<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________________
Commission File No.:000-26335
TEAM FINANCIAL, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
KANSAS 48-1017164
(State of Incorporation) (I.R.S. Employer Identification Number)
</TABLE>
8 WEST PEORIA, SUITE 200
PAOLA, KANSAS 66071
----------------------------------------
(Address of principal executive offices)
(913) 294-9667
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
The number of shares outstanding of the registrant's common stock, $.01
par value per share, as of August 11, 1999: 3,701,803
<PAGE> 2
PART I. FINANCIAL INFORMATION
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-Q and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments which are, in the
opinion of management, of a normal recurring nature necessary to a fair
statement of results for the interim periods presented have been made. The
results of operations for such interim periods are not necessarily indicative of
results of operations for a full year. The statements should be read in
conjunction with "Risk Factors" and the summary of significant accounting
policies and notes to consolidated financial statements included in the
Company's Registration Statement on Form S-1 declared effective on June 21,
1999, File No. 333-76163.
2
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TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
ASSETS (Unaudited)
----------- ------------
<S> <C> <C>
Cash and due from banks $ 20,245 27,397
Federal funds sold and interest-bearing deposits - 4,502
--------- ---------
20,245 31,899
--------- ---------
Investment securities:
Available-for-sale 111,430 109,296
Held-to-maturity 25,058 25,742
--------- ---------
Total investment securities 136,488 135,038
--------- ---------
Loans, net of unearned fees 262,167 256,126
Allowance for loan losses 2,734 2,541
--------- ---------
Net loans 259,433 253,585
--------- ---------
Bank premises and equipment, net 8,908 8,560
Assets acquired through foreclosure 715 906
Goodwill, net of accumulated amortization 5,631 5,850
Other assets 6,731 6,514
--------- ---------
Total assets $ 438,151 442,352
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 376,899 384,347
Federal funds purchased and securities sold under agreements
to repurchase 5,263 6,273
Accrued expenses and other liabilities 3,445 3,271
Notes payable 19,012 23,060
--------- ---------
Total liabilities 404,619 416,951
--------- ---------
Redeemable common stock held by ESOP, net of unearned compensation (note 2) - 16,876
Stockholders' equity
Preferred stock, no par value; 10,000,000 shares authorized, no shares issued - -
Common stock, no par value; 50,000,000 shares authorized, 3,728,808 and
3,020,098 shares issued at June 30, 1999 and December 31, 1998 20,781 13,980
Capital surplus 122 122
Retained earnings 13,173 11,921
Treasury stock, 27,005 shares of common stock
at June 30, 1999 and December 31, 1998 (187) (187)
Accumulated other comprehensive income (loss) (357) 565
Unearned compensation - (1,000)
Less redeemable common stock held by ESOP, net of unearned compensation - (16,876)
--------- ---------
Total stockholders' equity 33,532 8,525
Commitments and contingencies --------- ---------
$ 438,151 442,352
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
3
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TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 1998
------- -------
<S> <C> <C>
Interest income:
Loans, including fees $11,377 11,194
Taxable investment securities 3,466 3,613
Nontaxable investment securities 589 543
Other 325 123
------- -------
Total interest income 15,757 15,473
------- -------
Interest expense:
Deposits 7,205 7,312
Federal funds purchased and securities sold under agreements to repurchase 147 260
Notes payable 703 605
------- -------
Total interest expense 8,055 8,177
------- -------
Net interest income 7,702 7,296
Provision for loan losses 386 724
------- -------
Net interest income after provision for loan losses 7,316 6,572
------- -------
Other income:
Service charges 1,131 960
Trust fees 295 133
Gain on sales of mortgage loans 304 334
Gain on sales of investment securities 1 5
Other 587 627
------- -------
Total other income 2,318 2,059
------- -------
Other expenses:
Salaries and employee benefits 3,711 3,631
Occupancy and equipment 876 895
Data processing 695 585
Professional fees 286 314
Marketing 115 235
Goodwill and other intangible amortization 335 233
Other 1,323 1,562
------- -------
Total other expenses 7,341 7,455
------- -------
Income before income taxes 2,293 1,176
Income taxes 706 293
------- -------
Net income $ 1,587 883
======= =======
Basic and diluted income per share $ .55 .32
======= =======
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
4
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TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
1999 1998
------ -------
Interest income:
<S> <C> <C>
Loans, including fees $5,698 5,800
Taxable investment securities 1,739 1,833
Nontaxable investment securities 293 280
Other 135 34
------ ------
Total interest income 7,865 7,947
------ ------
Interest expense:
Deposits 3,589 3,790
Federal funds purchased and securities sold under agreements to repurchase 58 124
Notes payable 380 356
------ ------
Total interest expense 4,027 4,270
------ ------
Net interest income 3,838 3,677
Provision for loan losses 203 278
------ ------
Net interest income after provision for loan losses 3,635 3,399
------ ------
Other income:
Service charges 591 499
Trust fees 154 54
Gain on sales of mortgage loans 112 197
Gain on sales of investment securities 1 4
Other 277 392
------ ------
Total other income 1,135 1,146
------ ------
Other expenses:
Salaries and employee benefits 1,853 1,865
Occupancy and equipment 415 483
Data processing 352 312
Professional fees 83 208
Marketing 61 114
Goodwill and other intangible amortization 162 75
Other 726 893
------ ------
Total other expenses 3,652 3,950
------ ------
Income before income taxes 1,118 595
Income taxes 358 148
------ ------
Net income $ 760 447
====== ======
Basic and diluted income per share $ .26 .16
====== ======
</TABLE>
See accompanying notes to the unaudited consolidated financial statements
5
<PAGE> 6
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 1998
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,587 883
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 386 724
Depreciation and amortization 859 826
Net (gain) loss on sales of investment securities (1) (5)
Net gain on sales of mortgage loans (304) (334)
Net (gain) loss on sales of assets acquired through
foreclosure - (9)
Proceeds from sale of mortgage loans 26,970 22,137
Origination of mortgage loans for sale (24,457) (23,210)
Increase in other assets (490) (1,729)
(Increase) decrease in accrued expenses and other liabilities 665 (512)
-------- --------
Net cash provided by (used in) operating activities 5,215 (1,229)
-------- --------
Cash flows from investing activities:
Net increase in loans (8,074) (23,583)
Proceeds from sale of investment securities available-for-sale - 8,547
Proceeds from maturities and principal reductions of
investment securities available-for-sale 20,378 14,205
Purchases of investment securities available-for-sale (24,221) (41,440)
Proceeds from maturities and principal reductions of
investment securities held-to-maturity 5,843 5,234
Purchases of investment securities held-to-maturity (5,195) (3,921)
Purchase of bank premises and equipment, net of sales (760) (1,100)
Proceeds from sales for payments on assets acquired through
foreclosure 15 33
Net cash used in investing activities $(12,014) (42,025)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits $ (7,448) 39,818
Net (decrease) in federal funds purchased and
securities sold under agreement to repurchase (1,010) (5,755)
Payments on notes payable (6,036) -
Proceeds of notes payable 2,988 8,955
Common stock issued 6,801 82
Dividends paid on common stock (150) -
-------- --------
Net cash provided by (used in) financing activities (4,855) 43,100
-------- --------
Net decrease in cash and cash equivalents (11,654) (154)
Cash and cash equivalents at beginning of the period 31,899 20,205
-------- --------
Cash and cash equivalents at end of the period $ 20,245 20,051
======== ========
</TABLE>
6
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TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTH PERIOD ENDED JUNE 30, 1999 AND 1998
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q. The consolidated financial
statements should be read in conjunction with the audited financial statements
included in the Company's prospectus dated June 26, 1999.
The consolidated financial statements include the accounts of Team
Financial, Inc. and its wholly owned subsidiaries. Intercompany balances and
transactions have been eliminated. The December 31, 1998 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 the financial statements have
been reflected herein. The results of the interim period ended June 30, 1999 are
not necessarily indicative of the results expected for the year ended December
31, 1999.
2. INITIAL PUBLIC OFFERING
On June 21, 1999, the Company completed an initial public offering,
whereby the Company and its ESOP sold 700,000 and 300,000 shares, respectively
of common stock at $11.25 per share. Total expenses of the offering approximated
$1.1 million. The Company's shares are listed and traded on the Nasdaq National
Market under the symbol TFIN. As a result of the offering, the redeemable common
stock held by the ESOP has been reclassified into stockholders' equity.
3. EARNINGS PER COMMON SHARE
Earnings per share are computed in accordance with SFAS No. 128. Basic
earnings per share is based upon the weighted average number of common shares
outstanding during the periods presented, less any unallocated ESOP shares. For
the periods presented, there were no dilutive potential common shares
outstanding.
4. DIVIDEND DECLARED
On June 29, 1999, the Company declared a quarterly dividend of $.05 per
share to all shareholders of record on June 30, 1999, payable July 20, 1999.
5. SUBSEQUENT EVENTS
On July 15, 1999, the Company sold an additional 150,000 shares as part of
the over allotment option associated with the initial public offering discussed
above.
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6. COMPREHENSIVE INCOME
The Company adopted SFAS No. 130 "Reporting Comprehensive Income", in
the first quarter of 1998. SFAS No. 130 requires the reporting of comprehensive
income and its components. Comprehensive income is defined as the change in
equity from transactions and other events and circumstances from non-owner
sources and excludes investments by and distributions to owners. The Company's
only component of other comprehensive income is the unrealized holding gains and
losses on available for sale securities.
Comprehensive income was $665,000 and $1.2 million for the six months
ended June 30, 1999 and 1998, respectively and $53,000 and $686,000 for the
three months ended June 30, 1999 and 1998, respectively.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Team Financial, Inc., a multi-bank holding company, offers full service
community banking through 15 locations in the Kansas City metropolitan area,
southeastern Kansas, and western Missouri. The Company's growth over recent
years has been achieved primarily through purchases of branches of large banks
and through an acquisition of a community bank. Additional asset growth has
occurred through internal growth at existing banks as well as from opening three
new branches.
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 on interest-bearing liabilities. The Company's
operations are also affected by non-interest income, such as service charges,
loan fees, and gains and losses from the sale of newly originated loans. The
Company's principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, occupancy costs, data processing expenses
and provisions for loan losses.
RESULTS OF OPERATIONS
Interest income for the six and three months ended June 30, 1999
totaled $15.8 million and $7.9 million, respectively, compared to $15.5 million
and $7.9 million for the same periods in 1998. The increase of $284,000 was
primarily due to an increase of $14.2 million, or 14.4%, for the six month
period in the average balance of earning assets, which also increased as between
the two three month periods, but was offset by the yield earned on loans as
discussed below. The majority of the increase in earning assets was attributable
to average loans outstanding which increased from $245.5 million for the six
months ended June 30, 1998 to $255.3 million at June 30, 1999. Interest income
on loans was negatively impacted by a decrease in the yield earned on loans. The
average yield on loans was 8.87% for the six months ended June 30, 1999 compared
to 9.33% for the same period in 1998, while the average yield on loans for the
three months ended June 30, 1999, was 8.82% compared to 9.36% for the same
period in 1998.
Interest expense decreased $122,000 and $243,000, respectively, for the
six months and three months ended June 30, 1999 compared to the same periods in
1998. Interest expense on time deposits decreased $107,000 and $201,000
primarily as a result of a decrease in the interest rates. The average yield on
interest bearing deposits was 4.29% for the six months ended June 30, 1999
compared to 4.27% for the same period in 1998, while the average yield on
interest bearing deposits for the three months ended June 30, 1999, was 4.29%
compared to 4.94% for the same period in 1998. Interest expense on notes payable
increased $98,000 and $24,000, or 16.2% and 6.7%, respectively, primarily as a
result of an increase in the average balance of such borrowings of $2.6 million
and $4.9 million, in the six and three month periods ended June 30, 1999
compared to the same periods in 1998.
Net interest income was $7.7 million for the six months ended June 30,
1999, an increase of $406,000 or 5.6% from $7.3 million for the same period in
1998. Net interest income for the three months ended June 30, 1999 and 1998 was
$3.8 million and $3.7 million respectively. The change in net interest income is
primarily due to two factors, the increase in interest earning assets resulting
from a branch acquisition in March of 1998 and internal growth and a decline in
the interest paid on deposits and other borrowings.
Other income generated in the first two quarters of 1999 increased to
approximately $2.3 million compared to $2.1 million for the first two quarters
of 1998, and $1.2 million for the three months ended June 30, 1999 and 1998.
This overall increase was attributable primarily to additional fee income from
an increase in service charges and trust fees. Other expenses in the first half
of 1999 were $7.3 million as compared to $7.5 million for the same period in the
previous year. Other expenses in the three months ended June 30, 1999 were $3.7
million compared to $4.0 million for the three months ended June 30, 1998. The
decrease in other
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<PAGE> 10
expenses was primarily due to a decline, as a result of cost cutting measures,
in occupancy and equipment expense, marketing costs, and other general and
administrative expenses.
Income tax expense was $358,000 for the three months ended June 30,
1999 compared to $128,000 for the same period in 1998. Income tax expense was
$706,000 and $293,000 for the six months ended June 30, 1999 and 1998,
respectively. The effective tax rates for the same periods were 31% in 1999 and
25% in 1998. The effective tax rate is less than the statutory federal rate of
34% due primarily to municipal interest income and the income tax benefit
resulting from dividends paid to the ESOP.
For the six months ended June 30, 1999, the Company generated net
income after provisions for income tax of $1.6 million compared to $883,000 for
the same period in the prior year and $760,000 and $447,000 for the three months
ended June 30, 1999 and 1998, respectively. This improvement is attributable to
an increase in interest earning assets, a decline in the provision for loan
loss, and a decrease in operating costs.
FINANCIAL CONDITION
Total assets of the Company were approximately $438.2 million and
$442.4 million at June 30, 1999 and December 31, 1998, respectively. The
Company's primary ongoing sources of funds are deposits, proceeds from principal
and interest payments on loans and investment securities and proceeds from the
sale of mortgage loans and investment securities. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows and
mortgage prepayments are significantly influenced by general interest rates,
economic conditions and competition.
Net loans were $262.2 million and $256.1 million at June 30, 1999 and
1998, respectively. The increase in the loan balance is attributable to
additional commercial and commercial real estate loans originated in the current
year.
The Company's primary source of funds has historically been customer
deposits, which totaled $376.9 million at June 30, 1999, a $7.4 million decrease
from December 31, 1998. This was primarily a seasonal decrease as public
entities distributed tax receipts which were on deposit at the end of 1998.
In June and July 1999, the Company completed its initial public
offering of its common stock. See note 2 in the Notes to Consolidated Financial
Statements and Part 2, Item 2 hereof. Net proceeds from the initial public
offering were used to repay $7.3 million of debt and $1.0 million was
contributed to a subsidiary bank as capital. The ESOP used proceeds from the
sale to pay debt guaranteed by the Company, which reduced the Company's
liabilities and increased stockholders' equity by $659,000.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents management's recognition of
the risks of extending credit and its evaluation of the quality of the loan
portfolio. The allowance is maintained at a level considered adequate to provide
for anticipated loan losses based on management's assessment of various factors
affecting the loan portfolio. The allowance is increased by additional charges
to operating income and reduced by loans charged off, net of recoveries.
Nonperforming assets, consisting of, non-accrual loans, loans 90 days
past due and still accruing interest, and other real estate owned, totaled $4.1
million and $3.9 million at June 30, 1999 and 1998, or 0.94% and 0.89% of total
assets. The Company's allowance for loan losses to total loans has remained
relatively stable, totaling 1.1% at June 30, 1999, compared to 0.9% at June 30,
1998. The allowance for loan losses as a percentage of non-performing assets was
67% and 55% at June 30, 1999 and 1998, respectively. Management
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believes that the Company is adequately secure on these loans, and is not aware
of any adverse trend relating to the Company's loan portfolio.
LIQUIDITY
The Company continuously forecasts and manages its liquidity in order
to satisfy cash flow requirements of depositors and borrowers and allow the
Company to meet its own cash flow needs. The Company has developed internal and
external sources of liquidity to meet its continued growth needs. These include,
but are not limited to, the ability to raise deposits through branch promotional
campaigns, maturity of overnight funds, short term investment securities
classified as available-for-sale and draws on credit facilities established
through the Federal Home Loan Bank. The Company's most liquid assets are cash
and cash equivalents and investment securities available for sale. The level of
these assets are dependent on the Company's operating, financing, lending and
investing activities during any given period. At June 30, 1999 and December 31,
1998, these liquid assets totaled $131.7 million and $140.9 million,
respectively. Management believes the Company's sources of liquidity are
adequate to meet expected cash needs for the foreseeable future.
At June 30, 1999, the Company's leverage, Tier 1 risk based capital,
and total risk based capital ratios were 6.45%, 10.22% and 11.20%, respectively,
well above the minimum required levels of 4%, 8%, and 4%, respectively.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/liability management refers to management's efforts to minimize
fluctuations in net interest income caused by interest rate changes. This is
accomplished by managing the repricing of interest rate sensitive
interest-earning assets and interest-bearing liabilities. An interest rate
sensitive balance sheet item is one that is able to reprice quickly, through
maturity of otherwise. Controlling the maturity of repricing of an institution's
liabilities and assets in order to minimize interest rate risk is commonly
referred to as gap management. Close matching of repricing assets and
liabilities will normally result in little change in net interest income when
interest rates change.
The following table indicates that at March 31, 1999, if there had been
a sudden and sustained increase in prevailing market interest rates, the
Company's 1999 interest income would be expected to decrease, while a decrease
in rates would indicate an increase in income.
<TABLE>
<CAPTION>
NET INTEREST (DECREASE) PERCENT
Change in Interest Rates Income Increase Change
- ------------------------ ------------ ---------- -------
<S> <C> <C> <C>
200 basis point rise $ 15,618 $ (305) (3.13)%
100 basis point rise 15,871 (252) (1.56)
base rate scenario 16,123 -- --
100 basis point decline 16,312 189 1.17
200 basis point decline 16,560 437 2.71
- ----------------------- -------- ----- -----
</TABLE>
The Company believes that no significant changes in its interest rate
sensitivity position have occurred since March 31, 1999. The Company also
believes it is appropriately positioned for future interest rate movements,
although it may experience some fluctuation in net interest income due to short
term timing differences between the repricing of assets and liabilities.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, a significant business issue has emerged
regarding how existing software programs and operating systems can accommodate
the date value for the year 2000. Many existing software products, including
products used by the Company and its affiliates were designed to accommodate
only a two-digit date value, which represents the year. For example, information
relating to the year 1996 is stored in the system as 96. As a result, the year
1999 could be the maximum date value that these systems will be able to process
accurately. Regulatory agencies monitor bank holding companies and bank's
readiness for the year 2000 as part of the regular examination process.
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The Company believes that with modifications to existing software and
conversion to new software, the year 2000 issue will not pose significant
operational problems for the Company's business operations. Substantially all
data processing services for the Company are provided by M&I Data Services, a
subsidiary of M&I Bank, Milwaukee, Wisconsin. M&I Data Services' Year 2000
Outsourcing Solution division has received Information Technology Association of
America 2000 certification. M&I Data Services provides bi-monthly written status
reports to management. Reports to date indicate that M&I Data Services has met
all target dates and is prepared to meet all future target dates for completion
of the project. Management is not aware of limitations on the Company's legal
remedies should the conversion not be completed on time.
Additionally, implementation of the Company's plan to test in-house
software has been underway since the fourth quarter of 1998. Testing of
applications considered to be mission critical was completed in the first
quarter of 1999. Total compliance for all systems, including the Company's
outsourced computer systems was completed in the second quarter of 1999 and no
significant deficiencies were encountered.
Management currently estimates that year 2000 compliance will cost
$500,000. Of this amount approximately $80,000 was expensed through June 30,
1999. The Company expects that the remaining amount will be expended during the
remainder of 1999, of which $55,000 will be expensed and $380,000 will be
capitalized. The plan implementation team is responsible for progress and will
continue to provide a status report to the board of directors on a bi-monthly
basis through December 31, 1999. However, if the modifications and conversion
are not made, or are not completed on time, the year 2000 issue could have a
material adverse impact on the operations of the Company. Because of the factors
discussed below, management cannot estimate with any reasonable degree of
certainty the magnitude of lost revenues should the worst case scenario develop
in which the Company would need to fully implement its contingency plan to
operate in the year 2000 environment and noncompliant customers are unable to
repay their loans.
The Company has developed a contingency plan in the event services from
its outsourced computer systems are not available in the year 2000. The
essential elements of this plan include procedures to be followed in the event
of disruptions to business which may impact the Company's customers and business
partners, as well as procedures to handle business disruptions from natural
disasters and utility outages. This plan was completed and tested in the second
quarter 1999. In the event the Company were to fully implement all phases of the
contingency plan, management believes that operational costs would increase
modestly.
The Company has sent direct mail to their customers regarding the year
2000 issue and the need for readiness pursuant to guidelines of the banking
industry regulators. Management continues to solicit customer response. Failure
of customers to prepare for year 2000 compatibility could have a significant
adverse effect on customers' operations and profitability, thus inhibiting their
ability to repay loans and adversely affecting the Company's operations. At this
time, the Company is unable to estimate with reliability the degree to which
customer's operations are susceptible to potential problems relating to the year
2000 issue or, further, to quantify the potential lost revenue to the Company in
this case.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quantitative and Qualitative Disclosures About Market
Risk."
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In June and July 1999 the Company completed its initial public offering
of 850,000 shares, including 150,000 shares pursuant to the underwriters
over-allotment option, of common stock at $11.25 per share pursuant to a
Registration Statement on form S-1. The Securities and Exchange Commission
declared the Form S-1 effective on June 21, 1999. The offering was underwritten
as a firm commitment basis by Howe Barnes Investments., Inc, as representative
of the underwriters. Gross proceeds of the offering to the Company were $9.6
million, and net proceeds were approximately $8.3 million, of which $7.3 million
was used to repay debt and $1.0 million was contributed to a subsidiary bank as
capital. 300,000 shares of Common Stock were also registered and sold in the
offering at $11.25 per share by the Company's Employee Stock Ownership Plan. Net
proceeds to the ESOP were approximately $3.1 million. The ESOP used $659,000 to
repay debt guaranteed by the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 12, 1999, the Company held its Annual Stockholders Meeting. At
the meeting the following matters were voted upon:
o Glen E. Gilpin, Carolyn S. Jacobs and Denis A. Kurtenbach were
elected as Class I directors to serve a three year term. Neil
Blakeman and R.G. (Gary) Kilkenny remain as directors in Class
II and will be considered for re-election in the year 2000.
Michael L. Gibson, Montie Taylor and Robert J. Weatherbie
remain as directors in Class III and will be considered for
re- election in the year 2001.
o The Company's Employee Stock Purchase Plan was approved by the
following vote: For -- 2,221,657 Against -- 45,430 Abstain --
205.
o The Company's 1999 Stock Incentive Plan for employees was
approved by the following vote: For -- 2,199,130 Against --
67,732 Abstain -- 430.
o A proposal to amend the Company's Articles of Incorporation to
require a two-thirds vote of the outstanding shares in order
to approve a merger, consolidation, or liquidation and
dissolution of the Company was approved by the following vote:
For -- 2,199,563 Against -- 63,749 Abstain -- 3,980.
o A proposal to approve the selection of KPMG, LLC, as the
Company's independent auditors was approved by the following
vote: For -- 2,266,887 Against -- 0 Abstain -- 405.
ITEM 5. OTHER INFORMATION
None
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
(I) EXHIBITS FILED WITH THIS FORM 10-Q:
Exhibit No. Description
- ----------- -----------
3.3 Certificate of Amendment to the Articles of Incorporation of
Team Financial, Inc.
3.4 Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of Team Financial, Inc.
11 Statement re Computation of per share earnings - see Unaudited
Consolidated Financial Statements.
27 Financial Data Schedule.
(ii) EXHIBITS PREVIOUSLY FILED AND INCORPORATED HEREIN BY REFERENCE:
Exhibit No. Description
- ----------- -----------
3.1 Restated and Amended Articles of Incorporation of Team
Financial, Inc. (1).
3.2 Amended Bylaws of Team Financial, Inc. (1).
21 Subsidiaries of Team (1).
- ----------
(1) Filed with the Registration Statement on Form S-1, SEC File No.
333-76163, on April 13, 1999 and incorporated herein by reference.
(b) REPORTS ON FORM 8-K
None
14
<PAGE> 15
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.
TEAM FINANCIAL, INC.
Date: August 16, 1999 By: /s/ ROBERT J. WEATHERBIE
----------------------------------
Robert J. Weatherbie,
Chief Executive Officer and
Chairman of the Board
By: /s/ MICHAEL L. GIBSON
----------------------------------
Michael L. Gibson, President
- Acquisitions/Investments
and Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.3 Certificate of Amendment to the Articles of Incorporation of
Team Financial, Inc.
3.4 Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock of Team Financial, Inc.
11 Statement re Computation of per share earnings - see Unaudited
Consolidated Financial Statements.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
TEAM FINANCIAL, INC.
We, Robert J. Weatherbie, Chief Executive Officer, and Lois Rausch,
Secretary, of the above named corporation, a corporation organized and existing
under the laws of the State of Kansas, do hereby certify that at a meeting of
the Board of Directors of said corporation, the board adopted a resolution
setting forth the following amendments to the Articles of Incorporation and
declaring its advisability:
AMENDMENT NO. I
Be It Resolved That Article Eight of the Articles of Incorporation be
amended by changing the word "fifty-one percent (51%)" to "SIXTY-SIX
AND TWO-THIRDS PERCENT (66 2/3%)"
We further certify that thereafter, pursuant to the resolution and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders
entitled to vote, voted in favor of the proposed amendment.
We further certify that amendment was duly adopted in accordance with
the provisions of K.S.A. 17-6602, as amended.
In Witness Whereof, we have hereunto set our hands and affixed the seal
of said corporation this 25th day of June, 1999.
/s/ ROBERT J. WEATHERBIE
---------------------------
ROBERT J. WEATHERBIE,
Chief Executive Officer
/s/ LOIS RAUSCH
---------------------------
LOIS RAUSCH, Secretary
<PAGE> 2
STATE OF KANSAS, COUNTY OF MIAMI, SS:)
Be it remembered that before me, a Notary Public in and for the
aforesaid county and state, personally appeared ROBERT J. WEATHERBIE, Chief
Executive Officer and LOIS RAUSCH, Secretary, of the corporation named in this
document, who are known to me to be the same persons who executed the foregoing
certificate, and duly acknowledged the execution of the same this 25th day of
June, 1999.
/s/ RACHELLE L. NEWPORT
---------------------------
Notary Public
My Appointment Expires: 1/12/02
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION OF
RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PREFERRED STOCK
OF
TEAM FINANCIAL, INC.
Pursuant to Section 17-6401 of the Kansas General Corporation Code:
The undersigned hereby certifies that the following resolution has been adopted
by the Board of Directors of Team Financial, Inc., a Kansas corporation (the
"Corporation") as required by Section 17-6401 of the Kansas General Corporation
Code, pursuant to a resolution unanimously adopted as of June 3, 1999;
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Corporation in accordance
with the provisions of its Certificate of Incorporation, the
Board of Directors hereby creates a series of Preferred Stock
of the Corporation and hereby states the designation and
number of shares, and fixes the relative rights, preferences
and limitations thereof (in addition to the provisions set
forth in the Certificate of Incorporation of the Corporation,
which are applicable to the Preferred Stock of all classes and
series), as follows:
Series A Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and
the number of shares constituting the Series A Preferred Stock shall be
1,000,000 shares of Series A Preferred Stock and shall not have a par value.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; PROVIDED, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, cash dividends in an amount per whole share (rounded
to the nearest cent) equal to the Formula Number (as defined below) then in
effect times the aggregate per share amount of all cash dividends declared or
paid on the Common Stock. In addition, if the Corporation shall pay any dividend
or make any distribution on the Common Stock payable in assets, securities or
other forms of noncash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the Corporation
shall simultaneously pay or make on each whole outstanding share of Series A
Preferred Stock, a dividend or distribution in like kind equal to the Formula
Number then in effect times such dividend or distribution on each share of the
Common Stock. As used herein, the "Formula Number" shall be 100; PROVIDED,
HOWEVER, that if at any time after June 3, 1999, the Corporation shall (i)
declare or pay any dividend or make any distribution on the Common Stock,
payable in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise), the outstanding shares of Common Stock into a larger number of
shares of Common Stock, or (iii) combine (by a reverse stock split or otherwise)
the outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such case the Formula Number in effect immediately prior to
such event shall be adjusted to a number determined by multiplying the Formula
Number then in effect by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event (and rounding the result to the
nearest whole number); and provided further, that, if at any time after June 3,
1999, the Corporation shall issue any shares of its capital stock in a merger,
reclassification, or change of the outstanding shares of Common Stock, then in
each such event the Formula Number shall be appropriately adjusted to reflect
such merger, reclassification, or change so that each share or Series A
Preferred Stock continues to be the economic equivalent of a Formula Number of
shares of Common Stock prior to such merger, reclassification or change.
<PAGE> 2
(b) The Corporation shall declare each dividend immediately prior to or
at the same time it declares any cash or non-cash dividend or distribution on
the Common Stock in respect of which a dividend is required to be paid. No cash
or non-cash dividend or distribution on the Common Stock in respect of which a
dividend is required shall be paid or set aside for payment on the Common Stock
unless a dividend in respect of such dividend shall have been paid.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein, in any other Certificate of
Amendment creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever dividends are in arrears or the Corporation shall be in
default in payment thereof, thereafter and until all declared and unpaid
dividends on shares of Series A Preferred Stock outstanding shall have been paid
or set aside for payment in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions
on or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on the shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior or on a parity (either as to
dividends or upon liquidation, dissolution or winding up) to or with the Series
A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior or parity stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
2
<PAGE> 3
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Certificate of Incorporation, or in any other Certificate of Amendment
or Certificate of Designation creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to the declared and unpaid
dividends and distributions thereon to the date of such payment, plus an amount
equal to the greater of (i) $0.01 per whole share, or (ii) an aggregate amount
per share equal to the Formula Number then in effect times the aggregate amount
to be distributed per share to holders of Common Stock, or (b) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, unless
simultaneously therewith distributions are made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of Series A Preferred Stock shares are entitled under clause
(a)(i) of this sentence and to which the holders of such parity shares are
entitled in each case upon such liquidation, dissolution or winding up.
Section 7. CONSOLIDATION, MERGER, ETC. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event that both this Section 7 and
Section 2 appear to apply to a transaction, this Section 7 shall control.
Section 8. EFFECTIVE TIME OF ADJUSTMENTS.
(a) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(b) The Corporation shall give prompt written notice to each holder of
a share of Series A Preferred Stock of the effect on any such shares of any
adjustment to the dividend rights or rights upon liquidation, dissolution or
winding up of the Corporation required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Corporation to give such notice shall
not affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 9. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 10. RANK. Unless otherwise provided in the Restated Certificate
of Incorporation or a Certificate of Designation relating to a subsequent series
of Preferred Stock of the Corporation, the Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Corporation's Preferred Stock.
Section 11. FRACTIONAL SHARES. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-hundredths (1/100ths)
of a share or any integral multiple of such fraction which shall entitle the
holder, in proportion to such holder's fractional shares, to receive dividends,
exercise voting rights, participate in distributions and to have the benefit of
all other rights of holders of Series A Preferred Stock. In lieu of fractional
shares, the Corporation, prior to the first issuance of a share or a fraction of
a share of Series A Preferred Stock, may elect (1) to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-hundredths (1/100ths) of a share or any integral multiple thereof, or (2) to
issue depository receipts evidencing such authorized fraction of a share of
Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; provided that such
agreement shall provide that the holders of such depository receipts shall have
the rights, privileges and
3
<PAGE> 4
preferences to which they are entitled as holders of the Series A Preferred
Stock.
Section 12. AMENDMENT. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, TEAM FINANCIAL, INC. has caused this Certificate to
be signed this 3rd day of June, 1999.
/s/ ROBERT J. WEATHERBIE
------------------------------
Robert J. Weatherbie, Chairman
I, Lois Rausch, Secretary of Team Financial, Inc., hereby certify that
Robert W. Weatherbie is the Chairman of the Board of said corporation, and has
signed said document in accordance with the authority granted him by the Board
of Directors.
/s/ LOIS RAUSCH
- ----------------------
Lois Rausch, Secretary
STATE OF KANSAS, COUNTY OF MIAMI: ss
Subscribed and sworn to before me, a Notary Public, by Robert J.
Weatherbie, Chairman, and Lois Rausch, Secretary to Team Financial, Inc., this
3rd day of June, 1999.
/s/ RACHELLE L. NEWPORT
-----------------------
Notary Public
My Appointment Expires: 1-12-02
4
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET DATED 6/30/99 AND STATEMENT OF INCOME FOR THE SIX MONTHS ENDED 6/30/99 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001082484
<NAME> TEAM FINANCIAL, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,245
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 111,430
<INVESTMENTS-CARRYING> 25,058
<INVESTMENTS-MARKET> 0
<LOANS> 262,167
<ALLOWANCE> 2,734
<TOTAL-ASSETS> 438,151
<DEPOSITS> 376,899
<SHORT-TERM> 5,263
<LIABILITIES-OTHER> 3,445
<LONG-TERM> 19,012
0
0
<COMMON> 20,781
<OTHER-SE> 13,173
<TOTAL-LIABILITIES-AND-EQUITY> 438,151
<INTEREST-LOAN> 11,377
<INTEREST-INVEST> 4,055
<INTEREST-OTHER> 325
<INTEREST-TOTAL> 15,757
<INTEREST-DEPOSIT> 7,205
<INTEREST-EXPENSE> 850
<INTEREST-INCOME-NET> 7,702
<LOAN-LOSSES> 386
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 7,241
<INCOME-PRETAX> 2,293
<INCOME-PRE-EXTRAORDINARY> 1,587
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,587
<EPS-BASIC> .55
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</TABLE>
