SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K405
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number 2-78658
INTRUST FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Kansas 48-0937376
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
105 North Main Street
Box One
Wichita, Kansas 67202
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(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 10, 1998, there were 2,171,404 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 3, 1998, the bid price of $102.00 per share would indicate an aggregate
market value of $153,902,496 for shares held by nonaffiliates.
EXHIBIT INDEX: Part IV hereof.
<PAGE>
PART I
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ITEM 1. BUSINESS.
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GENERAL
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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 is 105 North Main, Box One,
Wichita, Kansas 67202.
DESCRIPTION OF BUSINESS
-----------------------
As of December 31, 1997, the Company's direct wholly-owned banking
subsidiaries were INTRUST Bank, N.A. ("IB"), Wichita, Kansas, and Will Rogers
Bank ("WRB"), Oklahoma City, Oklahoma (collectively, the "Subsidiary Banks").
The Subsidiary Banks operate 36 banking locations. IB is a national banking
association organized under the laws of the United States. WRB a state banking
association is 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: NestEgg
Consulting, Inc. ("NCI"), INTRUST Community Development Corporation ("ICDC"),
KSB Properties, Inc. ("KSBP"), and INTRUST Investments, Inc. ("III")
(collectively, the "Non-Banking Subsidiaries"). NCI and ICDC are wholly-owned
subsidiaries of the Company; KSBP and III are wholly-owned subsidiaries of IB.
NCI is engaged in the business of providing pension plan consulting services.
ICDC is in business to make equity and debt investments to promote community
welfare. KSBP owned partial interests in oil and gas leases that were acquired
through foreclosure, all of which properties were sold in 1994. III performs
portfolio management activities by managing, investing and reinvesting the cash,
U.S. government obligations and other investment securities contributed to it by
INTRUST Bank, N.A.. All of the Non-Banking Subsidiaries are based in Wichita,
Kansas.
The Subsidiary Banks and the Non-Banking Subsidiaries are collectively
referred to as the "Subsidiaries".
At December 31, 1997, IB's trust division managed assets with a market value
of $2,010,000,000 in various fiduciary capacities.
As of December 31, 1997 the Company had 23 full-time employees. The
Subsidiaries collectively had approximately 799 full-time and 157 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
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The Company offers a wide range of financial services through its Subsidiary
Banks (IB and WRB). 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 acquisition 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
areas are Oklahoma City, Moore and Mustang, Oklahoma. The Company believes that
the primary source of competition comes from approximately seventeen other banks
with locations in Sedgwick County, eleven in Johnson County, four 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, on September 29, 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, one year after the date of enactment, 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 and agencies 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 higher
interest rates 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 stockholders.
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,
the Company's performance under the Community Reinvestment Act 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 June 1, 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.
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 and the Federal Deposit Insurance 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 other 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 the Subsidiary Banks 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 constitute 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 insured
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 are required to implement a plan to increase capital.
STATE BANK HOLDING COMPANY REGULATION
-------------------------------------
Kansas statutes prohibit any bank holding company from acquiring ownership or
control of, or power to vote, any of the voting shares of any bank which holds
Kansas deposits if, after such acquisition, the bank holding company and all
subsidiaries would hold or control, in the aggregate, more than 15% of total
Kansas deposits. Kansas deposits means deposits, savings deposits, shares or
similar accounts held by financial institutions attributable to any office in
Kansas where deposits are accepted as determined by the Kansas banking
commissioner. Such limitation does not apply in situations where the Kansas
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 banking commissioner. Subject to certain limited exceptions, Kansas
statutes authorize out-of-state bank holding companies 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 12.25% of the total deposits of insured depository institutions in
Oklahoma as determined by the Oklahoma Bank Commissioner ("OBC"). A bank cannot
be acquired by a bank or a multi-bank holding company until such bank has been
in existence and continuous operation for a period of five years; such
restriction does not prevent a bank or 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. An out-of-state bank holding company, upon
approval by the Federal Reserve Board, may acquire an unlimited number of banks
and bank holding companies so long as each bank to be acquired has been in
existence and continuous operation for more than five years.
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 Oklahoma Banking Department ("OBD"), and by the
FDIC. 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 virtually
identical regulations with respect to applications of national banks. The FDIC
has issued virtually identical 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") and certain limited exceptions, any Oklahoma bank may maintain and
operate outside attached facilities and two detached branch facilities. 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 are required to maintain reserves against deposits as
prescribed by the Board of Governors. The Oklahoma State Banking Board may
increase 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.
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 banking 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, 1997. 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
Guidelines Ratios Ratios Ratios
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Tier 1 Ratio 4.0% 7.9% 9.5% 12.8%
Total Capital Ratio 8.0% 9.2% 10.7% 13.9%
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, 1997 was 6.4%. Similar requirements also apply to the Subsidiary
Banks. At December 31, 1997 the leverage ratio for IB and WRB were 7.8%, and
9.5% 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.
"Undercapitalized," "significantly undercapitalized" and "critically
undercapitalized" institutions are required to submit a capital restoration plan
to the appropriate federal banking agency. A company controlling an
undercapitalized institution is required to guarantee a bank subsidiary
institution's compliance with the capital restoration plan subject to an
aggregate limitation of the lesser of 5% of the institution's assets at the time
it received FDIC notice that it was "undercapitalized" or the amount of the
capital deficiency when the subsidiary institution first failed to comply with
its capital restoration plan. As of the last classification, all of the
Subsidiary Banks were categorized as "well capitalized".
The minimum capital level for an Oklahoma state bank is based in part on the
population of the community in which the bank is located. WRB exceeds the
applicable minimum capital requirements for its community.
DIVIDENDS
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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.
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
-----------------
Effective January 1, 1993, the FDIC established a risk-based deposit
insurance premium assessment system, with assessment rates ranging from .23% of
domestic deposits (the same rate as under the previous flat-rate assessment
system) for those banks deemed to pose the least risk to the insurance fund to
.31% for those banks deemed to pose greater risk. The assessment rate applicable
to a bank is subject to change with each semi-annual assessment period.
Effective September 15, 1995, in view of the successful recapitalization of the
Bank Insurance Fund ("BIF"), which insures deposits at U.S. banks, the FDIC
lowered the assessment rate schedule for BIF-insured institutions from a range
of 0.23% to 0.31% of domestic deposits to a range of 0.04% to 0.31% of domestic
deposits. This reduction in the assessment rate schedule was made retroactive to
June 1, 1995 because the FDIC determined that the BIF achieved its
statutorily-required reserve ratio of 1.25% on May 31, 1995. On November 14,
1995, the FDIC again lowered the assessment rate schedule for BIF-insured
institutions, effective for the semiannual assessment period beginning January
1, 1996, to a range of .00% to 0.27% of domestic deposits.
The statutory semiannual minimum assessment of $1,000 per insured institution
was eliminated as part of the Economic Growth and Regulatory Paperwork Reduction
Act Of 1996 ("EGRPRA"), which was signed into law on September 30, 1996. EGRPRA
provides for the recapitalization of the Savings Association Insurance Fund
("SAIF") through a one-time special assessment on SAIF-insured deposits in order
to bring it into parity with the BIF. As of January 1, 1998, BIF and SAIF
premiums are assessed at between 0.00% and 0.27%, depending on the supervisory
rating assigned.
EGRPRA also requires BIF members to pay a portion of the annual interest on
the Financing Corporation ("FICO") bonds issued in 1987 to begin funding the
resolution of the problems of the savings and loan industry. Beginning January
1, 1997, BIF members paid a FICO premium on BIF deposits equal to 0.0129%.
Beginning January 1, 2000, BIF members will share in the payment of the FICO
assessment with SAIF members on a pro rata basis, with the annual assessment
expected to equal approximately 0.024% until retirement of the FICO bond
obligation in approximately 2017. This assessment is not expected to have a
materially adverse effect on the Subsidiary Banks.
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.
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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. Employees of the Non-Banking Subsidiaries occupy space within
various IB office locations.
As of December 31, 1997, 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 ten 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, 1997, was approximately 251,700 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.
WRB also has offices located in Moore, Oklahoma and in Mustang, Oklahoma. WRB
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 adequate for their
current and planned operations.
ITEM 3. LEGAL PROCEEDINGS.
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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.
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On December 9, 1997, a special meeting of common stockholders was held for
the purpose of amending and restating the Company's Articles of Incorporation.
The purpose of the amendment is to facilitate the issuance by INTRUST Capital
Trust, a subsidiary of the Company (the "Trust"), of up to 2,300,000 preferred
securities (the "Preferred Securities"), to be sold to the public and registered
for trading on the American Stock Exchange. Through the issuance of the
Preferred Securities, the Trust will raise proceeds in an aggregate of up to
$57,000,000. The proceeds received by the Trust will be used to purchase
subordinated debentures issued by the Company. The Company proposes to use the
proceeds of this transaction for general corporate purposes, including the
repurchase of its common stock, acquisitions, and the expansion and enhancement
of the Company's products, services and markets. On January 21, 1998, the Trust
completed the offering of the Preferred Securities.
A vote of at least 66 2/3% of the shares of common stock of the Company was
required to approve this proposal. There were 1,688,036 (77.6%) shares voted for
the amendment, 13,328 against and 99,899 abstentions.
<PAGE>
PART II
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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).
1997 1996
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High Low High Low
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1st Quarter $63 $63 $61 $59
2nd Quarter 70 63 61 61
3rd Quarter 75 70 61 61
4th Quarter 86 75 63 61
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 10, 1998, there were 424 stockholders of record
for the 2,171,404 shares of outstanding common stock. Approximately 73% 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 1997, the Company received cash dividends in the amount of
$4,500,000 and $1,350,000 from two of its subsidiaries, IB and WRB,
respectively. The Company declared cash dividends of $4,160,875, or $1.90 per
share during 1997 and $3,541,649, or $1.55 per share during 1996. During 1997,
dividend declaration dates were January 14, April 8, July 8, October 14 and
December 9. During 1996, dividend declaration dates were January 9, April 9,
July 9, October 8 and December 10. The payment of dividends by the Company is
primarily 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 14) 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 $11,219,000 in 9% Convertible
Subordinated Capital Notes due 1999, payment of interest related to the Trust
Preferred Securities and the quarterly interest payments and annual principal
payments on the variable rate term loan and the loan from the line of credit
payable to another financial institution. Additional information concerning the
Capital Notes, the term loan and the line of credit loan may be found in the
"Notes to Consolidated Financial Statements" (notes 9 and 10). 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>
ITEM 6. SELECTED FINANCIAL DATA.
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<TABLE>
INTRUST Financial Corporation and Subsidiaries
Five Year Summary of Selected Financial Data
Dollars in thousands except per share data
<CAPTION>
Years Ended December 31, 1997 1996 1995 1994 1993
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Operations:
<S> <C> <C> <C> <C> <C>
Interest income $132,454 $132,463 $127,919 $110,383 $98,825
Interest expense 60,147 56,436 53,460 38,267 34,253
- -----------------------------------------------------------------------------------------------------
Net interest income 72,307 76,027 74,459 72,116 64,572
Provision for loan losses 8,240 20,151 18,118 2,962 5,596
Credit card valuation write-down 4,645 17,475 0 0 0
- -----------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses and write-down 59,422 38,401 56,341 69,154 58,976
Other income 41,129 33,768 33,620 26,888 24,224
Other expenses 74,627 70,438 71,195 66,189 57,420
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Income before income taxes 25,924 1,731 18,766 29,853 25,780
Provision for income taxes 9,260 51 6,379 10,884 8,154
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Net income $ 16,664 $ 1,680 $ 12,387 $ 18,969 $17,626
- -------------------------------------------==========================================================
Average shares outstanding 2,193,268 2,285,337 2,344,762 2,371,377 2,381,859
- -------------------------------------------==========================================================
Per share data assuming no dilution $7.60 $0.74 $5.28 $8.00 $7.40
- -------------------------------------------==========================================================
Per share data assuming full dilution $6.74 $0.74 $4.77 $7.10 $6.59
- -------------------------------------------==========================================================
Cash dividends per share $1.90 $1.55 $1.50 $2.50 $1.50
- -------------------------------------------==========================================================
Balance sheet data at year-end:
Total assets $1,923,822 $1,721,402 $1,666,984 $1,519,117 $1,523,868
Total deposits 1,552,766 1,428,395 1,367,141 1,276,076 1,283,284
Long-term notes payable 23,000 17,660 20,310 22,950 25,580
Convertible capital notes 11,219 11,219 11,854 12,000 12,000
Stockholders' equity 132,645 122,094 135,163 127,590 115,529
Book value per share 61 55.37 57.81 54.01 48.51
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</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
------------------------------------
FINANCIAL OVERVIEW
------------------
INTRUST Financial Corporation's 1997 net earnings increased $14,984,000 from
1996 levels. As noted in previous filings, 1996 results were significantly
impacted by the Company's decision to sell the national market portion of its
credit card portfolio (the "national portfolio"). Terms of the sale, which was
concluded in August of 1997, provided that all economic activity associated with
the national portfolio would pass to the purchaser as of January 1, 1997. Thus,
interest income on this relatively higher-yielding portfolio was not recognized
in 1997. As more fully discussed below, while 1997 results were affected
somewhat by additional issues associated with the national portfolio, the impact
on net earnings was substantially less than that experienced in 1996, resulting
in 1997 provisions for losses and write-downs which were approximately $24.7
million less than those recorded in 1996. Solid growth in loan volume allowed
the Company to maintain its 1997 total interest income at 1996 levels, even
though the national portfolio assets were sold during the year. The national
portfolio, net of a $29 million allowance, totaled $89 million in loans at the
beginning of the year.
The Company also sold an office building in 1997 that it had acquired during
a merger transaction in 1993. This facility had been written down in each of the
past two years to its then net realizable value. A loss was recognized at the
time of sale of this facility in 1997, and another branch facility was
written-down, as that facility was demolished so that it may be replaced with a
new, more efficient structure in 1998.
The pre-tax effect of the nonrecurring charges associated with the national
portfolio and facility write-downs aggregated approximately $5.5 million in
1997.
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's 1997 combined provision for losses and write-downs totaled
$12,885,000, a decrease of $24,741,000 from the comparable amount recorded in
1996. The consummation of the sale of the national portfolio resulted in the
sizable decline. As noted in prior year filings, the Company embarked on
national marketing efforts in 1993 and 1994 to increase its level of credit card
outstandings. While these efforts did result in a significantly higher level of
credit card loans, it became apparent in 1995 and 1996 that the credit quality
of these national accounts would result in loss levels significantly higher than
the Company had historically experienced.
In 1996, after reviewing various options, the Company made a decision to exit
the national credit card market. Loans were marked-to-market and at December 31,
1996, the Company's national credit card portfolio of $118 million was carried
at its market value of $89 million. During 1997, negotiations with the
prospective purchaser were finalized, with the Company recording an additional
write-down on its national credit card portfolio of $4,645,000. The sale of the
national portfolio was consummated in August, 1997, but terms of the sale
specified that all economic activity of the national portfolio after December
31, 1996, including charge-offs, was passed to the purchaser. While there
remains a small dollar amount of credit card receivables that are outside the
Company's regional trade territory, these accounts are either customers who
belong to one of the affinity groups serviced through the Company's credit card
operations or customers who were formerly located in the Company's regional
trade territory and have relocated. Loss experience on these accounts has been
comparable to the Company's historical averages.
Net charge-offs in 1997 decreased significantly from prior year levels.
Again, this decline is attributable to the sale of the national portfolio.
During 1996, net charge-offs were $18,862,000, with net credit card charge-offs
totaling $17,744,000. Comparable 1997 amounts were $5,844,000 and $3,494,000,
respectively.
The overall economies of the Company's principal markets remained sound in
1997, resulting in favorable credit quality in the other business lines of the
Company's loan portfolio. The Company experienced significant growth in its
commercial loan portfolio in 1997. The Company does not believe that this growth
resulted from the lessening of credit standards, but rather from the continued
dislocation in the Company's principal markets. Net charge-offs in the
commercial, financial, agricultural and real estate areas continued to be quite
low. 1997 net charge-offs were $672,000. With approximately $750 million in
average loans in these business lines, the Company believes its ratio of net
charge-offs/average loans in the commercial sector would compare favorably to
industry averages. Net charge-offs on installment loans increased $427,000 this
year, after increasing $644,000 in 1996 and $214,000 in 1995. The increased
level of installment loan charge-offs was a function of both increased volumes
and somewhat higher loss rates. Average non-credit card consumer loans in 1997
increased approximately $40 million in 1997 and loss rates increased seven basis
points to 45 basis points. As noted in previous filings, loss rates in 1996
increased 17 basis points, from 1995's loss level of 21 basis points.
The Company's allowance for loan losses at year-end was equal to 266% of
nonaccrual, past due and restructured loans. The comparable percentages in 1996
and 1995 were 142% and 276%, respectively. The allowance for loan losses equaled
1.42%, 1.47% and 2.45%, of total loans outstanding at December 31, 1997, 1996
and 1995, respectively. While the allowance as a percentage of total loans has
declined in 1997, the Company believes the overall quality of the loan portfolio
has improved, as evidenced by the significant reduction in non-performing loans.
Non-performing loans at December 31, 1997 declined 38.2% from 1996 levels, after
increasing 16% in 1996. Total non-performing loans at December 31, 1997 were
$6,738,000, with $2,049,000 of this total comprised of non-performing credit
card loans. Comparable amounts in 1996 were $10,903,000 and $5,891,000,
respectively. The absence of the national credit card portfolio accounts for the
favorable year-over-year change. Non-performing loans as a percentage of total
year-end loans in 1997, 1996 and 1995 were .53%, 1.03% and .89%, respectively.
The largest single net charge-off during 1997 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.
Management continues to closely monitor its consumer lending exposure. Loans in
non-credit card consumer lending increased approximately $25 million during the
first half of 1997. The Company elected to reduce growth rates in this lending
area during the second half of the year through various pricing mechanisms. This
decision, coupled with the Company's securitization of approximately $45 million
in automobile loans in December, 1997, resulted in the reduction in year-end
installment loan outstandings reflected in Table 6. Loans outstanding in the
Company's other major consumer lending area, credit cards, showed a large
year-over-year increase in outstandings as detailed in Table 6. This increase
did not result from significant marketing efforts. Approximately $50 million in
previously securitized credit card outstandings were fully amortized in 1997.
Also, the Company decided to retain that portion of its national portfolio
comprised of accounts within existing affinity groups or which had other strong
relationship ties to the Company. These loans were contained in the line item
loans held-for-sale at December 31, 1996. The Company's credit card marketing in
1997 was all done on a local and regional basis. The Company has no intention of
pursuing any national marketing efforts. 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 1998. With a continued favorable
economic climate, the Company believes its provisions for loan losses and
write-downs in 1998 will be slightly less than that recorded in 1997.
NET INTEREST INCOME
-------------------
As was discussed in last year's Form 10-K, the Company anticipated that
changes in the composition of the loan portfolio, along with continued
competitive pressures, would result in compression in the interest margin. While
1997 saw the Company once again operate in a relatively stable interest rate
environment with respect to its funding costs, yields on interest-earning assets
did decline, resulting in a 44 basis point compression in the net yield on
interest-earning assets.
The interest rate environment present in 1997 continued to be indicative of
sustained growth coupled with low inflation. The yield curve experienced a
pronounced flattening during the year, with a spread of approximately 50 basis
points between three-month Treasury bill rates and the thirty-year Treasury note
existing at December 31, 1997. This is very similar to the yield curve that was
present at December 31, 1995. By comparison, the yield curve at December 31,
1996 had steepened to more traditional levels, with a spread of 130 basis points
between the Federal Funds rate and the thirty-year Treasury note rate.
Total interest income recorded by the Company in 1997 was $132,454,000,
essentially unchanged from the comparable 1996 amount of $132,463,000. Strong
growth in loan demand enabled the Company to reach this level of interest
income, as this growth offset the negative impact on interest income of the sale
of the relatively higher-yielding national credit card portfolio. Yields on net
loans in 1997 declined 76 basis points from 1996 levels. The Company estimates
that approximately 40% of this decline is attributable to the affect on yields
of the sale of the national credit card portfolio. As discussed in previous
filings, terms of the sale agreement provided that during the period January 1,
1997 through mid-August, 1997, the Company recognized interest income on a
reduced balance at a LIBOR-based rate, rather than recognizing interest income
on the entire receivable balance at contractual credit card interest rates. The
remaining decrease in the yield on net loans is attributable to both competitive
pressures and the overall decline in interest rates in the debt securities
market during the year, which impacted loan pricing.
Yields on total interest-earning assets declined 36 basis points for the
year, as the Company offset declines in the yield on net loans by increasing the
percentage of its interest-earning assets invested in loans. Overall loan demand
in the Company's primary markets remained strong during the year. Average net
loans, as a percentage of average total interest-earning assets were 78.8% in
1997, as compared to 72.4% in 1996 and 72.2% in 1995. Growth in the loan
portfolio occurred principally in the Company's commercial sector, as
commercial, financial and agricultural loans grew $137.8 million in 1997, after
increasing $69.5 million in 1996. Loans, as a percentage of deposits and
short-term debt averaged 77.3% in 1997, compared to 72.7% in 1996 and 72.9% in
1995. The Company's yield on investment securities changed little in 1997,
declining five basis points to 6.47%. Yield on investment securities in 1996 had
declined 22 basis points from prior year levels. The Company continued to
maintain an investment security portfolio with a relatively short weighted
average maturity. At December 31, 1997, the portfolio's weighted average
maturity was one year and nine months. The comparable term in 1996 was two
years.
Dislocation in the Company's principal markets continued in 1997, with the
Company again benefiting through growth in all deposit areas. Total average
deposits and short-term debt increased $98.3 million in 1997, after increasing
$100.5 million in 1996. Average non-interest bearing demand deposits increased
$31.5 million, as the Company acquired corporate deposits in connection with its
commercial loan growth. The Company continues to experience significant growth
in short-term repurchase agreements. Average short-term debt grew $29.2 million
in 1997, after increasing $36 million in both 1996 and 1995. The Company
believes this increase is attributable to its successful marketing of its cash
management products, along with its customers decreasing the term of their
investable funds due to the presence of the very flat yield curve.
The Company currently does not expect significant changes in the interest
rate environment in 1998, although any number of political considerations could
influence interest rates in 1998, as could events in Asia. However, as noted
above, the Company anticipates that changes in the composition of the loan
portfolio, combined with competitive changes in its principal marketplace are
expected to result in continued pressure on the interest margin, and that those
margins will decline in 1998. 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
------------------
After changing little in 1996, noninterest income in 1997 increased
$7,361,000, or 21.8% in 1997. Increases were recorded in all areas of
noninterest income.
Service charges on deposit accounts increased 8.6% this year, exceeding
$10,000,000. As discussed in previous quarterly filings, the Company continually
reviews its product offerings and pricing, and benefited in 1997 from the
increased volumes present during the year.
Trust and investment management fees increased $2,105,000, or 35.8% in 1997.
As indicated elsewhere the Company has made relatively significant investments
in this area of business during the last two years. Those investments are now
generating revenues. In 1996, trust fees were little changed from the prior
year, as the Company built its infrastructure. Assets under management for which
the Company has a fiduciary responsibility exceeded $2 billion at December 31,
1997, increasing 56% from December 31, 1996 levels.
Credit card fees increased 9.7%, as fees realized from merchant processing
services exceeded servicing fees lost as one of the Company's credit card
securitization programs contractually amortized during the year, and terminated
in December. As noted in previous filings, the Company no longer recognizes net
interest income and certain fee revenue, nor does it provide for loan losses on
the receivables that have been securitized and sold. Instead, servicing fee
income is received by the Company. The dollar amount of average credit card
receivables serviced in the securitization programs declined by approximately
25% in 1997, with the Company experiencing a proportional decline in servicing
fee revenues. The Company's servicing of national merchant accounts continued to
grow in 1997, with total revenues in this area increasing approximately $3.4
million. However, the Company also experienced significant increases in costs
with respect to this category of revenue, and made the decision in January, 1998
to service only those merchants that had operations in the Company's principal
markets. As a result of this decision, the portion of the merchant processing
portfolio comprised of national accounts was sold in January, 1998, with the
Company recording a pre-tax gain of approximately $1.4 million.
Other service charges, fees and income increased 47% from 1996, or
$3,186,000, to $9,965,000, as a full year of operations in some of the Company's
new lines of business generated additional fee revenue, and the Company recorded
$1.5 million in servicing fee revenue on the national portfolio for seven months
of 1997. This servicing fee revenue will not recur in 1998, nor will the
corresponding processing costs. The Company introduced its international
business services in 1997, and provided employee benefit plan education and
record-keeping services for a full year in 1997. These activities resulted in
the recording of approximately $700,000 in additional fee revenue in 1997.
Increased ATM activity, and service charges paid by non-customers for the use of
the Company's ATMs resulted in an additional $250,000 in fee revenue. Finally,
the securitization of consumer loans that was consummated in the fourth quarter
of 1997 resulted in the Company recording $165,000 in fee revenue for the year.
Total noninterest income in 1996 was little-changed from 1995 levels, as
increases in credit card fees and other service charges and fees were
approximately equal to the gain recorded on the sale of credit card loans
recorded in 1995. The credit card loans sold in 1995 resulted from the Company
ceasing to provide services to one of its affinity groups, and that affinity
group elected to repurchase the accounts of its members. The increase in credit
card fees in 1996 was attributable to the growth in the merchant portion of the
credit card business, which, as noted above, continued into 1997. Other service
charges, fees and income increased $846,000 in 1996 from 1995 levels, as
increases were realized in a number of areas, including data processing revenue,
gains on sale of residential real estate loans originated and sold, and various
sundry fees related to the Company's lending activities.
NONINTEREST EXPENSE
-------------------
Noninterest expense increased 5.9% in 1997, to $74,627,000. Increased
compensation costs and increases in other noninterest expenses exceeded
reductions realized in occupancy, postage and advertising costs.
Salaries and employee benefits increased $4,274,000, or 13.8% in 1997.
Approximately $1.7 million, or 40% of this increase is attributable to the
expansion of the Company's fee-based businesses. As noted in previous filings,
the Company has made significant investments in its trust and investment
management services business in 1996 and 1997. This investment has resulted in a
significantly higher level of assets under management and increased fee income,
as described above under "Noninterest Income". During 1997, the Company elected
to bring in-house certain personal computer services that had previously been
out-sourced. This decision, along with devoting increased resources to develop
the Company's Internet site, resulted in an increase of approximately $500,000
in compensation costs. In 1996, the Company significantly reduced its variable
pay awards to employees in recognition of the Company's decreased level of
profitability. With the Company's return to higher levels of profitability,
variable pay awards also returned to higher levels, resulting in a $600,000
increase in salaries and employee benefits. At December 31, 1997, the Company
had a total staff (on a full-time equivalent basis) of 901, compared to 890 and
877 at the end of 1996 and 1995, respectively. Salary end employee benefit costs
in 1997 represented 1.98% of average total assets, as compared to 1.84% and
1.87% in 1996 and 1995, respectively.
Salaries and employee benefits increased $1,359,000, or 4.6% in 1996, to
$30,913,000. Compensation costs associated with the establishment of new
fee-based businesses and a full year of operations at the Company's Ottawa
location were the principal causes of the increase in salaries and employee
benefits.
Net occupancy and equipment expense declined $488,000 in 1997, after
declining $1,549,000 in 1996. The Company recorded $550,000 in special charges
in 1997 related to the sale of an office building and the demolition of an
inefficient branch location. Impairment losses in 1996 and 1995 were $1,000,000
and $2,500,000, respectively.
Data processing expense was essentially unchanged from 1996 levels. However,
as noted above in the discussion of the change in salaries and employee
benefits, the Company elected to bring certain personal computer data processing
activities in-house, after previously outsourcing these activities. As a result,
data processing costs were approximately $500,000 less than they otherwise would
have been. The Company expended significant efforts in 1997 upgrading its
network infrastructure and developing its Internet site and check-image
capabilities. During 1996, the Company had a lesser level of development and was
able to recognize the increased efficiencies in its core processing systems that
came about from the Company's change in data processing vendors in 1994.
Supplies costs increased 10.4% in 1997, to $2,334,000. Increased volumes and
supplies required for the introduction of new products were the main reasons for
the increase.
As noted last year, the Company anticipated that its 1997 deposit insurance
assessment would be less than the amount recorded in 1996. During 1996, the
Company paid a one-time special assessment of approximately $750,000 to
recapitalize the Savings Association Insurance Fund. Such costs were not
incurred in 1997. The Company believes its assessment rate will remain stable
through 1998, with total costs impacted principally by changes in deposit
volumes.
Postage and dispatch costs declined in 1997, as investments in check-image
technology resulted in reduced postage costs associated with the mailing of
customer statements. The sale of the national credit card portfolio also
resulted in a reduction in the volume of statements mailed to the Company's
credit card customers. Advertising and promotional activities were $441,000 less
in 1997 than they were in 1996. The Company made greater use of targeted
marketing campaigns in 1997, employing less mass marketing techniques. Also, the
Company utilized more internal resources to more efficiently promote its credit
card marketing efforts.
Other noninterest expenses increased $1,648,000 or 11%. Costs associated with
the Company's processing of its national credit card merchant portfolio
increased approximately $2.8 million. Offsetting this increase in part were a
lesser level of fraud losses sustained in the cardholder segment of the credit
card business, as the national portfolio was sold, along with various reductions
in a number of other line items, none of which were individually significant.
Other noninterest expenses in 1996 increased $758,000 from 1995 levels, as the
Company made one-time payments to three vendors to terminate the multi-year
contractual relationship those vendors had with the Company.
Included in other noninterest expenses are the Company's payments to First
Data Resources, Inc. for credit card 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. As noted elsewhere, a generally
favorable economic environment was present in the region during 1997. The
Company believes a similar climate will be present in 1998. To a lesser extent,
the Company is also actively involved in certain areas of Oklahoma and the
Kansas City markets 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. The Company's loan
portfolio is comprised of customers in a number of industries, with the
manufacturing, agricultural and food service industries representing important
components of the portfolio. As the Company's principal market, Wichita, Kansas,
has a significant manufacturing presence in the general aviation industry. The
Boeing Company, Cessna Aircraft, Learjet, and Raytheon Aircraft all have
significant facilities in Wichita. During 1997, manufacturing employment in
Wichita increased 10%, principally as a result of the strength of the general
aviation market. While the uncertain situation in many of the Asian economies
could result in slower growth for this particular industry segment, it is
presently not thought that the difficulties in Asia will have an immediate,
significant impact on local employment levels. Food service industry borrowers
comprise an important part of the Company's commercial loan portfolio. The
Company believes that its risks in the food service industry are spread among a
number of different borrowers who are involved in a variety of different types
of food service in a number of geographic markets throughout the United States.
The agricultural industry is an important part of the overall Kansas economy. As
with its exposure in the food service industry, the Company's exposure in the
agricultural sector is spread among a number of different borrowers who are
engaged in different facets of the agricultural economy. Each loan in the
commercial portfolio is analyzed independently based upon the financial risk in
that particular situation.
Consumer credit is comprised of credit card and installment loans, and
represents a large concentration of overall risk in the loan portfolio. In large
part, installment receivables represent loans made to acquire automobiles and
are secured by the automobiles. While losses in this area of the loan portfolio
have increased modestly, the Company believes its loss experience in this
segment of consumer lending generally compares favorably to industry averages.
The Company does not engage in sub-prime automobile lending. Credit card
receivables are represented by Mastercard(R) and VISA(R) customers, and are
unsecured. As has been discussed elsewhere herein, the Company has exited the
national market for credit cards. The Company intends to aggressively pursue
consumer lending opportunities in its trade territory, but it does not intend to
embark on a national marketing campaign of its products in the future. The
volume and risk in all 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 three securitization transactions during
the last four years. These transactions allow the Company to free up capital for
other uses and to more effectively manage its balance sheet. Previous filings
have described the credit card securitizations that were concluded in December,
1994 and January, 1995. During 1997, the Company's floating rate credit card
securitization was renewed, while the fixed rate transaction commenced its
contractual amortization. At December 31, 1997, the fixed rate transaction, in
accordance with contractual terms, was fully amortized. In December, 1997 the
Company securitized and sold approximately $45 million of automobile loans. This
transaction also carries a floating interest rate, and provides that the Company
may, through December, 1998, securitize and sell up to $100 million in
automobile receivables through this conduit. In both of the securitization
transactions that are presently in place, neither the loan receivables sold or
the securities outstanding are defined as financial instruments of the Company,
but the Company continues to service the related credit card and automobile
accounts. The Company no longer recognizes net interest income and certain fee
revenue, nor does it provide for loan losses on the securitized portfolios.
Instead, servicing fee income is received by the Company. The automobile paper
securitization amortizes as principal payments on the securitized loans are
received.
At December 31, 1997, the aggregate amount of commitments to extend credit
outstanding was $414,224,000, excluding credit card lines of $761,593,000.
Comparable amounts at December 31, 1996 and 1995 were $366,264,000 and
$320,116,000, respectively. At December 31, 1997, the aggregate amount of
letters of credit outstanding was $39,654,000 compared to $33,756,000 at
December 31, 1996 and $30,846,000 at December 31, 1995.
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. The Company has the
ability, and management has the intent, to hold those investment securities
classified as held-to-maturity until maturity. In recognition of the significant
loan growth experienced by the Company, management elected to begin classifying
purchases of U.S. Government and Agency securities as available-for-sale. While
there has been no change in management's investment philosophy or intentions,
liquidity issues associated with continued loan growth could result in some
investment securities being sold prior to maturity, thus the Company's decision
to classify prospective purchases as available for sale. 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 that are
held-to-maturity, including mortgage-backed securities, in the next year of
$113,022,000. 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.
The Company also has $33,346,000 in investment securities that are classified as
available for sale which could provide an additional source of liquidity.
Further, 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 has securitized
and sold certain credit card and automobile paper receivables. 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, 1997, 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. Loans held-for-sale, net of
write-downs, are included in net loans in the table.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY
<CAPTION>
December 31, 1997 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 $674,311 $114,468 $139,758 $125,121 $207,291 $1,260,949
Investment Securities 44,784 17,892 50,055 112,547 81,872 307,150
Federal funds sold 89,615 0 0 0 0 89,615
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $808,710 $132,360 $189,813 $237,668 $289,163 $1,657,714
- ------------------------------------------------------------------------------------------------------------------------==========
Interest-bearing liabilities:
Interest-bearing deposits $739,838 $121,529 $ 88,176 $149,012 $ 65,158 $1,163,713
Federal funds purchased 183,678 0 0 0 0 183,678
Other borrowings 30,507 0 0 11,219 0 41,726
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $954,023 $121,529 $ 88,176 $160,231 $ 65,158 $1,389,117
- ------------------------------------------------------------------------------------------------------------------------==========
Interest rate sensitivity ($145,313) $ 10,831 $101,637 $ 77,437 $224,005
Cumulative interest rate sensitivity ($145,313) ($134,482) ($32,845) $ 44,592 $268,597
Cumulative interest rate sensitivity gap as a
percentage of total assets (7.55)% (6.99)% (1.71)% 2.32% 13.96%
Cumulative ratio of interest-sensitive assets to
interest-sensitive liabilities 84.77 % 87.50 % 97.18 % 103.37% 119.34%
</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 $76,005,000 for
the year ended December 31, 1997, as the net cash provided by operating and
financing activities exceeded the cash used in investing activities. Operating
activities provided $34,147,000 in cash in 1997, resulting primarily from net
earnings of $16,664,000 and noncash provisions for losses and depreciation of
$19,479,000. Cash outflows from investing activities totaled $143,720,000. These
outflows were the result of $132,822,000 in loan growth during the year and a
net increase in the Company's investment portfolio of $11,911,000. Financing
activities provided appreciably more cash in 1997 than they had in 1996 or 1995.
Company deposits increased $124,371,000 and short-term-borrowings (principally
repurchase agreements) increased $62,310,000.
For the year ended December 31, 1996, cash and cash equivalents declined
$29,879,000 as the net cash used in investing activities exceeded the net cash
provided by operating and financing activities. The $32,391,000 of net cash
provided by operating activities resulted from $47,064,000 in earnings, adjusted
for noncash charges and credits, offset in part by adjustment of $37,000 for
gain on sale of loans and changes in non-investment assets and non-financing
liabilities of $14,636,000. Cash outflows from investing activities resulted
primarily from net investments in loans of $138,831,000 and purchases of
investment securities of $101,770,000 net of $125,909,000 in securities matured
or called. Cash was provided by financing activities mainly because of increases
in deposits of $61,254,000. Increases in short-term borrowings of $11,062,000
substantially offset repurchases of treasury stock totaling $11,643,000.
The Company's ability to pay dividends on its common stock and interest on
its capital notes is dependent upon funds provided by dividends from the
Subsidiary Banks and such other funding sources as may be available to the
Company. In addition, the Company's debt agreements provide for minimal capital
levels that must be maintained as long as the indebtedness remains outstanding.
Total capital of the Company exceeded these requirements at December 31, 1997.
In January, 1998, the Company concluded a $57,500,000 public offering of trust
preferred stock. Terms of the issuance provide that payment of dividends to
common stockholders will be prohibited unless the Company has funded the payment
of the distributions due the trust preferred securities holders. The payment of
dividends by the Subsidiary Banks is restricted only by regulation. At December
31, 1997, approximately $4,494,000 was available from the Subsidiary Banks'
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, 1997 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, 1997, 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, 1997, the
Company's total capital to risk-weighted assets was 9.2% and its Tier 1 capital
to risk-weighted assets ratio was 7.9%. These ratios were 8.9% and 7.8%,
respectively in 1996.
As noted in the previous section, the Company concluded an offering of trust
preferred securities in January, 1998. These preferred securities are considered
capital for regulatory purposes. Pro forma capital ratios, as if the trust
preferred offering had been concluded at December 31, 1997 are as follows: total
capital to risk-weighted assets of 13% and Tier 1 capital to risk-weighted
assets of 8.8%.
While the Company does not have a formal stock buyback program, it will
consider repurchasing stock if and when it becomes available.
Capital ratios of the Subsidiary Banks are as follows:
INTRUST Will Rogers
Bank, N.A. Bank
---------- -----------
Leverage Ratio 7.8% 9.5%
Core Capital/Risk Weighted Assets 9.5% 12.8%
Total Capital/Risk Weighted Assets 10.7% 13.9%
Dividends declared in 1997 were $4,161,000 ($1.90 per share). Dividends of
$3,541,000 ($1.55 per share) and $3,518,000 ($1.50 per share) were declared in
1996 and 1995, respectively.
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 $13.8 million. The estimated book
value of financial assets exceeded its fair value by $12 million in 1996. The
year-over-year change is due to the increase in credit card outstandings in
1997, which occurred because of the amortization of one of the Company's credit
card securitization programs during the year. This resulted in the recording of
these credit card receivables on the Company's balance sheet, and since these
receivables carry a relatively higher interest rate, their estimated fair value
is higher than their carrying value.
The estimated fair value of financial liabilities at December 31, 1997
exceeded their book value by $25.1 million. This difference was $18.7 million in
1996. During 1997, the market value of the Company's common stock increased
approximately 37%. Since the estimated fair value of the Company's convertible
capital notes is based on the conversion feature of these notes, this increase
in the market value of the Company's common stock resulted in a proportionate
increase in the estimated fair value of the convertible capital notes.
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.
YEAR 2000 ISSUES
----------------
The Company, along with other financial institutions, will face potentially
serious issues associated with the inability of existing data processing
hardware and software to appropriately recognize calendar dates beginning in the
year 2000. Many computer programs that can only distinguish the final two digits
of the year entered may read entries for the year 2000 as the year 1900 and
compute payment, interest or delinquency based on the wrong date or are expected
to be unable to compute payment, interest or delinquency amounts. During 1997,
the Company began the process of identifying the many software applications and
hardware devices expected to be impacted by this issue.
The Company outsources its principal data processing activities to third
party vendors, and all significant software application systems are also
purchased from third parties. These outsourced systems include its core loan,
deposit, credit card, trust and general ledger systems. The Company believes
that its vendors are actively addressing the problems associated with the "Year
2000" issue. The Company's "Year 2000" action plan includes obtaining positive
confirmation from these vendors that their systems are "Year 2000" compliant,
and to test that compliance beginning in 1998. Other data processing
applications are principally PC-based, and while the Company believes its
personnel will devote time to testing the "Year 2000" compliance of these
systems, it does not expect significant operational issues associated with these
applications. The Company expects that efforts on the part of current employees
will be required to continue to monitor "Year 2000" activities, but does not
anticipate a significant increase in staff to address "Year 2000" issues. The
Company does not expect the costs of addressing "Year 2000" issues in a timely
manner will have a material impact on the Company's financial position or on its
results of operations. The Company believes that the efforts expended on "Year
2000" issues by its principal vendors may result in a delay in implementation of
certain core system enhancements which could have provided increased
efficiencies for the Company, but the Company does not expect that these delays
will have a material impact on the Company's financial position or its results
of operations.
Additionally, the failure of a commercial bank customer to prepare for Year
2000 compatibility could have a significant adverse effect on such customer's
operations and profitability, thereby impacting that customer's ability to repay
loans in accordance with their terms. Included in the Company's Year 2000
project plan are steps to develop processes to be employed in dealing with these
type issues with lending customers. However, until sufficient information is
accumulated to enable the Company to assess the degree to which customers'
operations are susceptible to potential problems relating to the Year 2000
issue, the Company will be unable to quantify the potential for losses from
loans to its commercial customers.
NEW ACCOUNTING STANDARDS
------------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This Statement is effective for fiscal
years beginning after December 15, 1997. The Company does not anticipate that
adoption of Statement No. 130 will have a material impact on its financial
statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This Statement is effective for financial statements for periods beginning after
December 15, 1997. The Company does not anticipate that adoption of Statement
No. 131 will have a material impact on its financial statements.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", revises employers'
disclosures about pension and other postretirement benefit plans effective for
fiscal years beginning after December 15, 1997. It does not change the
measurement or recognition of those plans. The Company does not anticipate that
adoption of Statement No. 132 will have a material impact on its financial
statements.
<PAGE>
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
<TABLE>
AVERAGE BALANCE SHEET (Table 1)
- --------------------------------------------------------------------------------------------------------------------------
The daily average amounts by condensed categories for the past three years is presented below (Dollars in thousands):
<CAPTION>
Year Ended December 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
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 $ 112,923 6.3% $ 89,060 5.3% $ 80,204 5.1%
Taxable Investment Securities 266,962 15.0 308,299 18.4 249,407 15.8
Nontaxable Investment
Securities 20,640 1.2 27,333 1.6 45,152 2.9
Federal Funds Sold 43,961 2.5 78,083 4.7 95,718 6.1
Loans (net of allowance for loan losses) 1,229,924 69.4 1,084,774 64.6 1,014,339 64.3
Building and Equipment 27,821 1.6 28,415 1.7 31,390 2.0
Other 70,870 4.0 62,242 3.7 60,395 3.8
- --------------------------------------------------------------------------------------------------------------------------
Total $1,773,101 100.0% $1,678,206 100.0% $1,576,605 100.0%
- ----------------------------------------------============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Demand Deposits $ 302,901 17.1% $ 271,355 16.2% $ 258,844 16.4%
Savings and Interest-Bearing
Demand Deposits 567,264 32.0 542,422 32.3 497,746 31.6
Time Deposits 555,129 31.3 542,414 32.3 535,061 33.9
Short-Term Debt 164,858 9.3 135,669 8.1 99,695 6.3
Long-Term Debt 33,627 1.9 30,840 1.8 33,822 2.2
Other Liabilities 20,993 1.2 18,846 1.1 18,866 1.2
Stockholders' Equity 128,329 7.2 136,660 8.2 132,571 8.4
- --------------------------------------------------------------------------------------------------------------------------
Total $1,773,101 100.0% $1,678,206 100.0% $1,576,605 100.0%
- ----------------------------------------------============================================================================
</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 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Income or Rate Balance Income or Rate Balance Income or Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taxable Investment Securities $ 266,962 $ 16,398 6.14% $ 308,299 $ 19,061 6.18% $ 249,407 $ 14,892 5.97%
Nontaxable Invest-
ment Securities* 20,640 1,396 10.77 27,333 1,907 10.38 45,152 3,329 10.98
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities* 287,602 17,794 6.47 335,632 20,968 6.52 294,559 18,221 6.74
Federal Funds Sold 43,961 2,424 5.51 78,083 4,183 5.36 95,718 5,581 5.83
Net Loans 1,229,924 112,236 9.13 1,084,774 107,312 9.89 1,014,339 104,117 10.26
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning
Assets* $1,561,487 $132,454 8.54% $1,498,489 $132,463 8.90% $1,404,616 $127,919 9.22%
- --------------------------------==============================================================================================
<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 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
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 $ 567,264 $17,002 3.00% $ 542,422 $15,292 2.82% $ 497,746 $14,347 2.88%
Time Deposits 555,129 32,282 5.82 542,414 32,042 5.91 535,061 30,843 5.76
- ------------------------------------------------------------------------------------------------------------------------------
Total Deposits 1,122,393 49,284 4.39 1,084,836 47,334 4.36 1,032,807 45,190 4.38
Short-Term Debt 164,858 8,278 5.02 135,669 6,739 4.97 99,695 5,504 5.52
Long-Term Debt 33,627 2,585 7.69 30,840 2,363 7.66 33,822 2,766 8.18
- ------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities $1,320,878 $60,147 4.55% $1,251,345 $56,436 4.51% $1,166,324 $53,460 4.58%
- --------------------------------==============================================================================================
Net Differential $ 240,609 $72,307 $ 247,144 $76,027 $ 238,292 $74,459
- --------------------------------====================------------====================------------====================----------
Net Yield on Interest-
Earning Assets 4.63% 5.07% 5.30%
- ---------------------------------------------------------=====---------------------------=====---------------------------=====
</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 1997 to 1996 and
from 1996 to 1995.
Net interest income decreased in 1997 as a result of negative rate variances. The increase in 1997 due to volume
changes is primarily because of an increase in net loans. Decreases in yields on earning assets, especially loans,
coupled with increases in rates paid on interest-bearing liabilities produced the negative rate variance. Average
interest-earning assets grew to a greater extent than interest- bearing liabilities, resulting in an increase in net
interest income due to volume changes.
<CAPTION>
1997 vs. 1996 1996 vs. 1995
- ----------------------------------------------------------------------------------------------------------------
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 $(2,663) $(2,540) $ (123) $ 4,169 $ 3,625 $ 544
Nontaxable Investment
Securities (511) (454) (57) (1,422) (1,252) (170)
- ----------------------------------------------------------------------------------------------------------------
Total Investment Securities (3,174) (2,994) (180) 2,747 2,373 374
Federal Funds Sold (1,759) (1.878) 119 (1,398) (970) (428)
Net Loans 4,924 13,654 (8,730) 3,195 7,057 (3,862)
- ----------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets (9) 8,782 (8,791) 4,544 8,460 (3,916)
- ----------------------------------------------------------------------------------------------------------------
Savings and Interest-Bearing
Demand Deposits 1,710 719 991 945 1,265 (320)
Time Deposits 240 744 (504) 1,199 428 771
- ----------------------------------------------------------------------------------------------------------------
Total Deposits 1,950 1,463 487 2,144 1,693 451
Short-Term Debt 1,539 1,465 74 1,235 1,830 (595)
Long-Term Debt 222 214 8 (403) (235) (168)
- -----------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 3,711 3,142 569 2,976 3,288 (312)
- -----------------------------------------------------------------------------------------------------------------
Net Interest Income $(3,720) $ 5,640 $(9,360) $ 1,568 $ 5,172 $(3,604)
- -----------------------------------------========================================================================
</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):
1997 1996 1995
- --------------------------------------------------------------------------------
U.S. Treasury Securities $ 85,969 $129,701 $151,268
U.S. Agency Securities 200,779 139,892 132,723
State, County and Municipal Securities 17,519 23,259 33,043
Other Securities 2,883 2,786 3,212
- --------------------------------------------------------------------------------
Total $307,150 $295,638 $320,246
- ------------------------------------------======================================
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, 1997 is as follows
(Dollars in thousands):
<CAPTION>
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>
U.S.Treasury Securities $ 85,969 5.7% $ 55,160 5.6% $ 30,809 6.0% $ 0 0.0% $ 0 0.0% 10.2 mos.
1 year,
U.S. Agencies 200,778 6.0 54,640 5.4 134,367 6.1 11,771 7.1 0 0.0 10.1 mos.
State, County and 4 years,
Municipal Securities* 17,520 9.8 3,137 10.9 9,362 9.7 3,867 9.3 1,154 8.8 1.4 mos.
9 years,
Other Securities 2,883 4.8 85 4.6 34 0.0 0 0.0 2,764 4.8 7.3 mos.
1 year,
Total $307,150 6.1% $113,022 5.7% $174,572 6.3% $15,638 7.7% $3,918 6.0% 9.4 mos.
<FN>
*Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
</TABLE>
<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):
<CAPTION>
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial, Financial
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
and Agricultural $ 623,707 49.4% $ 485,891 46.1% $ 416,428 39.5% $ 377,553 35.7% $389,513 40.0%
Real Estate-Construction 29,179 2.3 27,130 2.5 25,491 2.4 21,415 2.0 17,725 1.8
Real Estate-Mortgage 230,133 18.2 210,591 20.0 181,894 17.2 184,513 17.4 199,026 20.5
Installment, excluding
credit card 259,074 20.5 286,632 27.2 258,713 24.5 261,706 24.8 200,937 20.6
Credit card 120,366 9.6 43,868 4.2 173,270 16.4 212,051 20.1 166,021 17.1
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal 1,262,459 100.0% 1,054,112 100.0% 1,055,796 100.0% 1,057,238 100.0% 973,222 100.0%
Allowance for loan losses (17,932) (15,536) (25,892) (19,886) (21,793)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Loans $1,244,527 $1,038,576 $1,029,904 $1,037,352 $951,429
- ----------------------------======================================================================================================
</TABLE>
<PAGE>
<TABLE>
MATURITIES AND SENSITIVITY TO INTEREST RATE CHANGES (Table 7)
- ------------------------------------------------------------------------------------------------------------------
The maturity distribution of loans outstanding at December 31, 1997 (excluding Real Estate- Mortgage, and
Installment) by type and sensitivity to interest rate changes is as follows (Dollars in thousands):
<CAPTION>
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 $ 52,139 $ 2,878
and Agricultural $424,587 $174,741 $24,379
Real Estate- Floating or
Construction 15,457 6,750 6,972 Adjustable Rate 129,352 28,473
- ---------------------------------------------------------------- ---------------------------------------------
Total $440,044 $181,491 $31,351 Total $181,491 $31,351
- -----------------------------=================================== -----------------------======================
<FN>
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.
</FN>
</TABLE>
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):
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $4,618 $ 5,208 $3,988 $2,843 $2,756
Past Due Loans 2,120 5,695 5,383 3,074 2,053
Restructured Loans 0 0 0 336 370
- --------------------------------------------------------------------------------
Total $6,738 $10,903 $9,371 $6,253 $5,179
- ------------------------------------============================================
Gross interest income that would have been recorded in 1997 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 $520,000. The amount of interest
on those loans that was actually included in income for the period was $7,568.
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 0.4 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):
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amount of loans at year-end $1,262,459 $1,054,112 $1,055,796 $1,057,238 $973,222
- ------------------------------------------------------============================================================================
Average loans outstanding $1,246,145 $1,110,485 $1,037,067 $1,013,831 $834,412
- ------------------------------------------------------============================================================================
Beginning balance of allowance for loan losses $15,536 $25,892 $19,886 $21,793 $16,099
Allowance of banks acquired 0 0 172 164 3,579
Loans charged-off:
Commercial, Financial and Agricultural 1,613 1,414 2,672 845 211
Real Estate-Construction 0 46 0 0 50
Real Estate-Mortgage 61 15 85 248 56
Installment 1,972 1,584 999 662 680
Credit Cards 4,136 18,770 12,089 5,779 4,682
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans charged off 7,782 21,829 15,845 7,534 5,679
- ----------------------------------------------------------------------------------------------------------------------------------
Recoveries on charge-offs:
Commercial, Financial and Agricultural 973 1,579 1,926 1,261 1,031
Real Estate-Construction 0 0 0 0 0
Real Estate-Mortgage 29 29 40 134 175
Installment 294 333 392 269 251
Credit Cards 642 1,026 1,203 837 741
- ----------------------------------------------------------------------------------------------------------------------------------
Total recoveries 1,938 2,967 3,561 2,501 2,198
- ----------------------------------------------------------------------------------------------------------------------------------
Net loans charged off 5,844 18,862 12,284 5,033 3,481
Provision charged to expense 8,240 20,151 18,118 2,962 5,596
Transfer to write down loans held for sale 0 11,645 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $17,932 $15,536 $25,892 $19,886 $21,793
- ------------------------------------------------------============================================================================
Net charge-offs/average loans 0.47% 1.70% 1.18% 0.50% 0.42%
- ------------------------------------------------------============================================================================
Allowance for loan losses/loans at year-end 1.42% 1.47% 2.45% 1.88% 2.24%
- ------------------------------------------------------============================================================================
</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: 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $ 7,590 $ 5,181 $ 7,613 $ 6,694 $ 8,638
Real Estate-Construction 179 341 221 339 271
Real Estate-Mortgage 2,380 1,992 2,621 4,104 4,680
Installment 2,469 1,978 868 1,414 1,624
Credit Cards 5,314 6,044 14,569 7,335 6,580
- ---------------------------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $17,932 $15,536 $25,892 $19,886 $21,793
- ---------------------------------------------------------========================================================================
</TABLE>
<TABLE>
Percent of loans in each category to total loans 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 49.4% 46.1% 39.5% 35.7% 40.0%
Real Estate-Construction 2.3 2.5 2.4 2.0 1.8
Real Estate-Mortgage 18.2 20.0 17.2 17.4 20.5
Installment 20.5 27.2 24.5 24.8 20.6
Credit Cards 9.6 4.2 16.4 20.1 17.1
- ----------------------------------------------------------------------------------------------------------------------------------
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 $17,932,000 adequate to cover losses inherent in
loans outstanding at December 31, 1997. 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 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand Deposits $ 302,901 - $ 271,355 - $ 258,844 -
Interest-Bearing Demand 498,464 3.14% 467,747 2.93% 421,296 2.98%
Savings Deposits 68,800 2.08 74,676 2.10 76,450 2.33
Time Deposits 555,129 5.82 542,414 5.91 535,061 5.76
- -------------------------------------------------------------------------------------------------------------
Total $1,425,294 $1,356,192 $1,291,651
- ---------------------------------==========----------------==========----------------==========--------------
</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 1997
- --------------------------------------------------------------------------------
Time deposits in amounts of $100,000
or more maturing in:
3 months or less $ 49,907
Over 3 months through 6 months 24,613
Over 6 months through 12 months 31,554
Over 12 months 33,655
- --------------------------------------------------------------------------------
Total $139,729
- ----------------------------------------------------------------------==========
RETURN ON EQUITY AND ASSETS (Table 12)
- --------------------------------------------------------------------------------
The following table presents a three year history of certain operating ratios:
Year Ended December 31 1997 1996 1995
- --------------------------------------------------------------------------------
Return on Average Assets 0.94 0.10 0.79
Return on Average Equity 12.99 1.23 9.34
Dividend Payout Ratio 24.97 210.81 28.40
Average Equity to Average Assets Ratio 7.24 8.14 8.41
SHORT-TERM BORROWINGS (Table 13)
- --------------------------------------------------------------------------------
Borrowings 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 1997 1996 1995
- --------------------------------------------------------------------------------
Securities Sold Under Repurchase Agreements
Ending Balance $142,338 $85,685 $61,230
Ending Balance Rate 4.76% 4.75% 5.22%
Largest Month-End Balance $145,164 $111,221 $62,012
Average Balance $117,647 $91,914 $52,606
Average Interest Rate 4.79% 4.74% 5.34%
Securities Sold Under Repurchase Agreements are transactions in which the
Company sells securities and agrees to repurchase the identical securities at a
specified date for a specified price.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1997 1996
- --------------------------------------------------------------------------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 171,494 $ 123,378
Federal funds sold and securities purchased under
agreements to resell 89,615 61,726
- --------------------------------------------------------------------------------
Total cash and cash equivalents 261,109 185,104
- --------------------------------------------------------------------------------
Investment securities:
Held-to-maturity 270,971 291,404
Available-for-sale 33,346 1,498
Equity, at cost 2,833 2,736
- --------------------------------------------------------------------------------
Total investment securities 307,150 295,638
- --------------------------------------------------------------------------------
Loans held-for-sale, net of unrealized losses of
$0 in 1997 and $29,120 in 1996 16,422 102,063
Loans, net of allowance for loan losses of
$17,932 in 1997 and $15,536 in 1996 1,244,527 1,038,576
Land, buildings and equipment, net 26,529 28,501
Accrued interest receivable 12,955 11,462
Other assets 55,130 60,058
- --------------------------------------------------------------------------------
Total assets $1,923,822 $1,721,402
- -------------------------------------------------------=========================
Liabilities and Stockholders' Equity
Deposits:
Demand $ 389,053 $ 317,297
Savings and interest-bearing demand 599,739 554,505
Time 563,974 556,593
- --------------------------------------------------------------------------------
Total deposits 1,552,766 1,428,395
- --------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased and securities sold under
agreements to repurchase 183,678 117,726
Other 7,507 11,149
- --------------------------------------------------------------------------------
Total short-term borrowings 191,185 128,875
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities 13,007 13,159
Notes payable 23,000 17,660
Convertible capital notes 11,219 11,219
- --------------------------------------------------------------------------------
Total liabilities 1,791,177 1,599,308
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,415,071 shares issued 12,075 12,075
Capital surplus 12,377 12,377
Retained earnings 124,877 112,374
Treasury stock, at cost (240,667 shares in 1997
and 210,161 shares in 1996) (17,081) (14,799)
Unrealized securities gains, net of tax 397 67
- --------------------------------------------------------------------------------
Total stockholders' equity 132,645 122,094
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,923,822 $1,721,402
- -------------------------------------------------------=========================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Income
Years Ended December 31, 1997, 1996 and 1995
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1997 1996 1995
- --------------------------------------------------------------------------------
Interest income:
Loans $112,236 $107,312 $104,117
Investment securities:
Taxable 16,398 19,061 14,892
Nontaxable 1,396 1,907 3,329
Federal funds sold, securities purchased
under agreements to resell, and other 2,424 4,183 5,581
- --------------------------------------------------------------------------------
Total interest income 132,454 132,463 127,919
- --------------------------------------------------------------------------------
Interest expense:
Deposits:
Savings and interest-bearing demand 17,002 15,292 14,347
Time 32,282 32,042 30,843
Federal funds purchased and securities sold
under agreements to repurchase 7,879 6,395 5,041
Convertible capital notes 1,010 1,038 1,076
Other borrowings 1,974 1,669 2,153
- --------------------------------------------------------------------------------
Total interest expense 60,147 56,436 53,460
- --------------------------------------------------------------------------------
Net interest income 72,307 76,027 74,459
Provision for write-down of loans held-for-sale 4,645 17,475 0
Provision for loan losses 8,240 20,151 18,118
- --------------------------------------------------------------------------------
Net interest income after provision
for loan losses 59,422 38,401 56,341
- --------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 10,001 9,207 9,053
Trust fees 7,979 5,874 5,718
Credit card fees 13,019 11,871 10,898
Gain on sale of credit card loans 0 0 2,018
Securities gains 165 37 0
Other service charges, fees and income 9,965 6,779 5,933
- --------------------------------------------------------------------------------
Total noninterest income 41,129 33,768 33,620
- --------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 35,187 30,913 29,554
Net occupancy and equipment expense 8,819 9,307 10,856
Advertising and promotional activities 4,282 4,723 3,609
Data processing expense 3,605 3,584 4,686
Supplies 2,334 2,113 2,841
Postage and dispatch 2,200 2,310 2,387
Goodwill amortization 1,615 1,599 1,596
Deposit insurance assessment 151 1,103 1,638
Other 16,434 14,786 14,028
- --------------------------------------------------------------------------------
Total noninterest expense 74,627 70,438 71,195
- --------------------------------------------------------------------------------
Income before provision for income taxes 25,924 1,731 18,766
Provision for income taxes 9,260 51 6,379
- --------------------------------------------------------------------------------
Net income $ 16,664 $ 1,680 $ 12,387
- --------------------------------------------------==============================
Per share data:
- --------------------------------------------------------------------------------
Basic earnings per share $7.60 $0.74 $5.28
- --------------------------------------------------==============================
Diluted earnings per share $6.74 $0.74 $4.77
- --------------------------------------------------==============================
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, 1997, 1996 and 1995
<CAPTION>
Unrealized Total
Dollars in thousands except Common Capital Retained Treasury Securities Stockholders'Equity
per share data Stock Surplus Earnings Stock Gains
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Net income 0 0 1,680 0 0 1,680
Cash dividends ($1.55 per share) 0 0 (3,541) 0 0 (3,541)
Capital notes converted to stock 75 377 0 0 0 452
Purchase of treasury stock 0 0 0 (11,643) 0 (11,643)
Net change in unrealized gains on
available-for-sale securities 0 0 0 0 (17) (17)
- -----------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1996 12,075 12,377 112,374 (14,799) 67 122,094
Net income 0 0 16,664 0 0 16,664
Cash dividends ($1.90 per share) 0 0 (4,161) 0 0 (4,161)
Purchase of treasury stock 0 0 0 (2,282) 0 (2,282)
Net change in unrealized gains on
available-for-sale securities 0 0 0 0 330 330
- -----------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 $12,075 $12,377 $124,877 $(17,081) $397 $132,645
- ---------------------------------------================================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
<CAPTION>
Dollars in thousands 1997 1996 1995
- ------------------------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
<S> <C> <C> <C>
Net Income $ 16,664 $ 1,680 $ 12,387
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and write-downs 12,885 37,626 18,118
Provision for depreciation and amortization 6,594 6,679 7,022
Amortization of premium and accretion of
discount on investment securities (580) 31 788
Write-down of real estate to estimated market value 0 1,048 2,584
Gain on sale of investment securities (165) (37) 0
Gain on sale of loans 0 0 (2,018)
Changes in assets and liabilities, net of effect
from purchase of acquired entity:
Loans held for sale (3,518) (5,330) (6,889)
Other assets (1,589) (825) (3,679)
Income taxes 4,975 (8,896) (3,888)
Interest receivable (1,493) 1,086 (1,625)
Interest payable 167 (38) 809
Other liabilities (15) (420) 429
Other 222 (213) (1)
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 34,147 32,391 24,037
- ------------------------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Purchase of investment securities (170,777) (101,770) (169,124)
Investment securities matured or called 158,866 125,909 146,596
Proceeds from sale of investment securities 1,463 472 0
Net increase in loans (235,519) (138,831) (61,952)
Proceeds from sale of loans 102,697 0 62,108
Purchases of land, buildings and equipment (4,770) (5,128) (3,485)
Proceeds from sale of land, buildings and equipment 2,297 43 44
Proceeds from sale of other real estate and repossessions 3,364 3,657 3,396
Purchase of banks, net of cash and cash equivalents acquired 0 0 5,783
Other (1,341) (920) (370)
- ------------------------------------------------------------------------------------------------
Net cash absorbed by investing activities (143,720) (116,568) (17,004)
- ------------------------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Net increase in deposits 124,371 61,254 50,725
Net increase in short-term borrowings 62,310 11,062 50,020
Payments on notes payable (2,660) (2,650) (2,640)
Proceeds from notes payable 8,000 0 0
Retirement of convertible capital notes 0 (184) (146)
Cash dividends (4,161) (3,541) (3,518)
Purchase of treasury stock (2,282) (11,643) (1,380)
- ------------------------------------------------------------------------------------------------
Net cash provided by financing activities 185,578 54,298 93,061
- ------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 76,005 (29,879) 100,094
Cash and cash equivalents at beginning of year 185,104 214,983 114,889
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 261,109 $ 185,104 $ 214,983
- ----------------------------------------------------------------================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
INTRUST FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1997, 1996, and 1995
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 "Subsidiary Banks") (In 1996, The First Bank, Moore,
Oklahoma was merged into Will Rogers Bank); NestEgg Consulting Inc. and INTRUST
Community Development Corporation (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 and Use of Estimates - 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 Held-for-Sale - Loans originated and/or intended for sale are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.
d) 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 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.
From time to time, the Company sells loans, primarily through individual loan
or bulk sale transactions and through securitization transactions. The carrying
amount of loans sold is removed from the Company's statements of financial
position at the date of sale. The Company allocates the carrying amount of the
loans between the loans sold and any interest retained based on their relative
fair values. Fair value of any interest retained is based on discounted cash
flow analysis performed by the Company. Gains and losses on the sale of loans is
recorded based on the net proceeds received less the allocated carrying amount
of the loans sold.
e) Provision for Loan Losses - Each period the provision for loan losses in
the consolidated statements of income results from the combination of a) an
estimate by management of loan losses that occurred during the current period
and b) the ongoing adjustment of prior estimates of losses occurring in prior
periods.
To serve as a basis for making this provision each quarter, the bank
maintains an extensive credit risk monitoring process that considers several
factors including: current economic conditions affecting the banks customers,
the payment performance of individual large loans and pools of homogeneous small
loans, portfolio seasoning, changes in collateral values, and detailed reviews
of specific large loan relationships. For large loans deemed to be impaired due
to an expectation that all contractual payments will probably not be received,
impairment is measured by comparing the banks recorded investment in the loan to
the present value of expected cash flows discounted at the loans effective
interest rate, the fair value of the collateral or the loans observable market
price.
The provision for loan losses increases the allowance for loan losses, a
valuation account which is netted against loans on the consolidated statements
of financial condition. As the specific customer and amount of a loan loss is
confirmed by gathering additional information, taking collateral in full or
partial settlement of the loan, bankruptcy of the borrower, etc., the loan is
written down, reducing the allowance for loan losses. If, subsequent to a
write-down, the bank is able to collect additional amounts from the customer or
obtain control of collateral worth more than earlier estimated, a recovery is
recorded, increasing the allowance for loan losses.
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.
f) 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
g) 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 at
the date of settlement, foreclosure or abandonment. 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. These assets are included as a component of other assets in the
consolidated statements of financial condition and amounted to $665 and $541 at
December 31, 1997 and 1996, respectively.
h) Goodwill and Core Deposit Premium - 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 $14,960 and $16,587, net of accumulated
amortization, at December 31, 1997 and 1996, respectively.
i) Stock-Based Compensation - The Company accounts for stock options using
the intrinsic value based method of accounting. Pro forma disclosures, as if the
fair value based method of accounting had been applied, have not been presented
since such disclosures would not result in material differences from the
intrinsic value method.
j) 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 as a result of a
change in tax rates is recognized in income in the period that includes the
enactment date.
k) Trust Fees - Trust fees are recorded on the accrual basis.
l) Earnings Per Share - Basic earnings per share is computed based upon the
weighted average number of shares outstanding. Diluted earnings per share
includes shares issuable upon exercise of stock options and with the assumption
that the 9% convertible subordinated capital notes (note 10) had been converted
into common stock as of the beginning of each respective period presented with
related adjustments to interest and income tax expense. The following is a
reconciliation of the numerators and denominators of basic and diluted earnings
per share:
1997 1996 1995
- --------------------------------------------------------------------------------
Net income for basic earnings per share $16,664 $1,680 $12,387
Interest expense on convertible debt,
net of taxes 656 * 699
- --------------------------------------------------------------------------------
Net income for diluted earnings per share $17,320 $1,680 $13,086
- -------------------------------------------------===============================
Weighted average shares for basic earnings
per share 2,193,268 2,285,337 2,344,762
Shares issuable upon exercise of stock options 2,262 * 0
Shares issuable upon conversion of capital notes 373,967 * 398,545
- --------------------------------------------------------------------------------
Weighted average shares for diluted earnings
per share 2,569,497 2,285,337 2,743,307
- -------------------------------------------------===============================
* For 1996, diluted earnings per share is considered to be the same as basic
earnings per share, since the effect of exercise of stock options (285 shares)
and the conversion of subordinated capital notes (387,178 shares) would be
antidilutive.
m) 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:
1997 1996 1995
- --------------------------------------------------------------------------------
Interest $59,974 $56,474 $52,651
Income taxes 4,285 8,947 10,267
Noncash investing and financing activities
included the following:
1997 1996 1995
- --------------------------------------------------------------------------------
Acquisitions (note 2):
Assets acquired $ 0 $ 0 $34,794
Liabilities assumed 0 0 40,577
- --------------------------------------------------------------------------------
Assets net of liabilities acquired 0 0 (5,783)
Loans transferred to other assets 3,145 3,281 3,512
Investments transferred from
held-to-maturity at amortized cost (3,651) 0 (1,630)
Investments transferred to available-for-
sale at estimated market value 4,118 0 1,714
- --------------------------------------------------------------------------------
2) Acquisitions
The following acquisitions were made during 1996 and 1995:
Company Acquired Acquisition Date Purchase Price
- ---------------- ---------------- --------------
NestEgg Consulting Inc. November 1, 1996 $ 75
The First National Bank of Ottawa December 1, 1995 $3,500
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 statements 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 transactions occurred at the
beginning of the respective years of acquisition, was not significant.
3) Investment Securities
The amortized cost and estimated fair values of investment securities are as
follows at December 31:
Gross Gross
1997 Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $ 85,969 $ 179 $ 18 $ 86,130
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 153,037 291 145 153,183
Available-for-sale 29,958 0 15 29,943
U.S. Government Agency
mortgage-backed securities:
Held-to-maturity 14,532 528 1 15,059
Available-for-sale 2,855 412 0 3,267
Obligations of state and
political subdivisions:
Held-to-maturity 17,383 699 14 18,068
Available-for-sale 136 0 0 136
Other Securities:
Held-to-maturity 50 0 0 50
Equity Securities 2,833 0 0 2,833
- --------------------------------------------------------------------------------
Total held-to-maturity $270,971 $1,697 $178 $272,490
- ----------------------------------==============================================
Total available-for-sale $ 32,949 $ 412 $ 15 $ 33,346
- ----------------------------------==============================================
Total equity $ 2,833 $ 0 $ 0 $ 2,833
- ----------------------------------==============================================
Gross Gross
1996 Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $129,701 $ 476 $236 $129,941
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 120,016 244 563 119,697
U.S. Government Agency
mortgage-backed securities:
Held-to-maturity 19,876 824 56 20,644
Obligations of state and
political subdivisions:
Held-to-maturity 21,761 1,021 16 22,766
Available-for-sale 1,431 68 1 1,498
Other Securities:
Held-to-maturity 50 0 0 50
Equity Securities 2,736 0 0 2,736
- --------------------------------------------------------------------------------
Total held-to-maturity $291,404 $2,565 $871 $293,098
- ----------------------------------==============================================
Total available-for-sale $ 1,431 $ 68 $ 1 $ 1,498
- ----------------------------------==============================================
Total equity $ 2,736 $ 0 $ 0 $ 2,736
- ----------------------------------==============================================
Proceeds from sales of investment securities during 1997, 1996 and 1995 were
$1,463, $472 and $0, respectively. Gross realized gains on sales of
available-for-sale securities were $165, $37 and $0 in 1997, 1996 and 1995,
respectively.
The amortized cost and estimated fair value of investment securities (other
than equity securities) at December 31, 1997, by contractual maturity, are shown
as follows. 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.
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
Due in one year or less:
Held-to-maturity $102,766 $102,749
Available-for-sale 10,192 10,221
Due after one year through five years:
Held-to-maturity 151,549 152,518
Available-for-sale 22,621 22,989
Due after five years through ten years:
Held-to-maturity 15,638 16,082
Available-for-sale 0 0
Due after ten years:
Held-to-maturity 1,018 1,141
Available-for-sale 136 136
- --------------------------------------------------------------------------------
Total held-to-maturity $270,971 $272,490
- -------------------------------------------------------=========================
Total available-for-sale $ 32,949 $ 33,346
- -------------------------------------------------------=========================
For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on the weighted-average contractual maturities of the underlying collateral. The
mortgage-backed securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.
Investment securities, which are under the Company's control, with a book
value of $262,873 and $227,297 at December 31, 1997 and 1996, respectively, were
pledged as collateral for public and trust deposits and for other purposes as
required by law.
4) Loans Held-For-Sale
Loans held-for-sale, at December 31, 1996, included a portion of the
Company's credit card portfolio. These loans consisted of certain designated
accounts located outside of the Company's traditional market area. These loans,
which aggregated $118,278, had been written down to their estimated market value
of $89,158 in 1996. The Company sold these loans to a third party during 1997
after an additional write-down of $4,645.
Also included in loans held-for-sale at December 31, 1997 and 1996, were
approximately $16,422 and $12,904, respectively, of mortgage loans accounted for
at cost which approximated market value.
5) Loans
The composition of the loan portfolio at December 31, is as follows:
1997 1996
- --------------------------------------------------------------------------------
Commercial, financial and agricultural $ 623,707 $ 485,891
Real estate-construction 29,179 27,130
Real estate-mortgage 230,133 210,591
Installment, excluding credit card 259,074 286,632
Credit card 120,366 43,868
- --------------------------------------------------------------------------------
Subtotal 1,262,459 1,054,112
Allowance for loan losses (17,932) (15,536)
- --------------------------------------------------------------------------------
Net Loans $1,244,527 $1,038,576
- ----------------------------------------------------============================
Certain directors of the Company or related parties of these directors had
loans from the Subsidiary Banks aggregating $36,571 and $37,319 at December 31,
1997 and 1996, 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, 1996 $ 38,308 Additions $ 59,386 Repayments (61,123)
- --------------------------------------------------------------------------------
Loans at December 31, 1997 $ 36,571
- ----------------------------------------------------------------------==========
The following table discloses information about the recorded investment in
loans that the Company has classified as impaired:
(A) (B) (C) (D)
Amount in (A) for Amount in (A) for
Which There Is a Allowance Which There Is No
Total Impaired Related Allowance Associated With Related Allowance
Year End Loans for Credit Losses Amounts in (B) for Credit Losses
- -------- -------------- ----------------- --------------- ------------------
1997 $3,397 $1,879 $665 $1,518
1996 $3,082 $1,973 $687 $1,109
The average recorded investment in impaired loans for the years ended
December 31, 1997 and 1996, was $3,579 and $3,309, respectively. 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 $240 and $163 for the years
ended December 31, 1997 and 1996.
6) Allowance for Loan Losses
Transactions in the allowance for loan losses were as follows:
1997 1996 1995
- --------------------------------------------------------------------------------
Balance at beginning of year $ 15,536 $ 25,892 $ 19,886
Provision charged to expense 8,240 20,151 18,118
Transfer to write down loans held-for-sale 0 (11,645) 0
Allowance of banks acquired 0 0 172
Loans charged off (7,783) (21,829) (15,845)
Recoveries 1,939 2,967 3,561
- --------------------------------------------------------------------------------
Balance at end of year $ 17,932 $ 15,536 $ 25,892
- -----------------------------------------------=================================
The Company recorded net charge-offs in its credit card portfolio in 1997,
1996 and 1995 of $3,500, $17,700 and $10,900, respectively. The 1996 and 1995
provision for loan losses was increased in recognition of the increased level of
charge-offs.
7) Land, Buildings and Equipment
A summary of land, buildings and equipment is as follows:
December 31,
1997 1996
- --------------------------------------------------------------------------------
Land $ 5,495 $ 5,482
Buildings and improvements 30,418 32,497
Furniture, fixtures and equipment 27,244 25,800
- --------------------------------------------------------------------------------
63,157 63,779
Less accumulated depreciation (36,628) (35,278)
- --------------------------------------------------------------------------------
Total $ 26,529 $ 28,501
- -------------------------------------------------------=========================
Depreciation expense for the years 1997, 1996 and 1995 was approximately
$4,099, $4,269 and $4,630, respectively.
8) Time Deposits
Time certificates of deposit and other time deposits of $100 or more included
in total deposit liabilities at December 31, 1997 and 1996 were $139,729 and
$121,962, respectively. Interest expense on this classification of time deposits
for the years ended December 31, 1997, 1996 and 1995 totaled $7,569, $7,116 and
$6,736, respectively.
At December 31, 1997, the scheduled maturities of time deposits are as
follows:
1998 $348,427
1999 149,017
2000 40,830
2001 8,618
2002 and thereafter 17,082
- --------------------------------------------------------------------------------
Total $563,974
- -----------------------------------------------------------------------=========
9) 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,
1997, 1996 and 1995, was $191,185, $173,645 and $126,763, respectively. For the
years ended December 31, 1997, 1996 and 1995, the weighted average interest rate
on these borrowings was 5.0%, 5.0% and 5.5%, respectively, on average balances
outstanding of $164,858, $135,669 and $99,695, respectively.
Notes payable at December 31, 1997 includes a term loan to another financial
institution with an unpaid principal balance of $15,000. The term loan carries a
floating rate of interest and is repayable in annual principal installments of
$2,500, with the final payment due in 2003. The floating interest rate reprices
based on a Eurodollar interest period selected by the Company. The rate on the
indebtedness is computed based on a premium to the lender's Eurodollar Base
Rate. The indebtedness is secured by the outstanding common stock of INTRUST
Bank N.A. At December 31, 1997, the interest rate on the term loan was 7.14%.
The Company has a $10,000 line of credit agreement, subject to annual
renewal, with the financial institution that has issued the term loan. At
December 31, 1997, there was an outstanding principal balance of $8,000 under
this credit facility. There was no outstanding balance as of December 31, 1996.
The interest rate on the line of credit is calculated in the same manner as the
term loan.
10) 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, 1997, 384,929 shares of the Company's unissued common stock
were reserved for conversion of the convertible capital notes. In 1996,
convertible capital notes, with a face value of $183 were redeemed for cash, and
notes, with a face value of $452, were converted into 15,071 shares of the
Company's common stock. There were no notes redeemed for cash or converted to
common stock during 1997.
11) Employees' Retirement Plans
The Company's employee retirement plan covers substantially all full-time
employees who meet eligibility requirements as to age and tenure. The 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 1997, 1996 and 1995 was $321, $357 and $601, respectively.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements.
December 31,
1997 1996
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 6,887 $ 6,213
Non-vested 123 100
- --------------------------------------------------------------------------------
Total $ 7,010 $ 6,313
- ---------------------------------------------------------=======================
Projected benefit obligation $ 8,821 $ 7,838
Plan assets at fair value (10,288) (8,572)
- --------------------------------------------------------------------------------
Plan assets greater than projected benefit obligation 1,467 734
Unrecognized net transition asset being amortized
over 15 years (380) (475)
Unrecognized net (gain) loss due from assumptions made (85) 439
Unrecognized prior service cost (380) (426)
- --------------------------------------------------------------------------------
Prepaid pension cost $ 622 $ 272
- ---------------------------------------------------------=======================
Pension expense is comprised of the following:
1997 1996 1995
- --------------------------------------------------------------------------------
Service cost-benefits earned during the year $ 647 $ 649 $ 607
Interest cost on projected benefit obligation 514 517 482
Return on plan assets (698) (667) (556)
Net amortization and deferral (142) (142) (88)
Net loss from settlement 0 0 156
- --------------------------------------------------------------------------------
Total $ 321 $ 357 $ 601
- -------------------------------------------------===============================
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, the Company recognized $156 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 1997 or 1996.
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, 1997 and 1996, $4,043 and $4,012 had been accrued for the liability
under these agreements and is included in accounts payable and accrued
liabilities in the accompanying consolidated statements of financial condition.
Expense recognized in 1997, 1996 and 1995 was $656, $603 and $516, respectively,
and is included in salaries and employee benefits in the accompanying
consolidated statements of income.
12) Income Taxes
The provision for income taxes from operations includes the following
components:
1997 1996 1995
- --------------------------------------------------------------------------------
Current:
Federal $ (4,717) $ 7,174 $ 8,649
State 424 686 2,001
- --------------------------------------------------------------------------------
(4,293) 7,860 10,650
- --------------------------------------------------------------------------------
Deferred:
Federal 13,276 (6,631) (3,230)
State 277 (1,178) (1,041)
- --------------------------------------------------------------------------------
13,553 (7,809) (4,271)
- --------------------------------------------------------------------------------
Total $ 9,260 $ 51 $ 6,379
- ----------------------------------------------==================================
The provision for income taxes noted above produced effective income tax
rates of 35.7%, 2.9% and 34.0% for the years ended December 31, 1997, 1996 and
1995, respectively. The reconciliations of these effective income tax rates to
the federal statutory rates are shown below:
1997 1996 1995
- --------------------------------------------------------------------------------
Total income tax as reported 35.7% 2.9% 34.0%
Tax exempt income 2.0 38.1 5.9
Amortization of excess purchase price over
net assets acquired (2.1) (19.2) (1.3)
State income tax, net of federal income
tax benefit (1.7) 18.5 (3.4)
Other 1.1 (5.3) (0.2)
- --------------------------------------------------------------------------------
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, 1997 and
1996 are presented as follows:
1997 1996
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $ 6,936 $ 5,973
Loans held-for-sale 0 11,312
Buildings and equipment 232 4,477
Other real estate owned 176 457
Deferred compensation 1,568 1,557
Net operating loss carryforwards 2,854 2,155
Investment securities 392 538
Deposits 2,084 2,088
Other 328 229
- --------------------------------------------------------------------------------
Total gross deferred tax assets 14,570 28,786
Less valuation allowances 1,273 1,973
- --------------------------------------------------------------------------------
Deferred tax assets, net of valuation allowances 13,297 26,813
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Pension (475) (363)
Prepaid loan fees (314) (289)
Core deposit premium (43) (75)
Loans (292) (136)
Other (43) (267)
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities (1,167) (1,130)
- --------------------------------------------------------------------------------
Net deferred tax assets $ 12,130 $ 25,683
- ----------------------------------------------------------======================
At December 31, 1997, current income taxes receivable of $8,268 were included
in other assets. At December 31, 1996, current income taxes payable of $267 were
included in accounts payable and accrued liabilities. The net deferred tax
assets noted above were included in other assets.
At December 31, 1997, the Company had net operating loss deductions available
to carryforward of approximately $50,325 for state purposes which expire in
varying amounts from 1998 through 2006 and $373 for federal purposes which
expire from 2003 through 2009.
The valuation allowance at December 31, 1997 is attributable to certain net
operating loss carryforwards for state and federal tax purposes.
13) Commitments and Contingent Liabilities
At December 31, 1997, the Subsidiary Banks were required to have $7,846 held
as reserves with the Federal Reserve Bank.
At December 31, 1997, 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 as follows:
Minimum
Payments
- --------------------------------------------------------------------------------
1998 $ 3,154
1999 3,067
2000 3,074
2001 2,940
2002 2,801
Remainder 7,614
- --------------------------------------------------------------------------------
Total $22,650
- -------------------------------------------------------------------=======------
Lease rentals included in net occupancy and equipment expense for the years
ended December 31, 1997, 1996 and 1995 amounted to $1,057, $912 and $829,
respectively.
Payments on long-term data processing agreements included in data processing
expense for the years ended December 31, 1997, 1996 and 1995 totaled
approximately $1,559, $1,499 and $1,441, respectively.
One of the Company's data processing agreements has a term of eight years
ending in the year 2003. 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 advice 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.
14) Stockholders' Equity
Dividend Restriction
The Company's ability to pay dividends on its common stock and interest on
its indebtedness is dependent upon funds provided by dividends from the
Subsidiaries and such other funding sources as may be available to the Company.
In addition, the Company's debt agreements provide for minimum capital levels
that must be maintained as long as the indebtedness remains outstanding. Total
capital of the Company exceeded these requirements at December 31, 1997. The
payment of dividends by the Subsidiaries is restricted only by regulatory
authority. At December 31, 1997, approximately $4,494 was available from the
Subsidiaries' retained earnings for distribution as dividends to the Company
without regulatory approval.
Regulatory Capital
The Company and its Subsidiary Banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material affect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Subsidiary Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require minimum amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital (as defined) to average assets (as defined). As
of December 31, 1997, the consolidated ratios of the Company and for each of the
Subsidiary Banks meet all capital adequacy requirements to which they are
subject.
As of the most recent notification, the Subsidiary Banks were categorized as
"well capitalized" under the regulatory framework for prompt corrective action.
To be categorized as "well capitalized" the Subsidiary Banks must maintain
minimum ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Subsidiary
Banks' categories.
Actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of December 31, 1997:
Total Capital (to Risk Weighted Assets):
<S> <C> <C> <C> <C> <C> <C>
Consolidated $136,903 9.2% $118,870 8.0% N/A
INTRUST Bank, N.A. $149,456 10.7% $111,365 8.0% $139,206 10.0%
Will Rogers Bank $ 12,352 13.9% $ 7,104 8.0% $ 8,880 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $116,728 7.9% $ 59,435 4.0% N/A
INTRUST Bank, N.A. $132,477 9.5% $ 55,682 4.0% $ 83,524 6.0%
Will Rogers Bank $ 11,400 12.8% $ 3,552 4.0% $ 5,328 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $116,728 6.4% $ 73,672 4.0% N/A
INTRUST Bank, N.A. $132,477 7.8% $ 68,757 4.0% $ 85,946 5.0%
Will Rogers Bank $ 11,400 9.5% $ 4,885 4.0% $ 6,106 5.0%
As of December 31, 1996:
Total Capital (to Risk Weighted Assets):
Consolidated $119,207 8.9% $106,772 8.0% N/A
INTRUST Bank, N.A. $127,206 10.1% $100,481 8.0% $125,602 10.0%
Will Rogers Bank $ 11,233 15.1% $ 5,969 8.0% $ 7,461 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $104,183 7.8% $ 53,386 4.0% N/A
INTRUST Bank, N.A. $117,581 9.4% $ 50,241 4.0% $ 75,361 6.0%
Will Rogers Bank $ 10,322 13.8% $ 2,984 4.0% $ 4,477 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $104,183 6.3% $ 67,320 4.0% N/A
INTRUST Bank, N.A. $117,581 7.6% $ 62,691 4.0% $ 78,363 5.0%
Will Rogers Bank $ 10,322 8.9% $ 4,785 4.0% $ 5,981 5.0%
</TABLE>
Stock Option Plan
The Board of Directors of the Company on May 9, 1995, adopted, with
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. All options under the plan vest in 20% annual increments over
a five year period. At December 31, 1997, there were options granted and
unexercised for a total of 85,000 shares. The options outstanding have exercise
prices between $58 and $86, with a weighted average exercise price of $70. Of
the 85,000 shares granted, 17,500 were exercisable at December 31, 1997.
15) 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 30% 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.
16) 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 statements of financial
condition. The following summarizes those financial instruments, excluding
credit card lines of $761,593, with contract amounts representing credit risk:
Commitments to extend credit $414,224
Commercial and standby letters of credit $ 39,654
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. In November 1997, the Company sold
approximately $45,000 of consumer automobile loans. Neither the credit card
receivables or the consumer automobile loans sold, or the securities outstanding
as a result of these transactions are defined as financial instruments of the
Company, however the Company continues to service the related credit card
accounts and automobile loans. During 1997, $50,000 of securities related to the
December 1994 securitization were repaid. As a result of the securitization
transactions, the Company no longer recognizes net interest income and certain
fee revenue, nor does it provide for loan losses on the securitized portfolio.
Instead, the Company receives servicing fee income. During 1997, 1996 and 1995,
the Company recognized $4,813, $6,595 and $6,972, respectively, in servicing fee
income, which is included in credit card fees and other service charges, fees
and income in the accompanying consolidated statements of income.
In connection with these securitization transactions, the Company was
required to establish cash reserve accounts for the benefit of the purchasers.
These cash reserve accounts represent retained interests in the loans sold as
described in Note 1. The retained interests, consisting primarily of the cash
reserve accounts, totaled $5,256 and $5,000 at December 31, 1997 and 1996,
respectively.
17) 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 Held-for-Sale
The carrying amounts for loans held-for-sale are considered reasonable
estimates of fair value.
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, 1997 and 1996. 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 16.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
- ------------------------------------------------------------------------------------------
Financial assets:
<S> <C> <C> <C> <C>
Cash and due from banks $ 171,494 $ 171,494 $ 123,378 $ 123,378
Federal funds sold and securities
purchased under agreements to resell 89,615 89,615 61,726 61,726
Investment securities 307,150 308,669 295,638 297,332
Loans held-for-sale 16,422 16,422 102,063 102,063
Loans, net 1,244,527 1,256,826 1,038,576 1,048,883
Accrued interest receivable 12,955 12,955 11,462 11,462
- ------------------------------------------------------------------------------------------
Financial liabilities:
Deposits:
Demand $ 389,053 $ 389,053 $ 317,297 $ 317,297
Savings and interest-bearing demand 599,739 599,739 554,505 554,505
Time 563,974 568,083 556,593 562,969
Short-term borrowings 191,185 191,185 128,875 128,875
Accrued interest payable 4,678 4,678 4,506 4,506
Notes payable 23,000 23,000 17,660 17,660
Convertible capital notes 11,219 32,255 11,219 23,560
</TABLE>
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.
18) New Accounting Standards
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This Statement is effective for fiscal
years beginning after December 15, 1997. The Company does not anticipate that
adoption of Statement No. 130 will have a material impact on its financial
statements.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information", establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This Statement is effective for financial statements for periods beginning after
December 15, 1997. The Company does not anticipate that adoption of Statement
No. 131 will have a material impact on its financial statements.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", revises employers'
disclosures about pension and other postretirement benefit plans effective for
fiscal years beginning after December 15, 1997. It does not change the
measurement or recognition of those plans. The Company does not anticipate that
adoption of Statement No. 132 will have a material impact on its financial
statements.
<PAGE>
19) Parent Company Only Financial Statements
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Financial Condition
December 31, 1997 and 1996
Dollars in thousands except per share data 1997 1996
- --------------------------------------------------------------------------------
Assets
Cash $ 1,852 $ 1,493
Investment securities, held-to-maturity 441 576
Equipment 305 744
Investment in subsidiaries 161,250 146,744
Current and deferred income taxes 407 0
Other 3,550 2,582
- --------------------------------------------------------------------------------
Total assets $167,805 $152,139
- ---------------------------------------------------------=======================
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 859 $ 755
Accrued interest payable 82 87
Current and deferred income taxes 0 484
Notes payable 23,000 17,500
Convertible capital notes payable 11,219 11,219
- --------------------------------------------------------------------------------
Total liabilities 35,160 30,045
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,415,071 shares issued 12,075 12,075
Capital surplus 12,377 12,377
Retained earnings 124,877 112,374
Treasury stock (17,081) (14,799)
Unrealized securities gains, net of tax 397 67
- --------------------------------------------------------------------------------
Total stockholders' equity 132,645 122,094
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $167,805 $152,139
- ---------------------------------------------------------=======================
<PAGE>
19) Parent Company Only Financial Statements (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Income
Years Ended December 31, 1997, 1996 and 1995
Dollars in thousands except per share data 1997 1996 1995
- --------------------------------------------------------------------------------
Dividends from subsidiaries $ 5,850 $1,300 $25,250
Interest income 126 342 221
Fees charged subsidiary banks 2,110 1,619 1,574
Other income 439 0 0
- --------------------------------------------------------------------------------
Total income 8,525 3,261 27,045
- --------------------------------------------------------------------------------
Operating expenses:
Interest expense 2,571 2,339 2,734
Salaries and employee benefits 2,161 1,972 1,546
Other expense 1,035 1,360 1,231
- --------------------------------------------------------------------------------
Total operating expenses 5,767 5,671 5,511
- --------------------------------------------------------------------------------
Income (loss) before income tax benefit and equity
in undistributed net income of subsidiaries 2,758 (2,410) 21,534
Income tax benefit 1,614 1,470 1,289
- --------------------------------------------------------------------------------
Income (loss) before equity in undistributed net
income of subsidiaries 4,372 (940) 22,823
Equity in undistributed net income of subsidiaries 12,292 2,620 (10,436)
- --------------------------------------------------------------------------------
Net income $16,664 $1,680 $12,387
- ------------------------------------------------------==========================
Note: Parent Company Only Statements of Stockholders' Equity are the same as the
Consolidated Statements of Stockholders' Equity.
<PAGE>
19) Parent Company Only Financial Statements (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
Dollars in thousands 1997 1996 1995
- --------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
Net income $ 16,664 $ 1,680 $12,387
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net income
of subsidiaries (12,292) (2,620) 10,436
Depreciation 466 475 474
Accretion of discount on investment securities (30) (41) (52)
(Increase) decrease in other assets (968) (772) 12
Increase (decrease) in accounts payable and
accrued liabilities 97 (483) (465)
Increase (decrease) in current and
deferred income taxes (890) 150 (34)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by
operating activities 3,047 (1,611) 22,758
- --------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Capital expenditures (26) (13) (23)
Investment securities matured or called 165 165 163
Investment in subsidiaries (1,884) (1,147) (1,500)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (1,745) (995) (1,360)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Payments on notes payable (2,500) (2,500) (2,500)
Proceeds from notes payable 8,000 0 0
Retirement of capital notes 0 (183) (146)
Dividends paid (4,161) (3,542) (3,518)
Purchase of treasury stock, net (2,282) (11,643) (1,380)
- --------------------------------------------------------------------------------
Net cash absorbed by financing activities (943) (17,868) (7,544)
- --------------------------------------------------------------------------------
Increase (decrease) in cash 359 (20,474) 13,854
Cash at beginning of year 1,493 21,967 8,113
- --------------------------------------------------------------------------------
Cash at end of year $ 1,852 $ 1,493 $21,967
- ------------------------------------------------------==========================
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To INTRUST Financial Corporation:
We have audited the accompanying consolidated statements of financial condition
of INTRUST Financial Corporation and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. 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 principles used and significant 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
February 13, 1998
<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 1999, 2000 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.
RONALD L. BALDWIN, 44, 1999, has been director of the Company and Vice
Chairman of IB since 1996. From 1976 until 1996 Mr. Baldwin was employed by
Fourth Financial Corporation, an $8 billion banking institution headquartered in
Wichita, Kansas. He served Fourth Financial Corporation as executive
vice-president.
RICK L. BEACH, 47, has been Executive Vice President and Chief Credit Officer
of the Company since January 1997. He was Senior Vice President of the Company
from 1995 to 1997 and Vice President from 1988 to 1995.
C. ROBERT BUFORD, 64, 2000, 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.
FRANK L. CARNEY, 59, 1998, has been a director of the Company since 1982.
Since 1979 he has been self-employed in a private investment company, Carney
Enterprises. 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 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.
In June 1996, he became President and Manager of P.J. Wichita, L.L.C., a
development stage company. In December 1997, he became President and Manager of
P.J. Nor-Cal, L.L.C., a development stage company.
RICHARD G. CHANCE, 50, 1999, 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, 71, 1998, has been Chairman of the Board and Chief
Executive Officer of the Company since 1982. He was Chairman of the Board and
Chief Executive Officer of IB from 1975 until 1996. Mr. Chandler was 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, 44, 2000, 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. In 1996, he was elected Chairman and President of IB. Mr.
Chandler is the son of Charles Q. Chandler.
GEORGE T. CHANDLER, 76, 2000, 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.
STEPHEN L. CLARK, 56, 2000, has been a director of the Company since April,
1997 and director of IB since 1993. During the past five years, Mr. Clark has
been owner of Clark Investment Group which primarily invests in real estate
development including office buildings and self storage units.
ROBERT L. DARMON, 73, 2000, 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, 62, 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., 72, 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., 63, 2000, has been a director of the Company since 1982.
During the past five years, Mr. Eby has been Chief Executive Officer 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.
RICHARD M. KERSCHEN, 56, 1998, has been a director of the Company since
April, 1997 and director of IB since 1993. During the past five years, Mr.
Kerschen has been Chairman of the Board and President of The Law Company, Inc. a
commercial real estate construction company.
THOMAS D. KITCH, 54, 1998, has been a director of the Company since April,
1997 and director of IB since 1993. During the past five years, Mr. Kitch has
been a practicing attorney with the law firm of Fleeson, Gooing, Coulson &
Kitch, LLC.
ERIC T. KNORR, 55, 1999, 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, 62, 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 energy company.
J.V. LENTELL, 59, 1999, 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.
In 1995, he became a director of Renters Choice, Inc.
WILLIAM B. MOORE, 45, 1999, has been a director of the Company since April
1997 and an advisory director of IB from 1993 to 1997. Mr. Moore has been
Chairman of the Board of Kansas Gas and Electric Company since 1995. From 1992
to 1995, he was Vice President-Finance of Western Resources, the parent company
of Kansas Gas and Electric Company.
PAUL A. SEYMOUR Jr., 74, 1999, has been a director of the Company since 1982.
Mr. Seymour was President of Arrowhead Petroleum Inc. A petition under Chapter
11 of the United States Bankruptcy Code was filed in December 1990 in the United
States Bankruptcy Court for the District of Kansas by Arrowhead Petroleum, Inc.
Bankruptcy proceedings by Arrowhead Petroleum, Inc. were dismissed, effective
March 20, 1996. Arrowhead Petroleum, Inc. has been liquidated.
DONALD C. SLAWSON, 64, 1999, 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
development.
JOHN T. STEWART III, 62, 2000, has been a director of the Company since 1982.
During the past five years, Mr. Stewart's principal occupation has been Chairman
of the Board and Director of First National Bank, Medford, Oklahoma, Caldwell
State Bank, Caldwell, Kansas and First National Bank, Wellington, Kansas.
<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 four executive officers during each of
the last three fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------
(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 1997 $263,333 $ 62,500 $22,360 5,000 $74,148
COB & CEO of the Company 1996 330,000 0 22,360 0 69,006
1995 325,002 132,000 22,360 20,000 61,920
C.Q. Chandler IV 1997 $325,000 $148,500 $12,729 10,000 $20,209
President of the Company, 1996 262,500 0 0 7,500 15,735
Chairman, President of IB 1995 215,000 64,500 490 10,000 14,264
J.V. Lentell 1997 $228,333 $ 80,500 $ 0 5,000 $ 9,500
Director of the Company 1996 219,167 0 0 5,000 9,500
Vice Chairman of IB 1995 215,000 64,500 0 2,500 9,240
R.L. Baldwin 1997 $206,667 $ 73,500 $ 0 5,000 $ 2,188
Director of the Company 1996 168,455 0 0 5,000 0
Vice Chairman of IB
R.L. Beach 1997 $108,333 $ 33,000 $ 0 2,500 $ 3,250
Executive Vice President of the
Company and of IB
</TABLE>
R.L. Baldwin became an employee and executive officer of IB in February of 1996;
the table reflects compensation paid to Mr. Baldwin subsequent to such time.
R.L. Beach became an executive officer in January of 1997. There were no other
individuals who were considered executive officers of the Company at December
31, 1997.
(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. C.Q. J.V. R.L. R.L.
Chandler Chandler IV Lentell Baldwin Beach
-------- ----------- ------- ------- -----
Above-market amounts earned on
deferred compensation plans $67,723 $10,709 $ 0 $ 0 $ 0
Company contributions to
401(k) plan 6,425 9,500 9,500 2,188 3,250
----------------------------------------------
$74,148 $20,209 $9,500 $2,188 $3,250
==============================================
STOCK OPTION PLAN
-----------------
The Board of Directors of the Company on May 9, 1995, adopted, with
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, 1997, there were options granted and
unexercised for a total of 85,000 shares. The options outstanding have exercise
prices between $58 and $86, with a weighted average exercise price of $70. Of
the 85,000 shares granted, 17,500 were exercisable at December 31, 1997.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
- -------------------------------------------------------------------------------- --------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price
Name (#) Fiscal Year ($/Sh) Expiration Date 5%($) 10%($)
- -------------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 5,000 16.7% $86 12/09/07 $270,000 $ 685,000
C.Q. Chandler IV 10,000 33.3% $86 12/09/07 $541,000 $1,371,000
J.V. Lentell 5,000 16.7% $86 12/09/07 $270,000 $ 685,000
R.L. Baldwin 5,000 16.7% $86 12/09/07 $270,000 $ 685,000
R.L. Beach 2,500 8.3% $86 12/09/07 $135,000 $ 343,000
</TABLE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at December 31, 1996 at December 31, 1996
------------------------------ -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------------ -------------------------
C.Q. Chandler 8,000/17,000 $242,000/$374,250
C.Q. Chandler IV 5,500/22,000 $155,875/$343,500
J.V. Lentell 2,000/10,500 $53,500/$149,625
R.L. Baldwin 1,000/9,000 $23,250/$104,250
R.L. Beach 500/4,500 $11,625/$52,125
The fair market value of the Company's common stock, used to calculate the
value of in-the-money options, was $88.25 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
$100,000 $20,165 $ 26,887 $ 33,609 $ 40,331 $ 47,053
150,000 31,415 41,887 52,359 62,831 73,303
200,000 42,665 56,887 71,109 85,331 99,553
250,000 53,915 71,887 89,859 107,831 125,803
300,000 65,165 86,887 108,609 130,331 152,053
350,000 76,415 101,887 127,359 152,831 178,303
400,000 87,665 116,887 146,109 175,331 204,553
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, 1997, 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 12/31/97 OF 12/31/97 RETIREMENT AGE(65)
- ---- --------------- ------------------- -----------------------
C.Q. Chandler (1) $263,333 47.75 41.50
C.Q. Chandler IV 325,000 22.00 42.50
J.V. Lentell 228,333 31.83 37.42
R.L. Baldwin 206,667 1.92 21.40
R.L. Beach 108,333 10.00 28.00
(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. In addition, directors who are not full-time bank employees of IB
receive $150 for each Discount Committee and CRA 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 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, 1997, for
C.Q. Chandler and C.Q. Chandler IV, would have been $1,785,517 and $3,118,455
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, Richard G. Chance, and Donald C. Slawson. None of the members of the
committee have ever 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 10, 1998 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 10, UPON CONVERSION OF FACE AMOUNT OF
NAME ADDRESS 1998(2) CAPITAL NOTES(3) CAPITAL NOTES
- ---- ------- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
Ronald L. Baldwin 13915 Pinnacle Dr. 2,655(4) 93(4) $ 2,800
Wichita, KS 67230
Rick L. Beach 123 E. Hamlin Rd. 630(5) 0 $ 0
Andover, KS 67002
C. Robert Buford 9176 E. 13th St. 2,053 293 $ 8,800
Wichita, KS 67206
Frank L. Carney 2611 Wilderness Court, 1,132 732 $ 22,000
Wichita, KS 67226
Richard G. Chance 676 S. 119th St. W. 180 0 $ 0
Wichita, KS 67235
Charles Q. Chandler Box One 72,808(6) 16,736(6) $ 502,100
Wichita, KS 67201
Charles Q. Chandler IV Box One 44,561(7) 20,766(7) $ 623,000
Wichita, KS 67201
Anderson W. Chandler 4718 West Hills Dr. 321,969(8) 47,946(8) $1,438,400
Topeka, KS 66606
David T. Chandler c/o First National Bank 312,061(8) 48,337(8) $1,450,200
Pratt, KS 67124
George T. Chandler c/o First National Bank 270,243(8) 28,739(8) $ 862,200
Pratt, KS 67124
Stephen L. Clark 1625 N. Gatewood 25 0 $ 0
Wichita, KS 67206
Robert L. Darmon 8509 Huntington 5,880(9) 1,140(9) $ 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 6,798 2,398 $ 72,000
Wichita, KS 67201
Warren B. Gillespie 8201 E. Harry 120,000 0 $ 0
Unit 303
Wichita, KS 67202
Richard M. Kerschen 144 Rutland 25 0 $ 0
Wichita, KS 67206
Thomas D. Kitch 115 S. Rutan 25 0 $ 0
Wichita, KS 67218
Eric T. Knorr P.O. Box 206 25,194(10) 1,879(10) $ 56,400
Wichita, KS 67201
Charles G. Koch P.O. Box 2256 99,084 8,566 $ 257,000
Wichita, KS 67201
J.V. Lentell 1700 Laurel Cove 2,125(11) 0 $ 0
Wichita, KS 67206
William B. Moore 2764 N. North Shore Ct. 100 0 $ 0
Wichita, KS 67205
Paul A. Seymour, Jr. 8500 Killarney Place 121,031(12) 20,131(12) $ 604,000
Wichita, KS 67206
Donald C. Slawson 104 South Broadway, 3,820(13) 2,320 $ 69,600
Suite 200
Wichita, KS 67202
John T. Stewart III Box 2 145,226 24,106 $ 723,200
Wellington, KS 67152
Polly G. Townsend Five Live Oak 120,000 0 $ 0
Fernandina Beach, FL 32034
Directors and Executive
Officers as a Group (22 persons) 808,380(14) 128,824(14) $3,865,100
</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 3.32% 2.97% 4.48%
Charles Q. Chandler IV 2.03% 1.09% 5.55%
Anderson W. Chandler* 14.51% 12.62% 12.82%
David T. Chandler* 14.06% 12.15% 12.93%
George T. Chandler* 12.28% 11.12% 7.69%
Warren B. Gillespie 5.53% 5.53% 0.00%
Eric T. Knorr 1.16% 1.07% 0.50%
Charles G. Koch 4.55% 4.17% 2.29%
Paul A. Seymour, Jr. 5.52% 4.65% 5.38%
John T. Stewart III 6.61% 5.58% 6.45%
Polly G. Townsend 5.53% 5.53% 0.00%
*Includes shares directly owned and shares controlled as co-trustees. See (8).
The Directors and Executive Officers as a group beneficially owned
34.89% of the Company's common stock including shares issuable upon
conversion of the capital notes, 31.05% of the common stock excluding
shares issuable upon conversion of the capital notes, and 34.45% of the
capital notes.
(2) Includes shares issuable upon conversion of the capital notes and upon
exercise of common stock options.
(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) Mr. Baldwin's beneficial ownership includes 1,562 share of common
stock, currently exercisable options to purchase 1,000 shares of
common stock and $2,800 of capital notes (93 shares) over which he
shares voting and investment powers with his wife, Cindy Baldwin.
(5) Includes currently exercisable options to purchase 500 shares of
common stock.
(6) Includes currently exercisable options to purchase 8,000 shares of
Common Stock. 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), 241,504 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 18,295
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).
(7) Includes currently exercisable options to purchase 5,500 shares of
common stock. Does not include 95 shares of common stock owned by
Marla J. Chandler (wife).
(8) 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) 34,844 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 voting
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.
(9) Mr. Darmon's beneficial ownership is comprised of 45 shares of common
stock held in his name over which he has sole voting and investment
power and 4,695 shares of common stock and $34,200 of capital notes
(1,140 shares) held in a trust with his wife, Beatrice F. Darmon, with
whom he shares voting and investment power.
(10) Mr. Knorr's beneficial ownership is comprised of: (a) $29,200 of
capital notes (973 shares) held in his name; (b) 1,252 shares of
common stock held by him in an Individual Retirement Account; (c)
16,523 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.
(11) Includes currently exercisable options to purchase 2,000 shares of
common stock.
(12) Mr. Seymour's beneficial ownership is comprised of the following: (a)
100 shares of common stock held in his name over which he has sole
voting and investment power; (b) 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; (c) 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; (d) 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; (e) 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.
(13) Mr. Slawson's beneficial ownership is comprised of (a) 100 shares of
common stock held in his name over which he has sole voting and
investment power; (b) 1,400 shares of common stock and $34,800 of
capital notes (1,160 shares) held by Judith A. Slawson (wife) over
which he has shared voting and investment power; and (c) $34,800 of
capital notes (1,160 shares) held by Kathryn A. Slawson (Mother) and
Donald C. Slawson, co-trustees of the Kathryn A. Slawson Living Trust
over which he has shared voting and investment power.
(14) 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. The Certificate matured on December 31, 1997 and was paid in
full as of December 31, 1997.
Neither the Company nor any of its subsidiaries entered into during 1997 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
--------------------------
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 Statements of Financial Condition as of December 31,
1997 and 1996
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
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 December,
1997 (appears herein as exhibit)
3(b) Restated Articles of Incorporation of Registrant, as amended
through December, 1997 (appears herein as exhibit)
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)* Registrant's 1995 Incentive Plan (incorporated herein by
reference to Exhibit 10(i) to Registrant's 1995 10-K, File No.
2-78658)
10(g)* Registrant's Grant of Incentive Stock Options as provided by the
1995 Incentive Plan (incorporated herein by reference to Exhibit
10(j) to Registrant's 1995 10-K, File No. 2-78658)
10(h)* Registrant's Non-Qualified Stock Option Agreement as provided by
the 1995 Incentive Plan (incorporated herein by reference to
Exhibit 10(k) to Registrant's 1995 10-K, File No. 2-78658)
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 1997.
<PAGE>
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 10 , 1998 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 10 , 1998 /s/ C. Q. Chandler
----------------------------
C. Q. Chandler
Director, Chairman of the Board
and Chief Executive Officer
Date: March 10 , 1998 /s/ Jay L. Smith
----------------------------
Jay L. Smith
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 10 , 1998 /s/ Ronald L. Baldwin
----------------------------
Ronald L. Baldwin
Director
Date: March 10 , 1998 /s/ C. Robert Buford
----------------------------
C. Robert Buford
Director
Date: March 10 , 1998 /s/ Frank L. Carney
----------------------------
Frank L. Carney
Director
Date: March 10 , 1998 ----------------------------
Richard G. Chance
Director
Date: March 10 , 1998 /s/ C. Q. Chandler IV
----------------------------
C. Q. Chandler IV
Director
Date: March 10 , 1998 /s/ George T. Chandler
----------------------------
George T. Chandler
Director
Date: March 10 , 1998 /s/ Stephen L. Clark
----------------------------
Stephen L. Clark
Director
Date: March 10 , 1998 ----------------------------
R. L. Darmon
Director
Date: March 10 , 1998 /s/ Charles W. Dieker
----------------------------
Charles W. Dieker
Director
Date: March 10 , 1998 /s/ W. J. Easton
----------------------------
W. J. Easton Jr.
Director
Date: March 10 , 1998 ----------------------------
Martin K. Eby Jr.
Director
Date: March 10, 1998 /s/ Richard M. Kerschen
---------------------------
Richard M. Kerschen
Director
Date: March 10, 1998 /s/ Thomas D. Kitch
----------------------------
Thomas D. Kitch
Director
Date: March 10 , 1998 /s/ Eric T. Knorr
----------------------------
Eric T. Knorr
Director
Date: March 10 , 1998 ----------------------------
Charles G. Koch
Director
Date: March 10, 1998 /s/ J. V. Lentell
----------------------------
J. V. Lentell
Director
Date: March 10, 1998 ----------------------------
William B. Moore
Director
Date: March 10 , 1998 /s/ Paul A. Seymour, Jr.
----------------------------
Paul A. Seymour, Jr.
Director
Date: March 10 , 1998 /s/ Donald C. Slawson
----------------------------
Donald C. Slawson
Director
Date: March 10 , 1998 /s/ John T. Stewart III
----------------------------
John T. Stewart III
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.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION
3(a) Restated Bylaws
3(b) Restated Articles of Incorporation
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
EXHIBIT 3(a)
------------
AMENDED AND RESTATED BY-LAWS
OF
INTRUST FINANCIAL CORPORATION
ARTICLE I
GOVERNMENT
Section 1. Government and Control. The government and control of the
corporation shall be vested in a Board of Directors.
ARTICLE II
OFFICES
Section 1. The principal offices of the corporation shall be in the
City of Wichita, Kansas, and the registered office is 105 North Main, Wichita,
Kansas. The resident agent is Intrust Financial Corporation, 105 North Main,
Wichita, Kansas.
The corporation may also have offices at such other places as the Board
of Directors may from time to time designate, within or without the State of
Kansas, as the business of the corporation may require.
ARTICLE III
CORPORATE SEAL
Section 1. The corporate seal of this corporation shall be circular and
shall contain the full corporate name in the upper arc of the circle; the word
"Kansas" in the lower arc of the circle; and the words "Corporate Seal" in the
center thereof.
ARTICLE IV
CONVEYANCES
Section 1. Any and all instruments, including deeds, assignments,
mortgages, pledges, releases, trust indentures, or other instruments of
conveyance, transfer, mortgage or pledge, shall be deemed to be valid and
sufficient when the same are signed and executed in the name of the corporation
(and acknowledged when required) by either the Chief Executive Officer, the
President or Vice President, and when a seal is required--sealed with the
corporate seal and attested by the Secretary.
ARTICLE V
STOCKHOLDERS
Section 1. Place of Meeting.All meetings of the stockholders shall be
held at the principal office of the corporation, or at such other places as may
be designated by the Board of Directors, either within or without the State of
Kansas.
Section 2. Date of Annual Meeting. The annual meeting of the
stockholders shall be held on the second Tuesday in April, if not a legal
holiday and if a legal holiday, then on the next secular day following, at 1:30
o'clock p.m. At such meeting, the stockholders shall elect by a vote
representing a majority of all stock present and voting in person or by proxy, a
Board of Directors, and transact such other business as may be properly brought
before the meeting.
Section 3. Quorum. The holders of a majority of the common stock
issued, outstanding, and entitled to vote at said meeting present in person or
represented by proxy shall be requisite for and shall constitute a quorum at all
meetings of the stockholders, for the transaction of business, except as
otherwise provided by law, by the certificate of incorporation or by these
by-laws. If, however, such majority shall not be personally present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat present in person or by proxy shall have power to adjourn the
meeting from time to time without notice, other than announcement at the
meeting, until the requisite amount of voting stock shall be present at an
adjourned meeting, at which meeting any business may be transacted which might
have been transacted at the meeting as originally scheduled.
Section 4. Voting Power and Who May Vote. At each meeting of the
stockholders, each stockholder shall be entitled to one vote in person or by
proxy for each share of the common capital stock of the corporation held by such
stockholder. All proxies shall be in writing, subscribed by the stockholder or
his duly authorized agent, and delivered to the Secretary before the convening
of the meeting at which the proxy is to be exercised.
Section 5. Vote Taken by Ballot, Viva Voce, or by Showing of Hands. All
elections of directors, and the vote upon any other question, except as
otherwise provided by law, may be either by ballot, viva voce, or by showing of
hands, unless, on a vote of a director, or directors, a stockholder requests in
writing a vote by ballot, and then the election of such director or directors
shall be by secret written ballot.
Section 6. Notice of Annual Meeting. Written notice of the annual
meeting shall be mailed by the Secretary to each stockholder entitled to vote
thereat, at the last address appearing on the stock book of the corporation of
each stockholder, at least 10 days prior to the date of the meeting, unless such
notice is waived in writing.
Section 7. Special Meetings.Special meetings of the stockholders for
any purpose, purposes, unless otherwise prescribed by statute, may be called by
the Board of Directors, the President, or the Acting President, or by the
Secretary upon the written request of the owners of 20 percent of the stock
entitled to vote at an annual meeting. Such request shall state the purpose or
purposes of the proposed meeting; and said meeting shall be held at the
principal office of the corporation.
Section 8. Business Transacted. Business transacted at all special
meetings shall be confined to the object stated in the call.
Section 9. Notice of Special Meeting.Written notice of all special
meetings of the stockholders, stating the time, place and object thereof, shall
be mailed, postage prepaid at least 5 days before such meeting, to each
stockholder entitled to vote thereat, at the last address appearing on the books
of the corporation for each stockholder, unless notice is waived in writing.
Section 10. Roster of Stockholders. At each annual or special meeting
of the stockholders, the Secretary shall have available for the examination of
any stockholder a complete and duly certified list of all stockholders entitled
to vote and the number of voting shares held by each stockholder.
ARTICLE VI
DIRECTORS
Section 1. Number and Qualification. The number of directors of the
corporation shall be not less than three (3). The Board of Directors is
authorized to establish by a majority vote the number of directors from time to
time up to a maximum of twenty-five (25). In the event the directors vote to
increase the number of directors during the year, any new director shall be
elected by a majority vote of the current directors and shall serve until the
next annual stockholder meeting. The directors shall be divided into three (3)
classes with the number in each class to be determined by the directors, and
shall be elected at the annual meeting of the stockholders as provided in the
Articles of Incorporation. However, notwithstanding the foregoing, in the event
two (2) Preferred Directors (as defined in Article ELEVENTH of the Articles of
Incorporation) are elected, pursuant to the terms of Article ELEVENTH of the
Articles of Incorporation such Preferred Director shall only serve one-year
terms and shall not be appointed to one of the three (3) classes of directors
discussed above. A director shall be deemed qualified after filing a written
acceptance to the office.
Section 2. Quorum. A majority of the duly elected and qualified
directors shall constitute a quorum for the transaction of business. The act of
a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 3. Place of Meeting.The directors may hold their meetings at
the registered office of the corporation in the City of Wichita, Kansas, or at
such other place or places as they may from time to time determine, either
within or without the State of Kansas.
Section 4. Annual Meetings of the Board. The annual meeting of the
Board of Directors for the election of officers and transaction of other
business, shall be held immediately following the annual stockholders' meeting,
or at such other time or place as may be fixed by the written consent of all of
the directors; provided, however, that in the event the consent in writing is
not obtained of all the directors, the annual meeting shall be held at the same
place as and immediately following the annual meeting of the stockholders.
Section 5. Special Meetings.Special meetings of the Board of Directors
may be called by the Chief Executive Officer, President, or by any two members
of the Board of Directors, on two days' notice in writing to each director, such
notice to be served personally, by mail, or by telegram.
ARTICLE VII
OFFICERS
Section 1. Designated Officer. The officers of the corporation shall be
chosen by the Board of Directors and shall consist of a Chief Executive Officer,
a President, a Vice President and a Secretary and Treasurer.
Section 2. Other Officers. The corporation may have such other officers
and agents as may from time to time be determined and appointed by the Board of
Directors.
Section 3. Term and Qualification of Officers.The Officers of the
corporation shall hold their office until the next annual meeting of the Board
of Directors, or until their successors are chosen and qualified, unless their
respective terms of office shall be sooner terminated by death, resignation, or
otherwise, in writing, duly filed in the registered office of the corporation.
All unexpired terms of office vacated shall be filled by the Board of
Directors, at a special meeting held for that purpose.
Section 4. Salaries. The salaries of the officers of the corporation
shall be fixed by the Board of Directors.
Section 5. Removal of Officers. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the entire Board of Directors.
Section 6. President and Chief Executive Officer. The chief executive
officer shall preside at all meetings of the stockholders and directors, and
shall have ultimate responsibility and authority for carrying out the orders and
resolutions of the board of directors of the corporation. The president shall be
the chief operating officer of the corporation, and shall have general and
active management of the business of the corporation. He shall execute bonds,
mortgages and other instruments requiring a seal under the seal of the
corporation, and shall keep in safe custody the seal of the corporation, and
shall affix the same to any instrument requiring it, and, when so affixed, it
shall be attested by the signature of the secretary.
Section 7. Vice President. During the absence or incapacity of the
President, all of the powers, duties and responsibilities of the President shall
devolve upon the Vice President.
Section 8. Secretary. As Secretary, he shall attend all sessions of the
Board of Directors and all meetings of the stockholders, and record all votes
and the minutes of all proceedings in a book to be kept for that purpose. In the
absence of the President and Vice President, he shall preside at meetings of the
directors or stockholders. He shall give, or cause to be given, the required
notice of all meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or the President, under whose supervision he shall be.
Section 9. Treasurer. As Treasurer, he shall keep the books of the
corporation and shall perform such other duties as may be prescribed by the
Board of Directors or President, under whose supervision he shall be. He shall
give bond as required by statute.
Section 10. Failure to Elect.Vacancies. The failure to elect annually
any officers or directors shall not dissolve the corporation.
Vacancies occurring in the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
shall be filled by the remaining members of the Board of Directors. A majority
vote of the remaining directors shall be sufficient to elect a successor, or
successors, who shall hold office for the unexpired term, or terms, in respect
to which such vacancy occurred.
ARTICLE VIII
CAPITAL STOCK
Section 1. Amount. The total amount of capital of the corporation shall
be fifty million dollars ($50,000,000) represented by ten million (10,000,000)
shares of the common stock with a par value of five dollars ($5.00) each.
Section 2. Certificate. The certificate of stock of the corporation
shall be numbered and shall be entered in the books of the corporation as they
are issued. They shall exhibit the holder's name, the number of shares, all
other information required by statute, and shall be signed by the President and
the Secretary.
Section 3. Transfer of Stock. Transfers of stock shall be made on the
books of the corporation only by the person named in the certificate, or by his
attorney duly appointed in writing, and upon surrender of the certificate for
said stock.
Section 4. Closing of Transfer Book. The stock transfer book of the
corporation shall be closed 15 days before each annual or special meeting and 15
days before any dividend paying date.
ARTICLE IX
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of the corporation shall begin
on the first day of January of each year.
Section 2. Dividends. The Directors may from time to time declare
dividends upon the capital stock from the surplus or net profits of the
corporation, provided the financial position of the corporation is such that the
payment of any such dividend will not impair the working capital of the
corporation.
Section 3. Notices. Whenever, under the provision of these By-Laws,
notice is required to be given to any director, officer or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, by depositing the same in the post office in a postpaid sealed
wrapper, addressed to such stockholder, officer or director, at such address as
appears on the books of the corporation; or, in default of other address, to
such director, officer or stockholder, in the general post office in the City of
Wichita, Kansas, and such notice shall be deemed to be given at the time when
the same shall be thus mailed.
Any stockholder, director or officer may waive any notice required to
be given under these By-Laws.
ARTICLE X
AMENDMENTS
Section 1. These By-Laws may be altered, repealed or amended by the
Board of Directors at the annual meeting, or at any special meeting of the Board
of Directors called for that purpose, by a majority vote of all of the duly
elected and qualified directors; provided, however, notice of any such action by
the Board of Directors shall be given to each stockholder having voting rights,
at some time within the year following the date of such action by the Board of
Directors.
ADOPTED on this 17th day of June, 1971.
AS AMENDED, through December, 1997
INTRUST Financial Corporation
By: ________________________________________
Jay L. Smith, Secretary
EXHIBIT 3(b)
------------
INTRUST FINANCIAL CORPORATION
RESTATED ARTICLES OF INCORPORATION
We, the undersigned, incorporators, hereby associate ourselves together
to form and establish a corporation FOR profit under the laws of the State of
Kansas.
FIRST: The name of the Corporation is INTRUST FINANCIAL CORPORATION,
formerly First Bancorp of Kansas, Inc. originally incorporated May 28, 1971.
SECOND: The location of its Principal Place of Business in this state
is 105 North Main, Wichita, Kansas 67202.
THIRD: The location of its registered office in Kansas is 105 North
Main, Wichita, Sedgwick County, Kansas, 67202, and the resident agent in charge
thereof at such address is INTRUST FINANCIAL CORPORATION.
FOURTH: This Corporation is organized FOR profit and the nature of its
business is to engage in any lawful act or activity for which corporations may
be organized under the Kansas general corporation code and federal laws.
FIFTH: The total amount of capital of this Corporation is Fifty Million
($50,000,000), and the total number of shares into which it is divided is as
follows:
10,000,000 shares of common stock, par value of Five Dollars ($5.00)
each. The Corporation shall have authority to issue five million shares of
non-voting, non-cumulative, preferred stock, with a par value and other
designating preferences, rights, and qualifications to be determined by the
Board of Directors at the time of the issuance of the preferred stock.
SIXTH: The term for which this Corporation is to exist is perpetual.
SEVENTH: The Number of Directors shall be not less than three (3) with
the maximum number to be determined from time to time as prescribed by the
By-Laws. The Directors shall be divided into three (3) classes; the term of
office of those in the first class to expire at the 1990 annual meeting; the
term of office of those in the second class to expire at the 1991 annual
meeting; and the term of office of those in the third class to expire at the
1992 annual meeting. At each annual election held after such classification and
election, Directors shall be chosen for a full three (3) year term to succeed
those whose terms expire. However, notwithstanding the foregoing, in the event
two (2) Preferred Directors (as defined in Article ELEVENTH below) are elected,
pursuant to the terms of Article ELEVENTH below, such Preferred Director shall
only serve one-year terms and shall not be appointed to one of the three (3)
classes of directors discussed above.
EIGHTH: (a) No Director of this Corporation shall be held personally
liable to this Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a Director including merger and acquisition decisions,
provided that this provision shall not eliminate or limit the liability of a
Director (1) for any breach of the Director's duty of loyalty to this
Corporation or its stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) under
the provisions of K.S.A. 17-6424 and any amendments thereto, or (4) for any
transaction from which the Director derived an improper personal benefit. In
connection with merger and acquisition decisions, a Director may consider
factors in addition to financial adequacy of the offered price such as the
impact on employees, customers, the community, and the likelihood of shareholder
approval. (b) This Article shall not eliminate or limit the liability of a
Director for any act or omission occurring prior to the effective date of the
Amendment adding this Article EIGHTH to the Restated Articles of Incorporation
of this Corporation. (c) Any repeal or modification of this Article shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a Director of this Corporation existing at the time of such repeal
or modification.
NINTH: Any person, or such person's heir, executor or administrator may
be indemnified or reimbursed by the Corporation for reasonable expenses actually
incurred in connection with any action, suit or proceeding, civil or criminal,
to which such person shall be made a party by reason of being or having been a
director, officer or employee of the Corporation or of any firm, corporation or
organization which such person served in any such capacity at the request of the
Corporation; provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding as to
which such person shall finally be adjudged to have been guilty of or liable for
gross negligence, willful misconduct or criminal acts in the performance of such
person's duties to the Corporation; and, provided further, that no person shall
be so indemnified or reimbursed in relation to any matter in such action, suit
or proceeding which has been made the subject of a compromise settlement, except
with the approval of a court of competent jurisdiction, or the holders of record
of a majority of the outstanding shares of the Corporation, or the Board of
Directors, acting by vote of Directors not parties to the same or substantially
the same action, suit or proceeding, constituting a majority of the whole number
of Directors. The foregoing right of indemnification or reimbursement shall
specifically include all matters arising from merger and acquisition decisions
made by the director, officer or employee and shall not be exclusive of other
rights to which such person, or such person's heir, executor or administrator
may be entitled as a matter of law.
The Corporation may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers and other employees to the extent that such indemnification
is allowed in the preceding paragraph.
Such insurance may, but need not, be for the benefit of all directors, officers
or employees.
TENTH: With respect to action on amendment to these Articles of
Incorporation, on a plan of merger or share exchange, on the disposition of
substantially all of the property of the Corporation, on the disposition of
property by an entity controlled by the Corporation, and on the dissolution of
the Corporation, the vote of two-thirds or more of the shares of each class
entitled to vote in favor of such action shall be required for approval of such
action.
ELEVENTH: In the event any Distributions by INTRUST Capital Trust
payable to holders of INTRUST Capital Trust Preferred Securities (the "Preferred
Securities") pursuant to the terms of the Amended and Restated Trust Agreement
by and between INTRUST Financial Corporation, as depositor, State Street Bank
and Trust Company, as property trustee and Wilmington Trust Company, as Delaware
trustee (the "Agreement") are in arrears for six (6) or more quarterly periods,
(i) the number of members of the Board of Directors of this Corporation shall be
increased by two (2) (each of the additional Directors being a "Preferred
Director"), effective as of the time of election of such Preferred Directors as
hereinafter provided and (ii) the Preferred Securities holders (voting
separately as a class) will have the exclusive right to vote for and elect such
Preferred Directors at the next special or annual meeting of the stockholders of
the Corporations. Each Preferred Director shall serve one-year terms on the
Corporation's Board of Directors, such term to commence upon the date of their
election; provided, however, that such term shall immediately terminate upon the
Corporation curing the arrearage described in this Article ELEVENTH by paying or
depositing with INTRUST Capital Trust a sum sufficient to pay all such
arrearages. Upon the completion of a Preferred Director's one-year term, the
Preferred Securities holders (voting separately as a class) shall have the right
to vote for and reelect a Preferred Director or elect a successor Preferred
Director. This right shall continue until the arrearages described in this
Article ELEVENTH are cured by the Corporation through paying or depositing with
INTRUST Capital Trust a sum sufficient to pay all such arrearages.
Preferred Directors shall be elected by the affirmative vote or consent
of the holders of at least sixty-six and two-thirds percent (66.2/3%) of all
outstanding Preferred Securities. A majority of the Preferred Securities
outstanding and entitled to vote on any matter shall constitute a quorum. The
Preferred Securities holders (voting as a class) shall have the right to remove
without cause at any time and replace any Preferred Director.
CERTIFICATE
The above Restated Articles of Incorporation restate, integrate and
further amend the Restated Articles of Incorporation. The above Restated
Articles of Incorporation were duly proposed by the Board of Directors on
November 26, 1997, and adopted by the stockholders of the Corporation on
December 9, 1997, in the manner and by the vote prescribed by K.S.A. 17-6602.
_________________________________
C.Q. Chandler, III, Chairman
Attest: _________________________________
Jay L. Smith, Secretary
State of Kansas )
) ss.
County of Sedgwick )
Be it remembered that before me, a Notary Public in and for the
aforesaid county and state, personally appeared C.Q. Chandler, III, Chairman,
and Jay L. Smith, Secretary, of INTRUST Financial Corporation, who are known to
me to be the same persons who executed the foregoing certificate, and duly
acknowledged the execution of the same this 15th day of December, 1997.
-----------------------------------
Notary Public
My appointment expires _____________________
EXHIBIT 11
----------
INTRUST FINANCIAL CORPORATION
Computation of Earnings Per Share Years Ended December 31, 1997, 1996 and 1995
(Dollars in thousands except per share data)
1997 1996 1995
- --------------------------------------------------------------------------------
Basic Earnings Per Share:
Net income $ 16,664 $ 1,680 $ 12,387
- --------------------------------------------====================================
Weighted average common shares outstanding 2,193,268 2,285,337 2,344,762
Basic earnings per share $ 7.60 $ 0.74 $ 5.28
- --------------------------------------------====================================
Diluted Earnings per Share:
Net Income $ 16,664 $ 1,680 $ 12,387
Net reduction in interest expense assuming
conversion of capital notes 656 * 699
- --------------------------------------------------------------------------------
Net income $ 17,320 $ 1,680 $ 13,086
- --------------------------------------------====================================
Weighted average common shares outstanding
assuming conversion of capital notes and
exercise of stock options 2,569,497 2,285,337* 2,743,307
Diluted earnings per share $ 6.74 $ 0.74 $ 4.77
- --------------------------------------------====================================
* For 1996, diluted earnings per share is considered to be the same as
basic earnings per share, since the effect of exercise of stock options (285
shares) and the conversion of subordinated capital notes (387,178 shares) would
be antidilutive.
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1997
PERCENTAGE
OF VOTING
JURISDICTION SECURITIES
NAME OF ORGANIZATION OWNED
- ---- --------------- ----------
INTRUST Bank, National Association National Bank 100%
Will Rogers Bank Oklahoma 100%
NestEgg Consulting Inc. Kansas 100%
INTRUST Community Development Corporation Kansas 100%
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 171,494
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 89,615
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,346
<INVESTMENTS-CARRYING> 273,804
<INVESTMENTS-MARKET> 308,669
<LOANS> 1,278,881
<ALLOWANCE> 17,932
<TOTAL-ASSETS> 1,923,822
<DEPOSITS> 1,552,766
<SHORT-TERM> 191,185
<LIABILITIES-OTHER> 13,007
<LONG-TERM> 34,219
0
0
<COMMON> 12,075
<OTHER-SE> 120,570
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<INTEREST-OTHER> 2,424
<INTEREST-TOTAL> 132,454
<INTEREST-DEPOSIT> 49,284
<INTEREST-EXPENSE> 60,147
<INTEREST-INCOME-NET> 72,307
<LOAN-LOSSES> 12,885
<SECURITIES-GAINS> 165
<EXPENSE-OTHER> 74,627
<INCOME-PRETAX> 25,924
<INCOME-PRE-EXTRAORDINARY> 16,664
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,664
<EPS-PRIMARY> 7.60
<EPS-DILUTED> 6.74
<YIELD-ACTUAL> 4.63
<LOANS-NON> 4,618
<LOANS-PAST> 2,120
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 15,536
<CHARGE-OFFS> 7,782
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<ALLOWANCE-CLOSE> 17,932
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