U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
For the transition period from to
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Commission File Number 0-24037
FIRST KANSAS FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its Charter)
Kansas 48-1198888
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(State or other Jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
600 Main Street, Osawatomie, Kansas 66064
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 755-3033
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
X Yes No
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State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
As of May 10, 2000, there were 1,265,693 shares of the Registrant's common
stock, par value $0.10 per share, outstanding. The Registrant has no other
classes of common equity outstanding.
Transitional Small Business Disclosure Format (Check one) :
Yes X No
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FIRST KANSAS FINANCIAL CORPORATION
OSAWATOMIE, KANSAS
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - as of March 31, 2000 (Unaudited)
and December 31, 1999 2
Consolidated Statements of Earnings - (Unaudited) for
the three months ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows - (Unaudited) for
the three months ended March 31, 2000 and 1999 4
Notes to (unaudited) Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Balance Sheets
(In thousands)
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March 31, December 31,
2000 1999
Assets (unaudited)
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Cash and cash equivalents $ 3,626 4,090
Investment securities held-to-maturity 6,319 6,261
Mortgage-backed securities available-for-sale 20,165 20,795
Mortgage-backed securities held-to-maturity 55,981 57,965
(approximate fair value of $53,267 and $55,597, respectively)
Loans receivable, net 54,464 47,751
Stock in Federal Home Loan Bank (FHLB) of Topeka, at cost 2,125 2,114
Premises and equipment, net 2,186 2,213
Real estate held for development 357 357
Accrued interest receivable, prepaid expenses and other assets 1,045 1,000
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Total assets $ 146,268 142,546
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Liabilities and Stockholders' Equity
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Liabilities:
Deposits $ 83,077 82,317
Advances from borrowers for property taxes and insurance 351 142
Borrowings from FHLB of Topeka 42,500 40,500
Accrued interest payable and other liabilities 1,322 714
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Total liabilities 127,250 123,673
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Stockholders' equity:
Preferred stock, $.10 par value, 2,000,000 shares authorized, none issued - -
Common stock, $.10 par value, 8,000,000 shares authorized, 1,553,938
shares issued 155 155
Additional paid-in capital 14,850 14,842
Treasury stock (221,629 shares at March 31,2000 and December 31, 1999) (2,495) (2,495)
Retained earnings 8,472 8,289
Unearned compensation (1,565) (1,623)
Accumulated other comprehensive income (loss) (399) (295)
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Total stockholders' equity 19,018 18,873
Commitments - -
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Total liabilities and stockholders' equity $ 146,268 142,546
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See accompanying notes to unaudited consolidated financial statements.
2
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Earnings
(Unaudited)
(In thousands except per share data)
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For the three months
ended March 31,
2000 1999
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Interest income:
Loans $ 945 801
Investment securities 100 92
Mortgage-backed securities 1,259 984
Interest-bearing deposits 17 60
Dividends on FHLB stock 37 15
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Total interest income 2,358 1,952
Interest expense:
Deposits 858 904
Borrowings 539 189
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Total interest expense 1,397 1,093
Net interest income 961 859
Provision for loan losses 9 9
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Net interest income after provision for loan losses 952 850
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Noninterest income:
Deposit account service fees 183 173
Other 37 23
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Total noninterest income 220 196
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Noninterest expense:
Compensation and benefits 408 348
Occupancy and equipment 96 84
Federal deposit insurance premiums and assessments 14 20
Data processing 48 63
Amortization of premium on deposits assumed 15 15
Advertising 38 41
Other 149 152
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Total noninterest expense 768 723
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Earnings before income tax expense 404 323
Income tax expense 154 129
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Net earnings $ 250 194
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Net earnings per share - basic and diluted $ 0.20 0.14
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See accompanying notes to unaudited consolidated financial statements.
3
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999
(Unaudited)
(In thousands)
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2000 1999
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Cash flows from operating activities:
Net earnings $ 250 194
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Provision for loan losses 9 9
Depreciation 45 37
Amortization of premium on deposits assumed 15 15
FHLB stock dividends - (15)
Amortization of loan fees (5) (9)
Accretion of discounts and amortization of premiums on
investment and mortgage-backed securities, net (19) (4)
Gain on sales of loans, net - 2
Proceeds from sales of loans - 92
Origination of loans for sale - (94)
Change in accrued interest receivable, prepaids and other assets (60) (176)
Change in accrued interest payable and other liabilities 662 839
Amortization of RSP shares and allocation of ESOP shares 66 -
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Net cash provided by operating activities 963 890
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Cash flows from investing activities:
Increase (decrease) in loans, net (678) 635
Loans purchased (6,039) (563)
Maturities of investment securities held-to-maturity 13 10
Paydowns and maturities of mortgage-backed securities available-for-sale 472 3,308
Paydowns and maturities of mortgage-backed securities held-to-maturity 1,979 2,915
Purchases of investment securities held-to-maturity - (1,490)
Purchases of mortgage-backed securities available-for-sale (47) (1,496)
Purchases of mortgage-backed securities held-to-maturity - (24,192)
Additions of premises and equipment, net (18) (163)
Purchase of FHLB stock (11) (524)
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Net cash used by investing activities $ (4,329) (21,560)
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(Continued)
4
FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIARY
OSAWATOMIE, KANSAS
Consolidated Statements of Cash Flows, Continued
(In thousands)
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2000 1999
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Cash flows from financing activities:
Net increase in deposits $ 760 402
Repayment of borrowings from FHLB - (650)
Increase in borrowings from FHLB 2,000 20,000
Purchases of stock for the Treasury and for the RSP - (660)
Dividends paid (67) -
Net decrease in advances from borrowers for taxes and insurance 209 151
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Net cash provided by financing activities 2,902 19,243
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Net (decrease) in cash and cash equivalents (464) (1,427)
Cash and cash equivalents at beginning of period 4,090 8,143
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Cash and cash equivalents at end of period $ 3,626 6,716
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See accompanying notes to unaudited consolidated financial statements.
5
FIRST KANSAS FINANCIAL CORPORATION
OSAWATOMIE, KANSAS
Notes to Unaudited Consolidated Financial Statements
March 31,2000 and 1999
(1) Basis of presentation
The accompanying consolidated financial statements have been prepared in
accordance with the instructions for Form 10-QSB. The consolidated
financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report on Form
10-KSB for fiscal year ended December 31, 1999.
The consolidated financial statements include the accounts of First
Kansas Financial Corporation and its wholly-owned subsidiary, First
Kansas Federal Savings Bank (the "Bank" and, collectively, the
"Company"). Intercompany balances and transactions have been eliminated.
The December 31,1999 consolidated balance sheet has been derived from
the audited consolidated financial statements as of that date. In the
opinion of management, all adjustments, including normal recurring
accruals, considered necessary for a fair presentation of financial
statements have been reflected herein. The results of the interim period
ended March 31, 2000 are not necessarily indicative of the results
expected for the year ended December 31, 2000 or for any other period.
(2) Earnings Per Common Share
Basic earnings per share is based upon the weighted average number of
common shares outstanding during the periods presented. Common shares
issued to the employee stock ownership plan are not included in the
computation until they are allocated to plan participants. Basic
earnings per share excludes dilution and is computed by dividing income
available to common stock holders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share
includes the effect of potential dilutive common shares outstanding
during the period.
The following schedule summarizes the number of average shares and
equivalents used in the computation of earnings per share:
For the three months
Ended March 31,
2000 1999
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Basic shares outstanding 1,227,678 1,445,163
Dilutive effect of stock options -0- -0-
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Diluted shares outstanding 1,227,678 1,445,163
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(3) Pending Accounting Pronouncement
The FASB recently issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation." The Interpretation, which is
effective July 1, 2000, clarifies the application of APB Opinion No. 25
"Accounting for Stock Issued to Employees." Management does not expect
that the Interpretation will have a significant impact on the Company's
financial statements.
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FIRST KANSAS FINANCIAL CORPORATION AND SUBSIDIDARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. First Kansas Financial Corporation (the "Company") was formed on
February 9, 1998, to become the holding company for First Kansas Federal Savings
Association (the "Bank") in the conversion of the Bank from a federal mutual
savings association to a federal stock savings bank (the "Conversion"). The
Conversion to a federal stock savings bank was completed on June 25, 1998, and
the Bank now operates as the First Kansas Federal Savings Bank, which accounts
for virtually all of the Company's business.
The Company's results of operations depend primarily on net interest income,
which is the difference between interest income from interest-earning assets and
interest expense from interest-bearing liabilities. The Company's operations are
also affected by noninterest income, such as service charges, loan fees and
gains and losses from the sale of newly originated loans. The Company's
principal operating expenses, aside from interest expense, consist of
compensation and employee benefits, occupancy costs, provisions for loan losses
and general and administration expenses.
Net earnings for the first three months of 2000 increased $56,000, or 28.9%, as
compared to the same period in 1999. Net interest income increased $102,000 for
the first three months of 2000 compared to the same period in 1999 primarily due
to the arbitrage transactions, executed in April and September 1999, as well as
growth in the loan portfolio. The arbitrage transactions consisted of purchasing
certain mortgage-backed securities aggregating approximately $18.0 million,
using funds borrowed from the FHLB under long-term advances of a similar amount.
An increase in deposit account fee-generating activity was reflected in the
increase in noninterest income for the two periods involved, while compensation
expense was the key component for the increase in noninterest expense.
Interest Income. Interest income increased $406,000, or 20.8%, to $2.4 million
for the first quarter of 2000. This increase resulted from combined arbitrage
transactions of approximately $18.0 million completed in April and September
1999, as well as a $13.5 million increase in the loan portfolio from the end of
the first quarter 1999 to the end of the first quarter 2000. Paydowns on other
interest earning assets partially offset the increase in income.
Interest Expense. Interest expense increased $304,000, or 27.8%, to $1.4 million
during the first quarter of 2000. Interest expense on FHLB advances increased
substantially as such instruments were used to fund the Company's arbitrage
transactions and the FHLB line of credit was activated to fund growth in
mortgage loan balances. Interest expense on deposits decreased as a result of a
decrease in deposits and a slight decrease in interest rates for the periods
involved.
Provision for Loan Losses. The provision for loan losses was $9,000 for the
first three months of 2000, identical to the same period in 1999. The loan loss
reserve at March 31, 2000, was $249,000 or .46% of total loans receivable,
slightly less than the reserve percentage of .50% at December 31, 1999.
Noninterest income. Noninterest income increased $24,000, or 12.2%, to $220,000
for the first three months of 2000. This increase was the result of the combined
increases of deposit account fees and other miscellaneous fees received for the
period ended March 31, 2000.
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Noninterest expense. Noninterest expense increased $45,000, or 6.2%, to $768,000
for the first quarter of 2000. The increase resulted from an increase in
compensation expense partially offset by decreases in FDIC premiums and data
processing costs.
Income Tax Expense. Income tax expense decreased slightly in first quarter 2000
compared to first quarter 1999 with effective tax rates of 38.1% and 39.9%
respectively.
Asset Quality & Distribution. The Company's assets grew $3.8 million from $142.5
million at December 31, 1999 to $146.3 million at March 31, 2000 as a result of
the Company's efforts to expand its loan portfolio. The Company's primary
ongoing sources of funds are deposits, FHLB advances and proceeds from principal
and interest payments on loans and mortgage backed securities. While maturities
and scheduled amortization of loans are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.
The primary investing activity of the Company for the first quarter of 2000 was
the purchase of mortgage loans for its portfolio. The Company utilizes several
mortgage outlets and invests in 1-4 family loans. The Company plans to continue
this activity for the foreseeable future due to Company's inability to generate
sufficient loans in its market areas. During the first three months of 2000,
gross loan purchases and mortgage orginations totaled $8.7 million compared to
$2.3 million for the same period of 1999. Mortgage loan purchases were $6.0
million during the first quarter of 2000. Gross consumer and commercial loans
originated were $670,000 for the first quarter of 2000 compared to $744,000
during the first three months of 1999.
Liability distribution Deposits increased $760,000 from December 31, 1999 to
March 31, 2000. The Company also increased its FHLB advances by $2.0 million
during the quarter ended March 31, 2000 by accessing its existing line of
credit. The advances were used to fund purchases of mortgage loans.
Liquidity. The Company's most liquid assets are cash equivalents and short-term
government agency investments. It has also invested in liquidity qualifying
mortgage-backed securities. The Company's liquidity as of March 31, 2000 was
$46.0 million, or 49.51%.
Capital. At March 31, 2000, the Bank had a Tier 1 capital ratio of 9.58% and a
risk based capital ratio of 31.03%. As shown by the following table, the Bank's
capital exceeded the minimum capital requirement: (Dollars in thousands)
March 31, 2000 December 31, 1999
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Amount Percent Required Amount Percent
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Tier I Capital $13,990 9.58% 4.00% $13,668 9.61%
Risk Based Capital 14,229 31.03% 8.00% 13,898 33.21%
Savings associations and their holding companies are generally expected to
operate at or above the minimum capital requirements and the above ratios are
well in excess of regulatory minimums.
provide services to the Company.
8
Cautionary Statement. This Quarterly Report on Form 10-QSB contains or may
contain forward-looking statements with respect to the financial condition,
results of operations, plans, objectives, future performance and business of the
Company, including statements preceded by, followed by or that include the
words, "believes", "expects", "anticipates" or similar expressions. These
forward-looking statements involve certain risks and uncertainties and may
relate to future operating results of the company. Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, among others, the following possibilities: (1) a significant
increase in competitive pressures among depository and other financial
institutions; (2) changes in the interest rate environment resulting in reduced
margins; (3) general economic or business conditions, either nationally or in
the states in which the Company will be doing business, being less favorable
than expected, resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit; (4) legislative or regulatory changes
adversely affecting the businesses in which the Company will be engaged; (5)
changes in the securities markets; and (6) changes in the banking industry
including the effects of consolidation resulting from possible mergers of
financial institutions.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
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From time to time, the Company and its subsidiaries may be a
party to various legal proceedings incident to its or their
business. At March 31, 2000, there were no legal proceedings
to which the Company or any subsidiary was a party, or to
which any of their property was subject, which were expected
by management to result in a material loss.
Item 2. Changes in Securities and Use of Proceeds
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Not Applicable
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
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(a) (27) Financial Data Schedule (electronic filing only)
(b) There were no current reports on Form 8-K filed during the
quarter ended March 31, 2000.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST KANSAS FINANCIAL CORPORATION
Date: May 12, 2000 By: /s/ Larry V. Bailey
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Larry V. Bailey, President
Date: May 12, 2000 By: /s/ James J. Casaert
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James J. Casaert
Vice President and Treasurer
(Principal Accounting Officer)
10