<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Securities and Exchange Commission File Number: 000-26335
TEAM FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
KANSAS 48-1017164
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8 West Peoria, Suite 200, Paola, Kansas 66071
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (913) 294-9667
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUES:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
There were 3,893,540 shares of the Registrant's common stock, no par value,
outstanding as of August 9, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statements of Financial Condition as of
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Comprehensive Income
for the Three and Six Months Ended June 30, 2000
and 1999 5
Consolidated Statements of Changes In Stockholders'
Equity For the Six Months Ended June 30, 2000 6
Consolidated Statements of Cash Flows For the
Six Months Ended June 30, 2000 and 1999 7
Notes To Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 - 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 4. Submission Of Matters To A Vote Of Security Holders 21
Item 6. Exhibits And Reports On Form 8-K 22 - 23
Signature Page 24
2
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
----------- ------------
<S> <C> <C>
Cash and due from banks $ 8,621 $ 17,458
Federal funds sold and interest bearing bank deposits 7,680 5,049
--------- ---------
Cash and cash equivalents 16,301 22,507
--------- ---------
Investment securities
Available for sale, at estimated fair value (amortized cost of $143,592 and
$139,618 at June 30, 2000 and December 31, 1999, respectively) 140,057 136,901
Held to maturity, at cost (estimated fair value of $24,315 and $25,135
at June 30, 2000 and December 31, 1999, respectively) 24,707 25,630
--------- ---------
Total investment securities 164,764 162,531
--------- ---------
Loans receivable, net of unearned fees 331,556 309,255
Allowance for loan and lease losses (3,783) (3,320)
--------- ---------
Net loans receivable 327,773 305,935
--------- ---------
Accrued interest receivable 5,141 4,911
Premises and equipment, net 9,945 9,770
Assets acquired through foreclosure 435 792
Goodwill, net of accumulated amortization 11,284 9,263
Other assets 3,511 2,496
--------- ---------
Total assets $ 539,154 $ 518,205
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Checking deposits $ 129,516 $ 124,415
Savings deposits 23,979 22,135
Money market deposits 44,353 46,889
Certificates of deposit 247,485 241,677
--------- ---------
Total deposits 445,333 435,116
--------- ---------
Federal Funds purchased and securities sold
under agreements to repurchase 7,167 9,227
Federal Home Loan Bank Advances 32,006 24,055
Notes payable 14,175 9,924
Accrued expenses and other liabilities 4,014 2,314
--------- ---------
Total liabilities 502,695 480,636
--------- ---------
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; 4,163,545 and
4,157,053 shares issued; 3,893,540 and 4,130,048 shares outstanding at
June 30, 2000 and December 31, 1999 25,324 25,268
Capital surplus 122 122
Retained Earnings 15,652 14,356
Treasury stock, 270,005 and 27,005 shares of common stock at cost (2,347) (187)
at June 30, 2000 and December 31, 1999 respectively
Accumulated other comprehensive income (loss) (2,292) (1,990)
--------- ---------
Total stockholders' equity 36,459 37,569
--------- ---------
Total liabilities and stockholders' equity $ 539,154 $ 518,205
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 7,397 $ 5,698 $ 14,324 $ 11,377
Taxable investment securities 2,432 1,739 4,776 3,466
Nontaxable investment securities 260 293 527 589
Other 92 135 174 325
----------- ----------- ----------- -----------
Total interest income 10,181 7,865 19,801 15,757
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits
Checking deposits 554 451 1,086 917
Savings deposits 150 137 296 267
Money market deposits 427 311 821 642
Certificates of deposit 3,558 2,690 6,856 5,379
Federal funds purchased and securities sold
under agreements to repurchase 108 58 301 147
FHLB advances payable 398 344 753 452
Notes payable 292 36 501 251
----------- ----------- ----------- -----------
Total interest expense 5,487 4,027 10,614 8,055
----------- ----------- ----------- -----------
Net interest income before provision for loan losses 4,694 3,838 9,187 7,702
Provision for loan losses 203 203 388 386
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 4,491 3,635 8,799 7,316
----------- ----------- ----------- -----------
OTHER INCOME:
Service charges 879 591 1,558 1,131
Trust fees 143 154 285 295
Gain on sales of mortgage loans 127 112 180 304
Gain (loss) on sales of investment securities (1) 1 (6) 1
Other 303 277 678 587
----------- ----------- ----------- -----------
Total other income 1,451 1,135 2,695 2,318
----------- ----------- ----------- -----------
OTHER EXPENSES:
Salaries and employee benefits 2,364 1,853 4,595 3,711
Occupancy and equipment 548 415 1,043 876
Data processing 489 352 957 695
Professional fees 185 83 356 286
Marketing 80 61 144 115
Supplies 65 78 147 137
Goodwill amortization 189 110 347 219
Conversion 62 -- 62 --
Other 738 700 1,447 1,302
----------- ----------- ----------- -----------
Total other expenses 4,720 3,652 9,098 7,341
----------- ----------- ----------- -----------
Income before income taxes 1,222 1,118 2,396 2,293
Income taxes 375 358 709 706
----------- ----------- ----------- -----------
Net income $ 847 $ 760 $ 1,687 $ 1,587
=========== =========== =========== ===========
Shares applicable to basic and diluted income per share 3,908,254 2,959,972 3,973,453 2,913,462
Basic and diluted income per share $ 0.22 $ 0.26 $ 0.42 $ 0.55
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------- ------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income $ 847 $ 760 $ 1,687 $ 1,587
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities available for sale net
of tax $32 and $(435) for the three months ended June 30, 2000 and June
30, 1999, respectively; and net of tax $(516) and $(565) for
the six months ended June 30, 2000 and June 30, 1999 respectively 8 (706) (310) (921)
Reclassification adjustment for gains (losses) included in net income
net of tax $0 and $0 for the three months ended June 30, 2000 and June
30, 1999, respectively; and net of tax $2 and $0 for
the six months ended June 30, 2000 and June 30, 1999 respectively 1 (1) 8 (1)
------- ------- ------- -------
Other comprehensive income (loss) 9 (707) (302) (922)
------- ------- ------- -------
Comprehensive income $ 856 $ 53 $ 1,385 $ 665
======= ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained Treasury comprehensive stockholders'
Stock capital earnings Stock income (loss) equity
--------- ---------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1999 $ 25,268 $ 122 $ 14,356 $ (187) $ (1,990) $ 37,569
Repurchase shares of common stock (243,000) (2,160) (2,160)
Common stock issued in connection with
compensation plans (6,492 shares) 56 56
Net Income 1,687 1,687
Dividends ($0.10 per share) (391) (391)
Other comprehensive income (loss) (302) (302)
--------- ---------- -------- --------- --------- ---------
BALANCE, June 30, 2000 $ 25,324 $ 122 $ 15,652 $ (2,347) $ (2,292) $ 36,459
========= ========== ======== ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,687 $ 1,587
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 388 386
Depreciation and amortization 889 859
Net loss (gain) on sales of investment securities 6 (1)
Net gain on sales of mortgage loans (180) (304)
Net loss on sales of assets acquired through
foreclosure 15 --
Proceeds from sale of mortgage loans 6,446 26,970
Origination of mortgage loans for sale (7,881) (24,457)
Net increase in other assets (1,240) (490)
Net increase in accrued expenses and other liabilities 2,075 665
-------- --------
Net cash provided by operating activities 2,205 5,215
-------- --------
Cash flows from investing activities:
Net increase in loans (8,295) (8,074)
Proceeds from sale of investment securities 3,409 --
Proceeds from maturities and principal reductions of
investment securities available-for-sale 6,271 20,378
Purchases of investment securities available-for-sale (6,458) (24,221)
Proceeds from maturities and principal reductions of
investment securities held-to-maturity 1,172 5,843
Purchases of investment securities held-to-maturity (135) (5,195)
Purchase of bank premises and equipment, net of sales (196) (760)
Proceeds from sales for payments on assets acquired through
foreclosure 1,139 15
Cash paid for acquisitions, net of cash received (2,731) --
-------- --------
Net cash used in investing activities (5,824) (12,014)
-------- --------
Cash flows from financing activities:
Net decrease in deposits (8,073) (7,448)
Net (decrease) increase in federal funds purchased and
securities sold under agreement to repurchase (2,210) (1,010)
Payments on Federal Home Loan Bank advances (1,049) (36)
Proceeds from Federal Home Loan Bank advances 7,000 2,988
Payments on notes payable (1,099) (6,000)
Proceeds of notes payable 5,350 --
Common stock issued 56 6,801
Purchase of treasury stock (2,160) --
Dividends paid on common stock (402) (150)
-------- --------
Net cash used financing activities (2,587) (4,855)
-------- --------
Net change in cash and cash equivalents (6,206) (11,654)
Cash and cash equivalents at beginning of the period 22,507 31,899
-------- --------
Cash and cash equivalents at end of the period $ 16,301 $ 20,245
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
TEAM FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
Note 1: Basis of Presentation
------------------------------
The accompanying consolidated financial statements of Team Financial, Inc. and
Subsidiaries (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes necessary for a comprehensive
presentation of financial condition and results of operations required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all normal recurring adjustments necessary for a fair
presentation of results have been included. The consolidated financial
statements should be read in conjunction with the audited financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 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, 1999 statement of financial condition has
been derived from the audited consolidated financial statements as of that date.
The results of the interim periods ended June 30, 2000 are not necessarily
indicative of the results expected for the year ended December 31, 2000.
Note 2: 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 period
presented, there were no dilutive potential common shares outstanding.
Note 3: Stock Repurchase Program
---------------------------------
The Board of Directors approved a stock repurchase program in February 2000,
authorizing the repurchase of up to 300,000 shares of the Company's common
stock. As of June 30, 2000, the Company had repurchased 243,000 shares of its
common stock under the program at an average price of $8.69.
Note 4: Dividend Declared
--------------------------
On June 28, 2000, the Company declared a quarterly dividend of $0.05 per share
to all shareholders of record on June 30, 2000, payable July 20, 2000.
Note 5: Acquisitions
---------------------
On March 24, 2000, the Company acquired Fort Calhoun Investment Co., and its
subsidiary Fort Calhoun State Bank with total assets of approximately $22
million, for $3.5 million in cash. The acquisition was financed through a $3.5
million advance from the Company's $15 million line of credit with interest
floating at 1.75% over the one month LIBOR. The acquisition was recorded using
the purchase accounting method, generating $2.4 million in goodwill to be
amortized over the next 20 years. The results of operations Fort Calhoun are
included from the date of acquisition.
Note 6: Recent Accounting Pronouncements
-----------------------------------------
The Financial Accounting Standards Board (FASB) issued SFAS No. 133, ACCOUNTING
FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES as amended by SFAS
No. 137 and SFAS No. 138. SFAS No. 133 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
is effective for fiscal years beginning after June 15, 2000. The adoption of the
standard is not expected to have a significant impact on the consolidated
financial statements of the Company.
8
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
Team Financial, Inc. (the "Company") is a multi-bank holding company
incorporated in the State of Kansas. The Company offers full service community
banking and financial services through 20 locations in the Kansas City
metropolitan area, southeastern Kansas, western Missouri, and the Omaha,
Nebraska metropolitan area. The Company's presence in Kansas consists of seven
locations in the Kansas City metro area, which includes the high growth market
of Johnson County, three locations in southeast Kansas and two locations along
the I-70 corridor. The Company operates three locations in western Missouri, and
five in the high growth metropolitan area of Omaha, Nebraska. The Company's
growth over recent years has been achieved primarily through purchases of
branches of large banks and through an acquisition of two community banks.
Additional asset growth has occurred through internal growth at existing banks
as well as from opening three new branches. The Company's stock is listed on the
Nasdaq National Market ("NASDAQ") under the symbol "TFIN".
On March 24, 2000, the Company acquired Fort Calhoun Investment Co., and its
subsidiary Fort Calhoun State Bank with total assets of approximately $22
million, for $3.5 million in cash. The acquisition was recorded using the
purchase accounting method, generating $2.4 million in goodwill to be amortized
over the next 20 years. The results of operations Fort Calhoun are included from
the date of acquisition. The acquisition will compliment the Company's presence
in the high growth Omaha, Nebraska metropolitan area, with the addition of three
new locations.
The Company's results of operation 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 mortgage loans. The Company's
principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, occupancy costs, data processing expense and
provisions for loan losses.
FINANCIAL CONDITION
Total assets of the Company at June 30, 2000 were $539.2 million compared to
$518.2 million at December 31, 1999. The increase of $21.0 million was primarily
due to an increase in loans receivable of $22.3 million, and an increase in
investment securities of $2.2 million, of which $6.2 million was funded by the
decrease in cash and cash equivalents. The first quarter acquisition of Fort
Calhoun Investment Co. contributed $13.5 million to the increase in loans
receivable and $7.3 million to the increase in investment securities.
INVESTMENT SECURITIES: Investment securities available for sale and held to
maturity increased $2.2 million, or 1.4%, to $164.8 million. Investment
securities represented 30.6% of total assets at June 30, 2000 versus 31.4% of
total assets at December 31, 1999. The increase in investment securities from
December 31, 1999 was the result of $7.3 million in additional investment
securities from the Fort Calhoun Investment Co. acquisition. Excluding the
acquisition, investment securities decreased $5.1 million from December 31,
1999. The Company redirected the proceeds from the decrease in investment
securities to fund loans receivable.
The Company's securities portfolio serves as a source of liquidity and earnings
and contributes to the management of interest rate risk. The debt securities
portfolio is comprised primarily of obligations collateralized by U.S.
Government agencies (mainly in the form of mortgage-backed securities), U.S.
Government agency securities, U.S. Treasury securities, and municipal
obligations. With the exception of municipal obligations, the maturity structure
of the debt securities portfolio is generally short-term in nature or indexed to
variable rates.
9
<PAGE>
LOANS RECEIVABLE: Loans receivable increased 7.2%, to $331.6 million at June 30,
2000 compared to $309.3 million at December 31, 1999. Internal loan growth
accounted for 39.6%, or $8.8 million of the $22.3 million increase. This
internal growth was primarily comprised of loans secured by real estate
including approximately $4.2 million of one to four family mortgages. The
remaining $13.5 million can be attributed to the first quarter acquisition of
Fort Calhoun Investment Co., of which 81% were comprised of loans secured by
real estate.
The substantial majority of the Company's residential mortgage loan production
is underwritten in compliance with the requirements for sale to or conversion to
mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation
(FHLMC), the Federal National Mortgage Association (FNMA), or the Government
National Mortgage Association (GNMA). The Company will typically sell fixed rate
mortgage loans to permanent investors with the servicing rights retained. The
majority of the Company's commercial loans include loans to service, retail,
wholesale, and light manufacturing businesses. These loans are made at rates
based on the prevailing national prime interest rate, as well as fixed rates for
terms generally ranging from three to five years. Installment loans include
automobile, residential, credit card, and other personal loans. The majority of
the installment loans are loans with fixed interest rates.
NON-PERFORMING ASSETS: Non-performing assets consist of loans 90 days or more
delinquent and still accruing interest, non-accrual loans and other real estate
owned (OREO). OREO represents real estate properties acquired through
foreclosure or by deed in lieu of foreclosure and is classified as assets
acquired through foreclosure on the balance sheet until the property is sold.
Commercial loans, residential real estate loans, and installment loans are
generally placed on non-accrual status when principal or interest is 90 days or
more past due, unless the loans are well-secured and in the process of
collection. Loans may be placed on non-accrual status earlier when, in the
opinion of management, reasonable doubt exists as to the full, timely collection
of interest or principal.
The following table summarizes the Company's non-performing assets:
<TABLE>
<CAPTION>
June 30, 2000
(Unaudited) December 31, 1999
------------- -----------------
<S> <C> <C>
Non-Performing Assets: (Dollars In Thousands)
Non-accrual loans
Real estate loans $ 656 $ 445
Commercial and industrial 1,368 1,043
Installment loans 377 298
Lease financing receivables 51 6
--- ---
Total Non-accrual loans 2,452 1,792
------ -----
Loans Past Due 90 Days or More Still Accruing
Real estate loans $ 760 $ 292
Commercial and industrial 513 292
Installment loans 55 37
--- --
Total Past Due 90 Days or More Still Accruing 1,328 621
------ ---
Total Non-Performing Loans 3,780 2,413
Other real estate owned 435 792
---- ---
Total non-performing assets $ 4,215 $ 3,205
======= =======
Non-performing loans to total loans 1.14% 0.78%
Non-performing assets to total assets 0.78% 0.62%
</TABLE>
Non-performing assets totaled $4.2 million at June 30, 2000 increasing $1.0
million from December 31, 1999. The increase in non-performing assets was due to
the increase in non-performing loans of $1.4 million and a decrease
10
<PAGE>
in other real estate owned of $357,000. The increase in non-performing loans
was essentially generated from a $609,000 increase in non-performing loans
occurring at the bank the Company acquired in the fourth quarter of 1999, and
a $300,000 increase related to a bankruptcy. The increase in non-performing
loans was comprised of an additional $45,000 in non-performing lease
financing receivables, $679,000 in non-performing loans secured by real
estate, $546,000 in non-performing commercial and industrial loans and
$97,000 in non-performing installment loans. Management is not of the opinion
the increase in non-performing loans for the quarter is evidence of an
unfavorable trend in loan quality as the non-performing loans were
concentrated at one of the Company's recent acquisitions. As of June 30, 2000
there were no significant balances of loans excluded from non-performing
loans set forth above, where known information about possible credit problems
of borrowers caused management to have serious doubts as to the ability of
such borrowers to comply with the present loan repayment terms and which may
result in such loans becoming non-performing.
ALLOWANCE FOR LOAN AND LEASE LOSSES: Management maintains its allowance for loan
and lease losses based on industry standards, historical experience, and an
evaluation of economic conditions. The Company regularly reviews delinquencies
and loan portfolio quality. Based upon such factors, management makes various
assumptions and judgments about the ultimate collectibility of the loan
portfolio and provides an allowance for potential loan losses based upon a
percentage of the outstanding balances and for specific loans if their ultimate
collectibility is considered questionable. Allowance for loan and lease losses
increased to 1.14% of total loans at June 30, 2000, up from 1.07% at December
31, 1999. The increase in allowance for loan and lease losses primarily resulted
from the additional $353,000 in reserves from the first quarter acquisition of
Fort Calhoun Investment Co.
The following table summarizes the Company's allowance for loan and lease
losses:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
(Dollars In Thousands)
<S> <C> <C>
Balance, beginning of period $ 3,320 $ 2,541
Provision for estimated loan losses 388 386
Charge-offs (429) (296)
Recoveries 151 103
Allowance of acquired banks 353 --
------- --
Balance, end of period $ 3,783 $ 2,734
======= =======
Allowance for loan and lease losses
as a percent of total loans 1.14% 1.04%
Allowance for loan and lease losses
as a percent of non performing loans 100.08% 80.82%
Net charge-offs as a percent of total loans 0.08% 0.07%
</TABLE>
LIABILITIES: Total liabilities were $502.7 million at June 30, 2000, an increase
of $22.1 million from $480.6 million at December 31, 1999. The increase is
largely related to the first quarter acquisition of Fort Calhoun Investment Co.
DEPOSITS: Total deposits increased $10.2 million from December 31, 1999, to a
balance at June 30, 2000 of $445.3 million. Net of the first quarter acquisition
of Fort Calhoun Investment Co., total deposits decreased $8.9 million. The
decrease in deposits net of the acquisition was related to a decrease in money
market deposits of $6.6 million and a decrease in certificates of deposit of
$3.4 million. The decrease in money market deposits is attributed to the
roll-off of a large deposit related to a customer's trust that was temporarily
deposited into a bank money market account until disbursed. The decrease in
certificate of deposit account balances is attributable to less aggressive
pricing on large public fund deposits that the Company routinely bids on as a
source of funding.
FEDERAL HOME LOAN BANK ADVANCES: Federal Home Loan Bank advances increased $8.0
million to a balance of $32.0 million at June 30, 2000. The increase was due to
additional short-term 90-day borrowings of $4.0 million,
11
<PAGE>
$2.0 million in borrowings greater than one year, and $2.0 million in
advances from the acquisition during the first quarter.
NOTES PAYABLE: Notes Payable increased $4.3 million from December 31, 1999 to a
balance of $14.2 million at June 30, 2000. Contributing to the increase was $2.0
million in borrowings to finance the repurchase of the Company's stock under the
repurchase program approved by the Board of Directors in February of 2000. Also
contributing to the increase in notes payable was $3.5 million in borrowings to
finance the first quarter acquisition of Fort Calhoun Investment Company. The
notes payable primarily consist of a $4.8 million term note and $8.9 million
borrowed against a $15.0 million line of credit, both of which float at 1.75%
over one month LIBOR.
EQUITY: The Company's Board of Directors approved a stock repurchase program in
February 2000 authorizing the repurchase of up to 300,000 shares of the
Company's common stock. As of June 30, 2000 the Company had repurchased 243,000
under the program increasing treasury stock $2.2 million to $2.3 million at June
30, 2000.
REGULATORY CAPITAL: The Company is subject to regulatory capital requirements
administered by Federal Reserve, the Federal Deposit Insurance Corporation, and
the Comptroller of the Currency. Failure to meet the regulatory capital
guidelines may result in the initiation by the Federal Reserve of appropriate
supervisory or enforcement actions. As of June 30, 2000, the Company met all
capital adequacy requirements to which it is subject and management does not
anticipate any difficulty in meeting these requirements on an ongoing basis. The
Company's ratios at June 30, 2000 were as follows:
At June 30, 2000
----------------------------
Ratio Actual Minimum Required
----- ------ ----------------
Total capital to risk weighted assets 9.15% 8.00%
Core capital to risk weighted assets 8.04% 4.00%
Core capital to average assets 5.26% 4.00%
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 levels of these
assets are dependent on the Company's operating, financing, lending, and
investing activities during any given period. At June 30, 2000 and December 31,
1999 these liquid assets totaled $156.4 million and $159.4 million,
respectively. Management believes the Company's sources of liquidity are
adequate to meet expected cash needs for the foreseeable future.
12
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income for the three and six months ended June 30, 2000 totaled
$4.7 million and $9.2 million, respectively, compared to $3.9 million and $7.7
million for the same periods in 1999. The respective increases of $856,000 and
$1.5 million are primarily due to the interest income from the $29.3 million
increase in loans receivable from June 30, 1999 to June 30, 2000, as well as
from the acquisition of ComBankshares, Inc. during the fourth quarter of 1999
and Fort Calhoun Investment Company during the first quarter of 2000.
Despite the increase in net interest income for the three and six months ended
June 30, 2000 over the same periods one year ago, the Company's net interest
margin as a percent of average earning assets decreased. For the three months
ended June 30, 2000 net interest margin fell to 3.88% from 3.92% for the three
months ended June 30, 1999. During this same time period average earning assets
increased $96.4 million from $407.9 million to $504.3 million. For the first six
months of 2000, net interest margin fell to 3.89% from 3.93% for the first six
months of 1999, with the corresponding increase in average earning assets of
$84.0 million from $410.0 million to $494.0.
The decrease in net interest margin can be attributed to the addition of $6.5
million of additional borrowings from the Company's acquisitions floating at
1.75% over one-month LIBOR, $2.0 million of additional borrowings from the
Company's stock buyback floating at 1.75% over one-month LIBOR, and the average
yield on interest earning assets increasing at a slower rate than the average
cost of interest paying liabilities. The average yield on interest earning
assets for the quarter ended June 30, 2000 increased 38 basis points to 8.26%,
up from 7.88% for the quarter ended June 30, 1999, while the cost of interest
paying liabilities increased 51 basis points to 4.91%, up from 4.40% for that
same time period. Comparing the six months ended June 30, 2000 to the same six
months for 1999, the yield on interest earning assets increased 32 basis points
to 8.21%, up from 7.89%, while interest-paying liabilities increased 38 basis
points to 4.78%, up from 4.40%.
13
<PAGE>
The following tables present certain information relating to net interest income
for the three and six months ended June 30, 2000 and 1999. The average rates and
costs are derived by dividing annualized interest income or expense by the
average balance of assets and liabilities, respectively, for the periods shown.
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999
----------------------------------------- ------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
(Dollars In Thousands) (Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans receivable, net (1) (2) (3) $ 331,771 $ 7,397 8.97% $ 251,697 $ 5,698 9.08%
Investment securities-taxable 143,063 2,432 6.84% 112,252 1,739 6.21%
Investment securities-nontaxable (4) 23,650 435 7.40% 24,306 442 7.29%
Federal funds sold and interest-bearing
deposits 5,808 92 6.37% 19,628 135 2.76%
------ --- ----- ------- ---- -----
Total interest earning assets $ 504,291 10,356 8.26% $ 407,883 8,014 7.88%
========== ------- ----- ========== ------ -----
INTERESET PAYING LIABILITIES:
Savings deposits and interest bearing
checking $ 148,548 $ 1,131 3.06% $ 131,440 899 2.74%
Time deposits 253,051 3,558 5.66% 206,422 2,690 5.23%
Federal funds purchased and securities sold
under agreements to repurchase 7,476 108 5.79% 6,729 58 3.46%
Notes Payable 40,600 690 6.84% 22,615 380 6.74%
------- ---- ----- ------- ---- -----
Total interest bearing liabilities $ 449,675 5,487 4.91% $ 367,205 4,027 4.40%
========== ------ ----- ========== ------ -----
Net interest income (tax equivalent) $ 4,869 $ 3,987
======== =======
Interest rate spread 3.35% 3.48%
Net interest earning assets 54,616 40,678
Net interest margin 3.88% 3.92%
===== =====
Ratio of average interest bearing liabilities
to average interest earning assets 89.17% 90.03%
====== ======
</TABLE>
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average balances.
(3) The Company includes loan fees in interest income. These fees for the three
months ended June 30, 2000 and 1999 were $244,000 and $333,000,
respectively.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects for the three months ended June 30, 2000 and 1999 were $175,000 and
$149,000, respectively.
14
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 Six Months Ended June 30, 1999
-------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(Dollars In Thousands) (Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans receivable, net (1) (2) (3) $ 322,559 $ 14,324 8.93% $ 254,295 $ 11,377 9.02%
Investment securities-taxable 141,567 4,776 6.78% 113,148 3,466 6.18%
Investment securities-nontaxable (4) 24,063 891 7.45% 24,354 882 7.30%
Federal funds sold and interest-bearing
deposits 5,756 174 6.08% 18,191 325 3.60%
------ ---- ----- ------- ---- -----
Total interest earning assets $ 493,945 20,165 8.21% $ 409,988 16,050 7.89%
========== ------- ----- ========== ------- -----
INTERESET PAYING LIABILITIES:
Savings deposits and interest bearing
checking $ 147,383 $ 2,203 3.01% 132,245 1,826 2.78%
Time deposits 249,627 6,856 5.52% 206,607 5,379 5.25%
Federal funds purchased and securities sold
under agreements to repurchase 10,541 301 5.74% 7,144 147 4.15%
Notes Payable 39,323 1,254 6.41% 23,172 703 6.12%
------- ------ ----- ------- ---- -----
Total interest bearing liabilities $ 446,874 10,614 4.78% $ 369,167 8,055 4.40%
========== ------- ----- ========== ------ -----
Net interest income (tax equivalent) $ 9,551 $ 7,995
======= =======
Interest rate spread 3.43% 3.49%
Net interest earning assets 47,071 40,821
Net interest margin (4) 3.89% 3.93%
===== =====
Ratio of average interest bearing liabilities
to average interest earning assets 90.47% 90.04%
====== ======
</TABLE>
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average
balances.
(3) The Company includes loan fees in interest income. These fees for the
six months ended June 30, 2000 and 1999 were $436,000 and $438,000,
respectively.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects for the six months ended June 30, 2000 and 1999 were $364,000
and $293,000, respectively.
15
<PAGE>
The following table presents the components of changes in the Company's net
interest income, on a tax equivalent basis, attributed to volume and rate.
Changes in interest income or interest expense attributable to volume changes
are calculated by multiplying the change in volume by the prior fiscal year's
average interest rate. The changes in interest income or interest expense
attributable to change in interest rates are calculated by multiplying the
change in interest rate by the prior fiscal year average volume. The changes in
interest income or interest expense attributable to the combined impact of
changes in volume and change in interest rate are calculated by multiplying the
change in rate by the change in volume.
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
Compared To
Three Months Ended June 30, 1999
Increase (Decrease) Due To:
--------------------------------------------------
Volume /
Volume Rate Rate Net
<S> <C> <C> <C> <C>
INTEREST INCOME: (Dollars In Thousands)
Loans receivable, net (1) (2) (3) $ 1,793 $ (72) $ (22) $ 1,699
Investment securities-taxable 472 173 48 693
Investment securities-nontaxable (4) (13) 6 -- (7)
Federal funds sold and interest-bearing
deposits (94) 175 (124) (43)
------- ------- ------- -------
TOTAL INTEREST INCOME 2,158 282 (98) 2,342
------- ------- ------- -------
INTEREST EXPENSE:
Savings deposits and interest bearing
checking 115 103 14 232
Time deposits 598 220 50 868
Federal funds purchased and securities sold
under agreements to repurchase 6 40 4 50
Notes Payable 301 5 4 310
------- ------- ------- -------
TOTAL INTEREST EXPENSE 1,020 368 72 1,460
------- ------- ------- -------
NET CHANGE IN NET INTEREST INCOME $ 1,138 $ (86) $ (170) $ 882
======= ======= ======= =======
</TABLE>
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average balances.
(3) The Company includes loan fees in interest income. These fees for the three
months ended June 30, 2000 and 1999 were $244,000 and $333,000,
respectively.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects for the three months ended June 30, 2000 and 1999 were $175,000 and
$149,000, respectively.
16
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
Compared To
Six Months Ended June 30, 1999
Increase (Decrease) Due To:
-----------------------------------------------------
Volume /
Volume Rate Rate Net
INTEREST INCOME: (In Thousands)
<S> <C> <C> <C> <C>
Loans receivable, net (1) (2) (3) $3,094 ($116) $ (31) $2,947
Investment securities-taxable 878 346 86 1,310
Investment securities-nontaxable (4) (11) 20 - 9
Federal funds sold and interest-bearing
deposits (222) 224 (153) (151)
----- ---- ----- -----
TOTAL INTEREST INCOME 3,739 474 (98) 4,115
INTEREST EXPENSE:
Savings deposits and interest bearing
checking 214 146 17 377
Time deposits 1,129 290 58 1,477
Federal funds purchased and securities sold
under agreements to repurchase 70 57 27 154
Notes Payable & FHLB Advances 493 34 24 551
---- --- --- ---
TOTAL INTEREST EXPENSE 1,906 527 126 2,559
NET CHANGE IN NET INTEREST INCOME $ 1,833 $ (53) $ (224) $ 1,556
======== ====== ======= =======
</TABLE>
(1) Loans are net of deferred loan fees.
(2) Non-accruing loans are included in the computation of average balances.
(3) The Company includes loan fees in interest income. These fees for the six
months ended June 30, 2000 and 1999,were $436,000vand.$438,000,
respectively.
(4) Yield is adjusted for the tax effect of tax exempt securities. The tax
effects for the six months ended June 30, 2000 and 1999 were $364,000 and
$293,000, respectively.
17
<PAGE>
NON-INTEREST INCOME
Non-interest income for the three months ended June 30, 2000 was $1.5 million up
$316,000 or 28% over the same three-month period ended June 30, 1999. For the
six months ended June 30, 2000 non-interest income was up $377,000 to $2.7
million versus $2.3 million for the same period the prior fiscal year. The
increase in non-interest income is primarily the result of an increase in
service charge revenue.
Service charge revenue increased $288,000 or 49% to $879,000 for the three
months ended June 30, 2000 compared to $591,000 for the three months ended June
30, 1999. For the six months ended June 30, 2000 service charge revenue
increased $427,000 to $1.6 million over $1.1 million for the first six months of
the prior fiscal year. The Company's acquisitions accounted for $71,000 and
$116,000 of this increase for the respective three and six months ended June 30,
2000. The remaining increase of service charge revenue of $217,000 and $311,000
respectively for the three and six month periods of the current fiscal year, was
primarily generated by a new overdraft fee structure the Company implemented in
February of 2000 along with an enhanced control over fee waivers.
Offsetting the increase in non-interest income for the six months ended June 30,
2000 was a decrease in the gain on sale of mortgage loans of $124,000 to
$180,000 from $304,000 for the six months ended June 30, 1999. The decrease was
the result of higher interest rates, which led to an increase in the origination
of variable rate residential one to four family mortgages versus the origination
of fixed rate residential one to four family mortgages, as consumers opted for
variable rate loans in conjunction with the increase in mortgage interest rates.
The Company's general practice is to sell fixed rate residential one to four
family mortgages with servicing rights retained, and maintain variable rate
residential mortgages in the Company's loan portfolio. Therefore, the Company
originated more residential one to four family mortgages to be held in its
portfolio, and sold fewer loans to the secondary market, reducing gain on the
sale of mortgage loans. For future periods, the Company anticipates altering its
general practice of holding variable rate residential one to four family
mortgages for its loan portfolio to selling some or all of the originations and
servicing rights. This will allow the Company to price one to four family
residential mortgage loans more competitively, produce greater non-interest
income, and provide increased flexibility in interest rate risk management.
NON-INTEREST EXPENSE
Non-interest expense for the three months ended June 30, 2000 was $4.7 million,
up $1.1 million, or 29% over the same three-month period a year ago. For the six
month period June 30, 2000, non interest expense was $9.1 million, up $1.8, or
24% over $7.3 million for the six months ended June 30, 1999.
The increase in non-interest expense is primarily due to the additional expenses
from the acquisition of ComBankshares, Inc. and Fort Calhoun Investment Company,
which accounts for 77% of the total increase for the three months ended June 30,
2000 and 73% of the total increase for the six months ended June 30, 2000, both
compared to the corresponding periods from the prior fiscal year. The
integration of the two acquisitions is progressing as planned.
Salaries and benefits expense was up $511,000 for the three months ended June
30, 2000 to $2.4 million compared to $1.9 million for the three months ended in
1999. The Company's acquisitions accounted for $409,000 of this increase,
resulting in a net increase in salaries and benefits excluding the acquisition
of $102,000. For the six months ended June 30, 2000 salaries and benefits
expense increased $884,000 to $4.6 million compared to $3.7 million for first
six months of the prior year. The increase of $244,000 exclusive of the
acquisition was attributable to addition of three full time equivalent employees
in conjunction with the Company's internal growth.
Occupancy and equipment expense for the respective three and six months ended
June 30, 2000 was $548,000 and $1.0 million, increasing $133,000 and $167,000
respectively from the same periods the prior fiscal year. The increase is
primarily attributable to the acquisitions.
Data processing fees were $489,000 for the three months ended June 30,2000, an
increase of $137,000 over the same period in 1999. For the six months ended June
30, 2000 data processing fees were $957,000, $262,000 above $695,000 in expense
for the six months of the prior fiscal year. The increase was primarily due to
increased volume from internal growth in conjunction with an annual price
increase in the fees charged from the Company's data
18
<PAGE>
processing service. The Company's two community bank acquisitions contributed
$34,000 to this increase for the quarter and $68,000 for the first half of
the current fiscal year over the prior periods. Exclusive of the acquisition
the increase for the respective three and six month periods of 2000 versus
the same periods in 1999 was $103,000 and $194,000.
Goodwill amortization increased $79,000 to $189,000 for the quarter ended June
30, 2000 and $128,000 to $347,000 for the first six months ended June 30, 2000
compared to same periods ended June 30, 1999. The increase was a result of the
addition of goodwill established by premiums paid on the acquisition of Fort
Calhoun Investment Co. in the first quarter of 2000 and the acquisition of
ComBankshares, Inc. in the fourth quarter of 1999. The Company's two community
bank acquisitions have been accounted for using purchase accounting, which means
the excess of the purchase price over the carrying value of the net assets
acquired is recorded in the consolidated financial statements as goodwill.
Goodwill is amortized over periods ranging from 15 to 20 years. The amortization
is a non-cash operating expense, which reduces net income. The balance of the
Company's goodwill was $11.3 million as of June 30, 2000.
Other expense for the three months ended June 30, 2000 increased $38,000 to
$738,000, up $700,000 from June 30, 1999. For the six months ended June 30,
2000, other expense increased $145,000 to $1.4 million, up from $1.3 million for
the six months ended June 30, 1999. Included in other expense for the three and
six month periods are losses recorded from the sale of repossessed leasing
equipment of $43,000 and a loss on deposits accounts of $20,000.
INCOME TAX EXPENSE
The Company recorded income tax expense of $375,000 for the three months ending
June 30, 2000, compared to an income tax expense of $358,000 for the quarter
ended June 30, 1999. The Company's effective tax rate decreased to approximately
30.69% for the three months ended June 30, 2000, down from approximately 32.02%
for the three months ended June 30, 1999. Income tax expense for the six months
ended June 30, 2000 was $709,000 compared to $706,000 for the six months ended
June 30, 1999. The Company's effective tax rate decreased to approximately
29.59% for the six months ended June 30, 2000, down from approximately 30.79%
for the six months ended June 30, 1999. The Company's 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 and
dividends passed through the ESOP to the ESOP participants. The decrease in the
effective tax rate for the three and six months ended June 30, 2000 is primarily
attributed to the Company passing through its dividend for the fourth quarter of
1999 and first quarter of 2000 to the ESOP participants.
19
<PAGE>
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ASSET AND LIABILITY MANAGEMENT
Asset and 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-bearing assets and interest-bearing liabilities. 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 June 30, 2000, if there had been a sudden
and sustained increase in prevailing market interest rates, the Company's 2000
interest income would be expected to decrease, while a decrease in rates would
indicate an increase in income.
Net Interest (Decrease) Percent
Change in Interest Rates Income Increase Change
------------------------ ------------ ---------- -------
(Dollars In Thousands)
200 basis point rise $ 16,855 $ (597) (3.42)%
100 basis point rise 17,200 (252) (1.45)
base rate scenario 17,452 -- --
100 basis point decline 17,590 138 0.79
200 basis point decline 17,865 413 2.36
20
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company's subsidiary, Community Bank is a defendant in litigation filed in
the Johnson County District Court, Johnson County. The litigation was filed
prior to the Company's acquisition of ComBankshares, Inc., the parent company of
Community Bank, in the fourth quarter of 1999. The litigation consists of 132
related petitions, each alleging fraud, negligent misrepresentation, civil
conspiracy, and negligence against Community Bank and a former officer of
Community Bank. The petitions also contain a RESPONDANT SUPERIOR claim against
Community Bank for the former officer's alleged wrongdoing. Each petition
contains allegations of wrongdoing by other banks and bank officers. The
petitions allege that Community Bank, the former officer of Community Bank, and
the other banks and bank officers committed wrongful acts, either intentionally
or unintentionally as to an alleged scheme conducted by a company called Parade
of Toys. The Parade of Toys used Community Bank, the former officer of Community
Bank, and the other banks and bank officers as credit references in
representations made to the plaintiffs by the Parade of Toys. The prayer for
relief from the 132 petitions estimates a total prayer for all the plaintiffs at
approximately $2,812,880. The petitions do not list any claims for punitive
damages, as Kansas law does not allow a plaintiff to list a claim for punitive
damages in a petition. To file for punitive damages, the plaintiffs will have to
amend their petitions. The deadline to amend has not yet passed. Community Bank
denies any liability and is in the process of vigorously defending this claim.
The Company is unable to estimate its potential range of monetary expense, if
any, or to predict the likely outcome of this matter.
Upon the acquisition of ComBankshares, Inc. in the fourth quarter of 1999, the
Company set aside $500,000 of the purchase price in an escrow, to be used for
legal fees and damages from the litigation. In addition, the Company has an
insurance policy of $1,000,000 to be used for damages from the litigation.
The Company is from time to time involved in routine litigation incidental to
the conduct of its business. The Company believes that no pending litigation to
which it is a party will have a material adverse effect on its liquidity,
financial condition, or results of operations
Item 4. Submission Of Matters To A Vote Of Security Holders
a) The Company's annual meeting of Stockholders was held on June 20,
2000.
b) The election of the following individuals as Directors for the
term of three years each.
Name For Against
Neil Blakeman 3,113,414 184,138
R.G. (Gary) Kilkenny 3,134,959 162,593
c) Other Matters
a. The proposal to increase the number of shares reserved
for issuance under the 1999 Stock Incentive Plan from
70,000 shares to 470,000 shares
For Against Abstain Not Voted
2,630,903 346,808 35,056 284,984
b. The appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31,
2000.
For Against Abstain
3,208,157 87,920 1,475,000
d) Not Applicable
21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description
No.
2.1 Acquisition Agreement and Plan of Merger dated October 1, 1999 among
Team Financial, Inc., Team Financial Acquisition Subsidiary, Inc., and
ComBankshares, Inc. (2)
3.1 Restated and Amended Articles of Incorporation of Team Financial, Inc.
(1).
3.2 Amended Bylaws of Team Financial, Inc. (1)
4.1 Specimen common stock certificates (1)
10.1 Employment Agreement between Team Financial, Inc. and Robert J.
Weatherbie dated January 1, 1999 (1)
10.2 Employment Agreement between Team Financial, Inc. and Michael L. Gibson
dated January 1, 1999 (1)
10.3 Employment Agreement between Team Financial, Inc. and Rick P. Bartley
dated January 1, 1999 (1)
10.4 Laser Pro License and Maintenance Agreement between Miami County
National Bank (now TeamBank N.A.) and CFI Bankers Service Group, Inc.
dated March 17, 1999 (1).
10.5 Data Processing Services Agreement between TeamBanc, Inc. (now Team
Financial, Inc.) and M&I Data Services, Inc. dated December 22, 1992
(1).
10.6 401K Plan of Team Financial, Inc. 401(k) Trust, effective January 1,
1999 and administered by Nationwide Life Insurance Company (1).
10.7 The following documents regarding the loan agreement between Team
Financial, Inc., Team Financial, Inc. Employee Stock Ownership Plan and
Commerce Bank all of which are dated August 21, 1997, unless otherwise
noted: (i) Term Loan Agreement and Amendment One to Term Loan Agreement
dated October 31, 1997; (ii) Term Note in the principal amount of
$1,199,000; (iii) Collateral Assignment; (iv) ESOP Note (and Pledge
Agreement) in the amount of $1,199,000; (v) Lending Agreement; (vi)
Corporate Guaranty for Team Financial Acquisition Subsidiary, Inc.; and
(vii) Collateral Pledge Agreements from Team Financial, Inc. and from
Team Financial Acquisition Subsidiary, Inc. (1)
10.8 The following documents regarding the loan agreement between Team
Financial, Inc., Team Financial, Inc. Employee Stock Ownership Plan and
Commerce Bank all of which are dated August 21, 1997, unless otherwise
noted: (i) Term Loan Agreement and Amendment One to Term Loan Agreement
dated October 31, 1997; (ii) Term Note in the principal amount of
$247,000; (iii) Collateral Assignment; (iv) ESOP Note (and Pledge
Agreement) in the amount of $247,000; and (v) Lending Agreement. (1)
10.9 The following documents regarding the loan agreement between Team
Financial, Inc., Team Financial, Inc. Employee Stock Ownership Plan and
Commerce Bank all of which are dated August 30, 1997, unless otherwise
noted: (i) Term Loan Agreement and Amendment One to Term Loan Agreement
dated October 31, 1997; (ii) Term Note in the principal amount of
$200,018; (iii) Collateral Assignment; (iv) ESOP Note (and Pledge
Agreement) in the amount of $200,018; and (v) Lending Agreement. (1)
10.10 The following documents regarding the loan agreement between Team
Financial, Inc., Team Financial, Inc. Employee Stock Ownership Plan and
Commerce Bank all of which are dated August 9, 1997, unless otherwise
noted: (i) Loan Agreement and Amendment One and Two to the Loan
Agreement dated March 19, 1998 and June 29, 1998, respectively; (ii)
Amended and Restated Term Note in the principal amount of $12,400,000
dated June 29, 1999; and (ii) Corporate Guaranty. (1)
22
<PAGE>
10.11 Team Financial, Inc. Employee Stock Ownership Plan Summary. (1)
10.12 Team Financial, Inc. 1999 Stock Incentive Plan. (1)
10.13 Rights Agreement between Team Financial, Inc. and American Securities
Transfer & Trust, Inc. dated June 3, 1999. (1)
10.14 Team Financial, Inc. - Employee Stock Purchase Plan. (1)
11.1 Statement regarding Computation of per share earnings - see
consolidated financial statements.
(1) Filed with Registration Statement on Form S-1, as amended,
(registration Statement No. 333-76163) and incorporated herein by
reference.
(2) Filed with the amended Form 8-K dated December 30, 1999 and
incorporated herein by reference.
(b) Reports on Form 8-K Filed During the Quarter Ended December 31, 1999.
(b.1) Report on Form 8-K Filed on December 17, 1999 reporting the acquisition
of ComBankshares, Inc.
(b.2) Report on Form 8-K Filed on January 4, 1999 amending 8-K filed on
December 17, 1999.
23
<PAGE>
Additional Exhibit
27 Financial Data Schedule (3)
24
<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.
Date: August 9, 2000 By: /s/ Robert J. Weathebie
------------------------
Robert J. Weatherbie
Chairman
Chief Executive Officer
Date: August 9, 2000 By: /s/ Michael L. Gibson
------------------------
President - Acquisitions/
Investments
Chief Financial Officer
25
