SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
105 North Main Street
Box One
Wichita, Kansas 67202
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (316) 383-1111
Securities registered pursuant to Section 12(b) of the Act: 8.24%
Cumulative Trust Preferred Securities (issued by INTRUST Capital
Trust and guaranteed by its parent, INTRUST Financial Corporation)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ X ]
At January 27, 2000, there were 2,385,550 shares of the registrant's common
stock, par value $5 per share, outstanding. There is no established public
trading market for the registrant's common stock. Registrant is aware that
quotations for its common stock have become available through the National
Quotation Bureau, Inc. As reported by the National Quotation Bureau, Inc. as of
March 2, 2000, the bid price of $134.00 per share would indicate an aggregate
market value of $217,033,234 for shares held by nonaffiliates.
EXHIBIT INDEX: Part IV hereof.
<PAGE>
PART I
ITEM 1. BUSINESS.
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GENERAL
INTRUST Financial Corporation, a Kansas corporation (the "Company"), is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. The mailing address of the Company is 105 North Main, Box One,
Wichita, Kansas 67202.
This 10-K 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.
In May 1999, INTRUST RE Holdings, Inc. was formed as a wholly-owned
subsidiary of INTRUST Bank, N. A.
In May 1999, INTRUST REIT, Inc. was formed as a wholly-owned subsidiary of
INTRUST RE Holdings, Inc.
DESCRIPTION OF BUSINESS
As of December 31, 1999, the Company's direct wholly-owned banking
subsidiaries were INTRUST Bank, N.A. ("IB"), Wichita, Kansas, and Will Rogers
Bank ("WRB"), Oklahoma City, Oklahoma (collectively, the "Subsidiary Banks").
The Subsidiary Banks operate 50 banking locations. IB is a national banking
association organized under the laws of the United States. WRB is a state
banking association organized under the laws of Oklahoma. The Subsidiary Banks
provide a broad range of banking services to their customers, including checking
and savings accounts, NOW accounts, money market deposit accounts, certificates
of deposit, Individual Retirement Accounts, personal loans, real estate and
commercial loans, investment services, credit cards, automated teller machines,
and safe deposit facilities. In addition, IB offers fiduciary and trust
services, equipment and automobile leasing, cash management, data processing,
and correspondent bank services.
The direct and indirect non-banking subsidiaries of the Company are:
NestEgg Consulting, Inc. ("NCI"), INTRUST Community Development Corporation
("ICDC"), INTRUST Capital Trust ("Trust"), INTRUST Properties, Inc. ("IPI"),
INTRUST Financial Services, Inc. ("IFS"), INTRUST RE Holdings, Inc. ("IHC"),
INTRUST REIT, Inc. ("REIT") and INTRUST Investments, Inc. ("III") (collectively,
the "Non-Banking Subsidiaries"). NCI, ICDC and Trust are wholly-owned
subsidiaries of the Company; IPI, IFS, IHC and III are wholly-owned subsidiaries
of IB. REIT is a wholly-owned subsidiary of IHC. NCI is engaged in the business
of providing pension plan consulting services. ICDC is in business to make
equity and debt investments to promote community welfare. Trust was formed to
issue trust preferred securities. IPI owns banking facilities that it leases to
IB. IFS provides investment brokerage services. IHC is a real estate trust
holding company. REIT is a real estate investment trust. III performs portfolio
management activities by managing, investing and reinvesting the cash and
investment securities contributed to it by IB. All of the Non-Banking
Subsidiaries are based in Wichita, Kansas except Trust, IHC and REIT.
On January 21, 1998, Trust, a statutory business trust formed under
Delaware law, issued $57,500,000 in cumulative trust preferred securities (the
"Trust Preferred Securities"). In addition, the Trust issued 71,155 common
securities which are owned by the Company. The Trust Preferred Securities are
publicly held and listed on the American Stock Exchange, Inc. under the symbol
"IKT.PR.A." The Trust Preferred Securities, which, within prescribed limits,
qualify as Tier 1 capital for regulatory reporting purposes, have a distribution
rate of 8.24%. The only assets of Trust consist of 8.24% subordinated debentures
(and payments thereon) due January 31, 2028 issued by the Company to Trust.
The Subsidiary Banks and the Non-Banking Subsidiaries are collectively
referred to as the "Subsidiaries."
At December 31, 1999, IB's trust division managed assets with a market
value of $2,719,237,000 in various fiduciary capacities.
As of December 31, 1999, the Company had 23 full-time employees. The
Subsidiaries collectively had approximately 906 full-time and 244 part-time
employees. None of the employees of the Company or the Subsidiaries are subject
to a collective bargaining agreement. The Company generally considers its
relationships with its employees and the employees of the Subsidiaries to be
good.
The Company and the Subsidiaries do not engage in any other business.
COMPETITION
The Company offers a wide range of financial services through its
Subsidiary Banks. The Company and its Subsidiary Banks encounter intense
competition in all of their activities. As lenders, the Subsidiary Banks compete
not only with other banks, but also with savings associations, credit unions,
finance companies, factoring companies, insurance companies and other
non-banking financial institutions. They compete for funds with other banks,
savings associations, credit unions, mutual funds, money market funds, and
issuers of commercial paper and other securities. In addition, large regional
and national corporations have in recent years become increasingly visible in
offering a broad range of financial services to all types of commercial and
consumer customers. Many of such competitors have greater financial resources
available for lending and acquisition as well as higher lending limits than the
Subsidiary Banks and may provide services which the Company or its Subsidiaries
may not offer. In addition, non-banking financial institutions are generally not
subject to the same regulatory constraints applicable to banks. The recently
enacted Gramm-Leach-Bliley Act allows consolidation within the banking,
securities and insurance industries and is predicted to substantially increase
competition in all three areas of the financial services industry. See "Recent
Legislation," below.
The Company is predominantly a retail bank committed to serving the
financial needs of customers in the local communities where the Subsidiary Banks
and their branches are located. IB's primary service areas are Sedgwick County
(including Wichita), and northeast Kansas; WRB's primary service areas are
Oklahoma City, Moore and Mustang, Oklahoma. The Company believes that the
primary source of competition comes from approximately twenty other banks with
locations in Sedgwick County, over seventy in northeast Kansas, six in Oklahoma
City, and five in Mustang and Moore. However, competition can also come from
institutions that do not have offices located in the Subsidiary Banks' service
areas. The Company believes that the principal competitive factors in its
markets for deposits and loans are, respectively, interest rates paid and
interest rates charged.
As discussed more fully below, on September 29, 1994, the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 was enacted (the
"IBBEA"). This legislation facilitates the interstate expansion and
consolidation of banking organizations by: (i) permitting bank holding companies
that are adequately capitalized and managed to acquire banks located in states
outside their home state regardless of whether such acquisitions are authorized
under the law of the host state; (ii) permitting the interstate merger of banks
in all states that did not "opt out" of the merger authority prior to June 1,
1997; (iii) permitting banks to establish new branches on an interstate basis
provided that such action is specifically authorized by the law of the host
state; (iv) permitting foreign banks to establish, with approval of the
regulators in the United States, branches and agencies outside their home state
to the same extent that national or state banks located in the home state are
authorized to do so; and (v) permitting banks to receive deposits, renew time
deposits, close loans, service loans and receive payments on loans and other
obligations as agent for any bank or thrift affiliate, whether the affiliate is
located in the same state or a different state. Overall, this legislation
increases competition and promotes geographic diversification in the banking
industry. See "Federal Regulation of Bank Holding Companies" below.
Generally, increased competition in the banking industry has the effect of
requiring banks to accept lower interest rates on loans and to pay higher
interest rates on a larger percentage of deposits.
SUPERVISION AND REGULATION
The Company and the Subsidiary Banks are subject to extensive regulation
by federal and state authorities. Such regulation is generally intended to
protect depositors, not stockholders.
FEDERAL REGULATION OF BANK HOLDING COMPANIES
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Act"), and is registered as such
with the Board of Governors of the Federal Reserve System (the "Board of
Governors"). The Board of Governors may make examinations of the Company and its
Subsidiaries, and the Company is required to file with the Board of Governors an
annual report and such other additional information as the Board of Governors
may require pursuant to the Act.
The Act requires every bank holding company to obtain the prior approval
of the Board of Governors before (i) acquiring direct or indirect ownership or
control of more than 5% of the outstanding shares of any class of the voting
shares or all or substantially all of the assets of any bank, or (ii) merging or
consolidating with another bank holding company. In determining whether to
approve such a proposed acquisition, merger or consolidation, the Board of
Governors is required to take into account the competitive effects of the
proposed transaction, the convenience and needs of the community to be served,
the Company's performance under the Community Reinvestment Act and the financial
and managerial resources and future prospects of the bank holding companies and
banks concerned. The Act provides that the Board of Governors shall not approve
any acquisition, merger or consolidation which would result in a monopoly, or
which would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States,
or any other proposed acquisition, merger or consolidation, the effect of which
may be substantially to lessen competition or tend to create a monopoly in any
section of the country, or which in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed transaction are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the community to be served.
The IBBEA authorizes interstate acquisitions of banks and bank holding
companies by qualifying bank holding companies without geographic limitation. In
addition, as of June 1, 1997, the IBBEA also authorizes a bank to merge with a
bank in another state as long as neither of the states opted out of interstate
branching between the date of enactment of the IBBEA and June 1, 1997. Such
acquisitions and mergers may be subject to such state-imposed contingencies as
compliance with state age laws and nationwide and statewide concentration
limits. A bank may establish and operate a de novo branch in a state in which
the bank does not maintain a branch if that state expressly permits de novo
branching. Once a bank has established branches in a state through an interstate
merger transaction, the bank may establish and acquire additional branches at
any location in the state where any bank involved in the interstate merger
transaction could have established or acquired branches under applicable federal
or state law. A bank that has established a branch in a state through de novo
branching may establish and acquire additional branches in such state in the
same manner and to the same extent as a bank having a branch in such state as a
result of an interstate merger.
The Act also prohibits, with certain exceptions, a bank holding company
from engaging in and from acquiring direct or indirect ownership or control of
more than 5% of the outstanding shares of any class of the voting shares of any
company engaged in a business other than banking, managing and controlling
banks, or furnishing services to its affiliated banks. One of the exceptions to
this prohibition provides that a bank holding company may engage in, and may own
shares of companies engaged in, certain businesses that the Board of Governors
has determined to be so closely related to banking as to be a proper incident
thereto. In making such determination, the Board of Governors is required to
weigh the expected benefit to the public, such as greater convenience, increased
competition, or gains in efficiency, against the risks of possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
A bank holding company and its subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with the extension of credit or the
lease or sale of any property or the furnishing of any service. Subsidiary banks
of a bank holding company are also subject to certain restrictions imposed by
the Federal Reserve Act and the Federal Deposit Insurance Act on extensions of
credit to the bank holding company or any of its subsidiaries, investments in
the stock or other securities thereof, the taking of such stocks or securities
as collateral for loans and other transactions with the bank holding company and
its subsidiaries. These restrictions limit the Company's ability to obtain funds
from the Subsidiary Banks. In addition, the amount of loans or extensions of
credit that the Subsidiary Banks may make to the Company, or to third parties
secured by securities or obligations of the Company, are substantially limited
by the Federal Reserve Act and the Federal Deposit Insurance Act. The Board of
Governors possesses cease and desist and other administrative sanction powers
over bank holding companies if their actions constitute unsafe or unsound
practices or violations of law.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") established a cross guarantee provision pursuant to which the Federal
Deposit Insurance Corporation ("FDIC") may recover from a depository institution
losses that the FDIC incurs in providing assistance to, or paying off the
insured depositors of, any of such depository institution's affiliated insured
banks. The cross guarantee provision thus enables the FDIC to assess a holding
company's healthy insured subsidiaries for the losses of any of the holding
company's failed insured members. Cross guarantee liabilities are generally
superior in priority to obligations of the depository institution to its
stockholders due solely to their status as stockholders and obligations to other
affiliates.
The Board of Governors has promulgated "capital adequacy guidelines" for
use in its examination and supervision of bank holding companies. These
guidelines are described in detail below. A holding company's ability to pay
dividends and expand its business through the establishment or acquisition of
new subsidiaries can be restricted if its capital falls below levels established
by these guidelines. In addition, holding companies whose capital falls below
specified levels are required to implement a plan to increase capital.
STATE BANK HOLDING COMPANY REGULATION
Kansas statutes prohibit any bank holding company from acquiring ownership
or control of, or power to vote, any of the voting shares of any bank which
holds Kansas deposits if, after such acquisition, the bank holding company and
all subsidiaries would hold or control, in the aggregate, more than 15% of total
Kansas deposits. Kansas deposits means deposits, savings deposits, shares or
similar accounts held by financial institutions attributable to any office in
Kansas where deposits are accepted as determined by the Kansas banking
commissioner. Such limitation does not apply in situations where the Kansas
banking commissioner, in the case of a state bank, or the Comptroller of the
Currency ("OCC"), in the case of a national bank, determines that an emergency
exists and the acquisition is appropriate in order to protect the public
interest against the failure or probable failure of a bank. Acquisitions by bank
holding companies of control of state banks in Kansas require the approval of
the Kansas banking commissioner. Subject to certain limited exceptions, Kansas
statutes authorize out-of-state bank holding companies to acquire voting shares
of banks or bank holding companies domiciled in Kansas.
Subject to certain limited exceptions, Oklahoma law prohibits a multi-bank
holding company from acquiring ownership or control of any insured financial
institution located in Oklahoma if such acquisition would result in the holding
company owning or controlling banks located in Oklahoma with total deposits in
excess of 12.25% of the total deposits of insured depository institutions in
Oklahoma as determined by the Oklahoma Bank Commissioner ("OBC"). A bank cannot
be acquired by a bank or a multi-bank holding company until such bank has been
in existence and continuous operation for a period of five years; such
restriction does not prevent a bank or a multi-bank holding company from
acquiring a bank whose charter was granted for the purpose of purchasing the
assets and liabilities of a bank located in Oklahoma closed by regulators due to
insolvency or impairment of capital. An out-of-state bank holding company, upon
approval by the Federal Reserve Board, may acquire an unlimited number of banks
and bank holding companies so long as each bank to be acquired has been in
existence and continuous operation for more than five years.
Under Oklahoma law, each bank holding company that controls 25% or more of
the voting shares of a bank located in Oklahoma must furnish a copy of its
annual report to the Board of Governors and to the OBC.
FEDERAL REGULATION OF SUBSIDIARY BANKS
IB is a national bank. National banks are subject to regulation,
supervision and examination primarily by the OCC. They are also regulated, in
certain respects, by the Board of Governors and the FDIC. WRB is an Oklahoma
state nonmember (of the Federal Reserve System) bank, subject to regulation and
examination primarily by the Oklahoma Banking Department ("OBD"), and by the
FDIC. Regulation by these agencies is generally designed to protect depositors,
rather than stockholders.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Improvement Act") provides for, among other things, the strengthening of
internal control and auditing systems, the enhancement of credit underwriting
and loan documentation standards (particularly with respect to real estate), the
accounting for interest rate exposure and other off-balance sheet items,
restrictions on the compensation of officers and directors, and the adoption of
a risk-based deposit insurance system.
The FDIC Improvement Act also authorizes the regulator of an insured
depository institution to assess all costs and expenses of any regular or
special examination of the insured depository institution.
Under the Federal Reserve Act, extensions of credit by a bank to the
executive officers, directors, or principal stockholders of the bank or its
affiliates or any related interest of such persons must be on substantially the
same terms as, and following credit underwriting procedures that are not less
stringent than, those applicable to comparable transactions with nonaffiliated
persons and must not involve more than the normal risk of repayment or present
other unfavorable features.
The rate of interest a bank may charge on certain classes of loans is
limited by state law. At certain times in the past, these limitations, in
conjunction with national monetary and fiscal policies which affect the interest
rates paid by banks on deposits and borrowings, have resulted in reductions of
net interest margins on certain classes of loans. Such circumstances may recur
in the future, although the trend of recent federal and state legislation has
been to eliminate restrictions on the rates of interest which may be charged on
some types of loans and to allow maximum rates on other types of loans to be
determined by market factors.
Federal law imposes additional restrictions on a national bank's lending
activities. For example, federal law regulates the amount of credit a national
bank may extend to an individual borrower and has in the past subjected real
estate lending activities to rigid statutory requirements.
Banks are authorized to invest in service corporations that can offer the
same services as the banking related services which bank holding companies are
authorized to provide. However, the approval of the OCC must be obtained before
a national bank may make such an investment or perform such services.
The Board of Governors has issued Community Reinvestment Act ("CRA")
regulations, pursuant to its authorization to conduct examinations and to
consider applications for the formation and merger of bank holding companies and
member banks, to encourage banks to help meet the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. The OCC has issued virtually
identical regulations with respect to applications of national banks. The FDIC
has issued virtually identical regulations with respect to applications of banks
which are incorporated under state law and are not members of the Federal
Reserve System.
STATE REGULATION OF SUBSIDIARY BANKS
Kansas law permits a Kansas bank to install remote service units, also
known as automatic teller machines, throughout the state. Remote service units
which are not located at the principal place of business of the bank or at a
branch location of the bank must be available for use by other banks and their
customers on a non-discriminatory basis. Federal law generally allows national
banks to establish branches in locations which do not violate state law.
All limitations and restrictions of the Oklahoma Banking Code applicable
to Oklahoma-chartered banks apply to such banks that become subsidiaries of a
foreign bank holding company. In addition, Oklahoma-chartered banks that are
subsidiaries of foreign bank holding companies are required to maintain current
reports showing the bank's record of meeting the credit needs of its entire
community with the OBD. Subject to approval of the Oklahoma Banking Board
("OBB") and certain limited exceptions, any Oklahoma bank may maintain and
operate outside attached facilities and two detached branch facilities. Upon
written notice to the OBC, an Oklahoma state bank may also install and operate
consumer banking electronic facilities. An Oklahoma bank offering such services
to a bank which establishes or maintains a consumer banking electronic facility
must make the use thereof available to banks located in Oklahoma on a fair and
equitable basis of non-discriminatory access and rates.
Oklahoma banks are required to maintain reserves against deposits as
prescribed by the Board of Governors. The Oklahoma State Banking Board may
increase the reserve requirements of banks which are not members of the Federal
Reserve System if it is determined that the maintenance of sound banking
practices or the prevention of injurious credit expansion or contraction make
such action advisable.
Notwithstanding any provision of state law, the FDIC Improvement Act
provides that an insured state-chartered bank generally may not make an
investment or engage in an activity that is not permissible for a national bank,
unless the FDIC determines that such investment or activity would not pose a
significant risk to the insurance fund.
CAPITAL REQUIREMENTS
The Board of Governors together with the other federal banking regulatory
agencies jointly promulgated guidelines defining regulatory capital requirements
based upon the level of risk associated with holding various categories of
assets (the "Guidelines"). The Guidelines, which are applicable to all bank
holding companies and federally supervised banking organizations, took effect on
March 15, 1989, and were fully phased into the existing supervisory system as of
the end of 1992. Under the Guidelines, balance sheet assets are assigned to
various risk weight categories (i.e., 0, 20, 50, or 100 percent), and
off-balance sheet items are first converted to on-balance sheet "credit
equivalent" amounts that are then assigned to one of the four risk-weight
categories. For risk-based capital purposes, capital is divided into two
categories: core capital ("Tier 1 capital") and supplementary capital ("Tier 2
capital"). Tier 1 capital generally consists of the sum of: common stock,
additional paid-in capital, retained earnings, qualifying perpetual preferred
stock (within certain limitations), minority interest in equity accounts of
consolidated subsidiaries; less intangibles, including goodwill (within certain
limitations). Tier 2 capital generally includes: reserve for loan losses (within
certain limitations), perpetual preferred stock not included in Tier 1 capital,
perpetual debt, mandatory convertible instruments, hybrid capital instruments,
and subordinated debt and intermediate-term preferred stock (within certain
limitations). The total amount of Tier 2 capital under the Guidelines is limited
to 100% of Tier 1 capital. The sum of Tier 1 and Tier 2 capital comprises total
capital ("Total Capital"). The Guidelines require minimum ratios of Tier 1 and
Total Capital to risk weighted assets, on a consolidated basis. The minimum
ratios required by the Guidelines are shown as follows in comparison with the
consolidated ratios of the Company and for each of the Subsidiary Banks at
December 31, 1999. Based on this financial data, the Company's capital ratios
exceed the Guidelines on a consolidated basis. All of the Subsidiary Banks also
exceeded the minimum guidelines at the individual bank level.
Company IB WRB
Guidelines Ratios Ratios Ratios
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Tier 1 Ratio 4.0% 9.1% 8.8% 14.9%
Total Capital Ratio 8.0% 10.6% 10.1% 15.8%
In addition to the Guidelines, the Board of Governors requires a minimum
leverage ratio ("leverage ratio") of Tier 1 capital (as described above) to
total assets of 3 percent. For all but the most highly rated bank holding
companies, the leverage ratio must be 3 percent plus an additional cushion of at
least 100 to 200 basis points. The Company's consolidated leverage ratio at
December 31, 1999 was 7.9%. Similar requirements also apply to the Subsidiary
Banks. At December 31, 1999, the leverage ratio for IB and WRB were 7.8% and
9.6%, respectively.
The FDIC Improvement Act requires all regulators of insured depository
institutions to classify such institutions according to the following "prompt
corrective action" categories: (1) well capitalized, (2) adequately capitalized,
(3) undercapitalized, (4) significantly undercapitalized or (5) critically
undercapitalized. "Undercapitalized", "significantly undercapitalized" and
"critically undercapitalized" institutions may be required to take or to refrain
from taking certain actions, such as, among other things, requiring a
recapitalization or divestiture of subsidiaries or restricting transactions with
affiliates, interest rates on deposits, asset growth or distributions to parent
bank holding companies, until such institution becomes adequately capitalized.
"Undercapitalized," "significantly undercapitalized" and "critically
undercapitalized" institutions are required to submit a capital restoration plan
to the appropriate federal banking agency. A company controlling an
undercapitalized institution is required to guarantee a bank subsidiary
institution's compliance with the capital restoration plan subject to an
aggregate limitation of the lesser of 5% of the institution's assets at the time
it received FDIC notice that it was "undercapitalized" or the amount of the
capital deficiency when the subsidiary institution first failed to comply with
its capital restoration plan. As of the last classification, all of the
Subsidiary Banks were categorized as "well capitalized".
The minimum capital level for an Oklahoma state bank is based in part on
the population of the community in which the bank is located. WRB exceeds the
applicable minimum capital requirements for its community.
DIVIDENDS
The National Bank Act restricts the payment of dividends by a national
bank generally as follows: (i) no dividends may be paid which would impair the
bank's capital, (ii) until the surplus fund of a national banking association is
equal to its capital stock, no dividends may be declared unless there has been
carried to the surplus fund not less than one-tenth of the bank's net profits of
the preceding half year in the case of quarterly or semi-annual dividends, or
not less than one-tenth of the net profits of the preceding two consecutive
half-year periods in the case of annual dividends, and (iii) the approval of the
OCC is required if dividends declared by a national banking association in any
year exceed the total of net profits for that year combined with retained net
profits for the preceding two years, less any required transfers to surplus or a
fund for the retirement of any preferred stock. For further information
regarding dividends see Item 5 of this report.
No Oklahoma bank may permit the withdrawal, in the form of dividends or
otherwise, of any portion of its capital or surplus. If losses equal or exceed a
bank's undivided profits, no dividends shall be made and no dividends shall ever
be made by any Oklahoma bank in an amount greater than its net profits then on
hand less its losses and bad debts. The directors of any Oklahoma bank may
declare dividends of so much of the net profits as they judge expedient, except
that until the surplus fund of a bank equals its common capital, no cash
dividends shall be declared unless there has been carried to the surplus fund
not less than 1/10th of the Bank's net profits of the preceding half year in the
case of quarterly or semi-annual dividends, or not less then 1/10th of its net
profits of the preceding two consecutive half-year periods in the case of annual
dividends. The approval of the OBC is required if the total of all dividends
declared by a bank in any calendar year exceeds the total of its net profits of
that year combined with its retained net profits of the preceding two years,
less any required transfers to surplus to a fund for the retirement of any
preferred stock.
DEPOSIT INSURANCE
Effective January 1, 1993, the FDIC established a risk-based deposit
insurance premium assessment system, with assessment rates ranging from .23% of
domestic deposits (the same rate as under the previous flat-rate assessment
system) for those banks deemed to pose the least risk to the insurance fund to
.31% for those banks deemed to pose greater risk. The assessment rate applicable
to a bank is subject to change with each semi-annual assessment period.
Effective September 15, 1995, in view of the successful recapitalization of the
Bank Insurance Fund ("BIF"), which insures deposits at U.S. banks, the FDIC
lowered the assessment rate schedule for BIF-insured institutions from a range
of 0.23% to 0.31% of domestic deposits to a range of 0.04% to 0.31% of domestic
deposits. This reduction in the assessment rate schedule was made retroactive to
June 1, 1995 because the FDIC determined that the BIF achieved its statutorily
required reserve ratio of 1.25% on May 31, 1995. On November 14, 1995, the FDIC
again lowered the assessment rate schedule for BIF-insured institutions,
effective for the semiannual assessment period beginning January 1, 1996, to a
range of 0.00% to 0.27% of domestic deposits. The assessment rate established
for the semiannual period beginning January 1, 1996 continues in effect;
however, the FDIC is currently exploring extensive revisions to the current
assessment system that will tie assessment rates to the amount of risk in a
bank's portfolio.
The statutory semiannual minimum assessment of $1,000 per insured
institution was eliminated as part of the Economic Growth and Regulatory
Paperwork Reduction Act Of 1996 ("EGRPRA"), which was signed into law on
September 30, 1996. EGRPRA provided for the recapitalization of the Savings
Association Insurance Fund ("SAIF") through a one-time special assessment on
SAIF-insured deposits in order to bring it into parity with the BIF.
EGRPRA also requires BIF members to pay a portion of the annual interest
on the Financing Corporation ("FICO") bonds issued in 1987 to begin funding the
resolution of the problems of the savings and loan industry. Beginning January
1, 1997, BIF members paid a FICO premium on BIF deposits equal to 0.0129%.
Beginning January 1, 2000, BIF members will share in the payment of the FICO
assessment with SAIF members on a pro rata basis, with the annual assessment
expected to equal approximately 0.024% until retirement of the FICO bond
obligation in approximately 2017. This assessment is not expected to have a
material adverse effect on the Subsidiary Banks.
MONETARY POLICY
The earnings of the Company are affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities in the U.S. and abroad. In particular, the Federal Reserve Board
regulates the national supply of money and credit in order to influence general
economic conditions, primarily through open market operations in U.S. Government
securities, varying the discount rate on member bank borrowings and setting
reserve requirements against deposits. Federal Reserve monetary policies have
had a significant effect on the operating results of financial institutions in
the past and are expected to continue to do so in the future.
RECENT LEGISLATION
On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLBA") was signed
into law, thereby completing the process of financial modernization that began
more than a decade ago.
GLBA removes remaining Glass-Steagall Act (securities) and Bank Holding
Company Act (insurance) limitations on the types of financial activities
allowable in banking organizations for qualified bank holding companies.
GLBA establishes restrictions on the locations of the new or expanded
nonbank financial activities within the banking organization. Securities and
insurance agency activities can be conducted in direct subsidiaries of a bank,
subject to size limitations and other protections. Municipal securities
underwriting activities can be conducted directly in a national bank or in a
subsidiary or affiliate of the bank. A national bank must be well managed and
well capitalized and must deduct its equity investment in its financial
subsidiaries in determining whether it meets regulatory capital requirements.
Banks must also meet or exceed credit-rating thresholds before establishing such
subsidiaries or expanding their investment in them. Merchant banking and
insurance underwriting can be conducted only in a subsidiary of the bank holding
company. Securities activities and insurance agency business can be conducted in
the holding company as well as in the subsidiary of a bank.
GLBA, to some degree, relaxes and, in other cases, strengthens existing
limits on mixing banking and commerce, i.e., commercial activities such as
retail merchandising and manufacturing. A financial holding company may engage
in any nonfinancial activity that the Board of Governors determines is
complementary to a financial activity and poses no substantial risk to the
safety and soundness of depository institutions or the financial system.
Otherwise, the law prohibits mixing banking and commerce in financial services
holding companies that include a bank. Unitary thrifts that already mix banking
and commerce may continue to do so. Existing unitary thrifts retain their
authority to acquire a commercial firm but lose that authority if the thrift is
sold. Newly chartered unitary thrifts will no longer be able to combine banking
and commerce.
GLBA blends functional supervision of the component entities of the
holding company with umbrella supervision of consolidated financial holding
companies. Specifically, it requires that the Board of Governors supervise the
consolidated banking organization, primary bank regulators regulate and
supervise the banking subsidiaries, and functional regulators supervise and
regulate insurance and securities components. The OCC continues to regulate and
supervise national banks; the FDIC and state banking departments regulate state
nonmember banks; the Board of Governors and state banking departments regulate
state member banks; and the Office of Thrift Supervision regulates thrifts. As
before, so long as an organization includes a bank, it is a bank holding company
under the supervision of the Board of Governors. The GLBA creates a new umbrella
entity known as a financial services holding company (an "FSHC"). An FSHC may
engage in the newly authorized financial activities. FSHCs must meet statutory
qualifications: Each of its bank and thrift subsidiaries must be well managed
and well capitalized and have a rating of at least satisfactory under the CRA.
The GLBA requires that the umbrella supervisor, the Board of Governors, rely
principally on supervision by the functional regulator-that is, the state
insurance Commissioner where a subsidiary is engaged in insurance activities,
and the Securities and Exchange Commission where a subsidiary is engaged in
certain securities or broker-dealer activities.
GLBA enhances privacy protections in disseminating information about
customer accounts to third parties. GLBA gives customers the ability to prevent
information-sharing by a bank when the information is intended to be shared with
non-affiliated third parties. GLBA also requires banks to provide customers with
disclosures regarding the bank's information-sharing policies.
Many provisions of the GLBA have staggered effective dates and/or require
implementing regulations subject to notice and public comment. The GLBA is
predicted to substantially increase competition by allowing consolidation within
the banking, securities and insurance industries; however, it is too early to
predict to what extent that increased competition will affect the operations of
the Company or its Subsidiaries.
ITEM 2. PROPERTIES.
- ------ ----------
INTRUST FINANCIAL CORPORATION, INTRUST BANK, N.A. AND NON-BANKING
SUBSIDIARIES
The Company's principal offices and IB's main banking offices are located
at 105 North Main Street and 100 North Main Street, Wichita, Kansas. Both
offices are located in three office buildings owned by IPI. These three
buildings, together with the adjacent six-story garage and two-story garage
owned by IPI, occupy approximately one city block in downtown Wichita. The sixth
through tenth floors of the building at 105 North Main Street and sixth through
ninth floors of the building at 100 North Main are presently subleased by IB to
others. The Company subleases office space from IB on the third and fourth
floors of the building at 100 North Main. Employees of the Non-Banking
Subsidiaries occupy space within various IB office locations.
As of December 31, 1999, IB had eight detached branch facilities in
Wichita, Kansas, all leased from its subsidiary IPI. IPI owns the facilities and
the land at six offices. With respect to the two other detached offices, IPI
owns the facilities and leases the land on which such offices are located from
unaffiliated parties.
IB had two small branch offices which serve residents and staff members of
retirement communities located in Wichita, Kansas. IB leases office space at
both of these locations.
IB also had offices in ten Dillon supermarkets in Wichita. The office
space at each of these locations is leased from an unaffiliated party.
In addition to the above Wichita locations, IB had offices in the
following communities:
Branches owned by IPI and leased to IB in Andover, Augusta, Clay Center,
El Dorado, Emporia, Eureka, Gardner, Haysville, Holton, Iola, Lawrence (2),
Manhattan, Ottawa, Topeka and Valley Center, Kansas.
Dillon supermarket offices leased by IB from an unaffiliated party in
Andover, Derby, El Dorado and Shawnee, Kansas.
A branch at Emporia State University in Emporia, Kansas occupied and
operated through a contract with Emporia State University.
A branch, in Overland Park, Kansas, leased by IB from an unaffiliated
party.
A branch in Prairie Village, Kansas. IB owns the main office building and
leases the land where the main office building is located from unaffiliated
parties.
IB had loan production offices in Oklahoma City, Oklahoma and Tulsa,
Oklahoma. Both offices are leased from unaffiliated parties.
Total square footage of all facilities owned and occupied by IB, as of
December 31, 1999, was approximately 511,000 square feet.
WILL ROGERS BANK
WRB's main banking office is located at 5100 Northwest Tenth, Oklahoma
City, Oklahoma. Total square footage of the facility, which is owned by WRB, is
approximately 23,550 square feet.
WRB leases a branch facility located at 5909 N.W. Expressway, Oklahoma
City, Oklahoma, which has approximately 3,200 square feet of office space.
WRB also has offices located in Moore, Oklahoma and in Mustang, Oklahoma.
WRB owns both buildings, the total square footage of which is approximately
19,000 square feet.
All facilities owned by the Company and the Subsidiary Banks are
maintained in good operating condition and are adequately insured. The Company
considers its properties and those of the Subsidiary Banks to be adequate for
their current and planned operations.
ITEM 3. LEGAL PROCEEDINGS.
- ------ -----------------
There are no legal proceedings pending against the Company. A subsidiary
of the Company has been named as a defendant in a lawsuit alleging damages of
approximately $4 million. The Company believes it has meritorious and
substantial defenses to the claims contained in the lawsuit, but the
uncertainties of litigation make it difficult to predict the ultimate outcome of
this lawsuit. Certain of the subsidiaries of the Company are parties in a
variety of other legal proceedings, none of which is considered to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------ ---------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1999.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------ ---------------------------------------------------------------------
The common stock of the Company is traded in the local over-the-counter
market on a limited basis. Transactions in the common stock are relatively
infrequent. The following table sets forth the per share high and low bid
quotations for the periods indicated as reported by the National Quotation
Bureau, Incorporated (NQB).
1999 1998
- --------------------------------------------------------------------------------
High Low High Low
- --------------------------------------------------------------------------------
1st Quarter $128 $127 $110 $ 86
2nd Quarter 129 128 123 110
3rd Quarter 130 129 125 123
4th Quarter 132 130 127 127
The quotations in the above table reflect inter-dealer quotations, without
retail mark-up, mark-down, or commission and may not necessarily represent
actual transactions. On January 27, 2000, there were 423 stockholders of record
for the 2,385,550 shares of outstanding common stock. Approximately 73% of the
shares are held by Kansas resident individuals, institutions or trusts, with the
remainder held by residents of thirty other states, with no singular
concentrations. In 1999, the Company received cash dividends in the amount of
$1,500,000 from WRB and $147,000 from Trust. The Company declared and paid cash
dividends of $4,883,407, or $2.40 per share during 1999 and $5,333,475, or $2.50
per share during 1998. During 1999, dividend declaration dates were January 12,
April 13, July 13, and October 12. During 1998, dividend declaration dates were
January 13, April 14, July 14, October 13 and December 8. The payment of
dividends by the Company is primarily dependent upon receipt of cash dividends
from the Subsidiary Banks. Regulatory authorities can restrict the payment of
dividends by national and state banks when such payments might, in their
opinion, impair the financial condition of the bank or otherwise constitute
unsafe and unsound practices in the conduct of banking business. Additional
information concerning dividend restrictions may be found in the "Notes to
Consolidated Financial Statements" (note 15) and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under topic titled
"Liquidity and Asset/Liability Management". The priorities for use of cash
dividends paid to the Company will be the payment of interest related to the
Trust Preferred Securities and the quarterly interest payments and annual
principal payments on the variable rate term loan payable to another financial
institution. Additional information concerning the Trust Preferred Securities
and the term loan may be found in the "Notes to Consolidated Financial
Statements" (notes 10 and 11). The Company's Board of Directors will continue to
review the cash dividends on the Company's common stock each quarter with
consideration given to the earnings, business conditions, financial position of
the Company and such other factors as may be relevant at the time.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
- ------ -----------------------
<TABLE>
<CAPTION>
INTRUST Financial Corporation and Subsidiaries
Five Year Summary of Selected Financial Data
Dollars in thousands except per share data
- ---------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C> <C>
Interest income $155,206 $146,883 $132,454 $132,463 $127,919
Interest expense 71,539 69,325 60,147 56,436 53,460
- ---------------------------------------------------------------------------------------------------------------
Net interest income 83,667 77,558 72,307 76,027 74,459
Provision for loan losses 10,940 11,090 8,240 20,151 18,118
Credit card valuation write-down 0 0 4,645 17,475 0
- ---------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses and write-down 72,727 66,468 59,422 38,401 56,341
Other income 47,159 42,637 41,129 33,768 33,620
Other expenses 83,090 77,381 74,627 70,438 71,195
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 36,796 31,724 25,924 1,731 18,766
Provision for income taxes 14,338 12,190 9,260 51 6,379
- ---------------------------------------------------------------------------------------------------------------
Net income $ 22,458 $ 19,534 $ 16,664 $1,680 $ 12,387
- --------------------------------------------------=============================================================
Average shares outstanding 2,045,623 2,147,118 2,193,268 2,285,337 2,344,762
- --------------------------------------------------=============================================================
Per share data assuming no dilution $10.98 $9.10 $7.60 $0.74 $5.28
- --------------------------------------------------=============================================================
Per share data assuming full dilution $9.48 $7.90 $6.74 $0.74 $4.77
- --------------------------------------------------=============================================================
Cash dividends per share $2.40 $2.50 $1.90 $1.55 $1.50
- --------------------------------------------------=============================================================
Balance sheet data at year-end:
Total assets $2,338,453 $2,115,465 $1,923,822 $1,721,402 $1,666,984
Total deposits 1,818,476 1,647,354 1,552,766 1,428,395 1,367,141
Long-term notes payable 10,000 12,500 23,000 17,660 20,310
Convertible capital notes 0 11,078 11,219 11,219 11,854
Subordinated debentures 57,500 57,500 0 0 0
Stockholders' equity 153,883 129,611 132,645 122,094 135,163
Book value per share 64.33 63.95 61.00 55.37 57.81
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS.
-----------------------
FINANCIAL OVERVIEW
INTRUST Financial Corporation's 1999 consolidated net income totaled
$22,458,000, establishing a new record for the Company. Current year net income
increased $2,924,000, or 15%, over comparable 1998 amounts. As a result of stock
repurchases made in 1998 and 1999, the 15% increase in net income referred to
above translated into a 20% increase in diluted earnings per share.
The Company continued to record growth in its principal markets, and also
expanded into new markets with the acquisition of certain branches of another
financial institution in September. Loan demand continued to be strong, credit
quality remained sound, and the Company experienced only a modest decline in its
net yield on interest-earning assets. These factors, along with continued growth
in non-interest income, allowed the Company to more than offset cost increases
associated with the branch acquisition and additional data processing
initiatives.
As noted in previous filings, operating results in 1997 reflected charges
associated with the Company's decision to exit the national credit card market.
Since that date, financial results in the Company's credit card line of business
have continued to improve, and have been a significant factor in the improved
profitability of the consumer banking segment, as reported in the footnotes to
the accompanying consolidated financial statements.
The Company's Year 2000 efforts have been discussed in prior filings. The
Company encountered no service issues associated with the Year 2000 date change.
ASSET QUALITY AND PROVISION FOR LOAN LOSSES
The amount charged to the Company's earnings to provide for an adequate
allowance for loan losses is determined after giving consideration to a number
of factors. These include, but are not limited to, management's assessment of
the quality of existing loans, changes in economic conditions, evaluation of
specific industry risks, the need to support projected loan volumes and a
provision for the timely elimination of uncollectible receivables.
The Company has established credit analysis and review processes for
determining the propriety of its allowance for loan losses. Individual
commercial loans meeting certain size criteria are reviewed and graded
individually. A specific allowance is then computed for each reviewed credit
based on the overall grade assigned. A general allowance for those commercial
loans not individually reviewed is computed based on a factor applied to the
total dollar amount of commercial loans not subject to specific review. Credit
card loans are considered to be a homogeneous group of receivables, with the
allowance allocated to the credit card portfolio based on credit scoring,
bankruptcy trends and delinquency information of that portfolio. Other consumer
loans consist principally of loans secured by automobiles. These loans are also
reviewed in the aggregate. The Company's grading system is based on both
objective factors - principally financial information and ratios, and some more
subjective measures such as quality of management, projected industry trends and
competitive factors. A detailed analysis of the allowance for loan losses is
conducted quarterly. It is during this analysis that the Company may make
changes to the allocation of the allowance based on an assessment of specific
risk issues in each of its business lines.
The Company recorded a provision for loan losses and write-downs of loans
held-for-sale of $10,940,000 in 1999. Comparable amounts in 1998 and 1997 were
$11,090,000 and $12,885,000, respectively. As discussed above and in previous
filings, the Company's decision to exit the national credit card market resulted
in a write-down of the national credit card portfolio in 1997. As a result of
this write-down, the total provision amount in 1997 exceeded the provision
amounts of 1998 and 1999.
The 1999 provision, when combined with generally favorable charge-off
experience, resulted in an increase of $4,307,000 in the allowance for loan
losses. Approximately 55% of the increase in the allowance is attributable to an
increase in reserves on specifically identified commercial receivables. The
remainder of the increase results primarily from increased loan volumes. Total
loans (excluding loans held-for-sale) increased $207,426,000, or 14.7%, over
year-end 1998 amounts. At year-end, the allowance for loan losses was equal to
1.60% of total loans. The comparable percentages in 1998 and 1997 were 1.53% and
1.42%, respectively.
The overall economies of the Company's principal markets remained sound in
1999, resulting in favorable credit quality in the Company's loan portfolio. The
Company experienced significant growth in its commercial loan portfolio again
this year, principally in the commercial real estate area. It does not believe
that this growth resulted from the lessening of credit standards, but rather
from the continued dislocation in the Company's principal markets, and to
business expansion by its existing customer base.
Net charge-offs in the Company's loan portfolio continue to be quite low,
totaling .45% of average loans in 1999. Comparable percentages in 1998 and 1997
were .55% and .47%, respectively. Net charge-offs in the commercial, financial,
agricultural and real estate areas were relatively low again this year. Net
charge-offs totaled $2,438,000, representing approximately .24% of average loans
of this type. The comparable percentage in 1998 was .21%. The Company believes
its ratio of net charge-offs/average loans in the commercial sector would
compare favorably to industry averages. Net charge-offs on installment loans
declined $305,000 this year, and net credit card charge-offs were $700,000 less
than comparable prior year amounts. While the Company believes its ratio of net
consumer indebtedness charge-offs/average consumer indebtedness generally
compares favorably to industry averages, it has elected to increase its
allowance for loan losses in this category of lending. This is being done
principally because of loan volume increases in this segment of the loan
portfolio.
The Company's allowance for loan losses at year-end was equal to 624% of
nonaccrual, past due and restructured loans. Comparable percentages in 1998 and
1997 were 355% and 266%, respectively. Non-performing credit card loans
comprised 34.5% of total non-performing loans in 1999, and were 26.4% of total
non-performing loans in 1998, and 30.4% of the comparable 1997 total.
Non-performing loans as a percentage of total year-end loans in 1999, 1998 and
1997 were .26%, .43% and .53%, respectively.
While the dollar amount of non-performing loans has declined, the Company
has elected to increase its allowance for loan losses because of the significant
volume of new business that it has recorded in 1998 and 1999. Over the last two
years, the Company's total loans have grown approximately $360,000,000. During
that same period, the allowance for loan losses has increased $8,078,000. Also,
certain forward-looking indicators, such as delinquency levels, do not seem to
have the direct relationship to subsequently charged-off accounts that they once
had. The Company has experienced more loans, particularly in the consumer
segment, going directly from a performing status to bankruptcy. Finally, the
current economic expansion is unprecedented in its length. With consumer
indebtedness at record levels, the Company remains concerned that an economic
downturn could have a disproportionate impact on outstanding receivables.
The largest single net charge-off during 1999 was to a commercial
enterprise for a commercial real estate loan. No trends were noted during the
year that would point to particular exposure issues with respect to a given
industry or segment of the loan portfolio. Management continues to closely
monitor its consumer lending exposure. Management believes the allowance for
loan losses to be adequate at this time. Please refer to Table 9, Summary of
Loan Loss Experience, for additional information. Management is not aware of
issues that would significantly impact the overall credit quality of the loan
portfolio in 2000. With a continued favorable economic climate, the Company
believes its provisions for loan losses will be comparable to that recorded in
1999.
NET INTEREST INCOME
The interest rate environment in 1999 was markedly different than that
present in 1998. The Federal Reserve raised rates three times in the second half
of 1999, completely reversing the 75 basis point easing that took place in 1998.
The slope of the yield curve also began to steepen. At the end of 1998, the
spread between three-month Treasury bill rates and thirty-year Treasury notes
was approximately 60 basis points. At the end of 1999, the comparable spread was
approximately 130 basis points. The timing of the Federal Reserve movements is
important for purposes of analyzing the impact on net interest income. The
Federal Reserve easing of 1998 took place in the fourth quarter. This resulted
in lower yields being present for much of 1999 when compared to 1998. The 1999
tightening by the Federal Reserve took place during the second half of the year.
Much of the effect of this tightening will be felt in 2000. The net result of
these actions is that both yields and funding costs in 1999 were somewhat lower
than those recorded in 1998. Absent easing by the Federal Reserve early in 2000
(which is not expected), yields and funding costs in 2000 should exceed 1999
levels.
Total interest income increased $8,323,000, or 5.7%, over 1998 levels, as
increases in interest-earning assets more than offset declining yields. Average
interest-earning assets increased 9.5% in 1999, while yields on average
interest-earning assets declined 31 basis points this year. Changes in the
composition of interest-earning assets served to mitigate the decline in yields.
Net loans comprised 78.1% of average interest earning assets in 1999. The
comparable 1998 percentage was 73.1%.
The Company continued to experience significant loan growth this year.
After increasing $75,715,000 in 1998, average net loans increased $223,139,000
in 1999. Growth in the loan portfolio was internally generated. Dislocation in
the Company's principal markets continued in 1999, with the Company again
obtaining new customer relationships. In addition, many of the Company's
existing customers increased their operations during the year, resulting in
additional loan volume. However, the Company did operate much of the year in a
somewhat lower interest rate environment, and in a very competitive marketplace.
Yields on average net loans declined 55 basis points in 1999, reflecting the
impact of the reduction in interest rates by the Federal Reserve in late 1998.
Yields on the Company's investment security portfolio also declined this
year. The Company maintains an investment security portfolio with a relatively
short (less than 2 years) weighted-average life. Over the last two years,
approximately $358 million of investment securities have matured and been
replaced in this lower interest rate environment, resulting in a decline in
yields. With approximately 31% of its investment portfolio maturing in 2000, and
two-thirds of the investment security purchases in 1999 occurring during the
last half of the year, the Company anticipates an increase in investment
security yields next year.
Interest expense increased 3.2% in 1999, totaling $71,539,000. The
Company's experience with funding costs was similar to that experienced with its
yield on interest-earning assets. Volume increases in interest-bearing
liabilities more than offset reduced funding costs. Average interest-bearing
liabilities increased $181,939,000, with 84% of this increase attributable to an
increase in average interest-bearing deposits. Approximately one-third of the
increase in average interest-bearing deposits was due to the deposits acquired
in the branch acquisition from another financial institution late in the third
quarter of this year. Average deposit funding costs declined 36 basis points
this year. As noted in previous filings, the Company believes that it operates
in a very competitive environment with respect to the pricing of traditional
deposit products. Even though a lower interest rate environment was present for
much of the year, competitive pressures kept funding costs from declining the
entire amount of the Federal Reserve's 75 basis point easing.
Average short-term debt increased 12.7% in 1999, as the Company continued
to have success in the sale of its cash management products. The increase in
cash management services resulted in an increase of $17,368,000 in average
securities sold under repurchase agreements. The Company was also a purchaser of
a somewhat higher level of federal funds during the year. Interest expense
associated with the Company's short-term debt increased $485,000, or 4.4%, over
prior year amounts, as the lower rate environment in place during much of 1999
offset in large part the aforementioned volume increase. The Company's interest
expense on its long-term debt declined slightly in 1999. The Company's debt with
another financial institution carried a lesser rate of interest for much of the
year and the average convertible capital note balance outstanding in 1999 was
less than that outstanding in 1998. These factors offset the increase in
interest expense arising from an additional twenty-one days of interest incurred
on the trust preferred stock issued by one of the Company's subsidiaries.
The Company's 1998 net interest income increased $5,251,000, or 7.3% over
comparable 1997 amounts. Volume increases more than offset a 29 basis point
compression in the Company's net yield on interest-earning assets. Total average
net loans increased $75,700,000 over 1997 levels, and average investment
securities increased $72,096,000. Yields on average interest-earning assets
declined 28 basis points, as a majority of the Company's investment security
portfolio repriced at a lesser rate of interest during 1998. 1998 interest
expense increased $9,178,000, or 15.3%, over 1997 amounts. Approximately
one-half of this increase is due to the issuance by a subsidiary of the Company
of trust preferred securities. In January, 1998, INTRUST Capital Trust issued
$57,500,000 in trust preferred securities, which carry a dividend rate of 8.24%.
This issuance served to increase the long-term debt interest cost of the Company
by 23 basis points, and had a 14 basis point effect on the Company's overall
cost of funds. Had the trust preferred securities not been outstanding in 1998,
the Company's overall cost of funds would have declined nine basis points from
1997 levels.
Based on recent comments by the Chairman of the Federal Reserve, the
Company anticipates that the interest rate environment in 2000 will be slightly
higher than that experienced in 1999. The Company anticipates that competitive
pressures in its principal markets, along with aggressively pricing and
promoting its products in the new markets it entered in 1999 will result in
continued pressure on the interest margin. Management will continue to place a
major emphasis on the maintenance of net interest margins within the overall
framework of sound interest-rate risk management.
NONINTEREST INCOME
Total noninterest income increased $4,522,000, or 10.6%, over 1998 levels.
The Company recorded increases in all major components of noninterest income
this year.
Service charges on deposit accounts increased 11.9% this year, to
$12,323,000. Deposit accounts serviced this year grew 23.6%. The majority of
this growth was attributable to the accounts acquired in the branch acquisition.
Prior to the branch acquisition, the number of accounts serviced by the Company
had grown at an annualized rate of 3.5%. The Company continued to record growth
in fee income arising from the sale of its cash management products. OD and NSF
fee income also increased in 1999, as the acquired branch accounts generated
proportionately higher fees than had the existing customer base.
Fiduciary income increased $2,753,000, or 26.2%. As discussed in previous
filings, the Company made significant investments in this business line in 1996
and 1997, greatly expanding its product offering in the wealth management area.
The Company continues to expand the services it provides in the areas of private
wealth management, institutional wealth management, record keeping, employee
education and actuarial consulting services for employee benefit plans.
Favorable market conditions and new business development resulted in assets
under management for which the Company has a fiduciary responsibility increasing
19.7% to $2,719,000,000 at December 31, 1999. The Company will continue to
emphasize growth in this area in 2000.
Credit card fee income in 1999 grew 4.3%, to $9,204,000. Pricing changes
introduced in 1998 were in place for a full year in 1999. Revenue from cash
advance fees, late fees and overlimit fees offset an increase in agent bank and
affinity payments. Also contributing to the increase in this revenue source was
a 5.7% increase in merchant fee revenue, arising principally from increased
volumes. A 5.4% increase in net cash flows from the Company's securitized credit
card portfolio resulted in approximately $150,000 in additional income from this
revenue source, as the Company benefited from the lower interest rate
environment present for much of the year.
Security gains for the year totaled $540,000. As has been discussed in
previous filings, these gains were the result of non-recurring transactions. The
Company did not enter into any sales transactions with respect to its core
investment security portfolio, and does not maintain a trading portfolio of
investment securities. Other service charges, fees and income totaled
$11,830,000 in 1999. This represents a decline in this line item of $340,000, or
2.8%. The decrease in this line item is due to a $1,400,000 gain recorded in
1998 on the sale of the Company's national merchant processing business.
Excluding this transaction, other service charges would have increased
approximately 9.8% in 1999. The majority of this increase is attributable to
additional revenue recorded as a result of the expansion of the Company's ATM
network. In addition, the Company recorded increases in data processing fee
income and in its international banking area, offsetting declines in fee revenue
from the Company's automobile loan securitization, which is now in the process
of maturing.
Noninterest income in 1998 increased $1,508,000 over 1997 levels.
Significant growth in revenue was recorded in both service charges and fiduciary
income in 1998, but the Company's decision to exit the national merchant
processing business and the amortization of one of the Company's credit card
securitization programs resulted in a 32.2% decline in credit card fees.
Fiduciary income in 1998 increased $2,530,000 over 1997 levels, as the
Company's continued investment in this segment of its business resulted in
revenue growth of 31.7%. Assets under management increased 13%, to top $2
billion. The increase in service charge revenue resulted from a 4.3% increase in
accounts serviced, combined with continued growth recorded by the Company in its
sale of cash management products. Other service charges, fees and income
increased $2,205,000 over comparable 1997 amounts. Approximately 63% of this
increase was due to a gain recorded by the Company on the sale of its national
merchant processing business. In addition, the interest rate environment present
in 1998 resulted in higher volumes for new residential real estate loan
originations and a greater volume of refinancing activity. These factors led to
a $500,000 increase in income from this revenue source. Increases were also
recorded in international banking revenue, fee income from the securitization of
automobile loans in the fourth quarter of 1997 and increased ATM transaction
volume.
NONINTEREST EXPENSE
Noninterest expense increased 7.4% in 1999, to $83,090,000. Operating
costs and goodwill amortization associated with the acquired branches accounted
for approximately 30% of the year-over-year increase in noninterest expense.
Noninterest expense would have increased approximately 5.2% had it not been for
the acquisition of these additional facilities.
Salaries and employee benefits increased $3,459,000 in 1999. 14.6% of this
change arises from compensation costs associated with the Company's new
facilities. Approximately two-thirds of the total increase in compensation costs
was recorded in the Company's retail banking and technology areas. At December
31, 1999, the Company employed 1,028 full-time equivalent employees. 62 of these
full-time equivalent employees are employed at branches that were not open in
1998. During the year, the Company made certain enhancements to its defined
benefit and defined contribution plans. Approximately $300,000 in additional
expense (excluding early-retirement costs in 1998) was recognized as a result of
these enhancements. Health care costs increased nominally this year. Salaries
and employee benefit costs in 1999 represented 1.93% of average total assets, as
compared to 1.92% in 1998.
Occupancy costs increased significantly in 1999. The total increase in
this line item was $1,538,000, or 16.9%. Approximately $300,000 of this increase
is due to the new facilities acquired in 1999. The Company also replaced a
significant portion of its personal computer infrastructure in 1999. Many of
these machines had been fully depreciated, and as a result of this replacement
and other technology equipment additions, depreciation costs increased by
approximately $800,000. Increased ATM volumes resulted in a $280,000 increase in
rents paid for space occupied by the Company's ATMs in the largest convenience
store chain in Kansas.
The Company continued to invest in its Internet-related products and
services in 1999. In addition, volume increases have resulted in increased costs
paid to the Company's principal data processing provider. These two factors
account for the majority of the increase in the Company's data processing
expense in 1999. As noted above, there was a year-over-year increase of 23.6% in
the number of deposit accounts serviced. The Company also recorded significant
growth in the number of loan accounts that it services. As a result of these
volume increases, the Company saw its core data processing costs increase
approximately 24%. During 1999, the Company also invested in the updating of its
retail Internet site, along with development activities for its commercial
Internet site, which is expected to be available in 2000.
The increases recorded in supplies expense, postage and dispatch and
goodwill amortization all principally arise from the branch acquisition. The
Company incurred $200,000 in supplies cost associated with the initial stocking
of the new locations with forms and supplies. Postage and dispatch costs
increased as the Company corresponded with its new customers. The increase in
goodwill amortization is due solely to the goodwill recorded as a result of the
branch acquisition.
The Company's advertising and promotional activities expense declined in
1999. Advertising costs were reduced in 1999 as the Company did not undertake a
major advertising initiative in 1999, as it did in 1998 when it placed its ATMs
in the dominant convenience-store chain in Kansas. The Company does anticipate
that these costs will increase in 2000 as it promotes its entry into its various
new markets. Other non-interest expense declined $201,000, or 1.4%, in 1999. A
reduction in net interchange expense more than offset increases in travel and
telephone costs.
Noninterest expense increased 3.7% in 1998 over comparable 1997 amounts.
The Company recorded increases in most line items in 1998, although the
cessation of national merchant processing did result in a significant reduction
in other noninterest expense.
Salaries and employee benefit costs in 1998 increased 9.6% over prior year
amounts. The total increase of $3,361,000 arose principally from four factors.
Compensation costs in the Company's wealth management segment increased
$1,200,000 over 1997 amounts as the Company continued its investment in that
line of business. Second, $700,000 in one-time costs were incurred in connection
with an early retirement program and certain severance costs. Third, the
Company's health care costs increased 15.4%, after remaining relatively stable
the preceding two years. Lastly, general wage increases totaled approximately
3.7% during the year.
Investments made in the Company's Internet banking product, combined with
upgrading technology equipment and systems resulted in an increase in 1998 in
data processing and occupancy expense. The successful consummation of an
agreement with Kansas' largest convenience store chain to place ATMs in their
stores in INTRUST's principal markets resulted in increases in both occupancy
and advertising costs. The Company's overall growth in 1998 resulted in
additional supplies expense.
Included in other noninterest expenses are the Company's payments to a
third party for credit card processing.
Just as is the increase in noninterest income and the maintenance of net
interest income, the control of noninterest expense is a significant goal of the
Company's management.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk are monitored on a continuous basis by the
Company. The Company's principal service area has been identified as the Wichita
MSA. Credit risk is therefore dependent on the economic vitality of this region.
Within the region, credit risk is widely diversified and does not rely upon a
particular industry, segment or borrower. As previously noted, a generally
favorable economic environment was present in the region during 1999. The
Company believes a similar climate will be present in 2000. To a lesser extent,
the Company is also actively involved in certain areas of Oklahoma and the
Kansas City markets through the operations of its subsidiary locations in
Oklahoma City, Oklahoma and Prairie Village, Kansas. As mentioned earlier, the
Company recently entered new markets in Kansas through the acquisition by one of
its subsidiaries of certain branches previously owned by another financial
institution. While the Company acquired no significant loan business as a result
of this acquisition, it does believe that this transaction has the potential to
provide additional diversification of its loan portfolio.
The Company does not believe there are any significant concentrations of
risk in the commercial, financial and agricultural loan portfolio. The Company's
loan portfolio is comprised of customers in a number of industries, with the
manufacturing, agricultural and food service industries representing important
components of the portfolio. As the Company's principal market, Wichita, Kansas,
has a significant manufacturing presence in the general aviation industry. The
Boeing Company, Cessna Aircraft, Learjet, and Raytheon Aircraft all have
significant facilities in Wichita. During 1999, manufacturing employment in
Wichita declined slightly as there was a small workforce reduction in the
aviation industry. The general aviation manufacturers are continuing to operate
with a backlog of orders that should result in relatively stable employment in
this industry segment in 2000. The overall Wichita unemployment rate at
December, 1999 was 3.6%, continuing below the comparable national rate.
Food service industry borrowers comprise an important part of the
Company's commercial loan portfolio. The Company believes that its risks in the
food service industry are spread among a number of different borrowers who are
involved in a variety of different types of food service in a number of
geographic markets throughout the United States. The agricultural industry is an
important part of the overall Kansas economy. As with its exposure in the food
service industry, the Company's exposure in the agricultural sector is spread
among a number of different borrowers who are engaged in different facets of the
agricultural economy. The Company has very limited exposure within the
agricultural sector to pork producers. Each loan in the commercial portfolio is
analyzed independently based upon the financial risk in that particular
situation.
Consumer credit is comprised of credit card and installment loans, and
represents a large concentration of overall risk in the loan portfolio. In large
part, installment receivables represent loans made to acquire automobiles and
are secured by the automobiles. While losses in this area of the loan portfolio
have increased modestly, the Company believes its loss experience in this
segment of consumer lending generally compares favorably to industry averages.
The Company does not engage in sub-prime automobile lending. Credit card
receivables are represented by Mastercard(R) and VISA(R) customers, and are
unsecured. As has been discussed elsewhere herein, the Company has exited the
national market for credit cards. The Company intends to aggressively pursue
consumer lending opportunities in its trade territory, but it does not intend to
embark on a national marketing campaign of its products in the foreseeable
future. The volume and risk in all loans is continuously evaluated and reflected
in the allowance for loan losses.
During the past two years, and as a matter of general credit policy, the
Company has not participated in either real estate mortgage loans (either
construction or permanent loans) outside the service area described above or
loans defined as highly leveraged transactions (HLT's).
OFF-BALANCE-SHEET RISK
Off-balance-sheet risk of the Company consists principally of the issuance
of commitments to extend credit and the issuance of letters of credit. During
the past two years, the Company has not entered into any financial instruments
of a derivative nature that involve other off-balance-sheet market or credit
risks, such as interest rate swaps, futures, options or similar types of
instruments. However, as disclosed in previous filings the Company has entered
into credit card receivable and automobile loan receivable securitization
transactions. These transactions allow the Company to free up capital for other
uses and to more effectively manage its balance sheet. Previous filings have
described the credit card securitizations that were concluded in December, 1994
and January, 1995. During 1997, the Company's floating rate credit card
securitization was renewed, while the fixed rate transaction commenced its
contractual amortization, which concluded in December, 1997. In December, 1997
the Company securitized and sold approximately $45 million of automobile loans.
The automobile paper securitization amortizes as principal payments on the
securitized loans are received. At December 31, 1999, approximately $9,500,000
in receivables remained outstanding. This transaction also carries a floating
interest rate. In both of the securitization transactions that are presently in
place, neither the loan receivables sold or the securities outstanding are
defined as financial instruments of the Company, but the Company continues to
service the related credit card and automobile accounts. The Company no longer
recognizes net interest income and certain fee revenue, nor does it provide for
loan losses on the securitized portfolios. Instead, servicing fee income is
received by the Company.
At December 31, 1999, the aggregate amount of commitments to extend credit
outstanding was $524,706,000, excluding credit card lines of $867,024,000.
Comparable amounts at December 31, 1998 and 1997 were $520,888,000 and
$414,224,000, respectively. At December 31, 1999, the aggregate amount of
letters of credit outstanding was $38,938,000, compared to $55,556,000 at
December 31, 1998 and $39,654,000 at December 31, 1997.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on management's credit evaluation
of the counter-party.
Letters of credit consist of two principal types: commercial and standby.
Commercial letters of credit are generally issued to facilitate the flow of
commercial transactions, generally to finance goods in transit. Standby letters
of credit are used to ensure the performance of obligations in some future
period. Letter of credit expirations generally do not run beyond one year from
the date of issuance.
The issuance of letters of credit is governed by the same underwriting
standards as are applicable in any other credit transaction. Some are secured,
others are supported by the general credit standing of the obligor. Liabilities
under letters of credit are evaluated on a continuing basis, as are all other
loans in the credit review process.
INVESTMENT PORTFOLIO RISK
Analysis of the investment portfolio is included in Table 4, Investment
Portfolio, and Table 5, Maturities and Yield Analysis. The Company has the
ability, and management has the intent, to hold those investment securities
classified as held-to-maturity until maturity. In recognition of the significant
loan growth experienced by the Company, management elected, in 1997, to begin
classifying purchases of U.S. Government and Agency securities as
available-for-sale. While there has been no change in management's investment
philosophy or intentions, liquidity issues associated with continued loan growth
could result in some investment securities being sold prior to maturity, thus
the Company's decision to classify prospective purchases as available-for-sale.
The Company does not maintain a trading account or engage in trading activities.
On occasion, maturities will be pre-funded. Pre-funding occurs within a short
period prior to the maturity of the maturing obligations.
Management believes the average maturity of the Company's investment
security portfolio to be shorter than peer group averages and that maintenance
of a portfolio of this duration substantially reduces interest rate risk. At
December 31, 1999, the Company's investment security portfolio had a weighted
average maturity of 1 year and 11.7 months. At year-end, the cost basis of the
Company's investment portfolio exceeded its market value by $3,885,000, as the
majority of the portfolio was purchased in the lower interest rate environment
of the previous two years. The Company maintains a conservative investment
strategy and believes the diversification of the portfolio results in very
little credit risk existing in the portfolio.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The principal functions of asset/liability management are to provide
adequate liquidity, maintaining a reasonable and prudent relationship between
rate sensitive assets and liabilities and to continuously evaluate risks,
including interest-rate risks. Adequate liquidity is described as "the ability
of the Company to provide funds to appropriately meet normal loan extensions,
and at the same time, meet deposit withdrawals." A variety of funding sources
are available to the Company, including core deposit acquisition, federal funds
purchases, acquisition of public funds and the normal run-off of
interest-earning assets.
The day-to-day liquidity needs of the Company are primarily met by the
management of the federal funds position. Adjustments in the Company's net
federal funds position have historically been sufficient to meet liquidity
needs. As previously noted, and as described in Table 5, the Company's
investment portfolio carries a relatively short weighted-average maturity. The
Company has contractual maturities of investment securities (excluding
mortgage-backed securities), in the next year that have a cost basis of
$131,920,000. Interest rate risks are minimized by the maintenance of this
relatively short-term investment position, and the normal run-off of these
investment securities provides a secondary source of liquidity for the Company.
The Company also has approximately $167,499,000 in investment securities with
contractual maturities in excess of one year that are classified as available
for sale which could provide an additional source of liquidity. Further, a
significant portion of the loan portfolio is comprised of installment
instruments that provide an additional source of liquidity through their normal
run-off. As previously discussed in this analysis, the Company has securitized
and sold certain credit card and automobile paper receivables. Proceeds from
these transactions provide additional sources of liquidity.
<PAGE>
A major component of the asset/liability management process is the focus
on the control of interest rate exposure. Emphasis is placed on maintenance of
acceptable net interest margins in various interest rate environments, and in
providing the Company the ability to change interest rates should market
circumstances warrant. The following table presents, at December 31, 1999, the
Company's interest rate sensitivity based on contractual maturities. The table
reflects the actions taken by customers to shorten their deposit maturities
given the flat yield curve that presently exists. The table reflects only
contractual maturities; it does not consider prepayments that typically occur on
automobile loans and mortgage loans. Management believes the sensitivity and gap
ratios reflected in this table result in acceptable management of interest rate
exposure. Loans held-for-sale, net of write-downs, are included in net loans in
the table.
<TABLE>
INTEREST RATE SENSITIVITY
December 31, 1999 1 to 90 91 to 180 181 to 365 1 to 2 Over
(Dollars in thousands) Days Days Days Years 2 Years Total
------------------------------------------------------------------------------------------------------------------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Net loans $ 859,365 $ 138,387 $ 184,017 $183,525 $263,344 $1,628,638
Investment securities 38,532 17,365 75,568 154,863 141,024 427,352
Federal funds sold 46,240 0 0 0 0 46,240
------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 944,137 $ 155,752 $ 259,585 $338,388 $404,368 $2,102,230
--------------------------------------------------------------------------------------------------------==========
Interest-bearing liabilities:
Interest-bearing deposits $1,033,032 $ 115,928 $ 114,074 $142,378 $129,510 $1,534,922
Federal funds purchased 270,316 0 0 0 0 270,316
Other borrowings 20,392 0 0 0 57,500 77,892
------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $1,323,740 $ 115,928 $ 114,074 $142,378 $187,010 $1,883,130
--------------------------------------------------------------------------------------------------------==========
Interest rate sensitivity $ (379,603) $ 39,824 $ 145,511 $196,010 $217,358
Cumulative interest rate sensitivity $ (379,603) $(339,779) $(194,268) $ 1,742 $219,100
Cumulative interest rate sensitivity gap as a
percentage of total assets (16.23)% (14.53)% (8.31)% 0.07% 9.37%
Cumulative ratio of interest-sensitive assets
to interest-sensitive liabilities 71.32 % 76.40 % 87.50 % 100.10% 111.63%
</TABLE>
The following information should be read in conjunction with the
consolidated statement of cash flows, which appears under item 8 of this report.
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, federal funds sold and securities
purchased under agreements to resell. Cash and cash equivalents decreased
$44,818,000 for the year ended December 31, 1999, as the net cash absorbed by
investing activities exceeded the cash provided by operating and financing
activities. Operating activities provided cash of $45,178,000, resulting
primarily from net earnings of $22,458,000 and non-cash provisions for loan
losses and depreciation and amortization. Cash outflows from investing
activities totaled $264,179,000, increasing $17,996,000 over 1998 levels. The
Company recorded loan growth of $212,872,000 and increased its investment
portfolio by approximately $44,000,000. Financing activities provided
$174,183,000 in cash in 1999, increasing $4,917,000 from the comparable 1998
amount. The acquisition of deposits in the branch acquisition offset the
Company's overall decline in deposits of $58,994,000. A portion of this deposit
decline was the result of commercial customer migrating out of traditional
deposit products and into the Company's cash management products. This migration
is the main reason for the increase in short-term borrowings of $36,493,000.
For the year ended December 31, 1998, cash and cash equivalents declined
$60,503,000 as the net cash absorbed by investing activities exceeded the cash
provided by operating and financing activities. Operating activities provided
$16,414,000 in cash in 1998, resulting primarily from net earnings of
$19,534,000. Cash outflows from investing activities totaled $246,183,000. These
outflows were the result of $161,737,000 in loan growth during the year and a
net increase in the Company's investment portfolio of $78,980,000. Financing
activities provided $169,266,000 in cash in 1998. Deposit growth of $94,588,000,
increased utilization of the Company's cash management products and the issuance
of subordinated debentures were the principal additions to cash flows from
financing activities.
The Company's ability to pay dividends on its common stock and interest on
its capital notes is dependent upon funds provided by dividends from the
Subsidiary Banks and such other funding sources as may be available to the
Company. In addition, the Company's debt agreements provide for minimum capital
levels that must be maintained as long as the indebtedness remains outstanding.
Total capital of the Company exceeded the most restrictive of these requirements
by $7,086,000 at December 31, 1999. In January, 1998, the Company concluded a
$57,500,000 public offering of trust preferred stock. Terms of the issuance
provide that payment of dividends to common stockholders will be prohibited
unless the Company has funded the payment of the distributions due the trust
preferred securities holders. The payment of dividends by the Subsidiary Banks
is restricted only by regulation. At December 31, 1999, approximately
$40,071,000 was available from the Subsidiary Banks' retained earnings for
distribution as dividends to the Company in future periods without regulatory
approval. The availability of dividends from the Subsidiary Banks combined with
cash balances maintained by the parent company at December 31, 1999 provide the
parent company with sufficient liquidity to meet its needs.
CAPITAL ADEQUACY
Capital strength is important to the success of INTRUST Financial
Corporation. Capital strength promotes depositor and investor confidence and
provides a solid foundation for future growth. As noted above, the Company
concluded an offering of trust preferred securities in January, 1998. These
preferred securities are considered capital for regulatory purposes. At December
31, 1999, the Company's capital position exceeded all regulatory requirements.
The Company must maintain a minimum ratio of total capital to risk-weighted
assets of 8%, of which at least 4% must qualify as Tier 1 capital. At December
31, 1999, the Company's total capital to risk-weighted assets was 10.6% and its
Tier 1 capital to risk-weighted assets ratio was 9.1%. These ratios were 11.4%
and 9.3%, respectively in 1998.
While the Company does not have a formal stock buyback program, it may,
from time to time, offer to repurchase stock from stockholders meeting
pre-determined criteria as to the size of their holdings, and it will consider
repurchasing stock if and when it becomes available.
Capital ratios of the Subsidiary Banks are as follows:
INTRUST Will Rogers
Bank, N.A. Bank
---------- ----
Leverage Ratio 7.8% 9.6%
Core Capital/Risk Weighted Assets 8.8% 14.9%
Total Capital/Risk Weighted Assets 10.1% 15.8%
Dividends declared in 1999 were $4,883,000 ($2.40 per share). Dividends of
$5,333,000 ($2.50 per share) and $4,161,000 ($1.90 per share) were declared in
1998 and 1997, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As discussed in the accompanying financial statements, the Company has
disclosed estimated fair values for its financial instruments. As noted in the
financial statements, no ready market exists for a significant portion of the
Company's financial instruments, and a precise determination of the fair value
of these instruments, in the absence of a ready market, cannot be made.
The estimated fair value (as computed) of its financial assets exceeded
the book value of those assets by $13,799,000. The estimated book value of
financial assets exceeded its fair value by $17,282,000 in 1998. The
year-over-year change is due to increases in interest rates experienced in 1999,
which resulted in both loans originated and investment securities purchased
during prior periods declining in market value.
The estimated fair value of financial liabilities at December 31, 1999
exceeded their book value by $188,000. This difference was $47,118,000 in 1998.
During 1999, the Company's convertible capital notes matured. The majority of
these notes were converted into shares of the Company's common stock, and no
longer figure into the computation of the fair value of financial liabilities.
In addition, the guaranteed preferred beneficial interests in the Company's
subordinated debentures carry a dividend rate of 8.24%. With a rise in interest
rates during the year, the fair value of these financial liabilities decreased.
INFLATION AND CHANGING PRICES
The impact of inflation on financial institutions differs from that
exerted on other types of commercial enterprises. INTRUST Financial Corporation
has a relatively small portion of its resources invested in capital or fixed
assets. The majority of its assets are monetary in nature. For this reason,
changes in interest rates are a primary factor in determining their value.
Fluctuations in interest rates and efforts by the Federal Reserve Board to
regulate money and credit conditions have a greater effect on the Company's
profitability than do the effects of higher costs for goods and services.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 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, as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
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>
CONSOLIDATED STATISTICAL INFORMATION
The following tables, charts and comments present selected financial information
relating to INTRUST Financial Corporation in compliance with the statistical
disclosure requirements of the Securities and Exchange Commission for bank
holding companies.
The scope of the Company does not include foreign operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Average Balance Sheet (Table 1)
- ------------------------------------------------------------------------------------------------------------------------
The daily average amounts by condensed categories for the past three years is presented below (Dollars in thousands):
Year Ended December 31
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
- ------------------------------------------------------------------------------------------------------------------------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and Due from Banks $ 107,330 4.9% $ 128,090 6.4% $ 112,923 6.3%
Taxable Investment Securities 370,931 17.0 343,512 17.1 266,962 15.0
Nontaxable Investment
Securities 12,954 0.6 16,186 0.8 20,640 1.2
Federal Funds Sold 43,943 2.0 121,146 6.0 43,961 2.5
Loans (net of allowance for loan losses) 1,528,778 70.3 1,305,639 65.1 1,229,924 69.4
Building and Equipment 32,486 1.5 26,984 1.4 27,821 1.6
Other 79,710 3.7 64,341 3.2 70,870 4.0
- -------------------------------------------------------------------------------------------------------------------------
Total $2,176,132 100.0% $2,005,898 100.0% $1,773,101 100.0%
- --------------------------------------------=============================================================================
Liabilities and Stockholders' Equity:
Demand Deposits $ 324,777 14.9% $ 344,974 17.2% $ 302,901 17.1%
Savings and Interest-Bearing
Demand Deposits 723,303 33.2 643,555 32.1 567,264 32.0
Time Deposits 624,729 28.7 550,898 27.5 555,129 31.3
Short-Term Debt 260,036 11.9 230,757 11.5 164,858 9.3
Long-Term Debt 79,889 3.7 80,808 4.0 33,627 1.9
Other Liabilities 26,378 1.2 17,842 0.9 20,993 1.2
Stockholders' Equity 137,020 6.4 137,064 6.8 128,329 7.2
- -------------------------------------------------------------------------------------------------------------------------
Total $2,176,132 100.0% $2,005,898 100.0% $1,773,101 100.0%
- --------------------------------------------=============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Net Interest-Earnings Analysis (Table 2)
- -----------------------------------------------------------------------------------------------------------------------
The following table presents an analysis of the average yields on earning assets, average rates paid on
interest bearing liabilities, and the net interest differential for each of the past three years. Loans on
nonaccrual basis and overdrafts are included in the average loan amounts.
The Net Yield on Interest-Earning Assets is net interest income divided by average interest-earning assets.
Year Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Income or Rate Balance Income or Rate Balance Income or Rate
- -----------------------------------------------------------------------------------------------------------------------
Taxable Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities $ 370,931 $ 21,153 5.70% $ 343,512 $ 20,263 5.90% $ 266,962 $ 16,398 6.14%
Nontaxable Investment
Securities* 12,954 712 8.81 16,186 988 9.76 20,640 1,396 10.77
- -----------------------------------------------------------------------------------------------------------------------
Total Investment
Securities* 383,885 21,865 5.81 359,698 21,251 6.07 287,602 17,794 6.47
Federal Funds Sold 43,943 2,259 5.14 121,146 6,555 5.41 43,961 2,424 5.51
Net Loans 1,528,778 131,082 8.57 1,305,639 119,077 9.12 1,229,924 112,236 9.13
- -----------------------------------------------------------------------------------------------------------------------
Total Interest-Earning
Assets* $1,956,606 $155,206 7.95% $1,786,483 $146,883 8.26% $1,561,487 $132,454 8.54%
- ----------------------------===========================================================================================
<FN>
* Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
</TABLE>
<PAGE>
<TABLE>
Year Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Expense or Rate Balance Expense or Rate Balance Expense or Rate
- -----------------------------------------------------------------------------------------------------------------------
Savings and Interest-
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bearing Demand Deposits $ 723,303 $19,542 2.70% $ 643,555 $19,645 3.05% $ 567,264 $17,002 3.00%
Time Deposits 624,729 34,015 5.44 550,898 32,088 5.82 555,129 32,282 5.82
- -----------------------------------------------------------------------------------------------------------------------
Total Deposits 1,348,032 53,557 3.97 1,194,453 51,733 4.33 1,122,393 49,284 4.39
Short-Term Debt 260,036 11,506 4.42 230,757 11,021 4.78 164,858 8,278 5.02
Long-Term Debt 79,889 6,476 8.11 80,808 6,571 8.13 33,627 2,585 7.69
- -----------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities $1,687,957 $71,539 4.24% $1,506,018 $69,325 4.60% $1,320,878 $60,147 4.55%
- ----------------------------===========================================================================================
Net Differential $ 268,649 $83,667 $ 280,465 $77,558 $ 240,609 $72,307
- ----------------------------====================-----------====================-----------====================---------
Net Yield on Interest-
Earning Assets 4.28% 4.34% 4.63%
- ---------------------------------------------------=====--------------------------=====--------------------------======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Change in Interest Income and Interest Expense (Table 3)
- ---------------------------------------------------------------------------------------------------------------
Further insight into year-to-year changes in net interest income may be gained by segregating the rate and
volume components of the increases in interest income and expense associated with earning assets
and interest-bearing liabilities.
The following table presents this rate/volume analysis comparing changes in net interest income from 1999 to
1998 and from 1998 to 1997.
Net interest income increased in 1999 as a result of positive volume variances. The increase in 1999 due to
volume changes is primarily because of an increase in net loans. Decreases in yields on earning assets,
especially net loans, produced the negative rate variance even though rates paid on interest-bearing
liabilities also declined. Average interest-earning assets grew to a greater extent than interest-bearing
liabilities, resulting in an increase in net interest income due to volume changes.
1999 vs. 1998 1998 vs. 1997
- -----------------------------------------------------------------------------------------------------------
Due to Changes in Due to Changes in
-------------------- ---------------------
Increase Increase
(Dollars in thousands) (Decrease) Volume Rates (Decrease) Volume Rates
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable Investment Securities $ 890 $ 1,579 $ (689) $ 3,865 $ 4,538 $ (673)
Nontaxable Investment
Securities (276) (184) (92) (408) (281) (127)
- -----------------------------------------------------------------------------------------------------------
Total Investment Securities 614 1,395 (781) 3,457 4,257 (800)
Federal Funds Sold (4,296) (3,984) (312) 4,131 4,177 (46)
Net Loans 12,005 19,449 (7,444) 6,841 6,906 (65)
- -----------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 8,323 16,860 (8,537) 14,429 15,340 (911)
- -----------------------------------------------------------------------------------------------------------
Savings and Interest-Bearing
Demand Deposits (103) 2,289 (2,392) 2,643 2,323 320
Time Deposits 1,927 4,112 (2,185) (194) (246) 52
- -----------------------------------------------------------------------------------------------------------
Total Deposits 1,824 6,401 (4,577) 2,449 2,077 372
Short-Term Debt 485 1,333 (848) 2,743 3,165 (422)
Long-Term Debt (95) (75) (20) 3,986 3,828 158
- -----------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 2,214 7,659 (5,445) 9,178 9,070 108
- -----------------------------------------------------------------------------------------------------------
Net Interest Income $ 6,109 $ 9,201 $(3,092) $ 5,251 $ 6,270 $(1,019)
- -----------------------------------------==================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Investment Portfolio (Table 4)
- --------------------------------------------------------------------------------
The book value of investment securities at December 31 for the past three years
is presented below (Dollars in thousands):
1999 1998 1997
- --------------------------------------------------------------------------------
U.S. Treasury Securities $ 37,628 $ 53,538 $ 85,969
U.S. Agency Securities 374,859 317,766 200,779
State, County and Municipal Securities 11,443 13,540 17,519
Other Securities 3,422 2,976 2,883
- --------------------------------------------------------------------------------
Total $427,352 $387,820 $307,150
- --------------------------------------------====================================
Except for total U.S. Treasury and U.S. Agency obligations, no investment in a
single issuer exceeds 10 percent of stockholders' equity.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Maturities and Yield Analysis (Table 5)
- -------------------------------------------------------------------------------------------------------------------
The distribution of maturities and weighted average yields of investment
securities (other than equity securities) at December 31, 1999 is as follows
(Dollars in thousands):
Total Within 1 Year 1-5 Years 5-10 Years After 10 Years
------------------------------------------------------------------------------------- Average
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Maturity
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.Treasury $ 37,628 5.2% $ 27,140 5.2% $ 10,488 5.0% $ 0 0.0% $ 0 0.0% 7.7 mos.
1 year,
U.S. Agency 374,859 5.8 102,119 5.6 262,235 5.8 10,448 7.3 57 7.1 11.8 mos.
State, County and 3 years,
Municipal * 11,443 8.0 2,206 9.5 6,837 7.3 1,685 8.1 715 9.7 10.1 mos.
Other Securities 3,422 4.3 0 0.0 0 0.0 0 0.0 3,422 4.3 10 years
- -------------------------------------------------------------------------------------------------------------------
1 year,
Total $427,352 5.8% $131,465 5.6% $279,560 5.8% $12,133 7.4% $4,194 5.3% 11.7 mos.
- -------------------================================================================================================
<FN>
*Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Loan Portfolio (Table 6)
- ----------------------------------------------------------------------------------------------------------------------------------
A breakdown of outstanding loans, by type, at year-end for the past five years is as follows (Dollars in thousands):
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial, Financial
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
and Agricultural $ 775,027 47.8% $ 707,326 50.0% $ 623,707 49.4% $ 485,891 46.1% $ 416,428 39.5%
Real Estate-Construction 63,112 3.9 38,137 2.7 29,179 2.3 27,130 2.5 25,491 2.4
Real Estate-Mortgage 326,174 20.1 250,282 17.7 230,133 18.2 210,591 20.0 181,894 17.2
Installment, excluding
credit card 330,732 20.4 299,884 21.2 259,074 20.5 286,632 27.2 258,713 24.5
Credit card 127,159 7.8 119,149 8.4 120,366 9.6 43,868 4.2 173,270 16.4
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal 1,622,204 100.0% 1,414,778 100.0% 1,262,459 100.0% 1,054,112 100.0% 1,055,796 100.0%
Allowance for loan losses (26,010) (21,703) (17,932) (15,536) (25,892)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Loans $1,596,194 $1,393,075 $1,244,527 $1,038,576 $1,029,904
- ---------------------------=======================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Maturities and Sensitivity to Interest Rate Changes (Table 7)
- ----------------------------------------------------------------------------------------------------
The maturity distribution of loans outstanding at December 31, 1999 (excluding Real Estate-
Mortgage, and Installment) by type and sensitivity to interest rate changes is as follows
(Dollars in thousands):
Due Loans Due After One Year
- --------------------------------------------------------- ---------------------------------------
One Year After 1 Year After Within After
or Less thru 5 Years 5 Years 5 Years 5 Years
- --------------------------------------------------------- ---------------------------------------
Commercial, Financial
<S> <C> <C> <C> <C> <C>
and Agricultural $489,479 $242,310 $43,238 Fixed Rates $125,012 $11,961
Real Estate- Floating or
Construction 46,364 11,295 5,453 Adjustable Rate 128,593 36,730
- --------------------------------------------------------- ---------------------------------------
Total $535,843 $253,605 $48,691 Total $253,605 $48,691
- -----------------------================================== --------------------===================
<FN>
Note: Demand loans, past due loans and overdrafts are reported in "One Year or Less."
</FN>
</TABLE>
Loans are renewed only after consideration of the borrower's creditworthiness at
maturity, except for installment loans which are written on a fully amortized
basis. Loans are not written on the basis of guaranteed renewals. Those loans
which are renewed are generally renewed for similar terms at market interest
rates.
- --------------------------------------------------------------------------------
Risk Elements (Table 8)
- --------------------------------------------------------------------------------
Loans considered risk elements include those which are accounted for on a
nonaccrual basis, loans which are contractually past due 90 days or more as to
interest or principal payments, and those renegotiated to provide a reduction of
interest or principal which would not otherwise be considered except in cases of
deterioration in the financial position of the borrower. The following is a
table of nonaccrual, past due and restructured loans at December 31 for each of
the past five years (Dollars in thousands):
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $3,063 $5,027 $4,618 $5,208 $3,988
Past Due Loans 1,105 1,090 2,120 5,695 5,383
Restructured Loans 0 0 0 0 0
- --------------------------------------------------------------------------------
Total $4,168 $6,117 $6,738 $10,903 $9,371
- ----------------------------------------========================================
Gross interest income that would have been recorded in 1999 on nonaccrual and
restructured loans, if the loans had been current in accordance with their
original terms and had been outstanding throughout the period or since
origination if held for part of the period, was $365,000. The amount of interest
on those loans that was actually included in income for the period was $130,000.
Loans are reported as being in nonaccrual status if: (a) they are maintained on
a cash basis because of deterioration in the financial position of the borrower,
(b) payment in full of interest or principal is not expected, or (c) principal
or interest has been in default for a period of 90 days or more unless the
obligation is both well secured and in the process of collection. Any accrued
but unpaid interest previously recorded on such loans is reversed against
current period interest income.
The classification of a loan as nonaccrual or reduced rate does not necessarily
indicate that the ultimate collection of the loan principal and interest is
doubtful. In fact, the Company's experience suggests that a significant
percentage of both principal and interest on loans so classified, particularly
commercial and real estate loans, is eventually recovered. Interest income on
nonaccrual loans is recognized only in the period when realized. At the same
time, however, management recognizes the lower quality and above normal risk
characteristics of these loans and, therefore, considers the potential risk of
principal loss on loans included in this category in evaluating the adequacy of
the allowance for possible loan losses.
Management has identified additional problem loans in the portfolio which are
not stated in Table 8. These loans are reviewed on a continuous basis. They
comprise less than 0.3 percent of the loan portfolio. The Company has developed
a credit risk rating system in which a high percentage of loans in each bank are
evaluated by Credit Review staff.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Summary of Loan Loss Experience (Table 9)
- ---------------------------------------------------------------------------------------------------------------
The table below presents, in summary form, for the past five years the year-end
and average loans outstanding; the changes in the allowance for loan losses,
with loans charged off and recoveries on loans previously charged off by loan
category; the ratio of net charge-offs to average loans; and the ratio of the
allowance for losses to year-end loans outstanding (Dollars in thousands):
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amount of loans at year-end $1,622,204 $1,414,778 $1,262,459 $1,054,112 $1,055,796
- -----------------------------------------------================================================================
Average loans outstanding $1,552,242 $1,325,903 $1,246,145 $1,110,485 $1,037,067
- -----------------------------------------------================================================================
Beginning balance of allowance for loan $21,703 $17,932 $15,536 $25,892 $19,886
losses
Allowance related to assets acquired 310 0 0 0 172
Loans charged-off:
Commercial, Financial and Agricultural 3,079 2,317 1,613 1,414 2,672
Real Estate-Construction 0 0 0 46 0
Real Estate-Mortgage 14 34 61 15 85
Installment 1,736 1,916 1,972 1,584 999
Credit Cards 4,354 4,913 4,136 18,770 12,089
- ---------------------------------------------------------------------------------------------------------------
Total loans charged off 9,183 9,180 7,782 21,829 15,845
- ---------------------------------------------------------------------------------------------------------------
Recoveries on charge-offs:
Commercial, Financial and Agricultural 633 528 973 1,579 1,926
Real Estate-Construction 0 0 0 0 0
Real Estate-Mortgage 22 14 29 29 40
Installment 504 379 294 333 392
Credit Cards 1,081 940 642 1,026 1,203
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 2,240 1,861 1,938 2,967 3,561
- ---------------------------------------------------------------------------------------------------------------
Net loans charged off 6,943 7,319 5,844 18,862 12,284
Provision charged to expense 10,940 11,090 8,240 20,151 18,118
Transfer to write down loans held for sale 0 0 0 11,645 0
- ---------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $26,010 $21,703 $17,932 $15,536 $25,892
- -----------------------------------------------================================================================
Net charge-offs/average loans 0.45% 0.55% 0.47% 1.70% 1.18%
- -----------------------------------------------================================================================
Allowance for loan losses/loans at year-end 1.60% 1.53% 1.42% 1.47% 2.45%
- -----------------------------------------------================================================================
</TABLE>
<TABLE>
<CAPTION>
A breakdown of the allowance for loan losses, at the end of the past five years, is presented below
(Dollars in thousands):
Allocation of the Allowance for Loan Losses
Balance at end of period applicable to:
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $10,355 $ 9,241 $ 7,590 $ 5,181 $ 7,613
Real Estate-Construction 381 266 179 341 221
Real Estate-Mortgage 4,376 2,272 2,380 1,992 2,621
Installment 3,739 3,202 2,469 1,978 868
Credit Cards 7,159 6,722 5,314 6,044 14,569
- ---------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $26,010 $21,703 $17,932 $15,536 $25,892
- --------------------------------------------------=============================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Percent of loans in each category to total loans 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 47.8% 50.0% 49.4% 46.1% 39.5%
Real Estate-Construction 3.9 2.7 2.3 2.5 2.4
Real Estate-Mortgage 20.1 17.7 18.2 20.0 17.2
Installment 20.4 21.2 20.5 27.2 24.5
Credit Cards 7.8 8.4 9.6 4.2 16.4
- --------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
- --------------------------------------------------============================================================
</TABLE>
The Company's determinations of the level of the allowance and, correspondingly,
the provision for loan losses rests upon various judgments and assumptions
including, but not necessarily limited to, general economic conditions, loan
portfolio composition and prior loan loss experience. The Company considers the
allowance for loan losses of $26,010,000 adequate to cover losses inherent in
loans outstanding at December 31, 1999. While it is the Company's policy to
write off in the current period those loans or portions of loans on which a loss
is certain or probable, no assurance can be given that the Company will not in
any particular period sustain loan losses that are sizeable in relation to the
amount reserved, or that subsequent evaluations of the loan portfolio, in light
of conditions and factors then prevailing, will not require significant changes
in the allowance for loan losses. Credit card charge-offs constitute a
significant portion of total charge-offs. It is management's opinion that the
loan portfolio is well diversified. There are no concentrations of loans (in
excess of 10 percent of the total loan portfolio) to multiple borrowers engaged
in similar activities. You are encouraged to refer to the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of this report, in which the provision for loan losses is discussed
further. Among the factors considered in establishing the provision for loan
losses are historical charge-offs, the level and composition of nonperforming
loans, the condition of industries experiencing particular financial pressures,
the review of specific loans involving more than a normal risk of collectability
and evaluation of underlying collateral for secured lending. Aided by a
specialized loan review process, senior management and the entire lending staff
continually review the entire loan portfolio to identify and manage loans
believed to possess unusually high degrees of risk. A portion of this review
involves the Board of Directors on a regular basis. Also taken into
consideration are classification judgments of bank regulators and the Company's
independent certified public accountants.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Deposits (Table 10)
- ---------------------------------------------------------------------------------------------------------------
A breakdown of average deposits by type for the past three years is as follows (Dollars in thousands):
Year Ended December 31 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand Deposits $ 324,777 - $ 344,974 - $ 302,901 -
Interest-Bearing Demand 642,237 2.99% 561,068 3.33% 498,464 3.14%
Savings Deposits 81,066 2.09 82,487 2.48 68,800 2.08
Time Deposits 624,729 5.44 550,898 5.82 555,129 5.82
- ---------------------------------------------------------------------------------------------------------------
Total $1,672,809 $1,539,427 $1,425,294
- ------------------------------------------==========-------------==========------------==========--------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Time Deposits (Table 11)
- --------------------------------------------------------------------------------
The following table sets forth, by remaining time to maturity, time deposits in
amounts of $100,000 or more at year-end (Dollars in thousands):
At December 31 1999
----------------------------------------------------------------------------
Time deposits in amounts of $100,000 or more maturing in:
3 months or less $92,265
Over 3 months through 6 months 30,621
Over 6 months through 12 months 23,323
Over 12 months 42,183
----------------------------------------------------------------------------
Total $188,392
-------------------------------------------------------------------=========
- --------------------------------------------------------------------------------
Return on Equity and Assets (Table 12)
- --------------------------------------------------------------------------------
The following table presents a three year history of certain operating ratios:
Year Ended December 31 1999 1998 1997
-------------------------------------------------------------------------
Return on Average Assets 1.03 0.97 0.94
Return on Average Equity 16.39 14.25 12.99
Dividend Payout Ratio 21.74 27.30 24.97
Average Equity to Average Assets Ratio 6.30 6.83 7.24
- --------------------------------------------------------------------------------
Short-Term Borrowings (Table 13)
- --------------------------------------------------------------------------------
Information for each category of short-term borrowings for which the average
balance outstanding for the period was at least 30 percent of stockholders'
equity at the end of the period is presented below (Dollars in thousands):
Year Ended December 31 1999 1998 1997
------------------------------------------------------------------------------
Federal Funds Purchased:
Ending Balance $38,760 $53,530 $41,340
Ending Balance Rate 5.01% 4.49% 5.41%
Largest Month-End Balance $117,160 $54,170 $64,010
Average Balance $57,162 $42,375 $38,338
Average Interest Rate 4.81% 5.18% 5.45%
Securities Sold Under Repurchase Agreements
Ending Balance $231,556 $188,425 $142,338
Ending Balance Rate 4.45% 3.97% 4.76%
Largest Month-End Balance $231,556 $188,776 $145,164
Average Balance $191,097 $173,729 $117,647
Average Interest Rate 4.22% 4.56% 4.79%
Federal funds purchased transactions are borrowings of immediately
available bank funds, for one business day, at a specified interest rate.
Securities sold under repurchase agreements are transactions in which the
Company sells securities and agrees to repurchase the identical
securities at a specified date for a specified price.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
- --------- -----------------------------------------------------------
Information concerning this item may be found in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" under topic
titled "Liquidity and Asset/Liability Management".
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1999 1998
- --------------------------------------------------------------------------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 109,548 $ 132,056
Federal funds sold and securities purchased under
agreements to resell 46,240 68,550
- --------------------------------------------------------------------------------
Total cash and cash equivalents 155,788 200,606
- --------------------------------------------------------------------------------
Investment securities:
Held-to-maturity 65,849 176,305
Available-for-sale 361,503 211,515
- --------------------------------------------------------------------------------
Total investment securities 427,352 387,820
- --------------------------------------------------------------------------------
Loans held-for-sale 32,444 34,834
Loans, net of allowance for loan losses of
$26,010 in 1999 and $21,703 in 1998 1,596,194 1,393,075
Land, buildings and equipment, net 38,656 29,509
Accrued interest receivable 16,252 15,223
Other assets 71,767 54,398
- --------------------------------------------------------------------------------
Total assets $2,338,453 $2,115,465
- -------------------------------------------------------=========================
Liabilities and Stockholders' Equity
Deposits:
Demand $ 283,554 $ 402,178
Savings and interest-bearing demand 828,799 690,159
Time 706,123 555,017
- --------------------------------------------------------------------------------
Total deposits 1,818,476 1,647,354
- --------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased and securities sold under
agreements to repurchase 270,316 241,955
Other 10,392 2,260
- --------------------------------------------------------------------------------
Total short-term borrowings 280,708 244,215
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities 17,886 13,207
Notes payable 10,000 12,500
Convertible capital notes 0 11,078
Guaranteed preferred beneficial interests in the
Company's subordinated debentures 57,500 57,500
- --------------------------------------------------------------------------------
Total liabilities 2,184,570 1,985,854
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,783,650 shares issued in 1999
and 2,418,573 issued in 1998 13,918 12,093
Capital surplus 21,673 12,464
Retained earnings 156,653 139,078
Treasury stock, at cost (391,498 shares in 1999
and 391,824 shares in 1998) (35,965) (34,626)
Accumulated other comprehensive income (loss) (2,396) 602
- --------------------------------------------------------------------------------
Total stockholders' equity 153,883 129,611
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,338,453 $2,115,465
- -------------------------------------------------------=========================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Income
Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1999 1998 1997
- --------------------------------------------------------------------------------
Interest income:
Loans $131,082 $119,077 $112,236
Investment securities:
Taxable 21,153 20,263 16,398
Nontaxable 712 988 1,396
Federal funds sold, securities purchased
under agreements to resell, and other 2,259 6,555 2,424
- --------------------------------------------------------------------------------
Total interest income 155,206 146,883 132,454
- --------------------------------------------------------------------------------
Interest expense:
Deposits:
Savings and interest-bearing demand 19,542 19,645 17,002
Time 34,015 32,088 32,282
Federal funds purchased and securities sold
under agreements to repurchase 11,131 10,613 7,879
Convertible capital notes 927 1,003 1,010
Subordinated debentures 4,738 4,475 0
Other borrowings 1,186 1,501 1,974
- --------------------------------------------------------------------------------
Total interest expense 71,539 69,325 60,147
- --------------------------------------------------------------------------------
Net interest income 83,667 77,558 72,307
Provision for write-down of loans
held-for-sale 0 0 4,645
Provision for loan losses 10,940 11,090 8,240
- --------------------------------------------------------------------------------
Net interest income after provision
for loan losses 72,727 66,468 59,422
- --------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 12,323 11,008 10,001
Fiduciary income 13,262 10,509 7,979
Credit card fees 9,204 8,824 13,019
Securities gains 540 126 165
Other service charges, fees and income 11,830 12,170 9,965
- --------------------------------------------------------------------------------
Total noninterest income 47,159 42,637 41,129
- --------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 42,007 38,548 35,187
Net occupancy and equipment expense 10,619 9,081 8,819
Advertising and promotional activities 4,007 4,578 4,282
Data processing expense 4,692 3,961 3,605
Supplies 2,799 2,508 2,334
Postage and dispatch 2,243 2,132 2,200
Goodwill amortization 1,947 1,620 1,615
Deposit insurance assessment 268 244 151
Other 14,508 14,709 16,434
- --------------------------------------------------------------------------------
Total noninterest expense 83,090 77,381 74,627
- --------------------------------------------------------------------------------
Income before provision for income taxes 36,796 31,724 25,924
Provision for income taxes 14,338 12,190 9,260
- --------------------------------------------------------------------------------
Net income $ 22,458 $ 19,534 $ 16,664
- -------------------------------------------------===============================
Per share data:
- --------------------------------------------------------------------------------
Basic earnings per share $10.98 $9.10 $7.60
- -------------------------------------------------===============================
Diluted earnings per share $ 9.48 $7.90 $6.74
- -------------------------------------------------===============================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
INTRUST FINANCIAL CORPORATION Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997
Accumulated
Other Total
Common Capital Retained Treasury Comprehensive Stockholders'
Dollars in thousands except per share data Stock Surplus Earnings Stock Income (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 $12,075 $12,377 $112,374 $(14,799) $ 67 $122,094
Comprehensive income:
Net income 0 0 16,664 0 0 16,664
Other comprehensive income-
Unrealized gains (losses) on securities
arising during the period, net of tax of $286 0 0 0 0 429 429
Reclassification adjustment for (gains)
losses on securities included in net income,
net of tax of $66 0 0 0 0 (99) (99)
-------------
Total other comprehensive income 330
-------------
Total comprehensive income 0 0 0 0 0 16,994
Cash dividends ($1.90 per share) 0 0 (4,161) 0 0 (4,161)
Purchase of treasury stock 0 0 0 (2,282) 0 (2,282)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 12,075 12,377 124,877 (17,081) 397 132,645
Comprehensive income:
Net income 0 0 19,534 0 0 19,534
Other comprehensive income-
Unrealized gains (losses) on securities
arising during the period, net of tax of $187 0 0 0 0 281 281
Reclassification adjustment for (gains)
losses on securities included in net income,
net of tax of $50 0 0 0 0 (76) (76)
-------------
Total other comprehensive income 205
-------------
Total comprehensive income 0 0 0 0 0 19,739
Cash dividends ($2.50 per share)
0 0 (5,333) 0 0 (5,333)
Capital notes converted to common stock 18 87 0 0 0 105
Purchase of treasury stock 0 0 0 (17,589) 0 (17,589)
Exercise of stock options 0 0 0 44 0 44
- ------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1998 12,093 12,464 139,078 (34,626) 602 129,611
Comprehensive income:
Net income 0 0 22,458 0 0 22,458
Other comprehensive income-
Unrealized gains (losses) on securities
arising during the period, net of tax of $1,783 0 0 0 0 (2,674) (2,674)
Reclassification adjustment for (gains)
losses on securities included in net income,
net of tax of $216 0 0 0 0 (324) (324)
-------------
Total other comprehensive income (loss) (2,998)
-------------
Total comprehensive income 0 0 0 0 0 19,460
Cash dividends ($2.40 per share) 0 0 (4,883) 0 0 (4,883)
Capital notes converted to common stock 1,825 9,117 0 0 0 10,942
Purchase of treasury stock 0 0 0 (1,845) 0 (1,845)
Exercise of stock options 0 92 0 506 0 598
- -----------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999 $13,918 $21,673 $156,653 $(35,965) $(2,396) $153,883
- -------------------------------------------------------======================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTRUST FINANCIAL CORPORATION Consolidated Statements of Cash Flows Years Ended
December 31, 1999, 1998 and 1997
- ---------------------------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- ---------------------------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
<S> <C> <C> <C>
Net Income $ 22,458 $ 19,534 $ 16,664
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and write-downs 10,940 11,090 12,885
Provision for depreciation and amortization 7,907 6,887 6,594
Amortization of premium and accretion of discount
on investment securities (294) (947) (580)
Gain on sale of investment securities (540) (126) (165)
Loss on retirement of convertible capital notes 325 114 0
Changes in assets and liabilities, net of effect
of acquisition of branches:
Loans held for sale 2,390 (18,412) (3,518)
Other assets (79) (7,852) (1,589)
Income taxes 1,148 8,586 4,975
Interest receivable (1,029) (2,268) (1,493)
Interest payable 2,349 (311) 167
Other liabilities (368) (79) (15)
Other (29) 198 222
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 45,178 16,414 34,147
- ---------------------------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Purchase of investment securities (225,406) (256,235) (170,777)
Investment securities matured or called 181,147 177,094 158,866
Proceeds from sale of investment securities 592 161 1,463
Net increase in loans (212,872) (161,737) (235,519)
Proceeds from sale of loans 0 0 102,697
Purchases of land, buildings and equipment (8,392) (7,697) (4,770)
Proceeds from sale of land, buildings and equipment 475 318 2,297
Proceeds from sale of other real estate and repossessions 1,509 2,679 3,364
Other (1,232) (766) (1,341)
- ---------------------------------------------------------------------------------------------------
Net cash absorbed by investing activities (264,179) (246,183) (143,720)
- ---------------------------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Proceeds from assumption of liabilities and acquisition
of assets of bank branches, net 205,867 0 0
Net increase (decrease) in deposits (58,994) 94,588 124,371
Net increase in short-term borrowings 36,493 53,030 62,310
Payments on notes payable (2,500) (10,500) (2,660)
Proceeds from notes payable 0 0 8,000
Retirement of convertible capital notes (461) (150) 0
Proceeds from subordinated debentures, net of issuance costs 0 55,176 0
Cash dividends (4,883) (5,333) (4,161)
Purchase of treasury stock (1,339) (17,545) (2,282)
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing activities 174,183 169,266 185,578
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (44,818) (60,503) 76,005
Cash and cash equivalents at beginning of year 200,606 261,109 185,104
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 155,788 $ 200,606 $ 261,109
- ----------------------------------------------------------------===================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
INTRUST FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1999, 1998, and 1997
Dollars in thousands except per share data
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTRUST Financial Corporation (the "Company") is a bank holding company
incorporated under the laws of the state of Kansas and is registered under the
Bank Holding Company Act of 1956, as amended. The Company is the sole
shareholder of INTRUST Bank, N.A., Wichita, Kansas, Will Rogers Bank, Oklahoma
City, Oklahoma (the "Subsidiary Banks"), NestEgg Consulting Inc., INTRUST
Capital Trust and INTRUST Community Development Corporation (the
"Subsidiaries"). The Company's primary business is providing customers in Kansas
and Oklahoma with personal and commercial banking services, fiduciary services
and real estate and other mortgage services.
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and general practices within the banking
industry. The following is a description of the more significant policies:
a) PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES - The consolidated
financial statements include the accounts of the Company and its wholly-owned
Subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions. Those estimates relate principally to the
determination of the allowance for loan losses, income taxes and the fair value
of financial instruments. Actual results could differ from those estimates.
b) INVESTMENT SECURITIES - Debt securities and equity securities which have a
readily determinable market value that may be sold in response to changes in
interest rates or prepayment risk are classified as available-for-sale and are
carried at estimated fair value with unrealized gains and losses reported as a
separate component of other comprehensive income, net of income taxes. Debt
securities that management has the ability and intent to hold to maturity are
classified as held-to-maturity and are carried at cost, adjusted for
amortization of premiums and accretion of discounts. Equity securities, which do
not have a readily determinable market value, are carried at cost. Gains and
losses on the sale of investment securities are included as a component of
noninterest income. Applicable income taxes, if any, are included in income
taxes. The basis of the securities sold is determined by the specific
identification of each security.
c) LOANS HELD-FOR-SALE - Loans originated and/or intended for sale are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.
d) LOANS - Loans are reported as being in nonaccrual status if: (a) they are
maintained on a cash basis because of deterioration in the financial position of
the borrower, (b) payment in full of interest or principal is not expected, or
(c) principal or interest has been in default for a period of 90 days or more
unless the obligation is both well secured and in the process of collection. Any
accrued but unpaid interest previously recorded on such loans is reversed
against current period interest income.
Loans are charged-off whenever the loan is considered uncollectible. Credit
card loans are charged-off at the earlier of when they are considered
uncollectible or are 210 days past the contractual due date. Other installment
loans are charged-off at the time they are considered uncollectible or are 120
days past due, whichever is earlier.
From time to time, the Company sells loans, primarily through individual loan
or bulk sale transactions and through securitization transactions. The carrying
amount of loans sold is removed from the Company's statements of financial
condition at the date of sale. The Company allocates the carrying amount of the
loans between the loans sold and any interest retained based on their relative
fair values. Fair value of any interest retained is based on discounted cash
flow analysis performed by the Company. Gains and losses on the sale of loans
are recorded based on the net proceeds received less the allocated carrying
amount of the loans sold.
e) PROVISION FOR LOAN LOSSES - Each period the provision for loan losses in
the consolidated statements of income results from the combination of a) an
estimate by management of loan losses that occurred during the current period
and b) the ongoing adjustment of prior estimates of losses occurring in prior
periods.
To serve as a basis for making this provision each quarter, the Company
maintains an extensive credit risk monitoring process that considers several
factors including: current economic conditions affecting bank customers, the
payment performance of individual large loans and pools of homogeneous small
loans, portfolio seasoning, changes in collateral values, and detailed reviews
of specific large loan relationships. For large loans deemed to be impaired due
to an expectation that all contractual payments will probably not be received,
impairment is measured by comparing the recorded investment in the loan to the
present value of expected cash flows discounted at the loan's effective interest
rate, the fair value of the collateral or the loan's observable market price.
The provision for loan losses increases the allowance for loan losses, a
valuation account which is netted against loans on the consolidated statements
of financial condition. As the specific customer and amount of a loan loss is
confirmed by gathering additional information, taking collateral in full or
partial settlement of the loan, bankruptcy of the borrower, etc., the loan is
written down, reducing the allowance for loan losses. If, subsequent to a
write-down, the Company is able to collect additional amounts from the customer
or obtain control of collateral worth more than earlier estimated, a recovery is
recorded, increasing the allowance for loan losses.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions. The Subsidiary Banks are subject to the regulations of certain
federal agencies and undergo periodic examinations by those regulatory
authorities. As an integral part of those examinations, the various regulatory
agencies periodically review the Subsidiary Banks' allowances for loan losses.
Such agencies may require the Subsidiary Banks to recognize changes to the
allowances based on their judgments about information available to them at the
time of their examination.
f) LAND, BUILDINGS AND EQUIPMENT - Land is stated at cost, and buildings and
equipment are stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line or declining balance method depending upon the
type of asset and year of acquisition. The following useful lives have been
established:
Buildings and improvements 15 to 40 years
Furniture, fixtures and equipment 3 to 20 years
g) OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS - Other real estate owned
and repossessed assets may include assets acquired from loan settlements,
foreclosure, or abandonment of plans to use real estate previously acquired for
future expansion of banking premises. These assets are recorded at the lower of
cost or fair market value at the date of settlement, foreclosure or abandonment.
Any initial write-downs on assets acquired from loan settlements and
foreclosures are charged to the allowance for loan losses. Subsequent
write-downs, due to a decline in fair value, are charged to current expense.
Revenues and expenditures related to the operation or maintenance of these
assets are recorded in operating income as incurred. These assets are included
as a component of other assets in the consolidated statements of financial
condition and amounted to $495 and $114 at December 31, 1999 and 1998,
respectively.
h) GOODWILL AND CORE DEPOSIT PREMIUM - The excess of cost over fair value of
net assets acquired is amortized using the straight-line method over 15 years.
Core deposit premiums are amortized using accelerated methods over the estimated
life of the deposit relationship. These assets are included as a component of
other assets and amounted to $26,424 and $13,369, net of accumulated
amortization, at December 31, 1999 and 1998, respectively.
i) STOCK-BASED COMPENSATION - The Company accounts for stock options using
the intrinsic value based method of accounting.
j) INCOME TAXES - The Company and its Subsidiaries file a consolidated
federal income tax return on an accrual basis. Deferred tax assets and
liabilities are recognized for the future income tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. The effect on deferred tax
assets and liabilities as a result of a change in tax rates is recognized in
income in the period that includes the enactment date.
k) FIDUCIARY INCOME - Fiduciary income is recorded on the accrual basis.
l) EARNINGS PER SHARE - Basic earnings per share is computed based upon the
weighted average number of shares outstanding. Diluted earnings per share
includes shares issuable upon exercise of stock options and with the assumption
that the 9% convertible subordinated capital notes (note 10) had been converted
into common stock as of the beginning of each respective period presented with
related adjustments to interest and income tax expense. The following is a
reconciliation of the numerators and denominators of basic and diluted earnings
per share:
<TABLE>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income for basic earnings per share $22,458 $19,534 $16,664
Interest expense on convertible debt, net of taxes 575 652 656
- ----------------------------------------------------------------------------------------------
Net income for diluted earnings per share $23,033 $20,186 $17,320
- ------------------------------------------------------------==================================
Weighted average shares for basic earnings per share 2,045,623 2,147,118 2,193,268
Shares issuable upon exercise of stock options 40,168 35,468 2,262
Shares issuable upon conversion of capital notes 343,152 371,644 373,967
- ----------------------------------------------------------------------------------------------
Weighted average shares for diluted earnings per share 2,428,943 2,554,230 2,569,497
- ------------------------------------------------------------==================================
</TABLE>
m) STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, federal funds
sold and securities purchased under agreements to resell. Generally, federal
funds are purchased and sold for one-day periods and securities purchased under
agreements to resell mature within 90 days. The following amounts of cash were
paid for interest and income taxes:
1999 1998 1997
- --------------------------------------------------------------------------------
Interest $69,190 $69,636 $59,974
Income taxes 13,190 3,626 4,285
Noncash investing and financing activities included the following:
1999 1998 1997
- --------------------------------------------------------------------------------
Loans transferred to other assets $ 1,941 $ 2,098 $ 3,145
Capital notes converted to common stock 10,942 105 0
Investments transferred from held-to-maturity
at amortized cost 0 0 (3,651)
Investments transferred to available-for-sale
at estimated market value 0 0 4,118
2) ACQUISITION
On September 24, 1999, INTRUST Bank, N. A. assumed liabilities totaling
$246,779, consisting primarily of banking customer deposits of $243,671, and
acquired $30,653 million in assets, including goodwill of $15,158, related to
twenty bank branch offices. Cash consideration of $216,126 was paid to INTRUST
Bank, N. A. Concurrent with this transaction, $15,160 was paid to another
institution in connection with a single branch disposition.
The above transaction has been accounted for as a purchase, and accordingly,
the acquired assets and liabilities assumed have been recorded at their fair
value at acquisition date and the operating results of the acquisition is
included in the Company's consolidated statements of income from the date of
acquisition.
<PAGE>
3) INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are as
follows at December 31:
Gross Gross
1999 Amortized Unrealized Unrealized Fair
---- Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $ 2,003 $ 0 $ 1 $ 2,002
Available-for-sale 35,830 1 206 35,625
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 40,497 1 140 40,358
Available-for-sale 226,763 0 2,701 224,062
Mortgage-backed securities
Held-to-maturity 12,170 152 33 12,289
Available-for-sale 99,379 8 1,077 98,310
Obligations of state and
political subdivisions:
Held-to-maturity 11,179 169 40 11,308
Available-for-sale 102 0 18 84
Equity Securities:
Available-for-sale 3,422 0 0 3,422
- --------------------------------------------------------------------------------
Total held-to-maturity $ 65,849 $322 $ 214 $ 65,957
- --------------------------------------==========================================
Total available-for-sale $365,496 $ 9 $4,002 $361,503
- --------------------------------------==========================================
Gross Gross
1999 Amortized Unrealized Unrealized Fair
---- Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $ 33,310 $ 218 $ 0 $ 33,528
Available-for-sale 20,063 165 0 20,228
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 116,656 784 17 117,423
Available-for-sale 187,015 815 231 187,599
Mortgage-backed securities
Held-to-maturity 12,901 453 0 13,354
Available-for-sale 517 93 0 610
Obligations of state and
political subdivisions:
Held-to-maturity 13,438 562 0 14,000
Available-for-sale 102 0 0 102
Equity Securities:
Available-for-sale 2,814 162 0 2,976
- --------------------------------------------------------------------------------
Total held-to-maturity $176,305 $2,017 $ 17 $178,305
- --------------------------------------==========================================
Total available-for-sale $210,511 $1,235 $231 $211,515
- --------------------------------------==========================================
Proceeds from sales of investment securities during 1999, 1998 and 1997 were
$592, $161 and $1,463, respectively. Gross realized gains on sales of
available-for-sale securities were $540, $126 and $165 in 1999, 1998 and 1997,
respectively. No losses were realized on sales of available-for-sale securities
in 1999, 1998 or 1997.
<PAGE>
The amortized cost and estimated fair value of investment securities at
December 31, 1999 by contractual maturity, are shown as follows. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
Due in one year or less:
Held-to-maturity $ 36,724 $ 36,710
Available-for-sale 95,196 94,741
Due after one year through five years:
Held-to-maturity 14,819 14,753
Available-for-sale 167,397 164,946
Due after five years through ten years:
Held-to-maturity 1,505 1,536
Available-for-sale 0 0
Due after ten years:
Held-to-maturity 631 669
Available-for-sale 102 84
Mortgage-backed securities:
Held-to-maturity 12,170 12,289
Available-for-sale 99,379 98,310
Equity securities 3,422 3,422
- --------------------------------------------------------------------------------
Total held-to-maturity $ 65,849 $ 65,957
- ---------------------------------------------------------=======================
Total available-for-sale $365,496 $361,503
- ---------------------------------------------------------=======================
Investment securities, which are under the Company's control, with a book
value of $388,719 and $326,120 at December 31, 1999 and 1998, respectively, were
pledged as collateral for public and trust deposits and for other purposes as
required by law.
4) LOANS HELD-FOR-SALE
Loans held-for-sale at December 31, 1999 and 1998 consisted of $32,444 and
$34,834, respectively, of mortgage loans accounted for at cost, which
approximated market value.
During 1997, the Company sold a portion of its credit card portfolio to a
third party. These loans, which aggregated $118,728, had been written down to
their estimated market value of $89,158 in 1996, and then were written down an
additional $4,645 prior to their ultimate disposition in 1997.
5) LOANS
The composition of the loan portfolio at December 31, is as follows:
1999 1998
- --------------------------------------------------------------------------------
Commercial, financial and agricultural $ 775,027 $ 707,326
Real estate-construction 63,112 38,137
Real estate-mortgage 326,174 250,282
Installment, excluding credit card 330,732 299,884
Credit card 127,159 119,149
- --------------------------------------------------------------------------------
Subtotal 1,622,204 1,414,778
Allowance for loan losses (26,010) (21,703)
- --------------------------------------------------------------------------------
Net Loans $1,596,194 $1,393,075
- -----------------------------------------------------===========================
Certain directors and executive officers of the Company or related parties of
the directors had loans from the Subsidiary Banks aggregating $42,585 and
$31,949 at December 31, 1999 and 1998, respectively. Such loans were made in the
ordinary course of business and on substantially the same terms as those
prevailing at the time for comparable loans to other borrowers.
Transactions involving such loans were as follows:
- --------------------------------------------------------------------------------
Loans at December 31, 1998 $ 31,949
Additions 53,363
Repayments (42,727)
- --------------------------------------------------------------------------------
Loans at December 31, 1999 $ 42,585
- ----------------------------------------------------------------------==========
The following table discloses information about the recorded investment in
loans that the Company has classified as impaired:
(A) (B) (C) (D)
Amount in (A) for Amount in (A) for
Total Which There Is a Allowance Which There Is No
Year Impaired Related Allowance Associated With Related Allowance
End Loans for Credit Losses Amounts in (B) for Credit Losses
- ----- --------- ----------------- --------------- -----------------
1999 $1,057 $ 14 $ 1 $1,043
1998 $2,054 $ 262 $130 $1,792
The average recorded investment in impaired loans for the years ended
December 31, 1999 and 1998, was $2,076 and $2,655, respectively. Interest
payments received on impaired loans are recorded as interest income unless
collection of the remaining recorded investment is doubtful, at which time
payments received are recorded as reductions of principal. The was no interest
income recognized on impaired loans for the years ended December 31, 1999 and
1998.
6) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Balance at beginning of year $21,703 $17,932 $15,536
Provision charged to expense 10,940 11,090 8,240
Allowance related to assets acquired 310 0 0
Loans charged-off (9,183) (9,180) (7,783)
Recoveries 2,240 1,861 1,939
- --------------------------------------------------------------------------------
Balance at end of year $26,010 $21,703 $17,932
- ----------------------------------------------==================================
7) LAND, BUILDINGS AND EQUIPMENT
A summary of land, buildings and equipment is as follows:
December 31,
1999 1998
- --------------------------------------------------------------------------------
Land $ 6,019 $ 5,043
Buildings and improvements 40,464 32,544
Furniture, fixtures and equipment 32,939 30,099
- --------------------------------------------------------------------------------
79,422 67,686
Less accumulated depreciation (40,766) (38,177)
- --------------------------------------------------------------------------------
Total $ 38,656 $ 29,509
- ------------------------------------------------------------====================
Depreciation expense for the years 1999, 1998 and 1997 was approximately
$4,873, $4,161 and $4,099, respectively.
8) TIME DEPOSITS
Time certificates of deposit and other time deposits of $100 or more included
in total deposit liabilities at December 31, 1999 and 1998 were $188,392 and
$134,863, respectively. Interest expense on this classification of time deposits
for the years ended December 31, 1999, 1998 and 1997 totaled $9,831, $7,897 and
$7,569, respectively.
At December 31, 1999, the scheduled maturities of time deposits are as
follows:
2000 $433,276
2001 142,378
2002 55,334
2003 19,455
2004 and thereafter 55,680
- --------------------------------------------------------------------------------
Total $706,123
- -----------------------------------------------------------------------=========
9) SHORT-TERM BORROWINGS
All short-term borrowings generally mature in less than 30 days. The maximum
amount of these borrowings at any month-end for the years ended December 31,
1999, 1998 and 1997, was $297,459, $244,215 and $191,185, respectively. For the
years ended December 31, 1999, 1998 and 1997, the weighted average interest rate
on these borrowings was 4.4%, 4.8% and 5.0%, respectively, on average balances
outstanding of $260,036, $230,757 and $164,858, respectively.
10) LONG-TERM DEBT AND CAPITAL SECURITIES
NOTES PAYABLE
Notes payable at December 31, 1999 and 1998 consist of a term loan from
another financial institution. The term loan carries a floating rate of interest
and is repayable in annual principal installments of $2,500, with the final
payment due in 2003. The floating interest rate reprices based on a Eurodollar
interest period selected by the Company. The rate on the indebtedness is
computed based on a premium to the lender's Eurodollar Base Rate. The
indebtedness is secured by the outstanding common stock of INTRUST Bank N.A. At
December 31, 1999, the interest rate on the term loan was 7.70%.
The Company has a $10,000 line of credit agreement, subject to annual
renewal, with the financial institution that has issued the term loan. At
December 31, 1999 and 1998, there was no outstanding principal balance under
this credit facility. The interest rate on the line of credit is calculated in
the same manner as the term loan.
In accordance with the term loan and line of credit agreements, certain
covenants exist that require the Company to meet specifications regarding levels
of capitalization, nonperforming assets, total indebtedness and net worth, among
others. At December 31, 1999, the Company was in compliance with these
covenants.
CONVERTIBLE CAPITAL NOTES
The convertible subordinated capital notes (the "notes"), bearing interest at
9%, matured on December 22, 1999. The notes were convertible, at the note
holder's option, into the Company's common stock at a conversion price of $30.00
per share. At maturity, to the extent that the notes had not been previously
retired through redemption or conversion, the principal amount of the notes were
repaid either in cash, at the note holder's election, or by exchange for the
Company's common stock based upon the market value (as defined) of the Company's
common stock at the maturity date of the notes.
In 1999, notes, with a face value of $136 were redeemed for cash, and notes,
with a face value of $10,942, were converted into 365,077 shares of the
Company's common stock. In 1998, notes, with a face value of $36 were redeemed
for cash, and notes, with a face value of $105, were converted into 3,502 shares
of the Company's common stock.
11) GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE COMPANY'S SUBORDINATED
DEBENTURES
In January 1998, INTRUST Capital Trust ("Trust"), a special purpose
subsidiary of the Company, issued $57,500 in cumulative trust preferred
securities. These preferred securities, which qualify as capital for regulatory
reporting purposes, have a dividend 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 Trust, and the only assets of
Trust consist of the 8.24% subordinated debentures due January 31, 2028 issued
by the Company to Trust. The Company has issued Back-up Obligations to Trust,
which, when taken in the aggregate, constitute the full and unconditional
guaranty by the Company of all of the Trust's obligations under the preferred
securities.
The subordinated debentures may be called by the Company at any time after
January 30, 2003, provided the Company has received prior approval by the
Federal Reserve. Also, the Company may call the subordinated debentures, subject
to regulatory approval, in the event changes are made to existing income tax law
or regulations that would affect the income tax treatment of the preferred
securities or subordinated debentures, or if the Company is advised that there
is more than an insubstantial risk of impairment of the Company's ability to
treat the preferred securities as capital for regulatory reporting purposes. In
the event the Company elects to redeem the subordinated debentures prior to
their stated maturity, a mandatory redemption of the preferred securities will
occur. As long as the Company is not in default in the payment of interest on
the subordinated debentures and Trust is not in arrears on any payments due on
the preferred securities, the Company may elect to extend the maturity of the
subordinated debentures to a date not later than January 31, 2037.
Interest on the subordinated debentures and distributions on the preferred
securities are payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year.
<PAGE>
12) EMPLOYEE BENEFIT PLANS
EMPLOYEE RETIREMENT PLAN
The Company's employee retirement plan covers substantially all full-time
employees who meet eligibility requirements as to age and tenure. The plan
provides retirement benefits that are a function of both the years of service
and the highest level of compensation during any consecutive five-year period
during the ten-year period preceding retirement. The Company's funding policy is
to fund the amount necessary to meet the minimum funding requirements set forth
by the Employee Retirement Income Security Act of 1974, plus such additional
amounts, if any, as the Company may determine to be appropriate from time to
time. Plan assets are invested primarily in U.S. Government and Federal agency
securities, corporate obligations, mutual funds and listed stocks. Pension
expense for 1999, 1998 and 1997 was $567, $943 and $321, respectively.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements.
December 31,
1999 1998
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 7,472 7,649
Non-vested 224 178
- --------------------------------------------------------------------------------
Total $ 7,696 7,827
- ------------------------------------------------------------====================
Change in projected benefit obligation
Projected benefit obligation at beginning of year $10,396 $ 8,821
Service cost 837 781
Interest cost 693 596
Plan amendments 0 372
Actuarial gain 509 506
Benefits paid (1,601) (1,207)
Special termination benefits 0 527
- --------------------------------------------------------------------------------
Projected benefit obligation at end of year 10,834 10,396
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 10,623 10,288
Actual return on plan assets 1,138 938
Employer contribution 566 604
Benefits paid (1,601) (1,207)
- --------------------------------------------------------------------------------
Fair value of plan assets at end of year 10,726 10,623
- --------------------------------------------------------------------------------
Funded status (108) 227
Unrecognized net transition asset being amortized over
15 years (190) (285)
Unrecognized net (gain) loss due from assumptions made 586 348
Unrecognized prior service cost (6) (7)
- --------------------------------------------------------------------------------
Prepaid pension cost $ 282 $ 283
- ------------------------------------------------------------====================
Pension expense is comprised of the following:
1999 1998 1997
- --------------------------------------------------------------------------------
Service cost-benefits earned during the year $ 837 $ 781 $ 647
Interest cost on projected benefit obligation 693 596 514
Return on plan assets (867) (865) (698)
Amortization of transition asset (95) (95) (95)
Prior service cost recognized (1) (1) (47)
Net loss from settlement 0 527 0
- --------------------------------------------------------------------------------
Total $ 567 $ 943 $ 321
- ------------------------------------------------------==========================
The weighted average discount rate used was 7.00% for each of the past three
years. The expected long-term rate of return on plan assets and increase in
compensation levels used in determining the projected benefit obligation were
8.25% and 4.00%, respectively, for each of the past three years.
During 1998, the Company recognized $527 in pension expense arising from an
early retirement program that was offered to employees that met certain
eligibility requirements as to age. No such program was offered in 1999 or 1997.
DEFERRED COMPENSATION
The Company has entered into deferred compensation agreements with certain
officers and directors. Under the provisions of these agreements, the officers
and directors will receive monthly payments for specified periods. The
liabilities under these agreements are being accrued over the officers'
remaining periods of employment or the directors' assumed retirement ages so
that, on the date of their retirement, the then-present value of the payments
will have been accrued. The liabilities are being accrued at interest rates that
exceed market rates at the times the plans were adopted with the above market
spread varying between 3% and 9%, depending on individual agreements. At
December 31, 1999 and 1998, $3,942 and $4,091 had been accrued for the liability
under these agreements and is included in accounts payable and accrued
liabilities in the accompanying consolidated statements of financial condition.
Expense recognized in 1999, 1998 and 1997 was $664, $726 and $656, respectively,
and is included in salaries and employee benefits in the accompanying
consolidated statements of income.
DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan in which all employees may elect
to participate. The Company matches employee contributions up to 6% of salary.
The matching percentage varies based on employee tenure with the Company. The
Company also maintains a non-qualified plan that contains contributions made by
employees in prior years. The Company's contributions to these plans in 1999,
1998 and 1997 were $983, $798 and $759, respectively, and are included in
salaries and employee benefits in the accompanying consolidated statements of
income.
STOCK INCENTIVE PLAN
The Board of Directors of the Company on May 9, 1995, adopted, with
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price of any options granted under the Plan cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. Options under the plan may vest no more rapidly than 20% per
year from the date of grant. The following table summarizes the Company's stock
option activity and related information for the three years ended December 31,
1999:
Weighted
Average
Number Exercise Price
---------- --------------
Options outstanding as of December 31, 1996 55,000 $60.86
1997:
Granted 30,000 $86.00
---------
Options outstanding as of December 31, 1997 85,000 $69.74
1998:
Granted 35,500 $130.00
Exercised $58.00
(750)
---------
Options outstanding as of December 31, 1998 119,750 $87.67
1999:
Granted 46,725 $133.00
Exercised (29,429) $64.78
---------
Options outstanding as of December 31, 1999 137,046 $100.40
=========
Outstanding options exercisable as of:
December 31, 1997 17,500 $59.80
December 31, 1998 33,750 $64.84
December 31, 1999 26,409 $80.62
Had compensation expense for stock options granted under the Plan been
determined based upon the fair value at grant date for awards under the Plan,
net income and diluted earnings per share would have been reduced by
approximately $680,000 or $.28 per share in 1999, $390,000 or $.15 per share in
1998 and $260,000 or $.10 per share in 1997. The estimated fair value of options
granted was $33.30, $22.92 and $17.80 in 1999, 1998 and 1997, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. An expected dividend rate of 2.25% and
expected volatility of 10.4% were used in the fair value computation for each of
the years in the three-year period. Risk-free interest rate assumptions of
6.52%, 4.59% and 5.4% were used in 1999, 1998 and 1997, respectively.
<PAGE>
13) INCOME TAXES
The provision (benefit) for income taxes from operations includes the
following components:
1999 1998 1997
- --------------------------------------------------------------------------------
Current:
Federal $13,876 $12,379 $(4,717)
State 1,945 83 424
- --------------------------------------------------------------------------------
15,821 12,462 (4,293)
- --------------------------------------------------------------------------------
Deferred:
Federal (1,373) (2,203) 13,276
State (110) 1,931 277
- --------------------------------------------------------------------------------
(1,483) (272) 13,553
- --------------------------------------------------------------------------------
Total $14,338 $12,190 $ 9,260
- -------------------------------------------------===============================
The provision (benefit) for income taxes noted above produced effective
income tax rates of 39.0%, 38.4% and 35.7% for the years ended December 31,
1999, 1998 and 1997, respectively. The reconciliations of these effective income
tax rates to the federal statutory rates are shown below:
1999 1998 1997
- --------------------------------------------------------------------------------
Total income tax as reported 39.0% 38.4% 35.7%
Tax exempt income 0.7 1.3 2.0
Amortization of excess purchase price over
net assets acquired (1.5) (1.8) (2.1)
State income tax, net of federal income
tax benefit (3.2) (4.1) (1.7)
Other 0.0 1.2 1.1
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
- ---------------------------------------------------=============================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1999 and
1998 are presented as follows:
1999 1998
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $10,059 $ 8,218
Deposits 2,053 2,036
Unrealized loss on available-for-sale securities 1,597 0
Deferred compensation 1,528 1,549
Net operating loss carryforwards 301 1,194
Buildings and equipment 421 328
Investment securities 113 181
Other real estate owned 176 172
Other 392 341
- --------------------------------------------------------------------------------
Total gross deferred tax assets 16,640 14,019
Less valuation allowances 300 773
- --------------------------------------------------------------------------------
Deferred tax assets, net of valuation allowances 16,340 13,246
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities 0 (402)
Pension (329) (324)
Prepaid loan fees (230) (265)
Loans (39) (206)
Core deposit premium (8) (22)
Other (136) (26)
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities (742) (1,245)
- --------------------------------------------------------------------------------
Net deferred tax assets $15,598 $12,001
- --------------------------------------------------------------==================
Current income taxes payable of $2,682 and $590 were included in accounts
payable and accrued liabilities at December 31, 1999 and 1998 respectively. The
net deferred tax assets noted above were included in other assets.
At December 31, 1999, the Company had net operating loss deductions available
for carryforward of approximately $4,313 for state purposes that expire in
varying amounts from 2000 through 2006.
The valuation allowance at December 31, 1999 is attributable to certain net
operating loss carryforwards for state tax purposes.
14) COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1999, the Subsidiary Banks were required to have $27,965 held
as reserves with the Federal Reserve Bank.
At December 31, 1999, the Company was committed to make future payments under
several long-term lease and data processing agreements. The minimum payments
required by these agreements are summarized as follows:
Minimum
Payments
- --------------------------------------------------------------------------------
2000 $ 3,368
2001 3,194
2002 3,016
2003 2,127
2004 2,099
Remainder 10,410
- --------------------------------------------------------------------------------
Total $24,214
- -----------------------------------------------------------------------=========
Lease rentals included in net occupancy and equipment expense for the years
ended December 31, 1999, 1998 and 1997 amounted to $2,081, $1,462 and $1,057,
respectively.
Payments on long-term data processing agreements included in data processing
expense for the years ended December 31, 1999, 1998 and 1997 totaled
approximately $1,686, $1,621 and $1,559, respectively.
One of the Company's data processing agreements has a term of eight years
ending in the year 2003. The Company has the option to terminate this data
processing agreement by paying a cancellation fee that is based on the number of
months remaining under the original contract term.
A subsidiary of the Company has been named as a defendant in a lawsuit claiming
damages of approximately $4,000. The Company believes it has meritorious and
substantial defenses to the claims contained in this lawsuit. However, the
uncertainties of litigation make it difficult to predict the outcome of this
lawsuit. In addition, the Company and its Subsidiaries are involved in certain
claims and suits arising in the ordinary course of business. In the opinion of
management, based in part on the advice of legal counsel, potential liabilities
arising from these other claims, if any, would not have a significant effect on
the Company's consolidated financial position or future results of operations.
15) STOCKHOLDERS' EQUITY
DIVIDEND RESTRICTION
The Company's ability to pay dividends on its common stock and interest on
its indebtedness is dependent upon funds provided by dividends from the
Subsidiaries and such other funding sources as may be available to the Company.
In addition, the Company's debt agreements provide for minimum capital levels
that must be maintained as long as the indebtedness remains outstanding. Total
capital of the Company exceeded the most restrictive of these requirements by
$7,086 at December 31, 1999. The payment of dividends by the Subsidiaries is
restricted only by regulatory authority. At December 31, 1999, approximately
$40,071 was available from the Subsidiaries' retained earnings for distribution
as dividends to the Company without regulatory approval.
REGULATORY CAPITAL
The Company and its Subsidiary Banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material affect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Subsidiary Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require minimum amounts and ratios (set forth in the following table) of total
and Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital (as defined) to average assets (as defined). As
of December 31, 1999, the consolidated ratios of the Company and for each of the
Subsidiary Banks meet all capital adequacy requirements to which they are
subject.
As of the most recent notification, the Subsidiary Banks were categorized as
"well capitalized" under the regulatory framework for prompt corrective action.
To be categorized as "well capitalized" the Subsidiary Banks must maintain
minimum ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Subsidiary
Banks' categories.
Actual capital amounts and ratios are also presented in the table.
<PAGE>
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
-------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------------ ------ ----------- ------ ----------- ------
As of December 31, 1999:
Total Capital (to Risk Weighted Assets):
<S> <C> <C> <C> <C> <C> <C>
Consolidated $212,498 10.6% $160,849 8.0% N/A
INTRUST Bank, N.A. $193,713 10.1% $153,850 8.0% $192,312 10.0%
Will Rogers Bank $ 12,970 15.8% $ 6,577 8.0% $ 8,221 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $181,948 9.1% $ 80,424 4.0% N/A
INTRUST Bank, N.A. $169,658 8.8% $ 76,925 4.0% $115,387 6.0%
Will Rogers Bank $ 12,264 14.9% $ 3,288 4.0% $ 4,933 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $181,948 7.9% $ 93,148 4.0% N/A
INTRUST Bank, N.A. $169,658 7.8% $ 87,354 4.0% $109,192 5.0%
Will Rogers Bank $ 12,264 9.6% $ 5,139 4.0% $ 6,424 5.0%
As of December 31, 1998:
Total Capital (to Risk Weighted Assets):
Consolidated $194,282 11.4% $136,689 8.0% N/A
INTRUST Bank, N.A. $175,217 10.8% $129,845 8.0% $162,306 10.0%
Will Rogers Bank $ 12,755 16.3% $ 6,277 8.0% $ 7,846 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $158,423 9.3% $ 68,344 4.0% N/A
INTRUST Bank, N.A. $154,921 9.5% $ 64,922 4.0% $ 97,384 6.0%
Will Rogers Bank $ 11,965 15.3% $ 3,138 4.0% $ 4,707 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $158,423 7.7% $ 83,332 4.0% N/A
INTRUST Bank, N.A. $154,921 7.9% $ 78,444 4.0% $ 98,055 5.0%
Will Rogers Bank $ 11,965 9.7% $ 5,008 4.0% $ 6,260 5.0%
</TABLE>
16) BUSINESS AND CREDIT CONCENTRATIONS
The Company provides a wide range of banking services to individual and
corporate customers through its Kansas and Oklahoma subsidiaries. The Company
makes a variety of loans including commercial, agricultural, real estate
construction, real estate mortgage, installment and credit card loans. The
majority of the loans are made to borrowers located in Kansas, although some
loans are made to out-of-state borrowers. Credit risk is therefore dependent
upon economic conditions in Kansas; however, loans granted within the Company's
trade area have been granted to a wide variety of borrowers and management does
not believe that any significant concentrations of credit exist with respect to
individual borrowers or groups of borrowers which are engaged in similar
activities that would be similarly affected by changes in economic or other
conditions. Approximately 28% of the Company's total loan portfolio is comprised
of unsecured credit card loans and installment loans (a large part of which are
collateralized by automobiles). Consequently, the Company's credit risk with
respect to these loans is dependent upon the ability of consumers in general to
repay their indebtedness. The Company considers the composition of the loan
portfolio in establishing the allowance for loan losses as described in note 1.
17) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the statements of financial
condition. The following summarizes those financial instruments, excluding
credit card lines of $867,024, with contract amounts representing credit risk:
Commitments to extend credit $524,706
Commercial and standby letters of credit $ 38,938
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon extension
of credit is based on management's credit evaluation of the counter-party.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Company has, in the ordinary course of business, securitized and sold
both credit card receivables and consumer automobile loans. The most recent
transaction was in November 1997, when the Company sold approximately $45,000 of
automobile loans. Neither the credit card receivables or the consumer automobile
loans sold, or the securities outstanding as a result of these transactions are
defined as financial instruments of the Company, however the Company continues
to service the related credit card accounts and automobile loans. During 1997,
$50,000 of securities related to a previous credit card receivable
securitization was repaid.
As a result of the securitization transactions, the Company no longer
recognizes net interest income and certain fee revenue, nor does it provide for
loan losses on the securitized portfolio. Instead, the Company receives
servicing fee income. During 1999, 1998 and 1997, the Company recognized $3,226,
$3,465 and $4,813, respectively, in servicing fee income, which is included in
credit card fees and other service charges, fees and income in the accompanying
consolidated statements of income.
In connection with these securitization transactions, the Company was
required to establish cash reserve accounts for the benefit of the purchasers.
These cash reserve accounts represent retained interests in the loans sold as
described in Note 1. The retained interests, consisting primarily of the cash
reserve accounts, totaled $4,000 and $4,121 at December 31, 1999 and 1998,
respectively, and are included in other assets in the accompanying consolidated
statements of financial condition.
18) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
About Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values for its financial instruments. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments:
CASH AND CASH EQUIVALENTS
The carrying amounts for cash and cash equivalents are considered reasonable
estimates of fair value.
INVESTMENT SECURITIES
The fair values of investment securities are based on quoted market price or
dealer quotations, if available. The fair value of certain state and municipal
obligations is not readily available through market sources. Fair value
estimates for these instruments are based on quoted market prices for similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued.
LOANS HELD-FOR-SALE
The carrying amounts for loans held-for-sale are considered reasonable
estimates of fair value.
LOANS
Fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type, and then further broken down into
fixed and adjustable rate components, and by performing and non-performing
categories.
The fair value of loans is estimated by discounting scheduled cash flows
through the estimated maturity using the current rates at which similar loans
could be made to borrowers with similar credit ratings and for similar
maturities.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE
The carrying amounts for accrued interest receivable and accrued interest
payable are considered reasonable estimates of fair value.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings and interest-bearing demand
deposits is the amount payable on demand at December 31, 1999 and 1998. The fair
value of time deposits is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates offered for deposits of
similar remaining maturities as of each valuation date.
SHORT-TERM BORROWINGS
The carrying amount approximates fair value because of the short maturity of
these instruments.
NOTES PAYABLE
Interest rates currently available to the Company for debt instruments with
similar terms and remaining maturities are used to estimate the fair value of
notes payable as of each valuation date.
CONVERTIBLE CAPITAL NOTES
The fair value of the convertible capital notes is based on market price
quotations obtained from securities dealers.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE COMPANY'S SUBORDINATED
DEBENTURES
The fair value of the preferred beneficial interests in the subordinated
debentures is based on market price quotations obtained from the American Stock
Exchange listings.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreement and the present creditworthiness of the counterparties. The fair value
of letters of credit is based on fees currently charged to enter into similar
agreements. The fees associated with the commitments and letters of credit
currently outstanding reflect a reasonable estimate of fair value. For further
discussion concerning financial instruments with off-balance-sheet risk, refer
to note 17.
The estimated fair values of the Company's financial instruments are as
follows:
December 31, 1999 December 31, 1998
--------------------- ----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
- --------------------------------------------------------------------------------
Financial assets:
Cash and due from banks $ 114,989 $ 114,989 $ 132,056 $ 132,056
Federal funds sold and
securities purchased
under agreements to resell 46,240 46,240 68,550 68,550
Investment securities 427,352 427,460 387,820 389,820
Loans held-for-sale 32,444 32,444 34,834 34,834
Loans, net 1,596,194 1,609,885 1,393,075 1,408,357
Accrued interest receivable 16,252 16,252 15,223 15,223
- --------------------------------------------------------------------------------
Financial liabilities:
Deposits:
Demand $ 283,554 $ 283,554 $ 402,178 $ 402,178
Savings and
interest-bearing demand 828,799 828,799 690,159 690,159
Time 706,123 706,886 555,017 562,578
Short-term borrowings 286,149 286,149 244,215 244,215
Accrued interest payable 6,716 6,716 4,367 4,367
Notes payable 10,000 10,000 12,500 12,500
Convertible capital notes 0 0 11,078 46,897
Guaranteed preferred beneficial
interests in the Company's
subordinated debentures 57,500 56,925 57,500 61,238
LIMITATIONS
No ready market exists for a significant portion of the Company's financial
instruments. It is necessary to estimate the fair value of these financial
instruments based on a number of subjective factors, including expected future
loss experience, risk characteristics and economic performance. Because of the
significant amount of judgment involved in the estimation of the accompanying
fair value information, the amounts disclosed cannot be determined with
precision.
The fair value of a given financial instrument may change substantially over
time as a result of, among other things, changes in scheduled or forecasted cash
flows, movement of current interest rates, and changes in management's estimates
of the related credit risk or operational costs. Consequently, significant
revisions to fair value estimates may occur during future periods. Management
believes it has taken reasonable efforts to ensure that fair value estimates
presented are accurate. However, adjustments to fair value estimates may occur
in the future and actual amounts realized from financial instruments may differ
from the amounts presented herein.
The fair values presented apply only to financial instruments and, as such,
do not include such items as fixed assets, other real estate and assets owned,
other assets and liabilities as well as other intangibles which have resulted
over the course of business. As a result, the aggregation of the fair value
estimates presented herein does not represent, and should not be construed to
represent, the underlying value of the Company.
19) SEGMENT REPORTING
The Company's operations are divided into operating segments using individual
products or services or groups of related products and services. Each segment
has a manager that reports to a person that makes decisions about performance
assessment and resource allocation for all segments. The Company has four
operating segments: consumer banking, commercial banking, wealth management, and
community banking. The consumer banking segment provides personal banking
services to customers of the Company. Commercial banking provides banking
services to the business customers of the Company. Wealth management offers
fiduciary, trust and investment services to its customers. The community banking
segment provides comprehensive banking services to customers through bank
offices located in Oklahoma. Each operating segment uses the same accounting
principles as reported in Note 1, Summary of Significant Accounting Policies,
and the Company evaluates the performance of each segment using before-tax
income or loss from continuing operations. Transactions between segments are
accounted for as if each segment is an external customer.
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.
<PAGE>
Listed below is a presentation of profit or loss and asset information for
all segments. The only significant noncash items are the loan loss provision,
depreciation, and amortization. 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.
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1999 Banking Banking Management Banking Total
- -------------------------------------------- ---------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 65,216 $ 28,769 $ 40 $ 4,866 $ 98,891
Net interest income-intercompany (8,843) 0 0 802 (8,041)
Noninterest income-external 23,686 6,362 15,893 1,473 47,414
Noninterest income-intercompany 164 0 417 0 581
Provision for loan losses 5,060 5,790 0 90 10,940
Depreciation and amortization 4,584 611 926 716 6,837
Segment profit/loss 19,358 19,463 3,260 2,321 44,402
Assets 574,988 1,061,440 4,146 128,594 1,769,168
Asset expenditures 7,770 516 959 359 9,604
</TABLE>
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1998 Banking Banking Management Banking Total
- ------------------------------- ------------ ---------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 56,116 $ 25,858 $ 29 $ 4,603 $ 86,606
Net interest income-intercompany (5,606) 0 0 1,046 (4,560)
Noninterest income-external 22,990 5,656 12,594 1,445 42,685
Noninterest income-intercompany 127 25 346 15 513
Provision for loan losses 6,861 4,189 0 40 11,090
Depreciation and amortization 3,803 547 632 757 5,739
Segment profit/loss 15,504 17,985 484 2,440 36,413
Assets 492,470 939,298 4,853 124,821 1,561,442
Asset expenditures 5,554 120 661 228 6,563
</TABLE>
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1997 Banking Banking Management Banking Total
- ------------------------------- ------------ ---------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 46,487 $ 23,780 $ 3 $ 5,288 $ 75,558
Net interest income-intercompany (2,674) 0 0 206 (2,468)
Noninterest income-external 25,516 3,608 9,544 1,716 40,384
Noninterest income-intercompany 217 43 199 0 459
Provision for loan losses 10,735 2,080 0 70 12,885
Depreciation and amortization 4,264 582 666 647 6,159
Segment profit/loss 7,977 17,270 (585) 2,499 27,161
Assets 409,516 842,405 2,269 122,057 1,376,247
Asset expenditures 4,028 129 338 231 4,726
</TABLE>
Reconciliations of segment revenue, profit or loss, assets, and other items
of significance to consolidated amounts are presented in the following tables.
Corporate level items are derived from the Company's investment portfolio, fixed
assets and other activities not considered by management to be operating
segments. Revenues are net of interest expense.
Net Revenues: 1999 1998 1997
- --------------------------------------------------------------------------------
Net revenue from segments $138,845 $125,244 $113,933
Net revenue from corporate level not
allocated to segments (15,479) (9,096) (2,506)
Net revenue from intercompany income 7,460 4,047 2,009
- --------------------------------------------------------------------------------
Consolidated net revenue $130,826 $120,195 $113,436
- -----------------------------------------------=================================
Profit: 1999 1998 1997
- --------------------------------------------------------------------------------
Profit from segments $44,402 $36,413 $27,160
Expenses at corporate level not
allocated to segments (7,606) (4,689) (1,236)
- --------------------------------------------------------------------------------
Income before tax $36,796 $31,724 $25,924
- ------------------------------------------------================================
Assets: 1999 1998 1997
- --------------------------------------------------------------------------------
Assets of segments $1,769,168 $1,561,442 $1,376,247
Corporate level assets 574,726 554,023 547,575
- --------------------------------------------------------------------------------
Consolidated assets $2,343,894 $2,115,465 $1,923,822
- ----------------------------------------------==================================
Amounts Amounts not
Reported by Reported at Consolidated
Other Items of Significance: Year Segments Segment Level Amounts
- --------------------------------------------------------------------------------
Net interest income 1999 $98,891 $(15,224) $83,667
1998 86,606 (9,048) 77,558
1997 75,558 (3,251) 72,307
Provision for loan losses and
write-down of loans held-for-sale 1999 $10,940 $ 0 $10,940
1998 11,090 0 11,090
1997 12,885 0 12,885
Depreciation and amortization 1999 $ 6,837 $ 1,070 $ 7,907
1998 5,739 1,148 6,887
1997 6,159 435 6,594
Asset expenditures 1999 $ 9,604 $ 20 $ 9,624
1998 6,563 1,855 8,418
1997 4,726 657 5,383
The Company has no operations in foreign countries; therefore, geographic
information is not presented.
20) 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, as amended, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
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>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Financial Condition
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1999 1998
- --------------------------------------------------------------------------------
Assets
Cash $ 7,425 $ 22,349
Investment securities, held-to-maturity 310 607
Equipment 54 65
Investment in subsidiaries 209,310 184,300
Current and deferred income taxes 407 0
Other 6,424 6,152
- --------------------------------------------------------------------------------
Total assets $223,930 $213,473
- ------------------------------------------------------------====================
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 749 $ 764
Accrued interest payable 20 99
Current and deferred income taxes 0 143
Notes payable 10,000 12,500
Convertible capital notes payable 0 11,078
Subordinated debentures 59,278 59,278
- --------------------------------------------------------------------------------
Total liabilities 70,047 83,862
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares authorized,
2,783,650 shares issued in 1999 and 2,418,573
issued in 1998 13,918 12,093
Capital surplus 21,673 12,464
Retained earnings 156,653 139,078
Treasury stock (35,965) (34,626)
Accumulated other comprehensive income (loss) (2,396) 602
- --------------------------------------------------------------------------------
Total stockholders' equity 153,883 129,611
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $223,930 $213,473
- ------------------------------------------------------------====================
<PAGE>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Income
Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1999 1998 1997
- --------------------------------------------------------------------------------
Dividends from subsidiaries $ 1,647 $ 1,538 $ 5,850
Interest income 752 1,930 126
Fees charged subsidiary banks 2,577 2,196 2,110
Other income 299 244 439
- --------------------------------------------------------------------------------
Total income 5,275 5,908 8,525
- --------------------------------------------------------------------------------
Operating expenses:
Interest expense 6,623 6,709 2,571
Salaries and employee benefits 2,599 2,313 2,161
Other expense 1,580 1,276 1,035
- --------------------------------------------------------------------------------
Total operating expenses 10,802 10,298 5,767
- --------------------------------------------------------------------------------
Income (loss) before income tax benefit and equity
in undistributed net income of subsidiaries (5,527) (4,390) 2,758
Income tax benefit 3,477 2,858 1,614
- --------------------------------------------------------------------------------
Income (loss) before equity in undistributed net
income of subsidiaries (2,050) (1,532) 4,372
Equity in undistributed net income of subsidiaries 24,508 21,066 12,292
- --------------------------------------------------------------------------------
Net income $22,458 $19,534 $16,664
- ----------------------------------------------------============================
Note: Parent Company Only Statements of Stockholders' Equity are the same as the
Consolidated Statements of Stockholders' Equity.
<PAGE>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
Net income $22,458 $19,534 $16,664
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income
of subsidiaries (24,508) (21,066) (12,292)
Depreciation 27 367 466
Accretion of discount on investment securities (5) (19) (30)
Loss on retirement of capital notes 325 114 0
Other assets (272) (278) (968)
Accounts payable and accrued liabilities 541 (78) 97
Income taxes (1,089) 550 (890)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by
operating activities (2,523) (876) 3,047
- --------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Capital expenditures (20) (127) (26)
Purchase of investment securities 0 (751) 0
Investment securities matured or called 302 604 165
Investment in subsidiaries (3,500) (1,779) (1,884)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (3,218) (2,053) (1,745)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Payments on notes payable (2,500) (10,500) (2,500)
Proceeds from notes payable 0 0 8,000
Retirement of capital notes (461) (150) 0
Proceeds from subordinated debt, net of
issuance costs 0 56,954 0
Dividends paid (4,883) (5,333) (4,161)
Purchase of treasury stock, net (1,339) (17,545) (2,282)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by
financing activities (9,183) 23,426 (943)
- --------------------------------------------------------------------------------
Increase (decrease) in cash (14,924) 20,497 359
Cash at beginning of year 22,349 1,852 1,493
- --------------------------------------------------------------------------------
Cash at end of year $ 7,425 $22,349 $ 1,852
- ------------------------------------------------------==========================
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
INTRUST Financial Corporation:
We have audited the accompanying consolidated statement of financial condition
of INTRUST Financial Corporation and subsidiaries as of December 31, 1999, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of INTRUST Financial
Corporation and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
Wichita, Kansas
February 11, 2000
<PAGE>
Report of Independent Public Accountants
To INTRUST Financial Corporation:
We have audited the accompanying consolidated statement of financial condition
of INTRUST Financial Corporation and subsidiaries as of December 31, 1998, and
the related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the two years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INTRUST Financial Corporation
and subsidiaries as of December 31, 1998, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 19, 1999
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
This item is not applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------- --------------------------------------------------
Set forth below are the names of the directors, nominees for director,
executive officers as designated by the Board of Directors, and nominees for
executive officer of the Company, together with certain related information. All
of the executive officers of the Company will hold office until the next annual
meeting of directors. The directors of the Company are divided into three
classes; the terms of office of the first class, second class and third class
expire at the 2002, 2000 and 2001 annual meetings of stockholders, respectively.
Directors will be elected for a full three year term to succeed those whose
terms expire. The year in which each director's term expires is indicated after
his name and age. Directors and executive officers will serve as indicated or
until their successors are duly elected and qualified, unless sooner terminated
by death, resignation, removal or otherwise. There are no arrangements or
understandings between any of the directors, executive officers or any other
persons pursuant to which any of the directors or executive officers have been
selected to their respective positions.
RONALD L. BALDWIN, 46, 2002, has been director of the Company and Vice
Chairman of IB since 1996. From 1976 until 1996, Mr. Baldwin was employed by
Fourth Financial Corporation, an $8 billion banking institution headquartered in
Wichita, Kansas. He served Fourth Financial Corporation as executive
vice-president.
RICK L. BEACH, 49, has been Executive Vice President and Chief Credit
Officer of the Company since January 1997. He was Senior Vice President of the
Company from 1995 to 1997 and Vice President from 1988 to 1995.
C. ROBERT BUFORD, 66, 2000, has been a director of the Company since 1982.
During the past five years, he has been President and owner of Zenith Drilling
Corporation, an oil and gas drilling and exploration firm, managing partner of
Grand Bluffs Development Co., a real estate development firm, and a director of
Barrett Resources Corporation, an oil and gas production and operation firm.
FRANK L. CARNEY, 61, 2001, has been a director of the Company since 1982.
Since 1979, he has been self-employed in a private investment company, Carney
Enterprises. Since January 1994, Mr. Carney has been with Houston Pizza Venture
L.L.C., as President and Manager. In June 1995, he became President and Manager
of Devlin Partners, L.L.C., a development stage company. He became President and
Manager of P.J. (Papa John's Pizza Restaurants) Wichita, L.L.C. in 1996, P.J.
Nor-Cal L.L.C. in 1997, and Chairman and Manager of P.J Hawaii L.L.C. in 1998.
RICHARD G. CHANCE, 52, 2002, has been a director of the Company since
1990. During the past five years, he has been President and Chief Executive
Officer of Chance Industries, Inc., producer of amusement rides and manufacturer
of transit coaches, trams, and replica trolleys.
CHARLES Q. CHANDLER, 73, 2001, has been Chairman of the Board and Chief
Executive Officer of the Company since 1982. He was Chairman of the Board and
Chief Executive Officer of IB from 1975 until 1996. Mr. Chandler was employed by
IB since 1950. Mr. Chandler is the father of Charles Q. Chandler IV and the
nephew of George T. Chandler.
CHARLES Q. CHANDLER IV, 46, 2000, has been a director of the Company since
1985. Since April 1990, he has been President of the Company. From January 1988
through March 1990, he was Executive Vice President of the Company. He was
Executive Vice President of IB from January 1988 until July 1993 when he was
elected Vice Chairman. In 1996, he was elected Chairman and President of IB. Mr.
Chandler is the son of Charles Q. Chandler.
GEORGE T. CHANDLER, 78, 2000, has been a director of the Company since
1982. During the past five years, Mr. Chandler has been Chairman of the Board of
First National Bank, Pratt, Kansas. Mr. Chandler is an uncle of Charles Q.
Chandler.
STEPHEN L. CLARK, 58, 2000, has been a director of the Company since April
1997 and director of IB since 1993. During the past five years, Mr. Clark has
been owner of Clark Investment Group which primarily invests in real estate
development including office buildings and self-storage units.
ROBERT L. DARMON, 75, 2000, has been a director of the Company since 1982.
He was President of the Company from 1982 until April 1990, and Vice Chairman of
the Board of IB until his retirement January 31, 1990. He had been employed by
IB since 1970. He is Chairman of the Company's Audit Committee.
CHARLES W. DIEKER, 64, 2001, has been a director of the Company since
1982. Mr. Dieker had been Executive Vice President-Marketing of Beech Aircraft
Corporation from 1985 until his retirement January 1, 1992.
MARTIN K. EBY Jr., 65, 2000, has been a director of the Company since
1982. During the past five years, Mr. Eby has been Chief Executive Officer and
Chairman of the Board of Eby Corporation, which is the parent company of Martin
K. Eby Construction Co. Inc. In 1992, Mr. Eby became a director of SBC
Communications, Inc.
RICHARD M. KERSCHEN, 58, 2001, has been a director of the Company since
April 1997 and director of IB since 1993. During the past five years, Mr.
Kerschen has been Chairman of the Board and President of The Law Company, Inc. a
commercial real estate construction company.
THOMAS D. KITCH, 56, 2001, has been a director of the Company since April
1997 and director of IB since 1993. During the past five years, Mr. Kitch has
been a practicing attorney with the law firm of Fleeson, Gooing, Coulson &
Kitch, LLC.
ERIC T. KNORR, 57, 2002, has been a director of the Company since 1990.
Mr. Knorr was Vice President of K Bar M Pizza Co., Inc for 12 years until 1999
when he was elected President. In 1999, he became manager of HQS & C Management
Co., L.L.C. a restaurant management company. He was Chairman of the Board of
Dulaney, Johnston & Priest, general insurance (property and casualty)
independent agents, for ten years until January 1996 when he became Chairman
Emeritus.
CHARLES G. KOCH, 64, 2001, has been a director of the Company since 1982.
For the past five years, Mr. Koch has been Chairman of the Board and Chief
Executive Officer of Koch Industries Inc., an integrated energy company.
J.V. LENTELL, 61, 2002, has been a director of the Company since April
1994. Mr. Lentell has been Vice Chairman of IB since July 1993. In 1995, he
became a director of Renters Choice, Inc.
WILLIAM B. MOORE, 47, 2002, has been a director of the Company since April
1997 and an advisory director of IB from 1993 to 1997. Mr. Moore was Chairman of
the Board of Kansas Gas and Electric Company 1995 to 1998. From 1992 to 1995, he
was Vice President-Finance of Western Resources, the parent company of Kansas
Gas and Electric Company. In 1998, he became Executive Vice President, Chief
Financial Officer, Treasurer of Western Resources.
PAUL A. SEYMOUR Jr., 76, 2002, has been a director of the Company since
1982. Mr. Seymour was President of Arrowhead Petroleum Inc. until it ceased
operations in 1990. Since that time he has been active as a private investor.
DONALD C. SLAWSON, 66, 2002, has been a director of the Company since
1982. During the past five years, Mr. Slawson has been the Chairman of the Board
and President of Slawson Companies, Inc., a group of companies involved in the
acquisition of oil and gas properties, exploration and production of oil and
gas, purchasing and reselling of crude oil and natural gas, and real estate
development.
JOHN T. STEWART III, 64, 2000, has been a director of the Company since
1982. During the past five years, Mr. Stewart's principal occupation has been
Chairman of the Board and Director of First National Bank, Medford, Oklahoma,
Caldwell State Bank, Caldwell, Kansas and First National Bank, Wellington,
Kansas.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
- ------- ----------------------
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and each of the Company's other four most highly compensated executive
officers during each of the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
---------------------------------
(a) (b) (c) (d) (e) (f) (g)
Other Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Options (#) ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 1999 $204,167 $ 75,140 $88,612 10,957 $97,252
COB & CEO of the Company 1998 $229,175 $ 85,545 $38,923 3,000 $84,383
1997 $263,333 $ 62,500 $22,360 5,000 $74,148
C.Q. Chandler IV 1999 $364,583 $177,539 $12,729 14,768 $19,857
President of the Company, 1998 $346,673 $171,080 $12,729 7,500 $19,610
Chairman, President of IB 1997 $325,000 $148,500 $12,729 10,000 $20,209
J.V. Lentell 1999 $242,167 $ 91,295 $ 0 3,000 $11,600
Director of the Company 1998 $236,673 $ 90,488 $ 0 3,000 $10,000
Vice Chairman of IB 1997 $228,333 $ 80,500 $ 0 5,000 $ 9,500
R.L. Baldwin 1999 $228,333 $ 86,411 $ 0 3,000 $ 4,500
Director of the Company 1998 $218,341 $ 83,644 $ 0 3,000 $ 2,500
Vice Chairman of IB 1997 $206,667 $ 73,500 $ 0 5,000 $ 2,188
R.L. Beach 1999 $135,417 $ 43,953 $ 0 2,000 $ 9,200
Executive Vice President of the 1998 $126,672 $ 42,354 $ 0 2,000 $ 5,244
Company and of IB 1997 $108,333 $ 33,000 $ 0 2,500 $ 3,250
</TABLE>
(1) The amounts shown represent the above-market amounts paid on
distributions from the 1983, 1984, 1986, or 1990 Executive Deferred Compensation
Plans during each of the last three fiscal years. Does not include perquisites
which certain of the executive officers received, the aggregate amount of which
did not exceed the lessor of $50,000 or 10% of any such officer's salary and
bonus.
(2) The amounts shown for "All other Compensation" include the following
for the current year:
C.Q. C.Q. J.V. R.L. R.L.
Chandler Chandler IV Lentell Baldwin Beach
-------------------------------------------------------------------------------
Above-market amounts earned on
deferred compensation plans $85,652 $ 8,257 $ 0 $ 0 $ 0
Company contributions to
401(k) plan 11,600 11,600 11,600 4,500 9,200
-------------------------------------------------------------------------------
$97,252 $19,857 $11,600 $4,500 $9,200
---------------------------------==============================================
STOCK OPTION PLAN
The Board of Directors of the Company on May 9, 1995, adopted, with
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price, of any options granted under the Plan, cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. Options under the plan may vest no more rapidly than 20% per
year from the date of grant. At December 31, 1999, there were options granted
and unexercised for a total of 137,046 shares. The options outstanding have
exercise prices between $58 and $133, with a weighted average exercise price of
$100. Of the 137,046 shares granted, 26,409 were exercisable at December 31,
1999.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates of
Individual Grants (1) Stock Price Appreciation for
Option Term
- ------------------------------------------------------------------------------ ----------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price
Name (#) Fiscal Year ($/Sh) Expiration Date 5%($) 10%($)
- ------------------------------------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 3,000 6.4% $133 12/15/09 $250,931 $ 635,903
C.Q. Chandler 7,957 17.0% $133 12/30/09 $665,553 $1,686,627
C.Q. Chandler IV 7,500 16.1% $133 12/15/09 $627,328 $1,589,758
C.Q. Chandler IV 7,268 15.6% $133 12/30/09 $607,922 $1,540,581
J.V. Lentell 3,000 6.4% $133 12/15/09 $250,931 $ 635,903
R.L. Baldwin 3,000 6.4% $133 12/15/09 $250,931 $ 635,903
R.L. Beach 2,000 4.3% $133 12/15/09 $167,287 $ 423,935
<FN>
(1) Options were granted at 100% of the market price on the date of grant. The maximum term for options or
rights cannot exceed ten years from the date they are granted. Options under the plan may vest no
more rapidly than 20% per year from the date of grant.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at December 31, 1999 at December 31, 1999(1)
Shares Acquired Value ------------------------- -------------------------
Name On Exercise (#) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
C.Q. Chandler 18,000 $1,294,000 0/20,957 $0/$450,000
C.Q. Chandler IV 10,929 $ 676,175 6,321/31,768 $366,075/$654,000
J.V. Lentell 500 $ 37,500 6,500/11,500 $410,500/$323,500
R.L. Baldwin 5,000/11,000 $298,000/$286,000
R.L. Beach 2,900/6,100 $150,200/$143,300
<FN>
(1) The values represent the difference between the exercise price of the options and the market price of the
Company's common stock on the date of exercise and at fiscal year-end, respectively.
</FN>
</TABLE>
DEFINED BENEFIT PLANS
The Company has adopted a defined benefit retirement plan for all of its
employees. Employees become participants in the plan on the next January first
or July first following the satisfaction of the following requirements: (i)
twelve consecutive months of employment in which the employee worked 1,000 or
more hours, and (ii) attainment of age 21, provided that the employee was less
than 60 years of age on the date of his employment. Although benefits under the
plan are payable in a variety of ways, the normal form of benefit payment
provides monthly payments to an employee for fifteen years. An employee's Normal
Retirement Benefit (as defined in the plan) is a monthly benefit equal to 1.0%
of such employee's Final Average Monthly Compensation (as defined in the plan),
plus 0.5% of his Final Average Monthly Compensation in excess of his Social
Security Covered Compensation (as defined in the plan), and multiplied by such
employee's number of completed years of Benefit Service (as defined in the plan)
not to exceed 35 years. Final Average Monthly Compensation is equal to the
average of an employee's monthly cash compensation (exclusive of bonuses) during
the five-year period prior to such employee's Normal or Early Retirement, or
termination of employment prior to Normal Retirement Date (as defined in the
plan).
As an addition to the defined benefit retirement plan, IB maintains a
supplemental retirement plan which is an unfunded excess benefit plan. The
purpose of this plan is to provide retirement benefits to its employees that
cannot be provided through its defined benefit retirement plan due to the
benefit limits imposed by Internal Revenue Code Section 415. Code Section 415
places a limit on the amount of annual benefits which can be provided to
individual employee participants in the defined benefit retirement plan.
The following table illustrates combined estimated annual benefits payable
upon retirement or upon written election of the participant if the participant
continues to work after his Normal Retirement Date, under the Company's defined
benefit retirement and IB's supplemental retirement plan, to persons in the
specified remuneration and years of service classifications. Because the covered
remuneration equals cash compensation, excluding bonuses, the remuneration
categories below reflect the base salary amounts in the summary compensation
table. The amounts presented are straight life annuity amounts and are not
subject to any deduction for social security or other offset amounts. The
following amounts are overstated to the extent that social security covered
compensation for an individual may exceed $15,000.
PENSION PLAN TABLE
REMUNERATION YEARS OF CREDITED SERVICE
- ------------ ------------------------------------------------------------------
15 20 25 30 35 40
$100,000 $19,868 $ 26,490 $ 33,113 $ 39,735 $ 46,358 $ 51,358
150,000 31,118 41,490 51,863 62,235 72,608 80,108
200,000 42,368 56,490 70,613 84,735 98,858 108,858
250,000 53,618 71,490 89,363 107,235 125,108 137,608
300,000 64,868 86,490 108,113 129,735 151,358 166,358
350,000 76,118 101,490 126,863 152,235 177,608 195,108
400,000 87,368 116,490 145,613 174,735 203,858 223,858
450,000 98,618 131,490 164,363 197,235 230,108 252,608
The following table sets forth the covered compensation and years of
credited service for pension plan purposes for each of the executive officers
listed in the summary compensation table as of December 31, 1999, as well as the
number of years of credited service which will have been completed by each of
said persons if they retire at the age of 65.
COVERED COMPLETED YEARS OF TOTAL YEARS OF CREDITED
COMPENSATION AS CREDITED SERVICE AS SERVICE AT NORMAL
NAME OF 12/31/99 OF 12/31/99 RETIREMENT AGE(65)
- --------------------------------------------------------------------------------
C.Q. Chandler (1) $204,167 49.75 41.50
C.Q. Chandler IV 364,583 24.00 42.50
J.V. Lentell 242,167 33.83 37.42
R.L. Baldwin 228,333 3.92 21.40
R.L. Beach 135,417 12.00 28.00
(1) C.Q. Chandler elected in writing, as permitted under the plan, to
commence receipt of his normal retirement benefit in the form of a lump sum
payment. This payment was received by C.Q. Chandler in December 1992.
COMPENSATION OF DIRECTORS
The directors of the Company receive no remuneration for serving in that
capacity. However, the directors of the Company are also directors of IB, and in
that capacity receive fees of $1,250 per quarter and $600 for each board meeting
attended. In addition, directors who are not full-time bank employees of IB
receive $150 for each Discount Committee and CRA Committee meeting attended,
$200 for each Audit Committee meeting attended and for attendance by the
chairman at the Trust Department Examining Committee, and $100 for all other
committee meetings attended.
In 1983, 1984, and 1986, the Board of Directors of IB adopted unfunded
Outside Directors' Deferred Compensation Plans which were open to directors of
IB who are not full-time bank employees and who chose to participate. Under
these plans, a participating director had the option to defer up to 100 percent
of his quarterly fee. Benefit payment amounts relate to the fee deferred and
accrual of interest at an above market rate. At retirement (age 70), benefits
will be paid on a monthly basis for 120 months, with any installments not paid
prior to a participant's death being paid to his designated beneficiary. If a
director ceases to serve as such prior to attaining age 70, the participating
director will receive reduced benefit payments related to the fees deferred and
the duration of his participation.
The Board of Directors of the Company adopted an unfunded Outside
Directors' Deferred Compensation Plan in 1990 which was open to directors of the
Company who were not full-time Company or IB employees and who chose to
participate. Under the plan, a participating director had the option to defer
100 percent of his 1990 quarterly fee paid by IB. Benefit payments and other
terms of the plan are the same as the IB plans described in the previous
paragraph.
CHANGE-IN-CONTROL ARRANGEMENTS
Under unfunded Executive Deferred Compensation Plans established in 1983,
1984, and 1986 by IB and in 1990 by the Company, in which C.Q. Chandler and C.Q.
Chandler IV are participants, if the employee's employment with the Company
terminates for any reason other than death or voluntary separation of employment
after the date on which a Change in Control (as described below) occurs, then
the Company shall pay to the employee within 60 days after such termination, a
single lump sum in lieu of any other subsequent payments under the Plan. The
lump sum payment shall be equal to the sum of all amounts that the employee
would have received if the employee had retired on the employee's 65th birthday.
Such payment shall include all unpaid Interim Distributions, if any, and all
Retirement Payments. The entire lump sum payment shall be discounted by a
one-time charge of 8%. The amount of such payments, as of December 31, 1999, for
C.Q. Chandler and C.Q. Chandler IV, would have been $1,570,940 and $3,063,255
respectively.
If the employee dies after termination of employment but before payment of
any amount under this paragraph, then such amount shall be paid to the
beneficiary or beneficiaries named as soon as practical after the employee's
death.
A Change in Control of the Company shall be deemed to have occurred if: 1)
any person, partnership, corporation, trust, or similar entity or group shall
acquire or control more than 20%, after October 16, 1991, of the voting
securities of the Company in a transaction or series of transactions; or 2) at
any time during any two-year period a majority of the Board of Directors of the
Company is not comprised of individuals who were members of such Board of
Directors at the commencement of such two-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's compensation committee are C. Robert
Buford, Richard G. Chance, and Donald C. Slawson. None of the members of the
committee have ever served as an officer or employee of the Company.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------- --------------------------------------------------------------
The following table sets forth information as of January 27, 2000 relating
to the beneficial ownership of the Company's common stock by each person known
by the Company to own beneficially more than five percent of the outstanding
shares of the Company's common stock, by each director, by each nominee for
director, by each executive officer and by all directors and executive officers
of the Company as a group. The information as to beneficial ownership of the
Company's common stock was supplied by the individuals involved. For purposes of
this table, beneficial ownership is as defined in the rules and regulations of
the Securities and Exchange Commission. Unless otherwise indicated, the
individual possesses sole voting and investment power as to the shares shown as
being beneficially owned:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
OWNED AT
NAME ADDRESS JANUARY 27, 2000(2)
- -----------------------------------------------------------------------------
Ronald L. Baldwin 9414 E. Woodspring 5,100(3)
Wichita, KS 67226
Rick L. Beach 123 E. Hamlin Rd. 3,030(4)
Andover, KS 67002
C. Robert Buford 9176 E. 13th St. 2,053
Wichita, KS 67206
Frank L. Carney 1740 Barrier Cove 1,133
Wichita, KS 67206
Richard G. Chance 676 S. 119th St. W. 180
Wichita, KS 67235
Charles Q. Chandler Box One 75,318(5)
Wichita, KS 67201
Charles Q. Chandler IV Box One 50,408(6)
Wichita, KS 67201
Anderson W. Chandler 4718 West Hills Dr. 276,933(7)
Topeka, KS 66606
David T. Chandler c/o First National Bank 266,837(7)
Pratt, KS 67124
George T. Chandler c/o First National Bank 225,206(7)
Pratt, KS 67124
Stephen L. Clark 1625 N. Gatewood 25
Wichita, KS 67206
Robert L. Darmon 8509 Huntington 5,880(8)
Wichita, KS 67206
Charles W. Dieker 632 Birkdale Dr. 2,866
Wichita, KS 67230
Martin K. Eby, Jr. P.O. Box 1679 6,799
Wichita, KS 67201
Richard M. Kerschen 144 Rutland 25
Wichita, KS 67206
Thomas D. Kitch 115 S. Rutan 25
Wichita, KS 67218
Eric T. Knorr P.O. Box 206 31,591(9)
Wichita, KS 67201
Charles G. Koch P.O. Box 2256 99,084
Wichita, KS 67201
J.V. Lentell 1700 Laurel Cove 7,125(10)
Wichita, KS 67206
William B. Moore 2764 N. North Shore Ct. 100
Wichita, KS 67205
Paul A. Seymour, Jr. 8500 Killarney Place 121,033(11)
Wichita, KS 67206
Donald C. Slawson 104 South Broadway, 4,420(12)
Suite 200
Wichita, KS 67202
John T. Stewart III P.O. Box 2 145,226
Wellington, KS 67152
Directors and Executive
Officers as a Group (22 persons) 786,620(13)
(1) The officers, executive officers, and directors who beneficially owned
more than 1.0% of the outstanding shares and other persons who
beneficially owned more than 5.0% of the outstanding shares were:
Percentage
Ownership of
Capital Stock
-------------
Charles Q. Chandler III 3.16%
Charles Q. Chandler IV 2.11%
Anderson W. Chandler* 11.61%
David T. Chandler* 11.19%
George T. Chandler* 9.44%
Eric T. Knorr 1.32%
Charles G. Koch 4.15%
Paul A. Seymour, Jr. 5.07%
John T. Stewart III 6.09%
*Includes shares directly owned and shares controlled as
co-trustees. See (8).
The Directors and Executive Officers as a group beneficially owned
32.69% of the Company's common.
(2) Includes shares issuable upon exercise of common stock options.
(3) Mr. Baldwin's beneficial ownership includes 100 shares of common stock
over which he shares voting and investment powers with his wife, Cindy
Baldwin and currently exercisable options to purchase 5,000 shares of
common stock.
(4) Includes currently exercisable options to purchase 2,900 shares of
common stock.
(5) Does not include 225,206 shares of common stock beneficially owned by
George T. Chandler (uncle), and 50,408 shares of common stock
beneficially owned by Charles Q. Chandler IV (son).
(6) Includes currently exercisable options to purchase 6,321 shares of
common stock. Does not include 95 shares of common stock owned by
Marla J. Chandler (wife).
(7) Anderson, David and George Chandlers' beneficial ownership is
comprised of the following:
(a) Shares beneficially owned by all three over which they share
voting and investment power:
(1) 128,473 shares of common stock held as co-trustees for the
Olive C. Clift Trust.
(b) Shares beneficially owned by David and George Chandler over which
they share voting and investment power:
(1) 10 shares of common stock held as co-trustees for the George
T. Chandler Trust #1.
(2) 1,353 shares of common stock held as co-trustees for the
Barbara A. Chandler Trust #1.
(3) 95,370 shares of common stock held as partners in Chandler
Enterprises, L. P.
(c) Shares beneficially owned by David Chandler who has sole voting
and investment power:
(1) 9,275 shares of common stock held in the George T. Chandler
Trust #2 for benefit of David T. Chandler.
(2) 9,278 shares of common stock held in the George T. Chandler
Trust #2 for benefit of George T. Chandler, Jr.
(3) 9,275 shares of common stock held in the George T. Chandler
Trust #2 for benefit of Paul T. Chandler.
(4) 9,278 shares of common stock held in the George T. Chandler
Trust #2 for benefit of Barbara Ann Chandler.
(d) 148,460 shares of common stock held in Anderson Chandler's name
over which he has sole voting and investment power.
(e) 4,525 shares of common stock held in David Chandler's name over
which he has sole voting and investment power.
(8) Mr. Darmon's beneficial ownership is comprised of 45 shares of common
stock held in his name over which he has sole voting and investment
power and 5,835 shares of common stock held in a trust with his wife,
Beatrice F. Darmon, with whom he shares voting and investment power.
(9) Mr. Knorr's beneficial ownership is comprised of: (a) 974 shares held
in his name; (b) 1,252 shares of common stock held by him in an
Individual Retirement Account; (c) 21,135 shares of common stock held
in a trust with his wife, Darlene R. Knorr over which he has sole
voting and investment power; (d) 1,784 shares of common stock held in
a trust over which he has sole voting and investment power, (e) 6,346
shares of common stock held jointly with his wife over which he has
shared voting and investment power; and (f) 100 shares of common stock
held by Eric T. Knorr, Custodian for Elizabeth T. Knorr under the
Uniform Gifts To Minors Act over which he has sole voting and
investment power. Does not include 200 shares of common stock, owned
by Darlene R. Knorr, in which Mr. Knorr disclaims beneficial
ownership.
(10) Includes currently exercisable options to purchase 6,500 shares of
common stock.
(11) Mr. Seymour's beneficial ownership is comprised of the following: (a)
100 shares of common stock held in his name over which he has sole
voting and investment power; (b) 28,100 shares of common stock held by
John Wofford Seymour and 4,000 shares held in the John Wofford Seymour
family trust over which he shares voting and investment power with
Dorothea W. Seymour; (c) 31,353 shares of common stock held by William
Todd Seymour over which he shares voting and investment power with
Dorothea W. Seymour; (d) 28,740 shares of common stock held by INTRUST
Bank, N.A., Trustee of Elizabeth Seymour Trust U/A dated June 1, 1980
over which he shares voting and investment power with Dorothea W.
Seymour; (e) 28,740 shares of common stock held by INTRUST Bank, N.A.,
Trustee of Katherine Seymour Trust U/A dated February 11, 1981 over
which he shares voting and investment power with Dorothea W. Seymour.
(12) Mr. Slawson's beneficial ownership is comprised of (a) 100 shares of
common stock held in his name over which he has sole voting and
investment power; (b) 3,160 shares of common stock held by Judith A.
Slawson (wife) over which he has shared voting and investment power;
and (c) 1,160 shares held by Kathryn A. Slawson (Mother) and Donald C.
Slawson, co-trustees of the Kathryn A. Slawson Living Trust over which
he has shared voting and investment power.
(13) Includes shares as to which beneficial owner shares investment and/or
voting power with others, after eliminating duplication within the
table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
CERTAIN BUSINESS RELATIONSHIPS
Neither the Company nor any of its subsidiaries entered into during 1999
or has proposed to enter into any other material transactions with officers,
directors or principal stockholders of the Company or its subsidiaries, or any
immediate family member of the foregoing persons who has the same home as such
person.
INDEBTEDNESS OF MANAGEMENT
There are outstanding loans by certain of the Subsidiary Banks to other
officer and directors of the Company or its subsidiaries or to their immediate
family members or associates, but all such loans have been made in compliance
with applicable regulations, in the ordinary course of business, and on
substantially the same terms, including interest rates and collateral, and the
same underwriting standards as those prevailing at the time for comparable
transactions with other persons. These loans did not involve more than the
normal risk of collectibility or present other unfavorable features.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT.SCHEDULES, AND REPORTS ON FORM 8-K.
- ------- ----------------------------------------------------------------
(a) The following documents are filed as a part of this Report.
1. Financial Statements - The following financial statements of INTRUST
Financial Corporation are included in PART II, Item 8 of this report:
Independent Auditors' Report
Consolidated Statements of Financial Condition as of December 31, 1999
and 1998
Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
financial statements or notes thereto.
3. Exhibits:
Number Description
------ -----------
3(a) Restated Bylaws of the Registrant, as amended through
December 1997 (incorporated herein by reference to Exhibit
3(a) to Registrant's 1997 10-K, File No. 2-78658)
3(b) Restated Articles of Incorporation of Registrant, as
amended through December 1997 (incorporated herein by
reference to Exhibit 3(b) to Registrant's 1997 10-K, File
No. 2-78658)
4(a) Amended and Restated Trust Agreement, dated as of January
21, 1998 among INTRUST Financial Corporation, State Street
Bank and Trust Company, Wilmington Trust Company, the
Administrative Trustees, and several Holders described
therein (incorporated herein by reference to Exhibit 4(b)
to Registrant's 1998 10-K, File No. 2-78658)
4(b) Indenture, dated as of January 21, 1998 between INTRUST
Financial Corporation and State Street Bank and Trust
Company (incorporated herein by reference to Exhibit 4(c)
to Registrant's 1998 10-K, File No. 2-78658)
4(c) Preferred Securities Guaranty Agreement, dated as of
January 21, 1998 between INTRUST Financial Corporation and
State Street Bank and Trust Company (incorporated herein by
reference to Exhibit 4(d) to Registrant's 1998 10-K, File
No. 2-78658)
4(d) Agreement as to Expenses and Liabilities, dated as of
January 21, 1998 between INTRUST Financial Corporation and
INTRUST Capital Trust (incorporated herein by reference to
Exhibit 4(e) to Registrant's 1998 10-K, File No. 2-78658)
10(a)* Description of INTRUST Bank, N.A. Executive Officers'
Deferred Compensation Plans (appears herein as exhibit)
10(b)* Description of INTRUST Financial Corporation Executive
Deferred Compensation Plan (appears herein as exhibit)
10(c)* Description of INTRUST Bank, N.A. Salary Continuation Plan
(appears herein as exhibit)
10(d)* Description of INTRUST Bank, N.A. Deferred Compensation
Plans for Directors (appears herein as exhibit)
10(e)* Description of INTRUST Financial Corporation Deferred
Compensation Plan for Directors (appears herein as exhibit)
10(f)* Registrant's 1995 Incentive Plan (incorporated herein by
reference to Exhibit 10(i) to Registrant's 1995 10-K, File
No. 2-78658)
10(g)* Registrant's Grant of Incentive Stock Options as provided
by the 1995 Incentive Plan (incorporated herein by
reference to Exhibit 10(j) to Registrant's 1995 10-K, File
No. 2-78658)
10(h)* Registrant's Non-Qualified Stock Option Agreement as
provided by the 1995 Incentive Plan (incorporated herein by
reference to Exhibit 10(k) to Registrant's 1995 10-K, File
No. 2-78658)
11 Computation of Earnings Per Share (appears herein as
exhibit)
21 Subsidiaries of the Registrant (appears herein as exhibit)
27 Financial Data Schedule (appears herein as exhibit)
* Exhibit relates to management compensation
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K, on October 8, 1999, reporting an
acquisition of assets.
(c) See above.
(d) See attached Exhibit 27.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTRUST Financial Corporation
Date: March 14, 2000 By /s/ C. Q. Chandler
-------------------
C. Q. Chandler
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Date: March 14, 2000 /s/ C. Q. Chandler
------------------
C. Q. Chandler
Director, Chairman of the Board
and Chief Executive Officer
Date: March 14, 2000 /s/ Jay L. Smith
----------------
Jay L. Smith
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 14, 2000 /s/ Ronald L. Baldwin
---------------------
Ronald L. Baldwin
Director
Date: March 14, 2000 /s/ C. Robert Buford
--------------------
C. Robert Buford
Director
Date: March 14, 2000 /s/ Frank L. Carney
-------------------
Frank L. Carney
Director
Date: March 14, 2000 /s/ Richard G. Chance
---------------------
Richard G. Chance
Director
Date: March 14, 2000 /s/ C. Q. Chandler IV
---------------------
C. Q. Chandler IV
Director
Date: March 14, 2000 /s/ George T. Chandler
----------------------
George T. Chandler
Director
Date: March 14, 2000 /s/ Stephen L. Clark
--------------------
Stephen L. Clark
Director
Date: March 14, 2000 /s/ R. L. Darmon
----------------
R. L. Darmon
Director
Date: March 14, 2000 /s/ Charles W. Dieker
---------------------
Charles W. Dieker
Director
Date: March 14, 2000
----------------------
Martin K. Eby Jr.
Director
Date: March 14, 2000 /s/ Richard M. Kerschen
-----------------------
Richard M. Kerschen
Director
Date: March 14, 2000 /s/ Thomas D. Kitch
-------------------
Thomas D. Kitch
Director
Date: March 14, 2000 /s/ Eric T. Knorr
-----------------
Eric T. Knorr
Director
Date: March 14, 2000 /s/ Charles G. Koch
-------------------
Charles G. Koch
Director
Date: March 14, 2000 /s/ J. V. Lentell
-----------------
J. V. Lentell
Director
Date: March 14, 2000
--------------------
William B. Moore
Director
Date: March 14, 2000 /s/ Paul A. Seymour, Jr.
------------------------
Paul A. Seymour, Jr.
Director
Date: March 14, 2000 /s/ Donald C. Slawson
---------------------
Donald C. Slawson
Director
Date: March 14, 2000 /s/ John T. Stewart III
-----------------------
John T. Stewart III
Director
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants which have not Registered Securities Pursuant to
Section 12 of the Act. Concurrently with the filing of this Form 10-K,
Registrant is furnishing the Commission, for its information, four copies of
INTRUST Financial Corporation's Annual Report to Shareholders.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION
10(a) Description of INTRUST Bank, N.A. Executive Officers' Deferred
Compensation Plans
10(b) Description of INTRUST Financial Corporation Executive Deferred
Compensation Plan
10(c) Description of INTRUST Bank, N.A. Deferred Salary Continuation
Plan
10(d) Description of INTRUST Bank, N.A. Deferred Compensation Plans for
Directors
10(e) Description of INTRUST Financial Corporation Deferred Compensation
Plan for Directors
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
EXHIBIT 10(a)
IB's EXECUTIVE OFFICERS' DEFERRED COMPENSATION PLANS
The Board of Directors of IB adopted three unfunded Executive Deferred
Compensation plans which allowed officers and key employees selected by a
Management Committee appointed by the Board of Directors to defer part of their
annual salary. The first plan began in 1983 and allowed a one time deferral of
up to 50% in that year and each of the other two plans allowed a one time
deferral of up to 20% in 1984 and 1986, respectively. These plans provide
benefit payments in amounts related to salary deferred by each participant and
accrual of interest at an above market rate. Income tax on deferred amounts is
payable upon receipt of payments under the plans. A participant must continue to
be employed by IB until age 65 or be eligible for early retirement under IB's
Employer's Retirement Income Plan in order to receive full supplemental
retirement benefits. If a participant's employment terminates prior to attaining
age 65 or the applicable early retirement age, the participant will receive
reduced benefit payments related to salary deferred and the duration of plan
participation. The addition of similar plans in the future is subject to
election by the Board of Directors of IB and voluntary participation.
EXHIBIT 10(b)
IFC's EXECUTIVE DEFERRED COMPENSATION PLAN
The Board of Directors of the Company adopted an unfunded Executive
Deferred Compensation plan which allowed officers and key employees selected by
a Management Committee appointed by the Board of Directors to defer part of
their 1990 annual salary. The plan allowed a one time deferral of up to 50
percent in 1990. The terms of the plan are the same as the IB plans described in
the previous paragraph, except the participant must be employed by the Company
or a subsidiary of the Company instead of IB only. The addition of similar plans
in the future is subject to election by the Board of Directors of the Company or
the subsidiaries and voluntary participation.
EXHIBIT 10(c)
IB's DEFERRED SALARY CONTINUATION PLAN
In December 1979, the Board of Directors of IB adopted a Salary
Continuation Plan for certain officers of IB. This plan provides that upon death
of an eligible person during his employment, his designated beneficiaries will
be entitled to receive during the first year after death an amount as specified
per individual plan agreement. Thereafter, until such person would have reached
age 65 (but not less than 9 years), an amount as specified per individual plan
agreement may be received each year. Upon retirement some varying amounts for
each participant, not specifically related to compensation, are also provided
for a 10-year period by this plan. Benefit amounts are provided by the deferral
of a portion of each participant's salary, agreed to by the participants, plus
accrued interest at a market rate.
EXHIBIT 10(d)
IB's DEFERRED COMPENSATION PLANS FOR DIRECTORS
In 1983, 1984, and 1986, the Board of Directors of IB adopted
unfunded Outside Directors' Deferred Compensation Plans which were open to
directors of IB who are not full-time bank employees and who chose to
participate. Under these plans, a participating director had the option to defer
up to 100 percent of his quarterly fee. Benefit payment amounts relate to the
fee deferred and accrual of interest at an above market rate. At retirement (age
70), benefits will be paid on a monthly basis for 120 months, with any
installments not paid prior to a participant's death being paid to his
designated beneficiary. If a director ceases to serve as such prior to attaining
age 70, the participating director will receive reduced benefit payments related
to the fees deferred and the duration of his participation.
EXHIBIT 10(e)
IFC's DEFERRED COMPENSATION PLAN FOR DIRECTORS
The Board of Directors of the Company adopted an unfunded Outside
Directors' Deferred Compensation Plan in 1990 which was open to directors of the
Company who were not full-time Company or IB employees and who chose to
participate. Under the plan, a participating director had the option to defer
100 percent of his 1990 quarterly fee paid by IB. Benefit payments and other
terms of the plan are the same as the IB plans described in Exhibit 10(k) above.
EXHIBIT 11
INTRUST FINANCIAL CORPORATION
Computation of Earnings Per Share Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands except per share data)
1999 1998 1997
- --------------------------------------------------------------------------------
Basic Earnings Per Share:
Net income $22,458 $19,534 $16,664
- -------------------------------------------------===============================
Weighted average common shares outstanding 2,045,623 2,147,118 2,193,268
Basic earnings per share $10.98 $9.10 $7.60
- -------------------------------------------------===============================
Diluted Earnings per Share:
Net Income $22,458 $19,534 $16,664
Net reduction in interest expense assuming
conversion of capital notes 575 652 656
- --------------------------------------------------------------------------------
Net income $23,033 $20,186 $17,320
- -------------------------------------------------===============================
Weighted average common shares outstanding
assuming conversion of capital notes and
exercise of stock options 2,428,943 2,554,230 2,569,497
Diluted earnings per share $9.48 $7.90 $6.74
- -------------------------------------------------===============================
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1999
PERCENTAGE
OF VOTING
JURISDICTION SECURITIES
NAME OF ORGANIZATION OWNED
- ---- --------------- ----------
INTRUST Bank, National Association National Bank 100%
Will Rogers Bank Oklahoma 100%
NestEgg Consulting Inc. Kansas 100%
INTRUST Community Development Corporation Kansas 100%
INTRUST Capital Trust Delaware 100%
<TABLE> <S> <C>
<ARTICLE> 9
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 109,548
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 46,240
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 361,503
<INVESTMENTS-CARRYING> 65,849
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<LOANS> 1,654,648
<ALLOWANCE> 26,010
<TOTAL-ASSETS> 2,338,453
<DEPOSITS> 1,818,476
<SHORT-TERM> 280,708
<LIABILITIES-OTHER> 17,886
<LONG-TERM> 67,500
0
0
<COMMON> 13,918
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<TOTAL-LIABILITIES-AND-EQUITY> 2,338,453
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<LOAN-LOSSES> 10,940
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<INCOME-PRETAX> 36,796
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