SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 19, 1999
GOLD BANC CORPORATION, INC.
(Exact name of registrant as specified in its charter)
KANSAS 0-28936 48-1008593
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
11301 Nall Avenue, Leawood, Kansas 66211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 451-8050
None
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On October 19, 1999 Gold Banc Corporation, Inc. ("Gold
Banc") entered into an Agreement and Plan of Reorganization to
acquire First Business Bancshares of Kansas City, Inc., a
Missouri corporation ("First Business"). Attached hereto as
Exhibits 99.1 and 99.2 are certain financial statements of First
Business.
ITEM 7. FINANCIAL STATEMENTS AND OTHER EXHIBITS.
EXHIBITS NO. DESCRIPTION
23.1 Consent of Independent Certified Public
Accountants.
99.1 First Business Bancshares of Kansas City, Inc.
Report of Independent Public Accountants;
Consolidated Statements of Financial Condition as
of September 30, 1999 and 1998 (unaudited) and
December 31, 1998 and 1997; Consolidated
Financial Statements of Income for the Nine Months
ended September 30, 1999 and 1998 (unaudited) and
Years Ended December 31, 1998, 1997 and 1996;
Consolidated Statements of Comprehensive Income
for the Nine Months Ended September 30, 1999 and
1998 (unaudited) and Years Ended December 31,
1998, 1997 and 1996; Consolidated Statements of
Cash Flows for the Nine Months Ended September 30,
1999 and 1998 (unaudited) and Years Ended December
31, 1998, 1997 and 1996.
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 hereunto duly authorized.
Dated: November 19, 1999.
GOLD BANC CORPORATION, INC.
By: /s/ J. Craig Peterson
J. Craig Peterson,
Chief Financial Officer
FIRST BUSINESS BANCSHARES OF
KANSAS CITY, INC.
Accountants' Report and
Consolidated Financial Statements
<PAGE>
December 31, 1998 and 1997
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
DECEMBER 31, 1998 AND 1997
CONTENTS
Page
INDEPENDENT ACCOUNTANTS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Income 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
First Business Bancshares of
Kansas City, Inc.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets
of FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC. as of December
31, 1998 and 1997, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the
years then ended. These 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 conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of FIRST BUSINESS BANCSHARES OF KANSAS CITY,
INC. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ BAIRD, KURTZ & DOBSON
Kansas City, Missouri
January 29, 1999
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
Cash and due from banks $ 5,555,812 $ 4,671,948
Federal funds sold 880,000
Total Cash and Cash Equivalents 6,435,812 4,671,948
Available-for-sale securities 10,418,289 7,929,374
Total Investments 10,418,289 7,929,374
Loans 94,528,726 76,886,667
Less allowance for loan losses 1,401,654 1,235,423
Net Loans 93,127,072 75,651,244
Premises and equipment, net 893,050 753,969
Interest receivable 795,578 734,083
Foreclosed assets held for sale 370,583 112,690
Federal Reserve Bank stock 223,700 223,700
Deferred income taxes 329,000 234,130
Other assets 281,292 290,530
Total Other Assets 2,893,203 2,349,102
Total Assets $112,874,376 $90,601,668
See Notes to Consolidated Financial Statements
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
LIABILITIES
Deposits
Noninterest-bearing deposits $ 24,798,837 $23,695,976
Interest-bearing demand deposits 31,236,551 28,544,714
Savings 93,749 148,417
Time deposits 41,639,443 25,651,269
Total Deposits 97,768,580 78,040,376
Note payable 1,237,820 797,468
Debentures 770,000 770,000
Securities sold under agreements
to repurchase 4,128,862 1,466,231
Other borrowings 417,319
Federal funds purchased 1,750,000
Income taxes payable 194,811 104,932
Accrued interest and other liabilities 672,963 653,963
Total Liabilities 105,190,355 83,582,970
MINORITY INTEREST 1,350,982 1,229,422
STOCKHOLDERS' EQUITY
Common stock, $1 par value;
authorized 500,000 shares;
issued and outstanding
162,000 shares in 1998 and
161,200 shares in 1997 including
shares held in treasury 162,000 161,200
Additional paid-in capital 5,627,527 5,615,335
Retained earnings 1,109,206 147,485
Accumulated other comprehensive
income
Unrealized appreciation on
available-for-sale
securities, net of income taxes 9,275 42,554
6,908,008 5,966,574
Treasury stock, at cost
1998 - 12,059 shares: 1997 - 3,994 (574,969) (177,298)
Total Stockholders' Equity 6,333,039 5,789,276
Total Liabilities and
Stockholders' Equity $112,874,376 $90,601,668
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
INTEREST INCOME
Interest and fees on loans $8,738,335 $7,018,412
Federal funds sold 395,444 325,845
Investment securities 529,706 427,184
Other interest income 13,422 16,676
Total Interest Income 9,676,907 7,788,117
INTEREST EXPENSE
Deposits 3,995,287 3,198,856
Notes payable and debentures 155,316 156,549
Federal funds purchased and
securities sold under
agreements to repurchase 153,360 45,622
Total Interest Expense 4,303,963 3,401,027
NET INTEREST INCOME 5,372,944 4,387,090
PROVISION FOR LOAN LOSSES 319,487 273,765
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,053,457 4,113,325
NONINTEREST INCOME
Service charges on deposit accounts 214,836 211,390
Other service charges 82,900 62,181
Other 62,781 57,081
Total Noninterest Income 360,517 330,652
NONINTEREST EXPENSE
Salaries and employee benefits 1,883,757 1,782,673
Net occupancy and equipment
expense 676,444 522,139
Professional fees 109,705 126,342
Credit card service fee expense 10,776 1,781
Insurance expense 54,054 48,878
Other expenses 751,264 718,867
Total Noninterest Expense 3,486,000 3,200,680
INCOME BEFORE INCOME TAXES 1,927,974 1,243,297
PROVISION FOR INCOME TAXES 794,384 550,060
INCOME BEFORE MINORITY INTEREST 1,133,590 693,237
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARY (171,869) (133,711)
NET INCOME $ 961,721 $ 559,526
EARNINGS PER SHARE
Basic $ 5.94 $ 3.48
Diluted $ 4.41 $ 2.70
See Notes to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Additional Retained
Comprehensive Stock Paid-in Earnings
Income Issued Capital (Deficit)
<S> <C> <C> <C> <C>
BALANCE (DEFICIT),
DECEMBER 31, 1996 $160,000 $5,597,047 $(412,041)
Net income $559,526 559,526
Change in unrealized
appreciation (depreciation)
on available-for-sale
securities, net of
income taxes of $-0- 48,776
Issuance of 1,200
shares of stock 1,200 18,288
Purchase of 1,200 shares of
treasury stock _____ _____ _____ _____
Comprehensive income $608,302
BALANCE,
DECEMBER 31, 1997 161,200 5,615,335 147,485
Net income $961,721 961,721
Change in unrealized
appreciation (depreciation)
on available-for-sale
securities, net of
income taxes of $7,800 (33,279)
Issuance of 800 shares
of stock 800 12,192
Purchase of 8,065 shares
of treasury stock _____ _____ _____ ______
Comprehensive income $928,442
BALANCE, DECEMBER 31, 1998 $162,000 $5,627,527 $1,109,206
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
---Income----
Unrealized
Appreciation
(Depreciation)
Available-
for-Sale
Securities Treasury
Net Stock Total
<S> <C> <C> <C>
BALANCE (DEFICIT),
DECEMBER 31, 1996 $(6,222) $(123,556) $5,215,228
Net income 559,526
Change in unrealized
appreciation (depreciation)
on available-for-sale
securities, net of
income taxes of $-0- 48,776
Issuance of 1,200
shares of stock 19,488
Purchase of 1,200 shares of
treasury stock _____ (53,742) (53,742)
Comprehensive income
BALANCE, DECEMBER 31, 1997 42,554 (177,298) 5,789,276
Net income 961,721
Change in unrealized
appreciation (depreciation)
on available-for-sale
securities, net of
income taxes of $7,800 (33,279) (33,279)
Issuance of 800 shares of stock 12,992
Purchase of 8,065 shares
of treasury stock _____ (397,671) (397,671)
Comprehensive income
BALANCE, DECEMBER 31, 1998 $9,275 $(574,969) $6,333,039
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 961,721 $ 559,526
Items not requiring (providing) cash:
Depreciation and amortization 176,149 154,937
Provision for loan losses 319,487 273,765
Minority interest in net income of
subsidiary 171,869 133,711
Loss on sale of other foreclosed
assets 5,400
Provision for losses on foreclosed
assets 15,000
Deferred income taxes (94,870) 122,783
Changes in:
Interest receivable (61,495) (208,448)
Other assets 28,738 176,990
Accrued interest and other
liabilities 19,000 91,640
Income taxes receivable/payable 89,879 (199,772)
Net cash provided by
operating activities 1,615,878 1,120,132
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of loan participations (2,088,125) (3,285,150)
Proceeds from sales of loan
participations 3,241,260 6,725,300
Net originations of loans (19,333,186) (18,752,769)
Purchase of premises and equipment (313,942) (218,296)
Proceeds from maturities of
available-for-sale securities 5,009,797 4,468,925
Purchases of available-for-sale
securities (7,533,279) (4,875,031)
Proceeds from sale of other assets 121,290
Net cash used in investing
activities (20,896,185) (15,937,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, savings, NOW
and money market accounts 3,740,030 2,789,161
Net increase in time deposits 15,988,174 2,826,482
Net increase in repurchase
agreements 2,662,631 934,830
Net increase (decrease) in short-
term borrowings (892,329) 1,750,000
Purchase of minority interest in
subsidiary bank (69,656) (78,750)
Proceeds from sale of stock 12,992 19,488
Purchase of treasury stock (397,671) (53,743)
Net cash provided by
financing activities 21,044,171 8,187,468
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,763,864 (6,629,421)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 4,671,948 11,301,369
CASH AND CASH EQUIVALENTS, END OF
YEAR $ 6,435,812 $4,671,948
See Notes to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company's primary activity to date has been to act as a
bank holding company of First Business Bank of Kansas City, N.A.
through its 86% ownership of the Bank. The Bank is subject to
the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
The Bank extends credit for commercial real estate mortgages,
working capital and equipment financing, and consumer loans to
businesses and residents primarily throughout the greater Kansas
City area. The Bank also participates in secured business loans,
originated by other banks, in the greater Kansas City area.
There were no securities purchased under reverse repurchase
agreements at December 31, 1998 and 1997.
USE OF ESTIMATES
The preparation of 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 financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance
for loan losses and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan
losses and the valuation of foreclosed assets held for sale,
management obtains independent appraisals for significant
properties.
Management believes that the allowance for losses on loans and
the valuation of foreclosed assets held for sale are adequate.
While management uses available information to recognize losses
on loans and foreclosed assets held for sale, changes in economic
conditions may necessitate revision of these estimates in future
years. In addition, various regulatory agencies, as an integral
part of their examination processes, periodically review the
Bank's allowances for losses on loans and valuation of foreclosed
assets held for sale. Such agencies may require the Bank to
recognize additional losses based on their judgments of
information available to them at the time of their examinations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
First Business Bancshares of Kansas City, Inc. and its 86%-owned
subsidiary, First Business Bank of Kansas City, N.A. All
significant intercompany accounts, transactions and stockholdings
have been eliminated in consolidation.
OPERATING SEGMENT
The Company has one subsidiary bank which provides traditional
banking services and has one operating segment.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all liquid investments with original
maturities of three months or less to be cash equivalents. At
December 31, 1998, cash equivalents were federal funds sold.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Available-for-sale securities, which include any security for
which the Bank has no immediate plan to sell but which may be
sold in the future, are carried at fair value. Realized gains
and losses, based on specifically identified amortized cost of
the specific security, are included in other income. Unrealized
gains and losses are recorded, net of related income tax effects,
in stockholders' equity. Premiums and discounts are amortized
and accreted, respectively, to interest income using the
level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity
securities are included in income when earned.
LOANS
Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-offs are reported
at their outstanding principal, 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.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions
charged to expense, by recoveries of loans previously charged
off, and reduced by loans charged off. The allowance is
maintained at a level considered adequate to provide for
potential loan losses, based on management's evaluation of the
loan portfolio, as well as on prevailing and anticipated economic
conditions and historical losses by loan category. General
allowances have been established, based upon the aforementioned
factors, and allocated to the individual loan categories.
Allowances are accrued on specific loans evaluated for impairment
for which the basis of each loan, including accrued interest,
exceeds the discounted amount of expected future collections of
interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the
Bank will not receive all amounts due according to the
contractual terms of the loan. This includes loans that are
delinquent 90 days or more (nonaccrual loans) and certain other
loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the
time such amounts are delinquent 90 days. Interest is recognized
for nonaccrual loans only upon receipt, and only after all
principal amounts are current according to the terms of the
contract.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized using the
straight-line method over the terms of the respective leases or
the estimated useful lives of the improvements, whichever is
shorter.
FORECLOSED ASSETS HELD FOR SALE
Assets acquired by foreclosure or in settlement of debt and
held for sale are valued at estimated fair value as of the date
of foreclosure, and a related valuation allowance is provided for
estimated costs to sell the assets. Management evaluates the
value of foreclosed assets held for sale periodically and
increases the valuation allowance for any subsequent declines in
fair value. Increases in the valuation allowance and
gains/losses on sales of foreclosed assets are included in
non-interest expenses, net.
FEE INCOME
Loan origination fees, net of direct origination costs, are
recognized as income in a manner that approximates the
level-yield method over the term of the loans.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax
effect of differences between the financial statements and tax
bases of assets and liabilities. A valuation allowance is
established to reduce deferred tax assets if it is more likely
than not that a deferred tax asset will not be realized.
RECLASSIFICATION
Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 financial statement
presentation. These reclassifications had no effect on net
income.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted
average number of shares outstanding during each year. Diluted
earnings per share is computed by using the weighted average
common shares and all potential dilutive common shares
outstanding during the period.
The computation of basic earnings per share is as follows:
1998 1997
NUMERATOR:
Net Income $ 961,721 $ 559,526
DENOMINATOR:
Weighted average common
shares outstanding 161,800 160,800
Basic earnings per share $ 5.94 $ 3.48
The computation of diluted
earnings per share is as
follows:
NUMERATOR:
Net income $ 961,721 $ 559,526
Adjustment for interest
on debentures 46,200 46,200
Adjusted for interest on
debentures 1,007,921 605,726
DENOMINATOR:
Weighted average common
shares outstanding 161,800 160,800
Average common shares stock
options and convertible
debentures outstanding 66,800 63,847
Average diluted common
shares 228,600 224,647
Diluted earnings per share $ 4.41 $ 2.70
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of
certain significant estimates and current vulnerabilities due to
certain concentrations. Estimates related to the allowance for
loan losses are reflected in the footnote regarding loans.
Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit
risk. Other significant estimates and concentrations not
discussed in those footnotes include:
DEPOSITS
Included in deposits are approximately $15,302,000 and
$15,474,000 at December 31, 1998 and 1997, respectively, of
demand deposits placed by companies under the control of a
stockholder and his related interests.
YEAR 2000 ISSUE
Like all entities, the Bank is exposed to risks associated
with the Year 2000 issue, which affects computer software and
hardware; transactions with customers, vendors and other
entities; and equipment dependent on microchips. The Bank has
begun but not yet completed the process of identifying and
remediating potential Year 2000 problems. It is not possible for
any entity to guarantee the results of its own remediation
efforts or to accurately predict the impact of the Year 2000
issue on third parties with which it does business. If
remediation efforts of the Bank or third parties with which it
does business are not successful, the Year 2000 problem could
have negative effects on the Bank's financial condition and
results of operations in the near term.
NOTE 3: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of investments
in available-for-sale securities are as follows:
December 31, 1998
Amortized Market Unrealized Unrealized
Cost Value Gains Losses
U.S.
Treasury $ 1,002,640 $ 1,012,188 $ 9,548
U.S.
Government
Agency 9,396,975 9,406,101 9,126
$10,399,615 $10,418,289 $18,674 $ 0
December 31, 1997
Amortized Market Unrealized Unrealized
Cost Value Gains Losses
U.S.
Treasury $ 3,004,029 $3,019,400 $15,371
U.S.
Government
Agency 4,875,186 4,909,974 34,788
$ 7,879,215 $7,929,374 $50,159 $ 0
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 3: INVESTMENTS IN DEBT AND EQUITY SECURITIES
(CONTINUED)
Maturities of investment securities at December 31, 1998 and
1997 are as follows:
1998 1997
Amortized Market Amortized Market
Cost Value Cost Value
In one year
or less $ 1,002,640 $ 1,012,188 $1,996,913 $2,001,600
After one
through
five years 2,877,135 2,882,039 4,385,054 4,414,074
After five
through
ten years 6,519,840 6,524,062 1,497,248 1,513,700
$10,399,615 $10,418,289 $7,879,215 $7,929,374
Investment securities with a cost of $200,000 and fair values
of $201,000 and $203,000 at December 31, 1998 and 1997,
respectively, were pledged to secure Treasury, Tax and Loan
deposits.
The Bank entered into sales of securities under agreements to
repurchase. The amounts deposited under these agreements
represent short-term borrowings and are reflected as a liability
in the balance sheets. The securities underlying the agreements
are book-entry securities in the Bank's safekeeping account
maintained at the Federal Reserve Bank of Kansas City and at
Commerce Bank of Kansas City at December 31, 1998 and 1997,
respectively. During the period, securities held in safekeeping
were pledged to the depositors under a written custodial
agreement that explicitly recognizes the depositor's interest in
the securities. The book value of securities pledged to secure
agreements to repurchase amounted to $4,973,000 and $2,983,000 at
December 31, 1998 and 1997, respectively. The approximate fair
value of these securities was $4,996,000 at December 31, 1998 and
$3,004,000 at December 31, 1997.
NOTE 4: LOANS
A summary of loans at December 31, 1998 and 1997 is as
follows:
1998 1997
Commercial $84,364,363 $66,931,282
Leases 2,185,095 2,209,750
Consumer 3,512,716 3,994,426
Real estate 4,466,552 3,751,209
$94,528,726 $76,886,667
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 4: LOANS (CONTINUED)
Activity in the allowance for loan losses for the years ended
December 31, 1998 and 1997 is as follows:
1998 1997
Balance at beginning
of year $ 1,235,423 $ 1,048,407
Provisions charged
to expense 319,487 273,765
Loans charged off (240,058) (206,031)
Recoveries on loans
previously charged off 86,802 159,282
Transfer allowance for
foreclosed assets (40,000)
Balance at end of year $ 1,401,654 $ 1,235,423
There were loans totaling approximately $444,000 and $164,000
on which the accrual of interest had been discontinued at
December 31, 1998 and 1997, respectively. Had interest been
accrued on these loans, interest income would have increased by
approximately $73,000 and $11,000 for the years ended December
31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, impaired loans totaled
$3,292,000 and $3,126,000, and the related allowance for loan
losses was $338,000 and $221,000, after partial charge-offs of
$239,000 and $152,000, respectively. Interest of $876,000 and
$604,000 was recognized on average impaired loans of $5,012,000
and $3,878,000, respectively. Interest of $4,900 and $3,500 was
recognized on impaired loans on a cash basis during 1998 and
1997.
NOTE 5: COMMITMENTS AND CREDIT RISK
The Bank extends credit for commercial real estate mortgages,
working capital and equipment financing, and consumer loans to
businesses and residents, principally in the Kansas City
Metropolitan area.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the lending contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments may
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Each
customer's creditworthiness is evaluated on a case-by-case basis.
The amount of collateral obtained, if deemed necessary, upon
extension of credit is based on management's credit evaluation of
the counterparty. Collateral held varies but may include real
estate mortgages and security agreements covering accounts
receivable, inventory, property and equipment, commercial real
estate and residential real estate.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5: COMMITMENTS AND CREDIT RISK (Continued)
At December 31, 1998 and 1997, outstanding commitments to
extend credit amounted to approximately $5,062,000 and
$3,235,000, respectively. The commitments extended over varying
periods of time with the majority being disbursed within a
one-year period. Loan commitments at fixed rates of interest
amounted to approximately $1,559,000 and $1,458,000 at December
31, 1998 and 1997, respectively, with the remainder at floating
market rates.
Letters of credit are conditional commitments issued to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond
financing and similar transactions. The credit risk involved in
issuing letters of credit is essentially the same as that
involved in extending loans to customers.
Total outstanding letters of credit amounted to
approximately $1,308,000 and $1,208,000 at December 31, 1998 and
1997, respectively, with terms ranging from one to four years.
Lines of credit are agreements to lend to a customer as long
as there is no violation of any condition established in the
contract. Lines of credit generally have fixed expiration dates.
Since a portion of the line may expire without being drawn upon,
the total unused lines do not necessarily represent future cash
requirements. Each customer's creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, commercial
real estate and residential real estate. Management uses the
same credit policies in granting lines of credit as it does for
on-balance sheet instruments.
At December 31, 1998 and 1997, unused lines of credit
borrowers aggregated approximately $20,024,000 and $19,122,000,
respectively.
Additionally, the Bank periodically has excess funds which
are loaned to other banks as federal funds sold. At December 31,
1998, federal funds sold totaling $880,000 were loaned to one
bank that acted as agent for First Business Bank in selling the
funds to other institutions. There were no federal funds sold at
December 31, 1997. The Bank's policy limits the amount deposited
with any one institution to its legal lending limit.
At December 31, 1998 and 1997, approximately 38% and 16% of
the Bank's total time deposits consisted of short-term
certificates of deposit which were issued through a broker.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 6: PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1998 and
1997 is as follows:
1998 1997
Leasehold improvements $ 836,767 $ 668,405
Equipment 1,210,299 1,147,362
Furniture and fixtures 465,828 383,185
2,512,894 2,198,952
Accumulated depreciation (1,619,844) (1,444,983)
$ 893,050 $ 753,969
NOTE 7: FORECLOSED ASSETS HELD FOR SALE
Transactions in the allowance for losses on foreclosed
assets for the year ended December 31, 1998 were as follows:
Balance, beginning of year $ 40,000
Charge-offs (40,000)
Balance, end of year $ 0
NOTE 8: INTEREST-BEARING DEPOSITS
Interest-bearing deposits in denominations of $100,000 or
more were $11,316,000 on December 31, 1998 and $5,808,000 on
December 31, 1997.
At December 31, 1998, the scheduled maturities of
certificates of deposit are as follows:
1999 $31,304,192
2000 9,531,301
2001 594,000
2002 110,950
2003 and thereafter 99,000
$41,639,443
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1998, the Bank had loans outstanding to
executive officers, directors and to companies in which the
Bank's executive officers or directors are principal owners, as
follows:
1998
Balance, beginning of year $ 4,719,000
New loans 3,219,000
Repayments (1,386,000)
Balance, end of year $ 6,552,000
In management's opinion, such loans and other extensions of
credit and deposits were made in the ordinary course of business
and were made on substantially the same terms (including interest
rates and collateral) as those prevailing at the time for
comparable transactions with other persons and did not involve
more than normal risk of collectibility or present other
unfavorable features.
NOTE 10: REGULATORY MATTERS
The Company and subsidiary bank are subject to various
regulatory capital requirements administered by the federal
banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could
have a direct material effect on the subsidiary bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the
subsidiary bank must meet specific capital guidelines that
involve quantitative measures of assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting
practices. The subsidiary bank's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Company and the subsidiary bank to
maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1998, that the Company and the
subsidiary bank exceeds all capital adequacy requirements to
which it is subject. The subsidiary bank had retained earnings
of approximately $2,000,000 against which dividends could be
charged at December 31, 1998.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 10: REGULATORY MATTERS (Continued)
As of the most recent notification from regulatory
authorities, the Company was categorized as adequately
capitalized and the subsidiary Bank was categorized as well
capitalized under current regulatory guidelines. To be
categorized as adequately capitalized and well capitalized, the
Company and the subsidiary bank must maintain minimum total
risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the following table. There are no conditions or events
since that notification that management believes have changed the
Company's and the subsidiary Bank's category.
AS OF DECEMBER 31, 1998: ACTUAL
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $ 7,734,739 8.1%
Bank only $10,999,500 11.5%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $6,333,039 6.6%
Bank only $9,597,800 8.9%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $6,333,039 5.6%
Bank only $9,597,800 8.0%
AS OF DECEMBER 31, 1997:
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $7,024,276 8.2%
Bank only $9,636,000 12.5%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $5,789,276 6.8%
Bank only $8,401,000 10.9%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $5,789,276 6.3%
Bank only $8,401,000 9.9%
FOR CAPITAL
AS OF DECEMBER 31, 1998: ADEQUACY PURPOSES
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $7,621,200 8.0%
Bank only $7,621,200 8.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $3,810,600 4.0%
Bank only $3,810,600 4.0%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $4,559,765 4.0%
Bank only $4,248,858 4.0%
AS OF DECEMBER 31, 1997:
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $6,146,000 8.0%
Bank only $6,146,000 8.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $3,073,000 4.0%
Bank only $3,073,000 4.0%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $3,412,200 4.0%
Bank only $3,392,000 4.0%
TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
AS OF DECEMBER 31, 1998: ACTION PROVISIONS
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $9,526,500 10.0%
Bank only $9,526,000 10.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $5,715,900 6.0%
Bank only $5,715,900 6.0%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $5,699,700 5.0%
Bank only $5,311,073 5.0%
AS OF DECEMBER 31, 1997:
Total Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $7,683,000 10.0%
Bank only $7,683,000 10.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets)
Consolidated $4,610,000 6.0%
Bank only $4,610,000 6.0%
Tier 1 Risk-Based Capital
(to Average Assets)
Consolidated $4,265,300 5.0%
Bank only $4,241,000 5.0%
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 11: EMPLOYEE BENEFIT PLANS
The Bank has a 401(k) plan which covers substantially all
employees who are 21 years of age and have been employed by the
Bank for six months. The Bank, on October 1, 1997, implemented a
two-tier matching plan, whereby it will match 50% of the
participant's 401(k) deferral up to 4% of eligible compensation
plus 25% of 401(k) deferral for the next 4% of the participant's
eligible compensation. The Bank may also make a discretionary
contribution, determined annually by the Board of Directors. The
Bank's contributions to the plan were $76,700 and $7,800 for the
years ended December 31, 1998 and 1997, respectively.
NOTE 12: LEASES
A non-cancellable operating lease for the Bank premises
expires November 1, 2002.
Future minimum lease payments at December 31, 1998 are as
follows:
1999 $ 291,918
2000 293,826
2001 303,364
2002 252,803
$1,141,911
Rental expense for all operating leases totaled $277,149 and
$222,479 for the years ended December 31, 1998 and 1997,
respectively.
NOTE 13: INCOME TAXES
The provision (credit) for income taxes consists of the
following:
1998 1997
Taxes currently payable $889,254 $427,277
Deferred income taxes (94,870) 122,783
$794,384 $550,060
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 13: INCOME TAXES (Continued)
A reconciliation of income tax expense at the statutory rate
to the Company's actual income tax rate is shown below:
1998 1997
Computed at the statutory rate (34%) $656,000 $423,000
Increase (decrease) in taxes
resulting from:
Deferred state income tax effect -
net of federal tax benefits 83,400 55,011
Other 54,984 72,049
Actual tax provision (credit) $794,384 $550,060
The tax effects of temporary differences related to deferred
taxes at December 31, 1998 and 1997 are as follows:
1998 1997
Deferred tax assets:
Allowance for loan losses $283,900 $175,000
Accrued compensated absences 11,500
Allowance for losses on repossessed
assets 3,400
Reserve for loss on other assets 23,000 12,800
Reserve for losses on other real
estate owned 13,600
Deferred loan fees 14,000 10,000
Other 8,700 14,830
329,600 241,130
Deferred tax liabilities:
Differences in tax and financial
depreciation methods (7,000)
Other (600)
(600) (7,000)
Net deferred tax asset $329,000 $234,130
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 14: NOTE PAYABLE
The Company's existing debt of $1,237,820 in 1998 ($797,468
in 1997) was obtained through Firstar Bank. The line of credit
of $2,000,000 is due July 24, 1999 with interest at the LIBOR
rate plus 2% and is collateralized by all shares of subsidiary
bank stock.
NOTE 15: DEBENTURES
During the year ended December 31, 1992, the Company offered
for sale $1.5 million in convertible debentures, bearing interest
at prime plus 2% with a lower and upper limit of 8% to 10%,
respectively. After December 31, 1994, these debentures can be
converted into nonvoting shares of common stock in the Parent
Company at the price of $13.95 per share. At December 31, 1998
and 1997, debentures totaling $770,000 had been issued.
NOTE 16: OTHER EXPENSES
Other expenses for the years ended December 31, 1998 and
1997 are as follows:
1998 1997
Advertising $102,283 $168,710
Courier 91,602 73,077
Supplies 59,213 70,723
Travel and entertainment 46,591 61,892
Postage and freight 43,922 41,262
Comptroller fees 37,775 33,489
Correspondent bank charges 40,210 16,731
Telecommunications 23,552 23,850
Recruiting and temporary help fees 27,279 43,983
Other 278,837 185,150
$751,264 $718,867
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 17: ADDITIONAL CASH FLOWS INFORMATION
NONCASH INVESTING ACTIVITY 1998 1997
Foreclosed assets held for sale
acquired in settlement of debt $ 384,736 $ 50,088
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid 4,315,493 3,250,847
Income taxes paid 723,491 196,000
NOTE 18: STOCK OPTIONS
The Company has an option plan under which the Company may
grant options which vest over five years to key employees of
First Business Bank of Kansas City. The exercise price of each
option is intended to equal the fair value of the Company's stock
on the date of the grant. An option's maximum term is 10 years.
During the year ended December 31, 1994, the Company adopted
an employee stock option plan for key officers of its subsidiary
(First Business Bank) and reserved 28,000 shares of Company
common stock for issuance related to options granted. There were
22,500 and 21,500 options available to issue at December 31, 1998
and 1997, respectively. The plan provides that the option price
will be no less than the book value per share of the Company's
regular common stock based on its most recent consolidated
audited financial statements. Generally, 20% of the options are
exercisable on each annual anniversary date of the grant of the
options and expire ten years after the date of the grant. As of
December 31, 1998 and 1997, 2,000 and 1,200 option shares had
been exercised, respectively.
A summary of the status of the plan at December 31, 1998 and
1997, and changes during the years then ended, is presented
below:
1998 1997
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
Outstanding,
Beginning of
Year 21,500 $ 17.76 24,500 $17.57
Granted 2,000 39.26
Exercised (800) 16.24 (1,200) 16.24
Forfeited (200) 16.24 (1,800) 16.24
Outstanding,
End of Year 22,500 $ 19.74 21,500 $17.76
Options
Exerciseable,
End of Year 22,500 21,500
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 18: STOCK OPTIONS (Continued)
The fair value of each option granted is estimated on the
date of the grant using the minimum value method with the
following weighted-average assumptions:
1998 1997
Dividend per share $ - $ -
Risk-free interest rate 4.90% 5.90%
Expected life of options 12 years 12 years
Weighted-average fair value of
options granted during year $39.26 $28.70
The following table summarizes information about stock
options under the plan outstanding at December 31, 1998.
- ---------Options Outstanding------------- --Options Exercisable--
Weighted- Weighted- Weighted-
Average Average Average
Range of Remaining Exercise Number Exercise
Exercise Contractual Price Exercisable Price
Prices Shares Life
$16.24 15,500 8 years $16.24 15,500 $16.24
20.21 3,000 9 years 20.21 3,000 20.21
26.60 2,000 10 years 26.60 2,000 26.60
39.26 2,000 12 years 39.26 2,000 39.26
The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans, and no compensation
cost has been recognized for the plan. Had compensation cost for
the Company's plan been determined, based on the fair value at
the grant dates using Statement of Financial Accounting Standards
No. 123, the Company's net income would have decreased by $9,000
and $23,000 for 1998 and 1997, respectively.
NOTE 19: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:
CASH AND DUE FROM BANKS
For these short-term instruments, the carrying amount
approximates fair value.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 19: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
INVESTMENT SECURITIES
Fair values for investment securities equal quoted market
prices, if available. If quoted market prices are not available,
fair values are estimated based on quoted market prices of
similar securities.
LOANS
The fair value 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. Loans with similar characteristics were
aggregated for purposes of the calculations. The carrying amount
of accrued interest approximates its fair value.
DEPOSITS
The fair value of demand deposits, savings accounts, NOW
accounts and certain money market deposits is the amount payable
on demand at the reporting date (i.e., their carrying amount).
The fair value of fixed-maturity time deposits is estimated using
a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities.
The carrying amount of accrued interest payable approximates its
fair value.
FEDERAL FUNDS PURCHASED AND OTHER BORROWINGS
For these short-term instruments, the carrying amount is a
reasonable estimate of fair value.
NOTES PAYABLE
Rates currently available to the Company for debt with similar
terms and remaining maturities are used to estimate fair value of
existing debt.
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF
CREDIT
The fair values of letters of credit and lines of credit are
based on fees currently charged for similar agreements or on the
estimated cost to terminate or otherwise settle the obligations
with the counterparties at the reporting date.
The following tables represent estimated fair values of the
Company's financial instruments. The fair values of certain
instruments were calculated by discounting expected cash flows,
which method involves significant judgments by management and
uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or
liquidation sale. Because no market exists for certain financial
instruments and because management does not intend to sell these
financial instruments, the Company is not certain whether the
fair values shown below represent values at which the respective
financial instruments could be sold individually or in the
aggregate.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 19: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS (Continued)
December 31, 1998
Carrying Fair
Amount Value
Financial assets:
Cash and cash equivalents $ 6,436,000 $ 6,436,000
Available-for-sale
securities 10,418,000 10,418,000
Interest receivable 796,000 796,000
Loans, net of allowance
for loan losses 93,127,000 93,235,000
Financial liabilities:
Deposits 97,769,000 98,156,000
Federal funds purchased
and other borrowings 417,000 417,000
Notes payable 1,238,000 1,238,000
Securities sold under
agreements to repurchase 4,129,000 4,129,000
Debentures 770,000 770,000
Interest payable 494,000 494,000
Unrecognized financial
instruments (net of
contract amount):
Commitments to extend credit 0 0
Letters of credit 0 0
Lines of credit 0 0
December 31, 1997
Carrying Fair
Amount Value
Financial assets:
Cash and cash equivalents $ 4,672,000 $ 4,672,000
Available-for-sale
securities 7,929,000 7,929,000
Interest receivable 734,000 734,000
Loans, net of allowance
for loan losses 75,651,000 75,637,000
Financial liabilities:
Deposits 78,040,000 78,232,966
Federal funds purchased
and other borrowings 1,750,000 1,750,000
Notes payable 797,000 797,000
Securities sold under
agreements to repurchase 1,466,000 1,466,000
Debentures 770,000 770,000
Interest payable 499,000 499,000
Unrecognized financial
instruments (net of
contract amount):
Commitments to extend credit 0 0
Letters of credit 0 0
Lines of credit 0 0
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 20: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY
ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
Assets
Cash $ 67,447 $ 52,525
Investment in subsidiary 8,246,985 7,171,679
Other 48,552 29,155
Total Assets $8,362,984 $7,253,359
Liabilities and Stockholders'
Equity
Debentures $ 770,000 $ 770,000
Note payable 1,237,820 797,468
Other 22,125 (103,385)
Stockholders' equity 6,333,039 5,789,276
Total Liabilities and
Stockholders' Equity $8,362,984 $7,253,359
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Income - Interest income $ 5,670 $ 4,083
Expenses 178,091 168,376
Loss before income taxes and
equity in undistributed net
income of subsidiary (172,421) (164,293)
Benefit for income taxes (69,781) (4,186)
Income before equity in
undistributed net income
of subsidiary (102,640) (160,107)
Equity in undistributed net
income of subsidiary 1,064,361 719,633
Net income $ 961,721 $ 559,526
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 20: CONSENSED FINANCIAL INFORMATION (PARENT COMPANY
ONLY) (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 961,721 $ 559,526
Items not requiring
(providing) cash:
Deferred income taxes (50) 199,050
Equity in undistributed
net income of subsidiary (1,064,361) (719,633)
Changes in:
Other assets (19,347) (23,205)
Other liabilities 125,510 96,548
Net cash provided
by operating activities 3,473 112,286
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 440,352
Issuance of common stock 12,992 19,488
Purchase of treasury stock (397,671) (53,743)
Purchase of minority interest
in subsidiary (44,224) (55,545)
Net cash provided
by (used in)
financing activities 11,449 (89,800)
INCREASE IN CASH AND CASH
EQUIVALENTS 14,922 22,486
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 52,525 30,039
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 67,447 $ 52,525
<PAGE>
FIRST BUSINESS BANCSHARES OF
KANSAS CITY, INC.
Accountants' Report and
Consolidated Financial Statements
<PAGE>
December 31, 1997 and 1996
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
DECEMBER 31, 1997 AND 1996
CONTENTS
PAGE
INDEPENDENT ACCOUNTANTS' REPORT. . . . . . . . . . . . . . . . . . .1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . .2
Statements of Income . . . . . . . . . . . . . . . . . . . . . .3
Statements of Changes in Stockholders' Equity. . . . . . . . . .4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . . . . .6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
First Business Bancshares of
Kansas City, Inc.
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets
of FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC. as of December
31, 1997 and 1996, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the
years then ended. These 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 conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of FIRST BUSINESS BANCSHARES OF KANSAS CITY,
INC. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ BAIRD, KURTZ & DOBSON
Kansas City, Missouri
January 23, 1998
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
Cash and due from banks $4,671,948 $7,751,369
Federal funds sold 3,550,000
Total Cash and Cash Equivalents 4,671,948 11,301,369
Available-for-sale securities 7,929,374 7,501,000
Total Investments 7,929,374 7,501,000
Loans 76,886,667 61,670,885
Less allowance for loan losses 1,235,423 1,048,407
Net Loans 75,651,244 60,622,478
Premises and equipment, net 753,969 686,452
Interest receivable 734,083 525,635
Foreclosed assets held for sale 112,690 117,602
Federal Reserve Bank stock 223,700 201,350
Deferred income taxes 234,130 280,000
Other assets 290,530 672,495
Total Other Assets 2,349,102 2,483,534
TOTAL ASSETS $90,601,668 $81,908,381
See Notes to Consolidated Financial Statements
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
LIABILITIES
Deposits
Noninterest-bearing deposits $23,695,976 $21,832,327
Interest-bearing demand
deposits 28,544,714 27,646,889
Savings 148,417 267,090
Time deposits 25,651,269 22,678,427
Total Deposits 78,040,376 72,424,733
Income taxes payable 16,896
Note payable 797,468 797,468
Debentures 770,000 770,000
Securities sold under
agreements to repurchase 1,466,231 531,401
Federal funds purchased 1,750,000
Accrued interest and other
liabilities 758,895 1,009,642
TOTAL LIABILITIES 83,582,970 75,550,140
MINORITY INTEREST 1,229,422 1,143,013
STOCKHOLDERS' EQUITY
Common stock, $1 par value;
authorized 500,000
shares; issued and
outstanding 161,200 shares
in 1997 and 160,000 shares
in 1996, including
shares held in treasury 161,200 160,000
Additional paid-in capital 5,615,335 5,597,047
Retained earnings (deficit) 147,485 (412,041)
Unrealized appreciation
(depreciation) on
available-for-sale
securities, net of
income taxes 42,554 (6,222)
Treasury stock, at cost
1997 - 3,994 shares;
1996 - 2,794 shares (177,298) (123,556)
TOTAL STOCKHOLDERS' EQUITY 5,789,276 5,215,228
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $90,601,668 $81,908,381
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
INTEREST INCOME
Interest and fees on loans $7,018,412 $6,430,105
Federal funds sold 325,845 568,761
Investment securities 427,184 385,841
Other interest income 16,676 11,659
Total Interest Income 7,788,117 7,396,366
INTEREST EXPENSE
Deposits 3,198,856 3,170,102
Long-term debt 156,549 149,127
Federal funds purchased and
securities sold under
agreements to repurchase 45,622 17,052
Total Interest Expense 3,401,027 3,336,281
NET INTEREST INCOME 4,387,090 4,060,085
PROVISION FOR LOAN LOSSES 273,765 41,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,113,325 4,019,085
NONINTEREST INCOME
Service charges on
deposit accounts 211,390 204,541
Other service charges 148,846 204,668
Other 57081 88,030
Total Noninterest Income 417,317 497,239
NONINTEREST EXPENSE
Salaries and employee benefits 1,782,673 1,604,549
Net occupancy and
equipment expense 522,139 499,615
Professional fees 126,342 246,808
Credit card service fee expense 88,446 159,390
Insurance expense 48,878 30,805
Other expenses 718,867 565,395
Total Noninterest Expense 3,287,345 3,106,562
INCOME BEFORE INCOME TAXES 1,243,297 1,409,762
PROVISION (CREDIT) FOR INCOME TAXES 550,060 (261,000)
INCOME BEFORE MINORITY INTEREST 693,237 1,670,762
MINORITY INTEREST IN NET INCOME
OF SUBSIDIARY (133,711) (212,566)
NET INCOME $559,526 $1,458,196
EARNINGS PER SHARE
Basic $3.48 $9.11
Diluted $2.70 $6.77
See Notes to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
STOCK PAID-IN EARNINGS
ISSUED CAPITAL (DEFICIT)
<S> <C> <C> <C>
BALANCE (DEFICIT),
DECEMBER 31, 1995 $160,000 $5,597,047 $(1,870,237)
Net income 1,458,196
Change in unrealized
appreciation
(depreciation) on
available-for-sale
securities _____ _____ _____
BALANCE (DEFICIT),
DECEMBER 31, 1996 160,000 5,597,047 (412,041)
Net income 559,526
Change in unrealized
appreciation
(depreciation) on
available-for-sale
securities
Issuance of 1,200 shares
of stock 1,200 18,288
Purchase of
1,200 shares of
treasury stock _____ _____ _____
BALANCE (DEFICIT)
DECEMBER 31, 1997 $161,200 $5,615,335 $147,485
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
ON AVAILABLE-
FOR-SALE TREASURY
SECURITIES STOCK TOTAL
<S> <C> <C> <C>
BALANCE (DEFICIT),
DECEMBER 31, 1995 $(16,634) $(123,556) $3,746,620
Net income 1,458,196
Change in unrealized
appreciation
(depreciation) on
available-for-sale
securities 10,412 _____ 10,412
BALANCE (DEFICIT),
DECEMBER 31, 1996 (6,222) (123,556) 5,215,228
Net income 559,526
Change in unrealized
appreciation
(depreciation) on
available-for-sale
securities 48,776
Issuance of 1,200 shares
of stock 19,488
Purchase of
1,200 shares of
treasury stock _____ (53,742) (53,742)
BALANCE (DEFICIT)
DECEMBER 31, 1997 $42,554 $(177,298) $5,789,276
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $559,526 $1,458,196
Items not requiring (providing) cash:
Depreciation and amortization 154,937 160,501
Provision for loan losses 273,765 41,000
Minority interest in net income
of subsidiary 133,711 212,566
Gain on sale of premises
and equipment (3,779)
Provision for losses on
foreclosed assets 15,000 10,000
Deferred income taxes 122,783 (280,000)
Changes in:
Interest receivable (208,448) 29,492
Other assets 176,990 (50,048)
Accrued interest and
other liabilities 91,640 113,625
Income taxes
receivable/payable (199,772) (17,379)
Net cash provided by
operating activities 1,120,132 1,708,932
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of loan participations (3,285,150) (2,715,217)
Proceeds from sales of loan
participations 6,725,300 4,320,654
Net originations on loans (18,752,769) (6,786,246)
Purchase of premises and
equipment (218,296) (102,409)
Proceeds from maturities of
available-for-sale securities 4,468,925 6,179,775
Purchases of available-for-sale
securities (4,875,031) (5,086,015)
Net cash used in
investing activities (15,937,021) (4,189,458)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, savings,
NOW and money market accounts 2,789,161 341,849
Net increase (decrease) in
time deposits 2,826,482 (1,301,963)
Net increase in repurchase
agreements 934,830 71,263
Net increase in short-term
borrowings 1,750,000 200,000
Purchase of minority interest
in subsidiary bank (78,750)
Proceeds from sale of stock 19,488
Purchase of treasury stock (53,743)
Net cash provided by
(used in) financing
activities 8,187,468 (688,851)
DECREASE IN CASH AND CASH EQUIVALENTS (6,629,421) (3,169,377)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 11,301,369 14,470,746
CASH AND CASH EQUIVALENTS,
END OF YEAR $4,671,948 $11,301,369
See Notes to Consolidated Financial Statements
<PAGE>
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company's primary activity to date has been to act as a
bank holding company of First Business Bank of Kansas City, N.A.
through its 85% ownership of the Bank. The Bank is subject to
the regulations of certain federal agencies and undergoes
periodic examinations by those regulatory authorities.
The Bank extends credit for commercial real estate
mortgages, working capital and equipment financing, and consumer
loans to businesses and residents primarily throughout the
greater Kansas City area. The Bank also participates in secured
business loans, originated by other banks, in the greater Kansas
City area. From time to time, the Bank sells securities to
others on a short-term basis under repurchase agreements while
maintaining physical control of the securities. There were no
securities purchased under reverse repurchase agreements at
December 31, 1997 and 1996.
USE OF ESTIMATES
The preparation of 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 financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance
for loan losses and the valuation of real estate acquired in
connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan
losses and the valuation of foreclosed assets held for sale,
management obtains independent appraisals for significant
properties.
Management believes that the allowance for losses on loans
and the valuation of foreclosed assets held for sale are
adequate. While management uses available information to
recognize losses on loans and foreclosed assets held for sale,
changes in economic conditions may necessitate revision of these
estimates in future years. In addition, various regulatory
agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans and
valuation of foreclosed assets held for sale. Such agencies may
require the Bank to recognize additional losses based on their
judgments of information available to them at the time of their
examination.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of First Business Bancshares of Kansas City, Inc. and its
85%-owned subsidiary First Business Bank of Kansas City, N.A.
All significant intercompany accounts, transactions and
stockholdings have been eliminated in consolidation.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(Continued)
CASH EQUIVALENTS
The Company considers all liquid investments with original
maturities of three months or less to be cash equivalents. At
December 31, 1996, cash equivalents consisted primarily of
federal funds sold.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Available-for-sale securities, which include any security
for which the Bank has no immediate plan to sell but which may be
sold in the future, are carried at fair value. Realized gains
and losses, based on specifically identified amortized cost of
the specific security, are included in other income. Unrealized
gains and losses are recorded, net of related income tax effects,
in stockholders' equity. Premiums and discounts are amortized
and accreted, respectively, to interest income using the
level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity
securities are included in income when earned.
LOANS
Loans that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-offs are reported
at their outstanding principal 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.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions
charged to expense, by recoveries of loans previously charged
off, and reduced by loans charged off. The allowance is
maintained at a level considered adequate to provide for
potential loan losses, based on management's evaluation of the
loan portfolio, as well as on prevailing and anticipated economic
conditions and historical losses by loan category. General
allowances have been established, based upon the aforementioned
factors, and allocated to the individual loan categories.
Allowances are accrued on specific loans evaluated for impairment
for which the basis of each loan, including accrued interest,
exceeds the discounted amount of expected future collections of
interest and principal or, alternatively, the fair value of loan
collateral.
A loan is considered impaired when it is probable that the
Bank will not receive all amounts due according to the
contractual terms of the loan. This includes loans that are
delinquent 90 days or more (nonaccrual loans) and certain other
loans identified by management. Accrual of interest is
discontinued, and interest accrued and unpaid is removed, at the
time such amounts are delinquent 90 days. Interest is recognized
for nonaccrual loans only upon receipt, and only after all
principal amounts are current according to the terms of the
contract.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(Continued)
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. Leasehold
improvements are capitalized and amortized using the
straight-line method over the terms of the respective leases or
the estimated useful lives of the improvements, whichever is
shorter.
FORECLOSED ASSETS HELD FOR SALE
Assets acquired by foreclosure or in settlement of debt and
held for sale are valued at estimated fair value as of the date
of foreclosure, and a related valuation allowance is provided for
estimated costs to sell the assets. Management evaluates the
value of foreclosed assets held for sale periodically and
increases the valuation allowance for any subsequent declines in
fair value. Increases in the valuation allowance and
gains/losses on sales of foreclosed assets are included in
non-interest expenses, net.
FEE INCOME
Loan origination fees, net of direct origination costs, are
recognized as income in a manner that approximates the
level-yield method over the term of the loans.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the
tax effect of differences between the financial statements and
tax bases of assets and liabilities. A valuation allowance is
established to reduce deferred tax assets if it is more likely
than not that a deferred tax asset will not be realized.
RECLASSIFICATION
Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 financial statement
presentation. These reclassifications had no effect on net
income.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(Continued)
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted
average number of shares outstanding during each year. Diluted
earnings per share is computed by using the weighted average
common shares and all potential dilutive common shares
outstanding during the period.
The computation of basic earnings per share is as follows:
1997 1996
NUMERATOR:
Net income $559,526 $1,458,196
DENOMINATOR:
Weighted average common shares
outstanding 160,800 160,000
Basic earnings per share $3.48 $9.11
The computation of diluted
earnings per share is
as follows:
NUMERATOR:
Net income $559,526 $1,458,196
Adjustment for interest on
debentures 46,200 46,200
Adjusted for interest on
debentures 605,726 1,504,396
DENOMINATOR:
Weighted average common shares
outstanding 160,800 160,000
Average common shares stock
options and convertible
debentures outstanding 63,847 62,100
Averaged diluted common
shares 224,647 222,100
Diluted earnings
per share $2.70 $6.77
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of
certain significant estimates and current vulnerabilities due to
certain concentrations. Estimates related to the allowance for
loan losses are reflected in the footnote regarding loans.
Current vulnerabilities due to certain concentrations of credit
risk are discussed in the footnote on commitments and credit
risk. Other significant estimates and concentrations not
discussed in those footnotes include:
. Included in deposits are approximately $15,474,000 and
$14,592,000 at December 31, 1997 and 1996, respectively, of
demand deposits placed by companies under the control of a
stockholder and his related interests.
NOTE 3: INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and approximate fair value of investments
in available-for-sale securities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
AMORTIZED MARKET UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES
<S> <C> <C> <C> <C>
U. S. Treasury $3,004,029 $3,019,400 $15,371
U. S. Government Agency 4,875,186 4,909,974 34,788
$7,879,215 $7,929,374 $50,159 $ 0
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
AMORTIZED MARKET UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES
<S> <C> <C> <C> <C>
U. S. Treasury $6,508,343 $6,504,750 $(3,593)
U. S. Government Agency 1,000,000 996,250 (3,750)
$7,508,343 $7,501,000 $0 $(7,343)
</TABLE>
Maturities of investment securities at December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
---------1997--------- ----------1996-----------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
In one year or less $1,996,913 $2,001,600 $4,504,415 $4,487,600
After one through
five years 4,385,054 4,414,074 3,003,928 3,013,400
After five through
ten years 1,497,248 1,513,700 ______ ______
$7,879,215 $7,929,374 $7,508,343 $7,501,000
</TABLE>
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3: INVESTMENTS IN DEBT AND EQUITY SECURITIES (Continued)
Investment securities with costs of $7,879,215 and
$7,508,343 and fair values of $7,929,374 and $7,501,000 at
December 31, 1997 and 1996, respectively, were pledged to secure
Treasury, Tax and Loan deposits, securities sold under agreements
to repurchase and for other purposes required or permitted by
law.
The Bank entered into sales of securities under agreements
to repurchase. The amounts deposited under these agreements
represent short-term borrowings and are reflected as a liability
in the balance sheets. The securities underlying the agreements
are book-entry securities in the Bank's safekeeping account
maintained at the Federal Reserve Bank of Kansas City and at
Commerce Bank of Kansas City at December 31, 1997 and 1996,
respectively. During the period, securities held in safekeeping
were pledged to the depositors under a written custodial
agreement that explicitly recognizes the depositor's interest in
the securities. At December 31, 1997, no material amount of
agreements to repurchase securities sold was outstanding with any
individual dealer. The book value of securities pledged to
secure agreements to repurchase amounted to $2,983,000 and
$1,011,000 at December 31, 1997 and 1996, respectively. The
approximate fair value of these securities was $3,004,000 at
December 31, 1997 and $1,021,000 at December 31, 1996.
NOTE 4: LOANS
A summary of loans at December 31, 1997 and 1996 is as
follows:
1997 1996
Commercial $66,931,282 $53,662,380
Leases 2,209,750 1,889,327
Consumer 3,994,426 3,888,938
Real estate 3,751,209 2,230,240
$76,886,667 $61,670,885
Activity in the allowance for loan losses for the years
ended December 31, 1997 and 1996 is as follows:
1997 1996
Balance at beginning
of year $1,048,407 $ 923,457
Provision charged
to expense 273,765 41,000
Loans charged off (206,031) (385,582)
Recoveries on loans
previously
charged off 159,282 469,532
Transfer allowance for
foreclosed assets (40,000) _____
Balance at end of year $1,235,423 $1,048,407
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4: LOANS (Continued)
There were loans totaling approximately $164,000 and
$213,000 on which the accrual of interest had been discontinued
at December 31, 1997 and 1996, respectively. Had interest been
accrued on these loans, interest income would have increased by
approximately $52,000 and $33,000 for the years ended December
31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, impaired loans totaled
$3,126,000 and $4,042,000, and the related allowance for loan
losses was $221,000 and $168,000, after partial charge-offs of
$206,000 and $152,000, respectively. Interest of $604,000 and
$601,000 was recognized on average impaired loans of $3,878,000
and $3,090,000, respectively. Interest of $621,000 and $626,000
was recognized on impaired loans on a cash basis during 1997 and
1996.
NOTE 5: COMMITMENTS AND CREDIT RISK
The Bank extends credit for commercial real estate
mortgages, working capital and equipment financing, and consumer
loans to businesses and residents, principally in the Kansas City
Metropolitan area.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the lending contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since a portion of the commitments may
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Each
customer's creditworthiness is evaluated on a case-by-case basis.
The amount of collateral obtained, if deemed necessary, upon
extension of credit is based on management's credit evaluation of
the counterparty. Collateral held varies but may include real
estate mortgages and security agreements covering accounts
receivable, inventory, property and equipment, commercial real
estate and residential real estate.
At December 31, 1997 and 1996, outstanding commitments to
extend credit amounted to approximately $3,235,000 and
$4,993,000, respectively. The commitments extended over varying
periods of time with the majority being disbursed within a
one-year period.
Letters of credit are conditional commitments issued to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond
financing and similar transactions. The credit risk involved in
issuing letters of credit is essentially the same as that
involved in extending loans to customers.
Total outstanding letters of credit amounted to
approximately $1,208,000 and $1,399,000 at December 31, 1997 and
1996, respectively, with terms ranging from one to four years.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5: COMMITMENTS AND CREDIT RISK (Continued)
Lines of credit are agreements to lend to a customer as long
as there is no violation of any condition established in the
contract. Lines of credit generally have fixed expiration dates.
Since a portion of the line may expire without being drawn upon,
the total unused lines do not necessarily represent future cash
requirements. Each customer's creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, commercial
real estate and residential real estate. Management uses the
same credit policies in granting lines of credit as it does for
on-balance sheet instruments.
At December 31, 1997 and 1996, unused lines of credit
borrowers aggregated approximately $19,122,000 and $12,284,000,
respectively.
Additionally, the Bank periodically has excess funds which
are loaned to other banks as federal funds sold. At December 31,
1996, federal funds sold totaling $3,550,000 were loaned to one
bank, that acted as agent for First Business Bank in selling the
funds to other institutions. There were no federal funds sold at
December 31, 1997. The Bank's policy limits the amount deposited
with any one institution to its legal lending limit.
NOTE 6: PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1997 and
1996 is as follows:
1997 1996
Leasehold improvements $668,405 $668,405
Equipment 1,147,362 942,451
Furniture and fixtures 383,185 369,800
2,198,952 1,980,656
Accumulated depreciation (1,444,983) (1,294,204)
$753,969 $686,452
NOTE 7: FORECLOSED ASSETS HELD FOR SALE
Transactions in the allowance for losses on foreclosed
assets for the year ended December 31, 1997 were as follows:
Balance, beginning of year $0
Transfer from allowance for loan losses 40,000
$40,000
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 8: INTEREST-BEARING DEPOSITS
Interest-bearing deposits in denominations of $100,000 or
more were $5,808,000 on December 31, 1997 and $4,644,000 on
December 31, 1996.
At December 31, 1997, the scheduled maturities of
certificates of deposit are as follows:
1998 $15,644,048
1999 9,480,672
2000 505,249
2001 0
2002 and thereafter 21,300
$25,651,269
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1997 and 1996, the Bank had loans
outstanding to executive officers, directors and to companies in
which the Bank's executive officers or directors are principal
owners, in the amount of $4,785,000 and $4,829,000, respectively.
In management's opinion, such loans and other extensions of
credit and deposits were made in the ordinary course of business
and were made on substantially the same terms (including interest
rates and collateral) as those prevailing at the time for
comparable transactions with other persons and did not involve
more than normal risk of collectibility or present other
unfavorable features.
NOTE 10: REGULATORY MATTERS
The subsidiary bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material
effect on the subsidiary bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for
prompt corrective action, the subsidiary bank must meet specific
capital guidelines that involve quantitative measures of the
subsidiary bank's assets, liabilities and certain off-balance
sheet items as calculated under regulatory accounting practices.
The subsidiary bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10: REGULATORY MATTERS (Continued)
Quantitative measures established by regulation to ensure
capital adequacy require the subsidiary bank to maintain minimum
amounts and ratios (set forth in the table below) of total and
Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31,
1997, that the subsidiary bank exceeds all capital adequacy
requirements to which it is subject.
As of June 30, 1997, the most recent notification from the
Comptroller of the Currency categorized the Bank as well
capitalized under current regulatory guidelines. To be
categorized as well capitalized, the subsidiary bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth in the following table. There are no
conditions or events since that notification that management
believes have changed the institution's category. The subsidiary
bank's actual capital amounts and ratios are also presented in
the following table.
AS OF DECEMBER 31, 1997: ACTUAL
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets) $9,636,000 12.5%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $8,401,000 10.9%
Tier 1 Risk-Based Capital
(to Average Assets) $8,401,000 9.9%
AS OF DECEMBER 31, 1996:
Total Risk-Based Capital
(to Net Risk Weighted Assets) $8,539,000 13.3%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $7,490,000 11.7%
Tier 1 Risk-Based Capital
(to Average Assets) $7,490,000 9.0%
FOR CAPITAL
AS OF DECEMBER 31, 1997: ADEQUACY PURPOSES
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets) $6,146,000 8.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $3,073,000 4.0%
Tier 1 Risk-Based Capital
(to Average Assets) $3,392,000 4.0%
AS OF DECEMBER 31, 1996:
Total Risk-Based Capital
(to Net Risk Weighted Assets) $5,136,000 8.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $2,568,000 4.0%
Tier 1 Risk-Based Capital
(to Average Assets) $3,324,000 4.0%
TO BE WELL CAPITALIZED
UNDER PROMPT CORRECTIVE
AS OF DECEMBER 31, 1997: ACTION PROVISIONS
AMOUNT RATIO
Total Risk-Based Capital
(to Net Risk Weighted Assets) $7,683,000 10.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $4,610,000 6.0%
Tier 1 Risk-Based Capital
(to Average Assets) $4,241,000 5.0%
AS OF DECEMBER 31, 1996:
Total Risk-Based Capital
(to Net Risk Weighted Assets) $6,420,000 10.0%
Tier 1 Risk-Based Capital
(to Net Risk Weighted Assets) $3,852,000 6.0%
Tier 1 Risk-Based Capital
(to Average Assets) $4,155,000 5.0%
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 11: EMPLOYEE BENEFIT PLANS
The Bank has a 401(k) plan which covers substantially all
employees who are 21 years of age and have been employed by the
Company for six months. The Company, on October 1, 1997,
implemented a two-tier matching plan, whereby it will match 50%
of the participant's 401(k) deferral up to 4% of eligible
compensation plus 25% of 401(k) deferral for the next 4% of the
participant's eligible compensation. The Company matching
contribution to the 401(k) plan was $13,380 for the year ended
December 31, 1997.
NOTE 12: LEASES
A noncancellable operating lease for the Bank premises
expires in 2002.
Future minimum lease payments at December 31, 1997 are as
follows:
1998 $ 280,267
1999 294,767
2000 296,700
2001 306,367
2002 255,306
$1,433,407
Rental expense for all operating leases totaled $197,938 and
$177,540 for the years ended December 31, 1997 and 1996,
respectively.
NOTE 13: INCOME TAXES
The provision (credit) for income taxes consists of the
following:
1997 1996
Taxes currently payable $427,279 $19,000
Deferred income taxes 122,783 (280,000)
$550,062 $(261,000)
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 13: INCOME TAXES (Continued)
A reconciliation of income tax expense at the statutory rate
to the Company's actual income tax rate is shown below:
1997 1996
Computed at the statutory rate (34%) $423,000 $479,000
Increase (decrease) in taxes
resulting from:
Deferred state income
tax effect - net of
federal tax benefits 55,011 59,000
Change in deferred tax
asset valuation allowance,
including use of net
operating loss carryforwards (842,000)
Other 72,049 43,000
Actual tax provision (credit) $550,060 $(261,000)
The tax effects of temporary differences related to deferred
taxes at December 31, 1997 and 1996 are as follows:
1997 1996
Deferred tax assets:
Allowance for loan losses $175,000 $113,000
Accrued compensated absences 11,500 13,000
Carryover of net operating losses 193,000
Allowance for losses on
repossessed assets 3,400
Reserve for loss on other assets 12,800
Reserve for losses on other
real estate owned 13,600
Deferred loan fees 10,000
Other 14,830 36,000
241,130 355,000
Deferred tax liabilities:
Differences in tax and
financial depreciation methods (7,000) (15,000)
Other (60,000)
(7,000) (75,000)
Net deferred tax asset before
valuation allowance 234,130 280,000
Valuation allowance:
Beginning balance 842,000
Change during the period (842,000)
Ending balance 0
Net deferred tax asset $234,130 $280,000
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 14: NOTE PAYABLE
The Company's existing debt of $797,468 was obtained through
the First Business Bank Lending Partnership. This partnership is
comprised of four directors of the Company, each director having
a 25% interest in the partnership. Subsequent to year end, the
Company obtained a $1,000,000 line of credit with another
institution and paid the existing outstanding debt. The new line
of credit is due January 20, 1999 with interest at the 90 day
LIBOR rate and is collateralized by 251,913 shares of subsidiary
bank stock.
NOTE 15: DEBENTURES
During the year ended December 31, 1992, the Company offered
for sale $1.5 million in convertible debentures, bearing interest
at prime plus 2% with a lower and upper limit of 8% to 10%,
respectively. After December 31, 1994, these debentures can be
converted into nonvoting shares of common stock in the Parent
Company at the price of $13.95 per share. At December 31, 1997
and 1996, debentures totaling $770,000 had been issued.
NOTE 16: OTHER EXPENSES
Other expenses for the years ended December 31, 1997 and
1996 are as follows:
1997 1996
Advertising $168,710 $96,507
Courier 73,077 65,521
Supplies 70,723 57,397
Travel and entertainment 61,892 45,130
Postage and freight 41,262 34,097
Comptroller fees 33,489 32,964
Correspondent bank charges 16,731 24,430
Telecommunications 23,850 20,073
Recruiting and temporary
help fees 43,983 14,396
All other 185,150 172,880
$718,867 $563,395
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 17: ADDITIONAL CASH FLOWS INFORMATION
NONCASH INVESTING ACTIVITY 1997 1996
Foreclosed assets held for
sale acquired in
Settlement of debt $50,088 $97,601
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid 3,250,847 3,336,281
Income taxes paid 196,000
NOTE 18: STOCK OPTIONS
The Company has an option plan under which the Company may
grant options which vest over five years to key employees of
First Business Bank of Kansas City. The exercise price of each
option is intended to equal the fair value of the Company's stock
on the date of the grant. An option's maximum term is 10 years.
During the year ended December 31, 1994, the Company adopted
an employee stock option plan for key officers of its subsidiary
(First Business Bank) and reserved 28,000 shares of Company
common stock for issuance related to options granted. There were
21,500 and 24,500 options available to issue at December 31, 1997
and 1996, respectively. The plan provides that the option price
will be no less than the book value per share of the Company's
regular common stock based on its most recent consolidated
audited financial statements. Generally, 20% of the options are
exercisable on each annual anniversary date of the grant of the
options and expire ten years after the date of the grant. As of
December 31, 1997, 1,200 option shares had been exercised.
A summary of the status of the plan at December 31, 1997 and
1996, and changes during the years then ended, is presented
below:
<TABLE>
<CAPTION>
----------1997----------- --------1996---------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C>
Outstanding, Beginning of Year 24,500 $17.57 22,500 $16.77
Granted 2,000 26.60
Exercised (1,200) 16.24
Forfeited (1,800) 16.24
Expired _____ _____
Outstanding, End of Year 21,500 $17.76 24,500 $17.57
Options Exercisable, End of Year 21,500 24,500
</TABLE>
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 18: STOCK OPTIONS (CONTINUED)
The fair value of each option granted is estimated on the
date of the grant using the minimum value method with the
following weighted-average assumptions:
1997 1996
Dividend per share $ - $ -
Risk-free interest rate 5.90% 6.41%
Expected life of options 12 years 12 years
Weighted-average fair value of
options granted during year $28.70 $26.60
The following table summarizes information about stock
options under the plan outstanding at December 31, 1997.
<TABLE>
<CAPTION>
- ---------------------OPTIONS OUTSTANDING--------------------- -----OPTIONS EXERCISABLE---
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES SHARES LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$16.24 16,500 9 years $16.24 16,500 $16.24
$20.21 3,000 10 years $20.21 3,000 $20.21
$26.60 2,000 10 years $26.60 2,000 $26.60
</TABLE>
The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans, and no compensation
cost has been recognized for the plan. Had compensation cost for
the Company's plan been determined, based on the fair value at
the grant dates using Statement of Financial Accounting Standards
No. 123, the Company's net income would have decreased by $23,000
and $24,400 for 1997 and 1996, respectively.
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 19: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
ASSETS
<S> <C> <C>
Cash $52,525 $30,039
Investment in subsidiary 7,171,679 6,347,725
Other 29,155 429,062
Total Assets $7,253,359 $6,806,826
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Debentures $770,000 $770,000
Note payable 797,468 797,468
Other (103,385) 24,130
Stockholders' equity 5,789,276 5,215,228
Total Liabilities and
Stockholders' Equity $7,253,359 $6,806,826
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Income - Interest income $4,083 $938
Expenses 168,376 152,204
Income (loss) before income taxes and
equity in undistributed net
income of subsidiary (164,293) (151,266)
Benefit for income taxes (4,186) (429,062)
Income before equity in
undistributed net income
of subsidiary (160,107) 277,796
Equity in undistributed net
income of subsidiary 719,633 1,180,400
Net income $559,526 $1,458,196
</TABLE>
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 19: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $559,526 $1,234,134
Items not requiring
(providing) cash:
Deferred income taxes 199,050 (205,00O)
Equity in undistributed
net income of subsidiary (719,633) (1,180,400)
Changes in:
Other assets (23,205)
Other liabilities 96,548 (19,998)
Net cash provided
by (used in)
operating activities 112,286 (171,264)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 200,000
Issuance of common stock 19,488
Purchase of treasury stock (53,743)
Purchase of minority interest
in subsidiary bank (55,545)
Net cash provided
by (used in)
financing activities (89,800) 200,000
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 22,486 28,736
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 30,039 1,303
CASH AND CASH EQUIVALENTS,
END OF YEAR $52,525 $30,039
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
ASSETS
9/30/99 9/30/98
Cash and due from banks $ 1,987,154 4,506,966
Federal funds sold - 17,100,000
Total Cash and Equivalents 1,987,154 21,606,966
Available-for-sale securities 10,138,104 7,952,422
Total Investments 10,138,104 7,952,422
Loans 111,370,015 88,652,808
Less allowance for loan loss 1,489,896 1,318,583
Net Loans 109,880,120 87,334,224
Investment in subsidiary
Premises and equipment, net 1,112,649 879,853
Interest receivable 834,827 532,142
Foreclosured assets held for sale - 381,083
Federal Reserve Bank stock 223,700 223,700
Deferred taxes 628,138 244,946
Other assets 313,250 289,144
Total Other Assets 3,112,565 2,550,867
Total Assets $125,117,943 $119,444,479
See Note to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
9/30/99 9/30/98
LIABILITIES
Noninterest-bearing deposits 13,592,428 22,477,790
Interest-bearing deposits 27,872,033 41,333,883
Savings 137,630 98,064
Time deposits 63,400,790 41,264,200
Total Deposits 105,002,881 105,173,937
Notes payable 3,237,820 1,097,820
Debentures 770,000 770,000
Securities sold under
agreements to repurch____ 4,637,774 4,147,177
Federal funds payable 2,100,000 ---
Income taxes payable 123,361 107,454
Accrued interest and
other liabilities 687,824 641,600
Total Liabilities 116,559,660 111,937,988
MINORITY INTEREST 1,429,639 1,316,599
STOCKHOLDERS' EQUITY
Common stock 180,500 162,000
Additional paid-in-capital 5,938,951 5,627,527
Retained earnings 1,705,691 798,049
Accumulated other
comprehensive income
Unrealized appreciation
(depreciation) on
available-for-sale
securities (121,529) 36,509
Less treasury stock (574,969) (434,193)
Total Stockholders' Equity 7,128,644 6,189,893
Total Liabilities and
Stockholders Equity $125,117,943 $119,444,479
See Note to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
9/30/99 9/30/98
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 7,293,067 $ 6,365,587
Federal funds sold 56,886 254,867
Investment securities 505,897 381,726
Other interest income - -
Total Interest Income 7,855,850 7,002,180
INTEREST EXPENSE
Deposits 3,130,764 2,908,030
Federal funds purchased and securities sold 360,011 229,826
under agreements to repurchase - -
Total Interest Expense 3,490,776 3,137,856
NET INTEREST INCOME (EXPENSE) 4,365,074 3,864,324
PROVISION FOR LOAN LOSSES 427,176 242,322
NET INTEREST INCOME (EXPENSE) AFTER PROVISION
FOR LOAN LOSSES 3,937,898 3,622,002
NONINTEREST INCOME
Service charge on deposit accounts 245,597 183,780
Other service charges 73,595 162,230
Other - -
Total Noninterest Income 319,192 346,010
NONINTEREST EXPENSE
Salaries 1,644,883 1,415,107
Net occupancy and equipment 341,766 506,492
Professional fees 106,770 119,257
Insurance expense 39,542 52,089
Other expenses 945,372 558,441
Total Noninterest Expense 3,078,333 2,651,385
INCOME (LOSS) BEFORE EQUITY IN NET LOSS
OF SUBSIDIARY 1,178,757 1,316,627
EQUITY IN NET INCOME OF SUBSIDIARY - -
INCOME BEFORE INCOME TAXES 1,178,757 1,316,627
PROVISIONS (CREDIT) FOR INCOME TAXES 466,023 542,776
MINORITY INTEREST IN NET INCOME OF SUBSIDIARY (116,249) (123,286)
NET INCOME $ 596,485 $ 650,564
Earnings per share
Basic $ 3.65 $ 4.02
Diluted $ 2.86 $ 2.99
</TABLE>
See Note to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
(9 MOS) (9 MOS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 596,485 $ 650,564
Items not requiring (providing) cash:
Depreciation 183,667 152,207
Provision for loan loss 427,176 242,322
Minority interest in net income of subsidiary 116,249 123,286
Loss on sale of other foreclosed assets 54,502 5,400
Provision for losses on foreclosed assets
Deferred income taxes (196,923) (65,125)
Changes in:
Interest receivable (39,249) 201,941
Other assets (18,697) 9,503
Accrued interest and other liabilities 14,860 (12,363)
Income taxes receivable/payable (71,450) (62,477)
Net cash provided by operating
activities 1,066,620 1,245,258
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of loan participation's (3,045,881) (2,088,125)
Proceeds from sales of loan participation's 2,756,010 3,241,260
Net origination of loans (16,890,353) (13,473,673)
Purchase of premises and equipment (398,545) (277,903)
Proceeds from maturities of
available-for-sale-securities 4,097,340 3,500,000
Purchases of available-for-sale securities (4,054,894) (3,404,572)
Proceeds from sale of other assets 316,081 121,290
Net cash used in investing activities (17,220,242) (12,381,723)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand, savings, NOW and money
market accounts (14,527,046) 11,520,630
Net increase in time deposits 21,761,347 15,612,931
Net increase in repurchase agreements 508,912 2,680,946
Net increase (decrease) in short-term borrowings 3,682,681 (1,449,648)
Purchase of minority interest in subsidiary bank (50,853) (49,473)
Proceeds from sale of stock 329,924 12,992
Purchase of treasury stock - (256,894)
Net cash provided by financing activities 11,704,965 28,071,484
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,448,657) 16,935,019
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,435,812 4,671,948
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,987,155 $ 21,606,967
</TABLE>
See Note to Consolidated Financial Statements
<PAGE>
FIRST BUSINESS BANCSHARES OF KANSAS CITY, INC.
NOTE TO CONSOLIDATED IFNNACIAL STATEMENT
SEPTEMBER 30, 1999 AND 1998
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of First Business
Bancshares, Inc of Kansas City N.A. and subsidiary as of and for
the nine month period ending September 30, 1999 and September 30,
1998 are unaudited, and, in the opinion of management, reflect
all adjustments (consisting only of normal reoccurring accruals)
necessary for a fair presentation of the financial condition and
results of operations for the unaudited period. The results of
operations for the nine month period ending September 30, 1999
and September 30, 1998 are not necessarily indicative of results
that may be expected for a full fiscal year.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our reports dated January 29, 1999 and
January 23, 1998, included in this Form 8-K, on our audits of the
consolidated financial statements of First Business Bancshares of
Kansas City, Inc. for the years ended December 31, 1998, 1997 and
1996.
We also consent to the incorporation by reference in the
following Registration Statement and related Prospectus of Gold
Banc Corporation, Inc. Of our reports dated January 29, 1999 and
January 23, 1998, on our audits of the consolidated financial
statements of First Business Bancshares of Kansas City, Inc.
included in this Form 8-K for the years ended December 31, 1998,
1997 and 1996.
Registration
Form Statement No. Purpose
S-4 333-65539 Shelf registration
of 3,920,292 shares
of Common Stock
/s/ BAIRD, KURTZ & DOBSON
Kansas City, Missouri
November 17, 1999
<PAGE>
