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UNITED STATES 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 0-28936
GOLD BANC CORPORATION, INC.
(Exact name of registrant as specified in its charter)
KANSAS 48-1008593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11301 Nall Avenue
Leawood, Kansas 66211
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (913) 451-8050
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Title of Each Class
Common Stock, $1.00 par value
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES / X / NO / /
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. / /
The aggregate market value of the Common Stock, par value
$1.00 per share, of the registrant held by nonaffiliates of the
registrant 34,148,939 shares as of March 24, 2000 was
$239,042,573, based on a closing sale price of $7.00.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Common Stock, $1.00 par value, outstanding as of March 24, 2000:
38,087,316 Shares
ITEM 1. BUSINESS
THE COMPANY AND SUBSIDIARIES
GOLD BANC CORPORATION, INC.
Gold Banc Corporation, Inc., a Kansas corporation (the
"Company"), is a multi-bank holding company that owns and
operates a number of commercial banks and one federal savings
bank (the "Banks"). The Banks are community banks providing a
full range of commercial and consumer banking services to small
and medium sized communities and metropolitan areas and the
surrounding market areas. The Company also owns five non-bank
financial subsidiaries ("Financial Subsidiaries"). These
Financial Subsidiaries provide securities brokerage, investment
management, trust, mortgage loan origination, insurance agency,
data processing and information technology services. Since
December 1978, the Company has grown internally and through
acquisitions from a one bank holding company with $2.9 million in
total assets to a multi-bank holding company offering diversified
financial services with total assets as of December 31, 1999 of
$1.4 billion. The Company's principal executive offices are
located at 11301 Nall Avenue, Leawood, Kansas 66211, telephone
number (913) 451-8050.
Between January 1, 2000 and March 23, 2000, the Company (i)
consummated the acquisition of three bank holding companies and
(ii) conducted an internal consolidation that merged nine of its
Kansas banks into a single bank. The composition of the
Company's banks and non-bank financial service affiliates is
discussed below as of December 31, 1999 (before the acquisitions
and the bank consolidation) and as of March 23, 2000 (after the
acquisitions and the bank consolidation).
THE BANKS: AS OF DECEMBER 31, 1999
Gold Bank ("Gold Bank"). As of December 31, 1999, Gold Bank
was a Kansas state bank with six banking offices. Gold Bank had
its principal office and one office in Marysville, Kansas, three
offices in Shawnee, Kansas, and one office in Leawood, Kansas.
Gold Bank was formerly known as Exchange National Bank, a
national banking association, which was renamed Gold Bank,
National Association, on May 20, 1999, and was later converted
into a Kansas state bank, on December 16, 1999, with its
principal headquarters and main office in Leawood, Kansas. Gold
Bank is a full service bank that conducts a general banking and
trust business, offering its customers checking and savings
accounts, debit cards, certificates of deposit, trust services,
brokerage services, safety deposit boxes and a wide range of
lending services, including credit card accounts, commercial and
industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans. Gold
Bank also introduced during 1999 a complete on-line internet
banking service which includes 24 hour access for account inquiry
and transfer and bill payment services. As of December 31, 1999,
Gold Bank's loan portfolio consisted primarily of commercial,
real estate construction and residential real estate loans. As
of December 31, 1999, Gold Bank had total assets of approximately
$452.9 million.
Citizens Bank of Tulsa ("Tulsa Bank"). Tulsa Bank is an
Oklahoma state bank with three banking offices located in Tulsa,
Oklahoma. The Company acquired Tulsa Bank on December 10, 1998.
Tulsa Bank is a full service bank that conducts a general banking
business, offering its customers checking and savings accounts,
debit cards, certificates of deposit, trust services, brokerage
services, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and
industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans. The loan
portfolio of Tulsa Bank consists primarily of commercial, real
estate and installment loans. As of December 31, 1999, Tulsa
Bank had total assets of approximately $239.9 million.
Provident Bank f.s.b. ("Provident Bank"). Provident Bank is
a federal savings bank with two banking offices located in St.
Joseph, Missouri. Provident Bank was acquired by the Company on
March 14, 1994. Provident Bank is a full service savings bank
that conducts a general banking and trust business, offering its
customers checking and savings accounts, debit cards,
certificates of deposit, trust services, brokerage services,
safety deposit boxes and a wide range of lending services,
including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial
and residential real estate loans. As of December 31, 1999,
Provident Bank had total assets of approximately $87.9 million.
The following banks were owned by the Company on December
31, 1999, but were merged with and into Gold Bank on January 5,
2000:
Citizens State Bank and Trust Co. ("Citizens Bank").
Citizens Bank had two banking offices located in Seneca, Kansas.
Citizens Bank was a full service bank that conducted a general
banking and trust business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, trust
services, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. Citizens Bank's loan portfolio consisted primarily of
agricultural loans, including farm real estate loans,
agricultural production loans, agricultural industrial loans and
residential loans. As of December 31, 1999, Citizens Bank had
total assets of approximately $69.1 million.
Farmers National Bank ("Farmers Bank"). Farmers Bank was a
Kansas state bank that had two banking offices located in Oberlin
and Norcatur, Kansas. Farmers Bank was a full service bank that
conducted a general banking and trust business, offering its
customers checking and savings accounts, debit cards,
certificates of deposit, trust services, brokerage services,
safety deposit boxes and a wide range of lending services,
including credit card accounts, commercial and industrial loans,
single payment personal loans, installment loans and commercial
and residential real estate loans. Farmers Bank's loan portfolio
consisted primarily of agricultural and real estate loans. As of
December 31, 1999, Farmers Bank had total assets of approximately
$54.2 million.
Farmers State Bank of Sabetha ("Sabetha Bank"). Sabetha
Bank was a Kansas state bank that had two banking offices located
in Sabetha, Kansas. The Company acquired Sabetha Bank on July 9,
1998. Sabetha Bank was a full service bank conducting a general
banking and trust business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, trust
services, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. Sabetha Bank's loan portfolio consisted primarily of
agriculture and real estate loans. As of December 31, 1999,
Sabetha Bank had total assets of approximately $59.9 million.
First National Bank in Alma ("Alma Bank"). Alma Bank was a
national banking association with one banking office located in
Alma, Kansas. The Company acquired Alma Bank on February 19,
1998. Alma Bank was a full service bank that conducted a general
banking and trust business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, trust
services, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. Alma Bank's loan portfolio consisted primarily of
agricultural and real estate loans. As of December 31, 1999,
Alma Bank had total assets of approximately $32.1 million.
Peoples National Bank ("Peoples Bank"). Peoples Bank was a
national banking association with five banking offices located in
the state of Kansas, with its principal office in Clay Center,
and offices in Concordia, Linn and Washington, respectively. Tri
County National Bank, which was acquired by the Company on August
17, 1998, was merged into Peoples Bank on October 31, 1998.
Peoples Bank was a full service bank that conducted a general
banking and trust business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, trust
services, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. Peoples Bank's loan portfolio consisted primarily of
real estate and agricultural loans. As of December 31, 1999,
Peoples Bank had total assets of approximately $132.6 million.
Peoples State Bank of Colby ("Colby Bank"). Colby Bank was
a Kansas state bank that had two banking offices located in Colby
and Rexford, Kansas. The Company acquired Colby Bank on August 4,
1998. Colby Bank was a full service bank that conducted a
general banking and trust business, offering its customers
checking and savings accounts, debit cards, certificates of
deposit, trust services, brokerage services, safety deposit boxes
and a wide range of lending services, including credit card
accounts, commercial and industrial loans, single payment
personal loans, installment loans and commercial and residential
real estate loans. Colby Bank's loan portfolio consisted
primarily of real estate and agricultural loans. As of December
31, 1999, Colby Bank had total assets of approximately $27.8
million.
The First State Bank and Trust Company ("First Bank"). First
Bank was a Kansas state bank that had two banking offices located
in Pittsburg, Kansas. The Company acquired First Bank on October
21, 1998. First Bank was a full service bank that conducted a
general banking and trust business, offering its customers
checking and savings accounts, debit cards, certificates of
deposit, trust services, brokerage services, safety deposit boxes
and a wide range of lending services, including credit card
accounts, commercial and industrial loans, single payment
personal loans, installment loans and commercial and residential
real estate loans. First Bank's loan portfolio consisted
primarily of real estate, commercial and installment loans. As
of December 31, 1999, First Bank had total assets of
approximately $125.7 million.
The following bank was owned by the Company on December 31,
1999, but was merged with and into Gold Bank on March 23, 2000:
Linn County Bank ("Linn Bank"). Linn Bank was a Kansas state
bank with 3 banking offices located in the Kansas communities of
LaCygne, Pleasanton and Lenexa. Linn Bank was acquired by the
Company on December 31, 1999. Linn Bank is full service bank
that conducts a general banking business, offering its customers
checking and savings accounts, debit cards, certificates of
deposit, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. Linn Bank's loan portfolio consists primarily of
agricultural and small business loans. As of December 31, 1999,
Linn Bank had total assets of approximately $61.5 million.
MERGER AND ACQUISITION TRANSACTIONS: JANUARY 5, 2000 TO MARCH 23,
2000
On January 5, 2000, Citizens Bank, Farmers Bank, Sabetha
Bank, Alma Bank, Peoples Bank, Colby Bank and First Bank were
merged with and into Gold Bank.
After January 5, 2000, the Company also acquired three bank
holding companies:
CountryBanc Holding Company ("CountryBanc"). On March 2,
2000, the Company acquired CountryBanc, a multi-bank holding
company that operated two Oklahoma state banks and one Kansas
state bank with a combined total of 21 banking offices in central
and western Oklahoma and southern Kansas. As of December 31,
1999, CountryBanc had total assets of approximately $560 million.
First Business Bancshares of Kansas City, Inc ("First
Business Bancshares"). On March 6, 2000, the Company acquired
First Business Bancshares, a one bank holding company that owned
First Business Bank of Kansas City, N.A. ("First Business Bank"),
a national banking association with one banking office in Kansas
City, Missouri. Concurrently with the acquisition of First
Business Bancshares, First Business Bank was merged with and into
Gold Bank. As of December 31, 1999, First Business Bancshares
had total assets of approximately $124 million.
American Bancshares, Inc. ("American Bancshares"). On March
20, 2000, the Company acquired American Bancshares, a one-bank
holding company that operated a Florida state bank with ten
banking offices located in western Florida. As of December 31,
1999, American Bancshares had total assets of approximately $460
million.
On March 23, 2000, Linn Bank was merged with and into Gold
Bank.
THE BANKS: AS OF MARCH 23, 2000
Gold Bank ("Gold Bank"). Gold Bank currently is a Kansas
state bank that has 27 banking offices located throughout the
state of Kansas, two locations in Kansas City, Missouri, and one
location in Lee's Summit, Missouri. Gold Banc has its principal
banking office in Leawood, Kansas. Gold Bank's assets were
significantly expanded on January 5, 2000, when it merged with
seven other banks owned by the Company (Citizens Bank, Farmers
Bank, Sabetha Bank, Alma Bank, Peoples Bank, Colby Bank and First
Bank). On March 6 and 23, 2000, respectively, First Business
Bank and Linn Bank were also merged into Gold Bank. Gold Bank's
loan portfolio currently consists primarily of commercial,
real estate, personal and agricultural loans. As of March 23,
2000, Gold Bank had total assets of approximately $1.1 billion.
Tulsa Bank. (See summary of activities above).
Provident Bank. (See summary of activities above).
American Bank, Bradenton, Florida ("American Bank").
American Bank is a Florida state bank that has ten banking
offices located in Bradenton, Florida and four other surrounding
communities. The Company acquired American Bank on March 20,
2000. American Bank is a full service bank that conducts a
general banking business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, brokerage
services, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and
industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans. American
Bank's loan portfolio consists primarily of commercial, real
estate, personal and agricultural loans. As of December 31,
1999, American Bank had total assets of approximately $460
million.
People First Bank, Hennessey, Oklahoma ("Hennessey Bank").
Hennessey Bank is an Oklahoma state bank that has 20 banking
offices located in western and central Oklahoma with headquarters
in Edmond, a suburb of Oklahoma City. The Company acquired
Hennessey Bank on March 2, 2000. Hennessey Bank is a full
service bank that conducts a general banking and trust business,
offering its customers checking and savings accounts, debit
cards, certificates of deposit, trust services, brokerage
services, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and
industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans.
Hennessey Bank's loan portfolio consists primarily of commercial,
real estate and agricultural loans. As of December 31, 1999,
Hennessey Bank had total assets of approximately $440 million.
People First Bank, Elkhart, Kansas ("Elkhart Bank").
Elkhart Bank is a Kansas state bank that has 1 banking office
located in Elkhart, Kansas. The Company acquired Elkhart Bank on
March 2, 2000. Elkhart Bank is a full service bank that conducts
a general banking business, offering its customers checking and
savings accounts, debit cards, certificates of deposit, brokerage
services, safety deposit boxes and a wide range of lending
services, including credit card accounts, commercial and
industrial loans, single payment personal loans, installment
loans and commercial and residential real estate loans. Elkhart
Bank's loan portfolio consists primarily of real estate and
agricultural loans. As of December 31, 1999, Elkhart Bank had
total assets of approximately $33 million.
American Heritage Bank, El Reno, Oklahoma ("El Reno Bank").
El Reno Bank is an Oklahoma state bank that has 1 banking office
located in El Reno, Oklahoma. The Company acquired El Reno Bank
on March 2, 2000. El Reno Bank is a full service bank that
conducts a general banking business, offering its customers
checking and savings accounts, debit cards, certificates of
deposit, brokerage services, safety deposit boxes and a wide
range of lending services, including credit card accounts,
commercial and industrial loans, single payment personal loans,
installment loans and commercial and residential real estate
loans. El Reno Bank's loan portfolio consists primarily of
commercial, real estate and agricultural loans. As of December
31, 1999, El Reno Bank had total assets of approximately $90
million.
FINANCIAL SERVICE SUBSIDIARIES
Midwest Capital Management, Inc. ("Midwest Capital").
Midwest Capital is a securities broker-dealer and investment
advisor that is registered with the National Association of
Securities Dealers (the "NASD"). Midwest Capital's customers
consist primarily of financial institutions located throughout
the United States, with a concentration in the Midwestern section
of the United States. Midwest Capital manages a wide variety of
stock, bond and money market portfolios for clients that
currently include a significant number of commercial banks
located primarily in Kansas, Missouri, Oklahoma, Nebraska and
Iowa. Midwest Capital also provides its services to trusts,
pension plans, insurance companies, commercial businesses,
government entities, foundations and high net worth individuals.
Midwest Capital is a wholly owned subsidiary of the Company, that
was acquired by the Company in January 1998. Midwest Capital has
its headquarters in Kansas City, Missouri.
The Trust Company ("Trust Company"). The Trust Company is a
wholly-owned subsidiary of the Company, which was acquired by the
Company in December 1998. Trust Company is a Missouri trust
company that has its headquarters in St. Joseph, Missouri.
During 1999, Trust Company received approval from the Kansas
Banking Department to expand and provide trust services at each
Gold Banc affiliate location in the state. As of December 31,
1999, Trust Company had approximately $215 million in
discretionary trust assets under management and approximately
$105 million in non-discretionary trust assets under
administration.
Gold Banc Mortgage, Inc. ("Gold Banc Mortgage"). Gold Banc
Mortgage, a subsidiary of Gold Bank, is a residential mortgage
banking company with its headquarters in Kansas City, Missouri.
Gold Banc Mortgage originates and services residential mortgage
loans in 26 states. Gold Banc Mortgage was formerly named
Regional Investment Company, which was acquired by the Company in
August 1999, and then contributed to Gold Bank on December 16,
1999.
Gold Banc Financial Services, Inc. ("Gold Banc Financial
Services"). Gold Banc Financial Services is a Kansas insurance
agency, which sells a full line of insurance products, including
life insurance, annuities, property and casualty insurance,
disability insurance and credit life insurance. Gold Banc
Financial Services is a wholly owned subsidiary of Gold Bank, and
is headquartered in Marysville, Kansas.
CompuNet Engineering, Inc. ("CompuNet"). CompuNet provides
information technology, e-commerce services and networking
solutions for banks and other businesses, including the design
and implementation of local and wide area networks. CompuNet is
a wholly owned subsidiary of the Company with its headquarters in
Lenexa, Kansas. CompuNet was acquired by the Company in March
1999.
BUSINESS
COMMUNITY BANKING STRATEGY
The Company serves the needs and caters to the economic
strengths of the metropolitan and county seat centers where the
Banks are located. Through the Banks and their employees, the
Company strives to provide a high level of personal and
professional customer service. Employee participation in
community affairs is encouraged in order to build long term
banking relationships with established businesses and individual
customers in these market areas.
The Company believes its central and western Kansas
locations, together with the other communities in their
respective counties that comprise their market area, provide a
stable base of relatively low cost deposits compared to larger
metropolitan and small business markets with larger competitors.
The Company believes that, through good management, community
banks such as the Banks can maximize earnings by attracting
relatively low cost core deposits and investing those funds in
loans and other high yielding investments, while maintaining risk
at an acceptable level.
The Company has applied its community banking strategy to
the affluent communities in the rapidly developing Johnson County
suburbs southwest of Kansas City and the growing Tulsa, Oklahoma
market area and will implement the strategy in the higher growth
market areas served by the banks acquired since December 31,
1999. The Company believes the recent wave of regional bank
acquisitions of local banks in those communities and metropolitan
areas, and the subsequent conversion of some of those acquired
banks to branch locations, has alienated the customers of those
locations. This has created an opportunity for the Company to
attract and retain as loan customers those owner operated
businesses that require flexibility and responsiveness in lending
decisions and desire a more personal banking relationship. The
Company believes that it has been able to meet these customers'
expectations without compromising credit standards. The success
of this strategy is reflected in the Company's growth and ability
to attract significant levels of non-interest bearing deposits in
the suburban communities of Leawood and Shawnee, Kansas and in
markets like Tulsa, Oklahoma and Pittsburg, Kansas.
OPERATING STRATEGY
The Company's operating strategy is to provide in each of
its markets a full range of financial products and services to
small and medium sized businesses and to consumers. The Company
emphasizes personal relationships with customers, involvement in
local community activities and responsive lending decisions. The
Company strives to maintain responsive community banking offices
with local decision makers, allowing senior management at each
banking location, within certain limitations, to make its own
credit and pricing decisions and retaining at each Bank a
local identity. The Company's goals include long term customer
relationships, a high quality of service and responsiveness to
specific customer needs. The principal elements of the Company's
operating strategy are:
Emphasize Personalized Customer Service and Community
Involvement. The Company believes that, in most of its market
areas, customer loyalty and service are the most important
competitive factors. The Banks have experienced low turnover in
their management and lending staffs, enabling them to provide
continuity of service by the same staff members, leading to
long term customer relationships, high quality service and quick
response to customer needs. The Banks' management and other
employees participate actively in a wide variety of community
activities and organizations in order to develop and maintain
customer relationships. The Banks seek to recruit the best
available banking talent to deliver the quality of personal
banking services required to meet customer expectations and to
permit the Company to meet its goals for long term profitable
growth.
Capitalize on Changing Market Conditions. The Company's
management continually monitors economic developments in its
market areas in order to tailor its operations to the evolving
strengths and needs of the local communities. For example, Gold
Bank has opened service locations in the high growth areas of
Shawnee and Leawood, Kansas to fill the void of community banks
that management believes has been created by the recent
transaction activity of regional banking institutions and to
deploy excess low cost funds derived from its rural markets.
Centralize and Streamline Operations to Achieve Economies.
In order to minimize duplication of functions, the Company has
centralized certain management and administrative functions,
including data processing, human resources, internal audit, loan
review and regulatory administration. Such centralization will
reduce operating expenses and enable Bank personnel to focus on
customer service and community involvement. The Company believes
it has the personnel necessary to make implementation of these
operating efficiencies possible. The Company also provides
overall direction in areas of budgets, asset/liability and
investment portfolio management.
ACQUISITION/GROWTH STRATEGY
Transactions. Management believes that the Company is well
positioned to acquire and profitably operate community banks
because of its experience in operating community banks, its
ability to provide centralized management assistance to those
banks and its access to capital. Management of the Company
believes there are owners of community banks who may be willing
to sell their banks in the future for, among other reasons,
stockholder liquidity, to diversify their own investment
portfolios, lack of family successor operators and the burden of
compliance with bank regulations. In addition, management
believes there are individual community bank owners in the
targeted regions who are interested in selling their banks to an
organization that has a strong capital base and management that
has demonstrated a commitment to maintaining local bank identity.
The Company's goal is to acquire banks with strong existing
management such that the Company's strategies can be implemented
while retaining the individual identity of the banks through the
continuation of the existing management and local decision
makers.
The Company is generally targeting larger community banks in
metropolitan areas and county seat towns of 2,000 persons or
more. Market factors to be considered by the Company include the
size and long term viability of the community and market area
served by the target bank, the position of the transaction target
in the market and the proximity of other banks owned by the
Company. Generally, the bank target must be among the top three
financial institutions in its market in terms of deposit share.
Financial criteria include historical performance, comparison to
peers in terms of key operating performance and capital ratios,
loan asset quality, operating procedures and deposit structure.
Also of significant financial importance is the investment
required for, and opportunity costs of, the transaction. Non-
financial considerations in evaluating a prospective bank target
include the quality of the target's management and the demand on
the Company resources to integrate the target institution.
Because of the large number of county seat towns and banks
and its familiarity with the market place, the Company's
transaction focus is the Midwest and primarily in the States of
Kansas, Oklahoma and Missouri, but it will also consider
institutions in other states, which now includes Florida since
its initial entry into the state through the acquisition of
American Bancshares. Kansas is perceived by management to be the
Company's best market for bank transactions because only recently
have state banking laws permitted the large regional banking
institutions based in Missouri to conduct branching activities in
the State of Kansas.
Internal Growth. The recent wave of regional bank
acquisitions of community banks in the Midwest has created what
management of the Company perceives to be a void in the community
banking market. It is management's belief that it has been the
practice of regional banking institutions to convert the banks
they acquire into branches of the acquiring institution without
the retention of local decision making. Management of the
Company believes this practice detracts from the delivery of
quality personalized services to the existing customer base of
those branches. Management of the Company believes its branching
activities are distinguished from those of regional banking
institutions by the high degree of autonomy given each branch
location.
The Company's expansion activity also has allowed it to
diversify its loan portfolio. Further, due to heavy residential
and small business development, the loan demand in the suburban
Johnson County communities, as well as in southeastern Tulsa,
Oklahoma, is greater than that experienced in the Company's rural
market areas.
LENDING ACTIVITIES
General. The Company strives to provide in each market area
it serves a full range of financial products and services to
small and medium sized businesses and to consumers. The Company
targets owner operated businesses and emphasizes the use of Small
Business Administration and Farmers Home Administration lending.
The Banks participate in credits originated within the
organization but generally do not participate in loans from non-
affiliated lenders. Each Bank has an established loan committee
which has authority to approve credits, within established
guidelines, of up to $500,000. Concentrations in excess of
$500,000 must be approved by an executive loan committee
comprised of the Chief Executive Officer and a Vice President of
the Company and the local Bank's president and senior lending
officer. When lending to an entity, the Company generally
obtains a guaranty from the principals of the entity. The loan
mix within the individual Banks is subject to the discretion of
the Bank's board of directors and the demands of the local
marketplace.
Residential loans are priced consistently with the secondary
market, and commercial and consumer loans generally are issued at
or above the prime rate. The Company has no potential negative
amortization loans. The following is a brief description of each
major category of the Company's lending activity.
Real Estate Lending. Commercial, residential and
agricultural real estate loans represent the largest class of
loans of the Company. As of December 31, 1999, real estate and
real estate construction loans totaled $442.4 million and $82.8
million, respectively or 46.7% and 8.8% of all loans,
respectively. Commercial loans at December 31, 1999 made up
approximately 31.9% of loans, followed by one to four family
residential 35.4%, and agricultural 9.2%. Generally, residential
loans are written on a variable rate basis with adjustment
periods of five years or less and amortized over either 15 or 30
years. The Company retains in its portfolio some adjustable rate
mortgages having an adjustment period of five years or less.
Agricultural and commercial real estate loans are amortized over
15 or 20 years. The Company also generates long term fixed rate
residential real estate loans which it sells in the secondary
market. The Company takes a security interest in the real
estate. Commercial real estate, construction and agricultural
real estate loans are generally limited, by policy, to 80% of the
appraised value of the property. Commercial real estate and
agricultural real estate loans also are supported by an analysis
demonstrating the borrower's ability to repay. Residential loans
that exceed 80% of the appraised value of the real estate
generally are required, by policy, to be supported by private
mortgage insurance, although on occasion the Company will retain
non-conforming residential loans to known customers at premium
pricing.
Commercial Lending. Loans in this category principally
include loans to service, retail, wholesale and light
manufacturing businesses, including agricultural service
businesses. Commercial loans are made based on the financial
strength and repayment ability of the borrower, as well as the
collateral securing the loans. As of December 31, 1999,
commercial loans represented the second largest class of loans at
$302.5 million, or 32.0% of total loans. The Company targets
owner operated businesses as its customers and makes lending
decisions based upon a cash flow analysis of the borrower as well
as the accounts receivable, inventory and equipment of the
borrower. Accounts receivable loans and loans for inventory
purchases are generally of a one year renewable term and those
for equipment generally have a term of seven years or less. The
Company generally takes a blanket security interest in all assets
of the borrower. Equipment loans are generally limited to 75% of
the cost or appraised value of the equipment. Inventory loans
are limited to 50% of the value of the inventory, and accounts
receivable loans are limited to 75% of a predetermined eligible
base. Each of the Banks is approved to make loans under the
Small Business Administration program.
Consumer and Other Lending. Loans classified as consumer
and other loans include automobile, credit card, boat, home
improvement and home equity loans, the latter two secured
principally through second mortgages. The Company generally
takes a purchase money security interest in goods for which it
provides the original financing. The terms of the loans range
from one to five years, depending upon the use of the proceeds,
and range from 75% to 90% of the value of the collateral. The
majority of these loans are installment loans with fixed interest
rates. As of December 31, 1999, consumer and other loans
amounted to $66.9 million, or 7.1% of total loans. The Company
implemented a credit card program in late 1994 and targeted the
Banks' existing customer base as potential consumers. As of
December 31, 1999, the Company had issued 3,856 cards having an
aggregate outstanding balance of $2.6 million in credit card
receivables. The Company has not marketed credit cards to
persons other than existing customers.
Agricultural Lending. The Company provides short term
credit for operating loans and intermediate term loans for farm
product, livestock and machinery purchases and other agricultural
improvements. Agricultural loans were $51.7 million as of
December 31, 1999, or 5.4% of total loans. Farm product loans
have generally a one year term and machinery and equipment and
breeding livestock loans generally have five to seven year terms.
Extension of credit is based upon the ability to repay, as well
as the existence of federal guarantees and crop insurance
coverage. Farmer Credit Services guarantees are pursued wherever
possible. Gold Bank and Citizens Bank hold "Preferred Lender
Status" from the Farmer Credit Services, a guarantee program
similar to the Small Business Administration, that minimizes the
credit exposure of the Banks through partial transfer of the
credit risk to the federal government. Preferred Lender Status
expedites the processing of loan applications. These loans are
generally secured by a blanket lien on livestock, equipment,
feed, hay, grain and growing crops. Equipment and breeding
livestock loans are limited to 75% of appraised value.
LOAN ORIGINATION AND PROCESSING
Loan originations are derived from a number of sources.
Residential loan originations result from real estate broker
referrals, mortgage loan brokers, direct solicitation by the
Banks' loan officers, present savers and borrowers, builders,
attorneys, walk in customers and, in some instances, other
lenders. Residential loan applications, whether originated
through the Banks or through mortgage brokers, are underwritten
and closed based on the same standards, which generally meet FNMA
underwriting guidelines. Consumer and commercial real estate
loan originations emanate from many of the same sources. The
average loan is less than $500,000. From time to time, loans may
be participated among the Banks.
The loan underwriting procedures followed by the Banks
conform to regulatory specifications and are designed to assess
both the borrower's ability to make principal and interest
payments and the value of any assets or property serving as
collateral for the loan. Generally, as part of the process, a
loan officer meets with each applicant to obtain the appropriate
employment and financial information as well as any other
required loan information. The Bank then obtains reports with
respect to the borrower's credit record, and orders and reviews
an appraisal of any collateral for the loan (prepared for the
Bank through an independent appraiser). The loan information
supplied by the borrower is independently verified.
Loan applicants are notified promptly of the decision of the
Bank by telephone and a letter. If the loan is approved, the
commitment letter specifies the terms and conditions of the
proposed loan including the amount of the loan, interest rate,
amortization term, a brief description of the required
collateral, and required insurance coverage. Prior to closing
any long term loan, the borrower must provide proof of fire and
casualty insurance on the property serving as collateral, and
such insurance must be maintained during the full term of the
loan. Title insurance is required on loans collateralized by
real property. Interest rates on committed loans are normally
locked in at the time of application or for a 30 to 45 day
period.
MORTGAGE BANKING OPERATIONS
The Company, through Gold Banc Mortgage and Provident Bank,
is engaged in the production of residential mortgages.
Gold Banc Mortgage. Gold Banc Mortgage is a full service
mortgage origination company, which became a wholly-owned
subsidiary of Gold Bank on December 16, 1999. Its primary
business involves the origination of residential mortgage loans
through retail operations and through wholesale operations.
Retail operations account for approximately 55% of
originations and wholesale operations account for approximately
45% of originations. Total originations have been approximately
$463 million, $578 million and $325 million in 1999, 1998 and
1997, respectively. 100% of loans originated are sold on a
servicing-released basis through either: (1) a quarterly or
monthly bulk loan flow basis, or (2) an individual loan sale
basis. Income is generated primarily through service release
fees, interest income on loans held for sale and marketing gain
or loss.
Gold Banc Mortgage is licensed to do business in 26 states
with 16 retail loan production offices. A part of the retail
operations involves loan production in the offices of banking
subsidiaries of the Company. The wholesale operations consist of
5 offices doing business in 23 states.
Regional Investment Company owned servicing rights on a
portfolio of loans which was in excess of $500 million as of
December 31, 1999. Those servicing rights are being sold; that
sale will be finalized during the first quarter of 2000. Loans
originated and sold will continue to be serviced by Gold Banc
Mortgage until delivered to purchases under either arrangement
described herein.
Provident Bank. Provident Bank is a federally-chartered
savings bank. It originates residential mortgage loans primarily
in Buchanan County, Missouri. Over 95% of its loans are sold
servicing-released. All sold loans are sold individually, and
are locked with the investor promptly upon origination.
Historically, loans were sold to three or four primary investors,
and origination, processing, underwriting, closing and shipping
functions were performed by the bank. During the first quarter
of 2000, arrangements will be finalized through which the bank
will originate loans and will sell them to Gold Banc Mortgage.
Gold Banc Mortgage will perform the processing, underwriting,
closing and shipping functions for sale pursuant to the methods
described in the section above covering Gold Banc Mortgage. The
bank will realize substantial reduction in its costs for back-
room operations.
Provident Bank originated approximately $40.2 million, $60.3
million and $50.9 million in residential loans in 1999, 1998 and
1997, respectively. Its income is generated from origination
fees and gain on sale of loans.
Residential loan business is generated primarily through
networking with and referrals from real estate brokers, builders,
developers and prior customers.
BROKERAGE SERVICES
The Company provides securities brokerage and investment
management services through Midwest Capital Management, Inc., a
wholly owned subsidiary, which operates as a broker dealer in
securities. Customers consist primarily of financial
institutions located throughout the United States, with
concentrations in the Midwestern section of the United States.
Midwest Capital manages a wide variety of stock, bond and money
market portfolios for clients which currently include a
significant number of commercial banks located primarily in
Kansas, Missouri, Oklahoma, Nebraska and Iowa, as well as trusts,
pension plans, insurance companies, commercial businesses,
government entities, foundations and high net worth individuals.
Midwest Capital is registered with the National Association of
Securities Dealers as a broker/ dealer and investment advisor.
TRUST SERVICES
The Company provides trust services, primarily to
individuals, corporations and employee benefit plans, through
Trust Company, a Missouri chartered trust company and
wholly owned non-bank subsidiary.
TECHNOLOGY AND E-COMMERCE SERVICES
The Company provides technology and e-commerce services
through CompuNet Engineering and the Gold Bank Technology Center.
The Technology Center provides consolidated core and backoffice
processing, including the electronic storage of checks and
statements and the preparation of imaged statements, for the
Kansas and Missouri banks, on-line banking support, a Call Center
currently serving the Kansas City metropolitan area, internet
access and electronic mail, as well as the gateway for all intra-
company electronic communications, twenty-four hour, seven-day-a-
week telephone banking and an internet firewall for the Gold Banc
wide area network. CompuNet designs and implements scaleable
local and wide area networking solutions utilizing the products
of Microsoft, Novell, Cisco and Citrix, among others, for Gold
Banc as well as other bank and non-bank clients, design and
servicing of three-tier video conferencing (simple station to
station, PC based multiple and conference room WAN),
providing network and PC service support on a twenty-four hour
per day, seven-day-per-week basis. Additional services provided
by CompuNet include the design and implementation of voice-over
IP (internet) solutions and consulting design and implementation
of wireless networking solutions.
OTHER SERVICES
The Company also provides insurance agency services through
Gold Banc Financial Services, an indirect wholly owned non-bank
subsidiary. Although this business is not of financial
significance to the Company, management believes this service is
important to certain of the Banks' customers, provides an
opportunity to strengthen and develop relationships with
customers, and furthers the Company's objective of becoming a
complete financial services provider.
INVESTMENT PORTFOLIO
The Banks' investment portfolio is used to meet the Banks'
liquidity needs while endeavoring to maximize investment income.
Additionally, management augments the quality of the loan
portfolio by maintaining a high quality investment portfolio
oriented toward U.S. government and U.S. government agency
securities. The portfolio is comprised of U.S. Treasury
securities, U.S. government agency instruments and a modest
amount of investment grade obligations of state and political
subdivisions. In managing its interest rate exposure, the
Company also invests in mortgage backed securities and
collateralized mortgage obligations. Federal funds sold and
certificates of deposit are additional investments that are not
classified as investment securities. Investment securities were
$276.6 million, or 19.7% of total assets, at December 31, 1999.
As of December 31, 1999, the investment portfolio included
approximately $400,000 of equity securities of other publicly
held bank holding companies.
DEPOSITS AND BORROWINGS
Deposits are the major source of the Banks' funds for
lending and other investment purposes. In addition to deposits,
including local public fund deposits and demand deposits of
commercial customers, the Banks derive funds from loan principal
repayments, maturing investments, Federal Funds borrowings from
commercial banks, borrowings from the Federal Reserve Bank of
Kansas City and the Federal Home Loan Bank ("FHLB") and from
repurchase agreements. Loan repayments and maturing investments
are a relatively stable source of funds, while deposit inflows
are significantly influenced by general interest rates and money
market conditions. Borrowings may be used on a short term basis
to compensate for reductions in the availability of funds from
other sources. They also may be used on a long term basis for
funding specific loan transactions and for general business
purposes.
The Banks offer a variety of accounts for depositors
designed to attract both short term and long term deposits.
These accounts include certificates of deposit savings accounts,
money market accounts, checking and individual retirement
accounts. Deposit accounts generally earn interest at rates
established by management based on competitive market factors and
management's desire to increase or decrease certain types or
maturities of deposits. The Company has not sought brokered
deposits and does not intend to do so in the future.
COMPETITION
The deregulation of the banking industry, the widespread
enactment of state laws permitting multi-bank holding companies,
and the availability of nationwide interstate banking has created
a highly competitive environment for financial services
providers, particularly for institutions in suburban areas, such
as Gold Bank's Shawnee and Leawood locations or Citizens Bank of
Tulsa. These locations compete with other commercial banks,
savings and loan associations, credit unions, finance companies,
mutual funds, insurance companies, brokerage and investment
banking companies and other financial intermediaries. Some of
these competitors have substantially greater resources and
lending limits and may offer certain services that these
locations do not currently provide. In addition, some of the non-
bank competitors are not subject to the same extensive federal
regulations that govern these locations.
Management believes the Banks have generally been able to
compete successfully in their respective communities because of
the Company's emphasis on local control and the autonomy of Bank
management, allowing the Banks to meet what is perceived to be
the preference of community residents and businesses to deal with
"local" banks. While management believes the Banks will
continue to compete successfully in their communities, there is
no assurance future competition will not adversely affect the
Banks' earnings.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as set forth
below.
PRINCIPAL OCCUPATION AND
NAME AGE FIVE YEAR EMPLOYMENT HISTORY
Michael W. 45 Mr. Gullion has served as Chairman of the
Gullion Board of Directors and Chief Executive
Officer of the Company since its inception
and served as the Company's President until
February 10, 1999. Mr. Gullion is the son-in-
law of William Wallman, a director of the
Company.
Malcolm M. 52 Mr. Aslin was appointed to the Board of
Aslin Directors on February 11, 1999. He has
served as President and Chief Operating
Officer of the Company since February 10,
1999. From October 1995 until February 10,
1999, Mr. Aslin served as (i) Chairman of
the Board of Western National Bank and
Unison Bancorporation, Inc. in Lenexa,
Kansas and (ii) Chairman and Managing
Director of CompuNet Engineering, L.L.C., a
Lenexa, Kansas computer service business the
Company acquired in February 1999. From May
1994 until May 1995 Mr. Aslin served as
President of Langley Optical Company, Inc.,
a wholesale optical laboratory located in
Lenexa, Kansas. Prior to purchasing Langley
Optical Company, Mr. Aslin spent more than
22 years in various positions with UMB Banks
and United Missouri Financial Corporation,
including President and Chief Operating
Officer of United Missouri Bancshares, Inc.
and President of UMB's Kansas City bank,
United Missouri Bank of Kansas City, N.A.
Keith E. 49 Mr. Bouchey was elected to the Board of
Bouchey Directors of the Company on May 30, 1996. He
served as the Executive Vice President,
Chief Financial Officer and Corporate
Secretary of the Company since joining the
Company in November 1995 until July 7, 1999.
He now serves as Executive Vice President --
Mergers and Acquisitions and Corporate
Secretary. Prior to joining the Company, Mr.
Bouchey had been, since August 1977, a
principal of GRA, Thompson, White & Company,
P.C., a regional bank accounting and
consulting firm, where he served on the
executive committee and as the managing
director of the firm's regulatory services
practice.
Joseph F. 51 Mr. Smith has served as Executive Vice
Smith President and Chief Technology Officer of
the Company since February 10, 1999. Mr.
Smith also serves as a director of Centurion
Funds, Inc., a Phoenix, Arizona mutual fund
family advised by Centurion Trust Company.
From October 1995 until February 10, 1999,
Mr. Smith served as President and Chief
Operating Officer of CompuNet Engineering,
L.L.C., a Lenexa, Kansas computer service
business that the Company acquired in
February 1999. From August 1993 until May
1995 Mr. Smith served as a director and
Executive Vice President of Investors
Fiduciary Trust Company, located in Kansas
City Missouri. Prior to joining Investors
Fiduciary Trust Company, Mr. Smith spent
more than 26 years in various management and
operational positions with UMB Bank,
including Executive Vice President and an
advisory director of UMB's Kansas City bank,
United Missouri Bank of Kansas City, N.A.
EMPLOYEES
The Company maintains a corporate staff of 25 persons. At
December 31, 1999, the Banks and non-bank subsidiaries had 557
full time equivalent employees. None of the employees of the
Company, the Banks or the non- bank subsidiaries are
covered by a collective bargaining agreement. The Company, the
Banks and the non-bank subsidiaries believe their employee
relations are good.
SUPERVISION AND REGULATION
REGULATION APPLICABLE TO BANK HOLDING COMPANIES
GENERAL. The Company is a registered bank holding company
within the meaning of the Bank Holding Company Act, subject to
the supervision of the Federal Reserve Board. The Company is
required to file with the Federal Reserve Board an annual report
and such other additional information as the Federal Reserve
Board may require pursuant to the Bank Holding Company Act.
Also, the Federal Reserve Board periodically examines the
Company. The Federal Reserve Board has authority to issue cease
and desist orders against bank holding companies if it determines
that that their actions represent unsafe and unsound practices or
violations of law. In addition, the Federal Reserve Board is
empowered to impose substantial civil money penalties for
violations of certain banking statutes and regulations.
Regulation by the Federal Reserve Board is intended to protect
depositors of the Banks, not shareholders of the Company.
SOURCE OF STRENGTH. Federal Reserve Board policy requires a
bank holding company to serve as a source of financial and
managerial strength to its subsidiary banks. Under this policy,
a bank holding company is expected to stand ready to use its
available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity,
and to maintain resources and the capacity to raise capital which
it can commit to its subsidiary banks. It is the Federal Reserve
Board's position that the failure of a bank holding company to
serve as a source of strength to a distressed subsidiary bank is
an unsafe and unsound banking practice. This has become known as
the "source of strength doctrine." It is not clear whether the
source of strength doctrine is legally enforceable by the Federal
Reserve Board.
LIMITATION ON ACQUISITIONS. The Bank Holding Company Act
requires every bank holding company to obtain the prior approval
of the Federal Reserve Board before (i) taking any action that
causes a bank to become a controlled subsidiary of the bank
holding company, (ii) acquiring direct or indirect ownership or
control of voting shares of any bank or bank holding company, if
the acquisition results in the acquiring bank holding company
having control of more than 5% of the outstanding shares of any
class of voting securities of such bank or holding company and
such bank or bank holding company is not majority-owned by the
acquiring bank holding company prior to the acquisition, (iii)
the acquisition by a bank holding company or any non-bank
subsidiary thereof of all or substantially all of the assets of a
bank, or (iv) a merger or consolidation with another bank holding
company.
In determining whether to approve a proposed acquisition,
merger or consolidation, the Federal Reserve Board is required to
take into account the competitive effects of the proposed
acquisition, the convenience and needs of the community to be
served, and the financial and managerial resources and future
prospects of the bank holding company and banks concerned. If a
proposed acquisition, merger or consolidation might have the
effect in any section of the United States to substantially
lessen competition or to tend to create a monopoly, or if such
proposed acquisition, merger, or consolidation otherwise would be
in restraint of trade, then the Federal Reserve Board may not
approve it unless it finds that the anticompetitive effects are
clearly outweighed in the public interest by the probable effect
of the proposed transaction in meeting the convenience and needs
of the community to be served. The Company may from time to time
acquire an interest in the voting stock or assets of other banks
or financial institutions.
LIMITATION ON CERTAIN ACTIVITIES. The Bank Holding Company
Act also prohibits a bank holding company, with certain
exceptions, from engaging in, and from acquiring direct or
indirect ownership or control of the voting shares or assets of
any company engaged in, any activity other than banking or
managing or controlling banks, and any activity which the Federal
Reserve Board has determined before November 12, 1999 to be so
closely related to banking, or managing or controlling banks, as
to be a proper incident thereto.
As of November 11, 1999, the Federal Reserve Board, by
regulation, has determined that, subject to expressed
limitations, certain activities are permissible for bank holding
companies and their subsidiaries and may be engaged in upon
notice to the Federal Reserve Board without prior approval.
These permissible activities include furnishing or providing
services for the internal operations of the bank holding company
and its subsidiaries, operating a safe deposit business, making
and servicing loans, operating an industrial bank, performing
certain trust company functions, acting as an investment or
financial advisor in certain capacities, leasing certain real or
personal property, making certain investments to promote
community development, providing certain data processing
services, performing certain insurance agency and underwriting
functions, owning, controlling and operating a savings
association, providing specified courier services, providing
management consulting advice to nonaffiliated banks and non-bank
depository institutions, selling certain money orders, United
States savings bonds and traveler's checks, performing appraisals
of real and personal property, arranging certain commercial real
estate equity financing, providing securities brokerage services,
underwriting and dealing in certain government obligations and
money market instruments, providing foreign exchange advisory and
transactional services, acting as a futures commission merchant,
providing investment advice on financial futures and options on
futures, providing consumer financial counseling, providing tax
planning and preparation services, providing certain check
guaranty services, operating a collection agency and operating a
credit bureau.
The Federal Reserve Board also has determined that certain
other activities, including real estate brokerage and
syndication, land development, property management, management
consulting, underwriting of life insurance not sold in connection
with a credit transaction, and insurance premium funding, are
improper activities for bank holding companies and their
subsidiaries. Under the Gramm-Leach-Bliley Act (the "GLB Act"),
which was enacted on November 12, 1999, the Federal Reserve Board
is prohibited from approving new kinds of activities to be
permissible for a bank holding company unless the bank holding
company has elected to be a financial holding company. Certain
bank holding companies and their subsidiaries possess
"grandfather rights" giving them authority to engage in one or
more of the activities which are not generally permissible
because they were engaged in such activities prior to the
adoption of legislation restricting such activities.
Under cross-guaranty provisions of the Federal Deposit
Insurance Act (the "FDIA"), bank subsidiaries of a bank holding
company are liable for any loss incurred (or reasonably
anticipated to be incurred) by the Bank Insurance Fund (the
"BIF"), the federal deposit insurance fund for banks, in
connection with the failure of any other bank subsidiary of the
bank holding company. Liability under such cross-guaranty would
be junior to deposit liabilities and most secured obligations,
but senior to obligations to shareholders and most obligations to
affiliates. The FDIC has authority to prospectively waive the
cross-guaranty provision.
As of December 31, 1999, the Company had the following bank
subsidiaries: Gold Bank, Tulsa Bank, Citizens Bank, Colby Bank,
First Bank, Linn Bank, Sabetha Bank, Alma Bank, Farmers Bank and
Peoples Bank. As of December 31, 1999, the Company also had a
federal savings bank subsidiary, which was Provident Bank. On
January 5, 2000, Citizens Bank, Colby Bank, First Bank, Sabetha
Bank, Alma Bank, Farmers Bank and Peoples Bank were merged with
and into Gold Bank. On March 6 and 23, 2000, respectively, First
Business Bank and the Linn Bank were also merged into Gold Bank.
As a result of these mergers and the acquisition of other banks
by the Company during the first quarter of the year 2000, as of
March 23, 2000, the Company had the following insured depository
institution subsidiaries: Gold Bank, American Bank, Elkhart
Bank, El Reno Bank, Hennessey Bank, Tulsa Bank and Provident
Bank.
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 services. Subsidiary banks and savings
associations of a bank holding company are also subject to
certain restrictions imposed by the Federal Reserve Act on any
extensions of credit to the bank holding company or any of its
subsidiaries, or investment in the stock or other securities
thereof, and on the taking of such stocks or securities as
collateral for loans.
ACTIVITIES OF A FINANCIAL HOLDING COMPANY. Under the GLB
Act, a bank holding company that elects to be a financial holding
company may engage in a wider range of financial activities than
a bank holding company that does not make such an election.
Effective March 11, 2000, the GLB Act (i) terminates the
restrictions of the Bank Holding Company Act that prohibit banks
from affiliating with insurance companies, (ii) terminates the
restrictions of the Glass-Steagall Act that prohibit affiliates
of banks from conducting certain securities underwriting
activities, and (iii) permits bank holding companies to conduct
other activities that the Federal Reserve Board and the United
States Department of Treasury ("Treasury") determine to be
financial in nature or incidental to a financial activity or the
Federal Reserve Board determines to be complementary to a
financial activity.
To engage in the newly authorized financial activities, a
bank holding company must elect to become a financial holding
company. The bank holding company may make such an election by
filing with the Federal Reserve Board (1) a declaration
that the company elects to be a financial holding company to
engage in Fed-approved financial activities or to acquire a
company that engages in such activities, and (2) a certification,
based upon the most recent regulatory examinations, that each of
the bank holding company's insured depository institutions is
well-capitalized and well-managed. Furthermore, each of the
insured depository institutions must be rated "satisfactory" in
its latest Community Reinvestment Act examination.
The non-bank subsidiaries of a financial holding company may
engage in pre-approved financial activities, which include the
underwriting of all types of insurance and annuity products, the
underwriting of all types of securities products and mutual
funds, merchant banking activities, full-service insurance agency
activities and operating a travel agency. A financial holding
company may conduct any of these activities, so long as the
financial holding company notifies the Federal Reserve Board
within 30 days after the financial holding company commences such
activities or acquires a company that engages in such activities.
A financial holding company does not need to file a formal
application with or obtain prior approval from the Federal
Reserve Board to conduct such activities.
If a financial holding company wishes to engage in
activities that are "financial in nature or incidental to a
financial activity" but not yet specifically authorized by the
Federal Reserve Board, the financial holding company must file an
application with the Federal Reserve Board. If both the Federal
Reserve Board and Treasury approve the application, the financial
holding company may commence the new activity. The Federal
Reserve Board may also approve a new activity that is
complementary to a financial activity, but the financial holding
company must make an additional showing that the activity does
not pose a substantial risk to the safety and soundness of
depository institutions or the financial system generally.
A bank holding company that does not elect to become a
financial holding company may remain a bank holding company. A
bank holding company's regulatory requirements remain
substantially the same, with two exceptions. First, the bank
holding company and its subsidiaries will be subject to new
customer privacy regulations, which will become effective on
either November 12, 2000 or a date thereafter that is specified
by federal banking agencies. Second, a bank that engages in
securities brokerage activities may be required, under certain
circumstances, to move its securities brokerage activities to a
subsidiary or non-bank affiliate that is a broker-dealer
registered with the NASD.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve Board
has promulgated "capital adequacy guidelines" for use in its
examination and supervision of bank holding companies. A holding
company's ability to pay dividends and expand its business
through the acquisition of new banking subsidiaries can be
restricted if its capital falls below levels established by these
guidelines. In addition, holding companies whose capital falls
below specified levels can be required to implement a plan to
increase capital.
The Federal Reserve Board's capital adequacy guidelines
provide for the following types of capital: Tier 1 capital (also
referred to as core capital), Tier 2 capital (also referred to as
supplementary capital), Tier 3 capital (consisting of short-term
subordinated debt that meets certain conditions and used only in
the measure of market risk, as discussed below) and Total
capital. A bank holding company's Tier 1 capital generally
includes the following elements: common shareholders' equity,
qualifying noncumulative perpetual preferred stock and related
surplus, qualifying cumulative perpetual preferred stock and
related surplus (limited to a maximum of 25% of Tier 1 capital
elements) and minority interests in the equity accounts of
consolidated subsidiaries. Goodwill is generally excluded from
Tier 1 capital. Most intangible assets are also deducted from
Tier 1 capital. A bank holding company's Tier 2 capital
generally includes allowances for loan and lease losses (limited
to 1.25% of risk-weighted assets), most perpetual preferred stock
and any related surplus (noncumulative and cumulative, without
percentage limits), certain hybrid capital instruments, perpetual
debt and mandatory convertible debt securities, and certain
intermediate-term preferred stock and intermediate-term
subordinated debt instruments (to a maximum of 50% of Tier 1
capital excluding goodwill, but phased-out as the instrument
matures). The maximum amount of supplementary capital that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital
(net of goodwill). For purposes of calculating the total risk-
based capital ratio, Total capital generally includes Tier 1
capital, plus qualifying Tier 2 capital, minus investments in
unconsolidated subsidiaries, reciprocal holdings of bank holding
company capital securities, certain deferred tax assets and other
deductions as determined by the Federal Reserve Board.
The Federal Reserve Board issued a regulation effective on
October 1, 1998 which increases the amount of intangible assets
which may be included in Tier 1 capital. Under the regulation,
mortgage servicing rights ("MSRs"), non-mortgage servicing
assets ("NMSAs") and purchased credit card relationships
("PCCRs") are included in Tier 1 capital to the extent that, in
the aggregate, they do not exceed 100% of Tier 1 capital and, to
the further extent that PCCRs and NMSAs, in the aggregate, do not
exceed 25% of Tier 1 capital. MSRs and PCCRs in excess of these
limits, as well as core deposit intangibles ("CDI") and all other
identified intangible assets, must be deducted in determining
Tier 1 capital.
Effective October 1, 1998, the Federal Reserve Board amended
its capital adequacy guidelines to permit bank holding companies
to include as part of Tier 2 capital up to 45 percent of the
pretax net unrealized holding gains on available-for-sale equity
securities.
The Federal Reserve Board's capital adequacy guidelines
require a bank holding company to satisfy a Tier 1 Leverage
Ratio, a total risk-based capital ratio and a Tier 1 risk-based
capital ratio. Under the Tier 1 Leverage Ratio capital
guideline, a bank holding company must have and maintain Tier 1
capital in an amount equal to at least 3.0% of its average total
consolidated assets. In general, average total consolidated
assets means the quarterly average total assets (net of the
allowance for loan and lease losses) reported on a bank holding
company's Consolidated Financial Statements (FR Y-9C Report),
minus goodwill and any other intangible assets or investments in
subsidiaries which are deducted from Tier 1 capital. The 3.0%
minimum Tier 1 Leverage Ratio is considered the absolute minimum
amount of Tier 1 capital which the most highly rated bank holding
companies (those rated composite 1 under the BOPEC rating system
for bank holding companies) or those bank holding companies that
have implemented the risk-based capital market risk measure set
forth in the Federal Reserve Board's capital adequacy guidelines
are required to maintain. All other bank holding companies must
maintain a minimum Tier 1 Leverage Ratio of 4.0%.
Under the Federal Reserve Board's capital adequacy
guidelines, a bank holding company must have and maintain a ratio
of Total capital to risk-weighted assets of 8.00%, and a ratio of
Tier 1 capital to risk-weighted assets of 4%. The amount of a
bank holding company's risk-weighted assets is determined by
multiplying the balance sheet amount of each of the bank holding
company's consolidated assets by a specified risk-weight factor
of 0%, 20%, 50% or 100%, in accordance with the relative risk
level of the asset. In determining risk-weighted assets, off-
balance sheet items, such as standby letters of credit, are
converted to an on-balance sheet credit equivalent amount by
multiplying the face amount of the off-balance sheet item by a
credit conversion factor of 0%, 20%, 50% or 100%, in accordance
with the probability that the off-balance sheet item will become
a credit extended by the bank holding company. In general,
intangible assets and other assets which are deducted in
determining Tier 1 capital and Total capital may also be excluded
from risk-weighted assets.
The Federal Reserve Board has proposed to permit portions of
claims (including repurchase agreements) collateralized by cash
on deposit with the lending institution or by securities issued
or guaranteed by the U.S. Treasury, U.S. government agencies, or
the central governments in other OECD countries to be eligible
for a zero percent risk weight. The effect of this proposal is
to allow banks and bank holding companies to hold less capital
for these types of collateralized transactions.
Under the Federal Reserve Board's market risk rules, an
institution with significant trading activities must measure and
hold capital for exposure to general market risk arising from
fluctuations in interest rates, equity prices, foreign exchange
rates and commodity prices and exposure to specific risk
associated with debt and equity positions in the trading
portfolio. This regulation applies to any bank holding company
(i) whose trading activity equals 10% or more of its total assets
or (ii) whose trading activity equals $1 billion or more.
General market risk refers to changes in the market value of on-
balance sheet assets and off-balance sheet items resulting from
broad market movements. Specific risk refers to changes in the
market value of individual positions due to factors other than
broad market movements and includes such risks as the credit risk
of an instrument's issuer. Under the Federal Reserve Board's
rules, an institution must measure its general market risk using
its internal risk measurement model to calculate a "value-at-
risk" based capital charge. An institution must also measure its
specific risk either through a valid internal model or by a so-
called standardized approach. The standardized approach for the
measurement of specific risk uses a risk-weighing process
developed by the Federal Reserve Board which categorizes
individual instruments and then assesses a fixed capital charge.
Until September 1997, an institution that used an internal model
to measure specific risk, rather than the standardized approach,
was required to hold capital for specific risk at least equal to
50 percent of the specific risk charge calculated when using the
standardized approach (the minimum specific risk charge). If
that portion of an institution's "value-at-risk" capital charge
which was attributable to specific risk did not equal the minimum
specific risk charge, the institution was subject to
additional charges to make up for such difference. In
September 1997, the Federal Reserve Board has eliminated the use
of the minimum specific risk charge and consequently, the need
for a dual calculation if an institution uses its internal model
to measure specific risk. Therefore, an institution using a
valid internal model to measure specific risk may use the "value-
at-risk" measures generated by its model without being required
to compare the model-generated risk charge to the minimum
specific risk charge as calculated under the standardized
approach.
The regulation supplements the existing credit risk-based
capital standards by requiring an affected institution to adjust
its risk-based capital ratio to reflect market risk. In
measuring market risk, institutions may use Tier 3 capital to
meet the market risk capital requirements. Tier 3 capital is
subordinated debt that is unsecured, fully paid up, has an
original maturity of at least 2 years, is not redeemable before
maturity without the prior approval of the institution's
supervisor, is subject to a lock-in clause that prevents the
issuer from repaying the debt even at maturity if the issuer's
capital ratio is, or with repayment, would become, less than the
minimum 8% risk-based capital ratio, and does not contain and is
not covered by any covenants, terms or restrictions that may be
inconsistent with safe and sound banking practices.
On December 31, 1999, the Company was in compliance with all
of the Federal Reserve Board's capital guidelines. On such date,
the Company had a Tier 1 leverage ratio of 6.62% (compared with a
minimum requirement of 3%), a ratio of total capital to risk-
weighted assets of 13.28% (compared with a minimum requirement of
8%) and a ratio of Tier 1 capital to risk-weighted assets of
8.54% (compared with a minimum requirement of 4%).
INTERSTATE BANKING AND BRANCHING. Under the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act"), bank holding companies are permitted to
acquire the stock or substantially all of the assets of banks
located in any state regardless of whether such transaction is
prohibited under the laws of any state. The Federal Reserve
Board, however, may not approve an interstate acquisition if as a
result of the acquisition the bank holding company would control
more than 10% of the total amount of insured deposits in the
United States or would control more than 30% of the insured
deposits in the home state of the acquired bank. The 30% of
insured deposits state limit does not apply if the acquisition is
the initial entry into a state by a bank holding company or if
the home state waives such limit.
Under the Riegle-Neal Act, individual states may restrict
interstate acquisitions in two ways. First, a state may prohibit
an out-of-state bank holding company from acquiring a bank
located in the state unless the target bank has been in existence
for a specified minimum period of time (not to exceed five
years). Second, a state may establish limits on the total amount
of insured deposits within the state which are controlled by a
single bank holding company (a "deposit cap"), provided that such
deposit limit does not discriminate against out-of-state bank
holding companies.
The Riegle-Neal Act now permits affiliated banks in
different states to act as agents for each other for purposes of
receiving deposits, renewing time deposits, closing loans,
servicing loans and receiving payments on loans and other
obligations. A bank acting as an agent for an affiliated bank is
not considered a branch of the affiliated bank.
Beginning on June 1, 1997, the Riegle-Neal Act authorized
interstate branching by a merger of banks with different home
states which results in a single bank with branches in both
states. The Riegle-Neal Act gave states the right to "opt out"
and prohibit interstate mergers by passing legislation before
June 1, 1997 that expressly prohibits all merger transactions
with out-of-state banks. The Riegle-Neal Act also gave states
the right to "opt in" and authorize early interstate mergers by
passing legislation that expressly permits interstate merger
transactions with all out-of-state banks. The Riegle-Neal Act
authorized banks to establish and operate de novo branches in a
state (other than the bank's home state) only if the host state
"opts in" to authorize de novo interstate banking by passing
legislation that expressly permits all out-of-state banks to
establish de novo branches in the state. As of June 1, 1997
approximately 44 states acted on the Riegle-Neal Act. As of June
1, 1997, only two states, Texas and Montana, opted out. Two
states contiguous with Kansas' borders, Nebraska and Oklahoma,
affirmatively "opted-in." Neither Kansas, Colorado nor Missouri
acted by June 1, 1997 to "opt-in" or "opt-out." Therefore,
interstate branching of banks by merger is now permitted in
Kansas and its contiguous states.
Effective October 10, 1997, the Riegle-Neal Act prohibits
any bank from establishing or acquiring a branch or branches
outside its home state primarily for the purpose of deposit
production. An interstate branch must reasonably help meet
the credit needs of the communities served as determined by a
loan-to-deposit ratio screen. The FDIC and other banking
agencies, under the final rule, will determine a bank's total
loan-to-deposit ratio for all branches opened in a particular
state one year or more after the bank has established an
interstate branch. If the ratio is less than 50 percent of the
average loan-to-deposit ratio for all banks headquartered in that
state, the banking regulators will try to determine whether the
branches are making a "reasonable" effort to meet the needs of
the community served in that state by using six mitigating
factors. The agencies may impose sanctions on institutions found
not to meet the community credit needs. The regulators may
require the bank to close branches in the state where it has a
low loan-to deposit ratio, and may prohibit the bank from opening
any new branches unless the institution assures the agencies that
it will attempt to meet those credit needs.
KANSAS BANK HOLDING COMPANY REGULATION. A bank holding
company that owns, controls or has the power to vote 25% or more
of any class of voting securities of a Kansas bank or a Kansas
bank holding company must file an application with the Kansas
State Bank Commissioner. Kansas prohibits any bank holding
company or any subsidiary of a bank holding company from
acquiring ownership or control of, or power to vote, any of the
voting shares of any bank that holds Kansas deposits if, after
such acquisition, the bank holding company and all of its
subsidiaries would hold or control, in the aggregate, more than
15% of total Kansas deposits.
REGULATION APPLICABLE TO THE BANKS
GENERAL. As Kansas state member banks, Gold Bank, and
Elkhart Bank are subject to regulation and examination primarily
by the Kansas State Bank Commissioner and the Federal Reserve
Board, and are also regulated by the FDIC. As Oklahoma state
member banks, Hennessey Bank and Tulsa Bank are subject to
regulation and examination primarily by the Oklahoma State
Banking Department and the Federal Reserve Board, and are also
regulated by the FDIC. As a Florida state non-member bank,
American Bank is subject to regulation and examination primarily
by the Florida Department of Banking and Finance and the FDIC.
As an Oklahoma non-member bank, El Reno Bank is subject to
regulation and examination primarily by the Oklahoma State
Banking Department and the FDIC. As a federal savings bank,
Provident Bank is subject to the regulation and examination
primarily by the OTS, and is also regulated by the FDIC.
Regulation by these agencies is designed to protect bank
depositors rather than our shareholders. Each of the Federal
Reserve Board, the FDIC and the OTS has the authority to issue
cease and desist orders if it determines that activities of any
of our subsidiary Banks represents unsafe and unsound banking
practices or violations of law. In addition, the Federal Reserve
Board, the FDIC and the OTS are empowered to impose substantial
civil money penalties for violations of banking statutes and
regulations.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve Board,
the FDIC, the OCC and the OTS have adopted minimum capital
requirements applicable to state member banks, state non-member
banks, national banks and federal savings banks, respectively,
which are substantially similar to the capital adequacy
guidelines established by the Federal Reserve Board for bank
holding companies. There are, however, technical differences in
the methodologies used to calculate the capital ratios.
On December 31, 1999, each of the Banks was in compliance
with its federal banking agency's minimum capital requirements.
The capital ratios of each of the Banks as of December 31, 1999
is shown on the chart below.
TIER I TOTAL
TIER I RISK-BASED RISK-BASED
SUBSIDIARY BANK LEVERAGE RATIO CAPITAL RATIO CAPITAL RATIO
Gold Bank 7.60% 10.46% 11.56%
Tulsa Bank 8.32% 10.54% 11.80%
Citizens Bank 10.16% 17.19% 18.43%
Colby Bank 9.38% 11.14% 11.96%
First Bank 8.33% 15.14% 16.17%
Linn Bank 5.55% 7.73% 12.26%
Sabetha Bank 9.46% 12.67% 13.78%
Alma Bank 9.53% 17.55% 17.69%
Farmers Bank 11.58% 15.32% 16.97%
Peoples Bank 8.30% 11.69% 12.87%
Provident Bank 8.49% 11.74% 12.83%
CLASSIFICATION OF BANKS. Federal banking laws classify
financial institutions in one of the following five categories,
depending upon the amount of their capital: well-capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Under
regulations promulgated by the Federal Reserve Board, the FDIC,
the OCC and the OTS, a bank or savings bank is deemed to be (i)
"well-capitalized" if it has a total risk-based capital ratio of
10% or greater, a Tier 1 risk-based capital ratio of 6% or
greater and a Tier 1 leverage ratio of 5% or greater (and is not
subject to any order or written directive specifying any higher
capital ratio), (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier 1 risk-based
capital ratio of 4% or greater and a Tier 1 leverage ratio of 4%
or greater (or a Tier 1 leverage ratio of 3% or greater, if the
bank has a CAMELS rating of 1), (iii) "undercapitalized" if it
has a total risk-based capital ratio that is less than 8%, a Tier
1 risk-based capital ratio that is less than 4% or a Tier 1
leverage ratio that is less than 4% (or a Tier 1 leverage ratio
that is less than 3%, if the bank has a CAMELS rating of 1), (iv)
"significantly undercapitalized" if it has a total risk-based
capital ratio that is less than 6%, a Tier 1 risk based capital
ratio that is less than 3% or a Tier 1 leverage ratio that is
less than 3%, and (v) "critically undercapitalized" if it has a
Tier 1 leverage ratio that is equal to or less than 2%. Federal
banking laws require the federal regulatory agencies to take
prompt corrective action against undercapitalized financial
institutions. Under Federal Reserve Board regulations Gold Bank
and Tulsa Bank were well-capitalized institutions as of December
31, 1999. Under FDIC regulations, Citizens Bank, Colby Bank,
First Bank, Linn Bank and Sabetha Bank were well-capitalized
institutions as of December 31, 1999. Under OCC regulations,
Alma Bank, Farmers Bank and Peoples Bank were well-capitalized
institutions as of December 31, 1999. Under OTS regulations,
Provident Bank was a well-capitalized institution as of December
31, 1999.
Federal banking laws provide that if an insured depository
institution receives a less than satisfactory examination rating
for asset quality, management, earnings, liquidity or interest
rate sensitivity, the examining agency may deem such financial
institution to be engaging in an unsafe or unsound practice. The
potential consequences of being found to have engaged in an
unsafe or unsound practice are significant, because the
appropriate federal regulatory agency may: (i) if the financial
institution is well-capitalized, reclassify the financial
institution as adequately capitalized; (ii) if the financial
institution is adequately capitalized, take any of the prompt
corrective actions authorized for undercapitalized financial
institutions and impose restrictions on capital distributions and
management fees; and (iii) if the financial institution is
undercapitalized, take any of the prompt corrective actions
authorized for significantly undercapitalized financial
institutions.
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of the
Company's subsidiary banks are insured by the BIF administered by
the FDIC, in general, to a maximum of $100,000 per insured
depositor. The deposits of the Company's subsidiary federal
savings bank and certain deposits of Gold Bank are insured by the
Savings Association Insurance Fund (the "SAIF") administered by
the FDIC, in general, to a maximum of $100,000 per insured
depositor. Under federal banking regulations, the Banks are
required to pay semi-annual assessments to the FDIC for deposit
insurance. The FDIC has adopted a risk-based assessment system.
Under the risk-based assessment system, BIF members pay varying
assessment rates depending upon the level of the institution's
capital and the degree of supervisory concern over the
institution. The assessment rates are set by the FDIC
semiannually. The FDIC's assessment rates range from zero (0)
cents to 27 cents per $100 of insured deposits. Institutions
qualifying for the $0 assessment rate are no longer required to
pay the minimum deposit premium payment of $2,000 annually. The
FDIC has authority to increase the annual assessment rate if it
determines that a higher assessment rate is necessary to increase
the reserve ratio of the BIF and the SAIF. There is no cap on
the annual assessment rate which the FDIC may impose.
In addition to any assessments that may be imposed by the
FDIC as described above, the Deposit Insurance Funds Act of 1996
provides for the imposition of annual assessments by the
Financing Corporation on SAIF-assessable deposits and BIF-
assessable deposits. Generally speaking, until December 31,
1999, the assessment rate imposed by Financing Corporation with
respect to BIF-assessable deposits was at a rate equal to one-
fifth (1/5) of the assessment rate for SAIF-assessable deposits.
As of January 1, 2000, BIF-assessable deposits and SAIF-
assessable deposits were assessed by Financing Corporation at the
same rate of 2.12 basis points of assessable deposits. As of
March 23, 2000, Gold Bank, American Bank, Elkhart Bank, El Reno
Bank, Hennessey Bank and Tulsa Bank had primarily BIF-assessable
deposits. Gold Bank also has a approximately $10 million of SAIF
insured deposits. As of March 23, 2000, Provident Bank only had
SAIF-assessable deposits. Consequently, the change in Financing
Corporation's assessment rates has resulted in Financing
Corporation increasing its annual assessment rate on Gold Bank,
American Bank, Elkhart Bank, El Reno Bank, Hennessey Bank and
Tulsa Bank and decreasing its annual assessment rate on Provident
Bank.
INTEREST RATES. The rate of interest a bank may charge on
certain classes of loans is limited by state and federal law. At
certain times in the past, these limitations, in conjunction with
national monetary and fiscal policies that 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.
LOANS TO ONE BORROWER. In addition to limiting the rate of
interest chargeable by banks on certain loans, federal and state
law imposes additional restrictions on the lending activities of
banks and savings associations.
The maximum amount that a federal savings bank or a national
bank may lend to one borrower (and certain related entities of
such borrower) generally is limited to 15% of the bank's
unimpaired capital and unimpaired surplus, plus an additional 10%
for loans fully secured by readily marketable collateral. There
are certain exceptions to the general rule, including loans fully
secured by government securities and deposit accounts in the
bank.
The maximum amount that a Florida state bank may lend to one
borrower (and certain related entities of such borrower)
generally is limited to 15% of the bank's capital accounts, plus
an additional 10% for loans fully secured by readily marketable
collateral. There are certain exceptions to the general rule,
including loans fully secured by government securities, deposit
accounts in the bank or loans made to school boards.
The maximum amount that a Kansas state bank may lend to one
borrower (and certain related entities of such borrower)
generally is limited to 25% of the bank's capital, plus an
additional 10% for loans fully secured by certain kinds of real
estate collateral. There are certain exceptions to the general
rule, including loans fully secured by government securities,
time deposit accounts in the bank, or bonded warehouse receipts
issued to the borrower by some other person.
The maximum amount that an Oklahoma state bank may lend to
one borrower (and certain related entities of such borrower)
generally is limited to 30% of the bank's capital, less
intangible assets. There are certain exceptions to the general
rule, including loans fully secured by government securities or
deposit accounts in the bank.
PAYMENT OF DIVIDENDS. The National Bank Act restricts the
payment of dividends by a national bank as follows: (i) no
dividends may be paid if the bank has no undivided profits or
retained earnings then on hand; (ii) until the surplus fund of
the bank 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 period in the case of quarterly or semiannual
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 the bank in any year would 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.
Gold Bank and Elkhart Bank, as Kansas state member banks,
are subject to the dividend restrictions set by Kansas law and
the Federal Reserve Board. Tulsa Bank, as an Oklahoma state
member bank, is subject to the dividend restrictions set by
Oklahoma law and the Federal Reserve Board. American Bank, as a
Florida state non-member bank, is subject to the dividend
restrictions set by Florida law and the FDIC. Provident Bank, a
federal savings bank, is subject to the dividend restrictions set
by the OTS. Under the Federal Deposit Insurance Act, a FDIC-
insured institution may not pay any dividend if payment would
cause it to become undercapitalized or while it is
undercapitalized. Florida, Kansas and Oklahoma banking law also
prohibit the declaration of a dividend out of the capital and
surplus of the bank. These laws and related regulations are not
expected to have a material effect upon the current dividend
policies of Gold Bank, American Bank, Elkhart Bank, El Reno Bank,
Hennessey Bank, Tulsa Bank, and Provident Bank.
COMMUNITY REINVESTMENT ACT. On May 4, 1995, the Federal
Reserve Board, the FDIC, the OTS and the OCC adopted regulations
relating to the Community Reinvestment Act (the "CRA"). The
purpose of the CRA regulations is to establish the framework and
criteria by which the bank regulatory agencies assess an
institution's record of helping to meet the credit needs of its
community, including low- and moderate-income neighborhoods, and
to provide that the agencies' assessment shall be taken into
account in reviewing certain applications. The regulations seek
to emphasize an institution's performance rather than the
process, to promote consistency in evaluation of
institutions, and to eliminate unnecessary reporting burdens.
The regulations replace the previous twelve assessment factors
for large banks with three tests: (i) a lending test, (ii) a
service test, and (iii) an investment test. While documentation
requirements have been substantially reduced, the safe harbors
from CRA protest have also been eliminated.
OTHER REGULATORY LIMITATIONS. The Company, the Banks and
the Non-Bank Subsidiaries are "affiliates" within the meaning of
the Federal Reserve Act. As such, the amount of loans or
extensions of credit which the Banks may make to non-bank
affiliates or to third parties, secured by securities or
obligations of the non-bank affiliates, are substantially limited
by the Federal Reserve Act and the FDIA. Such acts further
restrict the range of permissible transactions between a bank and
an affiliated company. A bank and its subsidiaries may engage in
certain transactions, including loans and purchases of assets,
with an affiliated company only if the terms and conditions of
the transaction, including credit standards, are substantially
the same as, or at least as favorable to the bank as, those
prevailing at the time for comparable transactions with
non-affiliated companies or, in the absence of comparable
transactions, on terms and conditions that would be offered to
non-affiliated companies.
Each of the Banks are also authorized to invest in a service
corporation that can offer the same services as the banking
related services that bank holding companies are authorized to
provide. However, regulatory approval must generally be obtained
prior to making such an investment or the performance of such
services.
BANKING ACTIVITIES. The investments and activities of the
Banks are subject to substantial regulation by federal banking
agencies, including without limitation investments in
subsidiaries, investments for their own account (including
limitations on investments in junk bonds and equity securities),
investments in loans, loans to officers, directors and
affiliates, security requirements, truth-in-lending, the types of
interest bearing deposit accounts which it can offer, trust
department operations, brokered deposits, audit requirements,
issuance of securities, branching and mergers and acquisitions.
FLORIDA BANK ACTIVITIES. The Florida Department of Banking
and Finance regulates or monitors all areas of the operations of
American Bank, including capital requirements, issuance of stock,
declaration of dividends, interest rates, record keeping,
establishment of branches, mergers and acquisitions, loans,
investments, borrowing, and employee responsibility and conduct.
The Florida Department of Banking and Finance places limitations
on activities of American Bank and requires the bank to maintain
a certain ratio of liquidity against deposits. The Florida
Department of Banking and Finance requires American Bank to file
a report annually, in addition to any periodic report requested.
American Bank is examined by the Florida Department of Banking
and Finance at least once every 18 months and at any other time
deemed necessary.
KANSAS BANK ACTIVITIES. The Kansas State Bank Commissioner
regulates or monitors all areas of the operations of Gold Bank
and Elkhart Bank, including capital requirements, issuance of
stock, declaration of dividends, interest rates, deposits, record
keeping, establishment of branches, mergers and acquisitions,
loans, investments, borrowing, and employee responsibility and
conduct. The Kansas State Banking Commissioner places limitations
on activities of Gold Bank and Elkhart Bank and requires these
banks to maintain a certain ratio of reserves against deposits.
The Kansas State Bank Commissioner requires Gold Bank and Elkhart
Bank to file a report annually showing receipts and disbursements
of each bank, in addition to any periodic report requested. Gold
Bank and Elkhart Bank are examined by the Kansas State Bank
Commissioner at least once every 18 months and at any other time
deemed necessary.
OKLAHOMA BANK ACTIVITIES. The Oklahoma State Banking
Department regulates or monitors all areas of the operations of
El Reno Bank, Hennessey Bank and Tulsa Bank, including capital
requirements, issuance of stock, declaration of dividends,
interest rates, deposits, record keeping, establishment of
branches, mergers and acquisitions, loans, investments,
borrowing, and employee responsibility and conduct. The Oklahoma
State Banking Department places limitations on activities of El
Reno Bank, Hennessey Bank and Tulsa Bank and requires these banks
to maintain a certain ratio of reserves against deposits. The
Oklahoma State Banking Department requires El Reno Bank,
Hennessey Bank and Tulsa Bank to file a report annually, in
addition to any periodic report requested. El Reno Bank,
Hennessey Bank and Tulsa Bank are examined by the Oklahoma State
Banking Department at least once every 18 months and at any other
time deemed necessary.
FEDERAL SAVINGS BANK ACTIVITIES. The OTS regulates or
monitors all areas of Provident Bank's operations, including
capital requirements, loans, investments, establishment of branch
offices, mergers, conversions, dissolutions, transactions,
borrowing, management, and record keeping. The OTS requires
Provident Bank to file annual current reports in compliance with
OTS procedures, as well as periodic reports upon the request of
the director of OTS. Provident Bank must also prepare a statement
of condition report showing the savings association's assets,
liabilities and capital at the end of each fiscal year.
All savings associations, including Provident Bank, are
required to meet the Qualified Thrift Lender test (the "QTL
test") to avoid certain restrictions on their operations. The QTL
test requires a savings association to have at least 65% of its
portfolio assets (as defined by regulation) in qualified thrift
investments on a monthly average for nine out of every 12 months
on a rolling basis. Qualified thrift investments primarily
consist of residential housing loans and investments, home equity
loans, education loans, small business loans and credit card
loans.
FINANCIAL SERVICE SUBSIDIARIES. The non-bank Financial
Service subsidiaries of the Company are subject to the
supervision of the Federal Reserve Board and may be subject to
the supervision of other regulatory agencies including the
Securities and Exchange Commission ("SEC"), the NASD, the
Missouri Division of Finance, and state securities and insurance
regulators.
The United States securities industry generally is subject
to extensive regulation under federal and state laws. The SEC is
the federal agency charged with administration of the federal
securities laws. However, much of the regulation of
broker/dealers, such as Midwest Capital, has been delegated to
self-regulatory organizations, principally the NASD and the
national securities exchanges. These self-regulatory
organizations adopt rules (that are subject to approval by the
SEC) that govern the industry and conduct periodic examinations
of member broker/dealers. Securities firms are also subject to
regulation by state securities commissions in the state in which
they registered. Midwest Capital is a registered broker/dealer in
securities under the Securities Exchange Act of 1934, as amended,
and is a member of the NASD.
The regulations to which broker/dealers are subject cover
all aspects of the securities business, including sales methods,
trade practices among broker/dealers, capital structure of
securities firms, uses and safekeeping of customers' funds and
securities, recordkeeping, and the conduct of directors, officers
and employees. Additional legislation, changes in rules
promulgated by the SEC and by self-regulatory organizations, or
changes in interpretation or enforcement of existing laws and
rules, often affect directly the method of operation and
profitability of broker/dealers. The SEC and the self-regulatory
organizations may conduct administrative proceedings that can
result in censure, fines, suspension or expulsion of a
broker/dealer, its directors, officers and employees. The
principal purposes of regulation and discipline of broker/dealers
is the protection of customer and the securities market rather
than the protection of creditors and stockholders of
broker/dealers.
OTHER REGULATIONS. Interest and certain other charges
collected or contracted for by the Banks are subject to state
usury laws and certain federal laws concerning interest rates.
The Banks' loan operations are also subject to certain federal
laws applicable to credit transactions, such as the federal Truth
In Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring
financial institutions to provide information to enable the
public and public officials to determine whether a financial
institution is fulfilling its obligation to help meet the housing
needs of the community it serves, the Equal Credit Opportunity
Act prohibiting discrimination on the basis of race, creed or
other prohibited factors in extending credit, the Fair Debt
Collection Practices Act governing the manner in which consumer
debts may be collected by collection agencies, and the rules and
regulations of the various federal agencies charged with the
responsibility of implementing such federal laws. The Banks also
are subject to the Electronic Funds Transfer Act, and Regulation
E issued by the Federal Reserve to implement that act, which
govern automatic deposits to and withdrawals from deposit
accounts and customers' rights and liabilities arising from the
use of automated teller machines and other electronic banking
services.
REGULATIONS ON PRIVACY OF CUSTOMER INFORMATION. Under the
GLB Act, (i) the Federal Reserve Board regulates and monitors the
Fair Credit Reporting Act's restrictions on the transfer of
customer information between a state member bank and its
affiliates; (ii) the FDIC regulates and monitors the Fair Credit
Reporting Act's restrictions on the transfer of customer
information between a state non-member bank and its affiliates;
and (iii) the OTS regulates and monitors the Fair Credit
Reporting Act's restrictions on the transfer of customer
information between a federal savings association and its
affiliates. Starting on either November 12, 2000 or a date
thereafter that is jointly specified by the OCC, OTS, FDIC and
Federal Reserve, these federal banking agencies will also
regulate and monitor restrictions on the transfer of
nonpublic personal information of consumers by their supervised
institutions to nonaffiliated third parties.
YEAR 2000 SAFETY AND SOUNDNESS STANDARDS. On October 15,
1998, the Federal Reserve Board, the FDIC, the OTS and the OCC
adopted guidelines which establish the minimum safety and
soundness standards for banks with respect to the Year 2000
readiness of their computer systems. The guidelines required
that each bank, in writing, (i) identify all internal and
external mission-critical computer systems that are not Year 2000
ready; (ii) establish the priorities for accomplishing work and
allocating resources to renovating internal mission-critical
systems; (iii) identify the resource requirements and individuals
assigned to the Year 2000 project on internal mission critical
systems; (iv) establish reasonable deadlines for commencing and
completing the renovation of such internal mission-critical
systems; (v) develop and adopt a project plan that addresses the
bank's Year 2000 renovation, testing, contingency planning, and
management oversight process; and (vi) develop a due diligence
process to monitor and evaluate the efforts of external third
party suppliers to achieve Year 2000 readiness. Each bank was
required to substantially complete the testing of the renovation
of all internal mission-critical systems by December 1, 1998.
The guidelines also required that each bank determine the ability
of external third party suppliers to renovate external mission-
critical systems that are not Year 2000 ready and to complete the
renovation in sufficient time to substantially complete the
testing of all external mission-critical systems by March 31,
1999. Furthermore, the guidelines required that each bank
complete the testing of all mission-critical systems by June 30,
1999.
For additional information on the Year 2000 readiness of the
Banks, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
MONETARY POLICY AND ECONOMIC CONDITIONS. The principal
sources of funds essential to the business of banks and bank
holding companies are deposits, shareholders' equity and borrowed
funds. The availability of these various sources of funds and
other potential sources such as preferred stock or commercial
paper, and the extent to which they are utilized, depends on many
factors, the most important of which are the monetary policies of
the Federal Reserve Board and the relative costs of different
types of funds.
An important function of the Federal Reserve Board is to
regulate the national supply of bank credit in order to combat
recession and curb inflationary pressures. Among the instruments
of monetary policy used by the Federal Reserve Board to implement
these objectives are open market operations in United States
government securities, changes in the discount rate on bank
borrowings and changes in reserve requirements against bank
deposits.
The Banks are subject to regulations issued by the Federal
Reserve Board which require depository institutions to maintain
non-interest bearing reserves against their transaction accounts
and non-personal time deposits. These regulations require
depository institutions to maintain reserves equal to 3% of
transaction accounts up to $44.3 million plus 10% (subject to
adjustment by the Federal Reserve Board between 8% and 14%) of
the total over $44.3 million. In addition, reserves, subject to
adjustment by the Federal Reserve Board between 0% and 9%, must
be maintained on non-personal time deposits. This reserve
percentage is currently 0%. Depository institutions may
designate and exempt up to $5.0 million of reservable liabilities
from the above reserve requirements. Because these reserves must
generally be maintained in cash or non-interest-bearing accounts,
the effect of the reserve requirements is to increase the cost of
funds to depository institutions.
Substantially all of the restrictions on the maximum
interest rates banks are permitted to pay on deposits have been
removed, although banks are still prohibited from paying interest
on demand deposits. Consequently, banks and thrift organizations
are substantially free to pay interest at any rate. Deregulation
has increased competition among such institutions for attracting
deposits and has resulted in an overall increase in such
institutions' cost of funds.
The monetary policies of the Federal Reserve Board have had
a significant effect on the operating results of commercial banks
in the past and are expected to continue to do so in the future.
In view of the continuing changes in regulations affecting
commercial banks and other actions and proposed actions by the
Federal government and its monetary and fiscal authorities,
including proposed changes in the structure of banking in the
United States and general economic conditions, no prediction can
be made as to future changes in interest rates, credit
availability, deposit levels, loan demand or the overall
performance of banks generally and the Banks and the non-bank
affiliates in particular.
The references in the foregoing discussion to various
aspects of statutes and regulation are merely summaries which do
not purport to be complete and which are qualified in their
entirety by reference to the actual statutes and regulations.
ITEM 2. PROPERTIES
The Company and the Banks each own their banking facilities. The
non-bank subsidiaries have entered into short-term leases for
their properties. The Company believes each of the facilities is
in good condition, adequately covered by insurance and sufficient
to meet the needs at that location for the foreseeable future.
The Company's headquarters and Gold Bank's Leawood, Kansas
location are contained in a 25,000 square foot building that
opened in 1996, all of which is occupied by the Company.
ITEM 3. LEGAL PROCEEDINGS
Gold Bank (formerly Exchange National Bank), is one of
several named defendants in a number of lawsuits arising out of
the same circumstances. The litigation was brought about on
behalf of persons who purchased distributorships from an entity
known as Parade of Toys ("Parade"). Gold Bank was included on
trade reference sheets that listed other banks with whom Parade
had done business. Plaintiffs allege that they contacted the
persons listed on the trade reference sheets and that the trade
reference defendants made false and misleading misrepresentations
in which plaintiffs relied to their detriment. Their current
claims include the theories of fraud, negligent
misrepresentations, civil conspiracy and negligence.
Plaintiffs commenced the litigation, in May 1997, as a
putative class action in the District Court of Johnson County,
Kansas. They then obtained an Order dismissing the case without
prejudice and, in September 1997, refiled in the United States
District Court for the District of Kansas. After the federal
court denied class certification, plaintiffs filed a second
action on behalf of 670 named plaintiffs. The court ruled that
those claims were misjoined and set a deadline for plaintiffs to
initiate new individual actions or to have claims dismissed with
prejudice. Plaintiffs then obtained an order from the federal
court dismissing all claims without prejudice and reinitiated
certain of their claims in state court in Johnson County, Kansas.
Plaintiffs began the process of recommencing the litigation
by filing a separate action for each plaintiff in February 1999.
Gold Bank was named as a defendant in 24 of those individual
actions. Plaintiffs then filed a number of multi-plaintiff
actions. The total number of plaintiffs in those four cases was
292.
On July 28, 1999, the state court ruled that claims in the
multi-plaintiff actions had been misjoined and that only the
first-named plaintiff in each case could proceed. It gave
plaintiffs until October 28, 1999 to commence new individual
actions or to have their claims dismissed with prejudice.
Counsel for the Bank has now been served with 316 Petitions in
individual actions in the Johnson County District Court. One of
the petitions alleges damages of approximately $75,000; two
allege damages of approximately $50,000; six allege damages of
approximately $40,000; one alleges damages of $12,175; and
fifteen allege damages of $10,000 or less. The remaining claims
range between $18,000 and $26,000.
Gold Bank has filed Answers denying any liability in the 24
cases commenced on behalf of individual plaintiffs and has filed
Motions to Dismiss the multi-plaintiff actions. On February 22,
2000, the District Court granted in part and denied in part the
Motions to Dismiss. After plaintiffs have repled their claims,
the Bank expects to file a motion for summary judgment.
Gold Bank denies any liability and intends to vigorously
defend these and any additional claims. The Company is unable to
estimate its potential range of monetary exposure, if any, or to
predict the likely outcome of these matters.
No accrual or provision for losses, if any, related to the
above matter has been made in the accompanying consolidated
financial statements. In the normal course of business, the
Company had certain other lawsuits pending at December 31, 1999.
In the opinion of management, after consultation with legal
counsel, none of those other lawsuits is expected to have a
significant effect on the consolidated financial condition or
results of operations of the Company.
First State Bank, a wholly-owned subsidiary of the Company,
was a defendant in an adversary proceeding styled Nelson v. First
State Bank in a bankruptcy case pending in the Federal Bankruptcy
Court for the Western District of Missouri styled In re: Hagman's
Inc. William R. Hagman, Jr. became an advisory director of the
Company on November 12, 1998. Mr. Hagman has had no direct or
indirect interest in Hagman, Inc., since 1982. In the adversary
proceeding, the bankruptcy trustee has alleged that First State
Bank received preferential transfers in settlement of loans and
bank overdrafts prior to the commencement of the Hagman's Inc.
bankruptcy case of approximately $694,000 plus interest. The
Company paid $465,000 in 1999 to settle this matter and charged
the settlement to earnings.
The Company is from time to time involved in other routine
litigation incidental to the conduct of its business. The
Company believes that no other pending litigation to which it is
a party will have a material adverse effect on its liquidity,
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
COUNTRYBANC HOLDING COMPANY
On October 22, 1999, Gold Banc entered into an Agreement and
Plan of Reorganization to acquire CountryBanc Holding Company of
Edmond, Oklahoma. On January 19, 2000 Gold Banc and Country Banc
entered into a First Amendment to Agreement and Plan of
Reorganization. As of December 31, 1999, CountryBanc had total
assets of approximately $560 million. American Heritage Bancorp,
Inc. was acquired on January 7, 2000. The acquisition was
accounted for as a pooling of interests. As of September 30,
1999, American Heritage had total assets of $81.2 million, total
deposits of $67.0 million, total stockholders' equity of
$9.8 million and year to date net earnings of $1.1 million.
The total purchase price of CountryBanc was approximately
$76 million in a stock-for-stock, tax free exchange. The
transaction was accounted for as a pooling of interests and
closed on March 2, 2000.
Gold Banc shareholders approved the acquisition of
CountryBanc at a special meeting on March 2, 2000, with 9,942,608
votes in favor, 408,000 votes against, and 7,176,310 abstentions
or broker non-votes.
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
On October 19, 1999 Gold Banc entered into an Agreement and
Plan of Reorganization to acquire First Business Bancshares of
Kansas City, Inc. On January 21, 2000, Gold Banc and First
Business Bancshares entered into a First Amendment to Agreement
and Plan of Reorganization. First Business Bancshares' principal
asset is an 86% ownership in First Business Bank of Kansas City,
N.A. As of December 31, 1999, the bank had total assets of
approximately $124 million. The total purchase price of First
Business Bancshares was approximately $20 million in a stock-for-
stock, tax-free exchange. The transaction was accounted for as a
pooling of interests and closed on March 6, 2000.
In conjunction with the acquisition of First Business
Bancshares and included in the approximately $20 million purchase
price was a stock-for-stock, tax-free exchange of Gold Banc stock
for the 14% minority interest held by third parties in First
Business Bank of Kansas City, N.A. The acquisition of the
minority interests was accounted for as a purchase.
Gold Banc shareholders approved the acquisition of First
Business Bancshares of Kansas City, Inc. and the minority
interests of First Business Bank of Kansas City, N.A. at a
special meeting on March 6, 2000, with 9,921,840 votes in favor,
104,478 votes against, and 7,500,600 abstentions or broker non-
votes.
AMERICAN BANCSHARES, INC.
On September 6, 1999 Gold Banc entered into an Agreement and
Plan of Reorganization to acquire American Bancshares, Inc., a
Florida corporation. On January 21, 2000, Gold Banc and American
Bancshares entered into a First Amendment to Agreement and Plan
of Reorganization. As of December 31, 1999, American
Bancshares had total assets of approximately $460 million. The
total purchase price of American Bancshares was approximately $55
million in a stock-for-stock, tax-free exchange. The transaction
was accounted for as a pooling of interests and closed on March
20, 2000.
Gold Banc shareholders approved the acquisition of American
Bancshares at a special meeting on March 13, 2000, with
10,173,637 votes in favor, 608,764 votes against, and 6,745,517
abstentions or broker non-votes.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock, par value $1.00 per share,
trades on the NASDAQ National Market tier of The NASDAQ Stock
Market under the symbol "GLDB."
Information relating to market prices of common stock and
cash dividends declared on common stock is set forth in the table
below.
MARKET PRICE
CASH
HIGH LOW DIVIDENDS
1998 QUARTERS
First $13.38 $11.63 $0.015
Second 22.75 12.50 0.02
Third 21.75 14.00 0.02
Fourth 17.25 13.00 0.02
1999 QUARTERS
First $16.25 $12.80 $0.02
Second 16.38 11.88 0.02
Third 13.88 9.75 0.02
Fourth 11.75 8.38 0.02
As of March 24, 2000, there were approximately 1,600 holders
of record of the Company's common stock.
On December 31, 1999, the Company issued 516,800 shares of
its common stock in an unregistered stock offering in connection
with its acquisition of DSP Investments, Ltd. (the parent company
of Linn County Bank). The sale was completed in reliance on the
exemption from the registration requirements provided by Section
4(2) of the Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
This selected consolidated information should be read in
conjunction with the consolidated financial statements of the
Company and notes beginning on page 47.
AT OR FOR THE YEARS ENDED
DECEMBER 31,
1999 1998 1997 1996 1995
(IN THOUSANDS EXCEPT SHARE DATA AND RATIOS)
EARNINGS
Net interest income $41,087 $35,608 $27,556 $20,370 $17,233
Provision for possible loan losses 1,602 2,781 2,130 1,262 1,812
Non-interest income 18,067 8,778 4,753 4,179 3,322
Non-interest expense 42,746 28,079 17,478 16,047 14,118
Income taxes 5,003 1,607 2,827 2,334 1,520
Net earnings 9,803 11,919 9,874 4,906 3,105
Adjusted net earnings $12,856 9,122 $8,295 4,906 $3,105
FINANCIAL POSITION
Total assets $1,407,379 $1,111,356 $824,464 $632,561 $532,044
Loans receivable, net 934,017 723,364 545,531 408,258 321,866
Allowance for loan losses 12,233 10,752 7,736 5,322 4,486
Goodwill 36,890 13,328 3,205 3,257 3,409
Investment securities 276,580 229,520 164,535 148,637 140,984
Deposits 1,086,537 926,687 697,163 549,507 466,327
Long-term debt 72,235 49,761 35,174 7,074 14,973
Guaranteed preferred beneficial
interest in Company debentures 66,300 28,750 --- --- ---
Stockholders' equity $87,014 $83,811 $66,566 $53,120 $28,875
PER SHARE DATA
Net income per share - diluted $ 0.57 $ 0.71 $ 0.64 $ 0.45 $ 0.30
Adjusted net income per share -
diluted 0.75 0.55 0.54 0.45 0.30
Book value per share 4.92 4.88 4.19 3.47 2.69
Cash dividends declared $ 0.08 $ .075 $ .045 $ --- $ ---
Average shares outstanding 17,237 16,707 15,522 11,237 10,871
RATIOS
Return on average assets 0.82% 1.22% 1.35% 0.85% 0.65%
Adjusted return on average assets 1.07% .93% 1.13% 0.85% 0.65%
Return on average equity 11.15% 15.14% 15.56% 13.63% 10.93%
Adjusted return on average equity 14.63% 11.59% 13.07% 13.63% 10.93%
Dividend payout 14.04% 0.56% 7.03% -- ---
Net interest margin 3.83% 4.11% 4.14% 3.95% 3.99%
Allowance for loan losses to non-
performing loans 351.62% 290.59% 673.28% 752.76% 227.02%
Non-performing assets to total assets .39% .47% .23% .12% .41%
Non-performing loans to total loans .37% .50% .21% .17% .61%
Net loan charge-offs to average loans .24% .21% .10% .12% .34%
Leverage ratio 6.62% 8.80% 11.00% 8.14% 5.27%
Adjusted numbers for 1999 represent recurring income without
one-time consolidation/repositioning expense, and 1998 and
1997 amounts include pro forma adjustments for taxes related
to Subchapter S earnings for Citizens Bank of Tulsa.
Prior to the second quarter of 1997, the Company had not
paid cash dividends on shares of its common stock. The
dividend payout ratio is computed using dividends paid by
the Company and does not include dividends paid by
subsidiaries acquired in pooling of interests transactions.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS GOLD BANC CORPORATION, INC.
AND SUBSIDIARIES
The following discussion of financial condition and results
of operations should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto, which
are included elsewhere in this report.
GENERAL
The Company provided community banking and related financial
services at 35 locations in Kansas, Oklahoma and Missouri as of
December 31, 1999. Geographic markets include Johnson County,
Kansas, an affluent suburb in the Kansas City metropolitan area,
Tulsa, Oklahoma, a growing city with a strong small-business
sector and a number of smaller cities.
The Company has focused on growth of its Banks' lending and
other services by cultivating relationships with small businesses
and other clients. The Company has expanded through a strategy of
internal growth supplemented by community bank acquisitions that
are believed to be accretive to earnings and stockholders'
equity. The Company also has taken steps to offer traditional and
on-line banking and non-bank financial services to customers of
its Banks. During 1999, the Company acquired one bank and two non-
bank subsidiaries. During 1998, the Company acquired six banks
and two non-bank subsidiaries.
The following table lists the Company's Banks' ("Banks")
total assets (in millions of dollars) as of December 31, 1999,
communities served, number of offices and year acquired:
TOTAL LOCATION AND YEAR
BANK ASSETS NUMBER OF OFFICES ACQUIRED
Gold Bank $452.9 Johnson County, KS-4 1978
Marysville, KS-2
Kansas City, MO-1 1999
Lee's Summit, MO-1 1999
Citizens Bank of Tulsa $293.9 Tulsa, OK-3 1998
Peoples National Bank $132.6 Clay Center, KS-1 1997
Concordia, KS-2
Washington County, KS-2
First State Bank and
Trust Company $125.7 Pittsburg, KS-2 1998
Provident Bank, f.s.b. $ 87.9 St. Joseph, MO-2 1994
Citizens State Bank
and Trust Co. $ 69.1 Seneca, KS-2 1985
Farmers National Bank $ 54.3 Decatur County, KS-2 1997
Farmers State Bank $ 59.9 Sabetha, KS-2 1998
First National Bank
in Alma $ 32.1 Alma, KS-1 1998
Peoples State Bank of
Colby $ 27.7 Thomas County, KS-2 1998
Linn County Bank $ 61.5 Linn County, KS-3 1999
On January 6, 2000, these banks were merged into Gold
Bank, Leawood, Kansas to create one state-wide charter.
On March 23, 2000, Linn County Bank was merged with and
into Gold Bank.
The following table lists non-bank subsidiaries of the
Company, which offer financial services to their own clients and
to bank customers through the offices of the Banks:
HEADQUARTERS YEAR
NON-BANK SUBSIDIARY SERVICE FOCUS LOCATION ACQUIRED
Midwest Capital Management, Inc. Broker/dealer Kansas City, MO 1998
The Trust Company Trust accounts St. Joseph, MO 1998
Gold Banc Financial Services, Inc. Insurance Marysville, KS -
CompuNet Engineering, Inc. Information technology Lenexa, KS 1999
and e-Commerce
Gold Bank Mortgage, Inc. Mortgage Kansas City, MO 1999
Subsequent to December 31, 1999, the Company completed three
previously announced acquisitions. First Business Bancshares,
CountryBanc Holding Company and American Bancshares were acquired
in business combinations to be accounted for as poolings of
interest. In addition, one previously announced acquisition,
Union Bancshares, Ltd., was terminated. The Company incurred
direct transaction costs aggregating approximately $11.9 million
in connection with the four transactions described above. Such
cost will be charged to expense in the quarter ending March 31,
2000.
MARKETS
The Company is headquartered in Johnson County, Kansas,
along with Gold Bank, our lead bank. Johnson County is a suburban
community near Kansas City. Johnson County has a more
competitive banking environment than the Company's smaller
markets, but its robust economic growth has enabled Gold Bank to
rapidly grow its loans and deposits in the county. Gold Bank has
four offices in growing areas of Johnson County. This presence in
Johnson County accounted for approximately 21% of the Company's
total assets at year-end 1999.
The Company entered the Tulsa, Oklahoma, market in 1998 with
the acquisition of Citizens Bank of Tulsa. Citizens serves a
rapidly growing area in southeastern Tulsa, a light-industrial
district that is home to more than 5,000 small businesses, and a
mature residential area of Tulsa. A third office was opened in a
developing residential area of south Tulsa during the second
quarter of 1999. Citizens Bank of Tulsa accounted for
approximately 23% of the Company's total assets at year-end 1999.
Other local markets where the Company operates generally did
not experience the level of growth seen in Johnson County and
Tulsa, but their economies were sound, with a mix of services,
manufacturing and agriculture-related industries. Each of the
local markets is generally a county seat and the Company's
locations serve both that city and the surrounding area including
Clay Center, Kansas, in north-central Kansas with 26,000
residents, Pittsburg, Kansas, located in a county of 36,000
people whose economy revolves around a state university and
regional trade for southeast Kansas and St. Joseph, Missouri, a
metropolitan area with 97,000 residents.
Financial services, including traditional and on-line
banking, trust, mortgage and investments, are offered to current
customers of the Banks, either directly through representatives
located in bank offices or through telecommunication links with
the non-bank offices.
INFLUENCES ON EARNINGS
The Company's net income depends upon the combined results
of operations of the Banks, each of which conducts a commercial
and consumer banking business by attracting deposits from the
general public and deploying those funds to earning assets. In
addition, the non-bank subsidiaries contribute income from
management fees and commissions.
Each Bank's profitability depends primarily on net interest
income, which is interest income on interest-earning assets less
interest expense on interest-bearing liabilities. Interest-
earning assets include loans, investment securities and other
earning assets, such as Federal Funds sold. Interest-bearing
liabilities include customer deposits, time and savings deposits
and other borrowings such as Federal Funds purchased, short-term
borrowings and long-term debt, including junior subordinated
deferrable interest debentures. Besides the balances of interest-
earning assets and interest-bearing liabilities, net interest
income is affected by each Bank's interest rate spread. This
spread is the difference between the Bank's average yield
on interest-earning assets and the average rate paid on interest-
bearing liabilities. The interest rate spread is impacted by
changes in interest rates, deposit flows and loan demand, among
other factors.
The levels of non-interest income and non-interest expense
also affect the Company's profitability. A significant portion of
the Company's revenue is non-interest income of the Banks and non-
bank subsidiaries, consisting of investment trading fees and
commissions, service fees, gains on the sale of mortgage loans
and investment securities, and other fees. Non-interest expense
consists of compensation and benefits, occupancy related
expenses, deposit insurance premiums, expenses of opening bank
offices, acquisition-related expenses and other operating
expenses. The Company's profitability also is affected by the
effective tax rate, the Banks' provision for loan losses, and
various non-recurring items.
RESULTS OF OPERATIONS
Overview
For the year ended December 31, 1999, the Company acquired a
community bank, a technology company and a mortgage company. The
acquisitions were accounted for as purchase transactions. Total
consideration paid for the 1999 acquisitions using the purchase
method was $27.6 million, consisting of $22.9 million of cash,
notes payable, and 516,800 shares of common stock.
For the year ended December 31, 1998, the Company acquired
six banks and two non-bank companies with assets aggregating $491
million. These acquisitions were accounted for as pooling-of-
interests and purchase transactions. Total consideration paid for
acquisitions using the purchase method was $22.4 million,
consisting of cash of $12.5 million and 1,292,000 shares of
common stock.
Net earnings for 1999 totaled $9.8 million, or $0.57 per
share. Excluding one-time expenses incurred to consolidate the
banks located in Kansas into one statewide organization, net
earnings were $12.9 million, or $0.75 per share. Net earnings
for 1998 totaled $11.9 million, or $0.71 per share. Net earnings
for 1997 totaled $9,874,000, or $0.64 per share.
Citizens Bancorporation, Inc., formerly the parent company
of Citizens Bank of Tulsa and one of the companies acquired in
1998 using the pooling-of-interests method, was a Subchapter S
Corporation prior to its acquisition. As a Subchapter S
Corporation, Citizens was not subject to tax on its earnings; the
earnings were included in the tax returns of Citizens'
stockholders. Consolidated net earnings and per share results for
1998 and 1997, as set forth above, exclude taxes on Citizens'
earnings. Pro forma net earnings and per share earnings as if
Citizens had been subject to income taxes for 1998 and 1997 were
$9,122,000 and $0.55 per share, and $8,295,000 and $0.54 per
share, respectively.
Net earnings for 1999, excluding the one-time expenses
described above, increased $3.8 million over 1998 pro forma net
earnings as a result of increased net interest income of $5.5
million, decreased provisions for loan losses of $1.2 million and
increased other income of $9.3 million, offset by increased non-
interest expense of $10.1 million and increased income tax
expense of $2.1 million.
Pro forma net earnings for 1998 increased $827,000 over pro
forma net earnings for 1997 as a result of increased net interest
income of $8.1 million and increased other income of $4 million,
offset by increased provisions for loan losses of $651,000 and
increased other expense of $10.6 million.
NET INTEREST INCOME
The following table presents the Company's average balances,
interest income and expense on a tax equivalent basis, and the
related yields and rates on major categories of the Company's
interest-earning assets and interest-bearing liabilities for the
periods indicated:
YEAR ENDED DECEMBER 31,
1999 1998 1997
Average Interest Average Average Interest Average Average Interest Average
Balance Income/ Rate Balance Income/ Rate Balance Income/ Rate
Expense Earned/ Expense Earned/ Expense Earned/
Paid Paid Paid
(Dollars in Thousands)
Assets:
Loans, net $797,874 $72,753 9.12% $642,598 $61,017 9.50% $489,314 $44,977 9.19%
Investment securities-
taxable 207,330 12,264 5.92% 167,971 9,724 5.79% 138,324 7,670 5.55%
Investment securities-
nontaxable 41,532 3,165 7.62% 28,606 2,100 7.34% 22,097 1,662 7.52%
Other earning assets 52,558 2,758 5.25% 43,619 3,069 7.03% 30,037 1,787 5.95%
Total earning assets 1,099,204 90,940 8.27% 882,794 75,910 8.60% 679,772 56,096 8.25%
Noninterest-earning
assets 100,911 93,102 53,630
Total assets $1,200,205 $975,896 $733,402
Liabilities and
Stockholders' Equity:
Savings deposits and
interest-bearing
checking $ 331,866 $10,653 3.21% $269,639 $9,332 3.46% $202,470 $6,614 6.27%
Time deposits 534,799 28,392 5.31% 460,841 25,599 5.55% 368,339 19,561 5.31%
Short-term borrowings 28,983 1,945 6.71% 13,448 751 5.59% 21,726 1,281 5.89%
Long-term borrowings 108,533 7,803 7.19% 59,110 3,906 6.61% 6,950 519 7.47%
Total interest-bearing
liabilities 1,004,181 48,793 4.86% 803,038 39,588 4.93% 599,485 27,975 4.67%
Non-interest-bearing
liabilities 108,138 94,117 70,440
Stockholders' equity 87,886 78,741 63,477
Total liabilities and
stockholders' equity $1,200,205 $975,896 $733,402
Net interest income $42,147 $36,322 $28,121
Net interest spread 3.41% 3.67% 3.58%
Net interest margin 3.83% 4.11% 4.14%
Non-accruing loans are included in the computation of average
balance.
Yield is adjusted for the tax effect of tax exempt
securities. The tax effects in 1999, 1998 and 1997 were
$1,060,000, $714,000 and $565,000, respectively.
The Company includes loan fees in interest income. Such fees
totaled $3,195,000, $2,782,000 and $2,146,000 in 1999, 1998 and
1997, respectively.
The net interest margin on average earning assets is the net
interest income divided by average interest-earning assets.
For 1999, total interest income increased $14.7 million, or
19.5%. Interest income on loans increased $11.7 million, or
19.2%. Of the $14.7 million increase, $1.8 million is attributed
to purchase transactions completed during 1999. The remaining
$12.9 million increase is primarily due to increased loan volume
in 1999 at certain Banks. For 1999, the average loan balance
increased $155.3 million, or 24.2%, and the yield earned on loans
decreased from 9.50% in 1998 to 9.12% in 1999. Interest income on
investments increased $3.3 million, or 29.3%. For 1999, the
average investment balance (taxable and non-taxable) increased
$52.3 million, or 26.6%. Interest income on non-taxable
investments was positively impacted by a slight increase in the
yield earned on non-taxable investments, 7.62% in 1999 compared
to 7.34% in 1998.
For 1998, total interest income increased $19.7 million, or
35.4%. Interest income on loans increased $16.0 million, or
35.7%, primarily due to increased loan volume in 1998. For 1998,
the average loan balance increased $153.3 million, or 31.3%, and
the yield earned on loans increased from 9.19% in 1997 to 9.50%
in 1998.
Total interest expense was $48.8 million for 1999 compared
to $39.6 million for 1998, a 23.3% increase. Of the $9.2 million
increase, $1.1 is attributed to interest expense of entities
acquired in purchase transactions in 1999, with the remainder
attributed to internal growth and increased rates paid. For 1999,
interest expense on savings and interest-bearing checking
increased $1.3 million, or 14.2%, primarily as a result of an
increase in the average balance of such deposits of $62.2
million, or 23.1%. Of the increase in the average balances of all
types of deposits, $3.1 million, or 0.3%, is attributed to the
entities acquired in purchase transactions in 1999. Interest
expense on time deposits increased $2.8 million, or 10.9%,
primarily as a result of an increase in the average balance of
such deposits of $74.0 million, or 16.1%. Interest expense on
combined short-term and long-term borrowings increased $5.1
million, or 109.3%, primarily as a result of an increase in the
average balance of such borrowings of $65.0 million, or 89.5%, in
1999 compared to 1998.
Total interest expense was $39.6 million for 1998, compared
to $28.0 million for 1997, a 41.5% increase. For 1998, interest
expense on savings and interest-bearing checking increased $2.7
million, or 41.1%, primarily as a result of an increase in the
average balance of such deposits of $67.2 million, or 33.2%.
Interest expense on time deposits increased $6.0 million, or
30.9%, primarily as a result of an increase in the average
balance on such deposits of $92.5 million, or 25.1%, coupled with
an increase in the rate paid on such deposits from 5.31% in 1997
to 5.55% in 1998.
As a result of the changes described above, net interest
income increased $5.5 million, or 15.4%, for 1999 compared to
1998 and increased $8.1 million, or 29.2%, for 1998 compared to
1997.
The following table summarizes the changes in net interest
income on a tax equivalent basis, by major category of interest-
earning assets and interest-bearing liabilities, identifying
changes related to volumes and rates. Changes not solely due to
volume or rate changes are allocated to rate. Management believes
this allocation method, applied on a consistent basis, provides
meaningful comparisons between periods.
YEAR ENDED DECEMBER 31
1999 COMPARED 1998 COMPARED
TO 1998 TO 1997
AVERAGE TOTAL AVERAGE TOTAL
VOLUME RATE CHANGES VOLUME RATE CHANGES
Interest income: (Dollars in Thousands)
Loans $14,751 $(3,015) $11,736 $ 14,087 $ 1,953 $16,040
Investment securities-taxable 2,279 260 2,539 1,645 409 2,054
Investment securities-nontaxable 949 117 1,066 489 (51) 438
Other earning assets 628 (939) (311) 809 473 1,282
Total interest income $18,607 $(3,577) $15,030 $ 17,030 $ 2,784 $19,814
Interest expense:
Savings deposits and
interest-bearing checking $ 2,153 $(832) $ 1,321 $ 2,197 $ 521 $ 2,718
Time deposits 4,105 (1,312) 2,793 4,911 1,127 6,038
Short-term borrowings 868 326 1,194 (488) (42) (530)
Long-term borrowings 3,267 630 3,897 3,897 (510) 3,387
Total interest expense $10,393 (1,188) 9,205 $10,517 $ 1,096 $ 11,613
Increase (decrease) in
net interest income $ 8,214 $(2,389) $5,825 $6,513 $ 1,688 $ 8,201
The Company includes loan fees in interest income. Such fees totaled
$3,195,000, $2,782,000 and $2,146,000 in 1999, 1998, and 1997, respectively.
PROVISION FOR LOAN LOSSES
An integral part of merging credit portfolios in the
Company's mergers requires converting the purchased banks' credit
culture and credit standards to that of the Company. Inherent
with this implementation of these processes and procedures is a
potential for increased credit risk. To prepare for this risk,
the Company generally increases its provisions to prepare for any
credit exposure. It is anticipated, that as these merged banks
adopt and implement these procedures credit risk should decline,
requiring lower provisions.
The provision for loan losses was $1.6 million for 1999
compared to $2.8 million for 1998, a 42.9% decrease. This
decrease in the provision is primarily the result of an overall
improvement in the quality of the loan portfolio, as the result
of implementation of the Company's credit processes and
procedures in Banks acquired prior to 1999. Improvement in
credit quality is evidenced by a decrease in non-performing loans
to $3.5 million as of December 31, 1999 as compared to $3.7
million at December 31, 1998 despite a $177 million (24.2%)
increase in total loans.
The provision for loan losses was $2.8 million for 1998
compared to $2.1 million for 1997, a 33.3% increase. The increase
in the provision was primarily the result of a $177.8 million, or
32.6%, increase in total loans outstanding at December 31, 1998
compared to the end of 1997, and in preparation for any potential
credit risk, while implementing credit procedures in the banks
acquired during 1998.
NON-INTEREST INCOME
The following table presents the components of the Company's
non-interest income for the years indicated:
YEAR ENDED DECEMBER 31
1999 1998 1997
(Dollars in Thousands)
Service charges on deposit accounts $ 4,124 $ 3,275 $ 2,446
Gain on sale of loans 3,253 1,106 679
Gain on sale of securities 170 94 116
Insurance premium income 100 65 99
Fiduciary income 1,637 531 405
Investment trading fees and
commissions 3,293 3,265 -
Other non-interest income 5,490 442 1,008
Total non-interest income $ 18,067 $ 8,778 $ 4,753
Non-interest income as a percentage
of average total assets 1.51% 0.90% 0.65%
Non-interest income was $18.1 million for 1999 compared to
$8.8 million for 1998, a 105.7% increase. Service charges on
deposit accounts increased $0.8 million, or 25.9%, in 1999 as a
result of a larger customer base. Gain on sale of loans increased
$2.1 million, or 194.1% in 1999, due to the acquisition of
Regional Investment Company in August 1999. The increased non-
interest income is due primarily to revenues of approximately
$5.0 million earned by CompuNet Engineering subsequent to its
acquisition in March 1999. Non-interest income was $8.8 million
for 1998 compared to $4.8 million for 1997, an 84.7% increase.
For 1998, the $4.0 million increase in non-interest income is
primarily due to investment trading fees and commissions as a
result of the Company's acquisition of Midwest Capital
Management, Inc. in January 1998.
NON-INTEREST EXPENSE
The following table presents the components of non-interest
expense for the years indicated:
YEAR ENDED DECEMBER 31
1999 1998 1997
(Dollars in Thousands)
Salaries and employee benefits $ 19,969 $ 13,307 $ 8,884
Net occupancy expense 3,910 2,482 2,145
Deposit insurance expense 185 103 95
Professional services 2,315 3,065 1,340
Data processing expense 1,744 1,115 677
Supplies 840 667 510
Telephone 626 326 206
Postage 561 374 253
Advertising/promotion 1,028 1,124 728
Other 11,568 5,516 2,640
Total non-interest expense $ 42,746 $ 28,079 $ 17,478
Efficiency Ratio 74.43% 67.50% 58.34%
Total non-interest expense was $42.7 million for 1999
compared to $28.1 million for 1998, a 52.0% increase. The
increase is partially attributable to an increase in salaries and
employee benefits of $6.7 million, or 50.1%, in 1999. Other non-
interest expenses increased $6.1 million, or 109.7%, as a result
of consolidation/repositioning expense and the expenses of the
three companies acquired in 1999. Net occupancy expense
increased $1.4 million or 57.5%.
Total non-interest expense was $28.1 million for 1998
compared to $17.5 million for 1997, representing a 60.6%
increase. The increase is primarily attributable to an increase
in salaries and employee benefits of $4.4 million, or 49.8%, in
1998. Professional services increased $1.7 million, or 128.7%,
as a result of legal and accounting expenses associated with
numerous acquisitions completed in 1998 and the profit
improvement study commissioned by the Company at a cost of
approximately $700,000. Net occupancy expense increased $337,000
or 15.7%, due to the purchase transactions completed during 1998.
The increase in other non-interest expense is primarily
attributed to the purchase transactions completed during 1998.
INCOME TAX EXPENSE
Income tax expense was $5.0 million for 1999 compared to
$1.6 million for 1998, a $3.4 million, or 212.5%, increase.
Income tax expense for 1997 was $2.8 million, $1.2 million
greater than 1998. The effective tax rates for 1999, 1998 and
1997 were 33.8%, 11.9%, and 22.3% respectively. The 1998 and 1997
effective tax rate differs from the expected rate of 34% due
primarily to the earnings of Citizens Bancorporation, Inc., which
as a Subchapter S Corporation, was not subject to tax prior to
the acquisition by the Company. In addition, the Company
recognized a $500,000 deferred tax benefit in 1998 resulting from
timing differences upon the conversion of Citizens back to a "C"
Corporation on the date of acquisition by the Company. Pro forma
tax expense for 1998 and 1997 if Citizens had not been a
Subchapter S Corporation, would have been $4,404,000 and
$4,406,000 yielding a tax rates of 32.6% and 34.7% respectively.
ASSET/LIABILITY MANAGEMENT
Asset/liability management refers to management's efforts to
minimize fluctuations in net interest income caused by interest
rate changes. This is accomplished by managing the repricing of
interest rate sensitive interest-earning assets and interest-
bearing liabilities. An interest rate sensitive balance sheet
item is one that is able to reprice quickly, through maturity or
otherwise. Controlling the maturity or repricing of an
institution's assets and liabilities in order to minimize
interest rate risk is commonly referred to as gap management.
Close matching of the repricing of assets and liabilities will
normally result in little change in net interest income when
interest rates change. A mismatched gap position will normally
result in greater changes in net interest income as interest
rates change.
Along with internal gap management reports, the Company and
the Banks use an asset/liability modeling methodology to analyze
each Bank's current gap position. That methodology simulates the
Banks' asset and liability base and projects future net interest
income under several interest rate assumptions. The Company
strives to maintain an aggregate gap position, so that changes in
interest rates will not negatively affect net interest income by
more than 10% in any twelve-month period.
The Company has not engaged in derivatives or hedging
transactions to synthetically alter net interest income.
The following table indicates that at December 31, 1999, in
the event of a sudden and sustained increase in prevailing market
rates, the Company's net interest income would be expected to
increase, while a decrease in rates would indicate a decrease in
income.
Changes in NET INTEREST PERCENT
Interest Rate INCOME CHANGE CHANGE
200 basis point rise $43,344,700 $ 283,700 0.66%
100 basis point rise 43,370,500 309,500 0.72%
Base rate scenario 43,061,000 --- ---
100 basis point decline 41,741,100 (1,319,900) -3.07%
200 basis point decline 39,876,400 (3,184,600) -7.40%
The following table sets forth the maturities of interest-
earning assets and interest-bearing liabilities outstanding at
December 31, 1999.
INTEREST RATE SENSITIVITY
OVER
0-3 4 MONTHS 1 TO 5 OVER 5
MONTHS TO 12 MONTHS YEARS YEARS TOTAL
(Dollars in Thousands)
Rate Sensitive Assets:
Loans $412,091 $148,499 $333,314 $ 52,345 $ 946,250
Investment securities 23,659 34,335 152,401 66,185 276,580
Other interest-bearing
assets 27,597 - - - 27,597
Total rate-sensitive
assets $463,347 $182,834 $485,715 $118,530 $1,250,426
Rate Sensitive Liabilities:
Savings deposits and
interest-bearing
checking $339,630 $ - $ - $ - $ 339,630
Time deposits 172,749 272,347 166,142 4,794 616,032
Short-term borrowings 54,745 8,175 - - 62,920
Long-term borrowings 25,626 15,064 28,563 85,726 154,979
Total rate-sensitive
liabilities $592,750 $295,586 $194,705 $ 90,520 $1,173,561
Net gap $(129,403) $(112,752) $291,010 $ 28,010 $ 76,865
Cumulative gap $(129,403) $(247,167) $ 47,426 $ 76,865
Cumulative ratio of
interest-earning assets
to interest-bearing
liabilities 78.17% 72.74% 104.51% 106.55%
Ratio of cumulative
gap to interest-earning
assets -27.93% -38.25% 4.19% 6.15%
The cumulative gap value indicated above indicates that a
rise in interest rates would have a positive effect on net
interest income. The Company has the ability to reprice the
rates on savings deposits and interest bearing checking.
Historically, the rates on these deposits have not been repriced
when rates have had small movements.
FINANCIAL CONDITION
LENDING ACTIVITIES
Commercial Loans. This category includes loans to service,
retail, wholesale and light manufacturing businesses, including
agricultural service businesses. Commercial loans were $302.5
million as of December 31, 1999, or 32.0%, of total loans. The
proportion of commercial loans increased in 1999, due primarily
to an ongoing expansion of lending activities in the Johnson
County, Kansas and Tulsa, Oklahoma markets.
Real Estate Loans. Real estate loans represent the largest
class of loans of the Company. The Company categorizes real
estate loans as follows:
I) Commercial. Commercial real estate loans totaled $167.5
million at December 31, 1999, compared to $170.2 million at
December 31, 1998, a decrease of $2.7 million, or 1.6%.
II) Construction. Construction lending consists primarily of
single family construction. Construction loans increased 63.3%
primarily due to an increase in such lending in Johnson County,
Kansas.
III) 1 to 4 Family Residential. Residential loans totaled $185.7
million at December 31, 1999, compared to $143.8 million at
December 31, 1998, an increase of $42.0 million, or 29.2%. Loans
in this category consist primarily of owner-occupied residential
loans. Since December 31, 1996, the mix of loans has
shifted from fixed-rate loans to variable-rate products. The
Company has elected to retain selected variable-rate real estate
loans, which has resulted in the loan growth in this category.
IV) Agricultural. This category consists of loans secured by
agricultural real estate. Agricultural loans totaled $48.6
million at December 31, 1999, compared to $38.1 million at
December 31, 1998, an increase of $10.5 million, or 27.6%. The
growth is almost entirely attributable to the acquisition of Linn
County Bank in 1999.
V) Held for Sale. Loans held for sale represent residential
loans intended to be sold to secondary investors, and are in the
process of being delivered; and student loans held for sale. The
increase of 649.2% is due to the acquisition of Gold Banc
Mortgage during 1999.
Agricultural Loans. Agricultural loans are typically made to
farmers, small corporate farms, and feed and grain dealers.
Agricultural loans were $51.7 million as of December 31, 1999,
compared to $54.7 million as of December 31, 1998, a decrease of
$3.0 million, or 5.5%. Agricultural loans as a percent of total
loans decreased from 7.5% in 1998 to 5.5% in 1999.
Consumer and Other Loans. Loans classified as consumer and
other loans include automobile, residential, other personal loans
and credit card loans. The majority of these are installment
loans with fixed interest rates. Consumer and other loans were
$66.9 million as of December 31, 1999, compared to $79.9 million
as of December 31, 1998, a decrease of $13.0 million, or 16.3%.
Consumer and other loans represented 7.1% of total loans as of
December 31, 1999, a decrease from 10.9% as of December 31, 1998.
The following table presents the balance of each major
category of the Company's loans as of December 31 of each year.
1999 1998 1997 1996 1995
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
(Dollars in Thousands)
Commercial $302,451 31.96% $191,325 26.06% $152,541 27.57% $109,745 26.54% $82,729 25.35%
Real estate construction 82,797 8.75% 50,696 6.91% 61,967 11.20% 38,608 9.34% 26,024 7.97%
Real estate 401,778 42.46% 352,072 47.96% 243,884 44.08% 195,556 47.28% 146,031 44.75%
Loans held for sale 40,643 4.30% 5,425 0.74% 4,359 0.79% 4,934 1.19% 9,631 2.95%
Agricultural 51,695 5.46% 54,698 7.45% 37,753 6.82% 21,805 5.27% 20,798 6.37%
Consumer and other loans 66,886 7.07% 79,900 10.88% 52,763 9.54% 42,932 10.38% 41,139 12.61%
Total loans 946,250 100.00% 734,116 100.00% 553,267 100.00% 413,580 100.00% 326,352 100.00%
Less allowance for loan 12,233 10,752 7,736 5,322 4,486
losses
Total $934,017 $723,364 $545,531 $408,258 $321,866
Includes commercial real estate loans, agriculture real estate loans and 1
to 4 family residential real estate loans.
The following table sets forth the repricing of portfolio
loans outstanding at December 31, 1999.
4 MONTHS OVER 1 TO OVER 5
0-3 MONTHS TO 1 YEAR 5 YEARS YEARS TOTAL
(Dollars in Thousands)
Loan category:
Commercial $172,618 $ 36,833 $82,048 $10,952 $302,451
Real Estate Construction 71,883 2,756 7,809 349 82,797
Real Estate 82,794 79,383 206,524 33,077 401,778
Loans Held for Sale 40,643 - - - 40,643
Agricultural Loans 24,730 18,625 7,755 585 51,695
Consumer and Other 19,424 10,902 29,178 7,382 66,886
Total Loans $412,092 $148,499 $ 333,314 $52,345 $946,250
As of December 31, 1999, loans repricing after one year
include approximately $285 million in fixed rate loans and $101
million in floating or adjustable rate loans.
ASSET QUALITY
The Company's asset quality compares favorably to its peer
institutions. The Company follows regulatory guidelines in
placing loans on a non-accrual basis and places loans with
doubtful principal repayment on a non-accrual basis, whether
current or past due. The Company considers non-performing assets
to include all non-accrual loans, other loans past due 90 days or
more as to principal and interest (with the exception of those
loans which in management's opinion are well collateralized or
exhibit other characteristics suggesting they are collectible),
other real estate owned ("OREO") and repossessed assets. The
Company does not return a loan to accrual status until it is
brought current with respect to both principal and interest and
future principal payments are no longer in doubt. When a loan is
placed on non-accrual status, any previously accrued and
uncollected interest income is reversed against current income.
Restructured and impaired loans are considered insignificant
for all years presented. The Company would have recorded
additional interest in the amounts of $328,000, $197,000 and
$44,000 for the years ended December 31, 1999, 1998 and 1997,
respectively, if non-accrual loans had been current during these
periods.
Non-performing assets are summarized in the following table:
1999 1998 1997 1996 1995
Loans:
Loans 90 days or more past due $ 960 $ 882 $ 102 $ 335 $ 87
still accruing
Non-accrual loans 2,519 2,818 1,047 372 1,889
Non-performing loans 3,489 3,700 1,149 707 1,976
Other assets 93 78 44 5 39
Other real estate owned 1,925 1,484 723 70 170
Non-performing assets $5,497 $ 5,262 $ 1,916 $ 782 $ 2,185
Non-performing loans as a
percentage of total loans 0.37% 0.50% 0.21% 0.17% 0.61%
Non-performing assets as a
percentage of total assets 0.39% 0.47% 0.23% 0.12% 0.41%
Non-performing assets as a
percentage of total
loans and OREO 0.58% 0.72% 0.35% 0.19% 0.67%
ALLOWANCE FOR LOAN LOSSES
The success of a bank depends to a significant extent upon
the quality of its assets, particularly loans. This is
highlighted by the fact that net loans are 66.4% of the Company's
total assets as of December 31, 1999. Credit losses are inherent
in the lending business. The risk of loss will vary with general
economic conditions, the type of loan being made, the
creditworthiness of the borrower over the term of the loan and
the quality of the collateral in the case of a collateralized
loan, among other things. Management maintains an allowance for
loan losses based on industry standards, management's experience,
historical experience, an evaluation of economic conditions and
regular reviews of delinquencies and loan portfolio quality.
Based upon such factors, management makes various assumptions and
judgments about the ultimate collectability of the loan portfolio
and provides an allowance for potential loan losses based upon a
percentage of the outstanding balances and for specific loans if
their ultimate collectability is considered questionable. Since
certain lending activities involve greater risks, the percentage
applied to specific loan types may vary.
The Company actively manages its past due and non-performing
loans in each Bank in an effort to minimize credit losses, and
monitors asset quality to maintain an adequate loan loss
allowance. Although management believes its allowance for loan
losses is adequate for each Bank and collectively, there can be
no assurance that the allowance will prove sufficient to cover
future loan losses. Further, although management uses the best
information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if
economic conditions differ substantially from the assumptions
used, or adverse developments arise with respect to non-
performing or performing loans. Accordingly, there can be no
assurance that the allowance for loan losses will be adequate to
cover loan losses or that significant increases to the allowance
will not be required in the future if economic conditions should
worsen. Material additions to the allowance for loan losses would
result in a decrease of the Company's net income and capital and
could result in the inability to pay dividends, among other
adverse consequences.
The allowance for loan losses on December 31, 1999, totaled
$12.2 million, or 1.29% of outstanding loans, compared to $10.8
million or 1.4% at December 31, 1998. Charge-offs were $2.7
million, recoveries were $761,000, and provisions charged to
expense were $1.6 million. In addition, allowance for loan losses
of acquired banks were $1.8 million. The allowance for loan
losses on December 31, 1998, totaled $10.8 million, a $3.0
million increase from the prior year. Charge-offs were $1.8
million, recoveries were $449,000, and provisions charged to
expenses were $2.8 million. In addition, allowance for loan
losses of acquired banks aggregated $1.6 million.
The following table sets forth activity in the Company's
allowance for loan losses during the periods indicated.
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
(Dollars in Thousands)
Total net loans outstanding
at the end of year $934,017 $723,364 $545,531 $408,258 $321,866
Average net loans
outstanding during the year 797,874 642,598 489,314 361,775 295,350
Allowance for loan losses,
beginning of year 10,752 7,736 5,322 4,486 3,678
Charge-offs:
Commercial 1,780 315 639 397 542
Real estate
Commercial 146 747 80 - -
Construction - 80 - 24 -
1 to 4 family residential 53 88 31 32 17
Agricultural - - - - -
Loans held for sale - - - - -
Total real estate 199 915 111 56 17
Agricultural 54 - 2 99 260
Consumer and other 679 583 253 195 444
Total charge-offs 2,712 1,813 1,005 747 1,263
Recoveries:
Commercial 337 131 351 98 10
Real estate
Commercial 34 21 29 - -
Construction - - - 11 -
1 to 4 family residential 56 11 5 7 5
Agricultural 10 53 20 100 53
Loans held for sale 5 - - - -
Total real estate 105 85 54 118 58
Agricultural 45 141 28 27 58
Consumer and other 274 92 48 78 133
Total recoveries 761 449 481 321 259
Net charge-offs 1,951 1,364 524 426 1,004
Provision charged to operations 1,602 2,781 2,130 1,262 1,812
Adjustments due to acquired
companies 1,830 1,599 808 - -
Allowance for loan losses, end
of year $12,233 $10,752 $7,736 $5,322 $4,486
Ratios:
Allowance as a percentage of
total loans 1.29% 1.46% 1.40% 1.29% 1.37%
Net charge-offs to average loans
outstanding 0.24% 0.21% 0.11% 0.12% 0.34%
Allowance as a percentage of
non-performing loans 351.62% 290.59% 673.28% 752.76% 227.02%
The following table sets forth the allocation of the
Company's allowance for loan losses among categories of loans as
of December 31, 1999:
PERCENT OF
LOANS
IN EACH
CATEGORY TO
AMOUNT TOTAL LOANS
(Dollars in Thousands)
Commercial $ 3,910 31.96%
Real estate construction 1,070 8.75%
Real estate 5,194 42.46%
Loans held for sale 525 4.30%
Agricultural 668 5.46%
Consumer and other 866 7.07%
Total $ 12,233 100.00%
INVESTMENT ACTIVITIES
The Company's investment portfolio serves three important
functions: First, it facilitates the adjustment of the balance
sheet's sensitivity to changes in interest rate movements;
second, it provides an outlet for investing excess funds; and
third, it provides liquidity. The investment portfolio is
structured to maximize the return on invested funds within
conservative risk management guidelines.
The portfolio is comprised primarily of available for sale
securities, which include U.S. Treasury securities, U.S.
government agency obligations, state municipal obligations,
Federal Reserve Bank stock, FNMA stock, and FHLB stock. The U.S.
government agency obligations include Federal Home Loan Mortgage
Corporation ("FHLMC"), FNMA notes and mortgage-backed securities,
FHLB notes and Government National Mortgage Association ("GNMA")
mortgage-backed securities. As of December 31, 1999, the
available for sale portfolio totaled $267.3 million, including a
net unrealized loss of $9.4 million.
The investment portfolio increased $47.1 million, or 20.5%,
during 1999. Of this increase, $22.4 million or 47.6% can be
attributed to purchase transactions completed in 1999, and $24.7
million of the increase is the result of increased activity at
certain Banks. The investment portfolio increased $65.0 million,
or 39.6%, during 1998.
The composition of the investment portfolio as of December
31, 1999 was 49.6% U.S. Treasury and agency securities, 17.7%
state and municipal securities, 25.2% mortgage-backed securities,
3.3% trading securities and 4.2% other securities. The comparable
distribution for December 31, 1998 was 46.3% U.S. Treasury and
agency securities, 16.6% state and municipal securities, 31.7%
mortgage-backed securities, 1.7% trading securities and 3.7%
other securities. The estimated maturity of the investment
portfolio on December 31, 1999 was 4 years. The average balance
of the investment portfolio as of December 31, 1999 represented
22.6% of average earning assets as compared to 22.2% on December
31, 1998.
The following table sets forth the composition of the
Company's investment portfolio at the dates indicated.
At December 31,
1999 1998 1997
(Dollars in thousands)
Securities held to maturity:
U.S. Treasury and other U.S. agencies and
corporations $ - $ - $ -
Obligations of states and political subdivisions 25 63 617
Mortgage-backed securities - - -
Total 25 $ 63 $ 617
Securities available for sale:
U.S. Treasury and other U.S. agencies and
corporations $ 137,220 $ 106,326 $ 106,375
Obligations of states and political subdivisions 48,974 38,085 19,683
Mortgage-backed securities 69,665 72,644 32,774
Trading 9,245 3,851 1,072
Other 11,451 8,551 4,014
Total investment securities $ 276,580 $ 229,520 $ 164,535
Held to maturity securities are carried on the
Company's books at amortized cost.
Available for sale securities are carried on the
Company's books at fair value.
Includes FHLB stock, Federal Reserve stock and FNMA
stock.
Trading securities are carried on the Company's books
at fair value.
The following table sets forth a summary of maturities in
the investment portfolio at December 31, 1999.
(AT MARKET VALUE)
OVER ONE YEAR OVER 5 YEARS
ONE YEAR OR LESS THROUGH 5 YEARS THROUGH 10 YEARS OVER 10 YEARS TOTAL
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
(Dollars in Thousands)
U.S. Treasury $19,886 5.79% $101,089 6.00% $15,737 6.67% $508 5.68% $137,220 6.05%
and other U.S.
agencies and
corporations
Obligations of 2,839 4.83% 11,102 4.56% 15,947 4.31% 19,111 4.65% 48,999 4.53%
states and
political
subdivisions
Mortgage-backed 430 5.68% 583 6.24% 3,479 5.78% 65,173 6.51% 69,665 6.47%
securities
Other 9,677 5.99% 435 6.18% 58 7.20% 1,281 6.21% 11,451 6.03%
Total $32,832 $113,209 $35,221 $86,073 267,335 5.88%
The above table does not include trading securities of $9,245 as
those securities do not have a stated yield or maturity.
DEPOSIT ACTIVITIES
Deposits are the major source of the Banks' funds for
lending and other investment purposes. In addition to deposits,
the Banks derive funds from interest payments, loan principal
payments, loan and securities sales, and funds from operations.
Scheduled loan repayments are a relatively stable source of
funds, while deposit inflows are significantly influenced by
general interest rates and money market conditions. The Banks
may use borrowings on a short-term basis, if necessary, to
compensate for reductions in the availability of other sources of
funds, or borrowings may be used on a longer-term basis for
general business purposes.
Deposits are attracted principally from within the Banks'
primary market area through the offering of a broad variety of
deposit instruments, including checking accounts, money market
accounts, savings accounts, certificates of deposit (including
jumbo certificates in denominations of $100,000 or more), and
retirement savings plans. The Banks have aggressively
attempted to obtain deposits in selected markets to increase
market share or meet particular liquidity needs. The Company has
not used brokered deposits and has not sought to attract deposits
outside its market areas.
Maturity terms, service fees and withdrawal penalties are
established by the Banks on a periodic basis. The determination
of rates and terms is predicated on funds transaction and
liquidity requirements, rates paid by competitors, growth goals
and federal obligations.
During 1999, average balances of non-interest bearing demand
deposits increased $13.9 million, or 16.2%; average balances of
savings and interest bearing deposits increased $62.2 million, or
23.1%; and average balances of time deposits increased $74.0
million, or 16.0%. As of December 31, 1999, the balance of total
deposits had increased $159.9 million compared to December 31,
1998. This increase is primarily due to increases of $49.9
million in time deposits less than $100,000 and $34.6 million in
savings and NOW accounts. Of the increase in year-end balances of
all deposits, $34.0 million, or 21.3%, is due to purchase
transactions completed during 1999. The remaining increase is
primarily the result of increased activity at certain Banks.
The following table sets forth the average balances and
weighted average rates for the Company's categories of deposits
at the dates indicated.
YEAR ENDED DECEMBER 31,
1999 1998 1997
% OF % OF % OF
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS
(Dollars in Thousands)
Non-interest bearing
demand $ 99,531 0.00% 10% $ 85,629 0.00% 10% $ 64,681 0.00% 10%
Savings deposits and
Interest-bearing demand 331,866 3.21% 35% 269,639 3.46% 33% 202,470 3.27% 32%
Time deposits 534,799 5.31% 55% 460,841 5.55% 57% 368,339 5.31% 58%
Total $966,196 100% $816,109 100% $635,490 100%
The Company does not have a concentration of deposits from
any one source, the loss of which would have a material adverse
effect on its business. Management believes that substantially
all of the Banks' depositors are residents in their respective
primary market areas.
The following table sets forth a summary of the deposits of
the Company at the dates indicated:
DECEMBER 31,
1999 1998 1997
(Dollars in Thousands)
Non-interest-bearing $ 130,875 $101,287 $ 76,846
Interest-bearing:
Savings and NOW accounts 339,630 305,065 226,366
Time accounts less
than $100,000 456,016 406,087 314,657
Time accounts greater
than $100,000 160,016 114,248 79,294
Total deposits $ 1,086,537 $926,687 $697,163
The following table summarizes at December 31, 1999, the
Company's certificates of deposit of $100,000 or more by time
remaining until maturity. (Dollars in thousands)
Maturity Period:
Less than three months $65,786
Over three months
through six months 32,973
Over six months
through twelve months 36,204
Over twelve months 25,053
Total $160,016
The Company has no other time deposits in excess of
$100,000.
CAPITAL AND LIQUIDITY
Sources of Liquidity. Liquidity defines the ability of the
Company and the Banks to generate funds to support asset growth,
satisfy other disbursement needs, meet deposit withdrawals and
other fund reductions, maintain reserve requirements and
otherwise operate on an ongoing basis. The immediate liquidity
needs of the Banks are met primarily by Federal Funds sold, short-
term investments, deposits and the generally predictable cash
flow (primarily repayments) from each Bank's assets. Intermediate
term liquidity is provided by the Banks' investment portfolios.
The Banks also have established a credit facility with the FHLB,
under which the Banks are eligible for short-term advances and
long-term borrowings secured by real estate loans or mortgage-
related investments. The Company's liquidity needs and funding
are provided through non-affiliated bank borrowing, cash
dividends and tax payments from its subsidiary Banks. As
described in note 8 to the financial statements, the Company has
a $25 million line of credit with outstanding borrowings of $5
million at year-end.
Cash provided by operating activities for 1999 was $6.9
million, consisting primarily of net earnings reduced by non-cash
items. Cash used in investing activities was $195.9 million,
consisting primarily of increased loans of approximately $151.6
million. Investing activities were financed by deposits of
approximately $125.8 million and the proceeds of debentures
issued of approximately $37.6 million.
Capital. The Company and its subsidiaries actively monitor
their compliance with regulatory capital requirements. The
elements of capital adequacy standards include strict definitions
of core capital and total assets, which include off-balance sheet
items such as commitments to extend credit. Under the risk-based
capital method of capital measurement, the ratio computed is
dependent on the amount and composition of assets recorded on the
balance sheet and the amount and composition of off-balance sheet
items, in addition to the level of capital. Historically, the
Banks have increased core capital through retention of earnings
or capital infusions. The primary source of funds available to
the Company is dividends by the subsidiaries. Each Bank's
ability to pay dividends may be limited by regulatory
requirements. At December 31, 1999, the subsidiaries could pay
dividends of $33,069,000 without prior regulatory approval.
IMPACT OF INFLATION AND CHANGING PRICES
The primary impact of inflation on the operations of the
Company is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities
of a financial institution are monetary in nature. As a result,
changes in interest rates have a more significant impact on the
performance of a financial institution than do changes in the
general rate of inflation and changes in prices. Interest rate
changes do not necessarily move in the same direction or have the
same magnitude as changes in the prices of goods and services.
ACCOUNTING AND FINANCIAL REPORTING
The Financial and Accounting Standards Board (FASB) has
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging
activities. This statement requires that entities recognize all
derivatives as either assets or liabilities in the statement of
condition and measure such instruments at fair value. SFAS 133,
as amended must be implemented by the Company in 2001. The
adoption of the standards is not expected to have a significant
impact on the financial statements of the Company.
YEAR 2000 STATE OF READINESS
The Company's preparation for the date change from 1999 to
2000 began in 1997. All phases of preparation recognized by
FFIEC guidelines were addressed, and all suggested timelines were
met. The Company and each of its subsidiaries also met all
internal timelines.
Successful and satisfactory testing of all mission-critical
data processing and environmental systems was completed in a
timely manner. All systems were monitored through February 29,
2000 and continue to be monitored. No year 2000 problems have
been experienced by the Company.
The Company earlier identified risks associated with the
date change issue. Based upon the Company's experience to date,
risks going forward are considered minimal.
Expenses incurred by the Company were less than the figure
of $1,000,000 originally anticipated.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
ASSET/LIABILITY MANAGEMENT
Asset/liability management refers to management's efforts to
minimize fluctuations in net interest income caused by interest
rate changes. This is accomplished by managing the repricing of
interest rate sensitive interest earning assets and interest
bearing liabilities. An interest rate sensitive balance sheet
item is one that is able to reprice quickly, through maturity or
otherwise. Controlling the maturity or repricing of an
institution's liabilities and assets in order to minimize
interest rate risk is commonly referred to as gap management.
Close matching of the repricing of assets and liabilities will
normally result in little change in net interest income when
interest rates change. A mismatched gap position will normally
result in changes in net interest income as interest rates
change.
Along with internal gap management reports, the Company and
the Banks use an asset/liability modeling service to analyze each
Bank's current gap position. The system simulates the Banks'
asset and liability base and projects future net interest income
results under several interest rate assumptions. The Company
strives to maintain an aggregate gap position such that changes
in interest rates will not affect net interest income by more
than 10% in any twelve month period. The Company has not engaged
in derivatives transactions for its own account.
The following table indicates that, at December 31, 1999, if
there had been a sudden and sustained increase in prevailing
market interest rates, the Company's 2000 net interest income
would be expected to increase, while a decrease in rates would
indicate a decrease in income.
Changes in NET INTEREST PERCENT
Interest Rate INCOME CHANGE CHANGE
200 basis point rise $ 43,344,700 $ 283,700 0.66%
100 basis point rise 43,370,500 309,500 0.72%
Base rate scenario 43,061,000 - -
100 basis point decline 41,741,100 (1,319,900) -3.07%
200 basis point decline 39,876,400 (3,184,600) -7.40%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Gold Banc Corporation, Inc.:
We have audited the accompanying consolidated balance
sheets of Gold Banc Corporation, Inc. and subsidiaries
(the Company) as of December 31, 1999 and 1998 and the
related consolidated statements of earnings, stockholders'
equity and comprehensive income, and cash flows for each
of the years in the three-year period ended December 31,
1999. 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 audits. We
did not audit the financial statements of First State Bank
and Trust Co. (First State) for 1997. Those statements
reflect total assets constituting 13% at December 31, 1997
and total revenues constituting 14% in 1997 of the related
consolidated totals. Those financial statements were
audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to the
amounts included for First State, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall
consolidated financial statement presentation. We believe
that our audits and the report of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the
other auditors, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Gold Banc Corporation,
Inc. and subsidiaries as of December 31, 1999 and 1998 and
the results of their operations and their cash flows for
each of the years in the three-year period ended
December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Kansas City, Missouri
February 18, 2000
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(Dollars in thousands)
ASSETS 1999 1998
Cash and due from banks $ 59,602 36,305
Federal funds sold and
interest-bearing deposits 27,597 62,798
Total cash and
cash equivalents 87,199 99,103
Investment securities (note 3):
Available-for-sale 267,310 225,606
Held-to-maturity 25 63
Trading 9,245 3,851
Total investment securities 276,580 229,520
Mortgage loans held for sale, net 40,643 5,425
Loans, net (note 4) 893,374 717,939
Premises and equipment, net
(note 5) 34,268 26,183
Goodwill, net 36,890 13,328
Accrued interest and other assets 38,425 19,858
1,043,600 782,733
Total assets $ 1,407,379 1,111,356
See accompanying notes to consolidated financial statements.
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
Liabilities:
Deposits (note 6) $1,086,537 926,687
Securities sold under agreements to
repurchase (note 7) 16,444 6,644
Federal funds purchased and other
short-term borrowings (note 8) 62,920 7,765
Guaranteed preferred beneficial
interests in Company's debentures
(note 9) 66,300 28,750
Long-term debt (note 9) 72,235 49,761
Accrued interest and other liabilities 15,929 7,938
Total liabilities 1,320,365 1,027,545
Stockholders' equity (notes 11 and 14):
Preferred stock, no par value;
50,000,000 shares authorized,
no shares issued - -
Common stock, $1 par value;
50,000,000 shares authorized,
17,698,418 and 17,181,618 shares
issued and outstanding at
December 31, 1999 and 1998,
respectively 17,698 17,182
Additional paid-in capital 32,971 29,200
Retained earnings 45,664 37,235
Accumulated other comprehensive
income (loss), net (6,144) 391
Unearned compensation (notes 8 and 11) (3,175) (197)
Total stockholders' equity 87,014 83,811
Commitments and contingent liabilities (note 16)
Total liabilities and
stockholders' equity 1,407,379 1,111,356
See accompanying notes to consolidated financial statements.
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1999, 1998, and 1997
(Dollars in thousands, except per share data)
1999 1998 1997
Interest income:
Loans, including fees $ 72,753 61,017 44,977
Investment securities 14,369 11,110 8,767
Other 2,758 3,069 1,787
89,880 75,196 55,531
Interest expense:
Deposits 39,045 34,931 26,175
Borrowings and other 9,748 4,657 1,800
48,793 39,588 27,975
Net interest income 41,087 35,608 27,556
Provision for loan losses
(note 4) 1,602 2,781 2,130
Net interest income
after provision
for loan losses 39,485 32,827 25,426
Other income:
Service fees 4,124 3,275 2,446
Investment trading fees
and commissions 3,293 3,265 -
Net gains on sales of
mortgage loans 3,253 1,106 679
Realized and unrealized
gains (losses) on
sales of securities 133 (305) 345
Other 7,264 1,437 1,283
18,067 8,778 4,753
Other expense:
Salaries and employee
benefits 19,969 13,307 8,884
Net occupancy expense 3,910 2,482 2,145
Depreciation expense 1,997 1,656 1,307
Goodwill amortization
expense 1,126 513 208
Consolidation/repositioning
expense (note 1) 4,577 - -
Other 11,167 10,121 4,934
42,746 28,079 17,478
Earnings before
income taxes 14,806 13,526 12,701
Income tax expense
(note 10) 5,003 1,607 2,827
Net earnings $ 9,803 11,919 9,874
Net earnings per share
- basic and diluted $ .57 .71 .64
Pro forma net earnings and
earnings per share data
(note 10):
Earnings before
income taxes $ 9,803 13,526 12,701
Pro forma income
tax expense - 4,404 4,406
Pro forma net
earnings $ 9,803 9,122 8,295
Pro forma net earnings
per common share-basic
and diluted $ .57 .55 .54
See accompanying notes to consolidated financial statements.
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Years ended December 31, 1999, 1998, and 1997
(Dollars in thousands)
ACCUMU-
LATED
OTHER
ADDITIONAL COMPRE-
PREFERRED COMMON PAID-IN RETAINED HENSIVE UNEARNED
STOCK STOCK CAPITAL EARNINGS INCOME COMPENSATION TOTAL
Balance at December 31, 1996 - 15,344 17,321 20,807 (77) (276) 53,119
Net earnings - - - 9,874 - - 9,874
Change in unrealized gain on
available-for-sale securities - - - - 432 - 432
Total comprehensive income - - - 9,874 432 - 10,306
Issuance of 546,000 shares of
common stock in purchase business
combinations - 546 3,208 - - - 3,754
Reduction of unearned compensation - - - - - 40 40
Dividends paid - - - (653) - - (653)
Balance at December 31, 1997 - 15,890 20,529 30,028 355 (236) 66,566
Net earnings - - - 11,919 - - 11,919
Change in unrealized gain on
available-for-sale securities - - - - 36 - 36
Total comprehensive income - - - 11,919 36 - 11,955
Issuance of 1,292,000 shares of
common stock in purchase
business combinations - 1,292 8,671 - - - 9,963
Reduction of unearned compensation - - - - - 39 39
Dividends and distributions paid - - - (4,712) - - (4,712)
Balance at December 31, 1998 - 17,182 29,200 37,235 391 (197) 83,811
Net earnings - - - 9,803 - - 9,803
Change in unrealized gain (loss)
on available-for-sale securities - - - - (6,535) - (6,535)
Total comprehensive income - - - 9,803 (6,535) - 3,268
Issuance of 516,800 shares of
common stock in purchase
business combinations - 516 3,771 - - - 4,287
Increase in unearned compensation - - - - - (2,978) (2,978)
Dividends paid - - - (1,374) - - (1,374)
Balance at December 31, 1999 - 17,698 32,971 45,664 (6,144) (3,175) 87,014
See accompanying notes to consolidated financial statements
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998, and 1997
(Dollars in thousands)
1999 1998 1997
Cash flows from operating activities:
Net earnings $ 9,803 11,919 9,874
Adjustments to reconcile net
earnings to net cash provided by (used in)
operating activities, net of
purchase acquisitions:
Provision for loan losses 1,602 2,781 2,130
Net change in securities 130 (428) (357)
Depreciation and amortization 3,123 2,169 1,515
Net (increase) decrease in
trading securities (5,431) 663 (829)
Net (increase) decrease in mortgage
loans held for sale 10,708 (1,066) 1,324
Other changes:
Accrued interest receivable and
other assets (5,556) (4,009) (931)
Accrued interest payable and
other liabilities (7,432) (1,196) 737
Net cash provided by
operating activities 6,947 10,833 13,463
Cash flows from investing activities:
Net increase in loans (151,575) (95,010) (114,015)
Principal collections and proceeds
from sales and maturities of
available-for-sale
securities 74,843 44,118 59,160
Purchases of available-for-sale
securities (94,166) (61,439) (56,639)
Net additions to premises and
equipment (7,619) (5,046) (3,607)
Cash paid (received) in acquisitions,
net (17,372) 3,579 362
Net cash used in
investing activities (195,889) (113,798) (114,739)
Cash flows from financing activities:
Increase in deposits 125,827 99,542 104,817
Proceeds from long-term debt 13,446 47,736 914
Principal payment on long-term debt (1,490) (5,444) (3,975)
Proceeds from issuance of guaranteed
preferred beneficial interests
in Company's debentures 37,550 - 28,750
Increase (decrease) in repurchase
agreements 2,665 (2,225) 550
Increase (decrease) in federal
funds purchased, advances, and
other short-term borrowings 414 (11,098) 1,523
Dividends and distributions paid (1,374) (4,712) (653)
Net cash provided by financing
activities 177,038 123,799 131,926
Increase (decrease) in cash
and cash equivalents (11,904) 20,834 30,650
Cash and cash equivalents,
beginning of year 99,103 78,269 47,619
Cash and cash equivalents,
end of year $87,199 99,103 78,269
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended December 31, 1999, 1998, and 1997
(Dollars in thousands)
1999 1998 1997
Supplemental disclosure of
cash flow information:
Cash paid during the year for interest $48,106 39,120 26,752
Cash paid during the year for income taxes $ 5,137 1,522 1,941
Supplemental schedule of noncash financing
activities - issuance of 516,800,
1,292,000 and 546,000 shares of
common stock for purchase business
combinations, respectively $ 4,286 9,963 3,754
Noncash activities related to purchase acquisitions:
Investing activities:
Increase in investments $22,436 47,949 17,498
Increase in loans and mortgage
loans held for sale 71,388 37 27,269
Increase in land, buildings, and
equipment 2,463 2,539 474
Financing activities:
Increase in deposits 34,023 126,981 42,838
Increase in borrowings 68,072 8,751 1,762
See accompanying notes to consolidated financial statements.
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Gold Banc Corporation, Inc. and its subsidiary banks and
companies (the Company). All significant intercompany
transactions have been eliminated.
NATURE OF OPERATIONS
The Company is a multi-bank holding company that owns and
operates community banks located in Kansas, Missouri, and
Oklahoma. The banks provide a full range of commercial and
consumer financial services. The Company owns and operates an
insurance division, a full-service broker/dealer and investment
firm, a mortgage banking operation, an information technology
service organization and a trust company. The Company has
determined that its financial services businesses are a single
operating segment.
ESTIMATES
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
INVESTMENT SECURITIES
The Company classifies investment securities in one of three
categories: trading, available-for-sale, or held-to-maturity.
Trading securities are bought and held principally for the
purpose of selling them in the near term. Held-to-maturity
securities are those that the Company has the positive intent and
ability to hold to maturity. All other securities are classified
as available-for-sale.
Held-to-maturity securities are recorded at amortized cost.
Trading and available-for-sale securities are recorded at fair
value. Unrealized holding gains and losses on trading securities
are included in earnings. Unrealized holding gains and losses,
net of related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component
of other comprehensive income until realized. Realized gains and
losses upon disposition of available-for-sale securities are
included in earnings using the specific identification method for
determining the cost of the securities sold.
A decline in the fair value of any security below cost that is
deemed other than temporary is charged to earnings, resulting in
the establishment of a new cost basis for the security. Premiums
and discounts are amortized or accreted over the life of the
related security as an adjustment to interest income. Dividend
and interest income are recognized when earned.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of cost or
fair value, computed on the aggregate basis. Fair value is
computed using the outstanding commitment price from investors.
Loan origination and processing fees and related direct
origination costs are deferred until the related loan is sold.
Revenue from the sale of loans is recognized at the sale date
when title passes.
The Company records a separate asset representing the right or
obligation, respectively, to service loans for others. A
servicing asset is determined by allocating the loans' previous
carrying amount between the servicing asset and the loans that
were sold, based on their relative fair values at the date of
sale. The fair value of the servicing right is initially
calculated based upon prices for comparable sales.
The Company generally does not retain mortgage servicing rights.
Sales of mortgage servicing rights are recorded when title has
passed, substantially all risks and rewards of ownership have
irrevocably passed to the buyer, and any recourse is minor and
can be reasonably estimated. Any gains or losses from such sales
are recorded at the sale date. Mortgage servicing rights held
for sale at December 31, 1999 totaled $6,508,000 and are included
in "Other Assets" in the accompanying consolidated balance
sheets.
LOANS
Loans receivable that management has the intent and ability to
hold for the foreseeable future or until maturity or payoff are
reported at their outstanding principal balance adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees
or costs on originated loans and unamortized premiums or
discounts on purchased loans.
Interest income on loans is accrued and credited to earnings
based on the principal amount outstanding. The accrual of
interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
Significant loan and commitment fee income and related costs are
deferred and amortized over the term of the related loan or
commitment.
ALLOWANCE FOR LOAN LOSSES
Provisions for losses on loans receivable are based upon
management's estimate of the amount required to maintain an
adequate allowance for losses, relative to the risk in the loan
portfolio. This estimate is based on reviews of the loan
portfolio, including assessment of the estimated net realizable
value of the related underlying collateral, and upon
consideration of past loss experience, current economic
conditions, and such other factors which, in the opinion of
management, deserve current recognition. Amounts are charged off
as soon as probability of loss is established, taking into
consideration such factors as the borrower's financial condition,
underlying collateral, and guarantees. Loans are also subject to
periodic examination by regulatory agencies. Such agencies may
require charge-offs or additions to the allowance based upon
their judgments about information available at the time of their
examination.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation and amortization are
computed using the straight-line and accelerated methods based on
the estimated useful lives of the related assets.
GOODWILL
The excess cost over the fair value of the net assets acquired of
purchased businesses is being amortized on a straight-line basis
generally over twenty years. When facts and circumstances
indicate potential impairment, the Company evaluates the
recoverability of asset carrying values, including goodwill,
using estimates of undiscounted cash flows over remaining asset
lives. Any impairment loss is measured by the excess of carrying
values over fair values.
OTHER INCOME AND OTHER EXPENSE
Significant items included in "Other Income":
1999 1998 1997
Trust fees $1,637 531 405
Information
technology services 2,342 - -
Other 3,285 906 878
$7,264 1,437 1,283
Significant items included in "Other Expense":
1999 1998 1997
Professional services $ 2,315 3,065 1,340
Advertising, public
relations 1,028 1,124 728
Other 7,824 5,932 2,866
$11,167 10,121 4,934
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between
the consolidated financial statement carrying amounts of existing
assets and liabilities and their respective tax bases, and are
measured using enacted tax rates expected to apply to taxable
income in the years in which those differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities for subsequent changes in tax rates is recognized in
the period that includes the tax rate change.
During 1998, the Company acquired Citizens Bank of Tulsa
("Citizens"), which had been taxed as a Subchapter S corporation
in 1997 and 1998. The consolidated statements of earnings for
those years include pro forma tax expense, net earnings, and
earnings per share as if that company had been subject to income
taxes at corporate rates. Distributions made by Citizens to its
stockholders to provide for the payment of taxes by the
stockholders on the earnings of Citizens are recorded as
dividends in the accompanying financial statements.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, cash
equivalents include cash on hand, amounts due from banks, federal
funds sold, and interest-bearing deposits.
EARNINGS PER SHARE
Basic earnings per share is based upon the weighted average
number of common shares outstanding during the periods presented.
Diluted earnings per share include the effects of all dilutive
potential common shares outstanding during each period. The
shares used in the calculation of basic and diluted income per
share are shown below (in thousands):
1999 1998 1997
Weighted average 17,183 16,566 15,482
common shares outstanding
Stock options 54 141 40
17,237 16,707 15,522
FUTURE ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued SFAS
No. 133, Accounting for Derivative Financial Instruments and
Hedging Activities. This statement, as amended by SFAS No. 137,
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. The statement is
required to be adopted by the Company in 2001. The Company does
not anticipate that adoption of this statement will have a
significant impact on its consolidated financial position or its
future results of operations.
CONSOLIDATION/REPOSITIONING EXPENSE
During 1999, the Company consolidated its Kansas banks into a
single statewide organization. The plan for the consolidation
was developed in the third quarter of 1999 and implementation
commenced during the fourth quarter with the intention to
reposition the Company to improve service to its customers,
achieve higher profitability and enhance its visibility
statewide.
The plan primarily relates to the decision to exit certain
duplicate branch banking facilities resulting in asset write-
downs to estimated fair value, to eliminate duplicate backroom
functions, to abandon certain leases, to sever 13% of its full-
time employees and to implement other repositioning activities.
Accordingly, the Company recognized consolidation/repositioning
expenses of $4,577,000, or $0.18 per diluted share after tax.
Details of the special charge are as follows (in thousands):
SPECIAL ACCRUAL AT
CHARGE ACTIVITY DECEMBER 31, 1999
Salaries, benefits and
severance $1,316 $764 $552
Asset write-downs and
lease abandonments 2,003 1,188 815
Other repositioning 1,258 778 480
Expenses
$4,577 $2,730 $1,847
(2) MERGERS AND ACQUISITIONS
During 1999 and 1998, the Company completed the following
acquisitions:
DATE OF TOTAL METHOD OF
COMPANY ACQUISITION ASSETS ACCOUNTING
Linn County Bank, LaCygne, Kansas December 1999 $ 52 Purchase
Regional Investment Co.,
Kansas City, Missouri August 1999 58 Purchase
CompuNet Engineering, LLC,
Lenexa, Kansas March 1999 2 Purchase
Citizens Bank of Tulsa, Oklahoma December 1998 225 Pooling
The Trust Company, St. Joseph, Missouri December 1998 1 Pooling
First State Bank & Trust Co.,
Pittsburg, Kansas October 1998 112 Pooling
Tri-County National Bank,
Washington, Kansas August 1998 44 Purchase
Peoples State Bank, Colby, Kansas August 1998 21 Pooling
Farmers State Bank, Sabetha, Kansas July 1998 48 Purchase
First National Bank in Alma, Kansas February 1998 30 Purchase
Midwest Capital Management January 1998 10 Purchase
Farmers National Bank, Oberlin, Kansas October 1997 54 Purchase
Peoples National Bank,
Clay Center, Kansas August 1997 71 Pooling
Assets at acquisition date, in millions.
Total consideration paid for the bank and financial services
companies acquired in 1999 using the purchase method aggregated
$27,640,000 consisting of cash and notes payable of $22,963,000
and 516,800 shares of common stock. Operations of the companies
acquired in 1999 have been included in consolidated net earnings
of the Company since their date of acquisition. The combined
effect of acquired companies in 1999 was to reduce net earnings
by $689,000, or $0.04 per share. Goodwill recorded in connection
with these acquisitions totaled $24,422,000.
Total consideration paid for the banks and financial services
companies acquired in 1998 using the purchase method aggregated
$22,400,000, consisting of cash of $12,500,000 and 1,292,000
shares of common stock. Operations of the companies acquired in
1998 have been included in the consolidated net earnings of the
Company since their date of acquisition with an
insignificant effect on 1998 net earnings. Goodwill recorded in
connection with these acquisitions totaled $10,254,000.
The following unaudited pro forma financial information presents
the combined results of operations of the Company and the
companies acquired through purchase transactions in 1999 and 1998
as if those acquisitions had occurred as of the beginning of
1998, after giving effect to certain adjustments, including
amortization of goodwill. The pro forma financial information
does not necessarily reflect the results of operations that would
have occurred had the Company and acquired entities constituted a
single entity during the periods (in thousands except per share):
YEAR ENDED
DECEMBER 31,
1999 1998
Net interest income after
provision for loan losses $ 41,834 35,631
Net earnings $ 9,401 13,820
Basic net earnings per share $ 0.53 0.80
The Company issued 5,745,000 shares in connection with the
acquisition of banks in 1998 using the pooling method. The
Company's results of operations and financial position were
restated for all periods prior to these acquisitions to include
the acquired companies' operating results and financial condition
as if they had always been combined with the Company.
The Company has announced the signing of definitive agreements to
acquire Union Bankshares, Ltd., of Denver, Colorado; CountryBanc
Holding Company of Edmond, Oklahoma; American Bancshares of
Bradenton, Florida; and First Business Bank of Kansas City, Inc.
in Kansas City, Missouri. The closing of these acquisitions is
expected to occur in 2000 after shareholder approvals are
received. These acquisitions will be accounted for as poolings
of interests. Had these acquisitions occurred on September 30,
1999, the four potentially acquired companies and the Company's
combined financial position on a pro forma basis would have been
reported as follows (in thousands):
Total loans $ 1,853,613
Total assets $ 2,741,407
Total deposits $ 2,172,127
Total long-term debt $ 199,821
Total stockholders' equity $ 184,368
The Company anticipates incurring direct transaction
costs of $18.4 million associated with the acquisitions. The
costs consist of primarily investment banking, legal, accounting,
printing and severance payments and operational consolidation
costs. As of December 31, 1999, the Company had incurred and
recorded as "Other Assets" in the accompanying consolidated
balance sheets $863,000 in costs related to the pending
acquisitions. These costs will be charged to operations on the
date the acquisitions are either consummated or not approved by
stockholders of the companies.
(3) INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses, and
estimated fair value of investment securities by major security
type at December 31, 1999 and 1998 are as follows (in thousands):
1999
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Held-to-maturity:
Obligations of states and
political subdivisions $ 25 - - 25
Available-for-sale:
U. S. treasury and agency
securities $139,801 27 (2,608) 137,220
Obligations of states and
political subdivisions 51,513 28 (2,567) 48,974
Mortgage-backed securities 73,909 2 (4,246) 69,665
Other 11,532 16 (97) 11,451
Total $276,755 73 (9,518) 267,310
1998
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
Held-to-maturity:
Obligations of states and
political subdivisions $ 63 - - 63
Available-for-sale:
U. S. treasury and agency
securities $105,658 672 (4) 106,326
Obligations of states and
political subdivisions 37,465 620 - 38,085
Mortgage-backed securities 73,271 2 (629) 72,644
Other 8,621 6 (76) 8,551
Total $225,015 1,300 (709) 225,606
Other securities classified as available-for-sale consist
primarily of stock in the Federal Reserve Bank, Federal Home Loan
Banks, Kansas Venture Capital Company, and certain other debt and
equity securities.
The amortized cost and estimated fair values of investment
securities at December 31, 1999, by contractual maturity, are
shown below (in thousands). 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.
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
Due in one year or less $ - - 19,006 18,968
Due after one year
through
five years 25 25 112,128 109,620
Due after five years
through
ten years - - 37,393 35,706
Due after ten years - - 22,787 21,900
Mortgage-backed securities - - 73,909 69,665
Other - - 11,532 11,451
Total $ 25 25 276,755 267,310
The Company's trading securities consist of a segregated
portfolio of equity securities purchased with the intent to
actively manage and trade such securities frequently. At
December 31, 1999, investment securities with fair values of
approximately $128,955,000 were pledged to secure public deposits
and for other purposes.
(4) LOANS
Loans are summarized as follows (in thousands):
1999 1998
Real estate - mortgage $ 401,779 352,072
Real estate - construction 82,797 50,696
Commercial 302,451 191,325
Agricultural 51,695 54,698
Consumer and other 66,885 79,900
905,607 728,691
Allowance for loan losses (12,233) (10,752)
$ 893,374 717,939
Loans made to directors and executive officers of Gold Banc and
its subsidiaries were $16,024,000 and $12,637,000 at December 31,
1999 and 1998, respectively. Such loans were made in the ordinary
course of business on normal credit terms, including interest
rate and collateralization. Changes in such loans for 1999 were
as follows (in thousands):
Balance at December 31, 1998 $ 12,637
Additions 25,985
Amounts collected (25,165)
Amounts of acquired bank 2,567
Balance at December 31, 1999 $ 16,024
Nonaccrual loans approximated $2,519,000 and $2,819,000 at
December 31, 1999 and 1998, respectively. The interest income not
recognized on nonaccrual loans was approximately $328,000,
$197,000, and $44,000 in 1999, 1998, and 1997, respectively.
Impaired loans, excluding nonaccrual loans, were not significant
at December 31, 1999 and 1998.
Activity in the allowance for loan losses during the years ended
December 31, 1999, 1998, and 1997 are as follows (in thousands):
1999 1998 1997
Balance at beginning of year $ 10,752 7,736 5,322
Allowance of acquired banks
(purchase method) 1,830 1,599 808
Provision for loan losses 1,602 2,781 2,130
Charge-offs (2,712) (1,813) (1,005)
Recoveries 761 449 481
Balance at end of year $ 12,233 10,752 7,736
(5) PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows (in thousands):
1999 1998
Land $ 5,107 5,403
Buildings and leasehold
improvements 22,685 18,498
Furniture, fixtures,
and equipment 19,844 12,057
Automobiles 231 308
47,867 36,266
Accumulated depcreciation
and amortization 13,599 10,083
$ 34,268 26,183
Depreciation expense totaled $1,997,000, $1,656,000, and
$1,307,000 for the years ended December 31, 1999, 1998, and 1997.
(6) DEPOSITS
Deposits are summarized as follows (in thousands):
1999 1998
Demand:
Noninterest bearing $ 130,875 101,287
Interest-bearing:
NOW 155,252 138,961
Money market 131,334 118,741
286,586 257,702
Total demand 417,461 358,989
Savings 53,044 47,363
Time 616,032 520,335
$ 1,086,537 926,687
Time deposits include certificates of deposit of $100,000 and
greater totaling $160,016,000 and $114,248,000 at December 31,
1999 and 1998, respectively.
Principal maturities of time deposits at December 31, 1999 were
as follows (in thousands):
YEAR AMOUNT
2000 $ 445,096
2001 111,737
2002 26,977
2003 18,205
2004 9,223
Thereafter 4,794
$ 616,032
(7) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Data concerning securities sold under agreements to repurchase
was as follows (in thousands):
1999 1998
Average monthly balance
during the year $ 12,196 11,664
Maximum month-end balance
during the year 22,041 13,986
At December 31, 1999, such agreements were secured by investment
and mortgage-backed securities. Pledged securities are maintained
by a safekeeping agent under the direction of the Company.
(8) FEDERAL FUNDS PURCHASED AND OTHER SHORT-TERM BORROWINGS
Following is a summary of federal funds purchased and other short-
term borrowings at December 31, 1999 and 1998 (in thousands):
1999 1998
Advances under a $25 million line of credit from LaSalle
National Bank, interest at LaSalle's prime rate (7.92%
at December 31, 1999), maturing on May 1, 2000,
secured by subsidiary stock $ 5,000 7,000
Advances under mortgage loan warehouse line of credit
with weighted average interest of 5.07% at
December 31, 1999 33,390 -
Note payable, secured by certain trading securities,
weighted average interest of 7.74% on margin account 9,118 568
Note payable of Gold Banc Corporation, Inc.
Employee Stock Ownership Plan, interest at Bank of
America's corporate base rate (7.85% at December 31,
1999), secured by 310,174 shares of Company stock
(see note 11) 3,175 197
Federal Home Loan Bank (FHLB) advances, secured by
qualifying one-to-four family mortgage loans, weighted
average interest of 6.10% 2,000 -
Federal funds purchased, weighted average interest rate
of 5.47% at December 31, 1999 10,237 -
$62,920 7,765
(9) LONG-TERM DEBT AND TRUST PREFERRED DEBENTURES
Following is a summary of long-term borrowings at December 31,
1999 and 1998 (in thousands):
1999 1998
FHLB borrowings by subsidiary banks bearing
weighted average fixed interest rates of
5.57% and 5.19% at December 31, 1999 and 1998
secured by qualifying one-to-four family
mortgage loans $ 68,059 49,604
Notes payable to former stockholders of
acquired company, interest
at 7% maturing August 2, 2002 4,080 -
Notes payable to former partners of
acquired company at Gold Bank's
floating prime rate maturing
January 1, 2001 (8.50% as of
December 31, 1999) 44 -
Notes payable of subsidiary to former
stockholders of acquired company, interest
rate of 8.50% at December 31, 1999,
maturing February 1, 2000 52 157
$ 72,235 49,761
On December 15, 1997, GBCI Capital Trust (the "Trust"), a
Delaware business trust formed by the Company, completed the sale
of $28.7 million of 8.75% Preferred Securities. The trust used
the net proceeds from the offering to purchase a like amount of
8.75% Junior Subordinated Deferrable Interest Debentures of the
Company. The Debentures are the sole assets of the Trust and are
eliminated along with the related income statement effects, in
the consolidated financial statements. Total expenses associated
with the offering approximated $1,219,000 and are included in
"Other Assets" and are being amortized on a straight-line basis
over the life of the debentures.
The Preferred Securities accrue and pay distributions quarterly
at annual rates of 8.75% and 9.12% of the stated liquidation
amount of $25 per Preferred Security. The Company has fully and
unconditionally guaranteed all of the obligations of the Trusts.
The guaranty covers the quarterly distributions and payments on
liquidation or redemption of the Preferred Securities.
The Preferred Securities are mandatorily redeemable upon the
maturity of the Debentures on December 31, 2027 and June 30,
2029, respectively, or upon earlier redemption as provided in the
Indentures. The Company has the right to redeem the Debentures,
in whole or in part, on or after December 31, 2002 and June 30,
2004, respectively, at a redemption price specified in the
Indentures plus any accrued but unpaid interest to the redemption
date.
Principal maturities of long-term borrowings at December 31, 1999
are as follows (in thousands):
YEAR AMOUNT
2000 $ 41,229
2001 2,630
2002 4,388
2003 23,808
2004 -
Thereafter 66,480
$ 138,535
None of the Company borrowings have any related compensating
balance requirements, which restrict the usage of Company assets.
However, regulations of the Federal Reserve System require
reserves to be maintained by all banking institutions according
to the types and amounts of certain deposit liabilities. These
requirements restrict usage of a portion of the amounts shown as
consolidated "cash and due from banks" from everyday usage in
operation of the banks.
(10) INCOME TAXES
Income tax expense (benefit) related to operations for 1999,
1998, and 1997 is summarized as follows (in thousands):
CURRENT DEFERRED TOTAL
1999:
Federal $ 5,372 (1,216) 4,156
State 891 (44) 847
$ 6,263 (1,260) 5,003
1998:
Federal $ 1,587 (568) 1,019
State 670 (82) 588
$ 2,257 (650) 1,607
1997:
Federal $ 2,439 (36) 2,403
State 442 (18) 424
$ 2,881 (54) 2,827
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities at December 31, 1999 and 1998 are presented below (in
thousands):
1999 1998
Deferred tax assets:
Allowance for loan losses $2,982 2,855
State taxes 356 177
Unrealized loss on AFS securities 3,308 -
Repositioning costs 1,224 -
Net operating loss carryovers 949 -
Other 45 755
Total deferred tax assets 8,864 3,787
Deferred tax liabilities:
Unrealized gains on available-for-sale
securities - 199
FHLB stock dividends 276 177
Premises and equipment 1,154 1,233
Mortgage servicing assets 1,585 -
Other 470 317
Total deferred tax liabilities 3,485 1,926
Net deferred tax asset,
included in "Other Assets" $5,379 1,861
A valuation allowance for deferred tax assets was not necessary
at December 31, 1999 or 1998 because of the Company's past and
expected future profits. The net operating loss carryforward of
acquired business expires through 2018. The utilization of the
tax benefit of the net operating loss carryforward is restricted
to approximately $250,000 per year.
A reconciliation of expected income tax expense based on the
statutory rate of 35% for 1999 and 34% for 1998 and 1997,
respectively, to actual tax expense for 1999, 1998, and 1997 is
summarized as follows (in thousands):
1999 1998 1997
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
Expected federal
income tax expense $ 5,182 35.0 % $ 4,599 34.0 % $ 4,318 34.0 %
Income of flow
through entity -- -- ( 2,063 ) ( 15.3 ) ( 1,254 ) ( 9.9 )
Municipal interest ( 824 ) ( 5.6 ) (546 ) ( 4.0 ) ( 453 ) ( 3.6 )
State taxes, net of
federal tax benefit 550 3.7 388 2.9 280 2.2
Goodwill Amortization 335 2.3 126 0.9 -- --
Change in tax status -- -- ( 500 ) ( 3.7 ) -- --
Other ( 240 ) ( 1.6 ) ( 397 ) ( 2.9 ) ( 64 ) ( 0.4 )
$ 5,003 33.8 % $ 1,607 11.9 % $ 2,827 22.3 %
Citizens Bank of Tulsa (Citizens), acquired in a pooling in
December 1998, was taxed as a Subchapter S corporation for 1997
and 1998 prior to the date of acquisition. As a Subchapter S
corporation, Citizens was not subject to federal or state income
taxes; rather, such income was included in the taxable income of
the stockholders. The accompanying consolidated statements of
earnings for 1997 and 1998 include pro forma tax expense, net
earnings, and earnings per share as if Citizens had not been a
Subchapter S corporation and had accrued corporate income tax
expense. The effect of the nontaxable income is reflected in the
table above as "Income of flow through entity." In connection
with the acquisition, Citizens' tax status was changed and, from
the date of acquisition forward, such earnings are subject to
income tax. As a result, deferred tax assets aggregating
$500,000 were recorded and are reflected in the table above as
"change in tax status." Cash distributions to Citizens
shareholders of $3,970,000 for the year ended December 31, 1998
are reflected as dividends in the accompanying consolidated
financial statements.
(11) EMPLOYEE BENEFIT PLANS
The Gold Banc Corporation, Inc. Employee Stock Ownership Plan
(ESOP) was formed to acquire shares of Company common stock for
the benefit of all eligible employees. During 1999, the ESOP
borrowed $3,018,000 from an unaffiliated bank to purchase 277,200
shares of Company common stock. At December 31, 1999, the ESOP
borrowings totaled $3,175,000 secured by 310,174 unallocated
shares of Company common stock. The ESOP will repay the debt
with contributions and dividends received from the Company.
Accordingly, the Company has recorded the obligation with an
offsetting amount of unearned compensation included in
stockholders' equity in the accompanying consolidated balance
sheets. The amount of annual contributions from the Company is
determined by the Board of Directors. Contributions were
approximately $55,000, $56,000, and $92,000 for the years ended
December 31, 1999, 1998, and 1997, respectively. The 1999
contribution was used to make principal payments of $39,000 and,
in connection with those payments, 9,690 shares were released to
participants.
The Company has a 401(k) savings plan for the benefit of all
eligible employees. Effective January 1, 1998, the Company
matched 50% of employee contributions up to 5% of base
compensation, subject to certain Internal Revenue Service
limitations. Contributions charged to salaries and employee
benefits expense were $249,000 for 1999 and $127,000 for 1998.
In 1996, the Company established a stock option plan. Under the
stock option plan, options to acquire 500,000 shares of the
Company's common stock may be granted to certain officers,
directors, and employees of the Company. The options will enable
the recipient to purchase stock at an exercise price equal to or
greater than the fair market value of the stock at the date of
the grant. Those options vest at various annual rates and
generally expire ten years from the grant date. A summary of
stock option activity is as follows:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
Outstanding December 31, 1996 - -
Granted 141,000 $ 5.25
Exercised - -
Outstanding December 31, 1997
(141,000 shares exercisable) 141,000 5.25
Granted 188,000 12.26
Exercised - -
Outstanding December 31, 1998
(141,000 shares exercisable) 329,000 9.25
Granted 150,700 13.41
Exercised - -
Outstanding December 31, 1999
(188,200 shares exercisable) 479,700 $10.55
The Company, in accounting for its plan, does not record
compensation expense related to its option plan in the
accompanying consolidated financial statements. Had compensation
cost for the Company's stock options been determined based upon
the fair value at the grant date, the Company's net earnings and
diluted earnings per share would have been decreased by
approximately $143,000 ($.01 per share) in 1999 and $125,000
($.01 per share) in 1998. The weighted average fair values of the
options granted are estimated using an option-pricing model with
the following assumptions: volatility of 27.51%, expected
dividend yield of 1.0%, risk-free interest rate of 7.0%, and an
expected life of ten years.
(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Financial instruments, which represent off-balance sheet credit
risk, consist of open commitments to extend credit, irrevocable
letters of credit, and loans sold with recourse. Open commitments
to extend credit and irrevocable letters of credit amounted to
approximately $138,574,000 at December 31, 1999. Such agreements
require the Company 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 fully 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 customer. Collateral held
varies, but may include accounts receivable, inventory, property,
plant and equipment, and income-producing commercial properties.
The Company processes residential home mortgage loans for sale in
the secondary market. In conjunction with the sale of such loans,
the Company has entered into agreements with the purchasers of
the loans, setting forth certain provisions. Among those
provisions is the right of the purchaser to return the loans to
the Company in the event the borrower defaults within a stated
period. This period ranges among the various purchasers from
between one to twelve months. Loans sold with recourse amounted
to approximately $2,569,000 and $14,303,000 at December 31, 1999
and 1998, respectively. The Company's exposure to credit loss in
the event of default by the borrower and the return of the loan
by the purchaser is represented by the difference in the amount
of the loan and the recovery value of the underlying collateral.
(13) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of
financial instruments are made in accordance with the
requirements of SFAS No. 107, Disclosures About Fair Value of
Financial Instruments. The estimated fair value amounts have been
determined by the Company and its subsidiaries using available
market information and valuation methodologies. However,
considerable judgment is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts the Company and its subsidiaries could realize in a
current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material impact on the
estimated fair value amounts.
The estimated fair value of the Company's financial instruments
is as follows (in thousands):
1999 1998
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Investment securities $ 276,580 276,580 229,520 229,520
Mortgage and student loans
held for sale $ 40,643 40,643 5,425 5,425
Loans $ 893,374 884,141 717,939 723,138
Deposits $1,086,537 1,063,134 926,687 915,492
Securities sold under
agreements to
repurchase $ 16,444 16,444 6,644 6,644
Federal funds purchased,
and other short-term
borrowings $ 62,920 62,920 7,568 7,568
Long-term debt $ 138,535 129,708 49,958 50,036
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
- - Investment securities - Various methods and assumptions were
used to estimate fair value of the investment securities.
For investment securities, excluding other securities, fair
values are based on quoted market prices or dealer quotes.
If a quoted market price is not available, fair value is
estimated using quoted prices for similar securities. The
carrying value of other securities approximates fair values.
- - Mortgage loans held for sale - The fair value of mortgage
and student loans held for sale equals the contractual sales
price agreed-upon with third-party investors.
- - Loans - For certain homogenous categories of loans, such as
some Small Business Administration guaranteed loans, student
loans, residential mortgages, consumer loans, and commercial
loans, fair value is estimated using quoted market prices
for similar loans or securities backed by similar loans,
adjusted for differences in loan characteristics. The fair
value of other types of loans is estimated by discounting
the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities.
- - Deposits - The fair value of demand deposits, savings
accounts, and money market deposits are the amount payable
on demand at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated by discounting
the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
- - Federal funds purchased and other short-term borrowings -
For these instruments, the current carrying amount is a
reasonable estimate of fair value.
- - Long-term debt - The fair value of long-term debt is
estimated using discounted cash flow analyses based on the
Company's and subsidiaries' current incremental borrowing
rates for similar types of borrowing arrangements.
- - Commitments to extend credit and irrevocable 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 agreements
and the present creditworthiness of the customers. For fixed
rate loan commitments, fair value also considers the
difference between current levels of interest rates and the
committed rates. The estimated fair value of letters of
credit is based on the fees currently charged for similar
agreements. These instruments were determined to have no
positive or negative market value adjustments and are not
listed in the following table.
- - Loans sold with recourse - The fair value of loans sold with
recourse is limited to the contractual amount of the loans
required to be repurchased. Loans currently under the
recourse provision have been sold to investors within the
last twelve months. Because the recourse provisions have not
yet expired, it is impractical to determine the fair value;
however, it is not believed they would have a material
market value adjustment.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1999 and
1998. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of
the consolidated financial statements since that date and,
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
(14) CAPITAL ADEQUACY
Quantitative measures established by regulation to ensure capital
adequacy require the Company and its banking subsidiaries to
maintain minimum amounts and ratios (set forth in the table below
on a consolidated basis, dollars in thousands) of total and Tier
1 capital (as defined in the regulations) to risk-weighted assets
and of Tier 1 capital to average assets. At December 31, 1999 and
1998, total risk-based and Tier 1 capital includes approximately
$32,000,000 and $23,000,000, respectively, of Trust Preferred
Debentures which is permitted under regulatory guidelines.
Management believes, as of December 31, 1999, that the Company
meets all capital adequacy requirements to which it is subject.
TO BE WELL
CAPITALIZED
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
At December 31, 1999:
Total risk-based capital
(to risk-weighted assets) $133,702 13.28 % $ 80,767 8.00 % $100,359 10.00 %
Tier 1 capital
(to risk-weighted assets) 86,872 8.54 40,384 4.00 60,576 6.00
Tier 1 capital
(to average assets) 86,872 6.62 53,553 4.00 66,941 5.00
At December 31, 1998:
Total risk-based capital
(to risk-weighted assets) $104,208 13.42 % $ 62,126 8.00 % $ 77,657 10.00 %
Tier 1 capital (to risk-weighted
assets) 93,456 12.03 31,063 4.00 53,071 6.00
Tier 1 capital
(to average assets) 93,456 8.80 42,457 4.00 46,594 5.00
(15) PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
Following is condensed financial information of the Company as of
December 31, 1999 and 1998 and for the three years ended
December 31, 1999 (in thousands):
CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS 1999 1998
Cash $ 5,695 1,743
Investment securities 4,976 3,739
Federal funds sold, securities
purchased under agreements to
resell, and interest-bearing
deposits - 22
Investment in subsidiaries 149,706 109,803
Other 13,069 5,715
Total assets $ 173,446 121,022
LIABILITIES AND STOCKHOLDERS' EQUITY
Guaranteed preferred beneficial
interests in
Company's debentures $ 66,300 29,639
Long-term debt 9,306 7,197
Other 10,826 375
Stockholders' equity 87,014 83,811
Total liabilities and
stockholders' equity $ 173,446 121,022
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
1999 1998 1997
Dividends from subsidiaries $ 3,500 1,114 943
Interest income 584 525 366
Unrealized gains (losses)
on trading securities (79) (399) 229
Other expense, net 11,489 6,835 1,885
Income (loss) before
equity in undistributed
earnings of subsidiaries (7,484) (5,595) (347)
Increase in undistributed equity
of subsidiaries 13,358 15,079 9,768
Earnings before
income taxes 5,874 9,484 9,421
Income tax benefit 3,929 2,435 453
Net earnings $ 9,803 11,919 9,874
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
1999 1998 1997
Cash flows from operating activities:
Net earnings $ 9,803 11,919 9,874
Increase in undistributed equity
of subsidiaries (42,200) (33,178) (11,213)
Net change in trading securities 995 87 (1,072)
Other 13,240 (2,702) (805)
Net cash used in
operating activities (18,162) (23,874) (3,216)
Cash flows from investing activities:
Net change in held-to-maturity
securities - 76 2
Net change in available-for-sale
securities (68) 3,586 (6,341)
Net change in loans 2,824 - -
Net additions to premises and
equipment (921) 565 (18)
Capital contributions to
subsidiaries (3,000) - (6,000)
Cash received (paid) for
acquisitions (18,717) 3,659 (1,964)
Net cash provided by (used in)
investing activities (19,882) 7,886 (14,321)
Cash flows from financing activities:
Principal payments on
long-term debt (40) 5,443 (3,130)
Purchase of treasury stock - - -
Issuance of common stock 4,677 - -
Issuance of subordinated
debentures 38,711 - 29,639
Payment of dividends (1,374) (4,712) (653)
Net cash provided by
financing activities 41,974 731 25,856
Net increase (decrease)
in cash 3,930 (15,257) 8,319
Cash at beginning of year 1,765 17,022 8,703
Cash at end of year $5,695 1,765 17,022
The primary source of funds available to the Company is the
payment of dividends by the subsidiaries and borrowings. Subject
to maintaining certain minimum regulatory capital requirements,
regulations limit the amount of dividends that may be paid
without prior approval of the subsidiaries' regulatory agencies.
At December 31, 1999, the subsidiaries could pay dividends of
$33,069,000 without prior regulatory approval.
(16) LITIGATION
Gold Bank, a subsidiary of the Company (formerly Exchange
National Bank), is one of several named defendants in a number of
lawsuits arising out of the same circumstances. The litigation
was brought about on behalf of persons who purchased
distributorships from an entity known as "Parade of Toys
("Parade"). Gold Bank was included on trade reference sheets
that listed other banks with whom Parade had done business.
Plaintiffs allege that they contacted the persons listed on the
trade reference sheets and that the trade reference defendants
made false and misleading misrepresentations in which plaintiffs
relied to their detriment. Their current claims include theories
of fraud, negligent misrepresentations, civil conspiracy and
negligence.
Plaintiffs commenced the litigation, in May 1997, as a putative
class action in the District Court of Johnson County, Kansas.
They then obtained an Order dismissing the case without prejudice
and, in September 1997, refiled in the United States District
Court for the District of Kansas. After the federal court denied
class certification, plaintiffs filed a second action on behalf
of 670 named plaintiffs. The court ruled that those claims were
misjoined and set a deadline for plaintiffs to initiate new
individual actions or to have claims dismissed with prejudice.
Plaintiffs then obtained an order from the federal court
dismissing all claims without prejudice and reinitiated certain
of their claims in state court in Johnson County, Kansas.
Plaintiffs began the process of recommencing the litigation by
filing a separate action for each plaintiff in February 1999.
Gold Bank was named as a defendant in 24 of those individual
actions. Plaintiffs then filed a number of multi-plaintiff
actions. The total number of plaintiffs in those four cases was
292.
On July 28, 1999, the state court ruled that claims in the multi-
plaintiff actions had been misjoined and that only the first-
named plaintiff in each case could proceed. It gave plaintiffs
until October 28, 1999 to commence new individual actions or to
have their claims dismissed with prejudice. Counsel for the Bank
has now been served with 316 Petitions in individual actions in
the Johnson County District Court. One of the petitions alleges
damages of approximately $75,000; two allege damages of
approximately $50,000; six allege damages of approximately
$40,000; one alleges damages of $12,175; and fifteen allege
damages of $10,000 or less. The remaining claims range between
$18,000 and $26,000.
Gold Bank has filed Answers denying any liability in the 24 cases
commenced on behalf of individual plaintiffs and has filed
Motions to Dismiss the multi-plaintiff actions.
Gold Bank denies any liability and intends to vigorously defend
these and any additional claims. The Company is unable to
estimate its potential range of monetary exposure, if any, or to
predict the likely outcome of these matters.
No accrual or provision for losses, if any, related to the above
matter has been made in the accompanying consolidated financial
statements. In the normal course of business, the Company had
certain other lawsuits pending at December 31, 1999. In the
opinion of management, after consultation with legal counsel,
none of those other lawsuits is expected to have a significant
effect on the consolidated financial condition or results of
operations of the Company.
First State Bank, a wholly-owned subsidiary of the Company, was a
defendant in an adversary proceeding styled Nelson v. First State
Bank in a bankruptcy case pending in the Federal Bankruptcy Court
for the Western District of Missouri styled In re: Hagman's Inc.
William R. Hagman, Jr. became an advisory director of the Company
on November 12, 1998. Mr. Hagman has had no direct or indirect
interest in Hagman, Inc., since 1982. In the adversary
proceeding, the bankruptcy trustee has alleged that First State
Bank received preferential transfers in settlement of loans and
bank overdrafts prior to the commencement of the Hagman's Inc.
bankruptcy case of approximately $694,000 plus interest. The
Company paid $465,000 in 1999 to settle this matter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
MANAGEMENT OF THE COMPANY
The directors and executive officers of the Company are as
set forth below.
Principal Occupation and
Name Age Five Year Employment History
Michael W. 45 Mr. Gullion has served as Chairman of
Gullion the Board of Directors and Chief
Executive Officer of the Company since
its inception and served as the
Company's President until February 10,
1999. His term of office as a
director expires in 2002. Mr. Gullion
is the son-in-law of William Wallman.
Malcolm M. 52 Mr. Aslin was appointed to the Board
Aslin of Directors on February 11, 1999. His
term of office as a director expires
at the annual meeting of stockholders
to be held on April 26, 2000. He has
served as President and Chief
Operating Officer of the Company since
February 10, 1999. From October 1995
until February 10, 1999, Mr. Aslin
served as (a) Chairman of the Board of
Western National Bank and Unison
Bancorporation, Inc. in Lenexa, Kansas
and (b) Chairman and Managing Director
of CompuNet Engineering, L.L.C., a
Lenexa, Kansas computer service
business the Company acquired in
February 1999. From May 1994 until
May 1995 Mr. Aslin served as President
of Langley Optical Company, Inc., a
wholesale optical laboratory located
in Lenexa, Kansas. Prior to purchasing
Langley Optical Company, Mr. Aslin
spent more than 22 years in various
positions with UMB Banks and United
Missouri Financial Corporation,
including President and Chief
Operating Officer of United Missouri
Bancshares, Inc. and President of
UMB's Kansas City bank, United
Missouri Bank of Kansas City, N.A.
Keith E. 49 Mr. Bouchey was elected as a Director
Bouchey of the Company on May 30, 1996. He has
served as the Executive Vice
President, Chief Financial Officer and
Corporate Secretary of the Company
since joining the Company in November
1995 until July 7, 1999. He now
serves as Executive Vice President -
Mergers and Acquisitions and Corporate
Secretary. Prior to joining the
Company, Mr. Bouchey had been, since
August 1977, a principal of GRA,
Thompson, White & Company, P.C., a
regional bank accounting and
consulting firm, where he served on
the executive committee and as the
managing director of the firm's
regulatory services practice.
Joseph F. 51 Mr. Smith has served as Executive Vice
Smith President and Chief Technology Officer
of the Company since February 10,
1999. Mr. Smith also serves as a
director of Centurion Funds, Inc., a
Phoenix, Arizona mutual fund family
advised by Centurion Trust Company.
From October 1995 until February 10,
1999, Mr. Smith served as President
and Chief Operating Officer of
CompuNet Engineering, L.L.C., a
Lenexa, Kansas computer service
business that the Company acquired in
February 1999. From August 1993 until
May 1995 Mr. Smith served as a
director and Executive Vice President
of Investors Fiduciary Trust Company,
located in Kansas City, Missouri Prior
to joining Investors Fiduciary Trust
Company, Mr. Smith spent more than 26
years in various management and
operational positions with UMB Bank,
including Executive Vice President and
an advisory director of UMB's Kansas
City bank, United Missouri Bank of
Kansas City, N.A.
William F. 57 Mr. Wright was elected as a director
Wright of the Company on May 30, 1996. For
more than five years Mr. Wright has
served as the Chairman of the Board
and Chief Executive Officer of AMCON
Distributing Company, a wholesale
distributor headquartered in Omaha,
Nebraska.
William 76 Mr. Wallman has served as a director
Wallman of the Company since November 1989.
His term of office as a director
expires at the annual meeting of
stockholders to be held in 2002. For
more than five years Mr. Wallman has
been the President and owner of
Wallman Chrysler-Plymouth, Inc., a car
dealership located in Beatrice,
Nebraska. Mr. Wallman is the father-
in-law of Mr. Gullion.
Allen D. 59 Mr. Petersen was appointed to the
Petersen Board of Directors of the Company on
July 31, 1997. Mr. Petersen previously
served in an advisory capacity to the
Board of Directors. For more than five
years Mr. Petersen has been the
Chairman and Chief Executive Officer
of American Tool Companies located in
Chicago, Illinois.
William R. 64 Mr. Hagman has served in an advisory
Hagman, Jr. capacity to the Board of Directors
since November 12, 1998. He currently
is a Director and serves as Chairman
of the audit committee. His term of
office as a director expires at the
annual meeting of stockholders to be
held in 2002. Since September 1996
Mr. Hagman has also served as an
advisory director of The First State
Bank and Trust Company, a wholly-owned
subsidiary of the Company. For more
than ten years Mr. Hagman served as a
director of City National Bank in
Pittsburg, Kansas until September
1996. For more than five years Mr.
Hagman has been the President of
Hagman Companies, Inc., a wholesale
distribution business located in
Pittsburg, Kansas. Mr. Hagman is
presently involved in managing
investments for his company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934,
the Company's directors and executive officers and shareholders
holding more than ten percent of the outstanding stock of the
Company are required to report their initial ownership of stock
and any subsequent change in such ownership to the Securities and
Exchange Commission and the Company. Specific time deadlines for
the Section 16(a) filing requirements have been established by
the Securities and Exchange Commission. To the Company's
knowledge, all reports due pursuant to Section 16 (a) were filed
on a timely basis during the fiscal year ended December 31, 1999.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item concerning
remuneration of the Company's officers and directors and
information concerning material transactions involving such
officers and directors is incorporated herein by reference from
the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held April 26, 2000, to be filed with the
Commission pursuant to Regulation 14A within 120 days after the
end of the Company's last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item concerning the stock
ownership of management and five percent beneficial owners is
incorporated herein by reference from the Company's definitive
Proxy Statement for its Annual Meeting of Stockholders to be held
April 26, 2000, to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company's
last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item concerning certain
relationships and related transactions is incorporated herein by
reference from the Company's definitive Proxy Statement for its
Annual Meeting of Stockholders to be held April 26, 2000, to be
filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Exhibits
3.1 Restated Articles of Incorporation of the Company.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-12377 and the same is incorporated
herein by reference.)
3.2 Certificate of Amendment to Restated Articles of
Incorporation. (Previously filed as an Exhibit to the Company's
Registration Statement on Form S-4 No. 333-28563 and the same is
incorporated herein by reference.)
3.3 Amended and Restated Bylaws of the Company. (Previously
filed as an Exhibit to the Company's Registration Statement on
Form S-4 No. 333-91559 and the same is incorporated herein by
reference.)
4.1 Form of Common Stock Certificate. (Previously filed as an
Exhibit to the Company's Registration Statement on Form SB-2 No.
333-12377 and the same is incorporated herein by reference.)
4.2 Rights Agreement dated October 13, 1999, between the Company
and American Stock Transfer and Trust, as Rights Agent.
(Previously filed as an Exhibit to the Company's Current Report
on Form 8-K filed October 15, 1999 and the same is incorporated
herein by reference.)
9.1 Proxy Agreement/Stockholder Agreement between Michael W.
Gullion and William Wallman, dated as of September 15, 1996.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-12377 and the same is incorporated
herein by reference.)
9.2 Proxy Agreement/Stockholder Agreement between Michael W.
Gullion and William F. Wright, and Allen D. Petersen dated as of
September 15, 1996. (Previously filed as an Exhibit to the
Company's Registration Statement on Form SB-2 No. 333-12377 and
the same is incorporated herein by reference.)
9.3 Accession of The Lifeboat Foundation to the Proxy
Agreement/Stockholder Agreement among Michael W. Gullion, William
F. Wright, and Allen D. Petersen, dated May 28, 1997.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-39849 and the same is incorporated
herein by reference.)
9.4 Addendum to Proxy/Shareholder Agreement between Michael W.
Gullion and William Wallman dated as of February 10, 1999.
(Previously filed as an Exhibit to the Company's Annual Report on
Form 10-K filed March 31, 1999 for the year ended December 31,
1998 and the same is incorporated herein by reference.)
9.5 Addendum to Proxy/Shareholder Agreement among Michael W.
Gullion, Allen D. Peterson, William F. Wright and The Lifeboat
Foundation, dated as of February 10, 1999. (Previously filed as
an Exhibit to the Company's Annual Report on Form 10-K filed
March 31, 1999 for the year ended December 31, 1998 and the same
is incorporated herein by reference.)
10.1 Employment Agreement between the Company and Michael W.
Gullion. (Previously filed as an Exhibit to the Company's
Registration Statement on Form SB-2 No. 333-12377 and the same is
incorporated herein by reference.)
10.2 Amendment to Employment Agreement between the Company and
Michael W. Gullion. (Previously filed as an Exhibit to the
Company's Annual Report on Form 10-K filed March 31, 1999 for the
year ended December 31, 1998 and the same is incorporated herein
by reference.)
10.3 Employment Agreement between the Company and Keith E.
Bouchey. (Previously filed as an Exhibit to the Company's
Registration Statement on Form SB-2 No. 333-12377 and the same is
incorporated herein by reference.)
10.4 Employment Agreement between the Company, CompuNet
Engineering, Inc., and Joseph F. Smith. (Previously filed as an
Exhibit to the Company's Annual Report on Form 10-K filed March
31, 1999 for the year ended December 31, 1998 and the same is
incorporated herein by reference.)
10.5 Employment Agreement between the Company and Malcolm M.
Aslin. (Previously filed as an Exhibit to the Company's Annual
Report on Form 10-K filed March 31, 1999 for the year ended
December 31, 1998 and the same is incorporated herein by
reference.)
10.6 Gold Bank Corporation, Inc. 1996 Equity Compensation Plan.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-12377 and the same is incorporated
herein by reference.)
10.7 Form of Tax Sharing Agreements between the Company and the
Company Subsidiaries. (Previously filed as an Exhibit to the
Company's Registration Statement on Form SB-2 No. 333-12377 and
the same is incorporated herein by reference.)
10.8 Form of Federal Home Loan Bank Credit Agreement to which
each of the Company's banking subsidiaries is a party.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-12377 and the same is incorporated
herein by reference.)
10.9 Form of Junior Subordinated Indenture between the Company
and Bankers Trust Company as Trustee relating to GBCI Capital
Trust. (Previously filed as an Exhibit to the Company's
Registration Statement on Form SB-2 No. 333-39849 and the same is
incorporated herein by reference.)
10.10 Form of Trust Agreement between the Company and Bankers
Trust (Delaware) as Trustee relating to GBCI Capital Trust.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form SB-2 No. 333-39849 and the same is incorporated
herein by reference.)
10.11 Form of Amended and Restated Trust Agreement among the
Company, Bankers Trust Company, as Property Trustee, Bankers
Trust (Delaware), as Delaware Trustee and various holders of
Trust Securities relating to GBCI Capital Trust. (Previously
filed as an Exhibit to the Company's Registration Statement on
Form SB-2 No. 333-39849 and the same is incorporated herein by
reference.)
10.12 Form of Guaranty Agreement between the Company, as
Guarantor, and Bankers Trust Company, as Trustee relating to GBCI
Capital Trust. (Previously filed as an Exhibit to the Company's
Registration Statement on Form SB-2 No. 333-39849 and the same is
incorporated herein by reference.)
10.13 Form of Junior Subordinated Indenture between the
Company and Bankers Trust Company as Trustee relating to GBCI
Capital Trust II. (Previously filed as an Exhibit to the
Company's Registration Statement on Form S-3 No. 333-76623 and
the same is incorporated herein by reference.)
10.14 Form of Trust Agreement between the Company and Bankers
Trust (Delaware) as Trustee relating to GBCI Capital Trust II.
(Previously filed as an Exhibit to the Company's Registration
Statement on Form S-3 No. 333-76623 and the same is incorporated
herein by reference.)
10.15 Form of Amended and Restated Trust Agreement between
the Company, Bankers Trust Company, as Property Trustee, and
Bankers Trust (Delaware), as Delaware Trustee, relating to GBCI
Capital Trust II. (Previously filed as an Exhibit to the
Company's Registration Statement on Form S-3 No. 333-76623 and
the same is incorporated herein by reference.)
10.16 Form of Guarantee Agreement between the Company, as
Guarantor, and Bankers Trust Company, as Trustee, relating to
GBCI Capital Trust II. (Previously filed as an Exhibit to the
Company's Registration Statement on Form S-3 No. 333-76623 and
the same is incorporated herein by reference.)
10.17 Voting Agreement, dated September 6, 1999, among Gold
Banc Corporation, Inc., J. Gary Russ, Ronald L. Larson, Timothy
I. Miller, Dan E. Molter, Kirk D. Moudy, Lynn B. Powell, III,
Walter L. Presha, R. Jay Taylor and Edward D. Wyke. (Previously
filed as an Exhibit to the Registrant's Current Report on Form 8-
K filed September 9, 1999 and the same is incorporated herein by
reference.)
10.18 Registration Rights Agreement among the Company, Daniel
Buford, Sam Buford, Sharon Buford, Stephen Buford, Dillard
Enterprises, L.L.C., Eric M. Bohne Revocable Family Trust #1, and
Eric M. Bohne Revocable Family Trust #2, dated as of December 10,
1998. (Previously filed as an Exhibit to the Company's Annual
Report on Form 10-K filed March 31, 1999 for the year ended
December 31, 1998 and the same is incorporated herein by
reference.)
10.19 Assignment and Assumption of Rights, Duties, and
Obligations of Guarantor under the Amended and Restated Guarantee
Agreement, dated March 20, 2000, among American Bancshares, Inc.
and Gold Banc Acquisition Corporation XI, Inc. (Previously filed
as an Exhibit to the Company's Current Report on Form 8-K filed
on March 23, 2000 and the same is incorporated herein by
reference.)
10.20 Assignment and Assumption of Rights, Duties, and
Obligations of Depositor under the Amended and Restated Trust
Agreement, dated March 20, 2000, among American Bancshares, Inc.
and Gold Banc Acquisition Corporation XI, Inc. (Previously filed
as an Exhibit to the Company's Current Report on Form 8-K filed
on March 23, 2000 and the same is incorporated herein by
reference.)
10.21 First Supplemental Indenture dated as of March 20, 2000
to Junior Subordinated Indenture dated as of July 7, 1998, by
Gold Banc Acquisition Corporation XI, Inc. as successor by merger
to American Bancshares, Inc. (Previously filed as an Exhibit to
the Company's Current Report on Form 8-K filed on March 23, 2000
and the same is incorporated herein by reference.)
10.22 Resignation of Administrator of ABI Capital Trust,
dated March 20, 2000, by Brian M. Watterson. (Previously filed
as an Exhibit to the Company's Current Report on Form 8-K filed
on March 23, 2000 and the same is incorporated herein by
reference.)
10.23 Resignation of Administrator of ABI Capital Trust,
dated March 20, 2000, by Jerry L. Neff. (Previously filed as an
Exhibit to the Company's Current Report on Form 8-K filed on
March 23, 2000 and the same is incorporated herein by reference.)
10.24 Appointment of Administrators of ABI Capital Trust,
dated March 20, 2000, by Keith E. Bouchey. (Previously filed as
an Exhibit to the Company's Current Report on Form 8-K filed on
March 23, 2000 and the same is incorporated herein by reference.)
10.25 Appointment of Administrators of ABI Capital Trust,
dated March 20, 2000, by Steven E. Rector. (Previously filed as
an Exhibit to the Company's Current Report on Form 8-K filed on
March 23, 2000 and the same is incorporated herein by reference.)
10.26 Form of Junior Subordinated Indenture between American
Bancshares, Inc. and Bankers Trust Company as Trustee relating to
ABI Capital Trust. (Previously filed as an Exhibit to ABI Capital
Trust's Registration Statement on Form S-1 No. 333-56095 and the
same is incorporated herein by reference.)
10.27 Form of Trust Agreement between American Bancshares,
Inc. and Bankers Trust (Delaware) as Trustee relating to ABI
Capital Trust. (Previously filed as an Exhibit to ABI Capital
Trust's Registration Statement on Form S-1 No. 333-56095 and the
same is incorporated herein by reference.)
10.28 Form of Amended and Restated Trust Agreement between
American Bancshares, Inc., Bankers Trust Company, as Property
Trustee, and Bankers Trust (Delaware), as Delaware Trustee,
relating to ABI Capital Trust. (Previously filed as an Exhibit
to ABI Capital Trust's Registration Statement on Form S-1 No. 333-
56095 and the same is incorporated herein by reference.)
10.29 Form of Amended and Restated Guarantee Agreement
between American Bancshares, Inc., as Guarantor, and Bankers
Trust Company, as Trustee, relating to ABI Capital Trust.
(Previously filed as an Exhibit to ABI Capital Trust's
Registration Statement on Form S-1 No. 333-56095 and the same is
incorporated herein by reference.)
21.1 List of Subsidiaries of the Company.
23.1 Consent of KPMG.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K
during the fourth quarter of 1999 and early 2000:
(1) Form 8-K filed on October 15, 1999, reporting on the
Company's declaration of a dividend distribution of one right for
each share of the Company outstanding on October 28, 1999
pursuant to the terms of a Rights Agreement dated October 13,
1999 under Items 5 and 7.
(2) Form 8-K filed on October 29, 1999, reporting on the Company
entering into an Agreement and Plan of Reorganization to acquire
First Business Bancshares of Kansas City, Inc. under Items 5 and
7.
(3) Form 8-K filed on October 29, 1999, reporting on the Company
entering into an Agreement and Plan of Reorganization to acquire
CountryBanc Holding Company under Items 5 and 7.
(4) Form 8-K filed on November 10, 1999, reporting certain
projections and estimates in regard to recently announced
acquisitions under Items 5 and 7.
(5) Form 8-K filed on November 19, 1999, reporting financial
statements of Union Bankshares, Ltd. under Items 5 and 7.
(6) Form 8-K filed on November 19, 1999, reporting financial
statements of American Bancshares, Inc. under Items 5 and 7.
(7) Form 8-K filed on November 19, 1999, reporting financial
statements of CountryBanc Holding Company under Items 5 and 7.
(8) Form 8-K filed on November 19, 1999, reporting financial
statements of First Business Bancshares of Kansas City, Inc.
under Items 5 and 7.
(9) Form 8-K/A filed on December 9, 1999, to correct certain
financial information damaged in transit during the electronic
filing under Items 5 and 7.
(10) Form 8-K filed on January 5, 2000, reporting nonrecurring
costs which will reduce net income and reporting on the Company's
completed acquisition of Linn County Bank on January 4, 2000 and
the repurchase of up to 516,000 shares of the Company in
connection therewith under Items 5 and 7.
(11) Form 8-K filed January 26, 2000, reporting amendments to the
Agreements and Plan of Reorganization with American Bancshares,
Inc., CountryBanc Holding Company, and First Business Bancshares
of Kansas City, Inc. under Items 5 and 7.
(12) Form 8-K filed January 26, 2000, reporting 1999 earnings of
the Company under Items 5 and 7.
(13) Form 8-K filed March 3, 2000, reporting the resignation by
J. Craig Peterson from his position with the Company under Item
5.
(14) Form 8-K filed March 20, 2000, reporting the termination of
the Agreement and Plan of Reorganization with Union Bankshares,
Ltd. under Items 5 and 7.
(15) Form 8-K filed March 23, 2000, reporting on the Company's
completed acquisition of American Bancshares, Inc. on March 20,
2000 and assumption of all rights, duties and obligations of
American Bancshares, Inc. relating to ABI Capital Trust under
Items 5 and 7.
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.
GOLD BANC CORPORATION, INC.
(Registrant)
By: /s/ Michael W. Gullion
Michael W. Gullion
Chief Executive Officer
Dated: March ___, 2000
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons in the capacities and on the dated indicated:
Signature Title
Date
/s/ Michael W. Gullion Chairman of the Board and
March ___, 2000 Chief Executive
Michael W. Gullion Officer (Principal Executive Officer)
/s/ Malcolm M. Aslin Director, President and
March ___, 2000 Chief Operating Officer
Malcolm M. Aslin
/s/ Keith E. Bouchey Director, Executive Vice
March ___, 2000 President and
Keith E. Bouchey Corporate Secretary
(Principal Financial Officer)
/s/ William Wallman Director
March ___, 2000
William Wallman
/s/ William F. Wright Director
March ___, 2000
William F. Wright
/s/ Allen D. Petersen Director
March ___, 2000
Allen D. Petersen
/s/ William R. Hagman, Jr. Director
March ___, 2000
William R. Hagman, Jr.
INDEX
ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OPERATIONS GOLD BANC CORPORATION,
INC. AND SUBSIDIARIES
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8K