U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
For the transition period from ___________ to ____________
Commission File Number 0-24037
FIRST KANSAS FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its Charter)
Kansas 48-1198888
-------------------------------- -------------------------------------
(State or other Jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
600 Main Street, Osawatomie, Kansas 66064
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 755-3033
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
X Yes No
----- ------
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date:
As of November 3, 2000, there were 1,137,548 shares of the Registrant's
common stock, par value $0.10 per share, outstanding. The Registrant has no
other classes of common equity outstanding.
Transitional Small Business Disclosure Format (Check one) :
Yes X No
----- ------
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION
OSAWATOMIE, KANSAS
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (Unaudited) as of September 30, 2000
and December 31, 1999 2
Consolidated Statements of Earnings - (Unaudited) for
the three and nine months ended September 30, 2000 and 1999 3
Consolidated Statements of Cash Flows - (Unaudited) for
the nine months ended September 30, 2000 and 1999 4
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Balance Sheets
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
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September 30, December 31,
2000 1999
Assets (unaudited)
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<S> <C> <C>
Cash and cash equivalents $ 4,329 4,090
Investment securities held-to-maturity 6,353 6,261
(approximate fair value of $6,046 and $5,963, respectively)
Mortgage-backed securities available-for-sale, at fair value 18,634 20,795
Mortgage-backed securities held-to-maturity 51,542 57,965
(approximate fair value of $49,325 and $55,597, respectively)
Loans receivable, net 64,510 47,751
Stock in Federal Home Loan Bank (FHLB) of Topeka, at cost 2,650 2,114
Premises and equipment, net 2,160 2,213
Real estate held for development 357 357
Real estate owned 18 -
Accrued interest receivable, prepaid expenses and other assets 1,026 1,000
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Total assets $ 151,579 142,546
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Liabilities and Stockholders' Equity
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Liabilities:
Deposits $ 79,638 82,317
Advances from borrowers for property taxes and insurance 487 142
Borrowings from FHLB of Topeka 51,500 40,500
Accrued interest payable and other liabilities 2,000 714
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Total liabilities 133,625 123,673
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Stockholders' equity:
Preferred stock, $.10 par value, 2,000,000 shares authorized, none issued -
- Common stock, $.10 par value, 8,000,000 shares authorized, 1,553,938
shares issued 155 155
Additional paid-in capital 14,859 14,842
Retained earnings 8,931 8,289
Unearned compensation (1,446) (1,623)
Treasury stock (356,390 shares at September 30 , 2000 and
221,629 shares at December 31, 1999) (4,004) (2,495)
Accumulated other comprehensive income (loss) (541) (295)
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Total stockholders' equity 17,954 18,873
Commitments - -
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Total liabilities and stockholders' equity $ 151,579 142,546
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</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Earnings
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
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For the three months For the nine months
ended September 30, ended September 30,
------------------------------ ------------------------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Interest income:
Loans $ 1,225 850 3,305 2,449
Investment securities 100 100 301 291
Mortgage-backed securities 1,192 1,204 3,684 3,398
Interest-bearing deposits 14 30 39 108
Dividends on FHLB stock 57 28 140 68
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Total interest income 2,588 2,212 7,469 6,314
Interest expense:
Deposits 873 880 2,595 2,680
Borrowings 754 411 1,963 952
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Total interest expense 1,627 1,291 4,558 3,632
Net interest income 961 921 2,911 2,682
Provision for loan losses 9 9 27 27
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Net interest income after provision for loan losses 952 912 2,884 2,655
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Noninterest income:
Deposit account service fees 223 210 644 567
Gain on sale of loans - - - 4
Other 54 35 145 95
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Total noninterest income 277 245 789 666
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Noninterest expense:
Compensation and benefits 441 388 1,252 1,117
Occupancy and equipment 101 96 298 274
Federal deposit insurance premiums and assessments 15 22 43 62
Data processing 53 61 147 178
Amortization of premium on deposits assumed 15 16 45 46
Advertising 40 51 106 142
Other 148 138 469 451
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Total noninterest expense 813 772 2,360 2,270
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Earnings before income tax expense 416 385 1,313 1,051
Income tax expense 146 143 476 403
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Net earnings $ 270 242 837 648
=========== ============ ============ ===========
Net earnings per share - basic and diluted $ 0.23 0.18 0.71 0.47
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</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Cash Flows For the nine months ended September 30,
2000 and 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
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2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 837 648
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Provision for loan losses 27 27
Depreciation 138 115
Amortization of premium on deposits assumed 45 46
FHLB stock dividends - (69)
Amortization of loan fees, net 2 (31)
Accretion of discounts and amortization of premiums on
investment and mortgage-backed securities, net (57) (4)
Gain on sales of loans, net - 4
Proceeds from sales of loans - 234
Origination of loans for sale - (238)
Increase in accrued interest receivable, prepaids and other assets (71) (249)
Increase in accrued interest payable and other liabilities 1,422 1,542
Amortization of RSP shares and allocation of ESOP shares 185 166
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Net cash provided by operating activities 2,528 2,191
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Cash flows from investing activities:
(Increase) decrease in loans, net (2,459) 1,231
Loans purchased (14,347) (6,777)
Maturities of investment securities held-to-maturity 30 28
Paydowns and maturities of mortgage-backed securities available-for-sale 1,784 7,567
Paydowns and maturities of mortgage-backed securities held-to-maturity 6,409 8,012
Purchases of investment securities held-to-maturity (47) (1,490)
Purchases of mortgage-backed securities available-for-sale - (2,496)
Purchases of mortgage-backed securities held-to-maturity - (46,769)
Additions of premises and equipment, net (85) (522)
Purchase of FHLB stock (536) (1,497)
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Net cash used by investing activities $ (9,251) (42,713)
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</TABLE>
(Continued)
4
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
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2000 1999
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<S> <C> <C>
Cash flows from financing activities:
Net decrease in deposits $ (2,679) (2,327)
Repayment of borrowings from FHLB - (650)
Increase in borrowings from FHLB 11,000 41,500
Purchases of stock for the Treasury and for the RSP (1,508) (2,340)
Dividends paid (195) (151)
Net increase in advances from borrowers for taxes and insurance 344 193
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Net cash provided by financing activities 6,962 36,225
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Net increase (decrease) in cash and cash equivalents 239 (4,297)
Cash and cash equivalents at beginning of period 4,090 8,143
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Cash and cash equivalents at end of period $ 4,329 3,846
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</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION
OSAWATOMIE, KANSAS
Notes to Unaudited Consolidated Financial Statements
September 30, 2000 and 1999
(1) Basis of presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-QSB. The
consolidated financial statements should be read in conjunction with the
audited financial statements included in the Company's Annual Report on
Form 10-KSB for fiscal year ended December 31, 1999.
The unaudited consolidated financial statements include the accounts
of First Kansas Financial Corporation and its wholly-owned subsidiary,
First Kansas Federal Savings Bank (the "Bank" and, collectively, the
"Company"). Intercompany balances and transactions have been eliminated.
The December 31, 1999 consolidated balance sheet has been derived from
the audited consolidated financial statements as of that date. In the
opinion of management, all adjustments, including normal recurring
accruals, considered necessary for a fair presentation of financial
statements have been reflected herein. The results of the interim period
ended September 30, 2000 are not necessarily indicative of the results
expected for the year ending December 31, 2000 or for any other period.
(2) Earnings Per Common Share
Basic earnings per share is based upon the weighted average number of
common shares outstanding during the periods presented. Common shares
issued to the employee stock ownership plan are not included in the
computation until they are allocated to plan participants. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share
includes the effect of potential dilutive common shares outstanding
during the period.
The following schedule summarizes the number of average shares and
equivalents used in the computation of earnings per share:
<TABLE>
<CAPTION>
For the three months For the nine months Ended
Ended September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic weighted average shares 1,154,366 1,343,000 1,184,154 1,392,000
Common stock equivalents/ stock options 7,858 4,000 - -
--------------------------- ---------------------------
Diluted weighted average shares 1,162,224 1,347,000 1,184,154 1,392,000
--------------------------- ---------------------------
</TABLE>
(3) Pending Accounting Pronouncement
The FASB issued SFAS No. 133, Accounting for Derivative Financial
Instruments and Hedging Activities, in June 1998. This statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. SFAS No. 133, as amended by SFAS
No. 137, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000 and will be adopted by the Company January 1, 2001.
SFAS No. 138, an amendment of SFAS No. 133, which addresses various
implementation issues, will also be adopted at the time. The adoption of
the new Statements is not expected to have a material impact on the
Company's consolidated financial statements.
(4) Stock Buy Back
The Company purchased 68,146 shares of common stock in the third quarter
of 2000 as part of its stock buy back plan, bringing the total shares
purchased year to date to 134,761. Cost of shares purchased in the third
quarter equaled $808,356; purchases for the first nine months of 2000
totaled $1,508,342. Such shares have been recorded as treasury stock on
the accompanying balance sheet at September 30, 2000.
6
<PAGE>
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIDARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. First Kansas Financial Corporation (the "Company") was formed on
February 9, 1998, to become the holding company for First Kansas Federal Savings
Association (the "Bank") in the conversion of the Bank from a federal mutual
savings association to a federal stock savings bank (the "Conversion"). The
Conversion to a federal stock savings bank was completed on June 25, 1998, and
the Bank now operates as the First Kansas Federal Savings Bank, which accounts
for virtually all of the Company"s business.
The Company"s results of operations depend primarily on net interest income,
which is the difference between interest income from interest-earning assets and
interest expense from interest-bearing liabilities. The Company"s operations are
also affected by noninterest income which is primarily comprised of service
charges and loan fees. The Company"s principal operating expenses, aside from
interest expense, consists of compensation and employee benefits, occupancy
costs, provisions for loan losses and general and administration expenses.
Net earnings for the first nine months of 2000 increased $189,000, or 29.2%, as
compared to the same period in 1999. Net earnings for the third quarter of 2000
increased $28,000, or 11.6%, as compared to the third quarter of 1999. Net
interest income increased $229,000 for the first nine months of 2000 compared to
the same period in 1999. Net interest income for the third quarter of 2000
increased $40,000 compared to the third quarter of 1999. These increases in net
interest income were primarily due to growth in the loan portfolio resulting
from loan purchases of $14.3 million in the first three quarters of 2000. These
loans were principally funded by borrowings from the Federal Home Loan Bank
(FHLB). An increase in deposit account fee-generating activity was reflected in
the increase in noninterest income for the periods presented, while compensation
expense was the key component for the increase in noninterest expense.
Interest Income. Interest income increased $1.2 million or 18.3%, to $7.5
million for the first nine months of 2000. Interest income increased $376,000,
or 17.0%, for the third quarter of 2000 compared to the same period in 1999.
This increase resulted from the $18.0 million increase in the loan portfolio
from September 30, 1999 to September 30, 2000. Paydowns on other interest
earning assets partially offset the increase in interest income.
Interest Expense. Interest expense increased $926,000, or 25.5%, to $4.6 million
during the first three quarters of 2000. Interest expense increased $336,000, or
26.0%, for the third quarter of 2000 compared to the same period in 1999.
Interest expense on FHLB advances and FHLB line of credit increased
substantially as such instruments were used to fund the growth in mortgage
loans. A reduction in the deposit portfolio partially offset the increase in
interest expense.
Provision for Loan Losses. The provision for loan losses was $27,000 for the
first three quarters of 2000 and $9,000 for the third quarter, representing no
change from the same periods involved in 1999. The loan loss reserve at
September 30, 2000, was $262,000, or .41% of total loans receivable, as compared
to $241,000, or .50% of total loans receivable at December 31, 1999. Net charge
offs for the nine months ended September 30, 2000 were $6,000.
7
<PAGE>
Noninterest Income. Noninterest income increased $123,000 or 18.5%, to $789,000
for the first nine months of 2000. Noninterest income increased $32,000, or
13.1%, for the third quarter of 2000 compared to the same period in 1999. This
increase was the result of the combined increases in deposit account fees and
other miscellaneous fees received for the periods ended September 30, 2000.
Noninterest Expense. Noninterest expense increased $90,000, or 4.0%, to $2.4
million for the first three quarters of 2000. Noninterest expense increased
$41,000, or 5.3%, for the third quarter of 2000 compared to the same period in
1999. The increase resulted from increases in compensation and occupancy costs
partially offset by decreases in advertising and data processing expenses.
Income Tax Expense. Income tax expense increased in the first nine months of
2000 compared to the same period in 1999 due primarily to higher levels of
pre-tax income. The effective tax rates for the three and nine month periods
ended September 30, 2000 were 35.1% and 36.3.%, compared to effective rates of
37.1% and 38.3% in the prior periods.
Asset Quality & Distribution. The Company's assets grew $9.1 million from $142.5
million at December 31, 1999 to $151.6 million at September 30, 2000 as a result
of the Company's efforts to increase its loan portfolio. The Company's primary
sources of funds are deposits, FHLB advances and proceeds from principal and
interest payments on loans and mortgage backed securities. While maturities and
scheduled amortization of loans are a predictable source of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.
The primary investing activity of the Company for the first three quarters of
2000 was the purchase of mortgage loans for its portfolio. The Company utilized
several mortgage outlets and invested in 1-4 family loans. During the first nine
months of 2000, gross loan purchases and mortgage originations totaled $21.6
million compared to $13.6 million for the same period of 1999. Mortgage loan
purchases were $14.3 million during the first three quarters of 2000. Gross
consumer and commercial loans originated were $2.7 million for the first three
quarters of 2000 compared to $2.6 million during the first nine months of 1999.
Liability Distribution Deposits decreased $2.7 million from December 31, 1999 to
September 30, 2000. FHLB advances increased by $11.0 million during the first
three quarters of 2000 in order to fund purchases of mortgage loans.
Liquidity. The Company's most liquid assets are cash equivalents and short-term
government agency investments. It has also invested in liquidity qualifying
mortgage-backed securities. The Company's liquidity as of September 30, 2000 was
$75.4 million, or 75.58%.
Capital. At September 30, 2000, the Bank had a Tier 1 capital ratio of 9.70% and
a risk based capital ratio of 30.08%. As shown by the following table, the
Bank's capital exceeded the minimum capital requirement: (Dollars in thousands)
September 30, 2000 December 31, 1999
------------------ --------------------
Amount Percent Required Amount Percent
------ ------- -------- ------ -------
Tier I Capital $14,709 9.70% 4.00% $13,668 9.61%
Risk Based Capital 14,959 30.08% 8.00% 13,898 33.21%
8
<PAGE>
Savings associations and their holding companies are generally expected to
operate at or above the minimum capital requirements and the above ratios are
well in excess of regulatory minimums.
Cautionary Statement. This Quarterly Report on Form 10-QSB contains or may
contain forward-looking statements with respect to the financial condition,
results of operations, plans, objectives, future performance and business of the
Company, including statements preceded by, followed by or that include the
words, "believes", "expects", "anticipates" or similar expressions. These
forward-looking statements involve certain risks and uncertainties and may
relate to future operating results of the company. Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, among others, the following possibilities: (1) a significant
increase in competitive pressures among depository and other financial
institutions; (2) changes in the interest rate environment resulting in reduced
margins; (3) general economic or business conditions, either nationally or in
the states in which the Company will be doing business, being less favorable
than expected, resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit; (4) legislative or regulatory changes
adversely affecting the businesses in which the Company will be engaged; (5)
changes in the securities markets; and (6) changes in the banking industry
including the effects of consolidation resulting from possible mergers of
financial institutions.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statements, whether written or oral, that may be made from time to time by or on
behalf of the Company.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and its subsidiaries may be a
party to various legal proceedings incident to its or their
business. At September 30, 2000, there were no legal
proceedings to which the Company or any subsidiary was a
party, or to which any of their property was subject, which
were expected by management to result in a material loss.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) (27) Financial Data Schedule (electronic filing only)
(b) There were no current reports on Form 8-K filed during the
quarter ended September 30, 2000.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST KANSAS FINANCIAL CORPORATION
Date: November 14, 2000 By: /s/Larry V. Bailey
----------------- -------------------------------
Larry V. Bailey, President
(Principal Executive Officer)
Date: November 14, 2000 By: /s/James J. Casaert
--------------------- -------------------------------
James J. Casaert
Vice President and Treasurer
(Principal Accounting Officer)
10
