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
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _____to _____
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Commission file number 2-78658
INTRUST Financial Corporation
(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 67201
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(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 20, 2000, there were 2,379,841 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 2000 1999
- --------------------------------------------------------------------------------
Cash and cash equivalents:
Cash and due from banks $ 99,918 $ 109,548
Federal funds sold and securities purchased
under agreements to resell 40,630 46,240
- --------------------------------------------------------------------------------
Total cash and cash equivalents 140,548 155,788
- --------------------------------------------------------------------------------
Investment securities:
Held-to-maturity (market value, $59,013 for 2000
and $65,957 for 1999) 58,757 65,849
Available-for-sale, at market 370,131 361,503
- --------------------------------------------------------------------------------
Total investment securities 428,888 427,352
- --------------------------------------------------------------------------------
Loans held-for-sale 33,820 32,444
Loans, net of allowance for loan losses of $26,835
in 2000 and $26,010 in 1999 1,635,251 1,596,194
Land, buildings and equipment, net 39,067 38,656
Other assets 89,851 88,019
- --------------------------------------------------------------------------------
Total assets $2,367,425 $2,338,453
- -------------------------------------------------------=========================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Deposits $1,855,696 $1,818,476
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 262,834 270,316
Other 4,153 10,392
- --------------------------------------------------------------------------------
Total short-term borrowings 266,987 280,708
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities 22,360 17,886
Notes payable 10,000 10,000
Guaranteed preferred beneficial interests in the
Company's subordinated debentures 57,500 57,500
- --------------------------------------------------------------------------------
Total liabilities 2,212,543 2,184,570
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000
shares authorized, 2,783,650 shares issued
in 2000 and 1999 13,918 13,918
Capital surplus 21,672 21,673
Retained earnings 159,391 156,653
Treasury stock, at cost (401,669 shares in
2000 and 391,498 shares in 1999) (37,343) (35,965)
Unrealized securities gains (losses), net of tax (2,756) (2,396)
- --------------------------------------------------------------------------------
Total stockholders' equity 154,882 153,883
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,367,425 $2,338,453
- -------------------------------------------------------=========================
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,
------------------
2000 1999
- --------------------------------------------------------------------------------
Interest income:
Loans $36,283 $30,445
Investment securities 6,426 5,473
Federal funds sold and securities purchased under
agreements to resell, and other 748 601
- --------------------------------------------------------------------------------
Total interest income 43,457 36,519
- --------------------------------------------------------------------------------
Interest expense:
Deposits 15,330 12,577
Federal funds purchased and securities sold under
agreement to repurchase 3,686 2,569
Convertible capital notes 0 241
Subordinated debentures 1,184 1,185
Other borrowings 304 293
- --------------------------------------------------------------------------------
Total interest expense 20,504 16,865
- --------------------------------------------------------------------------------
Net interest income 22,953 19,654
Provision for loan losses 2,655 2,280
- --------------------------------------------------------------------------------
Net interest income after provision for loan losses 20,298 17,374
- --------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 3,227 2,750
Fiduciary income 3,159 3,247
Credit card fees 2,416 2,187
Securities gains 0 163
Other service charges, fees and income 2,990 2,749
- --------------------------------------------------------------------------------
Total noninterest income 11,792 11,096
- --------------------------------------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 11,595 9,999
Professional services 2,947 837
Net occupancy and equipment expense 2,815 2,392
Advertising and promotional activities 1,239 900
Data processing expense 1,287 1,088
Supplies 669 540
Postage and dispatch 671 494
Goodwill amortization 653 403
Deposit insurance assessment 99 63
Other 2,402 2,428
- --------------------------------------------------------------------------------
Total noninterest expenses 24,377 19,144
- --------------------------------------------------------------------------------
Income before provision for income taxes 7,713 9,326
Provision for income taxes 3,183 3,626
- --------------------------------------------------------------------------------
Net income 4,530 5,700
Other comprehensive income (loss) (360) (511)
- --------------------------------------------------------------------------------
Comprehensive income $ 4,170 $ 5,189
- --------------------------------------------------------------==================
Per share data:
Basic earnings per share $1.90 $2.80
- --------------------------------------------------------------==================
Diluted earnings per share $1.88 $2.40
- --------------------------------------------------------------==================
Cash Dividends $0.75 $0.60
- --------------------------------------------------------------==================
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,
---------------------
2000 1999
- --------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
Net Income $ 4,530 $ 5,700
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses
2,655 2,280
Provision for depreciation and amortization 2,238 1,774
Amortization of premium and accretion of discount on
investment securities (279) (20)
Gain on sale of investment securities 0 (163)
Loss on retirement of convertible capital notes 0 144
Changes in assets and liabilities:
Loans held for sale (1,376) 4,169
Prepaid expenses and other assets (423) (2,025)
Income taxes 3,130 3,571
Interest receivable (1,603) (821)
Interest payable 1,565 2,035
Other liabilities (442) (1,011)
Other 22 0
- --------------------------------------------------------------------------------
Net cash provided by operating activities 10,017 15,633
- --------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Purchase of investment securities (48,358) (32,000)
Investment securities matured or called 46,500 49,877
Proceeds from sale of investment securities 0 214
Net increase in loans (42,140) (56,700)
Purchases of land, buildings and equipment (1,827) (1,622)
Proceeds from sale of equipment 44 1
Proceeds from sale of other real estate
and repossessions 524 336
Other (329) (202)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (45,586) (40,096)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Net increase (decrease) in deposits 37,220 (30,308)
Net decrease in short-term borrowings (13,721) (1,213)
Retirement of convertible capital notes (1) (187)
Cash dividends (1,791) (1,221)
Purchase of treasury stock (1,378) (488)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by financing activities 20,329 (33,417)
- --------------------------------------------------------------------------------
Decrease in cash and cash equivalents (15,240) (57,880)
Cash and cash equivalents at beginning of period 155,788 200,606
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $140,548 $142,726
- ------------------------------------------------------------====================
Supplemental disclosures
Interest paid $18,939 $14,830
Income tax paid $ 53 $ 33
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 1999 INTRUST
Financial Corporation Annual Report on Form 10-K. Reference is made to the
"Notes to Consolidated Financial Statements" under Item 8 of the 1999 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, 2000 and 1999 (in thousands):
2000 1999
-----------------------------------------------------------------------
Balance, January 1 $26,010 $21,703
Additions:
Provision for loan losses 2,655 2,280
-----------------------------------------------------------------------
28,665 23,983
Deductions:
Loans charged off 2,479 1,868
Less recoveries on loans
previously charged off 649 603
-----------------------------------------------------------------------
Net loan losses 1,830 1,265
-----------------------------------------------------------------------
Balance, March 31 $26,835 $22,718
-------------------------------------------------======================
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 related to loans considered impaired of $0 and
$11,000 at March 31, 2000 and 1999 respectively. 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, for 1999, assumes that the 9% convertible
subordinated capital notes had been converted into common stock as of the
beginning of the period 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
- --------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------
Net income for basic earnings per share $4,530 $5,700
Interest expense on convertible debt, net of taxes 0 149
- --------------------------------------------------------------------------------
Net income for diluted earnings per share $4,530 $5,849
- -----------------------------------------------------------=====================
Weighted average shares for basic earnings per share 2,384,812 2,033,548
Shares issuable upon exercise of stock options 28,965 39,482
Shares issuable upon conversion of capital notes 0 359,728
- --------------------------------------------------------------------------------
Weighted average shares for diluted earnings per share 2,413,777 2,432,758
- -----------------------------------------------------------=====================
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 the measurement of profit or
loss since the last annual report.
There has been no material change in total segment assets or in the basis of
segmentation since the last annual report. However, as a result of changes made
in the Company's management reporting structure, the Kansas bank offices located
in communities outside of the Wichita, Kansas metropolitan area, that were
previously reported within the community banking segment, are now reported
within the consumer and commercial banking segments. Reporting for the Oklahoma
bank offices remains in the community banking segment. The following segment
information has been restated, for all periods presented, to reflect this
change.
Three Months Ended
March 31,
2000 1999
------------------------------------------------------------------------------
Revenues from external customers
Consumer banking $21,210 $21,772
Commercial banking 9,699 7,953
Wealth management 4,104 3,759
Community banking 1,492 1,622
Intercompany revenues
Consumer banking $ (115) $(2,448)
Commercial banking 0 0
Wealth management 114 120
Community banking 264 80
Segment profit
Consumer banking $ 5,409 $ 5,476
Commercial banking 5,063 4,900
Wealth management 975 747
Community banking 536 518
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Profit from segments 11,983 11,641
Expenses at corporate level not allocated to segments (4,270) (2,315)
------------------------------------------------------------------------------
Consolidated income before tax $ 7,713 $ 9,326
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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, 2000 totaled $4,530,000, declining $1,170,000 from the
comparable period of 1999. Litigation and settlement costs incurred during the
first quarter this year resulted in an increase in professional services costs
of slightly more than $2,100,000. In addition, year-over-year results are
impacted by the Company's acquisition of the Kansas branches of another
financial institution late in the third quarter of 1999 and the introduction of
a new advertising campaign in March, 2000.
NET INTEREST INCOME. Net interest income increased $3,299,000, or 16.8%, over
prior year levels, as average interest-earning assets increased approximately
14% over comparable prior year amounts, and the Company recorded a modest
year-over-year improvement in its interest spread. Loan growth continued during
the first quarter. Average loans increased approximately $60 million over fourth
quarter, 1999 levels. The majority of this growth occurred in the Company's
commercial loan portfolio, as growth rates in the consumer segment have
moderated. The Company's net interest income in the first quarter of 2000
increased nominally from the level recorded during the preceding quarter. Net
interest income for the quarter ended March 31, 2000 was $22,953, compared to
$22,505 in the fourth quarter of 1999. While the Company did record a modest
year-over-year increase in its interest spread, there was no change in the first
quarter interest spread as compared to that of the preceding quarter.
Yields on average interest-earning assets increased eight basis points during
the quarter ended March 31, 2000. While the Federal Reserve raised interest
rates twice during the quarter, one of the increases was made during the second
half of March and had little impact on the Company's overall yield on
interest-earning assets. The Company experienced no significant change in the
composition of its interest-earning assets in the first quarter. Loans comprised
77% of average interest-earning assets during the first quarter, increasing
approximately 1% over the comparable prior quarter amount.
Funding costs have continued to rise slightly. The cost of interest-bearing
liabilities was eight basis points higher than the comparable fourth quarter
1999 amount. The increase would have been approximately twelve basis points, but
the maturity of the Company's convertible capital notes resulted in $206,000
less interest expense in the first quarter compared to fourth quarter totals.
The Company operates in what it believes to be very competitive markets, and it
has offered premium pricing on selected products in some of the new markets it
entered in the second half of 1999.
The Company believes its principal markets will continue to remain quite
competitive. As a result, the Company anticipates compression in its interest
margin during the remainder of the year.
PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan losses of
$2,655,000 in the first quarter, increasing $55,000 from the amount recorded in
the preceding quarter and $375,000 over the amount recorded in the first quarter
of 1999. Charge-offs in the first quarter totaled $2,479,000. This represents an
increase of $475,000 over comparable prior quarter amounts and an increase of
$611,000 over comparable prior year amounts. The increase in charge-offs is due
principally to the charge-off of a loan to a customer in the retail industry.
The Company has noted no trends during the quarter that would point to
particular exposure issues with respect to a given industry or segment of the
loan portfolio. Nonaccrual and past due loans increased nominally in terms of
dollars but were unchanged when viewed as a percentage of total loans. These
loans comprised .26% of total loans at March 31, 2000 and December 31, 1999. The
comparable percentage at March 31, 1999 was .41%.
The Company's allowance for loan losses at March 31, 2000 was equal to 1.61% of
total loans and 627% of loans considered risk elements. Comparable amounts at
December 31, 1999 and March 31, 1999 were 1.60% and 624%, and 1.55% and 377%,
respectively. All segments of the loan portfolio are generally performing as had
been expected. As noted above, the majority of the commercial lending segment
charge-offs arose from the charge-off of one credit in the retail industry.
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 experienced to date, it is expected that
the 2000 provision for loan losses will be approximately equal to the amount
recorded in 1999.
Summary of Loan Loss Experience
- --------------------------------------------------------------------------------
March 31,
2000 1999
- --------------------------------------------------------------------------------
Amount of loans at period-end $1,662,086 $1,469,682
- -------------------------------------------------------=========================
YTD Average loans outstanding $1,643,454 $1,431,593
- -------------------------------------------------------=========================
Beginning balance of allowance for loan losses $26,010 $21,703
Loans charged-off
Commercial, Financial and Agricultural 987 241
Credit Card 1,073 1,181
Installment 419 446
- --------------------------------------------------------------------------------
Total loans charged off 2,479 1,868
- --------------------------------------------------------------------------------
Recoveries on charge-offs
Commercial, Financial and Agricultural 164 248
Real Estate-Mortgage 16 3
Credit Card 335 234
Installment 134 118
- --------------------------------------------------------------------------------
Total recoveries 649 603
- --------------------------------------------------------------------------------
Net loans charged off 1,830 1,265
Provision charged to expense 2,655 2,280
- --------------------------------------------------------------------------------
Ending balance of allowance for loan losses $26,835 $22,718
- ----------------------------------------------------------======================
Net charge-offs/average loans 0.11% 0.09%
- ----------------------------------------------------------======================
Allowance for loan losses/loans at period-end 1.61% 1.55%
- ----------------------------------------------------------======================
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, 2000 December 31, 1999
- --------------------------------------------------------------------------------
Percent Percent
Amount Of Total Amount of Total
- --------------------------------------------------------------------------------
Commercial, Financial and Agricultural $ 817,213 49.2% $ 775,027 47.8%
Real Estate-Construction 68,709 4.1 63,112 3.9
Real Estate-Mortgage 338,800 20.4 326,174 20.1
Installment, excluding credit card 316,069 19.0 330,732 20.4
Credit card 121,295 7.3 127,159 7.8
- --------------------------------------------------------------------------------
Subtotal 1,662,086 100.0% 1,622,204 100.0%
Allowance for loan losses (26,835) (26,010)
- --------------------------------------------------------------------------------
Total $1,635,251 $1,596,194
- -----------------------------------------=======================================
As noted above, loans considered risk elements, as presented in the following
table were little-changed this quarter. These loans comprised .26% of total
loans at both December 31, 1999 and March 31, 2000. Management is not aware of
issues that would significantly impact the credit quality of the loan portfolio
in 2000. Management believes the allowance for loan losses to be adequate at
this time.
March, 31 December 31,
2000 1999
- --------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $3,021 $3,063
Past Due 90 days or more 1,261 1,105
- --------------------------------------------------------------------------------
Total $4,282 $4,168
- -------------------------------------------------===============================
LIQUIDITY AND CAPITAL RESOURCES. The Company considered its liquidity level
adequate at March 31, 2000. Continued strong growth in the Company's loan
portfolio resulted in the loan/deposit ratio equaling 89.6% at March 31, 2000.
Comparable amounts at December 31, 1999 and March 31, 1999 were 89.2% and 90.9%,
respectively. The Company became a member of the Federal Home Loan Bank of
Topeka during the first quarter, providing a secondary source of liquidity. In
addition, the Company maintains a variety of funding sources, including
core-deposit acquisition, federal funds purchases, acquisition of public funds
and the normal run-off of interest-earning assets.
Approximately 70% of the Company's investment portfolio is comprised of United
States government and agency securities, with mortgage-backed securities
representing another 28% of the portfolio. The Company maintains a short
weighted average maturity in this portion of its investment portfolio. At March
31, 2000, the average maturity of United States government and agency securities
and mortgage-backed securities was 1 year and 6 months, and the average maturity
of municipal securities was 3 years and 7 months.
The Company has thoroughly reviewed its investment security portfolio and has
determined that at March 31, 2000, 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 has experienced in its loan portfolio, it has
continued to classify 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, 2000, the Company's total capital to risk-weighted assets ratio was
10.5% and its Tier 1 capital to risk-weighted assets ratio was 9.0%.
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 totaled
$11,792,000, increasing approximately 6.3% over first quarter, 1999 amounts, but
declining 3.4% from the comparable fourth quarter, 1999 amount. Seasonal
transactional activity in the fourth quarter will typically result in the
Company recording lesser amounts of OD and NSF fee income and ATM fee income in
the first quarter of a year.
Service charges on deposit accounts increased 17.3% over comparable prior year
amounts. The Company has recorded a year-over-year increase of approximately 22%
in the number of deposit accounts serviced, with most of that increase arising
from the accounts acquired by the Company in its purchase in September, 1999 of
the Kansas branches of another financial institution. During the first quarter
of 2000, deposit accounts serviced grew at an annualized rate of 2%.
Fiduciary income, after increasing significantly in 1997, 1998 and 1999,
declined 2.7% in the first quarter from prior year levels. Assets under
management at March 31, 2000 were approximately equal to the comparable March
31, 1999 amount, but the Company experienced a shift in the composition of its
assets under management, resulting in the modest decline in fee income.
Credit card fees were flat when compared to fourth quarter amounts but were
10.5% greater than comparable 1999 amounts. Fourth quarter credit card fee
income is impacted by seasonal holiday purchase activity, resulting in increases
in cash advance fee income. In addition, promotional payment options usually
offered in the first quarter result in slightly lower levels of non-interest
income being generated through the Company's securitized credit card accounts.
The year-over-year change in credit card fees reflects increased merchant
activity and repricing efforts initiated in 1999 and continuing in 2000.
As noted in previous filings, the Company does not engage in securities trading
activity. The securities gains recorded in 1999 were the result of a contractual
agreement specifying the sale over a three-year period of stock acquired in a
previous acquisition. The sale in 1999 was the last installment of that
agreement, and there are no other similar agreements.
Other service charges, fees and income declined $126,000 from fourth quarter
amounts but increased 8.8% over comparable 1999 amounts. Letter of credit
transaction activity declined during the first quarter, and also declined
$56,000 from comparable 1999 amounts. This revenue source is
transaction-dependent, and the Company has recorded reduced transaction volume
this year. ATM activity also declined this quarter. This quarterly decline in
ATM activity is a seasonal issue; year-over-year ATM fees have increased
approximately 10%. The Company also continues to wind-down its automobile loan
securitization conduit, resulting in a decreased level of noninterest income
from this revenue source. Offsetting these declines were revenues from the
Company's broker-dealer subsidiary. INTRUST Financial Services recorded a
year-over-year increase in revenue of $254,000.
Total noninterest expense has increased $5,233,000, or 27.3% over comparable
prior year amounts. Two factors are responsible for the majority of this
increase. First, as has been discussed in previous filings, the Company acquired
the Kansas branches of another financial institution in September, 1999. As a
result of this acquisition, the Company significantly expanded its geographic
presence and entered a number of new markets. This has generated a higher level
of staffing, occupancy and operational costs. Second, as noted above, the
Company incurred legal and settlement costs associated with outstanding
litigation. Costs associated with the resolution of this issue generated a
$2,100,000 increase in professional services expense this quarter.
Salaries and employee benefit costs have increased $1,596,000, or 16% over
comparable 1999 amounts. Approximately one-third of this increase is due to
staffing costs associated with the branch acquisition discussed above. The
Company's FTEs at March 31, 2000 were 16% higher than comparable 1999 totals.
One-half of the FTE increase was attributable to personnel in place at the
Company's new locations. Also contributing to the increase in salaries and
employee benefit costs were increases in employee education, pension expense and
payroll taxes. These increases accounted for approximately $220,000 in
additional costs this year.
Net occupancy and equipment expense increased 17.7% over prior year amounts. 83%
of this increase was attributable to costs associated with the Company's new
locations. Advertising and promotional costs have increased $339,000 over
comparable 1999 amounts. The Company has undertaken a major advertising campaign
this year. The Company expects that quarterly advertising costs in the second
quarter will also be appreciably higher than prior year amounts. Data processing
expense has increased $199,000, or 18.3% over 1999 amounts. Much of this
increase is attributable to the increased account volumes now serviced by the
Company. As noted previously, the Company is now servicing 22% more deposit
accounts than it was at this time last year. In addition, the Company is
actively engaged in various initiatives associated with its Internet banking
applications. Increases have also been recorded in supplies and postage and
dispatch costs. Again, the acquisition of the new accounts and branches in
September, 1999 is the principal reason for the increase in these costs. The
Company is now corresponding with a larger account base, and courier costs have
increased as the Company's geographic presence has expanded.
The year-over-year increase in goodwill amortization was $250,000. This is due
solely to the goodwill recorded in the branch acquisition discussed elsewhere.
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, 2000.
The Company does not anticipate that adoption of Statement No. 133 will have a
material impact on its operating results or its financial condition.
FORWARD-LOOKING STATEMENTS. This 10-Q contains various forward-looking
statements and includes assumptions concerning the Company's operations, future
results and prospects. These forward-looking statements are based on current
expectations, are subject to risk and uncertainties and the Company undertakes
no obligation to update any such statement to reflect later developments. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company provides the following cautionary
statement identifying important economic, political and technological factors,
among others, the absence of which could cause the actual results or events to
differ materially from those set forth in or implied by the forward-looking
statements and related assumptions.
Such factors include the following: (i) continuation of the current and
projected future business environment, including interest rates and capital and
consumer spending; (ii) competitive factors and competitor responses to Company
initiatives; (iii) successful development and market introductions of
anticipated new products; (iv) stability of government laws and regulations,
including taxes; and (v) trends in the banking industry.
<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 12, 2000 By: /s/ C.Q. Chandler IV
---------------------
C.Q. Chandler IV
President
(Principal Executive Officer)
Date: May 12, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 99,918
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 40,630
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 370,131
<INVESTMENTS-CARRYING> 58,757
<INVESTMENTS-MARKET> 59,013
<LOANS> 1,695,906
<ALLOWANCE> 26,835
<TOTAL-ASSETS> 2,367,425
<DEPOSITS> 1,855,696
<SHORT-TERM> 266,987
<LIABILITIES-OTHER> 22,360
<LONG-TERM> 67,500
0
0
<COMMON> 13,918
<OTHER-SE> 140,964
<TOTAL-LIABILITIES-AND-EQUITY> 2,367,425
<INTEREST-LOAN> 36,283
<INTEREST-INVEST> 6,426
<INTEREST-OTHER> 748
<INTEREST-TOTAL> 43,457
<INTEREST-DEPOSIT> 15,330
<INTEREST-EXPENSE> 20,504
<INTEREST-INCOME-NET> 22,953
<LOAN-LOSSES> 2,655
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 24,377
<INCOME-PRETAX> 7,713
<INCOME-PRE-EXTRAORDINARY> 4,530
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,530
<EPS-BASIC> 1.90
<EPS-DILUTED> 1.88
<YIELD-ACTUAL> 0.00
<LOANS-NON> 3,021
<LOANS-PAST> 1,261
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 26,010
<CHARGE-OFFS> 2,479
<RECOVERIES> 649
<ALLOWANCE-CLOSE> 26,835
<ALLOWANCE-DOMESTIC> 26,835
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
