GLDB Gold Banc (MM)

Gold Banc Corporation, Inc. (Nasdaq: GLDB), a $4.1 billion financial services company offering banking and asset management services, today announced earnings for the quarter ended June 30, 2005, of $25.3 million or $0.66 per share. This is an increase of $25.0 million over the second quarter 2004 earnings of $0.3 million or $0.01 per share. Year-to-date earnings were $33.4 million or $0.86 per share compared to $13.6 million or $0.35 per share in the prior year. This is an increase in earnings of 145.2% over the prior year that included a $20.6 million gain on branch sales as well as qui tam litigation settlement expenses of $14.0 million. Positively impacting net earnings for the quarter was a $34.4 million gain ($22.1 net of tax) on the sale of five Oklahoma branches located in Oklahoma City, El Reno, Kingfisher, Hennessey, and Enid. This previously announced sale was completed June 17, 2005, pursuant to an agreement reached in January with Olney Bancshares of Texas, Inc. The combined loans and deposits of the five branches sold totaled approximately $347.9 million and $332.6 million, respectively. Additionally, the net value of premises and equipment sold was approximately $4.3 million. Gold Bank will continue to operate its three banking locations in Tulsa. As a result of the sale, Gold Banc adds significant new equity and positions its franchise with nearly 75% of deposits in counties with superior demographics to the United States as a whole. Also in conjunction with the branch sale, an allocation was made of a portion of the Company's goodwill and allowance for loan losses associated with the Oklahoma branches. "We are pleased with the continued robust loan growth for the quarter as well as our continued reduction in wholesale funding while increasing core deposits. We remain asset sensitive and improved our net interest margin for the quarter to 3.18% compared to 2.80% for the same quarter last year and 2.99% for the prior quarter. As planned, we increased our allowance for loan losses to 1.14% of loans compared to 1.03% at year-end and 1.01% last quarter end," said Mick Aslin, Chief Executive Officer. "Non-performing loans have increased during the past two quarters as a result of three loans, in which we feel well secured and are optimistic will be paid off or returned to a performing status. Net charge-offs are down compared to the comparable quarter and six-month period last year. Economic growth continues to look good in our markets and we expect continued loan growth, although at a slightly slower pace than the first half of this year. We are disappointed in the continued high level of accounting and legal expenses and will be renewing our focus on reducing these areas of expense. We are also disappointed in our service charge income and will continue our focus on improving this area," Aslin continued. In conjunction with the sale, Gold Bank announced the formation of the Gold Bank Foundation Fund with the Greater Kansas City Community Foundation funded with a donation of $1.5 million during the quarter. This fund will provide a vehicle for future charitable contributions and contribute to tax savings as an alternative to charges to earnings. Gold Banc also completed the sale of $101.3 million of investment securities during the second quarter with a net loss of $2.0 million. With the average costs of short-term borrowing approaching the yield on these bonds this strategy serves to de-leverage the balance sheet, reduce the Company's reliance on Federal Home Loan Bank ("FHLB") borrowings and improve margin. These available-for-sale securities were not required for pledging or other operating needs, and were sold in June at recent market highs. Net Interest Income For second quarter 2005, net interest income after provision for loan loss was $27.2 million, compared to $26.0 million for second quarter 2004 and $29.0 million for first quarter 2005. The increase over the prior year is attributed to a significant increase in interest earned on loans due to principal growth and increased rates offset by a decline on investment earnings due to declines in the principal balances from pay-downs, sales and maturities of securities. Borrowing costs also rose over last year due to rising interest rates. In addition, there was an increased provision for loan losses due to significant loan growth as well as changes in classifications of loans. Changes in net interest income from the first quarter of 2005 are primarily due to increased provision expense. The tax equivalent net interest margin for second quarter 2005 increased to 3.18% from 2.80% for second quarter 2004. Higher loan rates have continued to outpace deposit rate growth since the first quarter. Non-Interest Income Non-interest income totaled $38.7 million in second quarter 2005 compared to $13.4 million for second quarter 2004. The largest drivers of the change are gains on branch sales in 2005 and 2004 of $34.4 million and $3.6 million, respectively. As previously mentioned, a $1.9 million loss was realized on the sale of securities net of gains in the current quarter. Additionally, Gold Banc recognized a gain on the sale of its credit card portfolio of $1.2 million in second quarter 2004. Service fees are also down from a year ago due to restructuring of NSF and account analysis charges. This restructuring increased fees for analysis but negatively impacted fees overall. Non-interest income is down slightly from first quarter 2005 due to the items mentioned above as well as a decline in investment trading fees and commissions. Non-Interest Expense Non-interest expense for the quarter ended June 30, 2005, was $25.5 million, compared to $37.9 million for second quarter 2004, which contained $14.0 million of expenses associated with the settlement of qui tam litigation. Salaries and employee benefits were up slightly due to increases in health insurance costs offset by reductions in wages due to branch sales and reduced commissions from diminished trading activity. The current quarter showed an increase over the prior quarter ended March 31, 2005, with non-interest expense of $24.3 million due to increases in professional services costs including accounting and legal fees as well as the $1.5 million contribution to the Gold Bank Foundation Fund. Balance Sheet As of June 30, 2005, Gold Banc total assets were $4.095 billion including $2.908 billion total loans net of allowance, $781.1 million investment securities, and $2.913 billion total deposits. As of December 31, 2004, Gold Banc's total assets were $4.330 billion, total investment securities were $916.0 million, total loans net of allowance (including loans held for sale) were $3.067 billion, and total deposits (including deposits held for sale) were $3.137 billion. Loans and deposits held for sale at December 31, 2004, were identified for the then-pending transaction to sell five Oklahoma branches. Net loan growth continued with $122.8 million or 4.4% added in second quarter 2005, excluding the branch sales. Along with the $101.9 million added in first quarter 2005, net loans have grown 8.3% from $2.717 billion at December 31, 2004. Excluding branch sales, deposits grew $45.4 million or 1.6% during second quarter 2005 in addition to the growth of $81.3 million or 2.9% in the first quarter, despite a reduction in brokered certificates of deposit. Brokered certificates of deposit totaled $406.8 million as of June 30, 2005, a $129.8 million reduction from $536.6 million at the end of 2004. FHLB advances were $486.8 million at June 30, 2005, compared to $571.9 million at December 31, 2004, an $85.1 million reduction. This combined reduction of $214.9 million in brokered deposits and FHLB borrowings reflects Gold Banc's commitment to move away from wholesale funding and to build core deposits. The $381.8 million available-for-sale securities portfolio is comprised of $219.8 million in obligations of U.S. government-sponsored entities, $112.1 million of mortgage-backed securities, $39.7 million of stock and other investments, $9.5 million in municipal securities, and $0.7 million in U.S. Treasury securities. The average maturity is approximately 4.1 years, or 3.0 years excluding trust preferred securities. Held-to-maturity securities total $396.5, and are comprised of $252.1 million in obligations of U.S. government-sponsored entities, $83.2 million of mortgage-backed securities, $44.5 million of trust-preferred securities, and $16.7 million of municipal securities. Held-to-maturity securities provide a degree of desirable insulation to our tangible equity level in a rising-interest-rate environment. Credit Quality Non-performing loans totaled $25.8 million or 0.88% of total loans at June 30, 2005, compared to $15.7 million or 0.51% of total loans on December 31, 2004. Other real estate owned remained steady, increasing $0.1 million from December 31, 2004, to $3.8 million as of June 30, 2005. Non-performing assets as a percentage of total assets increased to 0.72% on June 30, 2005, compared to 0.45% on December 31, 2004, due to an increase in non-accrual loans. The provision for loan losses for the quarter was $4.0 million compared to $1.4 million in second quarter 2004. On a year-to-date basis, the provision for the loan losses in 2005 was $5.3 million compared to $4.3 million in 2004. The 2005 increase of $1.0 million is due primarily to specific reserves for individual credits as well as changes in classifications of loans to categories that merit greater allowances, reflecting our view of current economic trends and risk. The allowance for loan losses was $33.6 million on June 30, 2005, compared to $32.1 million on December 31, 2004. Capital The capital levels of Gold Banc continue to be well in excess of the well-capitalized levels established by regulatory agencies. At June 30, 2005, the company's total capital ratio was 11.97%, its tier-one ratio was 10.28%, and its leverage ratio was 8.16%. Capital ratios have grown from the previous year and the previous quarter due to the Oklahoma branch sale, offset somewhat by stock repurchases as discussed below. Book value per share was $7.20 and tangible book value was $6.31 on June 30, 2005, compared to $6.73 and $5.84 respectively on December 31, 2004. Gold's tangible equity to asset ratio at the end of second quarter 2005 was 6.80%, increased from 6.24% at December 31, 2004. This ratio has improved since first quarter due to the completion of Gold's sale of five Oklahoma branches. Share Repurchase On April 18, 2005, the board of directors authorized an additional expenditure of up to $20.0 million for the repurchase of its outstanding common stock from time to time during the next twelve months in open market purchases and private transactions subject to market conditions, and as permitted by securities laws and other legal requirements. This authorization is in addition to the expenditure of up to $12.0 million authorized on October 21, 2004. During the quarter, 960,225 shares of stock were repurchased at a total cost of $13.3 million (average cost per share of $13.87). This is in addition to the 766,114 shares of stock repurchased in first quarter 2005. On a year-to-date basis, 1,726,339 shares have been repurchased at a total cost of $24.3 million (average cost per share of $14.08). Dividend The Gold Banc board of directors also declared a cash dividend of $0.05 per common share on July 13, 2005. The dividend will be payable August 16, 2005, to shareholders of record as of August 9, 2005. Gold Banc has 38,682,766 shares outstanding as of June 30, 2005. This marks the second quarter of increased dividends paid, which have been $0.03 per common share since first quarter 2003 until the dividend declared on April 18, 2005. Conference Call A conference call has been scheduled for July 14, 2005, at 7:30 a.m. (CDT) to discuss earnings and results of operations for the second quarter, and strategic direction and goals. A transcript of the call will be available on www.goldbanc.com on July 15, 2005. To call in, please call: 303-262-2052 Toll-Free: 800-240-2430 The operator will ask which category each participant belongs in as follows: 1) Gold Banc Shareholders 2) Financial Analyst/Investment Managers 3) Associates 4) Media About Gold Banc Gold Banc is a $4.1 billion financial holding company headquartered in Leawood, Kansas, a part of the Kansas City metropolitan area. Gold Banc provides banking, and asset management services in Florida, Kansas, Missouri and Oklahoma through 33 banking locations. Gold Banc is traded on the NASDAQ under the symbol GLDB. Cautionary Statements Regarding Forward-Looking Information The Company does not intend to update the above information. The above information included herein contains certain "forward-looking statements" with respect to the financial condition, results of operations, plans objectives, future financial performance and business of our company and its subsidiaries, including, without limitation: -- statements that are not historical in nature; -- statements preceded by, followed by or that include the words "believes," "expects," "may," "will," "should," "could," "anticipates," "estimates," "intends" or similar expressions; and -- statements regarding the timing of the closing of the branch sales. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors: -- inability to obtain waivers of defaults under our credit facilities or find alternative financing; -- transition and strategies of new management; -- changes in interest margins on loans; -- changes in allowance for loan losses; -- changes in the interest rate environment; -- competitive pressures among financial services companies may increase significantly; -- general economic conditions, either nationally or in our markets, may be less favorable than expected; -- legislative or regulatory changes may adversely affect the business in which our Company and its subsidiaries are engaged; -- technological changes may be more difficult or expensive than anticipated; -- hedging activities may be less effective than anticipated; and -- changes may occur in the securities markets. We have described under the caption "Factors That May Affect Future Results of Operation, Financial Condition or Business" in Exhibit 99.1 to the Company's Annual Report on Form 10-K/A for 2004 additional factors that could cause actual results to be materially different from those described in the forward-looking statements. Other factors that we have not identified under that caption could also have this effect. You are cautioned not to put undue reliance on any forward-looking statement which speaks only as of the date it was made. -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) (unaudited) June 30, Dec. 31, 2005 2004 ----------- ----------- Assets Cash and due from banks $68,503 $65,011 Federal funds sold and interest-bearing deposits 99,446 43,286 ----------- ----------- Total cash and cash equivalents 167,949 108,297 ----------- ----------- Investment securities: Available-for-sale, at fair value 381,757 498,763 Held-to-maturity (fair value of $391,191 and $411,232 as of June 30, 2005, and December 31, 2004, respectively) 396,541 411,802 Trading, at fair value 2,845 5,456 ----------- ----------- Total investment securities 781,143 916,021 ----------- ----------- Loans 2,941,417 2,716,700 Allowance for loan losses (33,552) (32,108) ----------------------- 2,907,865 2,684,592 ----------------------- Mortgage loans held-for-sale, net 8,068 5,724 Premises and equipment, net 53,462 51,613 Goodwill 29,252 30,484 Other intangible assets, net 4,960 5,336 Accrued interest and other assets 57,036 57,807 Cash surrender value of bank-owned life insurance, net of surrender charges 84,857 82,992 Assets held for sale - 387,510 ----------- ----------- Total assets $4,094,592 $4,330,376 =========== =========== *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) (unaudited) June 30, Dec. 31, 2005 2004 ----------- ----------- Liabilities and Stockholders' Equity Liabilities: Deposits $2,913,417 $2,786,774 Securities sold under agreements to repurchase 131,450 112,205 Federal funds purchased and other short-term borrowings 15,960 2,463 Subordinated debt 116,599 116,599 Long-term borrowings 593,667 661,534 Accrued interest and other liabilities 45,171 30,231 Liabilities held for sale - 350,186 ----------- ----------- Total liabilities 3,816,264 4,059,992 ----------- ----------- Stockholders' equity: Preferred stock, no par value; 50,000,000 shares authorized, no shares issued - - Common stock, $1.00 par value; 50,000,000 shares authorized 45,233,680 and 45,011,227 shares issued at June 30, 2005, and December 31, 2004 45,234 45,011 Additional paid-in capital 132,935 129,381 Retained earnings 176,557 146,360 Accumulated other comprehensive loss, net (5,910) (6,007) Unearned compensation (11,888) (10,072) ----------- ----------- 336,928 304,673 Less treasury stock, 6,550,914 shares and 4,824,575 shares at June 30, 2005, and December 31, 2004 (58,600) (34,289) ----------- ----------- Total stockholders' equity 278,328 270,384 ----------- ----------- Total liabilities and stockholders' equity $4,094,592 $4,330,376 =========== =========== *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings For the Three Months ended (In thousands, except per share data) (unaudited) June 30, June 30, 2005 2004 --------- --------- Interest Income: Loans, including fees $51,406 $38,631 Investment securities 7,478 9,758 Other 746 463 --------- --------- Total interest income 59,630 48,852 --------- --------- Interest Expense: Deposits 19,206 14,208 Borrowings and other 9,151 7,166 --------- --------- Total interest expense 28,357 21,374 --------- --------- Net interest income 31,273 27,478 Provision for loan losses 4,033 1,447 --------- --------- Net interest income after provision for loan losses 27,240 26,031 --------- --------- Other income: Service fees 3,205 4,543 Investment trading fees and commissions 251 726 Net gains on sale of mortgage loans 379 419 Net gains (losses) on sale of securites (1,883) 36 Gain on sale of branch facilities 34,420 3,621 Bank-owned life insurance 943 928 Trust fees 1,224 1,103 Gain on sale of credit card portfolio - 1,156 Other 162 846 --------- --------- Total other income 38,701 13,378 --------- --------- Other expense: Salaries and employee benefits 12,968 12,640 Data processing 1,676 1,916 Net occupancy expense 1,774 1,733 Depreciation expense 1,861 1,610 Professional services 1,683 1,833 Expense for the settlement of qui tam litigation, net - 14,000 Other 5,575 4,151 --------- --------- Total other expense 25,537 37,883 --------- --------- Earnings from continuing operations before income taxes 40,404 1,526 Income tax expense 15,139 1,217 --------- --------- Net earnings $25,265 $309 ========= ========= Net earnings per share - basic $0.67 $0.01 --------- --------- Net earnings per share - diluted $0.66 $0.01 ========= ========= *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Consolidated Statements of Earnings For the Six Months ended (In thousands, except per share data) (unaudited) June 30, June 30, 2005 2004 --------- -------- Interest Income: Loans, including fees $99,725 $79,226 Investment securities 15,384 19,090 Other 1,532 1,052 --------- -------- Total interest income 116,641 99,368 --------- -------- Interest Expense: Deposits 36,938 28,731 Borrowings and other 18,130 14,619 --------- -------- Total interest expense 55,068 43,350 --------- -------- Net interest income 61,573 56,018 Provision for loan losses 5,285 4,311 --------- -------- Net interest income after provision for loan losses 56,288 51,707 --------- -------- Other income: Service fees 6,417 8,448 Investment trading fees and commissions 1,045 1,636 Net gains on sale of mortgage loans 587 806 Net gains (losses) on sale of securites (2,064) 137 Gain on sale of branch facilities 34,420 20,574 Gain on credit card portfolio - 1,156 Bank-owned life insurance 1,877 1,958 Trust fees 2,506 2,242 Other 351 1,168 --------- -------- Total other income 45,139 38,125 --------- -------- Other expense: Salaries and employee benefits 25,876 26,592 Data processing 3,564 4,015 Net occupancy expense 3,503 3,495 Depreciation expense 3,632 3,177 Professional services 2,889 3,811 Expense for the settlement of qui tam litigation, net - 14,000 Other 10,397 11,621 --------- -------- Total other expense 49,861 66,711 --------- -------- Earnings from continuing operations before income taxes 51,566 23,121 Income tax expense 18,178 8,955 --------- -------- Net earnings from continuing operations 33,388 14,166 Net loss from discontinued operations, net of tax - (551) --------- -------- Net earnings $33,388 $13,615 ========= ======== Net earnings from continuing operations per share - basic $0.87 $0.36 Net loss from discontinued operations per share - basic $ - $(0.01) --------- -------- Net earnings per share - basic $0.87 $0.35 ========= ======== Net earnings from continuing operations per share - diluted $0.86 $0.36 Net loss from discontinued operations per share - diluted $ - $(0.01) --------- -------- Net earnings per share - diluted $0.86 $0.35 ========= ======== *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Key Ratios June 30, 2005 and Dec. 31, 2004 (In thousands, except per share data and percentages) June 30, Dec. 31, 2005 2004 ------------ ------------ Balance Sheet Ratios: Total shares outstanding 38,683 40,187 Book value per share $ 7.20 $ 6.73 Tangible book value per share $ 6.31 $ 5.84 Leverage ratio 8.16% 7.75% Tier 1 risk-based capital ratio 10.28% 9.32% Total risk-based capital ratio 11.97% 11.08% Non-performing loans (NPL) $ 25,846 $ 15,693 NPL / Loans 0.88% 0.51% Allowance / NPL 129.81% 204.60% Allowance / Loans 1.14% 1.03% Non-performing assets (NPA) $ 29,648 $ 19,567 NPA / Assets 0.72% 0.45% *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Key Ratios - Three Months ended (In thousands, except per share data and percentages) June 30, June 30, 2005 2004 ---------- ---------- Income Statement Ratios: Weighted Average shares outstanding 38,434 39,190 Net income per share - basic $ 0.67 $ 0.01 Net income per share - diluted $ 0.66 $ 0.01 Net income per share - continuing operations - basic $ 0.67 $ 0.01 Net income per share - continuing operations - diluted $ 0.66 $ 0.01 Return on average assets (annualized) 2.33% 0.03% Return on average equity (annualized) 38.55% 0.46% Net interest margin (tax equivalent) 3.18% 2.80% Net interest margin 3.18% 2.76% Non-interest income / Net interest income 123.75% 45.24% Efficiency ratio 71.95% 71.31% Net loans charged off $ 468 $ 1,580 Net charge offs to loans (annualized) 0.06% 0.22% Average loans (in thousands, including loans held for sale) $3,177,972 $2,873,009 Average assets (in thousands) $4,346,981 $4,284,790 *T -0- *T GOLD BANC CORPORATION, INC. AND SUBSIDIARIES Key Ratios - Six Months ended (In thousands, except per share data and percentages) June 30, June 30, 2005 2004 ----------- ----------- Income Statement Ratios: Weighted Average shares outstanding 38,814 39,022 Net income per share - basic $ 0.87 $ 0.35 Net income per share - diluted $ 0.86 $ 0.35 Net income per share - continuing operations - basic $ 0.87 $ 0.36 Net income per share - continuing operations - diluted $ 0.86 $ 0.36 Net loss per share - discontinued operations - basic $ - $ (0.01) Net loss per share - discontinued operations - diluted $ - $ (0.01) Return on average assets (annualized) 1.54% 0.64% Return on average equity (annualized) 25.32% 10.28% Net interest margin (tax equivalent) 3.08% 2.87% Net interest margin 3.08% 2.82% Non-interest income / Net interest income 73.31% 63.90% Efficiency ratio 68.92% 76.88% Net loans charged off $ 1,555 $ 2,336 Net charge offs to loans (annualized) 0.11% 0.16% Average loans (in thousands, including loans held for sale) $3,164,340 $2,903,238 Average assets (in thousands) $4,370,881 $4,271,415 *T