UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
11301 Nall Avenue, Leawood, Kansas 66211
(Address of principal executive office) (Zip code)
(913) 451-8050
(Registrant's telephone number, including area code)
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 past 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 past 90 days. Yes x No o
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class Outstanding at April 30, 1998
- -------------------------- --------------------------
Common Stock, $1.00 par value 5,352,196
GOLD BANC CORPORATION, INC.
INDEX TO 10-Q FOR THE QUARTERLY
PERIOD ENDED March 31, 1998
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS..................................................1
Consolidated Balance Sheets at March 31, 1998 (unaudited)
and December 31, 1997....................................................... .1
Consolidated Statements of Earnings - Three months ended
March 31, 1998 and March 31, 1997 (unaudited).................................2
Consolidated Statements of Cash Flows - Three months ended
March 31, 1998 and March 31, 1997 (unaudited).................................3
Notes to Consolidated Financial Statements....................................4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................6
ITEM 3: QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.........................................7
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS................................. ...................8
ITEM 2: CHANGES IN SECURITIES.................................................8
ITEM 3: DEFAULTS UPON SENIOR SECURITIES.......................................8
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................8
ITEM 5: OTHER INFORMATION.....................................................8
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K......................................9
SIGNATURES...................................................................10
KC1-320397.1
PART I
FINANCIAL INFORMATION
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, 1998 Dec. 31, 1997
(unaudited)
Assets
Cash and due from banks $ 14,144 16,673
Federal funds sold and interest-bearing deposits 15,796 24,438
------ ------
Total cash and cash equivalents 29,940 41,111
------ ------
Investment securities
Held-to-maturity securities 100 100
Available-for-sale securities 126,296 100,500
Trading securities 1,709 1,072
Other investment securities 2,902 2,765
----- -----
Total investment securities 131,007 104,437
Mortgage loans held for sale 1,943 858
Loans, net 367,610 340,630
Premises and equipment, net 17,418 15,363
Deferred taxes 327 498
Accrued interest and other assets 18,435 11,700
------ ------
Total Assets $ 566,680 $ 514,597
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 455,084 $ 419,139
Securities sold under agreements to repurchase 4,268 6,516
Federal funds purchased, long-term debt and other borrowings 25,245 14,986
Accrued interest and other liabilities 4,384 3,473
----- -----
Total liabilities $ 488,981 $ 444,114
--------- ---------
Subordinated debentures 28,750 28,750
Stockholders' equity:
Common stock, $1.00 par value, 25,000,000 shares authorized,
5,352,196 and 5,066,615 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively 5,352 5,067
Additional paid-in capital 27,962 22,265
Retained earnings 15,580 14,605
Accumulated other comprehensive income 291 32
Unearned compensation (236) (236)
---- ----
Total stockholders' equity $ 48,949 $ 41,733
-------- --------
Total liabilities and stockholders $566,680 514,597
======== =======
</TABLE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For The Three Months Ended
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
<S> <C> <C>
Interest income:
Loans, including fees $ 8,426 $ 5,519
Investments securities 1,760 1,479
Other 228 123
--- ---
10,414 7,121
------ -----
Interest expense:
Deposits 4,830 3,410
Borrowings and Other 945 312
--- ---
5,775 3,722
----- -----
Net interest income 4,639 3,399
Provision for loan losses 360 105
--- ---
Net interest income after provision for loan losses 4,279 3,294
Other income;
Service fees 302 239
Net gains on sale of mortgage loans 225 117
Net securities gains (losses) 1 (12)
Gain on sale of other assets 0 (1)
Net unrealized gains on trading assets 49 -
Investment trading fees & commissions 691 -
Other 146 102
--- ---
1,414 445
Other expense
Salaries and employee benefits 2,258 1,391
Net occupancy expense 550 487
Federal deposit insurance premiums 22 28
Other 1,181 667
----- ---
4,011 2,573
----- -----
Earnings before income taxes 1,682 1,166
Income taxes 547 381
--- ---
Net earnings $ 1,135 $ 785
======= =====
Net earnings per share-basic (Note 2) $ 0.22 $ 0.16
Net earnings per share-diluted (Note 2) $ 0.22 $ 0.16
</TABLE>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,135 $ 785
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses 360 105
Net gains (losses) on sales of available-for-sale securities (1) 12
Amortization of investment securities premiums, net of accretion (269) 1
Depreciation and amortization 313 247
Gain on sale of assets, net 0 1
Purchases of trading securities (589) 0
Unrealized gain on trading securities (49) 0
Net (increase) decrease in mortgage loans (1,086) 1,046
Other changes:
Accrued interested receivable and other assets (814) (743)
Accrued interest payable and other liabilities (432) 150
---- ---
Net cash used by operating activities (1,432) 1,604
------ -----
Cash flows from investing activities:
Net increase in loans (8,239) (11,491)
Principal collections and proceeds from sales and
maturities of available-for-sale securities 574,146 7,684
Purchases of available-for-sale securities (585,470) (5,925)
Net additions to premises and equipment (1,805) (336)
Proceeds from sale of other assets 0 (1)
Cash received in bank acquisitions, net of cash paid 231 0
--- -
Net cash used in investing activities (21,137) (10,069)
------- -------
Cash flows from investing activities:
Increase in deposits 9,535 477
Net increase (decrease) in short-term borrowings (3,746) 3,990
Proceeds from long-term debt 5,770 0
Principal payments on long-term debt 0 (284)
Dividends paid (161) 0
---- -
Net cash provided by financing activities 11,398 4,183
Decrease in cash and cash equivalents (11,171) (4,282)
Cash and cash equivalents, beginnings of year 41,111 22,796
------ ------
Cash and cash equivalents, end of quarter 29,940 18,514
====== ======
Supplemental schedule of non-cash financing activities:
Issuance of common stock for acquisitions 5,982,198 0
Non-cash activities related to purchase acquisitions:
Investing activities:
Increase in investments 14,339,452 0
Net increase in loans 19,098,803 0
Increase in land, buildings, and equipment 492,878 0
Financing activities:
Increase in deposits 26,411,330 0
Increase in short term borrowings 4,986,284 0
Increase in long term borrowings 1,000,000 0
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation.
The accompanying consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q. The consolidated financial
statements should be read in conjunction with the audited financial statements
included in the Company's 1997 Annual Report on Form 10-K.
The consolidated financial statements include the accounts of the Company's
subsidiaries, Exchange National Bank, Citizens State Bank, Provident Bank,
f.s.b., Peoples National Bank, Farmers National Bank, Midwest Capital
Management, Inc., and First National Bank in Alma. (the ''Banks''). All
significant intercompany balances and transactions have been eliminated.
The December 31, 1997 balance sheet has been derived from the audited
financial statements.The consolidated financial statements as of March 31, 1998,
and for the three months ended March 31, 1998 and 1997 are unaudited but include
all adjustments (consisting only of normal recurring adjustments) which the
Company considers necessary for a fair presentation of financial position and
results of operations for those periods. The Consolidated Statements of Earnings
for the three months ended March 31, 1998 are not necessarily indicative of the
results that will be achieved for the entire year.
2. Earnings per common share.
Earnings per share are computed in accordance with SFAS No. 128, Earnings
per Share. Basic earnings per share is based upon the weighted average number of
common shares outstanding during the periods presented. Diluted income per share
includes the effects of all dilutive potential common shares outstanding during
each period. All per share data has been restated to conform to SFAS No. 128.
The shares used in the calculation of basic and diluted income per share
for the three months ended March 31, 1998 and 1997 are shown below (in
thousands):
- ---------------------------------------------------- ------------ ------------
1998 1997
- ---------------------------------------------------- ------------ ------------
- ---------------------------------------------------- ------------ ------------
Weighted average common shares outstanding 5,228 4,794
Stock options 41 0
- ---------------------------------------------------- ------------ ------------
- ---------------------------------------------------- ------------ ------------
5,269 4,794
- ---------------------------------------------------- ------------ ------------
3. Stock options.
On February 11, 1998, the Company granted options to certain officers of
the Company to purchase a total of 91,500 shares of the Company's Common Stock
at the fair market value of the Company's stock on that date. These options vest
over a five year period at 20 percent per year.
4. Subsequent Events.
On April 29, 1998, Company announced the signing of a definitive merger
agreement with Tri-County Bancshares, Inc. of Washington, Kansas for a
combination cash and stock-for-stock/tax free transaction valued at $4.4
million. Tri-County National Bank, a wholly-owned subsidiary of Tri-County
Bancshares with locations in Concordia, Linn and Washington, had total assets of
$43.8 million, deposits of $40.4 million and loans of $26.2 million at March 31,
1998.
Also, on April 29, 1998, Company announced a definitive merger agreement
with Farmers State Bancshares, Inc. of Sabetha, Kansas. Gold Banc will pay $8.5
million in cash to acquire all outstanding shares of Farmers State Bancshares
common stock, which is not publicly traded. Farmers State Bank, a wholly-owned
subsidiary of Farmers State Bancshares, had total assets of $48.7 million,
deposits of $42.7 million and loans of $22.1 million at March 31, 1998.
Gold Banc announced a two-for-one stock split in the form of a 100% stock
dividend distributed on May 18, 1998 to shareholders of record as of May 6,
1998. In addition, the Company declared a $.02 cash dividend on post-split
shares to shareholders of record as of May 20, 1998, payable on May 29, 1998.
5. Legal proceedings.
Exchange Bank, along with approximately 24 other persons and entities
including a number of depository institutions, is a named defendant in a case
filed in the United States District Court for the District of Kansas on
September 11, 1997 on behalf of a putative class of over 2,400 persons who
allegedly invested at least $14,900 each in entities known as Parade of Toys and
Bandero Cigar Company. The complaint alleges violations of the Racketeer
Influenced Corrupt Organizations ("RICO") statute (18 U.S.C. 1962(c)),
conspiracy to violate RICO, negligent misrepresentation, fraud, civil conspiracy
and negligence on the part of the defendants. The plaintiffs contend that the
defendants, including Exchange Bank, were listed in trade reference sheets
provided to plaintiffs by Parade of Toys and Bandero Cigar Company and that the
defendants made false and misleading representations on which they relied to
their detriment. In each count, the plaintiffs have sought actual damages in an
amount in excess of $75,000 each, treble damages under RICO, and punitive
damages. Exchange Bank denies liability and is in the process of vigorously
defending this claim.
The Company is from time to time involved in routine litigation incidental
to the conduct of its business. The Company believes that no pending litigation
to which it is a party will have a material adverse effect on its liquidity,
financial condition or results of operations.
6. Comprehensive Income
Comprehensive income, as defined by Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" was $1,394,000 and $525,000
for the three months ended March 31, 1998 and 1997, respectively. The difference
between comprehensive income and net earnings presented in the consolidated
statement of earnings is attributed solely to unrealized gains on
available-for-sale securities.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net income was $1.1 million for the three months ended March
31, 1998, compared to net income of $785,000 for the three months ended March
31,1997, yielding an annualized return on average assets ("ROA") of .82% for the
three months ended March 31, 1998, compared to 0.84% for the three months ended
March 31, 1997. Return on average common stockholders' equity ("ROE") for the
three months ended March 31, 1998 and 1997 was 9.62% and 9.06%, respectively.
The earnings increase for the first quarter of 1998 over 1997 was due to the
addition of two new subsidiaries to the organization and greater interest income
through an improved net interest margin coupled with greater loan volume. In
January, 1998 the Company acquired Midwest Capital Management, Inc., Kansas
City, Missouri ("MCM"), a full service broker/dealer and investment management
firm, through a purchase transaction, also in February 1998 the Company acquired
First National Bank, Alma, Kansas ("Alma") through a purchase transaction. As of
December 31, 1997, Alma had $31 million in total assets.
FINANCIAL CONDITION
Total assets were $566.7 million at March 31, 1998, an increase of $52.1
million from December 31, 1997. Total average assets were $555.8 million for the
three months ended March 31, 1998, compared to $445.9 million for the twelve
months ended December 31, 1997. Average interest-earning assets were $509.3
million for the three months ended March 31, 1998 and $410.9 million for the
twelve months ended December 31, 1997. Assets increased $52 million during the
first quarter of 1998 due to two acquisitions and internal growth. Loans grew
$29 million during the first quarter of 1998 of which $20 million can be
attributed to the acquisition of Alma and $9 million primarily at Exchange
National Bank's Leawood and Shawnee, Kansas locations.
The increase in net loans from December 31, 1997 to March 31, 1998
attributed to internal growth, was primarily funded through an increase in
deposits of $9 million. The allowance for loan losses increased to $5.4 million
at March 31, 1998 from $4.7 million at December 31, 1997. The allowance
represented 1.44% and 1.35% of total loans as of March 31, 1998 and December 31,
1997, respectively.
RESULTS OF OPERATIONS
Net Interest Income
Total interest income for the three months ended March 31, 1998 was $10.4
million, a 46.3% increase over the three months ended March 31, 1997. Average
total earning assets increased $167.7 million or 49.1% at March 31, 1998,
compared to March 31, 1997. The increase is primarily the result of loan
growth at Exchange National Bank's offices in Leawood and Shawnee, Kansas in
addition to the acquisitions of MCM and Alma.
Total interest expense for the first quarter of 1998 was 55.2% higher than
in the first quarter of 1997 as a result of a 49.3% increase in deposits and
other interest-bearing liabilities. Average total interest-bearing liabilities
increased by $153.0 million or 48.8% during the first quarter of 1998 compared
to the first quarter of 1997, primarily due to the acquisition of Alma and to
the increased volume in interest bearing deposits.
Net interest income was $4.6 million for the first three months ended March
31, 1998, compared to $3.4 million for the same period in 1997, an increase of
36.5%. This increase is attributable to significantly greater loan volumes
primarily originated from Exchange National Bank's Leawood and Shawnee, Kansas
locations and the acquisitions of MCM and Alma. The Company's net interest
margin decreased from 4.06% for the three months ended March 31, 1997 to 3.70%
for the three months ended March 31, 1998, as a result of additional interest
expense associated with the Company's issuance of subordinated debentures in
December 1997.
Provisions for Loan Losses
The provision for loan losses for the three months ended March 31, 1998,
was $360,000, an increase of $255,000, or 243% from the $105,000 provision
during the comparable 1997 period. This increase is consistent with the
Compan's significant loan growth. The allowance represented 1.44% and 1.23% of
total loans as of March 31, 1998 and March 31, 1997, respectively.
Other Income
Other income for the three months ended March 31, 1998, increased $969,000,
or 217.8% from the same period in 1997. This increase is primarily a result of
the Company's acquisition of MCM and increased gain on the sale of mortgage
loans through its subsidiary in St. Joseph, Missouri, Provident Bank f.s.b.
Other Expense
Other expense increased by $1.4 million for the three months ended March
31, 1998, as compared to the same period in 1997. This increase was primarily
due to a increased salaries and benefits expenses and other non interest
expenses, such as investor relations, professional fees, advertising, and
acquisition related expenses. Net occupancy expense increased primarily due to
the acquisitions of MCM and Alma. The Company's overall efficiency ratio
increased during the first quarter of 1998 to 70.5% compared to 68.6% for the
first quarter in 1997.
Income Tax Expense
Income tax expense for the three months ended March 31, 1998 and March 31,
1997 was $547,000 and $381,000, respectively. The effective tax rates for those
periods were 32.5% and 32.7%, respectively.
CAPITAL AND LIQUIDITY
At March 31, 1998, the Company's leverage, Tier 1 risk-based capital, and
total risk-based capital ratios were 10.6%,14.7%,20.2%respectively, compared to
minimum required levels of 4%, 8% and 4%, respectively (subject to change and
the discretion of regulatory authorities to impose higher standards in
individual cases). At March 31, 1998, the Company had risk-weighted assets of
$402.9 million. On April 29, 1998, the Company's Board of Directors declared a
quarterly dividend in the amount of $.02 per common share following a two for
one stock split in the form of a 100% stock dividend.
The Company had approximately $15.3 million in cash and short-term
investment grade securities at March 31, 1998 remaining from the issuance of
subordinated debentures in December 1997. Those proceeds are expected to be used
to finance the Company's growth strategy and for general corporate purposes. The
Company established a line of credit in the amount of $15 million with a
correspondent bank during the second quarter of 1998. No amounts had been drawn
under the line as of March 31, 1998.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's market risk from the
disclosure contained in the Company's 1997 annual report on form 10-K.
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
No disclosure is required under this item.
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On April 29, 1998 the Company held its Annual Meeting of Stockholders. The
following items were submitted for consideration by the stockholders.
Item 1 - Election of Directors
Two Class II directors, Mr. D. Michael Browne and Mr. Allen D. Petersen,
were elected at the Annual Meeting for terms expiring in 2001. Voting results
were as follows:
4,872,579 votes or 91.0% FOR
21,619 votes or 0.4% AGAINST
0 votes or 0% ABSTAINED
457,998 votes or 8.6% UNVOTED
Class I Director continuing in office is Keith E. Bouchey and William F.
Wright. Class I directors' terms expire in 2000.
Class III Directors continuing in office are Michael W. Gullion and William
Wallman. Class III Directors' terms expire in 1999.
Item 2 - Ratification of appointment of independent auditors. The Audit
Committee recommended the reappointment of KPMG Peat Marwick LLP as the
independent auditors for Company. Item 3 was approved with the following voting
results:
4,646,275 votes or 86.8% FOR
3,250 votes or 0% AGAINST
244,673 votes or 4.6% ABSTAINED
457,998 votes or 8.6% UNVOTED
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements 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.
Date: May 15, 1998 By: /s/ Keith E. Bouchey
------------------------
Keith E. Bouchey
Executive Vice President,
Chief Financial Officer,
and Corporate Secretary
(Authorized officer and principal financial officer of the registrant)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
GOLD BANC CORPORATION, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS OF GOLD BANC CORPORATION, INC. AS
OF March 31, 1998.
</LEGEND>
<CIK> 0001015610
<NAME> GOLD BANC CORPORATION, INC.
<MULTIPLIER> 1
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<S> <C>
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<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
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<CASH> 14,144
<INT-BEARING-DEPOSITS> 8,321
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<LOANS> 374,959
<ALLOWANCE> 5,406
<TOTAL-ASSETS> 566,680
<DEPOSITS> 455,084
<SHORT-TERM> 19,407
<LIABILITIES-OTHER> 4,384
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0
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