 127,803 153,364 178,924
The following table sets forth the covered compensation and years of
credited service for pension plan purposes for each of the executive officers
listed in the summary compensation table as of December 31, 1995, as well as the
number of years of credited service which will have been completed by each of
said persons if they retire at the age of 65.
COVERED COMPLETED YEARS OF TOTAL YEARS OF CREDITED
COMPENSATION AS CREDITED SERVICE AS SERVICE AT NORMAL
NAME OF 12/31/95 OF 12/31/95 RETIREMENT AGE(65)
C.Q. Chandler (1) $325,002 45.750 41.500
W.D. Bunten 250,000 13.083 13.750
C.Q. Chandler IV 215,000 20.000 42.500
J.V. Lentell 215,000 29.833 37.420
(1) C.Q. Chandler elected in writing, as permitted under the plan, to commence
receipt of his normal retirement benefit in the form of a lump sum payment.
This payment was received by C.Q. Chandler in December 1992.
COMPENSATION OF DIRECTORS
The directors of the Company receive no remuneration for serving in that
capacity. However, the directors of the Company are also directors of IB, and in
that capacity receive fees of $1,000 per quarter and $500 for each board meeting
attended. Advisory directors receive a quarterly fee of $750. In addition,
directors who are not full-time bank employees of IB receive $150 for each
Discount Committee meeting attended, $200 for each Audit Committee meeting
attended and for attendance by the chairman at the Trust Department Examining
Committee, and $100 for all other committee meetings attended.
In 1983, 1984, and 1986, the Board of Directors of IB adopted unfunded
Outside Directors' Deferred Compensation Plans which were open to directors of
IB who are not full-time bank employees and who chose to participate. Under
these plans, a participating director had the option to defer up to 100 percent
of his quarterly fee. Benefit payment amounts relate to the fee deferred and
accrual of interest at an above market rate. At retirement (age 70), benefits
will be paid on a monthly basis for 120 months, with any installments not paid
prior to a participant's death being paid to his designated beneficiary. If a
director ceases to serve as such prior to attaining age 70, the participating
director will receive reduced benefit payments related to the fees deferred and
the duration of his participation.
The Board of Directors of the Company adopted an unfunded Outside
Directors' Deferred Compensation Plan in 1990 which was open to directors of the
Company who were not full-time Company or IB employees and who chose to
participate. Under the plan, a participating director had the option to defer
100 percent of his 1990 quarterly fee paid by IB. Benefit payments and other
terms of the plan are the same as the IB plans described in the previous
paragraph.
CHANGE-IN-CONTROL ARRANGEMENTS
Under unfunded Executive Deferred Compensation Plans established in 1983,
1984, and 1986 by IB and in 1990 by the Company, in which C.Q. Chandler, W.D.
Bunten, and C.Q. Chandler IV are participants, if the employee's employment with
the Company terminates for any reason other than death or voluntary separation
of employment after the date on which a Change in Control (as described below)
occurs, then the Company shall pay to the employee within 60 days after such
termination, a single lump sum in lieu of any other subsequent payments under
the Plan. The lump sum payment shall be equal to the sum of all amounts that the
employee would have received if the employee had retired on the employee's 65th
birthday. Such payment shall include all unpaid Interim Distributions, if any,
and all Retirement Payments. The entire lump sum payment shall be discounted by
a one-time charge of 8%. The amount of such payments, as of December 31, 1995,
for C.Q. Chandler, W.D. Bunten and C.Q. Chandler IV, would have been $2,099,022,
$2,051,907 and $3,130,949 respectively.
If the employee dies after termination of employment but before payment of
any amount under this paragraph, then such amount shall be paid to the
beneficiary or beneficiaries named as soon as practical after the employee's
death.
A Change in Control of the Company shall be deemed to have occurred if: 1)
any person, partnership, corporation, trust, or similar entity or group shall
acquire or control more than 20%, after October 16, 1991, of the voting
securities of the Company in a transaction or series of transactions; or 2) at
any time during any two-year period a majority of the Board of Directors of the
Company is not comprised of individuals who were members of such Board of
Directors at the commencement of such two-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's compensation committee are C. Robert
Buford, Donald C. Slawson, and Robert L. Darmon. Mr. Darmon was President of the
Company from 1982 until April 1990. Mr. Buford and Mr. Slawson have never served
as an officer or employee of the Company.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
The following table sets forth information as of February 9, 1996 relating
to the beneficial ownership of the Company's common stock and capital notes by
each person known by the Company to own beneficially more than five percent of
the outstanding shares of the Company's common stock, by each director, by each
nominee for director, by each executive officer and by all directors and
executive officers of the Company as a group. The information as to beneficial
ownership of the Company's common stock was supplied by the individuals
involved. For purposes of this table, beneficial ownership is as defined in the
rules and regulations of the Securities and Exchange Commission. Unless
otherwise indicated, the individual possesses sole voting and investment power
as to the shares shown as being beneficially owned:
<TABLE>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------------
OWNED AT SHARES ISSUABLE
FEBRUARY 9, UPON CONVERSION OF FACE AMOUNT OF
NAME ADDRESS 1996(2) CAPITAL NOTES(3) CAPITAL NOTES
- ---- ------- ------- ---------------- -------------
<S> <C> <C> <C>
C. Robert Buford Fourth Financial Center, 2,053 293 $ 8,800
Suite 505
Wichita, KS 67202
William D. Bunten Box One 5,162 2,022 $ 60,700
Wichita, KS 67201
Frank L. Carney 2611 Wilderness Court, 1,132 732 $ 22,000
Wichita, KS 67226
Richard G. Chance 165 North Muirfield 180 0 $ 0
Wichita, KS 67212
Charles Q. Chandler Box One 66,808(4) 16,736(4) $ 502,100
Wichita, KS 67201
Charles Q. Chandler IV Box One 38,061(5) 20,766(5) $ 623,000
Wichita, KS 67201
Anderson W. Chandler 4718 West Hills Dr. 348,286(6) 47,946(6) $1,438,400
Topeka, KS 66606
David T. Chandler c/o First National Bank 338,377(6) 48,337(6) $1,450,200
Pratt, KS 67124
George T. Chandler c/o First National Bank 296,559(6) 28,739(6) $ 862,200
Pratt, KS 67124
Jamie B. Coulter P.O. Box 12248 350 50 $ 1,500
Wichita, KS 67202
Robert L. Darmon 8509 Huntington 5,880(7) 1,140(7) $ 34,200
Wichita, KS 67206
Charles W. Dieker 632 Birkdale Dr. 2,866 366 $ 11,000
Wichita, KS 67230
W.J. Easton, Jr. P.O. Box 889 1,919 559 $ 16,800
Wichita, KS 67201
Martin K. Eby, Jr. P.O. Box 1679 6,332 2,332 $ 70,000
Wichita, KS 67201
Warren B. Gillespie 8201 E. Harry 120,000 0 $ 0
Unit 303
Wichita, KS 67202
Eric T. Knorr P.O. Box 206 20,630(8) 1,879(8) $ 56,400
Wichita, KS 67201
Charles G. Koch P.O. Box 2256 95,038 8,566 $ 257,000
Wichita, KS 67201
J.V. Lentell 1700 Laurel Cove 125 0 $ 0
Wichita, KS 67206
Paul A. Seymour, Jr. Box 8287 Munger Station 254,582(9) 39,222(9) $1,176,800
Wichita, KS 67208
Donald C. Slawson 104 South Broadway, 2,886(10) 0 $ 0
Suite 200
Wichita, KS 67202
John T. Stewart III Box 2 145,226 24,106 $ 723,200
Wellington, KS 67152
Patrick H. Thiessen 115 South Rutan-6A 6,279(11) 2,319(11) $ 69,600
Wichita, KS 67218
Polly G. Townsend Five Live Oak 120,000 0 $ 0
Fernandina Beach,
FL 32034
Directors and Executive
Officers as a Group (19 persons) 952,068(12) 149,827(12) $4,495,300
</TABLE>
(1) Including and excluding shares issuable upon conversion of the
Convertible Capital Notes ("capital notes"), the officers, executive
officers, and directors who beneficially owned more than 1.0% of the
outstanding shares and other persons who beneficially owned more
than 5.0% of the outstanding shares were:
Percentage Ownership of Common Stock
------------------------------------
Including Shares Excluding Shares
Issuable Upon Issuable Upon Percentage
Conversion of Conversion of Ownership of
Capital Notes Capital Notes Capital Notes
------------- ------------- -------------
Charles Q. Chandler III 2.84% 2.15% 4.24%
Charles Q. Chandler IV 1.62% 0.74% 5.26%
Anderson W. Chandler* 14.64% 12.88% 12.13%
David T. Chandler* 14.22% 12.44% 12.23%
George T. Chandler* 12.56% 11.49% 7.27%
Warren B. Gillespie 5.15% 5.15% 0.00%
Charles G. Koch 4.06% 3.71% 2.17%
Paul A. Seymour, Jr. 10.74% 9.24% 9.93%
John T. Stewart III 6.16% 5.19% 6.10%
Polly G. Townsend 5.15% 5.15% 0.00%
*Includes shares directly owned and shares controlled as co-trustees. See (6).
The Directors and Executive Officers as a group beneficially owned
38.37% of the Company's common stock including shares issuable upon
conversion of the capital notes, 34.41% of the common stock
excluding shares issuable upon conversion of the capital notes, and
37.92% of the capital notes.
(2) Includes shares issuable upon conversion of the capital notes.
(3) Shares issuable upon conversion in accordance with the terms of the
Convertible Capital Notes issued December 22, 1987. The capital
notes are convertible into common stock, at any time prior to the
close of business on the fifteenth day prior to maturity on December
22, 1999, at a conversion price of $30.00 per share, subject to
adjustment in certain circumstances.
(4) Does not include 400 shares of common stock and $2,000 of capital
notes, convertible into 66 shares of common stock, owned by Georgia
J. Chandler (wife), 267,820 shares of common stock and $862,200 of
capital notes, convertible into 28,739 shares of common stock,
beneficially owned by George T. Chandler (uncle), and 17,295 shares
of common stock and $623,000 of capital notes, convertible into
20,766 shares of common stock, beneficially owned by Charles Q.
Chandler IV (son).
(5) Does not include 95 shares of common stock owned by Marla J.
Chandler (wife).
(6) Anderson, David and George Chandlers' beneficial ownership is comprised
of the following:
(a) Shares beneficially owned by all three over which they share
voting and investment power:
(1) 61,160 shares of common stock and $305,800 of capital
notes (10,193 shares) held as co-trustees for the Grace
Gannon Trust.
(2) 110,120 shares of common stock and $550,600 of capital
notes (18,353 shares) held as co-trustees for the
Olive C. Clift Trust.
(b) Shares beneficially owned by David and George over which they
share voting and investment power:
(1) 95,380 shares of common stock held as co-trustees for the
George T. Chandler Trust #1.
(2) 1,160 shares of common stock and $5,800 of capital
notes (193 shares) held as co-trustees for the Barbara
A. Chandler Trust #1.
(c) Shares beneficially owned by David Chandler who has sole votin
and investment power:
(1) 4,545 shares of common stock and $141,900 of capital
notes (4,730 shares) held in the George T. Chandler
Trust #2 for benefit of David T. Chandler.
(2) 4,545 shares of common stock and $142,000 of capital
notes (4,733 shares) held in the George T. Chandler
Trust #2 for benefit of George T. Chandler, Jr.
(3) 4,545 shares of common stock and $141,900 of capital
notes (4,730 shares) held in the George T. Chandler
Trust #2 for benefit of Paul T. Chandler.
(4) 4,545 shares of common stock and $142,000 of capital
notes (4,733 shares) held in the George T. Chandler
Trust #2 for benefit of Barbara Ann Chandler.
(d) 129,060 shares of common stock and $582,000 of capital notes
(19,399 shares) held in Anderson Chandler's name over which he
has sole voting and investment power.
(e) 3,040 shares of common stock and $15,200 of capital notes (506
shares) held in David Chandler's name over which he has sole
voting and investment power.
(f) 1,000 shares of common stock and $5,000 of capital notes (166
shares) held by Michele M. Chandler (wife of David Chandler)
over which David Chandler has shared voting and investment
power.
(7) Mr. Darmon's beneficial ownership is comprised of 45 shares of
common stock and $34,200 of capital notes (1,140 shares) held in his
name over which he has sole voting and investment power and 4,695
shares held in a trust with his wife, Beatrice F. Darmon, with whom
he shares voting and investment power.
(8) Mr. Knorr's beneficial ownership is comprised of: (a) 7,511 shares
of common stock and $29,200 of capital notes (973 shares) held in
his name; (b) 946 shares of common stock held by him in an
Individual Retirement Account; (c) 4,754 shares of common stock held
in a trust with his wife, Darlene R. Knorr over which he has sole
voting and investment power; (d) 5,440 shares of common stock and
$27,200 of capital notes (906 shares) held jointly with his wife
over which he has shared voting and investment power; and (e) 100
shares of common stock held by Eric T. Knorr, Custodian for
Elizabeth T. Knorr under the Uniform Gifts To Minors Act over which he
has sole voting and investment power. Does not include 200 shares of
common stock, owned by Darlene R. Knorr, in which Mr. Knorr
disclaims beneficial ownership.
(9) Mr. Seymour's beneficial ownership is comprised of the following:
(a) 200 shares of common stock and $1,000 of capital notes (33 shares)
held in his name over which he has sole voting and investment
power; (b) 87,940 shares of common stock and $439,700 of capital
notes (14,656 shares) held by Dorothea W. Seymour and Paul A.
Seymour Jr., Co-trustees of Dorothea W. Seymour Trust U/A dated
November 15, 1972, over which he shares voting and investment
power with Dorothea W. Seymour; (c) 26,800 shares of common stock
and $39,000 of capital notes (1,300 shares) held by John Wofford
Seymour and $120,000 of capital notes (4,000 shares) held in the
John Wofford Seymour family trust over which he shares voting and
investment power with Dorothea W. Seymour; (d) 19,595 shares of
common stock and $125,600 of capital notes (4,186 shares) held by
Paul A. Seymour III over which he shares voting and investment
power with Dorothea W. Seymour; (e) 26,160 shares of common stock
and $155,800 of capital notes (5,193 shares) held by William Todd
Seymour over which he shares voting and investment power with
Dorothea W. Seymour; (f) 1,300 shares of common stock and $6,500
of capital notes (216 shares) held by Paul A. Seymour Jr. and D.W.
Seymour, Co-trustees of Paul A. Seymour Trust U/A dated November
15, 1972, over which he shares voting and investment power with
Dorothea W. Seymour; (g) 23,920 shares of common stock and
$144,600 of capital notes (4,819 shares) held by INTRUST Bank,
N.A., Trustee of Elizabeth Seymour Trust U/A dated June 1, 1980
over which he shares voting and investment power with Dorothea W.
Seymour; (h) 23,920 shares of common stock and $144,600 of capital
notes (4,819 shares) held by INTRUST Bank, N.A., Trustee of
Katherine Seymour Trust U/A dated February 11, 1981 over which he
shares voting and investment power with Dorothea W. Seymour; (i)
2,025 shares of common stock held by Helen P. Seymour, Custodian
for Thomas Paul Seymour under UGTMA over which he shares voting
and investment power with Dorothea W. Seymour; (j) 1,800 shares of
common stock held by Helen P. Seymour, Custodian for Brooke
Seymour under UGTMA over which he shares voting and investment
power with Dorothea W. Seymour; (k) 1,700 shares of common stock
held by Helen P. Seymour, Custodian for Brian Piller Seymour under
UGTMA over which he shares voting and investment power with
Dorothea W. Seymour.
Mr. Seymour has pledged 89,430 shares of common stock and $447,200 of
capital notes to IB to secure loan obligations to IB. Mr. Seymour
filed a petition under Chapter 11 of the United States Bankruptcy Code
in December of 1990 which was dismissed effective December 27, 1995.
(See Part 3, Item 10).
(10) Mr. Slawson's beneficial ownership is comprised of 100 shares of
common stock held in his name over which he has sole voting and
investment power, 2,586 shares of common stock held by Judith A.
Slawson (wife) over which he has shared voting and investment power
and 200 shares of common stock held by Donald C. Slawson and Bill
Wohlford, co-trustees of the Charles J. Slawson Family Trust over
which he has shared voting and investment power.
(11) Mr. Thiessen's beneficial ownership is comprised of 3,000 shares of
common stock and $64,800 of capital notes (2,159 shares) held in his
name over which he has sole voting and investment power and 960
shares of common stock and $4,800 of capital notes (160 shares) held
by Lorraine Ross Thiessen (wife) over which he has shared voting and
investment power.
(12) Includes shares as to which beneficial owner shares investment
and/or voting power with others, after eliminating duplication
within the table.
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
Certain Business Relationships
------------------------------
On January 25, 1995, Koch Industries, Inc. ("Koch"), in which Charles G.
Koch, a director and stockholder of the Company, owns more than 10% of the
common stock, purchased an investor participation certificate in the amount of
$50,000,000 representing an interest in the INTRUST Bank Credit Card Trust
1995-A at a certificate rate of 8.9% per annum. These certificates were
purchased by Koch pursuant to a Certificate Purchase Agreement dated January 25,
1995 by and between INTRUST Bank N.A. and Koch. Pursuant to a Pooling and
Servicing Agreement dated as of January 1, 1995, the First National Bank of
Chicago agreed to serve as the Trustee of the INTRUST Credit Card Trust 1995-A
and INTRUST Bank N.A. agreed to be the servicer of the accounts transferred to
the Trust. Interest only is due under the Certificate during the first two years
of the agreement and principal plus interest will be paid during the third year
of the agreement.
Neither the Company nor any of its subsidiaries entered into during 1995 or
has proposed to enter into any other material transactions with officers,
directors or principal stockholders of the Company or its subsidiaries, or any
immediate family member of the foregoing persons who has the same home as such
person.
Indebtedness of Management
--------------------------
Paul Seymour, Jr., a director and stockholder of the Company, had filed a
petition under Chapter 11 of the United States Bankruptcy Code in 1990. He
dismissed his Chapter 11 bankruptcy, effective December 27, 1995. Mr. Seymour
was indebted to IB in the amounts of $4,400,623 and $254,197 for personal
obligations and business loans, respectively, at the end of the year. These
amounts are also the largest aggregate amounts of such indebtedness outstanding
at any time during the year. The rate of interest being charged on the personal
obligations was 9.50 percent. The interest being charged on $105,000 of the
business obligations at year end was 9.25 percent with the remainder charged at
8.75 percent. The personal loans of Mr. Seymour are not included in
nonperforming loans since payments are current and the loans are fully
collateralized. (Refer to Table 8 of Item 7, Consolidated Statistical
Information, and footnote 4 of the accompanying financial statements in Item 8
of this report). The business loans are included in the nonperforming loans
total since interest payments are past due. (Refer to the discussion regarding
Mr. Seymour's pledged stock under footnote (9) to the stock ownership table in
Item 12 above.)
There are outstanding loans by certain of the Subsidiary Banks to other
officer and directors of the Company or its subsidiaries or to their immediate
family members or associates, but all such loans have been made in compliance
with applicable regulations, in the ordinary course of business, and on
substantially the same terms, including interest rates and collateral, and the
same underwriting standards as those prevailing at the time for comparable
transactions with other persons. These loans did not involve more than the
normal risk of collectibility or present other unfavorable features.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------- -------------------------------------------------------------------
(a) The following documents are filed as a part of this Report.
1. Financial Statements:
The following financial statements of INTRUST Financial
Corporation are included in PART II, Item 8 of this report.
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits:
Number Description
------ -----------
3(a) Restated Bylaws of the Registrant, as amended
through July, 1993 (incorporated herein by
reference to Exhibit 3(a) to Registrant's 1994 10-K ,
File No. 2-78658)
3(b) Restated Articles of Incorporation of Registrant, as
amended through July, 1993 (incorporated herein by
reference to Exhibit 3(b) to Registrant's 1994 10-K ,
File No. 2-78658)
4(a) Trust Indenture, dated as of December 1, 1987, between
First Bancorp of Kansas and Boatmen's First National
Bank of Kansas City (incorporated herein by reference to
Exhibit 4.1 to Registrant's Registration Statement No.
33-17564)
10(a)* Description of INTRUST Bank, N.A. Executive Officers'
Deferred Compensation Plans (incorporated herein by
reference to Exhibit 10(h) to Registrant's 1993 10-K ,
File No.
2-78658)
10(b)* Description of INTRUST Financial Corporation Executive
Deferred Compensation Plan (incorporated herein by
reference to Exhibit 10(i) to Registrant's 1993 10-K,
File No.
2-78658)
10(c)* Description of INTRUST Bank, N.A. Salary Continuation
Plan (incorporated herein by reference to Exhibit
10(j) to Registrant's 1993 10-K, File No. 2-78658)
10(d)* Description of INTRUST Bank, N.A. Deferred
Compensation Plans for Directors (incorporated herein
by reference to Exhibit 10(k) to Registrant's 1993 10-K,
File No. 2-78658)
10(e)* Description of INTRUST Financial Corporation Deferred
Compensation Plan for Directors (incorporated herein by
reference to Exhibit 10(l) to Registrant's 1993 10-K,
File No.
2-78658)
10(f) Agreement, dated February 15, 1991, between
Resolution Trust Corporation, receiver of Mid-Kansas
Savings and Loan Association, F.A. and the Registrant
(incorporated herein by reference to Exhibit 10(k) to
Registrant's 1991 10-K, File No. 2-78658)
10(g) Agreement and Plan of Reorganization and Merger, dated
June 8, 1992, between WRB Bancshares, Inc., Morrison G.
Tucker and Horace K. Calvert, Will Rogers Bank & Trust
Co., and the Registrant (incorporated herein by
reference to Exhibit 10(n) to Registrant's 1992 10-K,
File No. 2-78658)
10(h) Stock Purchase Agreement, dated December 18,
1992, between Kansas State Financial Corporation,
George A. Angle, Kansas State Bank & Trust Company, and
First National Bank in Wichita (incorporated herein by
reference to Exhibit 10(o) to Registrant's 1992 10-K,
File No. 2-78658)
10(i)* Registrant's 1995 Incentive Plan, adopted by the
registrant's Board of Directors, subject to subsequent
shareholder approval (appears herein as exhibit)
10(j)* Registrant's Grant of Incentive Stock Options as
provided by the 1995 Incentive Plan (appears herein as
exhibit)
10(k)* Registrant's Non-Qualified Stock Option Agreement
as provided by the 1995 Incentive Plan (appears herein
as exhibit)
11 Computation of Earnings Per Share (appears herein as
exhibit)
21 Subsidiaries of the Registrant (appears herein as
exhibit)
27 Financial Data Schedule (appears herein as exhibit)
* Exhibit relates to management compensation
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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: March 12 , 1996 By /s/ C. Q. Chandler
-------------------
C. Q. Chandler
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Date: March 12 , 1996 /s/ C. Q. Chandler
----------------------
C. Q. Chandler
Director, Chairman of the Board
and Chief Executive Officer
Date: March 12 , 1996 /s/ Jay L. Smith
--------------------
Jay L. Smith
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 12 , 1996 /s/ C. Robert Buford
------------------------
C. Robert Buford
Director
Date: March 12 , 1996 /s/ W. D. Bunten
--------------------
William D. Bunten
Director
Date: March 12 , 1996 /s/ Frank L. Carney
-----------------------
Frank L. Carney
Director
Date: March 12 , 1996 /s/ Richard G. Chance
-------------------------
Richard G. Chance
Director
Date: March 12 , 1996 /s/ C. Q. Chandler IV
-------------------------
C. Q. Chandler IV
Director
Date: March 12 , 1996 -------------------------
George T. Chandler
Director
Date: March 12 , 1996 -------------------------
Jamie B. Coulter
Director
Date: March 12 , 1996 /s/ R. L. Darmon
-------------------------
R. L. Darmon
Director
Date: March 12 , 1996 /s/ Charles W. Dieker
-------------------------
Charles W. Dieker
Director
Date: March 12 , 1996 /s/ W. J. Easton
-------------------------
W. J. Easton Jr.
Director
Date: March 12 , 1996 -------------------------
Martin K. Eby Jr.
Director
Date: March 12 , 1996 /s/ Eric T. Knorr
-------------------------
Eric T. Knorr
Director
Date: March 12 , 1996 -------------------------
Charles G. Koch
Director
Date: March 12, 1996 -------------------------
J. V. Lentell
Director
Date: March 12 , 1996 /s/ Paul A. Seymour, Jr.
----------------------------
Paul A. Seymour, Jr.
Director
Date: March 12 , 1996 /s/ Donald C. Slawson
-------------------------
Donald C. Slawson
Director
Date: March 12 , 1996 /s/ John T. Stewart III
--------------------------
John T. Stewart III
Director
Date: March 12 , 1996 /s/ Patrick H. Thiessen
---------------------------
Patrick H. Thiessen
Director
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants which have not Registered Securities Pursuant to
Section 12 of the Act. Concurrently with the filing of this Form 10-K,
Registrant is furnishing the Commission, for its information, four copies of
INTRUST Financial Corporation's Annual Report to Shareholders and Notice of
Annual Meeting of Shareholders and form of proxy with respect to the annual
meeting of shareholders of Registrant to be held April 9, 1996.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION
- --------- -----------
10(i) Registrant's 1995 Incentive Plan
10(j) Grant of Incentive Stock Option
10(k) Non-Qualified Stock Option Agreement
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
EXHIBIT 10(i)
INTRUST FINANCIAL CORPORATION
1995 INCENTIVE PLAN
1. Purpose. The purposes of the INTRUST FINANCIAL CORPORATION 1995
Incentive Plan (the "Plan") are to provide additional incentives to those
officers and key employees of INTRUST FINANCIAL CORPORATION and its Subsidiaries
(as hereinafter defined) whose substantial contributions are essential to the
continued growth and success of the Company's business, to strengthen their
commitment to the Company and its Subsidiaries, to motivate those officers and
employees to perform their assigned responsibilities faithfully and diligently,
and to attract and retain competent and dedicated individuals whose efforts will
result in the long-term growth and profitability of the Company. To accomplish
these purposes, the Plan provides that the Company may grant Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Performance
Shares, Phantom Stock and Restricted Stock (as each term is hereinafter
defined).
2. Definitions. For purposes of the Plan:
A) "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of
transactions) constituting or resulting in a Change in Control or
(ii) the highest Fair Market Value of a Share during the ninety
(90) day period ending on the date of a Change in Control.
B) "Agreement" means the written agreement between the Company and
an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.
C) "Award" means a grant of Restricted Stock, Stock Appreciation
Rights, Performance Shares and/or Phantom Stock.
D) "Board" means the Board of Directors of the Company.
E) "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a
change in value) or exchange of Shares for a different number or
kind of shares or other securities of the Company, by reason of a
reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse
stock split, cash dividend, property dividend, combination or
exchange of shares, repurchase of shares, public offering,
private placement, change in corporate structure or otherwise,
which in the judgment of the Committee is material or
significant.
F) "Change in Control" means any of the following events:
i) The acquisition (other than from the Company) by any
"Person" (as the term is used for purposes of Sections
13[d] or 14[d] of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty percent (20%) or more of
the combined voting power of the Company's then
outstanding voting securities; or
ii) The individuals who, as of April 11, 1995, are members of
the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; provided,
however, that if the election, or nomination for election
by the Company's stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent
Board; or
iii) Approval by stockholders of the Company of (a) a merger or
consolidation involving the Company if the stockholders of
the Company, immediately before such merger or
consolidation do not, as a result of such merger or
consolidation, own, directly or indirectly, more than
seventy percent (70%) of the combined voting power of the
then outstanding voting securities of the corporation
which results from such merger or consolidation in
substantially the same proportion as their ownership of
the combined voting power of the voting securities of the
Company outstanding immediately before such merger or
consolidation or (b) a complete liquidation or dissolution
of the Company or an Agreement for the sale or other
disposition of all or substantially all of the assets of
the Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to Section 2(F)(i), solely because
twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities is acquired by (i) a
trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or any
Subsidiary or (ii) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.
G) "Code" means the Internal Revenue Code of 1986, as amended.
H) "Committee" means a committee consisting of at least three (3)
Disinterested Persons appointed by the Board to administer the
Plan and to perform the functions set forth herein.
I) "Company" means INTRUST FINANCIAL CORPORATION, a Kansas
corporation.
J) "Disinterested Person" means a disinterested administrator with
respect to the Company or any Subsidiary as described in Rule
16b-3(b)(2) under the Exchange Act and who is also an outside
director as defined in Section 162(m) of the Code and the
regulations promulgated thereunder.
K) "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
L) "Eligible Employee" means any officer or other designated
employees of the Company or a Subsidiary designated by the
Committee as eligible to receive Options or Awards subject to the
conditions set forth herein.
M) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
N) "Fair Market Value" means the fair market value of the Shares as
determined in good faith by the Committee; provided, however,
that (i) if the Shares are admitted to trading on a national
securities exchange, Fair Market Value on any date shall be the
last sale price reported for the Shares on such exchange on such
date or, if no sale was reported on such date, on the last date
preceding such date on which a sale was reported, (ii) if the
Shares are admitted to quotation on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") and have
been designated as a National Market System ("NMS") security,
Fair Market Value on any date shall be the last sale price
reported for the Shares on such system on such date or on the
last day preceding such date on which a sale was reported, or
(iii) if the Shares are admitted to quotation on NASDAQ and have
not been designated a NMS security, or are listed on another
comparable quotation system, Fair Market Value on any date shall
be the average of the highest bid and lowest asked prices of the
Shares on such system on such date.
O) "Good Objective" means a challenging and above average level of
performance of the Company, a Subsidiary or a Division during a
Performance Cycle for which Performance Shares are granted, as
determined by the Committee at the time such Performance Shares
are granted.
P) "Grantee" means a person to whom an Award has been granted under
the Plan.
Q) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
R) "Maximum Realistic Objective" means an excellent level of
performance of the Company, a Subsidiary or a Division during a
Performance Cycle for which Performance Shares are granted, as
determined by the Committee at the time such Performance Shares
are granted.
S) "Minimum Acceptable Objective" means a minimum level of
performance of the Company, a Subsidiary or a Division during a
Performance Cycle for which Performance Shares are granted, as
determined by the Committee at the time such Performance Shares
are granted.
T) "Non-Qualified Stock Option" means an Option which is not an
Incentive Stock Option.
U) "Option" means an Incentive Stock Option, a Non-Qualified Stock
Option, or either or both of them.
V) "Optionee" means a person to whom an Option has been granted
under the Plan.
W) "Performance Cycle" means the time period specified by the
Committee at the time Performance Shares are granted during which
the performance of the Company, a Subsidiary or a Division will
be measured, which period shall be at least two (2) fiscal years.
X) "Performance Shares" means Restricted Stock granted under Section
10 of the Plan.
Y) "Phantom Stock" means a bookkeeping entry on behalf of a Grantee
by which his or her account is credited (but not funded) as
though Shares had been transferred to such account.
Z) "Restricted Stock" means Shares issued or transferred to an
Eligible Employee which are subject to restrictions. Restricted
Stock may be subject to restrictions which lapse over time
without regard to the performance of the Company, a Subsidiary or
a Division, pursuant to Section 8 hereof or may be awarded as
Performance Shares pursuant to Section 10 hereof.
aa) "Shares" means the common stock, no par value, of the Company
(including any new, additional or different stock or securities
resulting from a Change in Capitalization).
bb) "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in
Section 7 hereof.
cc) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Company, if each of the
corporations, other than the last corporation in the unbroken
chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
dd) "Ten-Percent Stockholder" means an Eligible Employee, who, at the
time an Incentive Stock Option is to be granted to him or her,
owns (within the meaning of Section 422[b][6] of the Code) stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, or of a
parent or a subsidiary within the meaning of Section 422(b)(6) of
the Code.
3. Administration.
A) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper
administration of the Plan. A quorum shall consist of not less
than three members of the Committee and a majority of a quorum
may authorize any action. Each member of the Committee shall be a
Disinterested Person. No member of the Committee shall be
personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or any Agreements,
Options or Awards, and all members of the Committee shall be
fully indemnified by the Company with respect to any such action,
determination or interpretation.
B) Subject to the express terms and conditions set forth herein, the
Committee or the Board shall have the power from time to time:
i) to determine those Eligible Employees to whom Options
shall be granted under the Plan and the number of
Incentive Stock Options and/or Non-Qualified Stock Options
to be granted to each Eligible Employee and to prescribe
the terms and conditions (which need not be identical) of
each Option, including the purchase price per Share
subject to each Option, and make any amendment or
modification to any Agreement consistent with the terms of
the Plan;
ii) to select those Eligible Employees to whom Awards shall be
granted under the Plan and to determine the number of
Performance Shares, Shares of Restricted Stock, Stock
Appreciation Rights and/or Phantom Stock to be granted
pursuant to each Award, the terms and conditions of each
Award, including the restrictions relating to such Shares
or Stock Appreciation Rights, and whether Stock
Appreciation Rights will be granted alone, or in
conjunction with or related to an Option, and make any
amendment or modification to any Agreement consistent with
the terms of the Plan;
C) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
i) to construe and interpret the Plan and the Options and
Awards granted thereunder and to establish, amend and
revoke rules and regulations for the administration of the
Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the
manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective, and all
decisions and determinations by the Committee in the
exercise of this power shall be final, binding and
conclusive upon the Company, a Subsidiary, and the
Optionees and Grantees, as the case may be;
ii) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee or Grantee on
an individual basis without constituting a termination of
employment or service for purposes of the Plan;
iii) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
iv) generally, to exercise such powers and to perform such
acts as are deemed necessary or advisable to promote the
best interests of the Company with respect to the Plan.
4. Stock Subject to Plan.
A) The maximum number of Shares that may be issued or transferred
pursuant to Options and Awards under the Plan is two hundred
forty thousand (240,000) Shares (or the number and kind of shares
of stock or other securities to which such Shares are adjusted
upon a Change in Capitalization pursuant to Section 11) and the
Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each, such number of Shares
as shall be determined by the Board.
B) Not more than twenty-five percent (25%) of the Shares referred to
in Section 4(A) may be issued or transferred in connection with
Awards and Options to any one (1) Eligible Employee during any
taxable year. Notwithstanding anything to the contrary, all
determinations under the preceding sentence shall be made in a
manner that is consistent with Section 162(m) of the Code and
regulations promulgated thereunder.
C) Whenever any outstanding Option or Award or portion thereof
expires, is cancelled or is otherwise terminated for any reason
(other than by exercise of the Option or any Stock Appreciation
Right), the Shares allocable to the cancelled or otherwise
terminated portion of such Option or Award may again be the
subject of Options and Awards hereunder.
D) Whenever any Shares subject to an Award or Option are forfeited
for any reason pursuant to the terms of the Plan, such Shares may
again be the subject of Options and Awards hereunder.
5. Eligibility. Subject to the provisions of the Plan, the Committee
shall have full and final authority to select those Eligible Employees who will
receive Options and/or Awards; provided, however, that no Eligible Employee
shall receive any Incentive Stock Options unless he or she is an employee of the
Company or a Subsidiary (within the meaning of Section 422 of the Code) at the
time the Incentive Stock Option is granted.
6. Options. The Committee may grant Options in accordance with the Plan
and the terms and conditions of the Option shall be set forth in an Agreement.
Each Option and Agreement shall be subject to the following conditions:
A) Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option
shall be set forth in the Agreement, provided that the purchase
price per Share under each Incentive Stock Option shall not be
less than one hundred percent (100%) of the Fair Market Value of
a Share at the time the Incentive Stock Option is granted (one
hundred ten percent (110%) in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).
B) Duration. Options granted hereunder shall be for such length of
term as the Committee shall determine, provided that no Incentive
Stock Option shall be exercisable after the expiration of ten
(10) years from the date it is granted (five [5] years in the
case of an Incentive Stock Option granted to a Ten-Percent
Stockholder). The Committee may, subsequent to the granting of
any Option, extend the term thereof but in no event shall the
term as so extended exceed the maximum term provided for in the
preceding sentence.
C) Non-Transferability. No Option hereunder shall be transferable by
the Optionee to whom granted otherwise than by will or the laws
of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, and an Option may be exercised
during the lifetime of such Optionee only by the Optionee or his
guardian or legal representative. The terms of each such Option
shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.
D) Vesting. Subject to Section 6(I) hereof, each Option shall be
exercisable in such installments (which need not be equal) and at
such times as may be designated by the Committee and set forth in
the Agreement. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time
after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability
of any Option or portion thereof at any time.
E) Method of Exercise. The exercise of any Option shall be made only
by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive
office, specifying the number of Shares to be purchased and
accompanied by payment therefor and otherwise in accordance with
the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise
of an Option shall be paid in full upon such exercise, as
determined by the Committee in its discretion, in cash, by check,
or by transferring Shares to the Company upon such terms and
conditions as determined by the Committee. The written notice
pursuant to this Section 6(E) may also provide instructions from
the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as
such on the written notice, in payment for any Shares purchased
pursuant to the exercise of an Option, the Company shall issue
such Shares directly to the designated broker or dealer. Any
Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value
on the day preceding the date of exercise of such Option. If
requested by the Committee, the Optionee shall deliver the
Agreement evidencing the Option and the Agreement evidencing any
related Stock Appreciation Right to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares shall be
issued upon exercise of an Option and the number of Shares that
may be purchased upon exercise shall be rounded to the nearest
number of whole Shares.
F) Rights of Optionees. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and
until (i) the Option shall have been exercised pursuant to the
terms thereof, (ii) the Company shall have issued and delivered
the shares to the Optionee and (iii) the Optionee's name shall
have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such Shares.
G) Termination of Employment. The Agreement shall set forth the
terms and conditions of the Option applicable upon the
termination of the Optionee's employment with the Company,
Subsidiary or a Division (including a Grantee's ceasing to be
employed by a Subsidiary or Division as a result of the sale of
such Subsidiary or Division or an interest in such Subsidiary or
Division) as the Committee may, in its discretion, determine at
the time the Option is granted or thereafter; provided, however,
that no Option shall be exercisable beyond its maximum term as
described in Section 6(B) hereof.
H) Modification or Substitution. Subject to the terms of the Plan,
the Committee may, in its discretion, modify outstanding Options
or accept the surrender of outstanding Options (to the extent not
exercised) and grant new Options in substitution for them.
Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under any
Agreement without the Optionee's consent.
I) Effect of Change in Control. Notwithstanding anything contained
in the Plan or any Agreement to the contrary, in the event of a
Change in Control, (i) all Options outstanding on the date of
such Change in Control shall become immediately and fully
exercisable and (ii) an Optionee will be permitted to surrender
for cancellation within sixty (60) days after such Change in
Control, any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash
payment in an amount equal to the excess, if any, over the
aggregate purchase price for such Shares under the Option, of (a)
in the case of a Non-Qualified Stock Option, the greater of (i)
the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the Option or portion thereof
surrendered or (ii) the Adjusted Fair Market Value of the Shares
subject to the Option or portion thereof surrendered or (b) in
the case of an Incentive Stock Option, the Fair Market Value, at
the time of surrendered, of the Shares subject to the Option or
portion thereof surrendered; provided, however, that in the case
of an Option granted within six (6) months prior to the Change in
Control to any Optionee who may be subject to liability under
Section 16(b) of the Exchange Act, such Optionee shall be
entitled to surrender for cancellation his or her Option during
the sixty (60) day period commencing upon the expiration of six
(6) months from the date of grant of any such Option.
7. Stock Appreciation Rights. The Committee may, in its discretion,
either independently or in connection with the grant of an Option, grant Stock
Appreciation Rights in accordance with the Plan and the terms and conditions of
which shall be set forth in an Agreement. If granted in connection with an
Option, a Stock Appreciation Right shall, except as otherwise provided in this
Section 7, be subject to the same terms and conditions as the related Option.
A) Time of Grant. A Stock Appreciation Right may be granted (i) at
any time if unrelated to an Option, or (ii) if related to an
Option, either at the time of grant, or at any time thereafter
during the term of the Option.
B) Stock Appreciation Right Related to an Option.
i) Payment. A Stock Appreciation Right granted in connection
with an Option shall entitle the holder thereof, upon
exercise of the Stock Appreciation Right or any portion
thereof, to receive payment of an amount computed pursuant
to Section 7(B)(iii).
ii) Exercise. Subject to Section 7(F), a Stock Appreciation
Right granted in connection with an Option shall be
exercisable at such time or times and only to the extent
that the related Option is exercisable, and will not be
transferable except to the extent the related Option may
be transferable. A Stock Appreciation Right granted in
connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a Share on
the date of exercise exceeds the purchase price specified
in the related Incentive Stock Option Agreement.
iii) Amount Payable. Except as otherwise provided in Section
7(I), upon the exercise of a Stock Appreciation Right
related to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (a) the excess
of the Fair Market Value of a Share on the date of
exercise of such Stock Appreciation Right over the per
Share purchase price under the related Option, by (b) the
number of Shares as to which such Stock Appreciation Right
is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with
respect to any Stock Appreciation Right by including at
the time it is granted such limitation in the Agreement
evidencing the Stock Appreciation Right.
iv) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise. Upon the exercise of a Stock Appreciation
Right granted in connection with an Option, the Option
shall be cancelled to the extent of the number of Shares
as to which the Stock Appreciation Right is exercised,
and, in like manner, upon the exercise of an Option
granted in connection with a Stock Appreciation Right or
the surrender of such Option pursuant to Section 6(I), the
Stock Appreciation Right shall be cancelled to the extent
of the number of Shares as to which the Option is
exercised or surrendered.
C) Stock Appreciation Right Unrelated to an Option. The Committee
may grant to Eligible Employees Stock Appreciation Rights
unrelated to Options. Stock Appreciation Rights unrelated to
Options shall contain such terms and conditions as to
exercisability (subject to Section 7[F]), vesting and duration as
the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. The amount payable upon
exercise of a Stock Appreciation Right shall be determined in
accordance with Section 7(B)(iii) or 7(I), as the case may be,
except that "Fair Market Value of a Share on the date of the
grant of the Stock Appreciation Right" shall be substituted in
Clause (a) of Section 7(B)(iii) for "purchase price under the
related Option."
D) Method of Exercise. Stock Appreciation Rights shall be exercised
by a Grantee only by a written notice delivered in person or by
mail to the Secretary of the Company at the Company's principal
executive office, specifying the number of Shares with respect to
which the Stock Appreciation Right is being exercised. If
requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised
and the Agreement evidencing any related Option to the Secretary
of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Grantee.
E) Form of Payment. Payment of the amount determined under Sections
7(B)(iii) or 7(C) may be made in the discretion of the Committee,
solely in whole Shares in a number determined at their Fair
Market Value on the date preceding the date of exercise of the
Stock Appreciation Right, or solely in cash, or in a combination
of cash and Shares. If the Committee decides to make full payment
in Shares and the amount payable results in a fractional Share,
payment for the fractional Share will be made in cash.
Notwithstanding the foregoing, no payment in the form of cash may
be made upon the exercise of a Stock Appreciation Right pursuant
to Sections 7(B)(iii) or 7(C) to an officer of the Company or a
Subsidiary who is subject to liability under Section 16(b) of the
Exchange Act, unless the exercise of such Stock Appreciation
Right is made during the period beginning on the third (3rd)
business day and ending on the twelfth (12th) business day
following the date of release for publication of the Company's
quarterly or annual statements of earnings (the "Ten-Day Window
Period"); provided, however, the Ten-Day Window Period shall not
apply where the date of exercise of the Stock Appreciation Right
is automatic or fixed in advance, is at least six (6) months
beyond the date of grant of the Stock Appreciation Right, and is
outside the control of the Grantee.
F) Restrictions. No Stock Appreciation Right may be exercised before
the date six (6) months after the date it is granted, except in
the event that the death or disability (as defined in Section 422
of the Code) of the Grantee occurs before the expiration of the
six (6) month period.
G) Termination of Employment. The Agreement shall set forth the
terms and conditions of the Award applicable upon the termination
of the Grantee's employment with the Company, a Subsidiary or a
Division (including a Grantee's ceasing to be employed by a
Subsidiary or a Division as a result of the sale of such
Subsidiary or Division or an interest in such Subsidiary or
Division) as the Committee may, in its discretion, determine at
the time the Stock Appreciation Right is granted or thereafter.
H) Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Stock Appreciation
Rights or accept the surrender of outstanding Awards of Stock
Appreciation Rights (to the extent not exercised) and grant new
Awards in substitution for them. Notwithstanding the foregoing,
no modification of an Award shall adversely alter or impair any
rights or obligations under any Agreement without the Grantee's
consent.
I) Effect of Change in Control. Notwithstanding anything contained
in this Plan or any Agreement to the contrary, in the event of a
Change in Control, subject to Section 7(F), all Stock
Appreciation Rights shall become immediately and fully
exercisable. Notwithstanding Sections 7(B)(iii), 7(C) and 7(E),
upon the exercise of a Stock Appreciation Right or any portion
thereof during the sixty (60) day period following a Change in
Control, the amount payable shall be in cash and shall be
determined by reference to (i) in the case of a Stock
Appreciation Right independently granted or related to a
Non-Qualified Stock Option, the greater of (x) the Fair Market
Value of the Shares on the date preceding the date of such
exercise and (y) the Adjusted Fair Market Value of the Shares on
the date of such exercise or (ii) in the case of a Stock
Appreciation Right related to an Incentive Stock Option, the Fair
Market Value of the Shares on the date of such exercise;
provided, however, that in the case of a Stock Appreciation Right
granted within six (6) months prior to the Change in Control to
any Grantee who may be subject to liability under Section 16(b)
of the Exchange Act, such Grantee shall be entitled to exercise
his Stock Appreciation Right during the sixty (60) day period
commencing upon the expiration of six (6) months from the date of
grant of any such Stock Appreciation Right.
8. Restricted Stock. The Committee may grant Awards of Restricted Stock
which shall be evidenced by an Agreement between the Company and the Grantee.
Awards of Restricted Stock may be granted at no cost or at a specified price to
the Grantee. Each Agreement shall contain such restrictions, price, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on all such Share certificates. Awards of
Restricted Stock shall be subject to the following terms and provisions:
A) Rights of Grantee. Shares of Restricted Stock granted pursuant to
an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted
provided that the Grantee has executed an Agreement evidencing
the terms and conditions of the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow
agreement and any other documents which the Committee may require
as a condition to the issuance of such Shares. If a Grantee shall
fail to execute the Agreement evidencing a Restricted Stock
Award, the appropriate blank stock powers and any other
agreements or documents which the Committee may require within
the time period prescribed by the Committee at the time the Award
is granted, the Award shall be null and void. At the discretion
of the Committee, all Shares issued in connection with Restricted
Stock Awards shall be deposited together with the applicable
stock powers with an escrow agent designated by the Committee.
Unless the Committee determines otherwise, and as set forth in
the Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have all of the rights of a stockholder with
respect to such Shares, including the right to vote the Shares.
B) Purchase Price. The Committee in its sole discretion shall
determine the purchase price, if any, at which Shares of
Restricted Stock shall be sold to Grantee hereunder, provided
that such purchase price shall in any event be payable in cash by
Grantee at the time the Shares of Restricted Stock are sold.
C) Non-Transferability. Until any restrictions imposed upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed
in the manner set forth in Section 8(D), such Shares shall not be
sold, transferred or otherwise disposed of and shall not be
pledged or otherwise hypothecated.
D) Lapse of Restrictions. i) Generally. Restrictions upon Shares of
Restricted Stock awarded hereunder shall lapse at such time or
times and on such terms and conditions as the Committee may
determine.
ii) Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary, in the event of a
Change in Control, all restrictions upon any Shares of
Restricted Stock (other than Performance Shares) shall
lapse immediately and all such Shares shall become fully
vested in the Grantee.
E) Termination of Employment. The Agreement shall set forth the
terms and conditions of the Award of Shares of Restricted Stock
upon the termination of the Grantee's employment with the
Company, a Subsidiary or a Division (including a Grantee's
ceasing to be employed by a Subsidiary or a Division as a result
of the sale of such Subsidiary or Division or an interest in such
Subsidiary or Division) as the Committee may, in its discretion,
determine at the time the Award is granted or thereafter.
F) Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Restricted Stock.
Notwithstanding the foregoing, no modification of an Award shall
adversely alter or impair any rights or obligations under any
Agreement without the Grantee's consent.
G) Treatment of Dividends. At the time the Award of Shares of
Restricted Stock is granted, the Committee may, in its
discretion, determine that the payment to the Grantee of
dividends, or a specified portion thereof, declared or paid on
such Shares by the Company shall be deferred until the lapsing of
the restrictions imposed upon such Shares and held by the Company
for the account of the Grantee until such time. In the event of
such deferral, there shall be credited at the end of each year
(or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee, in
its discretion, may determine. Payment of deferred dividends,
together with interest accrued thereon, shall be made upon the
lapsing of restrictions imposed on such Shares, except that any
dividends deferred (together with any interest accrued thereon)
in respect of any Shares of Restricted Stock shall be forfeited
upon the forfeiture of such Shares of Restricted Stock pursuant
to Section 8(E) or otherwise.
H) Delivery of Shares. Upon the lapse of the restrictions on Shares
of Restricted Stock, the Committee shall promptly cause a new
stock certificate to be delivered to the Grantee with respect to
such Shares, free of all restrictive legends (delivery thereof
may be conditioned upon redelivery of any previously issued
certificate).
9. Phantom Stock. The Committee may grant Awards of Phantom Stock which
shall be evidenced by an Agreement between the Company and the Grantee. Each
Agreement shall contain such terms and conditions as the Committee may, in its
discretion, determine. Each Award of Phantom Stock shall be subject to the
following terms and provisions:
A) Vesting. The Committee may prescribe such terms and conditions
under which a Grantee's right to receive payment for Phantom
Stock shall become vested.
B) Shareholder Rights. A Grantee for whom Phantom Stock has been
credited generally shall have none of the rights of a shareholder
with respect to such Phantom Stock. However, an Agreement for the
use of Phantom Stock may provide for the crediting of a Grantee's
Phantom Stock account with cash or stock dividends declared with
respect to Shares represented by such Phantom Stock.
C) Payment. Payment to a Grantee for Phantom Stock credited to his
or her account shall be made in cash, Shares or a combination of
both unless otherwise provided in the Agreement, provided the
Committee shall at all times have the sole right to approve or
disapprove the payment of cash in settlement of any Phantom
Stock. Notwithstanding the foregoing, no payment in the form of
cash may be made upon the settlement of Phantom Stock to an
officer of the Company or a Subsidiary who is subject to
liability under Section 16(b) of the Exchange Act, unless the
settlement of such Phantom Stock is made during the period
beginning on the third (3rd) business day and ending on the
twelfth (12th) business day following the date of release for
publication of the Company's quarterly or annual statements of
earnings (the "Ten-Day Window Period"); provided, however, the
Ten-Day Window Period shall not apply where the date of
settlement of the Phantom Stock is automatic or fixed in advance,
is at least six (6) months beyond the date of grant of the
Phantom Stock, and is outside the control of the Grantee.
D) Termination of Employment. Each Agreement shall set forth the
terms and conditions of the Award of Phantom Stock applicable
upon the termination of the Grantee's employment with the
Company, a Subsidiary or a Division (including a Grantee's
ceasing to be employed by a Subsidiary or a Division as a result
of the sale of such Subsidiary or Division or an interest in such
Subsidiary or Division) as the Committee may, in its discretion,
determine at the time the Award of Phantom Stock is granted or
thereafter.
E) Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Phantom Stock or
accept the surrender of outstanding Awards of Phantom Stock (to
the extent not exercised) and grant new Awards in substitution
for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations
under any Agreement without the Grantee's consent.
F) Restrictions. No Phantom Stock may be settled before the date six
(6) months after the date it is awarded, except in the event that
the death or disability (as defined in Section 422 of the Code)
of the Grantee occurs before the expiration of the six (6) month
period.
G) Effect of Change in Control. Notwithstanding anything contained
in this Plan or any Agreement to the contrary, in the event of a
Change in Control, subject to Section 9(F), all Phantom Stock
shall become immediately vested and fully exercisable.
Notwithstanding Section 9(C), payment to a Grantee for Phantom
Stock credited to his or her account shall be made in cash;
provided, however, that in the case of Phantom Stock granted
within six (6) months prior to the Change in Control to any
Grantee who may be subject to liability under Section 16(b) of
the Exchange Act, such Grantee shall be entitled to exercise his
or her Phantom Stock rights during the sixty (60) day period
commencing upon the expiration of six (6) months from the date of
grant of any such Phantom Stock.
10. Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares which shall be evidenced by an Agreement between
the Company and the Grantee. Each Agreement shall contain such terms and
conditions as the Committee may, in its discretion, require and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on all such Share certificates. Awards of
Performance Shares shall be subject to the following terms and provisions:
A) Performance Objectives. Performance objectives for Performance
Shares may be expressed in terms ---------------------- of (i)
earnings per Share, (ii) pre-tax profits, (iii) net earnings or
net worth, (iv) return on equity or assets, (v) any combination
of the foregoing, or (vi) any other standard or standards deemed
appropriate by the Committee at the time the Award is granted.
Performance objectives may be in respect of the performance of
the Company and its Subsidiaries (which may be on a consolidated
basis), a single Subsidiary or a Division. Performance objectives
may be absolute or relative and may be expressed in terms of a
progression within a specified range, with the Grantee becoming
vested in (i) a minimum percentage of such Performance Shares in
the event the Minimum Acceptable Objective is met or, if
surpassed, a greater percentage, (ii) an intermediate percentage
of such Performance Shares in the event the Good Objective is met
or, if surpassed, a greater percentage, and (iii) one hundred
percent (100%) of such Performance Shares in the event the
Maximum Realistic Objective is met or surpassed. Prior to the end
of a Performance Cycle, the Committee, in its discretion, may
adjust the performance objectives to reflect a Change in the
Capitalization, a change in the tax rate or book tax rate of the
Company or any Subsidiary, or any other event which may
materially affect the performance of the Company, a Subsidiary or
a Division, including, but not limited to, market conditions or a
significant acquisition or disposition of assets or other
property by the Company, a Subsidiary or a Division.
B) Rights of Grantee. The Committee shall provide at the time an
Award of Performance Shares is made, the time or times at which
the Performance Shares granted pursuant to such Award hereunder
shall be issued in the name of the Grantee; provided, however,
that no Performance Shares shall be issued until the Grantee has
executed an Agreement evidencing the terms and conditions of the
Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents
which the Committee may require as a condition to the issuance of
such Performance Shares. If a Grantee shall fail to execute the
Agreement evidencing an Award of Performance Shares, the
appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the
Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued
in connection with an Award of Performance Shares shall be
deposited together with the stock powers with an escrow agent
designated by the Committee. Except as restricted by the terms of
the Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have, in the discretion of the Committee, all
of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares.
C) Non-Transferability. Until any restrictions upon the Performance
Shares awarded to a Grantee shall have lapsed in the manner set
forth in Section 10(D), such Performance Shares shall not be
sold, transferred or otherwise disposed of and shall not be
pledged or otherwise hypothecated, nor shall they be delivered to
the Grantee. The Committee may also impose such other
restrictions and conditions on the Performance Shares, if any, as
it deems appropriate.
D) Lapse of Restrictions.
i) Generally. Subject to Section 10(D)(ii), restrictions upon
Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or
times and on such terms, conditions and satisfaction of
performance objectives as the Committee may, in its
discretion, determine at the time an Award is granted.
ii) Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary, in the event of a
Change in Control, all restrictions shall lapse
immediately on all or a portion of the Performance Shares
as determined by the Committee at the time of the Award of
such Performance Shares and as set forth in the Agreement.
E) Termination of Employment. The Agreement shall set forth the
terms and conditions of the Award of Performance Shares upon the
termination of the Grantee's employment with the Company, a
Subsidiary or a Division (including a Grantee's ceasing to be
employed by a Subsidiary or a Division as a result of the sale of
such Subsidiary or Division or an interest in such Subsidiary or
Division) as the Committee may, in its discretion, determine at
the time the Award is granted or thereafter.
F) Treatment of Dividends. At the time the Award of Performance
Shares is granted, the Committee may, in its discretion,
determine that the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on Performance Shares
issued by the Company to the Grantee shall be deferred until the
lapsing of the restrictions imposed upon such Performance Shares,
and held by the Company for the account of the Grantee until such
time. In the event of such deferral, there shall be credited at
the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum
as the Committee, in its discretion, may determine. Payment of
deferred dividends, together with interest accrued thereon, shall
be made upon the lapsing of restrictions imposed on such
Performance Shares, except that any dividends deferred (together
with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance
Shares pursuant to Section 10(E) or otherwise.
G) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall
promptly cause a new stock certificate to be delivered to the
Grantee with respect to such Shares, free of all restrictions
hereunder.
H) Non-Transferability. No Performance Shares shall be transferable
by the Grantee otherwise than by will or the laws of descent and
distribution.
I) Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Performance Awards or accept
the surrender of outstanding Performance Awards and grant new
Performance Awards in substitution for them. Notwithstanding the
foregoing, no modification of a Performance Award shall adversely
alter or impair any rights or obligations under the Agreement
without the Grantee's consent.
11. Adjustment Upon Changes in Capitalization.
A) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to
the maximum number and class of Shares, Phantom Stock, Stock
Appreciation Rights or other stock or securities with respect to
which Options or Awards may be granted under the Plan, the number
and class of Shares, Phantom Stock, Stock Appreciation Rights or
other stock or securities which are subject to outstanding
Options or Awards granted under the Plan, and the purchase price
therefor, if applicable.
B) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner
as not to constitute a "modification" as defined by Section
424(h)(3) of the Code and only to the extent otherwise permitted
by Sections 422 and 424 of the Code.
C) If, by reason of a Change in Capitalization, a Grantee of an
Award shall be entitled to or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different
shares of stock, securities or Performance Shares (other than
rights or warrants to purchase securities), such new additional
or different shares shall thereupon be subject to all of the
conditions, restrictions and performance criteria which were
applicable to (i) the Performance Shares pursuant to the Award,
or (ii) Shares subject to the Option, as the case may be, prior
to such Change in Capitalization.
12. Effect of Certain Transactions. Subject to Sections 6(I), 7(I),
8(D)(ii), 9(G) and 10(D)(ii) in the event of (i) the liquidation or dissolution
of the Company or (ii) a merger or consolidation of the Company (a
"Transaction"), all Options and Awards issued hereunder shall continue in effect
in accordance with their respective terms and each Optionee and Grantee shall be
entitled to receive in respect of each Share subject to any outstanding Options
or Awards, as the case may be, upon exercise of any Option or Award or upon
payment or transfer in respect of any Award, the same number and kind of stock,
securities, cash, property, or other consideration that each holder of a Share
was otherwise entitled to receive in the Transaction in respect of a Share.
13. Release of Financial Information. A copy of the Company's annual
report to stockholders shall be delivered to each Optionee and Grantee at the
time such report is distributed to the Company's stockholders.
14. Termination and Amendment of the Plan.
A) The Plan shall terminate on the tenth (10th) anniversary of its
effective date and no Option or Award may be granted thereafter.
The Board may sooner terminate or amend the Plan (other than to
reduce the rights of Optionees and Grantees, as the case may be,
under Sections 6[I], 7[I], 8[D][ii], 9[G] and 10[D][ii]), at any
time and from time to time; provided, however, that to the extent
necessary under Section 16(b) of the Exchange Act and the rules
and regulations promulgated thereunder, no amendment shall be
effective unless approved by the stockholders of the Company in
accordance with applicable law and regulations at an annual or
special meeting held within twelve (12) months before or after
the date of adoption of such amendment.
B) Except as provided in Sections 11 and 12 hereof, rights and
obligations under any Option or Award granted before any
amendment of the Plan shall not be adversely altered or impaired
by such amendment, except with the consent of the Optionee or
Grantee, as the case may be.
15. Non-Exclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable.
16. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
A) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
B) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
C) limit in any way the right of the Company to terminate the
employment of any person at any time; or
D) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person in any
particular position at any particular rate of compensation or for
any particular period of time.
17. Regulations and Other Approvals; Governing Law.
A) This Plan and the rights of all persons claiming hereunder shall
be construed and determined in accordance with the laws of the
State of Kansas without giving effect to the conflicts of laws
principles thereof, except to the extent that such law is
preempted by federal law.
B) The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and regulations, including
all applicable federal and state securities laws, and the
obtaining of all such approvals by governmental agencies as may
be deemed necessary or appropriate by the Committee.
C) The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer
the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with such Rule
shall be inoperative and shall not affect the validity of the
Plan.
D) The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any
government authority, or to obtain for Eligible Employees granted
Incentive Stock Options the tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.
E) Each Option and Award is subject to the requirement that, if at
any time the Committee determines, in its discretion, that the
listing, registration or qualification of Shares issuable
pursuant to the Plan is required by any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or
the issuance of Shares, no Options shall be granted or payment
made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been
effected or obtained free of any conditions as acceptable to the
Committee.
F) Notwithstanding anything contained in the Plan to the contrary,
in the event that the disposition of Shares acquired pursuant to
the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended, and is not
otherwise exempt from such registration, such Shares shall be
restricted against transfer to the extent required by the
Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual
receiving Shares pursuant to the Plan, as a condition precedent
to receipt of such Shares (including upon exercise of an Option),
to represent and warrant to the Company in writing that the
Shares acquired by such individual are acquired without a view to
any distribution thereof and will not be sold or transferred
other than pursuant to an effective registration thereof under
said Act or pursuant to an exemption applicable under the
Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately legended to reflect their status as
restricted securities as aforesaid.
18. Miscellaneous.
A) Multiple Agreements. The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same
time, or at some other time. The Committee may also grant more
than one Option or Award to a given Eligible Employee during the
term of the Plan, either in addition to, or in substitution for,
one or more Options or Awards previously granted to that Eligible
Employee. The grant of multiple Options and/or Awards may be
evidenced by a single Agreement or multiple Agreements, as
determined by the Committee.
B) Withholding of Taxes. i) The Company shall have the right to
deduct from any distribution of cash to any Optionee or Grantee,
an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to any Option or Award. If an
Optionee or Grantee is entitled to receive Shares upon exercise
of an Option or pursuant to an Award, the Optionee or Grantee
shall pay the Withholding Taxes to the Company prior to the
issuance, or release from escrow, of such Shares. In satisfaction
of the Withholding Taxes to the Company, the Optionee or Grantee
may make a written election (the "Tax Election"), which may be
accepted or rejected in the discretion of the Committee, to have
withheld a portion of the Shares issuable to him or her upon
exercise of the Option or pursuant to an Award having an
aggregate Fair Market Value equal to the Withholding Taxes,
provided that (i) in respect of an Optionee or Grantee who may be
subject to liability under Section 16(b) of the Exchange Act
(unless his or her employment was terminated due to disability or
death), the Tax Election is made either at least six (6) months
prior to the date when the amount of the Withholding Taxes are
determined (the "Tax Date") or during the ten (10) day period
beginning on the third (3rd) business day and ending on the
twelfth (12th) business day following the release for publication
of the Company's quarterly or annual statements of earnings, (ii)
the Tax Election is made prior to the Tax Date, and (iii) the Tax
Election is irrevocable; provided, however, in the event that the
Tax Date occurs subsequent to the exercise of the Option or
issuance of Shares, the Optionee or Grantee shall tender back to
the Company on the Tax Date that number of Shares having a Fair
Market Value on the date preceding the Tax Date at least equal to
the Withholding Taxes.
ii) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to Optionee
pursuant to Optionee's exercise of an Option within the
two (2) year period commencing on the day after the date
of the grant or within the one (1) year period commencing
on the day after the date of transfer of such Share or
Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition,
notify the Company thereof, by delivery of written notice
to the Company at its principal executive office, and
immediately deliver to the Company the amount of
Withholding Taxes.
C) Designation of Beneficiary. Each Optionee and Grantee may
designate a person or persons to receive, in the event of his or
her death, any Option or Award or any amount payable pursuant
thereto, to which he or she would then be entitled. Such
designation will be made upon forms supplied by and delivered to
the Company and may be revoked in writing. If an Optionee fails
to effectively designate a beneficiary, then his or her estate
will be deemed to be the beneficiary.
19. Effective Date. The effective date of the Plan shall be the date of
its adoption by the Board, subject only to the approval by the affirmation votes
of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote a at a meeting of stockholders duly held in
accordance with the applicable laws of the State of Kansas within twelve (12)
months of such adoption.
INTRUST FINANCIAL CORPORATION
ATTEST: By__________________________
_______________, President
By _______________________________________
_____________________________, Secretary
EXHIBIT 10(j)
INTRUST FINANCIAL CORPORATION
GRANT OF INCENTIVE STOCK OPTION
Date of Grant: , 1995
THIS GRANT OF INCENTIVE STOCK OPTION (the "Agreement"), dated as of the
date of grant first stated above (the "Date of Grant"), is delivered
BY INTRUST FINANCIAL CORPORATION,
a Kansas corporation,
hereinafter referred to as
"Company,"
TO ____________________________,
an individual,
hereinafter referred to as
"Grantee."
WHEREAS, the Board of Directors of Company (the "Board") on , 1995,
adopted, subject to subsequent shareholder approval, the Intrust Financial
Corporation 1995 Incentive Plan (the "Plan");
WHEREAS, Grantee is an employee or officer of Company or one of its
subsidiaries (Grantee's employer is sometimes referred to herein as the
"Employer");
WHEREAS, the Plan provides for the granting of incentive stock options
by a committee to be appointed by the Board (the "Committee") to employees and
officers of Company or any subsidiary of Company to purchase, or to exercise
certain rights with respect to, shares of the common stock, no par value, of
Company (the "Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Grantee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined that
it would be in the best interest of Company to grant the incentive stock options
documented herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, Company and Grantee hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Company, with the approval and at the direction of the Committee, hereby
grants to Grantee, as of the Date of Grant, an option to purchase up to ( )
shares of Stock at a purchase price per share of one hundred percent (100%) of
the "Fair Market Value" per share on the Date of Grant. Such option is
hereinafter referred to as the "Option" and the shares of common stock
purchasable upon exercise of the Option are hereinafter sometimes referred to as
the "Option Shares." The Option is intended by the parties hereto to be, and
shall be treated as, an incentive stock option (as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended [the "Code"]).
2. Vesting of Exercise Rights. Subject to the other terms of this
Agreement, the Option shall become exercisable in five (5) installments, Grantee
having the right hereunder to purchase from Company the following number of
Option Shares upon exercise of the Option, on and after the following dates, in
cumulative fashion:
A) On and after the first (1st) anniversary of the Date of Grant, up
to one-fifth (1/5th) (ignoring fractional shares) of the total
number of Option Shares;
B) On and after the second (2nd) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares;
C) On and after the third (3rd) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares;
D) On and after the fourth (4th) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares; and
E) On and after the fifth (5th) anniversary of the Date of Grant, the
remaining Option Shares.
3. Termination of Option.
A) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate
and become null and void after the expiration of ten (10) years
from the Date of Grant (the "Option Term").
B) Upon the occurrence of Grantee's ceasing for any reason to be
employed by the Employer, the Option, to the extent not previously
exercised, shall terminate and become null and void immediately
upon such termination of Grantee's employment, except in a case
where the termination of Grantee's employment is by reason of
retirement, disability or death. Upon a termination of Grantee's
employment by reason of retirement, disability or death, the Option
may be exercised during the following periods, but only to the
extent that the Option was outstanding and exercisable on any such
date of retirement, disability or death: (i) the one (1) year
period following the date of such termination of Grantee's
employment in the case of a disability (within the meaning of
Section 22(e)(3) of the Code), (ii) the six (6) month period
following the date of issuance of letters testamentary or letters
of administration to the executor or administrator of Grantee's
estate, in the case of Grantee's death during his or her employment
by the Employer, but not later than one (1) year after Grantee's
death, and (iii) the three (3) month period following the date of
such termination in the case of retirement on or after attainment
of age sixty-five (65), or in the case of disability other than as
described in (i) above. In no event, however, shall any such period
extend beyond the Option Term.
C) In the event of the death of Grantee, the Option may be exercised
by Grantee's legal representative, but only to the extent that the
Option would otherwise have been exercisable by Grantee.
D) A transfer of Grantee's employment between Company and any
subsidiary of Company, or between any subsidiaries of Company,
shall not be deemed to be a termination of Grantee's employment.
E) Notwithstanding anything to the contrary set forth herein or in the
Plan, in the event Grantee shall (i) commit any act of malfeasance
or wrongdoing affecting Company or any subsidiary of Company, (ii)
breach any covenant not to compete, or employment contract, with
Company or any subsidiary of Company, or (iii) engage in conduct
that would warrant Grantee's discharge for cause (excluding general
dissatisfaction with the performance of Grantee's duties, but
including any act of disloyalty or any conduct clearly tending to
bring discredit upon Company or any subsidiary of Company), any
unexercised portion of the Option shall immediately terminate and
be null and void.
F) Notwithstanding anything to the contrary set forth herein or in the
Plan, the effectiveness of the Grant of the Option is subject to
Company timely obtaining shareholder approval of the Plan as
required by the Code. In the event such shareholder approval is not
obtained within twelve (12) months of the Date of Grant, then the
Option and all rights hereunder with respect thereto shall
immediately terminate and become null and void.
4. Exercise of Options.
A) Grantee may exercise the Option with respect to all or any part of
the number of Option Shares then exercisable hereunder by giving
the Secretary of Company at Company's principal executive office
written notice delivered in person or by mail of Grantee's
intention to exercise. The notice of the exercise shall specify the
number of Option Shares as to which the Option is to be exercised
and the date of exercise thereof, which date shall be at least five
(5) days after the giving of the notice unless an earlier time
shall have been mutually agreed upon.
B) Full payment (in U.S. dollars) by Grantee of the option price for
the Option Shares purchased shall be made on or before the exercise
date specified in the notice of exercise in cash, or, with the
prior written consent of the Committee, in whole or in part through
the surrender of previously acquired shares of Stock at their Fair
Market Value on the exercise date. On the exercise date specified
in Grantee's notice or as soon thereafter as is practicable, a
certificate or certificates for the Option Shares then being
purchased shall be issued to Grantee upon full payment of the
exercise price for such Option Shares. The obligation of Company to
deliver Stock shall, however, be subject to the condition that if
at any time the Committee shall determine in its sole discretion
that the listing, registration or qualification of the Option or
the Option Shares upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or a
connection with, the Option or the issuance or purchase of Stock
thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
C) If Grantee fails to timely pay for any of the Option Shares
specified in the notice or fails to accept delivery thereof,
Grantee's right to purchase the Option Shares may be terminated by
Company.
5. Adjustment of Option Shares and Option Price. In the event of any
stock dividend or subdivision of the shares of common stock of Company into a
greater number of shares, the purchase price hereunder shall be proportionately
reduced and the number of shares subject to the Option shall be proportionately
increased; conversely, in the event of any combination of the outstanding shares
of common stock of Company, the purchase price hereunder shall be
proportionately increased and the number of shares of Stock subject to the
Option shall be proportionately reduced.
6. Effect of Change in Control. Notwithstanding anything contained in
this Agreement to the contrary, in the event of a Change in Control (as such
term is defined under the Plan), the Option shall become immediately and fully
exercisable and Grantee will be permitted to surrender for cancellation within
sixty (60) days after such Change in Control, the Option or portion of the
Option to the extent not yet exercised and Grantee will be entitled to receive a
cash payment in an amount equal to the excess, if any, over the aggregate
purchase price for such Shares under the Option, of the Fair Market Value, at
the time of surrender, of the Shares subject to the Option or portion thereof
surrendered.
7. Investment Representation. Upon demand by the Committee, Grantee
shall deliver to the Committee, at the time of any exercise of the Option or
portion thereof, a written representation that the Stock to be acquired upon
such exercise is to be acquired for investment and not for resale or with a view
to the distribution thereof. Upon such demand by the Committee, delivery of such
representation prior to the delivery of any certificates representing the Stock
issuable upon exercise of the Option and prior to the expiration of the Option
Term shall be a condition precedent to the right of Grantee to purchase any
shares of Stock.
8. Rights as a Shareholder. Neither Grantee nor any personal
representative shall be, nor shall have any of the rights and privileges of, a
shareholder of Company with respect to any shares of Stock purchasable or
issuable upon the exercise of the Option, in whole or in part, unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii)
Company shall have issued and delivered a certificate evidencing the shares of
Stock to Grantee, and (iii) Grantee's name shall have been entered as a
stockholder of record on the books of Company. Thereupon, Grantee shall
thereafter have full voting, dividend and other ownership rights with respect to
such shares.
9. Non-Transferability of Option. During Grantee's lifetime, the Option
shall be exercisable only by Grantee or any guardian or legal representative of
Grantee, and the Option shall not be transferrable otherwise than by will or the
laws of descent and distribution (but shall be exercisable by Grantee's executor
or administrator pursuant to Paragraph 3(B) hereof) or pursuant to a qualified
domestic relations order as defined by the Code, nor shall the Option be subject
to attachment, execution or other similar process. In the event of (a) any
attempt by Grantee to alienate, assign, pledge, hypothecate or otherwise dispose
of the Option, except as provided for herein, or (b) the levy of any attachment,
execution or similar process upon the rights or interests hereby conferred, then
Company may terminate the Option by notice to Grantee and the Option shall
thereupon become null and void.
10. No Right to Continued Employment. Neither the granting of the Option
nor its exercise shall not be construed as granting to Grantee any right to
continuing employment by Company. Except as may otherwise be limited by a
written agreement between Company and Grantee, the right of Company to terminate
at will Grantee's employment with Company at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by Company, and
acknowledged by Grantee.
11. Disposition of Shares. No share of Stock acquired by the exercise of
the Option shall be transferable, other than by will or by the laws of descent
and distribution, within two (2) years of the Date of Grant or within one (1)
year after the transfer of shares pursuant to exercise of the Option. Each
certificate representing shares of Stock acquired by the exercise of the Option
shall bear a legend to that effect. Grantee hereby further acknowledges that the
transfer of the shares of Stock acquired by the exercise of the Option may be
limited by Rule 144 of the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended.
12. Amendment of Option. The Option may be amended by the Board or the
Committee at any time (a) if the Board or the Committee determines, in their
sole discretion, that amendment is necessary or advisable in light of any
addition to or change in the Code, or in the regulations issued thereunder, or
any federal or state securities law or other law or regulation, which change
occurs after the Date of Grant and by its terms applies to the Option or (b)
other than in the circumstances described in clause (a), with the consent of
Grantee.
13. Fair Market Value. For purposes of this Agreement, the term "Fair
Market Value" of a share of Stock shall mean the Fair Market Value of the Stock
as determined in good faith by the Committee; provided, however, that (a) if the
Stock is admitted to trading on a national securities exchange, Fair Market
Value on any date shall be the last sale price reported for the Stock on such
exchange on such date or, if no sale was reported on such date, on the last date
preceding such date on which a sale was reported (b) if the Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") and has been designated as a National Market System ("NMS")
security, Fair Market Value on any date shall be the last sale price reported
for the Stock on such system on such date or, if no sale was reported on such
date, on the last day preceding such date on which a sale was reported, or (c)
if the Stock is admitted to quotation on NASDAQ and has not been designated a
NMS security or is listed on another comparable quotation system, Fair Market
Value on any date shall be the average of the highest bid and lowest asked
prices of the shares of Stock on such system on such date or, if no sale was
reported on such date, on the last day preceding such date on which a sale was
reported.
14. Incorporation of Plan by Reference. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder.
IN WITNESS WHEREOF, Company and Grantee have executed this Agreement in
a manner appropriate to each as of the day and year first above written.
INTRUST FINANCIAL CORPORATION
By
Title:
"Company"
ACCEPTED AND AGREED TO:
(Signature)
(Print Name)
"Grantee"
EXHIBIT 10(k)
INTRUST FINANCIAL CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Date of Grant: , 1995.
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the "Agreement"), dated as of
the date of grant first stated above (the "Date of Grant"), is delivered
BY INTRUST FINANCIAL CORPORATION,
a Kansas corporation,
hereinafter referred to as
"Company,"
TO ,
an individual,
hereinafter referred to as
"Grantee."
WHEREAS, the Board of Directors of Company (the "Board") on , 1995,
adopted, subject to subsequent shareholder approval, the Intrust Financial
Corporation 1995 Incentive Plan (the "Plan");
WHEREAS, Grantee is an employee or officer of Company or one of its
subsidiaries (Grantee's employer is sometimes referred to herein as the
"Employer");
WHEREAS, the Plan provides for the granting of non-qualified stock
options by a committee to be appointed by the Board (the "Committee") to
employees and officers of Company or any subsidiary of Company to purchase, or
to exercise certain rights with respect to, shares of the common stock, no par
value, of Company (the "Stock"), in accordance with the terms and provisions
thereof; and
WHEREAS, the Committee considers Grantee to be a person who is eligible
for a grant of non-qualified stock options under the Plan, and has determined
that it would be in the best interest of Company to grant the non-qualified
stock options documented herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, Company and Grantee hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Company hereby grants to Grantee, as of the Date of Grant, an option to
purchase up to ( ) shares of Stock at a purchase price per share of one hundred
percent (100%) of the "Fair Market Value" per share on the Date of Grant. Such
option is hereinafter referred to as the "Option" and the shares of Stock
purchasable upon exercise of the Option are hereinafter sometimes referred to as
the "Option Shares."
2. Vesting of Exercise Rights. Subject to the other terms of this
Agreement, the Option shall become exercisable in five (5) installments, Grantee
having the right hereunder to purchase from Company the following number of
Option Shares upon exercise of the Option, on and after the following dates, in
cumulative fashion:
A) On and after the first (1st) anniversary of the Date of Grant, up
to one-fifth (1/5th) (ignoring fractional shares) of the total
number of Option Shares;
B) On and after the second (2nd) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares;
C) On and after the third (3rd) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares;
D) On and after the fourth (4th) anniversary of the Date of Grant, up
to an additional one-fifth (1/5th) (ignoring fractional shares) of
the total number of Option Shares; and
E) On and after the fifth (5th) anniversary of the Date of Grant, the
remaining Option Shares.
3. Termination of Option.
A) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate
and become null and void after the expiration of ten (10) years
from the Date of Grant (the "Option Term").
B) Upon the occurrence of Grantee's ceasing for any reason to be
employed by Company, the Option, to the extent not previously
exercised, shall terminate and become null and void immediately
upon such termination of Grantee's employment, except in a case
where the termination of Grantee's employment is by reason of
retirement, disability or death. Upon a termination of Grantee's
employment by reason of retirement, disability or death, the Option
may be exercised during the following periods, but only to the
extent that the Option was outstanding and exercisable on any such
date of retirement, disability or death: (i) the one (1) year
period following the date of such termination of Grantee's
employment in the case of a disability (within the meaning of
Section 22(e)(3) of the Code), (ii) the six (6) month period
following the date of issuance of letters testamentary or letters
of administration to the executor or administrator of Grantee's
estate, in the case of Grantee's death during his or her employment
by the Employer, but not later than one (1) year after Grantee's
death, and (iii) the one (1) year period following the date of such
termination in the case of retirement on or after attainment of age
sixty-five (65), or in the case of disability other than as
described in (i) above. In no event, however, shall any such period
extend beyond the Option Term.
C) In the event of the death of Grantee, the Option may be exercised
by Grantee's legal representative, but only to the extent that the
Option would otherwise have been exercisable by Grantee.
D) A transfer of Grantee's employment between Company and any
subsidiary of Company, or between any subsidiaries of Company,
shall not be deemed to be a termination of Grantee's employment.
E) Notwithstanding anything to the contrary set forth herein or in the
Plan, in the event Grantee shall (i) commit any act of malfeasance
or wrongdoing affecting Company or any subsidiary of Company, (ii)
breach any covenant not to compete, or employment contract, with
Company or any subsidiary of Company, or (iii) engage in conduct
that would warrant Grantee's discharge for cause (excluding general
dissatisfaction with the performance of Grantee's duties, but
including any act of disloyalty or any conduct clearly tending to
bring discredit upon Company or any subsidiary of Company), any
unexercised portion of the Option shall immediately terminate and
be null and void.
F) Notwithstanding anything to the contrary set forth herein or in the
Plan, the effectiveness of the Grant of the Option is subject to
Company timely obtaining shareholder approval of the Plan. In the
event such shareholder approval is not obtained within twelve (12)
months of the Date of Grant, then the Option and all rights
hereunder with respect thereto shall immediately terminate and
become null and void.
4. Exercise of Options.
A) Grantee may exercise the Option with respect to all or any part of
the number of Option Shares then exercisable hereunder by giving
the Secretary of Company at Company's principal executive office
written notice delivered in person or by mail of Grantee's
intention to exercise. The notice of the exercise shall specify the
number of Option Shares as to which the Option is to be exercised
and the date of exercise thereof, which date shall be at least five
(5) days after the giving of the notice unless an earlier time
shall have been mutually agreed upon. B) Full payment (in U.S.
dollars) by Grantee of the option price for the Option Shares
purchased shall be made on or before the exercise date specified in
the notice of exercise in cash, or, with the prior written consent
of Company, in whole or in part through the surrender of previously
acquired shares of Stock at their Fair Market Value on the exercise
date. On the exercise date specified in Grantee's notice or as soon
thereafter as is practicable, a certificate or certificates for the
Option Shares then being purchased shall be issued to Grantee upon
full payment of the exercise price for such Option Shares. The
obligation of Company to deliver Stock shall, however, be subject
to the condition that if at any time Company shall determine in its
sole discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a
condition of, or a connection with, the Option or the issuance or
purchase of Stock thereunder, the Option may not be exercised in
whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of
any conditions not acceptable to Company.
C) If Grantee fails to timely pay for any of the Option Shares
specified in the notice or fails to accept delivery thereof,
Grantee's right to purchase the Option Shares may be terminated by
Company.
D) As a condition to the issuance of Option Shares, Grantee agrees to
remit to Company at the time of any exercise of the Option an
amount equal to any taxes required to be withheld by Company under
federal or state law as a result of such exercise.
5. Adjustment of Option Shares and Option Price. In the event of any
stock dividend or subdivision of the shares of common stock of Company into a
greater number of shares, the purchase price hereunder shall be proportionately
reduced and the number of shares subject to the Option shall be proportionately
increased; conversely, in the event of any combination of the outstanding shares
of common stock of Company, the purchase price hereunder shall be
proportionately increased and the number of shares of Stock subject to the
Option shall be proportionately reduced.
6. Effect of Change in Control. Notwithstanding anything contained in
this Agreement to the contrary, in the event of a Change in Control (as such
term is defined under the Plan), the Option shall become immediately and fully
exercisable and Grantee will be permitted to surrender for cancellation within
sixty (60) days after such Change in Control, the Option or portion of the
Option to the extent not yet exercised and Grantee will be entitled to receive a
cash payment in an amount equal to the excess, if any, over the aggregate
purchase price for such Shares under the Option, of the Fair Market Value, at
the time of surrender, of the Shares subject to the Option or portion thereof
surrendered.
7. Investment Representation. Upon demand by Company, Grantee shall
deliver to Company, at the time of any exercise of the Option or portion
thereof, a written representation that the Stock to be acquired upon such
exercise is to be acquired for investment and not for resale or with a view to
the distribution thereof. Upon such demand by Company, delivery of such
representation prior to the delivery of any certificate representing the Stock
issuable upon exercise of the Option and prior to the expiration of the Option
Term shall be a condition precedent to the right of Grantee to purchase any
shares of Stock.
8. Rights as a Shareholder. Neither Grantee nor any personal
representative shall be, or shall have any of the rights and privileges of, a
shareholder of Company with respect to any shares of Stock purchasable or
issuable upon the exercise of the Option, in whole or in part, unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii)
Company shall have issued and delivered a certificate evidencing the shares of
Stock to Grantee, and (iii) Grantee's name shall have been entered as a
stockholder of record on the books of Company. Thereupon, Grantee shall
thereafter have full voting, dividend and other ownership rights with respect to
such shares.
9. Non-Transferability of Option. During Grantee's lifetime, the Option
shall be exercisable only by Grantee or any guardian or legal representative of
Grantee, and the Option shall not be transferrable otherwise by will or the laws
of descent and distribution (but shall be exercisable by Grantee's executor or
administrator pursuant to Paragraph 3(B) hereof) or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, nor shall the Option be subject to attachment, execution or other
similar process. In the event of (a) any attempt by Grantee to alienate, assign,
pledge, hypothecate or otherwise dispose of the Option, except as provided for
herein, or (b) the levy of any attachment, execution or similar process upon the
rights or interests hereby conferred, then Company may terminate the Option by
notice to Grantee and the Option shall thereupon become null and void.
10. No Right to Continued Employment. Neither the granting of the Option
nor its exercise shall not be construed as granting to Grantee any right to
continuing employment by Company. Except as may otherwise be limited by a
written agreement between Company and Grantee, the right of Company to terminate
at will Grantee's employment with Company at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by Company, and
acknowledged by Grantee.
11. Disposition of Shares. No share of Stock acquired by the exercise of
the Option shall be transferable, other than by will or by the laws of descent
and distribution, within two (2) years of the Date of Grant or within one (1)
year after the transfer of shares pursuant to exercise of the Option. Each
certificate representing shares of Stock acquired by the exercise of the Option
shall bear a legend to that effect. Grantee hereby further acknowledges that the
transfer of the shares of Stock acquired by the exercise of the Option may be
limited by Rule 144 of the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended.
12. Amendment of Option. The Option may be amended by the Board at any
time (a) if the Board of Directors determines, in its sole discretion, that
amendment is necessary or advisable in light of any addition to or change in the
Code, or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the Date of
Grant and by its terms applies to the Option; or (b) other than in the
circumstances described in clause (a), with the consent of Grantee.
13. Fair Market Value. For purposes of this Agreement, the term "Fair
Market Value" of a share of Stock shall mean the Fair Market Value of the Stock
as determined in good faith by Company; provided, however, that (a) if the Stock
is admitted to trading on a national securities exchange, Fair Market Value on
any date shall be the last sale price reported for the Stock on such exchange on
such date or, if no sale was reported on such date, on the last date preceding
such date on which a sale was reported, (b) if the Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") and has been designated as a National Market System ("NMS")
security, Fair Market Value on any date shall be the last sale price reported
for the Stock on such system on such date or, if no sale was reported on such
date, on the last day preceding such date on which a sale was reported, or (c)
if the Stock is admitted to quotation on NASDAQ and has not been designated a
NMS security or is listed on another comparable quotation system, Fair Market
Value on any date shall be the average of the highest bid and lowest asked
prices of the Stock on such system on such date or, if no sale was reported on
such date, on the last day preceding such date on which a sale was reported.
14. Incorporation of Plan by Reference. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder.
IN WITNESS WHEREOF, Company and Grantee have executed this Agreement in
a manner appropriate to each as of the day and year first above written.
INTRUST FINANCIAL CORPORATION
By
Title:
"Company"
ACCEPTED AND AGREED TO:
(Signature)
(Print Name)
"Grantee"
EXHIBIT 11
INTRUST FINANCIAL CORPORATION Computation of Earnings Per Share Years
Ended December 31, 1995, 1994 and 1993 (Dollars in thousands except per
share data)
1995 1994 1993
---------- ---------- ----------
Primary Earnings Per Share:
Net income $ 12,387 $ 18,969 $ 17,626
Weighted average common shares outstanding 2,344,762 2,371,377 2,381,859
Primary earnings per share $ 5.28 $ 8.00 $ 7.40
Fully Diluted Earnings per Share:
Net Income $ 12,387 $ 18,969 $ 17,626
Net reduction in interest expense assuming
conversion ofcapital notes 699 713 713
---------- ---------- ----------
Net income $ 13,086 $ 19,682 $ 18,339
========== ========== ==========
Weighted average common shares outstanding
assuming conversion of capital notes 2,743,307 2,771,377 2,781,859
Fully diluted earnings per share $ 4.77 $ 7.10 $ 6.59
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1995
PERCENTAGE
OF VOTING
JURISDICTION SECURITIES
NAME OF ORGANIZATION OWNED
- ---- --------------- -----
INTRUST Bank, National Association National Bank 100%
Will Rogers Bank Oklahoma 100%
The First Bank Oklahoma 100%
First Moore Insurance Agency, Inc. Oklahoma 100%
Note: As of February 11, 1995, INTRUST Bank, El Dorado, National Association,
INTRUST Bank, Haysville, National Association, INTRUST Bank, Johnson County,
National Association and INTRUST Bank, Valley Center no longer operate as
separate subsidiaries of the Company, having merged into INTRUST Bank, National
Association.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 102,963
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 112,020
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,923
<INVESTMENTS-CARRYING> 318,323
<INVESTMENTS-MARKET> 325,957
<LOANS> 1,037,385
<ALLOWANCE> 25,892
<TOTAL-ASSETS> 1,666,984
<DEPOSITS> 1,367,141
<SHORT-TERM> 117,813
<LIABILITIES-OTHER> 14,703
<LONG-TERM> 32,164
0
0
<COMMON> 12,000
<OTHER-SE> 123,163
<TOTAL-LIABILITIES-AND-EQUITY> 1,666,984
<INTEREST-LOAN> 104,117
<INTEREST-INVEST> 18,221
<INTEREST-OTHER> 5,581
<INTEREST-TOTAL> 127,919
<INTEREST-DEPOSIT> 45,190
<INTEREST-EXPENSE> 53,460
<INTEREST-INCOME-NET> 74,459
<LOAN-LOSSES> 18,118
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 71,195
<INCOME-PRETAX> 18,766
<INCOME-PRE-EXTRAORDINARY> 12,387
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,387
<EPS-PRIMARY> 5.28
<EPS-DILUTED> 4.77
<YIELD-ACTUAL> 5.30
<LOANS-NON> 3,988
<LOANS-PAST> 5,383
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,886
<CHARGE-OFFS> 15,845
<RECOVERIES> 3,561
<ALLOWANCE-CLOSE> 25,892
<ALLOWANCE-DOMESTIC> 25,892
<ALLOWANCE-FOREIGN> 0
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