UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ________________________
Commission file number 0-30680
First Federal of Olathe Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 48-1226075
- --------------------------------------------- -------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
100 East Park Street, Olathe, Kansas 66061
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 782-0026
----------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Pursuant to Rule 15d-2 of the Act, this annual report contains only financial
statements for the fiscal year ended December 31, 1999.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements:
Pursuant to Rule 15d-2 of the Act, this annual report contains only financial
statements for the fiscal year ended December 31, 1999 as the certified
financial reports for the year ended December 31, 1999 were not yet available
when the Registration Statement on Form SB-2 (File 333-92929) was filed on
December 16, 1999, and amended on February 3, 2000.
(a) (2) Financial Statement Schedules:
All financial statement schedules have been omitted as the information is either
inapplicable or not required under the related instructions.
(a) (3) Exhibits:
The following exhibit is filed as part of this report.
Exhibit 27 Financial Data Schedule
2
<PAGE>
CONTENTS
Page
----
Independent Auditors' Report 4
Statements of Financial Condition 5
Statements of Income and Comprehensive Income 6
Statements of Equity 7
Statements of Cash Flows 8
Notes to Financial Statements 10
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF OLATHE
Olathe, Kansas
We have audited the accompanying statements of financial condition of
First Federal Savings and Loan Association of Olathe as of December 31, 1999,
1998 and 1997, and the related statements of income and comprehensive income,
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Federal Savings and
Loan Association of Olathe as of December 31, 1999, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/Taylor, Perky & Parker, LLC
Overland Park, Kansas
February 18, 2000
4
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
STATEMENTS OF FINANCIAL CONDITION
December 31,
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and non-interest earning deposits $ 90,749 $ 112,508 $ 66,590
Overnight deposits at Federal Home Loan Bank
and First National Bank of Olathe 2,514,611 5,100,000 2,200,000
----------- ----------- -----------
Total cash and cash equivalents 2,605,360 5,212,508 2,266,590
Held to maturity securities, at cost 11,000,000 9,000,000 3,909,622
Available for sale securities 618,966 847,482 551,562
Federal Home Loan Bank stock, at cost 308,300 288,700 307,400
Loans receivable, net of deferred loan fees and loss allowance 31,472,474 28,978,023 25,741,621
Accrued interest receivable 420,090 301,158 264,316
Equipment, net of accumulated depreciation 19,643 20,695 640
Refundable income taxes 21,000 -- --
Other assets 146,258 -- 6,250
----------- ----------- -----------
Total Assets $46,612,091 $44,648,566 $33,048,001
=========== =========== ===========
LIABILITIES AND EQUITY
Deposits $36,203,251 $34,701,287 $25,139,748
Advance payments from borrowers for taxes and insurance 13,994 20,414 24,280
Interest payable on deposits 51,089 55,122 38,159
Advances from the Federal Home Loan Bank 1,000,000 1,000,000 --
Accrued expenses 106,175 89,613 47,480
Deferred income taxes payable 68,957 220,180 132,302
Income taxes payable -- 20,100 68,560
----------- ----------- -----------
Total Liabilities 37,443,466 36,106,716 25,450,529
Commitments and contingencies -- -- --
Equity:
Retained earnings 8,796,861 8,028,977 7,262,151
Accumulated other comprehensive income 371,764 512,873 335,321
----------- ----------- -----------
Total Equity 9,168,625 8,541,850 7,597,472
----------- ----------- -----------
Total Liabilities and Equity $46,612,091 $44,648,566 $33,048,001
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Interest and Dividend Income:
Loans receivable $ 2,627,928 $ 2,394,515 $ 2,178,540
Investment securities 693,583 406,123 414,948
Cash and cash equivalents 189,738 260,656 98,017
Capital stock 28,617 29,227 26,592
----------- ----------- -----------
Total Interest and Dividend Income 3,539,866 3,090,521 2,718,097
----------- ----------- -----------
Interest Expense:
Deposits 1,887,017 1,600,362 1,336,689
Federal Home Loan Bank advances 57,400 52,368 --
----------- ----------- -----------
Total Interest Expense 1,944,417 1,652,730 1,336,689
----------- ----------- -----------
Net Interest Income Before Provision for Loan Losses 1,595,449 1,437,791 1,381,408
Provision for Loan Losses 150,000 -- --
----------- ----------- -----------
Net Interest and Dividend Income
after Provision for Loan Losses 1,445,449 1,437,791 1,381,408
----------- ----------- -----------
Non-Interest Income:
Service charges and other fees 19,893 19,513 7,331
----------- ----------- -----------
Non-Interest Expense:
Salaries and related payroll expenses 120,285 100,411 96,790
Federal insurance premium 44,673 44,693 41,352
Occupancy of premises 27,415 21,229 23,353
Office supplies and related expenses 20,357 17,391 18,828
Other general and administrative 93,506 64,495 83,171
----------- ----------- -----------
Total Non-Interest Expense 306,236 248,219 263,494
----------- ----------- -----------
Income Before Income Taxes 1,159,106 1,209,085 1,125,245
Income Tax Provision 391,222 442,259 398,561
----------- ----------- -----------
Net Income 767,884 766,826 726,684
Other Comprehensive Income (Loss):
Unrealized gain (loss) on investment securities
available for sale, net of deferred tax expense (141,109) 177,552 113,929
----------- ----------- -----------
Comprehensive Income $ 626,775 $ 944,378 $ 840,613
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
STATEMENTS OF EQUITY
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Other Comprehensive
Income (Loss):
Unrealized Gain
on Securities
Available for Sale,
Retained Net of Deferred
Earnings Taxes Total Equity
----------- ------------------- ------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 6,535,467 $ 221,392 $ 6,756,859
Net income for the year ended
December 31, 1997 726,684 -- 726,684
Other comprehensive income:
Change in unrealized gain on
available for sale securities, net
of deferred taxes -- 113,929 113,929
----------- ----------- -----------
Balance, December 31, 1997 7,262,151 335,321 7,597,472
Net income for the year ended
December 31, 1998 766,826 -- 766,826
Other comprehensive income:
Change in unrealized gain on
available for sale securities, net
of deferred taxes -- 177,552 177,552
----------- ----------- -----------
Balance, December 31, 1998 8,028,977 512,873 8,541,850
Net income for the year ended
December 31, 1999 767,884 -- 767,884
Other comprehensive loss:
Change in unrealized gain on
available for sale securities, net of
deferred taxes -- (141,109) (141,109)
----------- ----------- -----------
Balance, December 31, 1999 $ 8,796,861 $ 371,764 $ 9,168,625
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
STATEMENTS OF CASH FLOWS
Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Mortgage loan interest received $ 2,603,380 $ 2,378,809 $ 2,182,351
Investment interest and dividends received 817,554 674,870 549,508
Other fees 19,893 19,513 7,331
------------ ------------ ------------
3,440,827 3,073,192 2,739,190
Interest paid 1,948,450 1,635,767 1,339,741
Salaries and other administrative expenses 430,765 195,676 266,686
Income taxes paid 496,138 521,209 338,932
------------ ------------ ------------
2,875,353 2,352,652 1,945,359
------------ ------------ ------------
Net cash provided by operating activities 565,474 720,540 793,831
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of U.S. Government and agency securities (3,000,000) (10,300,000) (5,909,622)
Maturity of U.S. Government and agency securities 1,000,000 5,209,622 7,700,000
Net increase in mortgage loans (2,644,451) (3,240,268) (795,438)
(Purchase) redemption of FHLB stock (19,600) 18,700 (21,100)
Purchase of property and equipment (4,115) (24,215) --
------------ ------------ ------------
Net cash provided (used) by investing activities (4,668,166) (8,336,161) 973,840
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 1,495,544 9,561,539 (1,795,571)
Proceeds from FHLB advances -- 1,000,000 --
------------ ------------ ------------
Net cash provided (used) by financing activities 1,495,544 10,561,539 (1,795,571)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (2,607,148) 2,945,918 (27,900)
CASH AND CASH EQUIVALENTS, Beginning of year 5,212,508 2,266,590 2,294,490
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, End of year $ 2,605,360 $ 5,212,508 $ 2,266,590
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 767,884 $ 766,826 $ 726,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 5,167 4,160 7,686
Provision for loan losses 150,000 -- --
Deferred income taxes (63,816) (30,490) (8,931)
Increase in accrued interest receivable (118,932) (36,842) (19,387)
(Increase) decrease in other assets (146,258) 6,250 26,766
Increase (decrease) in income taxes payable (41,100) (48,460) 68,560
Increase (decrease) in accrued interest payable (4,033) 16,963 (3,052)
Increase (decrease) in accrued expenses 16,562 42,133 (4,495)
--------- --------- ---------
Net cash provided by operating activities $ 565,474 $ 720,540 $ 793,831
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Nature of Operations
The Association was incorporated in December 1923 and provides financial
services to individual and corporate customers through its office in Olathe,
Kansas. The Association's primary source of revenue is one-to-four family
dwelling loans. The Association's lending activity is concentrated within a
small geographic area in Kansas.
2. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Investment Securities
Investment securities include U.S. Treasury notes and securities of the Federal
Home Loan Bank, all backed by the full faith and credit of the United States
Government and securities of the Federal Home Loan Mortgage Corporation and
Federal National Mortgage Association. Held-to-maturity debt securities that the
Association has the positive intent and ability to hold to maturity are carried
at cost, adjusted for amortization of premium and accretion of discounts using
methods approximating the interest method. Debt and equity securities that are
bought and held principally for the purpose of selling them in the near term are
classified as trading securities and reported at fair value, with unrealized
holding gains and losses included in income. Debt and equity securities not
classified as trading securities or as held-to-maturity securities are
classified as available for sale securities and reported at fair value, with
unrealized holding gains or losses, net of applicable deferred income taxes,
reported in a separate component of equity. If a decline in fair value is judged
to be other than temporary, the cost basis of the individual security shall be
written down to fair value as a new cost basis and the amount of the write-down
shall be included in income.
4. Loan Fees
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment net of a prepayment
factor over the contractual term of the related loans using the interest method.
5. Depreciation
Equipment is stated at cost, net of accumulated depreciation. Depreciation is
provided for in amounts sufficient to relate the costs of depreciable assets to
operations over their estimated service lives.
10
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
6. Cash Equivalents
For purposes of the statements of cash flows, cash equivalents include time
deposits and all highly liquid debt instruments with original maturities of less
than three months.
7. Loans Receivable
Loans receivable consist primarily of conventional first mortgage loans for
permanent one-to-four family dwellings. It is the policy of the Association to
limit mortgages to 80 percent of the appraised value of the mortgaged property.
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, economic conditions and other risks inherent in the portfolio.
8. Gains and Losses
Gains and losses on the sale of investment securities are determined using the
specific identification method.
NOTE B - RELATED PARTY TRANSACTIONS
In the normal course of business, the Association has made loans to its
directors, officers, and their related business interests. In the opinion of
management, related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than the
normal risk of collectibility. The aggregate dollar amount of loans outstanding
to directors, officers and their related business interests totaled
approximately $309,000, $208,000 and $175,000 at December 31, 1999, 1998 and
1997, respectively.
NOTE C - LOANS RECEIVABLE
Loans at December 31, are summarized as follows:
1999 1998 1997
----------- ----------- -----------
Loans receivable:
One-to-four family $31,969,022 $29,261,165 $25,949,070
Less:
Deferred loan fees, net 321,548 258,142 182,449
Allowance for loan losses 175,000 25,000 25,000
----------- ----------- -----------
Total loans receivable, net $31,472,474 $28,978,023 $25,741,621
=========== =========== ===========
11
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C - LOANS RECEIVABLE (CONTINUED)
The following table sets forth information at December 31, with respect to the
Association's allowance for loan losses.
1999 1998 1997
-------- -------- --------
Balance, beginning of period $ 25,000 $ 25,000 $ 25,000
Provision for loan losses 150,000 -- --
-------- -------- --------
Balance, end of period $175,000 $ 25,000 $ 25,000
======== ======== ========
Ratio of allowance for loan loss to
ending loans receivable, net .56% .09% .10%
NOTE D - AVAILABLE FOR SALE SECURITIES
The cost and market value of the available for sale securities are summarized as
follows:
December 31, 1999
------------------------------------------------------
Gross Unrealized Market
Cost Gains Value
---- ----- -----
Common Stock $10,960 $608,006 $618,966
======= ======== ========
December 31, 1998
------------------------------------------------------
Gross Unrealized Market
Cost Gains Value
---- ----- -----
Common Stock $10,960 $836,522 $847,482
======= ======== ========
December 31, 1997
------------------------------------------------------
Gross Unrealized Market
Cost Gains Value
---- ----- -----
Common Stock $10,960 $540,602 $551,562
======= ======== ========
12
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE E - HELD TO MATURITY SECURITIES
The amortized cost and market value of investments in debt securities are as
follows:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------
Amortized Unrealized Market
Cost (Losses) Value
------------ ------------ ------------
<S> <C> <C> <C>
Securities of the Federal Home Loan Bank $ 4,500,000 $ (209,535) $ 4,290,465
Securities of the Federal Mortgage Corp. 6,000,000 (450,620) 5,549,380
Securities of the Fed. Nat'l. Mtg. Assn 500,000 (36,930) 463,070
------------ ------------ ------------
$ 11,000,000 $ (697,085) $ 10,302,915
============ ============ ============
Due in less than one year $ -- $ -- $ --
After one through five years -- -- --
After five through ten years 5,500,000 (308,275) 5,191,725
After ten years 5,500,000 (388,810) 5,111,190
------------ ------------ ------------
$ 11,000,000 $ (697,085) $ 10,302,915
============ ============ ============
<CAPTION>
December 31, 1998
--------------------------------------------
Amortized Unrealized Market
Cost (Losses) Value
------------ ------------ ------------
<S> <C> <C> <C>
Securities of the Federal Home Loan Bank $ 3,500,000 $ (3,590) $ 3,496,410
Securities of the Federal Mortgage Corp. 5,000,000 3,450 5,003,450
Securities of the Fed. Nat'l. Mtg. Assn 500,000 6,475 506,475
------------ ------------ ------------
$ 9,000,000 $ 6,335 $ 9,006,335
============ ============ ============
Due in less than one year $ -- $ -- $ --
After one through five years -- -- --
After five through ten years 6,500,000 4,230 6,504,230
After ten years 2,500,000 2,105 2,502,105
------------ ------------ ------------
$ 9,000,000 $ 6,335 $ 9,006,335
============ ============ ============
<CAPTION>
December 31, 1997
--------------------------------------------
Amortized Unrealized Market
Cost (Losses) Value
------------ ------------ ------------
<S> <C> <C> <C>
Securities of the Federal Home Loan Bank $ 2,909,622 $ 10,988 $ 2,920,610
Securities of the Federal Mortgage Corp. 1,000,000 4,690 1,004,690
------------ ------------ ------------
$ 3,909,622 $ 15,678 $ 3,925,300
============ ============ ============
Due in less than one year $ -- $ -- $ --
After one through five years -- -- --
After five through ten years 3,500,000 17,980 3,517,980
After ten years 409,622 (2,302) 407,320
------------ ------------ ------------
$ 3,909,622 $ 15,678 $ 3,925,300
============ ============ ============
</TABLE>
13
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F - DEPOSITS
An analysis of deposit account balances, by interest rate, is as follows:
December 31, 1999
-------------------------------------------------------------------
Interest 18 to 60 Mo. 6 Mo. Money Savings
Rate C.D.'s C.D.'s Market Accounts Total
- ---------- ----------- ----------- ----------- ----------- -----------
3% - 3.99% $ -- $ -- $ 2,305,860 $ 4,551,676 $ 6,857,536
4% - 4.99% 100,000 2,453,711 -- -- 2,553,711
5% - 5.99% 17,133,883 -- -- -- 17,133,883
6% - 6.99% 9,658,121 -- -- -- 9,658,121
----------- ----------- ----------- ----------- -----------
Totals $26,892,004 $ 2,453,711 $ 2,305,860 $ 4,551,676 $36,203,251
=========== =========== =========== =========== ===========
December 31, 1998
-------------------------------------------------------------------
Interest 18 to 60 Mo. 6 Mo. Money Savings
Rate C.D.'s C.D.'s Market Accounts Total
- ---------- ----------- ----------- ----------- ----------- -----------
3% - 3.99% $ -- $ -- $ 2,240,937 $ 3,349,020 $ 5,589,957
4% - 4.99% -- -- -- -- --
5% - 5.99% 16,249,700 2,663,230 -- -- 18,912,930
6% - 6.99% 10,198,400 -- -- -- 10,198,400
----------- ----------- ----------- ----------- -----------
Totals $26,448,100 $ 2,663,230 $ 2,240,937 $ 3,349,020 $34,701,287
=========== =========== =========== =========== ===========
December 31, 1997
-------------------------------------------------------------------
Interest 18 to 60 Mo. 6 Mo. Money Savings
Rate C.D.'s C.D.'s Market Accounts Total
- ---------- ----------- ----------- ----------- ----------- -----------
3% - 3.99% $ -- $ -- $ 2,517,568 $ 2,545,897 $ 5,063,465
4% - 4.99% -- -- -- -- --
5% - 5.99% 13,654,234 176,295 -- -- 13,830,529
6% - 6.99% 6,023,336 222,418 -- -- 6,245,754
----------- ----------- ----------- ----------- -----------
Totals $19,677,570 $ 398,713 $ 2,517,568 $ 2,545,897 $25,139,748
=========== =========== =========== =========== ===========
At December 31, 1999, scheduled maturities of certificates of deposit are as
follows:
2000 $ 14,963,405
2001 7,074,209
2002 1,273,919
2003 4,021,689
2004 2,012,493
------------
$ 29,345,715
============
The aggregate amount of time deposit accounts exceeding $100,000 at December 31,
1999, 1998 and 1997 amounted to $9,713,000, $5,771,000 and $3,036,000,
respectively. Deposits in excess of $100,000 are not insured by the Federal
Deposit Insurance Corporation.
14
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F - DEPOSITS (CONTINUED)
The components of interest expense on deposits at December 31, are as follows:
1999 1998 1997
---------- ---------- ----------
Certificates of Deposit $1,716,896 $1,432,084 $1,190,267
Money Market 69,361 72,558 80,214
Savings Accounts 100,760 95,720 66,208
---------- ---------- ----------
$1,887,017 $1,600,362 $1,336,689
========== ========== ==========
NOTE G - ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB)
The Association is required to purchase stock in the FHLB. Such stock may be
redeemed at par but is not readily marketable. The Association had stock of
$308,300, $288,700 and $307,400 at December 31, 1999, 1998 and 1997,
respectively.
The Association had $1,000,000 in outstanding advances at a fixed interest rate
of 5.74 percent from the FHLB at December 31, 1999 and December 31, 1998. The
advances have a maturity date of February 2, 2001 and are collateralized by the
FHLB stock. There were no outstanding advances at December 31, 1997.
NOTE H - LINE OF CREDIT
At December 31, 1999, the Association had an unused line of credit with the FHLB
to be drawn upon as needed, with interest at the Federal Funds rate plus 15
basis points. The line of credit is limited to 40 percent of total assets.
15
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE I - LEASE COMMITMENTS
Rent expense under a long-term operating lease for office space amounted to
$16,057, $13,607 and $14,145 for the years ended December 31, 1999, 1998 and
1997, respectively. The Association renewed this lease on August 1, 1999 and is
obligated under the terms of this lease through July 31, 2004. Future lease
obligations under this agreement are as follows:
2000 $14,538
2001 14,538
2002 14,538
2003 14,538
2004 8,480
-------
$66,632
=======
NOTE J - RETIREMENT PLAN
Statement of Financial Accounting Standards No. 87, "Employer's Accounting for
Pensions," requires entities to disclose a description of the multi-employer
plan and the amount of cost recognized during the period. The Association
participates in a noncontributory group pension plan for the savings and loan
industry. This defined benefit plan covers all full-time employees. There were
no contributions to the plan for the years ended December 31, 1999, 1998 and
1997, since the plan was fully funded in accordance with the maximum funding
standards of ERISA. Because this is a multiple-employer pension plan, the
actuarial present value of plan benefits is not determinable. The net assets of
the fund available for benefits at June 30, 1999, the most recent information
available, amounted to $1,850,200,000.
NOTE K - REGULATORY MATTERS
The Association is subject to various regulatory capital requirements by its
primary federal regulator, the Office of Thrift Supervision (OTS). Under the
regulatory capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Association must meet specific capital guidelines that
involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
Failure to meet minimum regulatory capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Association's financial
statements. The Association's capital amounts and classification under the
prompt corrective action guidelines are also subject to qualitative judgments by
regulatory agencies about components, risk weightings, and other factors.
Regulatory quantitative measures to ensure capital adequacy require the
Association to maintain minimum amounts and ratios of total and risk-based
capital and Tier 1 Capital to risk-weighted assets (as defined in the
regulations), and Tier 1 Capital and Tangible Capital to adjusted total assets
(as defined).
16
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE K - REGULATORY MATTERS (CONTINUED)
As of the most recent notification from federal regulators, the Association was
categorized as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Association must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as disclosed in the table below. There are no conditions or events since the
notification that management believes would change the Association's category.
The following table sets forth regulatory capital ratios for the Association.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under the Prompt
Actual Adequacy Purposes Corrective Action Provisions
------ ----------------- ----------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999:
Total Risk-Based Capital
(to Risk-Weighted Assets) $8,972 45.89% >=$1,564 >=8.0% >=$1,955 >=10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $8,797 44.99% >=$ 782 >=4.0% >=$1,173 >= 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $8,797 18.89% >=$1,862 >=4.0% >=$2,328 >= 5.0%
Tangible Capital
(to Adjusted Total Assets) $8,797 18.89% >=$ 698 >=1.5% N/A N/A
December 31, 1998:
Total Risk-Based Capital
(to Risk-Weighted Assets) $8,054 44.28% >=$1,455 >=8.0% >=$1,819 >=10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $8,029 44.14% >=$ 727 >=4.0% >=$1,091 >= 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $8,029 17.97% >=$1,786 >=4.0% >=$2,233 >= 5.0%
Tangible Capital
(to Adjusted Total Assets) $8,029 17.97% >=$ 670 >=1.5% N/A N/A
December 31, 1997:
Total Risk-Based Capital
(to Risk-Weighted Assets) $7,287 50.85% >=$1,146 >=8.0% >=$1,432 >=10.0%
Tier 1 Capital
(to Risk-Weighted Assets) $7,262 50.68% >=$ 429 >=3.0% >=$ 859 >= 6.0%
Tier 1 Capital
(to Adjusted Total Assets) $7,262 21.97% >=$ 992 >=3.0% >=$1,652 >= 5.0%
Tangible Capital
(to Adjusted Total Assets) $7,262 21.97% >=$ 495 >=1.5% N/A N/A
</TABLE>
17
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE K - REGULATORY MATTERS (CONTINUED)
A reconciliation of generally accepted accounting principles ("GAAP") capital to
regulatory capital is presented in the following table as of December 31, 1999:
Tangible Core Total
Capital Capital Capital
------- ------- -------
(in Thousands)
GAAP capital $ 9,169 $ 9,169 $ 9,169
Other comprehensive income (372) (372) (372)
Regulatory general valuation -- -- 175
------- ------- -------
Regulatory capital $ 8,797 $ 8,797 $ 8,972
======= ======= =======
NOTE L - INCOME TAXES
The differences between the provision for income taxes and the amount computed
by applying the statutory federal income tax rate of 34% to income before income
taxes at December 31, were as follows for the following periods:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax at federal statutory rate $ 394,096 $ 411,089 $ 382,583
State income tax, net of federal tax benefit 50,100 54,000 68,706
Over (under) accrual of federal
and state income taxes 10,842 7,660 (43,797)
Deferred income tax benefit (63,816) (30,490) (8,931)
--------- --------- ---------
Provision for income taxes $ 391,222 $ 442,259 $ 398,561
========= ========= =========
Effective tax rate 33.75% 36.57% 35.41%
========= ========= =========
</TABLE>
The tax effects of existing temporary differences that give rise to significant
positions of deferred tax assets and deferred tax liabilities are as follows:
1999 1998 1997
--------- --------- ---------
Deferred tax assets
Deferred loan origination fees $ 97,750 $ 103,469 $ 72,979
Allowance for loan losses 67,375 -- --
Deferred tax liabilities
Unrealized gain on available for
sale securities (234,082) (323,649) (205,281)
--------- --------- ---------
Net deferred tax liability $ (68,957) $(220,180) $(132,302)
========= ========= =========
18
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined by the Association using
available market information and a selection from a variety of valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value. Accordingly, the
estimates presented are not necessarily indicative of the amount the Association
could realize in a current market exchange. The use of different market
assumptions and estimation methodologies may have a material effect on the
estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------------------- ------------------------- -------------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value Value Fair Value
----- ---------- ----- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents $ 2,605,360 $ 2,605,360 $ 5,212,508 $ 5,212,508 $ 2,266,590 $ 2,266,590
Investment 11,618,966 10,921,881 9,847,482 9,853,817 4,461,184 4,476,862
securities
Capital Stock of
Federal Home Loan
Bank 308,300 308,300 288,700 288,700 307,400 307,400
Loans receivable 31,472,474 31,476,981 28,978,023 29,692,496 25,741,621 26,250,426
Liabilities:
Deposits 36,203,251 36,298,979 34,701,287 35,008,904 25,139,748 25,150,585
Advances from
Federal Home Loan
Bank 1,000,000 992,376 1,000,000 1,000,000 -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value of
the financial instruments:
Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents
are reasonable estimates of their fair value.
Investment Securities - Estimated fair values of investment securities are based
on quoted market prices where available. If quoted market prices are not
available, fair values are estimated using quoted market prices for similar
instruments.
Capital Stock of Federal Home Loan Bank - The carrying value of capital stock of
Federal Home Loan Bank approximates its fair value.
19
<PAGE>
Loans Receivable - Fair values are estimated for portfolios with similar
financial characteristics. Future cash flows of these loans are discounted using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
20
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Deposits - The estimated fair value of demand deposits and savings accounts is
the amount payable on demand at the reporting date. The estimated fair value of
fixed-maturity certificates of deposit is estimated by discounting the future
cash flows using the rates currently offered for deposits of similar remaining
maturities.
Advances from Federal Home Loan Bank - The estimated fair value of advances from
Federal Home Loan Bank is determined by discounting the future cash flows of
existing advances using rates currently available on advances from Federal Home
Loan Bank having similar characteristics.
NOTE N - COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Association has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying financial statements.
At December 31, 1999, 1998 and 1997, the Association had outstanding commitments
to originate fixed rate mortgages of $1,111,700, $1,276,000, and $1,325,000,
respectively. At December 31, 1999, the interest rates on the outstanding
commitments ranged from 7.75% to 9.0%.
NOTE O - YEAR 2000 COMPLIANCE REVIEW
Subsequent to December 31, 1998, the Association completed a compliance
examination conducted by the Office of Thrift Supervision for Year 2000
compliance. The examination indicated that the Association is Year 2000
compliant and no further major updates will be necessary.
NOTE P - PLAN OF CONVERSION
On October 13, 1999, the Association's Board of Directors approved a plan
("Plan") to convert from a federally-chartered mutual savings association to a
federally-chartered stock savings association, subject to approval by its
members. The Plan, which includes formation of a holding company to own all of
the outstanding stock of the Association, is subject to approval by the Office
of Thrift Supervision (OTS) and includes the filing of a registration statement
with the Securities and Exchange Commission.
The Plan calls for the common stock of the holding company to be offered to
various parties in a subscription offering at a price based on an independent
appraisal of the Association. It is anticipated that any shares not purchased in
the subscription offering will be offered in a community offering. The
Association may not declare or pay a cash dividend if the effect thereof would
cause its net worth to be reduced below either the amount required for the
liquidation account discussed below or the regulatory capital requirements
imposed by the OTS.
21
<PAGE>
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF OLATHE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE P - PLAN OF CONVERSION (CONTINUED)
At the time of conversion, the Association will establish a liquidation account
in an amount equal to its retained earnings as reflected in the latest statement
of financial condition used in the final conversion prospectus. The liquidation
account will be maintained for the benefit of eligible account holders who
continue to maintain their deposit accounts in the Association after conversion.
In the event of a complete liquidation of the Association, and only in such an
event, eligible depositors who continue to maintain accounts shall be entitled
to receive a distribution from the liquidation account before any liquidation
may be made with respect to common stock.
If the conversion is ultimately successful, conversion costs will be accounted
for as a reduction of the stock proceeds. If the conversion is unsuccessful,
conversion costs will be charged to the Association's operations. As of December
31, 1999, $146,258 of conversion costs have been incurred.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
First Federal of Olathe Bancorp, Inc.
Date: May 4, 2000 By: /s/ Mitch Ashlock
------------------ --------------------------------
Mitch Ashlock
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Mitch Ashlock
- -----------------------------------------
Mitch Ashlock
President, Chief Executive Officer and
Director (Principal Executive, Accounting
and Financial Officer)
Date: May 4, 2000
/s/ John M. Bowen
- -----------------------------------------
John M. Bowen
Director
Date: May 4, 2000
/s/ Marvin E. Wollen
- -----------------------------------------
Marvin E. Wollen
Director
Date: May 4, 2000
/s/ Donald K. Ashlock
- -----------------------------------------
Donald K. Ashlock
Chairman of the Board
Date: May 4, 2000
/s/ Carl R. Palmer
- -----------------------------------------
Carl R. Palmer
Director
Date: May 4, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from First
Federal Savings and Loan Association of Olathe and is qualified in it's entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,605
<SECURITIES> 11,000
<RECEIVABLES> 31,647
<ALLOWANCES> 175
<INVENTORY> 0
<CURRENT-ASSETS> 15,120
<PP&E> 20
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,612
<CURRENT-LIABILITIES> 37,203
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,169
<TOTAL-LIABILITY-AND-EQUITY> 46,612
<SALES> 0
<TOTAL-REVENUES> 3,540
<CGS> 0
<TOTAL-COSTS> 1,944
<OTHER-EXPENSES> 286
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,159
<INCOME-TAX> 391
<INCOME-CONTINUING> 768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 768
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
