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 June 30, 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 July 19, 2000, there were 2,373,484 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)
June 30, December 31,
Assets 2000 1999
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Cash and cash equivalents:
Cash and due from banks $ 110,845 $ 109,548
Federal funds sold and securities purchased
under agreements to resell 12,350 46,240
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Total cash and cash equivalents 123,195 155,788
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Investment securities:
Held-to-maturity at cost (market value, $49,119
for 2000 and $65,957 for 1999) 48,855 65,849
Available-for-sale, at market 392,303 361,503
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Total investment securities 441,158 427,352
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Loans held-for-sale 34,177 32,444
Loans, net of allowance for loan losses of $27,783
in 2000 and $26,010 in 1999 1,689,569 1,596,194
Land, buildings and equipment, net 40,582 38,656
Other assets 85,635 88,019
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Total assets $2,414,316 $2,338,453
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Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------
Deposits $1,796,088 $1,818,476
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 310,142 270,316
Other 60,576 10,392
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Total short-term borrowings 370,718 280,708
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Accounts payable and accrued liabilities 20,481 17,886
Notes payable 10,000 10,000
Guaranteed preferred beneficial interests in
the Company's subordinated debentures 57,500 57,500
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Total liabilities 2,254,787 2,184,570
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Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,783,650 shares issued 13,918 13,918
Capital surplus 21,672 21,673
Retained earnings 164,600 156,653
Treasury stock, at cost (410,166 shares in
2000 and 391,498 shares in 1999) (38,506) (35,965)
Accumulated other comprehensive loss (2,155) (2,396)
--------------------------------------------------------------------------------
Total stockholders' equity 159,529 153,883
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,414,316 $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 Six Months
Ended June 30, Ended June 30,
------------------------------------
2000 1999 2000 1999
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Interest income:
Loans $38,728 $32,377 $75,011 $62,822
Investment securities 6,766 5,078 13,192 10,551
Federal funds sold and securities
purchased under agreements to resell,
and other 505 350 1,253 951
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Total interest income 45,999 37,805 89,456 74,324
--------------------------------------------------------------------------------
Interest expense:
Deposits 15,773 12,822 31,103 25,399
Federal funds purchased and securities
sold under agreement to repurchase 4,363 2,686 8,049 5,255
Convertible capital notes 0 242 0 483
Subordinated debentures 1,185 1,184 2,369 2,369
Other borrowings 596 287 900 580
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Total interest expense 21,917 17,221 42,421 34,086
--------------------------------------------------------------------------------
Net interest income 24,082 20,584 47,035 40,238
Provision for loan losses 2,655 3,030 5,310 5,310
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Net interest income after provision
for loan losses 21,427 17,554 41,725 34,928
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Noninterest income:
Service charges on deposit accounts 3,445 3,032 6,672 5,782
Fiduciary income 3,078 3,317 6,237 6,564
Credit card fees 2,620 2,178 5,036 4,365
Securities gains 0 378 0 541
Other service charges, fees and income 3,387 2,924 6,377 5,673
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Total noninterest income 12,530 11,829 24,322 22,925
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Noninterest expenses:
Salaries and employee benefits 11,600 9,966 23,195 19,965
Professional services 37 862 2,984 1,699
Net occupancy and equipment expense 2,919 2,542 5,734 4,934
Advertising and promotional activities 1,678 861 2,917 1,761
Data processing expense 1,388 1,088 2,675 2,176
Supplies 666 573 1,335 1,113
Postage and dispatch 621 542 1,292 1,036
Goodwill amortization 654 403 1,307 806
Deposit insurance assessment 98 64 197 127
Other 2,727 2,664 5,129 5,092
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Total noninterest expenses 22,388 19,565 46,765 38,709
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Income before provision for
income taxes 11,569 9,818 19,282 19,144
Provision for income taxes 4,574 3,832 7,757 7,458
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Net income 6,995 5,986 11,525 11,686
Other comprehensive income (loss) 601 (1,001) 241 (1,512)
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Comprehensive income $ 7,596 $ 4,985 $11,766 $10,174
---------------------------------------------===================================
Per share data:
Basic earnings per share $2.94 $2.95 $4.84 $5.75
---------------------------------------------===================================
Diluted earnings per share $2.90 $2.53 $4.78 $4.93
---------------------------------------------===================================
Cash Dividends $0.75 $0.60 $1.50 $1.20
---------------------------------------------===================================
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)
Six Months Ended
June 30
-----------------------
2000 1999
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Cash provided (absorbed) by operating activities:
Net Income $ 11,525 $ 11,686
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 5,310 5,310
Provision for depreciation and amortization 4,520 3,621
Amortization of premium and accretion of
discount on investment securities (492) (32)
Gain on sale of investment securities 0 (541)
Loss on retirement of convertible capital notes 0 155
Changes in assets and liabilities:
Loans held for sale (1,733) 3,883
Prepaid expenses and other assets (1,385) (758)
Income taxes 4,780 1,083
Interest receivable (2,797) (674)
Interest payable 2,377 4,135
Other liabilities 453 (336)
Other (6) 19
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Net cash provided by operating activities 22,552 27,551
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Cash provided (absorbed) by investing activities:
Purchase of investment securities (86,394) (77,115)
Investment securities matured or called 73,481 106,784
Proceeds from sale of investment securities 0 592
Net increase in loans (99,509) (143,932)
Purchases of land, buildings and equipment (4,782) (3,326)
Proceeds from sale of equipment 128 10
Proceeds from sale of other real estate
and repossessions 979 625
Other (551) (732)
--------------------------------------------------------------------------------
Net cash absorbed by investing activities (116,648) (117,094)
--------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Net decrease in deposits (22,388) (28,719)
Net increase in short-term borrowings 90,010 53,244
Retirement of convertible capital notes (1) (201)
Cash dividends (3,577) (2,440)
Purchase of treasury stock (2,541) (637)
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Net cash provided by financing activities 61,503 21,247
--------------------------------------------------------------------------------
Decrease in cash and cash equivalents (32,593) (68,296)
Cash and cash equivalents at beginning of period 155,788 200,606
--------------------------------------------------------------------------------
Cash and cash equivalents at end of period $123,195 $132,310
----------------------------------------------------------======================
Supplemental disclosures
Interest paid $40,044 $29,951
Income tax paid $ 2,957 6,353
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 six months
ended June 30, 2000 and 1999 (in thousands):
2000 1999
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Balance, January 1 $26,010 $21,703
Additions:
Provision for loan losses 5,310 5,310
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31,320 27,013
Deductions:
Loans charged off 4,741 4,570
Less recoveries on loans
previously charged off 1,204 1,065
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Net loan losses 3,537 3,505
--------------------------------------------------------------------------
Balance, June 30 $27,783 $23,508
------------------------------------------------------====================
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
$444,000 and $83,000 at June 30, 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:
Six Months Ended
June 30
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
Net income for basic earnings per share $11,525 $11,686
Interest expense on convertible debt, net of taxes 0 299
--------------------------------------------------------------------------------
Net income for diluted earnings per share $11,525 $11,985
----------------------------------------------------------======================
Weighted average shares for basic earnings per share 2,380,973 2,032,792
Shares issuable upon exercise of stock options 29,063 39,564
Shares issuable upon conversion of capital notes 0 359,055
--------------------------------------------------------------------------------
Weighted average shares for diluted earnings per share 2,410,036 2,431,411
----------------------------------------------------------======================
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
(in thousands):
Six Months Ended
June 30,
2000 1999
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Revenues from external customers
Consumer banking $43,360 $44,192
Commercial banking 19,681 16,385
Wealth management 8,031 7,839
Community banking 3,167 3,190
Intercompany revenues
Consumer banking $ (139) $(4,918)
Commercial banking 0 0
Wealth management 229 213
Community banking 445 292
Segment profit
Consumer banking $11,309 $11,531
Commercial banking 10,228 8,969
Wealth management 1,684 1,961
Community banking 1,169 1,083
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Profit from segments 24,390 23,544
Expenses at corporate level not allocated
to segments (5,108) (4,400)
-------------------------------------------------------------------------------
Consolidated income before tax $19,282 $19,144
--------------------------------------------------------=======================
<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 June 30, 2000 totaled $6,995,000, establishing a new quarterly
record for the Company. Net income increased 16.9% over the comparable quarter
of 1999, and represents a 54.4% improvement over first quarter earnings. The
Company received an $850,000 reimbursement during the second quarter from an
insurance carrier pertaining to a litigation issue that was settled in the first
quarter. In addition, the Company's net interest income improved $1,129,000 from
first quarter levels, and increases in noninterest expense (excluding the
quarter-over-quarter changes arising from the aforementioned litigation issue)
were more than offset by growth in noninterest income.
NET INTEREST INCOME. Net interest income increased $3,498,000, or 17.0%, over
prior year levels, as average interest-earning assets increased approximately
13.4% over comparable prior year amounts, and the Company recorded a 10 basis
point increase in its year-over-year interest spread. While the Company
continued to record loan growth in the second quarter, the rate of growth did
moderate. After increasing 3.8% in the first quarter, average loans increased
2.9% during the second quarter. Continuing recent trends, the majority of this
growth occurred in the Company's commercial loan portfolio. The quarterly
improvement in net interest income was driven by increases in both volumes and
interest spreads. Average interest-earning assets in the second quarter exceeded
first quarter amounts by approximately $41 million, and the Company recorded a
six basis point improvement in its interest spread.
Yields on average interest-earning assets increased thirty-one basis points
during the quarter ended June 30, 2000. The Federal Reserve twenty-five basis
point increase on March 21 and the fifty basis point increase in mid-May were
the principal reasons for the increase in yields. The Company's loan growth
continues to modestly impact the composition of its interest-earning assets.
Loans comprised 78% of average interest-earning assets in the second quarter.
This is an increase of one percent, and follows an increase of a similar amount
in the first quarter of this year.
Funding costs also rose during the quarter. The cost of interest-bearing
liabilities was twenty-five basis points higher than the comparable first
quarter amounts. The Company anticipates that it will continue to see pressure
with respect to funding costs for the remainder of the year. Average
interest-bearing deposits in the second quarter were relatively unchanged from
first quarter amounts, and total deposits at quarter-end actually experienced a
quarter-over-quarter decline. The Company typically sees a reduction in deposit
balances after income tax payments are processed in April. The effect this year
was more pronounced, and the Company recorded a quarter-over-quarter decline in
total deposits of $59,608,000. As a result of the decline in deposits, the
Company increased its borrowings from the Federal Home Loan Bank of Topeka.
These borrowings typically carry a higher rate of interest than traditional
deposit products.
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 second quarter, equal to the amount recorded in the preceding
quarter and $375,000 less than the amount recorded in the second quarter of
1999. Charge-offs in the second quarter totaled $2,262,000, declining slightly
from the first quarter amount of $2,479,000. This represents a decline of
$440,000 from comparable prior year amounts. Nonaccrual and past due loans
increased $591,000 from prior quarter totals. This increase was due principally
to the downgrade of one credit in the retail industry. These loans comprised
.28% of total loans at June 30, 2000, and .26% of total loans at March 31, 2000
and December 31, 1999. 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.
The Company's allowance for loan losses at June 30, 2000 was equal to 1.62% of
total loans and 570% of loans considered risk elements. Comparable amounts at
March 31, 2000 and December 31, 1999 were 1.61% and 627%, and 1.60% and 624%,
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.
<PAGE>
Summary of Loan Loss Experience (in thousands of dollars)
--------------------------------------------------------------------------------
June 30,
2000 1999
--------------------------------------------------------------------------------
Amount of loans at period-end $1,717,352 $1,554,338
-----------------------------------------------------===========================
YTD Average loans outstanding $1,667,764 $1,477,805
-----------------------------------------------------===========================
Beginning balance of allowance for loan losses $26,010 $21,703
Loans charged-off
Commercial, Financial and Agricultural 1,584 1,427
Real Estate-Construction 40 0
Credit Card 2,292 2,280
Installment 825 863
--------------------------------------------------------------------------------
Total loans charged off 4,741 4,570
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Recoveries on charge-offs
Commercial, Financial and Agricultural 340 298
Real Estate-Mortgage 19 6
Credit Card 602 492
Installment 243 269
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Total recoveries 1,204 1,065
--------------------------------------------------------------------------------
Net loans charged off 3,537 3,505
Provision charged to expense 5,310 5,310
--------------------------------------------------------------------------------
Ending balance of allowance for loan losses $27,783 $23,508
-----------------------------------------------------===========================
Net charge-offs/average loans 0.21% 0.24%
-----------------------------------------------------===========================
Allowance for loan losses/loans at period-end 1.62% 1.51%
-----------------------------------------------------===========================
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 (in thousands of dollars).
June 30, 2000 December 31, 1999
--------------------------------------------------------------------------------
Percent Percent
Amount of Total Amount of Total
--------------------------------------------------------------------------------
Commercial, Financial
and Agricultural $ 824,618 48.0% $ 775,027 47.8%
Real Estate-Construction 64,575 3.8 63,112 3.9
Real Estate-Mortgage 399,737 23.3 326,174 20.1
Installment, excluding credit card 304,160 17.7 330,732 20.4
Credit card 124,262 7.2 127,159 7.8
--------------------------------------------------------------------------------
Subtotal 1,717,352 100.0% 1,622,204 100.0%
Allowance for loan losses (27,783) (26,010)
--------------------------------------------------------------------------------
Total $1,689,569 $1,596,194
-------------------------------------===========================================
As noted above, loans considered risk elements increased slightly this quarter.
These loans comprised .28% of total loans, compared to .26% of total loans at
both December 31, 1999 and March 31, 2000, respectively. 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.
June, 30 December 31,
(in thousands of dollars) 2000 1999
--------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $3,670 $3,063
Past Due 90 days or more 1,203 1,105
--------------------------------------------------------------------------------
Total $4,873 $4,168
----------------------------------------------------============================
LIQUIDITY AND CAPITAL RESOURCES. The Company considered its liquidity level
adequate at June 30, 2000. Loan growth, coupled with the decline in deposits
referred to above, resulted in the Company's loan/deposit ratio increasing to
95.6% at June 30, 2000. Comparable amounts at March 31, 2000 and December 31,
1999 were 89.6% and 89.2%, respectively. As noted in previous filings, one of
the Company's subsidiaries became a member of the Federal Home Loan Bank of
Topeka during the first quarter of 2000. The increase in short-term borrowings
in the accompanying balance sheet is due principally to that subsidiary's
borrowings from the FHLB. In addition to FHLB borrowing capacity, 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 72% of the Company's investment portfolio is comprised of United
States government and agency securities, with mortgage-backed securities
representing another 24% of the portfolio. The Company maintains a short
weighted average maturity in this portion of its investment portfolio. At June
30, 2000, the average maturity of United States government and agency securities
and mortgage-backed securities was 1 year and 4 months, and the average maturity
of municipal securities was 3 years and 5 months.
The Company has thoroughly reviewed its investment security portfolio and has
determined that at June 30, 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 June 30, 2000, the Company's total capital to risk-weighted assets ratio was
10.7% and its Tier 1 capital to risk-weighted assets ratio was 9.2%.
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. Second quarter noninterest income increased 6.3%
over first quarter amounts, totaling $12,530,000. Excluding securities gains
recorded in the second quarter of 1999, noninterest income in the second quarter
increased 9.4% over comparable 1999 amounts. With the exception of fiduciary
income, the Company recorded quarter-over-quarter growth in all areas of
noninterest income.
Second quarter service charges on deposit accounts increased 13.6% 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. The Company has recorded only a nominal increase in the number of
accounts serviced during the year. Through the first six months of the year, the
number of accounts serviced grew at an annualized rate of 2%. OD and NSF volumes
have continued to increase during 2000. This source of fee income increased
13.4% over first quarter amounts, and increased $262,000 over the amount
recorded in the second quarter of 1999.
Fiduciary income declined again in the second quarter, as activity in the equity
markets resulted in further declines in the value of assets managed by the
Company. Revenues from fiduciary activities declined 2.6% from first quarter
levels and were 7.2% less than comparable 1999 amounts. The Company did record a
modest increase in assets under management during the month of June, reversing
the trend that has occurred for much of the year.
Quarterly credit card fees recorded a year-over-year increase of 20.3%, and
increased 8.4% over first quarter amounts. Approximately one-half of the
quarterly increase is attributable to increased merchant activity during the
second quarter, while the year-over-year increase arises from repricing efforts
initiated in 1999 and continuing this year. The Company also recorded a greater
amount of cash flow from its securitized credit card accounts in the second
quarter, resulting in a quarterly increase in revenue of $55,000.
As noted in previous filings, the Company does not engage in securities trading
activity. The securities gains recorded in 1999 were the result of nonrecurring
transactions. There have been no similar transactions in 2000.
Other service charges, fees and income, after declining $126,000 in the first
quarter, increased 13.3% in the second quarter. ATM activity levels increased
during the second quarter, resulting in a 15% increase in fees from this revenue
source. Letter of credit transaction activity also increased during the second
quarter. Additional volumes resulted in a $49,000 increase in letter of credit
fee income. INTRUST Financial Services, the Company's broker-dealer subsidiary,
continues to report increased revenues. After reporting a first quarter
year-over-year revenue increase of $254,000, second quarter revenues exceeded
those of the comparable period in 1999 by approximately $300,000.
Total noninterest expense in the second quarter increased $2,823,000, or 14.4%,
over comparable prior year amounts. Excluding the $850,000 insurance
reimbursement that was recorded as a reduction in professional services cost,
the year-over-year increase would have been $3,673,000. Approximately one-third
of this increase is attributable to costs associated with the locations acquired
in the Company's acquisition of the Kansas branches of another financial
institution in September, 1999. The Company has also undertaken a major
advertising initiative this year, which has resulted in a substantial increase
in advertising and promotional activities. Data processing, supplies and postage
costs have all been impacted by the greater number of accounts that are
presently being serviced by the Company.
Salaries and employee benefit costs, in the second quarter, have increased
$1,634,000, or 16.4%, over comparable 1999 amounts. $575,000 of this increase is
attributable to staffing costs associated with the new locations acquired in
1999. Increases in employee benefit plan costs were responsible for 5% of the
increase in total salaries and employee benefit costs. Employee education costs
increased $60,000, and incentive plan costs were 45% higher than year-ago
levels. INTRUST Financial Services recorded an increase in salaries and employee
benefit costs of $119,000, as commission costs increased as a result of
increased sales volume.
Net occupancy and equipment expense increased 14.8% over 1999 second quarter
levels, with 62% of this increase attributable to costs incurred at the
Company's new locations. Much of the remaining increase was due to increased
utilities cost and increased equipment depreciation expense. As has been noted
in previous filings, the Company has undertaken a major advertising campaign
this year, and has substantially increased its advertising expenditures. The
Company anticipates a lesser level of advertising expenditures for the remainder
of 2000. As discussed above, increased account volumes have resulted in
increased data processing, supplies and postage costs. The number of deposit
accounts serviced by the Company has increased over 21% this year. Additionally,
the Company presently has a number of initiatives underway in the technology
area.
The year-over-year increase in goodwill amortization was $251,000. 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: August 4, 2000 By: /s/ C.Q. Chandler IV
---------------------
C.Q. Chandler IV
President
(Principal Executive Officer)
Date: August 4, 2000 By: /s/ Jay L. Smith
-----------------
Jay L. Smith
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Number Description
------ -----------
27 Financial Data Schedule
<PAGE>
