QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-------------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _____to _____
------------
Commission file number 2-78658
INTRUST Financial Corporation
(Exact name of registrant as specified in its charter)
Kansas 48-0937376
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
105 North Main Street
Box One
Wichita, Kansas 67201
--------------- -----
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (316) 383-1111
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. Yes [X] No [ ]
At April 15, 1999, there were 2,031,903 shares of the registrant's common stock,
par value $5 per share, outstanding.
<PAGE>
Part 1. Financial Information
INTRUST Financial Corporation
Consolidated Condensed Statements of Financial Condition
(Unaudited - dollars in thousands except per share data)
March 31, December 31,
Assets 1999 1998
- -------------------------------------------------------------------------------
Cash and cash equivalents:
Cash and due from banks $ 102,556 $ 132,056
Federal funds sold and securities purchased
under agreements to resell 40,170 68,550
- -------------------------------------------------------------------------------
Total cash and cash equivalents 142,726 200,606
- -------------------------------------------------------------------------------
Investment securities:
Held-to-maturity (market value, $154,546 for
1999 and $178,305 for 1998) 153,085 176,305
Available-for-sale, at market 213,212 208,752
Equity, at cost 2,769 2,763
- -------------------------------------------------------------------------------
Total investment securities 369,066 387,820
- -------------------------------------------------------------------------------
Loans held-for-sale 30,665 34,834
Loans, net of allowance for loan losses of
$22,718 in 1999 and $21,703 in 1998 1,446,964 1,393,075
Land, buildings and equipment, net 30,028 29,509
Other assets 72,877 69,621
- -------------------------------------------------------------------------------
Total assets $2,092,326 $2,115,465
- -----------------------------------------------------==========================
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------
Deposits $1,617,046 $1,647,354
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 233,327 241,955
Other 9,675 2,260
- -------------------------------------------------------------------------------
Total short-term borrowings 243,002 244,215
- -------------------------------------------------------------------------------
Accounts payable and accrued liabilities 18,153 13,207
Notes payable 12,500 12,500
Convertible capital notes 10,755 11,078
Guaranteed preferred beneficial interests in the
Company's subordinated debentures 57,500 57,500
- -------------------------------------------------------------------------------
Total liabilities 1,958,956 1,985,854
- -------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,427,900 shares issued in 1999
and 2,418,573 issued in 1998 12,139 12,093
Capital surplus 12,698 12,464
Retained earnings 143,556 139,078
Treasury stock, at cost (395,518 shares in 1999
and 391,824 shares in 1998) (35,114) (34,626)
Unrealized securities gains, net of tax 91 602
- -------------------------------------------------------------------------------
Total stockholders' equity 133,370 129,611
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,092,326 $2,115,465
- -----------------------------------------------------==========================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST Financial Corporation
Consolidated Condensed Statements of Income and Comprehensive Income
(Unaudited - Dollars In Thousands Except per Share Data)
Three Months
Ended March 31,
------------------------
1999 1998
- -------------------------------------------------------------------------------
Interest income:
Loans $30,445 $29,101
Investment securities 5,473 4,937
Federal funds sold and securities purchased
under agreements to resell, and other 601 1,966
- -------------------------------------------------------------------------------
Total interest income 36,519 36,004
- -------------------------------------------------------------------------------
Interest expense:
Deposits 12,577 12,570
Federal funds purchased and securities sold
under agreement to repurchase 2,569 2,616
Convertible capital notes 241 252
Subordinated debentures 1,185 921
Other borrowings 293 411
- -------------------------------------------------------------------------------
Total interest expense 16,865 16,770
- -------------------------------------------------------------------------------
Net interest income 19,654 19,234
Provision for loan losses 2,280 3,600
- -------------------------------------------------------------------------------
Net interest income after provision
for loan losses 17,374 15,634
- -------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 2,750 2,434
Wealth management fees 3,247 2,572
Credit card fees 2,187 2,351
Securities gains 163 126
Other service charges, fees and income 2,749 4,061
- -------------------------------------------------------------------------------
Total noninterest income 11,096 11,544
- -------------------------------------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 9,999 9,199
Net occupancy and equipment expense 2,392 2,149
Advertising and promotional activities 900 870
Data processing expense 1,088 955
Supplies 540 597
Postage and dispatch 494 526
Goodwill amortization 403 405
Deposit insurance assessment 63 59
Other 3,265 3,894
- -------------------------------------------------------------------------------
Total noninterest expenses 19,144 18,654
- -------------------------------------------------------------------------------
Income before provision for income taxes 9,326 8,524
Provision for income taxes 3,626 3,142
- -------------------------------------------------------------------------------
Net income 5,700 5,382
Other comprehensive income (511) (419)
- -------------------------------------------------------------------------------
Comprehensive income $ 5,189 $ 4,963
- ----------------------------------------------------------=====================
Per share data:
Basic earnings per share $2.80 $2.48
- ----------------------------------------------------------=====================
Diluted earnings per share $2.40 $2.16
- ----------------------------------------------------------=====================
Cash Dividends $0.60 $0.50
- ----------------------------------------------------------=====================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST Financial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of dollars)
Three Months Ended
March 31,
--------------------
1999 1998
- --------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
Net Income $ 5,700 $ 5,382
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 2,280 3,600
Provision for depreciation and amortization 1,774 1,740
Amortization of premium and accretion of discount on
investment securities (20) (324)
Gain on sale of investment securities (163) (126)
Loss on retirement of convertible capital notes 144 0
Changes in assets and liabilities:
Loans held for sale 4,169 (4,051)
Prepaid expenses and other assets (2,025) 20
Income taxes 3,571 8,099
Interest receivable (821) (1,186)
Interest payable 2,035 2,006
Other liabilities (1,011) (1,316)
Other 0 72
- --------------------------------------------------------------------------------
Net cash provided by operating activities 15,633 13,916
- --------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Purchase of investment securities (32,000) (101,171)
Investment securities matured or called 49,877 51,631
Proceeds from sale of investment securities 214 161
Net increase in loans (56,700) (2,909)
Purchases of land, buildings and equipment (1,622) (805)
Proceeds from sale of equipment 1 5
Proceeds from sale of other real estate
and repossessions 336 883
Other (202) (2,424)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (40,096) (54,629)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Net increase (decrease) in deposits (30,308) 34,104
Net increase (decrease) in short-term borrowings (1,213) 21,050
Payments on notes payable 0 (8,000)
Retirement of convertible capital notes (187) 0
Proceeds from subordinated debentures 0 57,500
Cash dividends (1,221) (1,086)
Purchase of treasury stock (488) (348)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by financing activities (33,417) 103,220
- --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (57,880) 62,507
Cash and cash equivalents at beginning of period 200,606 261,109
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $142,726 $323,616
- ------------------------------------------------------------====================
Supplemental disclosures
Interest paid $14,830 $14,764
Income tax paid (refunded) $ 33 $(4,957)
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST Financial Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of
INTRUST Financial Corporation and subsidiaries. All significant intercompany
accounts and transactions have been eliminated. In the opinion of management,
the consolidated financial statements reflect all normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for the periods presented.
The significant accounting policies followed in the preparation of the quarterly
financial statements are the same as those disclosed in the 1998 INTRUST
Financial Corporation Annual Report on Form 10-K. Reference is made to the
"Notes to Consolidated Financial Statements" under Item 8 of the 1998 Form 10-K
for additional disclosure.
2. Allowance for Loan Losses
The following is a summary of the allowance for loan losses for the three months
ended March 31, 1999 and 1998 (in thousands):
1999 1998
--------- ---------
Balance, January 1 $21,703 $17,932
Additions:
Provision for loan losses 2,280 3,600
--------- ---------
23,983 21,532
Deductions:
Loans charged off 1,868 2,199
Less recoveries on loans
previously charged off 603 406
--------- ---------
Net loan losses 1,265 1,793
--------- ---------
Balance, March 31 $22,718 $19,739
========= =========
Statement of Financial Accounting Standards ("SFAS") No. 114 requires that
certain impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's original effective interest rate. As a
practical expedient, impairment may be measured based on the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance.
Less than 1% of the Company's total loan portfolio meet the criteria defined in
SFAS Nos. 114 and 118 for classification as an impaired loan. The Company
maintained a valuation allowance of $11,000 at March 31, 1999 related to loans
considered impaired. Interest income on this classification of loans has been
recorded by the Company in a manner consistent with its income recognition
policies on other loans. Such amount of interest income is not material to the
Company's financial statements.
3. Earnings Per Share Calculations
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 assumes that the 9% convertible subordinated
capital notes had been converted into common stock as of the beginning of each
respective period presented with related adjustments to interest and income tax
expense. The following is a reconciliation of the numerators and denominators of
basic and diluted earnings per share:
Three Months Ended
March 31,
- -------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------
Net income for basic earnings per share $5,700 $5,382
Interest expense on convertible debt, net of taxes 149 164
- -------------------------------------------------------------------------------
Net income for diluted earnings per share $5,849 $5,546
- -----------------------------------------------------------====================
Weighted average shares for basic earnings per share 2,033,548 2,171,292
Shares issuable upon exercise of stock options 39,482 28,066
Shares issuable upon conversion of capital notes 359,728 373,967
- -------------------------------------------------------------------------------
Weighted average shares for diluted earnings per share 2,432,758 2,573,324
- --------------------------------------------------------=======================
Pro forma disclosures of earnings per share, as if the fair value based method
of accounting as defined in SFAS No. 123 had been applied, have not been
presented since such disclosures would not result in material differences from
the intrinsic value method followed by the Company.
4. Segment Reporting
Listed below is a presentation of revenues and profits for all segments.
Taxes are not allocated to segment operations, and the Company did not have
discontinued operations, extraordinary items or accounting changes for any of
the segments. There has been no material change in total segment assets from
amounts disclosed in the last annual report, and there has been no change in the
basis of segmentation or in the measurement of profit or loss since the last
annual report.
Three Months Ended March 31,
1999 1998
-------------------------------------------------------------------------------
Revenues from external customers
Consumer banking $19,618 $19,481
Commercial lending 7,103 7,037
Wealth management 3,759 3,114
Community banking 4,627 4,193
Intercompany revenues
Consumer banking $(2,448) $ (730)
Commercial lending 0 6
Wealth management 120 82
Community banking 80 377
Segment profit
Consumer banking $ 5,196 $ 5,486
Commercial lending 4,538 4,996
Wealth management 686 111
Community banking 857 645
- --------------------------------------------------------------------------------
Profit from segments 11,277 11,238
Expenses at corporate level not
allocated to segments (1,951) (2,714)
-------------------------------------------------------------------------------
Consolidated income before tax $ 9,326 $ 8,524
-----------------------------------------------------==========================
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Unaudited consolidated net income of INTRUST Financial Corporation for the three
months ended March 31, 1999 was $5,700,000, increasing 5.9% over comparable 1998
amounts and establishing a new quarterly record for the Company. The Company
continues to experience solid growth in its principal markets, leading to
increased net interest income and noninterest income. Average loans for the
quarter increased 13.8% over 1998 levels, and wealth management fee income
increased 26.2% over comparable period 1998 amounts. There have been no
significant credit quality issues in the first quarter of 1999. Nonaccrual and
past due loans have increased 4.2% over prior year amounts, comparing favorably
to the overall increase in the Company's loan portfolio.
NET INTEREST INCOME. The Company's net interest income increased nominally from
prior year amounts. First quarter, 1999 net interest income was $420,000, or
2.2% greater than comparable 1998 amounts. As noted above, the Company has
experienced significant lending growth, with total loans averaging
$1,431,593,000 this quarter. However, the Company continues to operate in very
competitive markets, and has experienced a 23 basis point decline in its
interest spread. Much of the margin compression is attributable to an overall
decline in yields on interest-earning assets. Yields have declined 55 basis
points, and the decline would have been greater but for the greater
concentration of interest-earning assets invested in loans. Loans as a
percentage of interest-earning assets averaged 77.1% in 1999, compared to 73.1%
in 1998.
Funding costs did decline somewhat in 1999 when compared to 1998 amounts. The
cost of interest-bearing liabilities in the first quarter of 1999 was 4.26%,
compared to 4.58% during the same period of 1998. Competition for funds remains
significant, but the Company's lead bank has seen a net increase in the number
of deposit accounts serviced of 4.5% over the last twelve months.
Noninterest-bearing demand deposits comprised 21.5% of total deposits at
quarter-end, 1999, compared to 23.1% in 1998. In addition to its efforts to
increase its deposit base, the Company continues to evaluate alternative funding
sources.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the first quarter
of 1999 was $2,280,000, decreasing $1,320,000 from the amount recorded in the
first quarter of 1998. Net charge-offs in 1999 declined 29.4% from 1998 levels.
Nonaccrual and past due loans did increase modestly over comparable prior year
amounts ($244,000), but have declined as a percentage of total loans. Nonaccrual
and loans past due 90 days or more comprised .41% of total loans (excluding
loans held for sale) at March 31, 1999, compared to .46% at March 31, 1998.
The Company's allowance for loan losses at March 31, 1999 was equal to 1.55% of
total loans, and 377% of loans considered risk elements. Comparable amounts at
December 31, 1998 and March 31, 1998 were 1.53% and 355%, and 1.56% and 342%,
respectively. All segments of the loan portfolio are performing as had been
expected, and there have been no significant, unanticipated losses in the loan
portfolio in 1999. Management will continue to actively review the activity in
its loan portfolio to ensure that the provision for loan losses and resultant
allowance for loan losses remain adequate to appropriately address the credit
risk existing in the portfolio. Should the Company's assessment of its credit
risk for the rest of the year remain consistent with that of the first quarter,
it is expected that the 1999 provision for loan losses will be slightly less
than the amount recorded in 1998.
Summary of Loan Loss Experience
- ------------------------------------------------------------------------------
March 31,
1999 1998
- ------------------------------------------------------------------------------
Amount of loans at period-end $1,469,682 $1,262,644
- -------------------------------------------------=============================
YTD Average loans outstanding $1,431,593 $1,257,641
- -------------------------------------------------=============================
Beginning balance of allowance for loan losses $21,703 $17,932
Loans charged-off
Commercial, Financial and Agricultural 241 361
Credit Card 1,181 1,318
Installment 446 520
- ------------------------------------------------------------------------------
Total loans charged off 1,868 2,199
- ------------------------------------------------------------------------------
Recoveries on charge-offs
Commercial, Financial and Agricultural 248 133
Real Estate-Mortgage 3 5
Credit Card 234 204
Installment 118 64
- ------------------------------------------------------------------------------
Total recoveries 603 406
- ------------------------------------------------------------------------------
Net loans charged off 1,265 1,793
Provision charged to expense 2,280 3,600
- --------------------------------------------------------------------------------
Ending balance of allowance for loan losses $22,718 $19,739
- -------------------------------------------------=============================
Net charge-offs/average loans 0.09% 0.14%
- -------------------------------------------------=============================
Allowance for loan losses/loans at period-end 1.55% 1.56%
- -------------------------------------------------=============================
The accompanying table summarizes, by type, the Company's outstanding loans,
excluding loans held-for-sale. Installment loans are principally comprised of
loans secured by automobiles.
March 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Percent Percent
Amount Of Total Amount of Total
- --------------------------------------------------------------------------------
Commercial, Financial and Agricultural $ 732,478 49.8% $ 707,326 50.0%
Real Estate-Construction 41,839 2.9 38,137 2.7
Real Estate-Mortgage 270,464 18.4 250,282 17.7
Installment, excluding credit card 313,991 21.4 299,884 21.2
Credit card 110,910 7.5 119,149 8.4
- --------------------------------------------------------------------------------
Subtotal 1,469,682 100.0% 1,414,778 100.0%
Allowance for loan losses (22,718) (21,703)
- --------------------------------------------------------------------------------
Total $1,446,964 $1,393,075
- ----------------------------------------========================================
As noted above, loans considered risk elements, as presented in the following
table, totaled .41% of total loans, declining from prior quarter levels.
Management is not aware of issues that would significantly impact the credit
quality of the loan portfolio in 1999. Management believes the allowance for
loan losses to be adequate at this time.
March 31, December 31,
1999 1998
- --------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $5,059 $5,027
Past Due 90 days or more 960 1,090
- --------------------------------------------------------------------------------
Total $6,019 $6,117
- -----------------------------------------------------===========================
LIQUIDITY AND CAPITAL RESOURCES. The Company considered its liquidity level
adequate at March 31, 1999. Growth in the Company's loan portfolio has, however,
resulted in an overall decline in liquidity levels. The Company's loan/deposit
ratio at March 31, 1999 was 90.9%, compared to 79.6% at March 31, 1998 and 85.9%
at December 31, 1998. The Company continues to maintain an investment portfolio
with a relatively short weighted average maturity. At March 31, 1999, the
average maturity of United States government and agency securities in the
investment portfolio was 1 year and 5 months, and the average maturity of
municipal securities was 3 years and 10 months.
The Company has thoroughly reviewed its investment security portfolio and has
determined that at March 31, 1999, it has the ability and intent to hold all
securities in the portfolio that have been classified as held-to-maturity. With
the increases the Company is experiencing in its loan portfolio, it has started
classifying purchases of United States government and agency securities as
available-for-sale. The Company believes that it has a variety of sources of
additional liquidity available. These include, but are not limited to, the
following: securities classified as available-for-sale, the regularly scheduled
maturities of those securities presently held in its investment portfolio, the
securitization of credit card receivables, the ability to securitize other
receivables, such as automobile loans, and federal funds lines available through
other financial institutions. The Company believes these sources provide
sufficient liquidity to meet depositors' needs and make available lendable funds
within its service area.
As has been disclosed in previous filings, in January, 1998, a statutory
business trust of the Company issued $57,500,000 in cumulative trust preferred
securities. These preferred securities, which qualify as capital for regulatory
reporting purposes, have a distribution rate of 8.24%, and will mature on
January 31, 2028, unless called or extended by the Company. The Company owns
100% of the common stock of the trust, and the only assets of the trust consist
of the 8.24% subordinated debentures due January 31, 2028 issued by the Company
to the trust. The Company has issued Back-up Obligations to the trust, which,
when taken in the aggregate, constitute the full and unconditional guarantee by
the Company of all of the trust's obligations under the preferred securities.
The Company's capital position continues to exceed regulatory capital
requirements. The Company must maintain a minimum ratio of total capital to
risk-weighted assets of 8%, of which at least 4% must qualify as Tier 1 capital.
At March 31, 1999, the Company's total capital to risk-weighted assets ratio was
11.4% and its Tier 1 capital to risk-weighted assets ratio was 9.4%.
In addition to the aforementioned regulatory requirements, each of the Company's
subsidiary banks met all capital ratios required at the individual bank level.
OTHER INCOME AND OTHER EXPENSE. First quarter noninterest income declined
$448,000 from prior year levels. Included in 1998's first quarter noninterest
income was a $1.5 million gain on the disposition of the Company's national
merchant processing business. Excluding this non-recurring event, noninterest
income increased 10.5% over 1998 levels.
Service charges on deposit accounts increased 13.0% over 1998 levels. Growth in
the number of deposit accounts serviced, combined with increases in the number
of customers utilizing the Company's cash management services are the principal
reasons for the increase in this revenue line item. As discussed in previous
filings, the Company has significantly increased its investment in the wealth
management area. Assets under management in this area have increased 17.9% over
comparable 1998 amounts, and this has led to a 26.2% increase in this source of
fee income. Credit card fees declined 7.0% in 1999. Year-over-year, gross fees
increased modestly (2.7%), but additional costs associated with the Company's
affinity groups resulted in a decline in net credit card fees. Securities gains
recognized in the first quarter were the result of a contractual agreement
specifying the sale over a three year period of some stock acquired in a
previous acquisition. 1999 was the last installment of that agreement.
Other service charges, fees and income declined $1,312,000 from 1998 levels. As
noted above, the Company, during the first quarter of 1998, elected to sell its
national merchant processing business. The Company continues to process merchant
accounts, but believes that its efforts can be more productive if focused on its
regional trade territory. The sale of this national merchant processing business
resulted in the recognition of a $1.5 million gain on the disposition of the
business. Excluding this gain from 1998 results, other service charges, fees and
income would have increased 7.3% over 1998 levels.
Total noninterest expenses in the first quarter increased 2.6% over comparable
1998 amounts. Salaries and employee benefit costs increased 8.7% over prior year
levels. Increases in health care costs and the Company's 401k match accounted
for approximately 13% of the increase in salaries and employee benefits. In
addition, the number of full-time equivalent employees employed by the Company
at March 31, 1999 was 920, an increase of 29 over March 31, 1998 levels.
Net occupancy and equipment costs increased 11.3% over prior year amounts. The
Company has replaced fully-depreciated technology equipment, replaced two
facilities, and opened a new branch in Andover, Kansas in the second half of
1998. Data processing expense increased $133,000 over 1998 levels as increased
account volumes resulted in increased data processing expense, and the Company
continued to expend development efforts on its Internet site and enhancement of
its Internet banking products. Other noninterest expenses declined $629,000 from
1998 amounts. The sale of the national merchant processing business resulted in
a lesser level of merchant processing expense. The Company also experienced
reductions in its net interchange expense, and costs associated with repossessed
assets. Year-over-year changes in other noninterest expense categories were
relatively modest.
YEAR 2000 ISSUES. As described in previous filings, the Company, along with
other financial institutions, 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. 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.
The Company has been actively engaged in efforts to assess, renovate, test and
implement necessary changes to its existing systems. 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 Y2K issue. At March 31, 1999, the
Company has completed its assessment and renovation phases. 95% of the renovated
systems have been validated and tested, and 75% of the implementation plan has
been completed. The Company believes it is on schedule to complete its Y2K plan
in the second quarter of 1999.
The Company does not expect its Y2K efforts to have a material impact on its
financial position or its results of operations. Payments to third parties as a
result of work performed in connection with Y2K have not been material. As the
Company's major systems are outsourced to third parties, the Company is not
responsible for the actual renovation of code for these systems. Y2K has,
however, delayed the Company's ability to implement system enhancements that
might have otherwise increased efficiencies. The failure to have these
enhancements in place does not present the Company with operational difficulties
or impact the Company's ability to adequately serve its customers.
The failure of the Company's customers to adequately prepare for Y2K could have
an adverse effect on such customer's operations and profitability, thereby
impacting the customer's ability to repay loans in accordance with their terms.
The Company has completed a survey of its customer base on their Y2K efforts.
Survey results were generally favorable. The Company has addressed the prospect
of any additional risk associated with its lending portfolio arising from Y2K
issues in the normal course of its overall risk analysis.
It is possible that Y2K may result in a greater demand for liquidity at the
Company's subsidiary banks. The Company's overall liquidity plan for its
subsidiary banks is substantially complete. The Company intends to test this
plan in the second quarter of 1999. The modification of the Company's
contingency planning documents for Y2K issues is also substantially complete,
and should be tested in the second quarter.
NEW ACCOUNTING STANDARDS. Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities", establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
This Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage banking enterprise with the subsequent accounting for securities
retained after the securitization of other types of assets by a nonmortgage
banking enterprise. This Statement became effective in the first fiscal quarter
of 1999.
The adoption of Statement No. 134 did not have a material impact on the
operating results or financial condition of the Company. The Company does not
anticipate that adoption of Statement No. 133 will have a material impact on its
operating results or its financial condition.
<PAGE>
PART 2. OTHER INFORMATION
Item 6(b). Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTRUST Financial Corporation
Date: May 14, 1999 By: /s/ C.Q. Chandler IV
---------------------
C. Q. Chandler IV
President
(Principal Executive Officer)
Date: May 14, 1999 By: /s/ Jay L. Smith
-----------------
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 102,556
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 40,170
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 213,212
<INVESTMENTS-CARRYING> 155,854
<INVESTMENTS-MARKET> 157,315
<LOANS> 1,500,347
<ALLOWANCE> 22,718
<TOTAL-ASSETS> 2,092,326
<DEPOSITS> 1,617,046
<SHORT-TERM> 243,002
<LIABILITIES-OTHER> 18,153
<LONG-TERM> 80,755
0
0
<COMMON> 12,139
<OTHER-SE> 121,231
<TOTAL-LIABILITIES-AND-EQUITY> 2,092,326
<INTEREST-LOAN> 30,445
<INTEREST-INVEST> 5,473
<INTEREST-OTHER> 601
<INTEREST-TOTAL> 36,519
<INTEREST-DEPOSIT> 12,577
<INTEREST-EXPENSE> 16,865
<INTEREST-INCOME-NET> 19,654
<LOAN-LOSSES> 2,280
<SECURITIES-GAINS> 163
<EXPENSE-OTHER> 19,144
<INCOME-PRETAX> 9,326
<INCOME-PRE-EXTRAORDINARY> 5,700
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,700
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.40
<YIELD-ACTUAL> 0.00
<LOANS-NON> 5,059
<LOANS-PAST> 960
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 21,703
<CHARGE-OFFS> 1,868
<RECOVERIES> 603
<ALLOWANCE-CLOSE> 22,718
<ALLOWANCE-DOMESTIC> 22,718
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
