**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q/A**

 

**AmendmentNo. 1**

** **

| **(Mark  One)**                      |
|--------------------------------------|
|                                 |
| **ý**                           |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                 |   | **For  the quarterly period ended March 31, 2002** |
| **o**                                |   | **TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE  ACT** |
|                                 |   | **For  the transition period from                    to                  ** |
| **Commission  File Number: 0-28936** |

 

**GOLD BANC CORPORATION, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **Kansas**                                                        |   | **48-1008593**                          |
|-------------------------------------------------------------------|--------|-----------------------------------------|
| (State or other  jurisdiction   of incorporation or organization) |   | (I.R.S. Employer    Identification No.) |
|                                                              |   |                                    |
| **11301 Nall Avenue, Leawood, Kansas**                            |   | **66211**                               |
| (Address of  principal executive office)                          |   | (Zip code)                              |
|                                                              |   |                                    |
| **(913) 451-8050**                                                |
| (Registrant’s  telephone number, including area code)        |

 

Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for past 90 days.Yes o  No o

 

Indicate the number of shares outstanding of each ofthe issuer’s classes of common stock, as of the latest practical date.

 

| **Class**                      |   | **Outstanding at April 30, 2002** |
|--------------------------------|--------|-----------------------------------|
|                           |   |                              |
| Common Stock,  $1.00 par value |   | 33,986,992                        |

 

 

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**GOLDBANC CORPORATION, INC.**

**INDEXTO 10-Q FOR THE QUARTERLY**

**PERIODENDED MARCH 31, 2002**

 
|          |                                                                                                                                             | **PAGE** |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART I:**   | **FINANCIAL INFORMATION**                                                                                                                        |     |
|          |                                                                                                                                             |     |
| ITEM  1:      | FINANCIAL STATEMENTS                                                                                                                             |     |
|          |                                                                                                                                             |     |
|          | Consolidated Balance  Sheets at March 31, 2002 and December 31, 2001 (unaudited)                                                                 | 3        |
|          | Consolidated  Statements of Earnings-Three months ended March 31, 2002 and March 31, 2001  (unaudited)                                           | 4        |
|          | Consolidated  Statements of Stockholder’s Equity and Comprehensive Income-Three months  ended March 31, 2002 and March 31, 2001 (unaudited) | 5        |
|          | Consolidated  Statements of Cash Flows-Three months ended March 31, 2002 and March 31, 2001  (unaudited)                                         | 6        |
|          | Notes to  Consolidated Financial Statements                                                                                                      | 7        |
|          |                                                                                                                                             |     |
| ITEM  2:      | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                      | 15       |
|          |                                                                                                                                             |     |
| **PART  II:** | **OTHER  INFORMATION**                                                                                                                           |     |
|          |                                                                                                                                             |     |
| ITEM 6:       | EXHIBITS AND REPORTS ON FORM 8-K                                                                                                                 | 25       |
|          | SIGNATURES                                                                                                                                       | 26       |

 

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**EXPLANATORYNOTE**

** **

We are filing this Amendment No. 1 to ourQuarterly Report on Form 10-Q/A for the quarter ended March 31, 2002solely for the purpose of amending Items 1 and 2 of Part I andItem 6 of Part II of that Quarterly Report due to the recentdevelopments described below.

 

On March 14, 2003, we issued a press release andfiled a Current Report on Form 8-K announcing that Malcolm M. Aslin wouldreplace Michael W. Gullion as our Chief Executive Officer and as President andChief Executive Officer of our subsidiary, Gold Bank-Kansas, effectiveMarch 17, 2003.  Mr. Gullion wasreplaced due to improper conduct discovered during an internal investigationthat was conducted in close cooperation with bank regulatory authorities aspart of their regularly scheduled examination of Gold Bank-Kansas.

 

Our Audit Committee led an internal investigation withassistance from its independent legal counsel, forensic accountants and ourinternal audit department, which was outsourced in March 2003 toDeloitte & Touche.  The scopeof the internal investigation was extensive and included transactions,accounts, assets, loans and other matters involving Mr. Gullion, his familymembers or related entities that were identified as possibly suspicious duringthe investigation or otherwise by Gold Bank-Kansas personnel or regulatoryofficials.  The internal investigationis complete.  A report on the results ofthe internal investigation was issued on March 31, 2003 and was supplemented onApril 9, 2003.  The internalinvestigation generally covered the period commencing January 1, 1998through April 12, 2003.  However,the underlying documentation for some transactions in 1998 and early 1999 wasincomplete.  See “Item1.—Business—Summary of Recent Events and Restatement of Financial Statements”and “Item 13 — Certain Relationships and Related Transactions” in our AnnualReport on Form 10-K/A for 2002 (the “2002 Annual Report”) for additional informationrelated to the investigation.

 

As a result of the investigation, we determined thatit was necessary to restate our financial statements for the years endedDecember 31, 2001 and 2000.  Thefinancial statements reflecting this restatement were included in our 2002Annual Report.  See “Item 6 — SelectedConsolidated Financial Data” and the restatement of our consolidated financialstatements and the notes thereto contained in “Item 8 — Financial Statements andSupplementary Data”, including Note 2 “Restatement and Impact on Earnings” andNote 23 “Summary of Operating Results by Quarter — Unaudited” in the 2002Annual Report.  Based on discussionswith the staff of the SEC, we are also restating our quarterly financialstatements for 2002 and 2001.  Thisreport includes the restatement of the financial statements for the firstquarter of 2002 and 2001.  This reportincludes all of the adjustments relating to the restatement for such priorperiods including those required by Staff Accounting Bulletin No. 99 (“SAB99”).  In addition, this report alsoincludes adjustments relating to the reclassification of expenses related toMr. Gullion’s misconduct and other minor adjustments. See Note 2 to theconsolidated financial statements included elsewhere in this report. Except asdescribed in this paragraph, we are not modifying our previous disclosures(which were made based upon the information that was then available) to addressor account for events that have occurred subsequent to the date our original Form10-Q was filed.  In the near future, wewill file Form 10-Q/As with the SEC for the second and third quarters of 2002containing restated financial statements for the second and third quarters of2002 and 2001.

 

2

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**PART I**

**FINANCIALINFORMATION**

**GOLDBANC CORPORATION, INC. AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

**(Inthousands)**

**(unaudited)**

 
|                                                                                                                                         |   | **Mar. 31,  2002** |       | **Dec. 31,  2001** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------------------|------------|
|                                                                                                                                         |   | **(Restated)**     |       | **(Restated)**     |       |
| **Assets**                                                                                                                                   |   |               | ** ** |               | ** ** |
| Cash  and due from banks                                                                                                                     |   | $                  | 66,784     |               | $          | 73,675 |   |
| Federal  funds sold and interest-bearing deposits                                                                                            |   | 56,393             |       | 98                 |       |
| Total  cash and cash equivalents                                                                                                             |   | 123,177            |       | 73,773             |       |
| Investment  securities:                                                                                                                      |   |               |       |               |       |
| Available-for-sale                                                                                                                           |   | 546,554            |       | 567,746            |       |
| Held-to-maturity                                                                                                                             |   | 23,466             |       | 14,364             |       |
| Trading                                                                                                                                      |   | 2,772              |       | 6,668              |       |
| Total  investment securities                                                                                                                 |   | 572,792            |       | 588,778            |       |
| Mortgage  loans held for sale, net                                                                                                           |   | 39,500             |       | 11,335             |       |
| Loans,  net                                                                                                                                  |   | 2,277,301          |       | 2,124,973          |       |
| Premises  and equipment, net                                                                                                                 |   | 67,542             |       | 57,738             |       |
| Goodwill,  net                                                                                                                               |   | 35,184             |       | 35,184             |       |
| Intangible  assets                                                                                                                           |   | 3,957              |       | 3,984              |       |
| Cash  surrender value of bank owned life insurance                                                                                           |   | 54,141             |       | 53,038             |       |
| Accrued  interest and other assets                                                                                                           |   | 59,923             |       | 66,152             |       |
| Total  assets                                                                                                                                |   | $                  | 3,233,517  |               | $          | 3,014,955 |   |
| **Liabilities and Stockholders’ Equity**                                                                                                |   |               |       |               |       |
| Liabilities:                                                                                                                                 |   |               |       |               |       |
| Deposits                                                                                                                                     |   | $                  | 2,380,331  |               | $          | 2,163,866 |   |
| Securities  sold under agreements to repurchase                                                                                              |   | 104,498            |       | 103,672            |       |
| Federal  funds purchased and other short-term borrowings                                                                                     |   | 1,083              |       | 30,908             |       |
| Guaranteed  preferred beneficial interests in Company’s debentures                                                                      |   | 111,749            |       | 111,749            |       |
| Long-term  borrowings                                                                                                                        |   | 447,626            |       | 416,413            |       |
| Accrued  interest and other liabilities                                                                                                      |   | 26,027             |       | 23,807             |       |
| Total  liabilities                                                                                                                           |   | 3,071,314          |       | 2,850,415          |       |
| 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 38,404,002 issued at  March 31, 2002 and 38,352,074 issued at December 31, 2001 |   | 38,404             |       | 38,352             |       |
| Additional  paid-in capital                                                                                                                  |   | 76,640             |       | 76,584             |       |
| Retained  earnings                                                                                                                           |   | 89,273             |       | 83,987             |       |
| Accumulated  other comprehensive income (loss), net                                                                                          |   | (204               | )          | (8                 | )          |
| Unearned  compensation                                                                                                                       |   | (8,790             | )          | (3,440             | )          |
|                                                                                                                                         |   | 195,323            |       | 195,475            |       |
| Less  treasury stock 4,721,510 shares at March 31, 2002 and 4,417,010 shares at  December 31, 2001                                           |   | (33,120            | )          | (30,935            | )          |
| Total  stockholders’ equity                                                                                                             |   | 162,203            |       | 164,540            |       |
| Total  liabilities and stockholders’ equity                                                                                             |   | $                  | 3,233,517  |               | $          | 3,014,955 |   |

 

See accompanying notes toconsolidated financial statements.

 

3

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**GOLDBANC CORPORATION, INC. AND SUBSIDIARIES**

**ConsolidatedStatements of Earnings**

**ForThe Three Months Ended**

**(Inthousands, except per share data)**

**(unaudited)**

** **
|                                                 |   | **Mar. 31,  2002** |   | **Mar. 31,  2001** |   |
|------------------------------------------------------|--------|--------------------|--------|--------------------|--------|
|                                                 |   | **(Restated)**     |   | **(Restated)**     |   |
| Interest  Income:                                    |   |               |   |               |   |
| Loans,  including fees                               |   | 38,866             |   | $                  | 44,144 |   |
| Investment  securities                               |   | 8,337              |   | 7,131              |   |
| Other                                                |   | 595                |   | 1,711              |   |
|                                                 |   | 47,798             |   | 52,986             |   |
| Interest  Expense:                                   |   |               |   |               |   |
| Deposits                                             |   | 15,397             |   | 24,324             |   |
| Borrowings  and other                                |   | 8,441              |   | 6,403              |   |
|                                                 |   | 23,838             |   | 30,727             |   |
| Net  interest income                                 |   | 23,960             |   | 22,259             |   |
| Provision  for loan losses                           |   | 5,035              |   | 2,545              |   |
| Net  interest income after provision for loan losses |   | 18,925             |   | 19,714             |   |
| Other  income:                                       |   |               |   |               |   |
| Service  fees                                        |   | 3,970              |   | 2,595              |   |
| Investment  trading fees and commissions             |   | 1,396              |   | 1,467              |   |
| Net  gains on sale of mortgage loans                 |   | 695                |   | 870                |   |
| Net  securities gains                                |   | 600                |   | 979                |   |
| Information  technology services                     |   | 4,815              |   | 1,393              |   |
| Other                                                |   | 2,354              |   | 2,708              |   |
|                                                 |   | 13,830             |   | 10,012             |   |
|                                                 |   |               |   |               |   |
| Other  expense:                                      |   |               |   |               |   |
| Salaries  and employee benefits                      |   | 11,948             |   | 10,605             |   |
| Net  occupancy expense                               |   | 1,478              |   | 1,464              |   |
| Depreciation  expense                                |   | 1,509              |   | 1,548              |   |
| Goodwill  amortization expense                       |   | —             |   | 552                |   |
| Core  deposit intangible amortization                |   | 125                |   | —             |   |
| Losses  resulting from misapplication of bank funds  |   | 25                 |   | 70                 |   |
| Information  technology services                     |   | 3,171              |   | 795                |   |
| Other                                                |   | 6,512              |   | 5,427              |   |
|                                                 |   | 24,768             |   | 20,461             |   |
| Earnings  before income tax                          |   | 7,987              |   | 9,265              |   |
| Income  tax expense                                  |   | 1,930              |   | 3,202              |   |
| Net  earnings                                        |   | $                  | 6,057  |               | $      | 6,063 |   |
|                                                 |   |               |   |               |   |
| Net  earnings per share-basic and diluted            |   | $                  | 0.18   |               | $      | 0.17 |   |

 

See accompanying notes toconsolidated financial statements

 

4

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**GOLDBANC CORPORATION, INC. AND SUBSIDIARIES**

**ConsolidatedStatements of Stockholders’ Equity and Comprehensive Income**

**Forthe Three Months Ended March 31, 2002 (Restated) and March 31, 2001 (Restated)**

***(Dollars in thousands)***

 
|                                                                  |   | **Preferred  stock** |   | **Common  Stock** |   | **Additional  paid-in   capital** |   | **Retained  earnings** |   | **Accumulated  other   comprehensive  income (loss)** |   | **Unearned  compensation** |   | **Treasury  stock** |    | **Total** |    |
|-----------------------------------------------------------------------|--------|---------------------------|--------|-------------------|--------|---------------------------------------------|--------|-----------------------------|--------|----------------------------------------------------------------------|--------|----------------------------|--------|--------------------------|---------|-----------|---------|
|                                                                  |   |                      |   |              |   |                                        |   |                        |   |                                                                 |   |                       |   |                     |    |      |    |
| Balance at December 31,  2000                                         |   | $                         | — |              | 38,286 |                                        | 76,152 |                        | 63,534 |                                                                 | 836    |                       | (3,802 | )                        | (5,795  | )         | 169,211 |   |
| Net income for the three  months ended March 31, 2001                 |   | —                    |   | —            |   | —                                      |   | 6,063                       |   | —                                                               |   | —                     |   | —                   |    | 6,063     |    |
| Change in unrealized  gain on available-for-sale securities           |   | —                    |   | —            |   | —                                      |   | —                      |   | 519                                                                  |   | —                     |   | —                   |    | 519       |    |
| Total comprehensive income for the three months  ended March 31, 2001 |   | —                    |   | —            |   | —                                      |   | 6,063                       |   | 519                                                                  |   | —                     |   | —                   |    | 6,582     |    |
| Exercise of 36,887 stock options                                      |   | —                    |   | 37                |   | 173                                         |   | —                      |   | —                                                               |   | —                     |   | —                   |    | 210       |    |
| Purchase of 874,000 shares of treasury stock                          |   | —                    |   | —            |   | —                                      |   | —                      |   | —                                                               |   | —                     |   | (5,397                   | )       | (5,397    | )       |
| Decrease in unearned compensation                                     |   | —                    |   | —            |   | —                                      |   | —                      |   | —                                                               |   | —                     |   | —                   |    | —    |    |
| Dividends paid ($0.02 per common share)                               |   | —                    |   | —            |   | —                                      |   | (735                        | )      | —                                                               |   | —                     |   | —                   |    | (735      | )       |
| Balance at March 31, 2001                                             |   | $                         | — |              | 38,323 |                                        | 76,325 |                        | 68,862 |                                                                 | 1,355  |                       | (3,802 | )                        | (11,192 | )         | 169,871 |   |
|                                                                  |   |                      |   |              |   |                                        |   |                        |   |                                                                 |   |                       |   |                     |    |      |    |
| Balance at December 31, 2001                                          |   | $                         | — |              | 38,352 |                                        | 76,584 |                        | 83,987 |                                                                 | (8     | )                          | (3,440 | )                        | (30,935 | )         | 164,540 |   |
| Net earnings for the three months ended March 31,  2002               |   | —                    |   | —            |   | —                                      |   | 6,057                       |   | —                                                               |   | —                     |   | —                   |    | 6,057     |    |
| Change in unrealized gain on available-for-sale  securities           |   | —                    |   | —            |   | —                                      |   | —                      |   | (196                                                                 | )      | —                     |   | —                   |    | (196      | )       |
| Total comprehensive income for the three months  ended March 31, 2002 |   | —                    |   | —            |   | —                                      |   | 6,057                       |   | (196                                                                 | )      | —                     |   | —                   |    | 5,861     |    |
| Exercise of 51,927 stock options                                      |   | —                    |   | 52                |   | 56                                          |   | —                      |   | —                                                               |   | —                     |   | —                   |    | 108       |    |
| Purchase of 304,500 shares of treasury stock                          |   | —                    |   | —            |   | —                                      |   | —                      |   | —                                                               |   | —                     |   | (2,185                   | )       | (2,185    | )       |
| Decrease in unearned compensation                                     |   | —                    |   | —            |   | —                                      |   | —                      |   | —                                                               |   | (5,350                     | )      | —                   |    | (5,350    | )       |
| Dividends paid ($0.02 per common share)                               |   | —                    |   | —            |   | —                                      |   | (771                        | )      | —                                                               |   | —                     |   | —                   |    | (771      | )       |
| Balance at March 31, 2002                                             |   | $                         | — |              | 38,404 |                                        | 76,640 |                        | 89,273 |                                                                 | (204   | )                          | (8,790 | )                        | (33,120 | )         | 162,203 |   |

 

See accompanying notes toconsolidated financial statements.

 

5

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** **

**GOLDBANC CORPORATION, INC. AND SUBSIDIARIES**

**ConsolidatedStatements of Cash Flows**

**Forthe Three Months Ended**

**(Inthousands)**

**(unaudited)**

 
|                                                                                                                          |   | **March 31,  2002** |    | **March 31,  2001** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|---------------------|--------|
|                                                                                                                          |   | **(Restated)**      |    | **(Restated)**      |   |
| Cash  flows from operating activities:                                                                                        |   |                |    |                |   |
| Net  earnings                                                                                                                 |   | $                   | 6,057   |                | $      | 6,063 |   |
| Adjustments  to reconcile net earnings to net cash provided by (used in) operating  activities, net of purchase acquisitions: |   |                |    |                |   |
| Provision  for loan losses                                                                                                    |   | 5,035               |    | 2,545               |   |
| Gains  on sales of securities                                                                                                 |   | (600                | )       | (979                | )      |
| Amortization  of investment securities’ premiums, net of accretion                                                       |   | (19                 | )       | (136                | )      |
| Depreciation                                                                                                                  |   | 1,509               |    | 1,548               |   |
| Amortization  of intangible assets                                                                                            |   | 125                 |    | —              |   |
| Amortization  of goodwill                                                                                                     |   | —              |    | 552                 |   |
| Gain  on sale of mortgage loans, net                                                                                          |   | (695                | )       | (870                | )      |
| Bank  owned life insurance                                                                                                    |   | (1,103              | )       | —              |   |
| Net  (increase) decrease in trading securities                                                                                |   | 3,896               |    | 1,548               |   |
| Proceeds  from sale of loans held for sale                                                                                    |   | 28,154              |    | 58,522              |   |
| Origination  of loans held for sale, net of repayments                                                                        |   | (55,623             | )       | (17,862             | )      |
| Other  changes:                                                                                                               |   |                |    |                |   |
| Accrued  interest receivable and other assets                                                                                 |   | 6,153               |    | 7,034               |   |
| Accrued  interest payable and other liabilities                                                                               |   | 2,697               |    | (653                | )      |
| Net  cash (used in) provided by operating activities                                                                          |   | (4,414              | )       | 57,312              |   |
| Cash  flows from investing activities:                                                                                        |   |                |    |                |   |
| Net  increase in loans                                                                                                        |   | (157,363            | )       | (35,642             | )      |
| Principal  collections and proceeds from maturities of held-to-maturity securities                                            |   | (200                | )       | 1,179               |   |
| Principal  collections and proceeds from sales and maturities of available-for-sale  securities                               |   | 232,646             |    | 215,424             |   |
| Purchases  of available-for-sale securities                                                                                   |   | (211,527            | )       | (174,423            | )      |
| Purchases  of held-to-maturity securities                                                                                     |   | 9,306               |    | —              |   |
| Net  additions to premises and equipment                                                                                      |   | (11,313             | )       | (605                | )      |
| Cash  paid, net of cash received, in purchase acquisition                                                                     |   | —              |    | (2,490              | )      |
| Net  cash (used in) provided by investing activities                                                                          |   | (156,663            | )       | 3,443               |   |
| Cash  flows from financing activities:                                                                                        |   |                |    |                |   |
| Increase  (decrease) in deposits                                                                                              |   | 216,465             |    | (32,345             | )      |
| Net  increase (decrease) in short-term borrowings                                                                             |   | (28,999             | )       | 36,146              |   |
| Proceeds  From FHLB & long-term borrowings                                                                                |   | 25,863              |    | —              |   |
| Payment  on FHLB & long-term borrowings                                                                                   |   | —              |    | (27,298             | )      |
| Proceeds  from issuance of common stock                                                                                       |   | 108                 |    | 210                 |   |
| Purchase  of treasury stock                                                                                                   |   | (2,185              | )       | (5,397              | )      |
| Dividends  paid                                                                                                               |   | (771                | )       | (735                | )      |
| Net  cash provided by (used in) financing activities                                                                          |   | 210,481             |    | (29,419             | )      |
| Increase  in cash and cash equivalents                                                                                        |   | 49,404              |    | 31,336              |   |
| Cash  and cash equivalents, beginning of period                                                                               |   | 73,773              |    | 118,891             |   |
| Cash  and cash equivalents, end of period                                                                                     |   | $                   | 123,177 |                | $      | 150,227 |   |
| **Supplemental schedule of non-cash activities:**                                                                             |   |                |    |                |   |
| Non-cash  investing activities related to the securitization of loans held for sale:                                          |   |                |    |                |   |
| Increase  in investment securities                                                                                            |   | —              |    | $                   | 27,733 |   |
| Decrease  in mortgage loans held for sale                                                                                     |   | —              |    | 27,733              |   |
| Non-cash  activities related to purchase acquisitions:                                                                        |   |                |    |                |   |
| Increase  in land, buildings, and equipment                                                                                   |   | —              |    | $                   | 38     |   |
| Increase  in other assets                                                                                                     |   | —              |    | 1,600               |   |
| Increase  in other liabilities                                                                                                |   | —              |    | 17                  |   |
| Increase  in trading securities                                                                                               |   | —              |    | 835                 |   |
| Supplemental  Disclosure of Cash Flow Information:                                                                            |   |                |    |                |   |
| Cash  paid for interest                                                                                                       |   | 24,071              |    | 31,973              |   |
| Cash  paid for income taxes                                                                                                   |   | 1,717               |    | 2,734               |   |

 

See accompanying notes toconsolidated financial statements.

 

6

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NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

 

# 1.               Basisof Presentation.

 

The accompanying consolidated financial statementshave been prepared in accordance with the instructions for Form 10-Q. Theconsolidated financial statements should be read in conjunction with theaudited financial statements included in the Company’s 2002 Annual Report onForm 10-K/A (the “2002 Annual Report”).

 

The consolidated financial statements include theaccounts of Gold Banc Corporation, Inc. and its subsidiary banks and companies,collectively referred to as the Company. All significant intercompany balancesand transactions have been eliminated.

 

The consolidated financial statements as of March 31,2002 and for the three months ended March 31, 2002 and 2001 are unaudited butinclude all adjustments (consisting only of normal recurring adjustments) whichthe Company considers necessary for a fair presentation of financial positionand results of its operations and its cash flows for those periods. TheConsolidated Statement of Earnings for the three months ended March 31, 2002 isnot necessarily indicative of the results to be expected for the entire year.

#  

# 2.               Restatementand Impact on Earnings.

 

As disclosed in our 2002 Annual Report, we haverestated our financial statements for the years ended December 31, 2001 and2000.  The 2002 Annual Report includedall of the adjustments relating to the restatement for such prior periodsincluding those required by Staff Accounting Bulletin 99.  We are also filing amended Form 10-Qs withrespect to the first three quarters of 2002 to reflect the restatement of thefinancial information for such periods. Based on discussions with the staff of the SEC, we do not plan to fileamended Form 10-Ks or Form 10-Qs for 2001 and 2000.  The accompanying consolidated financial statements restate ourfinancial statements for the three months ended March 31, 2002 and March 31,2001.

 

The restatement principally related to certaintransactions totaling approximately $136,000, $1.1 million and $1.3 million in2002, 2001 and 2000, respectively, in which Michael W. Gullion, our formerChief Executive Officer, diverted funds of Gold Bank-Kansas for personal use,as well as the use of his company credit card for personal use and improperreimbursement of personal expenses charged to his personal credit card. Thetransactions were discovered by an internal investigation conducted by ourAudit Committee, with assistance from its independent legal counsel andforensic accountants.  For a detaileddiscussion of the internal investigation and the transactions discoveredtherefrom, see “Item 13 — Certain Relationships and Related Transactions” inthe 2002 Annual Report.

 

The effect of the restatement is as follows for theperiods presented below:

 
|                              |   | **Restatements  to Net Earnings   as Previously Reported** |   |
|-----------------------------------|--------|------------------------------------------------------------|--------|
|                              |   | **Pre-Tax**                                                |   | **Tax Effect** |   | **After Tax** |   | **% Change   to Reported** |   |
|                              |   |                                                       |   | **(Dollars  in thousands)** |   |   |   |
| **Three  Months Ended March 31:** |   |                                                       |   |   |   |   |   |
| 2002                              |   | $                                                          | (133   | ) | $ | (183 | ) | $ | 50 |   | 0.80 | % |
| 2001                              |   | $                                                          | (39    | ) | $ | (132 | ) | $ | 93 |   | 1.50 | % |

 

The impact of these amounts to reported basic anddiluted earnings (loss) per share is as follows:

 
|                              |   | **Basic  Earnings Per Share** |   | **Diluted  Earnings Per Share** |   |
|-----------------------------------|--------|-------------------------------|--------|---------------------------------|--------|
|                              |   | **As  reported**              |   | **As  restated**                |   | **As  reported** |   | **As  restated** |   |
| **Three  Months Ended March 31:** |   |                          |   |                            |   |   |   |   |   |
| 2002                              |   | $                             | 0.18   |                            | $      | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   |
| 2001                              |   | $                             | 0.16   |                            | $      | 0.17 |   | $ | 0.16 |   | $ | 0.17 |   |

#  

7

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# 3.               Earningsper Common Share.

 

Earnings per share are computed in accordance withSFAS No. 128, Earnings per Share. Basic earnings per share is based upon theweighted average number of common shares outstanding during the periodspresented. Diluted earnings per share includes the effects of all potentiallydilutive common shares outstanding during each period. Employee stock optionsare the Company’s only potential common share equivalent.

 

The shares used in the calculation of basic anddiluted income per share for the three months ended March 31, 2002 and 2001 areshown below (in thousands): 

 
|                                                      |   | **For the three****months endedMarch 31** |   |
|-----------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                      |   | **2002**                                  |   | **2001** |   |
|                                                      |   | **(Restated)**                            |   | **(Restated)** |   |
| Weighted  average common shares outstanding               |   | 33,798                                    |   | 37,000 |   |
| Unallocated  ESOP Shares                                  |   | (809                                      | )      | (754 | ) |
| Total basic weighted average  common shares outstanding   |   | 32,989                                    |   | 36,246 |   |
| Stock options                                             |   | 65                                        |   | 38 |   |
| Total diluted weighted average  common shares outstanding |   | 33,054                                    |   | 36,284 |   |

 

# 4.               IntangibleAssets and Goodwill

 

The following table presents information about theCompany’s intangible assets which are being amortized in accordance withStatement of Financial Accounting Standards (SFAS) No. 142. 

 
|                                                       |   | **March 31,  2002**           |   | **March 31,  2001**             |   |
|------------------------------------------------------------|--------|-------------------------------|--------|---------------------------------|--------|
|                                                       |   | **(Restated)**                |   |                            |   |   |   |
|                                                       |   | **Gross   Carrying   Amount** |   | **Accumulated    Amortization** |   | **Gross   Carrying  Amount** |   | **Accumulated    Amortization** |   |
|                                                       |   |                          |   | **(In  thousands)**             |   |   |   |
| Amortized intangible  assets:                              |   |                          |   |                            |   |   |   |   |   |
| Core  deposit premium                                      |   | $                             | 4,156  |                            | $      | 199 |   | $ | — |   | $ | — |   |
| Total                                                      |   | $                             | 4,156  |                            | $      | 199 |   | $ | — |   | $ | — |   |
| Aggregate  amortization expense for the three-months ended |   |                          |   | $                               | 125    |   |   |   | $ | — |   |

 

Estimated amortizationexpense for the years ending December 31 (in thousands):

 
| 2002 |   | $ | 277 |   |
|------|--------|---|-----|--------|
| 2003 |   | $ | 277 |   |
| 2004 |   | $ | 277 |   |
| 2005 |   | $ | 277 |   |
| 2006 |   | $ | 277 |   |

 

As required by SFAS 142, the Company discontinuedrecording goodwill amortization expense effective January 1, 2002. Thefollowing tables compare results of operations as if no goodwill amortizationhad been recorded in 2001. 

 

8

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|                            |   | **For the  Three  Months Ended  March 31**    |   |
|---------------------------------|--------|-----------------------------------------------|--------|
|                            |   | **2002**                                      |   | **2001** |   |
|                            |   | **(Restated)**                                |   | **(Restated)** |   |
|                            |   | **(In  thousands   except per share   data)** |   |
| **Reported net income**         |   | $                                             | 6,057  |   | $ | 6,063 |   |
| Add  back goodwill amortization |   | —                                        |   | 552 |   |
| Adjusted  net income            |   | $                                             | 6,057  |   | $ | 6,615 |   |
| **Basic earnings per share:**   |   |                                          |   |   |   |
| Reported  net income            |   | $                                             | 0.18   |   | $ | 0.17 |   |
| Add  back goodwill amortization |   | —                                        |   | 0.01 |   |
| Adjusted  net income            |   | $                                             | 0.18   |   | $ | 0.18 |   |
| **Diluted earnings per share**  |   |                                          |   |   |   |
| Reported  net income            |   | $                                             | 0.18   |   | $ | 0.17 |   |
| Add  back goodwill amortization |   | —                                        |   | 0.01 |   |
| Adjusted  net income            |   | $                                             | 0.18   |   | $ | 0.18 |   |

 

# 5.               ComprehensiveIncome.

 

Comprehensive income was $5.8 million and $6.6 millionfor the three months ended March 31, 2002 and 2001, respectively. Thedifference between comprehensive income and net earnings presented in theConsolidated Statement of Earnings is attributed solely to unrealized gains andlosses on available-for-sale securities. During the three months ended March31, 2002 and 2001, the Company recorded reclassification adjustments of$342,000 and $626,000 associated with gains included in net earnings for theperiods.

#  

# 6.               Mergers,Acquisitions, Dispositions and Consolidations

 

*OttFinancial Corporation*. On March 30, 2001, Gold Capital Management, our wholly owned subsidiary,acquired Ott Financial Corporation of Wichita, Kansas for approximately $2.7million. Ott was the holding company for Davidson Securities, Inc. and J.O.Davidson and Associates, Inc., which specialized in public finance advisory andunderwriting services. At the time of the acquisition, the companies were allmerged into Gold Capital Management. The acquisition was accounted for usingthe purchase method of accounting. The excess of cost over fair value of theunderlying net assets acquired was $1.5 million. Ott had total assets ofapproximately $1.3 million at the time of the acquisition. The followingschedule reflects the allocation of the purchase price to the various assetsand liabilities acquired in the acquisition.

 
|                           |   | **Historical  Basis** |          | **Fair Value    Adjustments** |          | **Adjusted  Balances** |          |
|--------------------------------|--------|-----------------------|---------------|-------------------------------|---------------|------------------------|---------------|
|                           |   |                  |          |                          |          |                   |          |
| **Cash**                       |   | **$**                 | **266,000**   |                          | **—**    |                   | **266,000**   |   |
| **Investments**                |   | **858,000**           | ** **    | **—**                    | ** **    | **858,000**            | ** **    |
| **Fixed  assets**              |   | **38,000**            | ** **    | **—**                    | ** **    | **38,000**             | ** **    |
| **Account  receivable**        |   | **51,000**            | ** **    | **—**                    | ** **    | **51,000**             | ** **    |
| **Other  assets**              |   | **61,000**            | ** **    | **—**                    | ** **    | **61,000**             | ** **    |
| **Goodwill**                   |   | **—**            | ** **    | **1,481,000**                 | ** **    | **1,481,000**          | ** **    |
|                           |   |                  |          |                          |          |                   |          |
|                           |   | **$**                 | **1,274,000** |                          | **1,481,000** | ** **             | **2,755,000** |   |
|                           |   |                  |          |                          |          |                   |          |
| **Other  accrued expenses**    |   | **$**                 | **17,000**    | ** **                    | **—**    | ** **             | **17,000**    | ** ** |
| **Stockholders’  equity** |   | **1,257,000**         | ** **    | **1,481,000**                 | ** **    | **2,738,000**          | ** **    |
|                           |   |                  |          |                          |          |                   |          |
|                           |   | **$**                 | **1,274,000** |                          | **1,481,000** | ** **             | **2,755,000** |   |

 

9

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*InformationProducts, Inc*.  OnApril 26, 2001, CompuNet Engineering, a wholly owned subsidiary of our Company,acquired the assets of Information Products for approximately $1 million.Information Products provides technology services, including LAN, WAN, productsupport, telecommunication line monitoring, hardware maintenance and systemsdesign and installation across all industry sectors. The asset acquisition wasaccounted for using the purchase method of accounting. The excess of cost overfair value of the underlying assets acquired was approximately $822 thousand.The following schedule reflects the allocation of the purchase price to thevarious assets and liabilities acquired in the acquisition.

 
|                           |   | **Historical  Basis** |          | **Fair Value    Adjustments** |        | **Adjusted  Balances** |          |
|--------------------------------|--------|-----------------------|---------------|-------------------------------|-------------|------------------------|---------------|
|                           |   |                  |          |                          |        |                   |          |
| **Inventory**                  |   | **$**                 | **453,000**   | ** **                    | **(19,000** | **)**                  | **434,000**   | ** ** |
| **Fixed  assets**              |   | **260,000**           | ** **    | **—**                    | ** **  | **260,000**            | ** **    |
| **Account  receivable**        |   | **557,000**           | ** **    | **(135,000**                  | **)**       | **422,000**            | ** **    |
| **Goodwill**                   |   | **—**            | ** **    | **921,000**                   | ** **  | **921,000**            | ** **    |
|                           |   |                  |          |                          |        |                   |          |
|                           |   | **$**                 | **1,270,000** |                          | **767,000** | ** **             | **2,037,000** |   |
|                           |   |                  |          |                          |        |                   |          |
| **Accounts  payable**          |   | **$**                 | **642,000**   | ** **                    | **(5,000**  | **)**                  | **637,000**   | ** ** |
| **Other  accrued expenses**    |   | **581,000**           | ** **    | **(53,000**                   | **)**       | **528,000**            | ** **    |
| **Stockholders’  equity** |   | **47,000**            | ** **    | **825,000**                   | ** **  | **872,000**            | ** **    |
|                           |   |                  |          |                          |        |                   |          |
|                           |   | **$**                 | **1,270,000** |                          | **767,000** | ** **             | **2,037,000** |   |

 

*NorthAmerican Savings Bank*. On July 27, 2001, Gold Bank-Kansas entered into an agreement with NorthAmerican Savings Bank, F.S.B., Grandview, Missouri, to purchase NorthAmerican’s deposit base of approximately $51 million and physical assets at8840 State Line Road, Leawood, Kansas. The excess of cost over fair value ofthe underlying assets acquired was approximately $4.2 million. Such amount hasbeen recorded as other intangible assets and is being amortized over ten years ona straight-line basis. The following schedule reflects the allocation of thepurchase price to the various assets and liabilities acquired in theacquisition.

 
|                  |   | **HistoricalBasis** |            | **Fair Value  Adjustments** |          | **Adjusted  Balances** |            |
|-----------------------|--------|---------------------|-----------------|-----------------------------|---------------|------------------------|-----------------|
|                  |   |                |            |                        |          |                   |            |
| **Cash**              |   | **$**               | **239,000**     | ** **                  | **—**    | ** **             | **239,000**     | ** ** |
| **Loans**             |   | **34,000**          | ** **      | **—**                  | ** **    | **34,000**             | ** **      |
| **Fixed  assets**     |   | **1,489,000**       | ** **      | **—**                  | ** **    | **1,489,000**          | ** **      |
| **Intangible  asset** |   | **—**          | ** **      | **4,156,000**               | ** **    | **4,156,000**          | ** **      |
|                  |   |                |            |                        |          |                   |            |
|                  |   | **$**               | **1,762,000**   |                        | **4,156,000** | ** **             | **5,918,000**   |   |
|                  |   |                |            |                        |          |                   |            |
| **Deposits**          |   | **$**               | **51,410,000**  | ** **                  | **—**    | ** **             | **51,410,000**  | ** ** |
| **Accrued  interest** |   | **221,000**         | ** **      | **—**                  | ** **    | **221,000**            | ** **      |
|                  |   |                |            |                        |          |                   |            |
| **Net  liabilities**  |   | **$**               | **(49,869,000** | **)**                       | **4,156,000** | ** **             | **(45,713,000** | **)** |

 

10

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*Mergerof Provident Savings into Gold Bank-Kansas*.  On July 6, 2001, Provident Bank, F.S.B., afederal savings bank and our wholly-owned subsidiary, merged with and into GoldBank-Kansas. As a result of the merger, Provident Bank’s two offices in St.Joseph, Missouri became branch offices of Gold Bank-Kansas. In connection withthe Provident merger, the REIT-related subsidiaries of Gold Bank-Kansas and ProvidentBank were combined. Gold Bank-Kansas’ wholly-owned subsidiary, Gold IHC, Inc.,a Nevada corporation, merged with and into Provident Bank’s wholly-ownedsubsidiary, Gold IHC-I, LLC, a Delaware limited liability company. Also, GoldRE Holdings, Inc., a Nevada corporation and REIT subsidiary of Gold IHC, Inc.,merged with and into Gold RE Holdings-I, Inc., a Delaware limited liabilitycompany and REIT subsidiary of Gold IHC-I, LLC. As a result of these twoREIT-related mergers, Gold IHC-I, LLC became a wholly-owned subsidiary of GoldBank-Kansas, and Gold RE Holdings-I, LLC remained a subsidiary of Gold IHC-I,LLC. Gold IHC-I, LLC and Gold RE Holding, LLC now conduct our REIT operationsfrom offices in St. Joseph, Missouri.

 

*Salesof Rural Branches*.  InJanuary 2002, we entered into contracts to sell branches of Gold Bank-Kansaslocated in rural Kansas. The branch sales closed in the second quarter of2002.  Bank branches in Oberlin, Colbyand Norcatur, with deposits of $27.3, $12.6, and $8.9 million, respectively,were sold to one purchaser. The branch in Alma, with deposits of $23.3 million,was sold to a second purchaser.

 

# 7.               TreasuryStock

 

On March 7, 2001, we announced we were commencing acommon stock repurchase program whereby we may acquire up to 1,839,000 sharesof common stock or approximately 5% of the shares currently outstanding. Wecompleted the repurchase program in August 2001 at prices ranging from $6.55 to$7.85. On September 17, 2001, we announced the approval of another common stockrepurchase program whereby we may acquire up to 1,750,336 additional shares ofour common stock, or approximately 5% of the outstanding shares. The shares maybe purchased from time to time over the next 12 months in the open market atprevailing market prices or in privately negotiated transactions. The extentand timing of any repurchases will depend on market conditions and otherfactors. At March 31, 2002, we had 373,426 shares available to be purchasedunder the second common stock repurchase program. At March 31, 2002, we hadacquired 3,921,510 shares under these programs at prices ranging from $6.55 to$7.85 per share.

#  

# 8.               Consolidation/Repositioning/MortgageSubsidiary Closing Expense

 

During 1999 and 2000, the Company consolidated itsKansas and Oklahoma banks into a single statewide organization. The plan forthe consolidation was formed with the intention to reposition the Company toimprove service to its customers, achieve higher profitability and enhance itsvisibility in each state.

 

The plan primarily involved exiting certain duplicatebranch banking facilities resulting in asset write-downs to estimated fairvalue, eliminating duplicate backroom functions, abandoning certain leases andreducing the number of full-time employees. Accordingly, the Company recognizedrepositioning expenses of $4,024,000 in the year ended December 31, 2000.Details of the Kansas and Oklahoma repositioning accrual at March 31, 2002 and2001 are as follows (in thousands): 

 
|                              |   |                          |   | **Activity  for   Quarter Ended   March 31, 2002** |   |     |   |
|-----------------------------------|--------|-------------------------------|--------|----------------------------------------------------|--------|----------|--------|
|                              |   | **Accrual at  Dec. 31, 2001** |   | **Expense**                                        |   | **Paid** |   | **Accrual at  March 31, 2002** |   |
|                              |   |                          |   | **(In  thousands)**                                |   |     |   |
| Salaries,  benefits and severance |   | $                             | 177    |                                               | — |     | $      | 107 |   | $ | 70 |   |
|                                   |        |                               |        |                                                    |        |          |        |  |  |  |  |  |

 

 
|                              |   |                          |   | **Activity  for   Quarter Ended   March 31, 2001** |   |     |   |
|-----------------------------------|--------|-------------------------------|--------|----------------------------------------------------|--------|----------|--------|
|                              |   | **Accrual at  Dec. 31, 2000** |   | **Expense**                                        |   | **Paid** |   | **Accrual at  March 31, 2001** |   |
|                              |   |                          |   | **(In  thousands)**                                |   |     |   |
| Salaries,  benefits and severance |   | $                             | 392    |                                               | — |     | $      | 74 |   | $ | 318 |   |
| Lease  abandonments               |   | 24                            |   | —                                             |   | 17       |   | 7 |   |
| Other  repositioning expenses     |   | 227                           |   | —                                             |   | 114      |   | 113 |   |
|                              |   | $                             | 643    |                                               | — |     | $      | 205 |   | $ | 438 |   |

 

11

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During the fourth quarter of 2000, the Companyannounced it would close its separate mortgage banking subsidiary, Gold BancMortgage. As a result of this decision, the Company recorded expenses of $19.3million in 2000. Details of the Gold Banc Mortgage closing accrual at March 31,2002 and 2001 are as follows (in thousands): 

 
|                              |   |                          |   | **Activity  for   Quarter Ended   March 31, 2002** |   |     |   |
|-----------------------------------|--------|-------------------------------|--------|----------------------------------------------------|--------|----------|--------|
|                              |   | **Accrual at  Dec. 31, 2001** |   | **Expense**                                        |   | **Paid** |   | **Accrual at  March 31, 2002** |   |
|                              |   |                          |   | **(In  thousands)**                                |   |     |   |
| Salaries,  benefits and severance |   | $                             | 39     |                                               | — |     | — |   | $ | 39 |   |
|                                   |        |                               |        |                                                    |        |          |        |  |  |  |  |

 
|                              |   |                          |       | **Activity  for   Quarter Ended   March 31, 2001** |       |     |       |
|-----------------------------------|--------|-------------------------------|------------|----------------------------------------------------|------------|----------|------------|
|                              |   | **Accrual at  Dec. 31, 2000** |       | **Expense**                                        |       | **Paid** |       | **Accrual at  March 31, 2001** |   |
|                              |   | **(Restated)**                |       |                                               |       |     |       | **(Restated)** |   |
|                              |   |                          | ** ** | **(In  thousands)**                                | ** ** |     | ** ** |
| Salaries,  benefits and severance |   | $                             | 341        |                                               | —     |     | $          | 55 |   | $ | 286 |   |
| Lease  abandonments               |   | 174                           |       | —                                             |       | 118      |       | 56 |   |
| Other  repositioning expenses     |   | 1,095                         |       | —                                             |       | 559      |       | 536 |   |
|                              |   | $                             | 1,610      |                                               | —     |     | $          | 732 |   | $ | 878 |   |

 

# 9.               SubsequentEvents

 

On January 2, 2002, the Company announced thecompletion of purchase and assumption agreements for the sale of four Kansasbranch locations. The Company has reached agreement with the Bank of Oberlin,Kansas for the purchase of the Colby, Oberlin, and Norcatur, Kansas branchlocations, and also reached agreement with Stockgrowers State Bank of MapleHill, Kansas for the purchase of the Alma, Kansas branch location. The salesclosed in the second quarter 2002.

 

On April 24, 2002 the Board of Directors declared a$0.02 cash dividend on common stock to shareholders of record as of May 7,2002, payable on May 14, 2002.

#  

# 10.         Legalproceedings

 

**RegionalHolding Litigation**

** **

The following legal proceedings all relate to ouracquisition of Regional Holding Company, Inc. in 1999. We purchased all of thecapital stock of Regional Holding from Brad D. Ives, David W. Murrill andRobert E. McGannon on August 2, 1999, for a purchase price of approximately$13.2 million, pursuant to a Stock Purchase Agreement, dated July 1, 1999,between us, Regional Holding and Ives, Murrill and McGannon (the “RegionalAcquisition”).

 

**TheFirst Regional Arbitration.** We prosecuted a claim against Ives, Murrill and McGannon, which wasfiled before the American Arbitration Association (“AAA”) in June 2000. Weasserted a claim for breach of the representations and warranties made in theStock Purchase Agreement. Ives, Murrill and McGannon asserted a counterclaimfor breach of certain promissory notes issued by us to them as part of theacquisition, seeking a principal amount of $4.08 million, plus interest. Ives,Murrill and McGannon also counter-claimed for declaratory judgment related toour set-off of our claim against the notes, and for fraud in connection withamendments to the notes, Ives’ and McGannon’s employment agreements and theStock Purchase Agreement.

 

We also gave Ives, Murrill and McGannon noticeinvoking an alternative dispute resolution (“ADR”) provision of the StockPurchase Agreement over the application of generally accepted accountingprinciples to the financial statements of Regional Holding. The accountingdispute affects the contract formula for calculating the purchase price. Wedemanded that Ives, Murrill and McGannon join in submitting the dispute toErnst & Young, LLP, as set forth in the 

 

12

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Stock Purchase Agreement. Ives, Murrill and McGannon disputed thetimeliness of the demand, and asked the AAA Panel to declare that we had nottimely invoked the procedure.

 

We obtained an award in our favor after an arbitrationhearing held July 16-24, 2001. A three-person AAA panel made an award in ourfavor canceling the $4.08 million promissory notes from us to Ives, Murrill andMcGannon, and awarding us additional damages of $489,000 against Ives, Murrilland McGannon. In addition, the AAA panel ruled in our favor on all of Ives’,Murrill’s and McGannon’s counter-claims. The AAA panel denied a request forcosts and fees, and denied a motion to reallocate or amend the award. As aresult of the AAA panel’s ruling, we recorded the cancellation of the notespayable and the monetary award as a reduction of other expense in the thirdquarter of 2001. With respect to the accounting dispute, the AAA panel ruled inour favor, ordering the parties to submit the matter in accordance with thecontract procedures. As of May 15, 2002, it had not yet been submitted to Ernst& Young, LLP for decision.

 

**CivilCourt Challenges of First Arbitration Award.**  On November 9, 2001, Ives and Murrill fileda Petition to Vacate or Modify Arbitration Award in Jackson County, MissouriDistrict Court.  On November 13,2001, McGannon, who now is represented by separate counsel from Ives andMurrill, filed a virtually identical Petition to Vacate or Modify ArbitrationAward, also in Jackson County. The petitions seek to have the court set asidethe AAA panel’s award on the grounds that the panel exceeded its authorityand/or violated the Ives’, Murrill’s and McGannon’s due process rights inmaking the award. We answered the petitions and asserted counterclaims onDecember 3, 2001. Our counterclaim seeks confirmation of the arbitration award,interest on the award from August 31, 2001 until the final judgment and itsfees and costs incurred in defending this challenge. Ives and Murrill repliedto our counterclaim on December 10, 2001. McGannon filed his reply on December28, 2001. We filed motions for summary judgment on January 8, 2002. Ives andMurrill opposed our motion and filed a cross motion for summary judgment onMarch 11, 2002. McGannon opposed our motion and filed a cross motion forsummary judgment on March 21, 2002. In April 2002, we responded to thesepleadings and participated in a hearing to (i) discuss the status of summaryjudgment briefing and (ii) schedule a tentative trial date in June 2002.

 

**CivilFraud and Employment Claims Suit.**  Ives, Murrill and McGannon filed a civil case onSeptember 5, 2000 against Gold Banc Mortgage, Inc., Michael Gullion andJerry Bengtson (“Defendants”) in the Circuit Court of Jackson County, Missouri.As subsequently amended, Ives, Murrill and McGannon in the Jackson County caseallege three counts:

##  

## •                                          that(similar to their fraud claim in the arbitration proceeding) in December 1999,Defendants fraudulently induced Ives, Murrill and McGannon to renegotiate andamend their employment agreements and promissory notes, seeking damages inexcess of $25,000 each plus punitive damages;

 

## •                                          thatMcGannon is entitled to declaratory judgment that his placement onadministrative leave for a period of time during the arbitration was aconstructive termination under his employment agreement entitling him tocertain rights; and

##  

## •                                          thatGold Banc Mortgage breached Ives’ employment agreement when it changed histermination to “for cause” in 2001 based on evidence acquired subsequent to hisoriginal termination in 2000 “without cause,” allegedly entitling Ives topayment of employment payments and benefits he otherwise would have received.

 

We have answered, denying the claims against us andasserting affirmative defenses.

 

**SecondRegional Arbitration.** We filed a second arbitration claim against Ives, Murrill and McGannonbefore the American Arbitration Association on January 10, 2002. We haveasserted:

##  

## •                                               a contractual claim againstIves, Murrill and McGannon for additional breaches of the representations andwarranties made in the Stock Purchase Agreement related to the acquisition ofRegional Holding and

##  

## •                                               an indemnification claimfor litigation expenses and other specified damages incurred by us after theclosing date of the acquisition of Regional Holding related to acts, oromissions, that occurred prior to the closing date of the acquisition.

 

13

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These breaches of representations and warranties andclaims for indemnification arose, or were discovered, after the firstarbitration was filed, and were not litigated or decided in the firstarbitration. We seek damages in the amount of $616,594.25 and our attorneys’fees. On February 8, 2002, McGannon responded to our claim with a general denialof the allegations. Ives and Murrill also responded on February 8, 2002 with ageneral denial of the allegations, a counterclaim alleging that we willfullybreached the Stock Purchase Agreement and our duties thereunder, and a prayerfor a declaratory judgment and compensatory and punitive damages. We haveresponded with a denial of all Ives’s and Murrill’s counterclaims.

 

**CUNATrademark Lawsuit**

 

We filed suit against the Credit Union NationalAssociation, Inc. (“CUNA”) on July 26, 2001, in the United States DistrictCourt for the District of Kansas to defend our MORE THAN MONEY service mark.Suit was filed to protect our rights against infringement by CUNA and otherinfringers. The lawsuit alleges CUNA has infringed our service mark MORE THANMONEY by using the service mark WHERE PEOPLE ARE WORTH MORE THAN MONEY in itsnational brand campaign promoting credit unions throughout the country. TheComplaint includes claims for (i) trademark infringement and unfaircompetition under federal and common law, and (ii) trademark dilutionunder federal and state law. Several types of relief are requested in the suit,including entry of a permanent injunction prohibiting CUNA and credit unionsfrom using the service mark WHERE PEOPLE ARE WORTH MORE THAN MONEY, an orderthat CUNA’s two registrations for its mark be cancelled, and money damages,including a sum to compensate us for corrective advertising. CUNA filed itsAnswer to the Complaint on September 17, 2001. At the conclusion of discoveryin March 2002, we participated in a court ordered mediation but were unable toreach a resolution. We have agreed to revisit the possibility of settlement ata later date following additional discovery. As of May 15, 2002, the matter hasbeen set for a final pretrial conference in September 2002 and has been placedon the January 2003 trial docket of the presiding judge. We cannot predict withcertainty the outcome of this litigation.

 

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**MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL**

**CONDITIONAND RESULTS OF OPERATIONS**

** **

The following financial review presents management’sdiscussion and analysis of the consolidated financial condition and results ofoperations of the Company. This review highlights the major factors affecting resultsof operations and any significant changes in financial condition for the threemonth period ended March 31, 2002. This review should be read in conjunctionwith the consolidated financial statements and related notes appearingelsewhere in this report as well as the Company’s 2001 Annual Report on Form10-K and the Company’s 2002 Annual Report on Form 10-K/A (the “2002 AnnualReport”). Results of operations for the three month period ended March 31, 2002are not necessarily indicative of results to be attained for any other period.

 

**SUMMARY**

 

Consolidated net earnings for the first three monthsof 2002 was $6.1 million; a $6 thousand decrease over the first three months of2001. Diluted earnings per share was $0.18 for the first three months of 2002 comparedto $0.17 per share for the first three months of 2001. The return on averageassets and equity was 0.78% and 14.59%, respectively, for the three monthsended March 31, 2002 compared to 0.90% and 14.36%, respectively, for the threemonths ended March 31, 2001. The stockholders’ equity to total assets ratio was5.05% and 5.46% at March 31, 2002 and March 31, 2001, respectively. Thedividend to net income ratio for the three months ended March 31, 2002 andMarch 31, 2001, respectively, was 11.15% and 12.37%.

 

**RecentEvents and Restatement**

 

As disclosed in our 2002 Annual Report, we haverestated our financial statements for the years ended December 31, 2001 and2000.  The 2002 Annual Report includedall of the adjustments relating to the restatement for such prior periodsincluding those required by Staff Accounting Bulletin 99.  We are also filing amended Form 10-Qs withrespect to the first three quarters of 2002 to reflect the restatement of thefinancial information for such periods. Based on discussions with the staff of the SEC, we do not plan to fileamended Form 10-Ks or Form 10-Qs for 2001 and 2000.  The consolidated financial statements included elsewhere in thisreport restate our financial statements for the three months ended March 31,2002 and March 31, 2001.

 

The restatement principally related to certaintransactions totaling approximately $136,000, $1.1 million and $1.3 million in2002, 2001 and 2000, respectively, in which Michael W. Gullion, our formerChief Executive Officer, diverted funds of Gold Bank-Kansas for personal use,as well as the use of his company credit card for personal use and improperreimbursement of personal expenses charged to his personal credit card. Thetransactions were discovered by an internal investigation conducted by ourAudit Committee, with assistance from its independent legal counsel andforensic accountants.  For a detaileddiscussion of the internal investigation and the transactions discoveredtherefrom, see “Item 13 — Certain Relationships and Related Transactions” inthe 2002 Annual Report.

 

The effect of the restatement (as described in Note 2“Restatement and Impact on Earnings” of the consolidated financial statements)is as follows for the periods presented below:

 

|                              |   | **Restatements  to Net Earnings   as Previously Reported** |   |
|-----------------------------------|--------|------------------------------------------------------------|--------|
|                              |   | **Pre-Tax**                                                |   | **Tax   Effect** |   | **After Tax** |   | **% Change   to Reported** |   |
|                              |   |                                                       |   | **(Dollars  in thousands)** |   |   |   |
| **Three  Months Ended March 31:** |   |                                                       |   |   |   |   |   |
| 2002                              |   | $                                                          | (133   | ) | $ | (183 | ) | $ | 50 |   | 0.80 | % |
| 2001                              |   | $                                                          | (39    | ) | $ | (132 | ) | $ | 93 |   | 1.50 | % |

 

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The impact of these amounts (as described in Note 2“Restatement and Impact on Earnings” to the consolidated financial statements)to reported basic and diluted earnings (loss) per share is as follows:

 
|                              |   | **Basic  Earnings Per Share** |       | **Diluted  Earnings Per Share** |       |
|-----------------------------------|--------|-------------------------------|------------|---------------------------------|------------|
|                              |   | **As  reported**              |       | **As  restated**                |       | **As  reported** |   | **As  restated** | ** ** |
| **Three  Months Ended March 31:** |   |                          | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| 2002                              |   | $                             | 0.18       |                            | $          | 0.18 |   | $ | 0.18 |   | $ | 0.18 |   |
| 2001                              |   | $                             | 0.16       |                            | $          | 0.17 |   | $ | 0.16 |   | $ | 0.17 |   |

 

**RESULTSOF OPERATIONS**

 

**NetInterest Income**

** **

Total interest income for the three months ended March31, 2002 was $47.8 million; a $5.2 million or 9.8% decrease over the threemonths ended March 31, 2001. The decrease was attributable to a reduction of$5.2 million in interest income on loans due to interest rate declines comparedto the first three months of 2001, which was partially offset by an increase inaverage loans outstanding during the three months ended March 31, 2002.Interest income on investment securities increased $1.2 million compared to thefirst three months of 2001 while other interest income decreased $1.1 millioncomparing the same periods. Average loans increased $337.3 million or 17.7%while average investments and other earning assets increased $51.3 million or8.83% compared to the three months ended March 31, 2001.

 

Total interest expense for the three months endedMarch 31, 2002 was $23.8 million; a $6.9 million or 22.4% decrease over thethree months ended March 31, 2001. The decrease was attributable to interestrate declines on interest bearing deposits compared to the first three monthsof 2001. Average interest bearing deposits increased $238.6 million or 12.67%and average borrowings increased $156.2 million or 30.65% compared to the threemonths ended March 31, 2001.

 

Net interest income was $24.0 million for the threemonths ended March 31, 2002, compared to $22.3 million for the same period in2001; an increase of 7.6%. The Company’s net interest margin decreased from3.68% for the three months ended March 31, 2001 to 3.47% for the three monthsended March 31, 2002. The increase in net interest income and decrease in netinterest margin was the result of a combination of factors. Average interestbearing liabilities increased $98.2 million more than average interest earningassets. In addition, the Company’s interest earning assets reprice more quicklythan its interest bearing liabilities. These two factors in the currentdeclining interest rate environment have resulted in both an increase in netinterest income and a decrease in net interest margin in the quarter endedMarch 31, 2002.

 

**Provision/Allowancefor Loan Losses**

 

The success of a bank depends to a significant extentupon the quality of its assets, particularly loans. This is highlighted by thefact that net loans are 71.6% of the Company’s total assets as of March 31,2002. Credit losses are inherent in the lending business. The risk of loss willvary with general economic conditions, the type of loan being made, thecreditworthiness of the borrower over the term of the loan and the quality ofthe collateral in the case of a collateralized loan, among other things.  The allowance for loan losses totaled $28.1million and $26.1 million at March 31, 2002 and December 31, 2001,respectively, and represented 1.20% and 1.21% of total loans at each date. Theprovision for loan losses for the three months ended March 31, 2002, was $5.0million compared to $2.5 million for the three months ended March 31, 2001. Theincrease in provision for loan loss of $2.5 million for the quarter ended March31, 2002 was due primarily to the increase in loan growth by $183 millionduring the period. Net charge-offs for the three months ended March 31, 2002were $3.0 million compared to $3.6 million for the three months ended March 31,2001. The decrease in net charge-offs for the three months ended March 31, 2002is the direct result of management’s continued efforts to upgrade the Company’sexisting credit standards. Management has continued to review the loanportfolios of the banks, to increase the provision and to charge-off thosecredits when collection is considered to be doubtful.

 

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The allowance for loan losses is comprised of specificallowances assigned to certain classified loans and a general allowance. Wecontinuously evaluate our allowance for loan losses to maintain an adequatelevel to absorb loan losses inherent in the loan portfolio. Factorscontributing to the determination of specific allowances include the creditworthiness of the borrower, changes in the expected future receipt of principaland interest payments and/or changes in the value of pledged collateral. Anallowance is recorded when the carrying amount of the loan exceeds thediscounted cash flows using the loan’s initial effective interest rate or thefair value of the collateral for certain collateral dependent loans. Forpurposes of determining the general allowance, the portfolio is segregated byproduct types to recognize differing risk profiles among categories, and thenfurther segregated by credit grades. Each credit grade is assigned a riskfactor, or allowance allocation percentage. These risk factors are multipliedby the outstanding principal balance and risk-weighted by product type to calculatethe required allowance.

 

The allowance allocation percentages assigned to eachcredit grade have been developed based on an analysis of historical loss ratesat our individual banks, adjusted for certain qualitative factors and on ourmanagement’s experience. Qualitative adjustments for such things as generaleconomic conditions, changes in credit policies and lending standards, andchanges in the trend and severity of problem loans, can cause the estimation offuture losses to differ from past experience. The unallocated portion of thegeneral allowance serves to compensate for additional areas of uncertainty andconsiders industry comparable reserve ratios.

 

The methodology used in the periodic review ofallowance adequacy, which is performed at least quarterly, is designed to beresponsive to changes in actual credit losses. The changes are reflected in thegeneral allowance and in specific allowances as the collectibility of largerclassified loans is continuously recalculated with new information. As ourportfolio matures, historical loss ratios are being closely monitored.

 

The Company actively manages its past due andnon-performing loans in each Bank in an effort to minimize credit losses, andmonitors asset quality to maintain an adequate loan loss allowance. Althoughmanagement believes its allowance for loan losses is adequate for each Bank andcollectively, there can be no assurance that the allowance will provesufficient to cover future loan losses. Further, although management uses thebest information available to make determinations with respect to the allowancefor loan losses, future adjustments may be necessary if economic conditionsdiffer substantially from the assumptions used, or adverse developments arisewith respect to non-performing or performing loans. Accordingly, there can beno assurance that the allowance for loan losses will be adequate to cover loanlosses or that significant increases to the allowance will not be required inthe future if economic conditions should worsen. Material additions to theallowance for loan losses would result in a decrease of the Company’s netincome and capital and could result in the inability to pay dividends, amongother adverse consequences.

 

The Company considers non-performing assets to includenon-accrual loans, other loans past due 90 days or more as to principal andinterest, other real estate owned and repossessed assets. Total non-performingloans were $21.0 million and $23.0 million at March 31, 2002 and December 31,2001, respectively. The $2.0 million reduction in non-performing loans cangenerally be attributed to loan charge-offs and underlying collateral beingtransferred to other real estate owned and repossessed assets.  Total non-performing loans were 0.89% and1.06% of gross loans at March 31, 2002 and December 31, 2001, respectively.Total non-performing assets were $24.9 million and $27.5 million at March 31,2002 and December 31, 2001, respectively. The $2.6 million increase innon-performing assets can generally be attributed to an increase in other realestate owned and repossessed assets resulting from loan charge-offs. Totalnon-performing assets were 0.77% and 0.91% of total assets at March 31, 2002and December 31, 2001, respectively.

 

**OtherIncome**

 

Other income for the three months ended March 31, 2002was $13.8 million; an increase of $3.8 million, or 38.1% over the same periodlast year. The increase in other income resulted from an increase in servicefees of $1.4 million compared with the first quarter of 2001 and a $71 thousanddecline in investment trading fees and commissions. Net securities gains fromrelated securities sales declined $379 thousand. The most significant changewas an increase in sales from information technology sales which increased from$1.4 million in the first quarter of 2001 to $4.8 million in the first quarterof 2002. This increase was the result of increased sales revenue derived fromthe sales of IPI which was acquired in the second quarter of 2001.

 

17

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**OtherExpense**

 

Other expense for the three months ended March 31,2002 was $24.8 million; an increase of $4.3 million, or 21.0% from the sameperiod last year. Salaries and employee benefits increased from $10.6 millionin the first quarter of 2001 to $11.9 million in the first quarter of 2002, oran increase of $1.3 million. Goodwill expense was $530 thousand during thefirst quarter of 2001which was reduced to zero in 2002 due to the adoption of anew accounting standard. The primary increase was a $2.4 million increase ininformation technology services which directly related to the cost of salescomponent of the $3.4 million increase in information technology servicerevenues as described in the preceding section. The remaining expenses classifiedas other expense increased from $5.5 million to $6.5 million.

 

**IncomeTax Expense**

 

Income tax expense for the three months ended March31, 2002 and 2001 was $1.9 million and $3.2, respectively. The effective taxrate for each time period was 24.2 % and 34.6 %, respectively.  The first quarter’s effective tax rate for2002 was lower than 2001 because of savings on state taxes from REIT activitiesas well as non-taxable income from the bank owned life insurance policies andalso due to the cessation of amortization of non-deductible goodwill.

 

Our effective tax rate is less than the statutoryfederal rate of 35% due primarily to municipal interest income and incomegenerated from the our investment in bank owned life insurance.

 

**FINANCIALCONDITION**

 

From December 31, 2001 to March 31, 2002, totalassets grew from $3.0 billion to $3.2 billion.  Net loans increased from $2.1 billionto $2.3 billion. Deposits increased from $2.2 billion to$2.4 billion, from December 31, 2001 to March 31, 2002.  Investment securities were$572.8 million at March 31, 2002, compared to $588.8 million atDecember 31, 2001; a decrease of $16.0 million or 2.8%. Mortgageloans held for sale increased from $11.3 million to $39.5 million.Net premises and equipment increased from $57.7 million to$67.5 million. Cash surrender value of BOLI life insurance increased from$53.0 million to $54.1 million. Total liabilities increased from$2.9 billion to $3.1 billion. Securities sold under agreements torepurchase increased from $103.7 million to $104.5 million. Totallong and short-term borrowings increased $2.2 million, or 0.3%, fromDecember 31, 2001. Accrued interest and other liabilities increased from$24.2 million to $26.0 million.

 

During the first three months of 2002, loans increased$180.5 million, or 8.45%, over balances at December 31, 2001. Theincrease was the result of increased loan activity. Mortgage loans held forsale increased $28.2 million over the balance at December 31, 2001.The increase was due to an increase in fixed rate single-family mortgage loansoriginated during the three-month period ended March 31, 2002.

 

Investment securities at March 31, 2002, decreased$16.0 million compared to the balance at December 31, 2001. Most ofthe decrease resulted from a $22.2 million decrease in available for salesecurities partially offset by a $9.1 million increase in held-to-maturitysecurities.  The total investmentsecurities portfolio amounted to $572.8 million at March 31, 2002, and wascomprised mainly of U.S. government and agencies (14.8%), mortgage-backed(60.8%), and other asset-backed (24.4%) investment securities.

 

Bank owned life insurance at March 31, 2002, increased$1.1 million compared to the balance sheet amount at December 31,2001. The increase in the balance resulted from the earnings recorded on theCompany’s investment in bank owned life insurance. The Company did not purchaseany additional bank owned life insurance during the three months ended March31, 2002.

 

Total deposits increased $216.5 million at March31, 2002, compared to December 31, 2001, mainly due to an increase of$172.6 million in long term retail certificates of deposit and$57.1 million in money market accounts and a $13.2 million decreasein other deposits.

 

Compared to 2001 year-end balances, borrowings atMarch 31, 2002 increased $2.2 million. The Company’s short-term borrowingsof federal funds purchased and securities sold under agreements to repurchasevary depending on daily liquidity requirements. These borrowings declined $29.0 millionduring the first three months of 2002 to a balance 

 

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of $105.6 million at March 31, 2002. Long term borrowings,consisting mainly of FHLB borrowings and other long term borrowings fromLaSalle Bank, increased $31.2 million to $447.6 million outstandingat March 31, 2002.

 

During the first three months of 2002, accruedinterest and other liabilities increased $2.2 million, or 9.3%, due to anincrease in accrued income taxes.

 

**Liquidityand Capital Resources**

 

Liquidity defines the ability of the Company and theBanks to generate funds to support asset growth, satisfy other disbursementneeds, meet deposit withdrawals and other fund reductions, maintain reserverequirements and otherwise operate on an ongoing basis. The immediate liquidityneeds of the Banks are met primarily by Federal Funds sold, short-terminvestments, deposits and the generally predictable cash flow (primarilyrepayments) from each Bank’s assets. Intermediate term liquidity is provided bythe Banks’ investment portfolios. The Banks also have established a creditfacility with the FHLB, under which they are eligible for short-term advancesand long-term borrowings secured by real estate loans or mortgage-relatedinvestments. The Company’s liquidity needs and funding are provided throughnon-affiliated bank borrowing, cash dividends and tax payments from itssubsidiary Banks. The Company has a $25 million line of credit with acorrespondent bank with no outstanding borrowings at March 31, 2002. Totalloans increased $180 million compared to December 31, 2001 while total depositsincrease $216 million compared to the same period. Even with this increase inthe balance sheet, the basic liquidity ratio for March 31, 2002 was 15.31%compared to our internal policy minimum of 15.00%.

 

The majority of the Company’s deposits consist of timedeposits which mature in less than one year. If the Company is unsuccessful inrolling over these deposits, then the Company will have to replace these fundswith alternative sources of funding, mainly other short-term borrowings.

 

Cash and cash equivalents and investment securitiestotaled $696.0 million, or 21.5% of total assets at March 31, 2002compared to $662.6 million, or 22.0% at December 31, 2001. Cash used byoperating activities for the three months ended March 31, 2002 was $4.3million, consisting primarily of net earnings and proceeds from the sale ofloans. Cash used by investing activities was $156.7 million, consistingprimarily of an increase in loans of $157.4 million. Cash provided by financingactivities was $210.6 million, consisting primarily of an increase in depositsof $216.5 million, and an increase in long-term borrowings of $31.2 million.

 

The Company and its subsidiaries actively monitortheir compliance with regulatory capital requirements. The elements of capitaladequacy standards include strict definitions of core capital and total assets,which include off-balance sheet items such as commitments to extend credit.Under the risk-based capital method of capital measurement, the ratio computedis dependent on the amount and composition of assets recorded on the balancesheet and the amount and composition of off-balance sheet items, in addition tothe level of capital. Historically, the Banks have increased core capitalthrough retention of earnings or capital infusions. To be well capitalized acompany’s total risk-based capital ratio, tier 1 risk-based capital ratio andtier 1 leverage ratio would be 10.0%, 6.0% and 5.0% respectively. The Company’stotal risk-based capital ratio, tier 1 risk-based capital ratio and tier 1leverage ratio at March 31, 2002 were 10.50%, 7.08% and 5.76%, respectively.These same ratios at December 31, 2001 were 11.35%, 7.76% and 6.20%,respectively. Total loans increased $183 million compared to December 31, 2001while total deposits increase $216 million compared to the same period. Evenwith this increase in the balance sheet, the Company’s ratios exceed the levelsto be considered well capitalized. The primary source of funds available to theCompany is dividends by the subsidiaries. Each Bank’s ability to pay dividendsmay be limited by regulatory requirements. At March 31, 2002, the subsidiariescould pay $25.9 million in dividends without prior regulatory approval. AtMarch 31, 2002, Management believes cash generated from its operations andcorrespondent bank facility will be sufficient to meet its cash requirementsfor internal growth and general operations in the foreseeable future.

 

On March 7, 2001, we announced we were commencing acommon stock repurchase program whereby we may acquire up to 1,839,000 sharesof common stock or approximately 5% of the shares currently outstanding. Wecompleted the repurchase program in August 2001 at prices ranging from $6.55 to$7.85. On September 17, 2001, we announced the approval of another common stockrepurchase program whereby we may acquire up to 1,750,336 additional shares ofour common stock, or approximately 5% of the outstanding shares. The shares maybe purchased from time to time over the next 12 months in the open market atprevailing market prices or in privately negotiated transactions. The extentand timing of any repurchases will depend on market conditions and otherfactors. At March 31, 2002, we had 373,426 shares 

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available to be purchased. At March 31, 2002, we had acquired 3,921,510shares under these programs at prices ranging from $6.55 to $7.85 per share.

* *

*BOLIPolicies*

** **

The Company’s Bank subsidiaries have purchasedbank-owned life insurance (“BOLI”) policies with death benefits payable to theBanks on the lives of certain officers. These single premium, whole-lifepolicies provide favorable tax benefits, but are illiquid investments. Federalguidelines limit a bank’s aggregate investment in BOLI to 25% of the bank’scapital and surplus, and its aggregate investment in BOLI policies from asingle insurance company to 15% of the Bank’s capital and surplus. All of theBanks’ BOLI investments comply with federal guidelines. As of March 31, 2002,Gold Bank-Kansas had $27.6 million of BOLI (equal to 19.8% of its capitaland surplus), Gold Bank-Oklahoma had $15.9 million of BOLI (equal to 21.2%of its capital and surplus) and Gold Bank-Florida had $10.6 million ofBOLI (equal to 27% of its capital and surplus). The Banks monitor the financialcondition and credit rating of each of the three life insurance companies thatissued the BOLI policies. The Company believes that these BOLI investments willnot have any significant impact on the capital or liquidity of the bankssubsidiaries.

* *

*CompuNetActivities*

 

CompuNet Engineering, Inc., which was acquired inMarch 1999, provides information technology, e-commerce services andnetworking solutions for banks and other businesses. Under current FederalReserve regulations, the data processing activities of a bank holding companyand its subsidiaries must be done primarily for financial companies, andnon-financial data processing activities must be limited to 30% of the bankholding company’s total consolidated annual data processing revenues. When theCompany acquired CompuNet, the aggregate data processing activities of theCompany and CompuNet complied with this 30% limitation.

 

On December 21, 2000, the Federal Reservepublished a proposed regulation that would permit a financial holding companyto generate up to 80% of its consolidated data processing revenue fromnon-financial data processing activities. The proposed regulation limits theinvestment of a financial holding company in such data processing activities to5% of the financial holding company’s tier 1 capital. The comment period on theproposed regulation expired on February 16, 2001.

 

In 2001, CompuNet acquired the assets of InformationProducts, Inc., which provides technology services, including LAN, WAN,product support, telecommunication line monitoring, hardware, maintenance andsystems design and installation across all industry sectors. This acquisitionsignificantly increased the amount of CompuNet’s non-financial data processingactivities. For the year ended December 31, 2001 approximately 71% ofCompuNet’s revenues were non-financial in nature, and thus not in compliancewith the Federal Reserve’s current 30% limitation. This will require us to takecorrective action to bring CompuNet’s activities within federal regulatoryrequirements.

 

This could be accomplished by increasing CompuNet’srevenues from financial data processing activities, decreasing CompuNet’srevenues from non-financial data processing activities, converting CompuNetinto a merchant banking investment (which may not be available if we arerequired to divest our merchant banking investments), or selling part or all ofCompuNet’s business to an unaffiliated third party, or other curative action.

 

**ACCOUNTINGAND FINANCIAL REPORTING**

 

Effective January 1, 2002, the Company adoptedStatement of Accounting Standards No.142, “Goodwill and Other IntangibleAssets”. SFAS 142 requires that goodwill and intangible assets with indefiniteuseful lives no longer be amortized, but instead tested for impairment at leastannually. It also requires that intangible assets with estimatable useful livesbe amortized over their respective estimated useful lives to their estimatedresidual values, and reviewed for impairment. The Statement requires theCompany to perform an assessment of whether there is an indication thatgoodwill is impaired as of January 1, 2002. To accomplish this, the Companymust identify its reporting units and determine the carrying value of eachreporting unit by assigning the assets and liabilities, including the existinggoodwill and intangible assets, to those reporting units as of January 1, 2002.The Company has identified their reporting units to be at the individualsubsidiary basis. The Statement allows until June 30, 2002, to determine thefair value of each reporting unit and compare it to the carrying amount of thereporting unit. To the extent the carrying amount of a reporting unit exceedsthe fair value of the reporting unit, an indication exists that the reportingunit goodwill may be impaired and the 

 

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Company must perform the second step of the transitional impairmenttest. In the second step, the Company must compare the implied fair value ofthe reporting unit goodwill with the carrying amount of the reporting unitgoodwill, both of which would be measured as of January 1, 2002. The impliedfair value of goodwill is determined by allocating the fair value of thereporting unit to all of the assets (recognized and unrecognized) andliabilities of the reporting unit in a manner similar to a purchase priceallocation. The residual fair value after this allocation is the implied fairvalue of the reporting unit goodwill. This second step is required to becompleted as soon as possible, but no later than the end of 2002. Anytransitional impairment loss must be recognized as the cumulative effect of achange in accounting principle in the Company’s 2002 statement of income.Because of the extensive effort needed to comply with adopting Statement 142,it is not practical to reasonably estimate the impact of adopting thisStatement on the Company’s financial statements at the date of this report,including whether it will be required to recognize any transitional impairmentlosses as the cumulative effect of a change in accounting principle.

 

SFAS No. 144 “Accounting for the Impairment ofDisposal of Long-Lived Assets” was adopted by the Company on January 1, 2002.The Statement established a single accounting model for all long-lived assetsto be disposed of by sale, which is to measure a long-lived asset classified asheld for sale at the lower of its carrying amount or fair value less cost tosell and to cease depreciation. The Statements also establishes criteria todetermine when a long-lived asset is held for sale and provides additionalguidance on accounting for such specific circumstances. The adoption of the newStatement, did not have a significant effect on earnings or the financialposition of the Company.

 

**CriticalAccounting Policies**

 

The Company’s accounting policies are fundamental tounderstanding management’s discussion and analysis of results of operations andfinancial condition. Many of the Company’s accounting policies requiresignificant judgment regarding valuation of assets and liabilities. A summaryof significant accounting policies is listed in the first note to theconsolidated financial statements in the Company’s 2001 Annual Report on Form10-K. Critical accounting policies are both most important to the portrayal ofthe Company’s financial condition and results, and require management’s mostdifficult, subjective or complex judgments, often as a result of the need tomake estimates about the effect of matters that are inherently uncertain.

* *

*Allowancefor Loan Losses*

 

The Company’s most critical accounting policy relatesto the allowance for loan losses and involves significant management valuationjudgments. The Company performs periodic and systematic detailed reviews of itslending portfolio to assess overall collectability. The level of the allowancefor loan losses reflects the Company’s estimate of the collectability of theloan portfolio. Further discussion of the methodologies used in establishingthis reserve is contained in the Provision/Allowance for Loan Losses section ofthis report.

 

The Company makes various assumptions and judgmentsabout the collectibility of its loan portfolio and provides an allowance forlosses based on a number of factors. If the Company’s assumptions are wrong,its allowance for loan losses may not be sufficient to cover loan losses. TheCompany may have to increase the allowance in the future. Material additions tothe Company’s allowance for loan losses would have a material adverse effect onits net earnings.

* *

*Impairmentof Goodwill Analysis*

 

As required by the provisions of SFAS 142, theCompany completed its initial valuation analysis to determine whether thecarrying amounts of the Company’s reporting units were impaired. The Company’sinitial impairment review indicated that there was no impairment of goodwill asof December 31, 2001. However, as required by SFAS 142, the Companywill be required to review the goodwill for impairment at least annually ormore frequently based upon facts and circumstances related to a particularreporting unit.

 

The fair value of the Company’s non-bank financialsubsidiaries (Gold Capital Management and CompuNet Engineering) fluctuatessignificantly based upon, among other factors, the net operating income ofthese subsidiaries. If these subsidiaries experience a sustained deteriorationin their cash flow from operations then the Company may have to record agoodwill impairment charge in the future.

 

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*DeferredIncome Taxes*

 

SFAS 109, *Accounting for Income Taxes,* establishesfinancial accounting and reporting standards for the effect of income taxes.The objectives of accounting for income taxes are to recognize the amount oftaxes payable or refundable for the current year and deferred tax liabilitiesand assets for the future tax consequences of events that have been recognizedin an entity’s financial statements or tax returns. Judgement is required inassessing the future tax consequences of events that have been recognized inthe Company’s financial statements or tax returns. Fluctuations in the actualoutcome of these future tax consequences could materially impact the Company’sfinancial position or its results of operations.

 

**Forward-LookingStatements**

 

This report, including information included orincorporated by reference in this report, contains certain forward-lookingstatements with respect to the financial condition, results of operations,plans, objectives, future performance and business of our Company and itssubsidiaries, including, without limitation:

##  

## •                                          statementsthat are not historical in nature

 

## •                                          statementspreceded by, followed by or that include the words “believes,” “expects,”“may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” orsimilar expressions, and

 

## •                                          statementsregarding the timing of the closing of the branch sales.

 

Forward-looking statements are not guarantees offuture performance or results. They involve risks, uncertainties andassumptions. Actual results may differ materially from those contemplated bythe forward-looking statements due to, among others, the following factors:

##  

## •                                          competitivepressures among financial services companies may increase significantly

##  

## •           costs ordifficulties related to the integration of the business of our Company and itsacquisition targets may be greater than expected

 

## •                                          changesin the interest rate environment may reduce interest margins

 

## •                                          generaleconomic conditions, either nationally or in our markets, may be less favorablethan expected

##  

## •                                          legislativeor regulatory changes may adversely affect the business in which our Companyand its subsidiaries are engaged

 

## •                                          technologicalchanges may be more difficult or expensive than anticipated

 

## •                                          changesmay occur in the securities markets

 

We have described under “Factors That May AffectFuture Results of Operations, Financial Condition or Business” additionalfactors that could cause actual results to be materially different from thosedescribed in the forward-looking statements. Other factors that we have notidentified in this report could also have this effect. You are cautioned not toput undue reliance on any forward-looking statement which speaks only as of thedate it was made.

 

**FactorsThat May Affect Future Results of Operations, Financial Condition or Business**

 

We are identifying important risks and uncertaintiesthat could affect our Company’s results of operations, financial condition orbusiness and that could cause them to differ materially from our Company’shistorical results of operations, financial condition or business, or thosecontemplated by forward- looking statements made herein or elsewhere, by, or onbehalf of, our Company. Factors that could cause or contribute to suchdifferences include, but are not limited to, those factors described below.

 

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*Thereis no assurance we can maintain our growth rate.*

 

It may be difficult for us to maintain our rapid rateof growth. We have completed several acquisitions in the past few years thathave significantly enhanced our rate of growth. We cannot be certain that wewill continue to sustain this rate of growth or grow at all. Competition forsuitable acquisition candidates is intense. We are targeting acquisitioncandidates, particularly in the metropolitan and suburban areas, that a varietyof larger financial institutions are also interested in acquiring.

 

We continue to review potential acquisition candidatesand hold preliminary discussions with several of these candidates. We cannotassure you that any of these discussions will be successful. We may not besuccessful in identifying acquisition candidates or be able to acquire banksand financial services businesses on terms we feel are favorable.

 

The rural market areas we now serve afford limited, ifany, opportunities for growth. We believe future growth in our revenues and netearnings will depend on our growth in the metropolitan and suburban marketareas where we have locations in addition to acquisitions. The financialinstitutions in these metropolitan and suburban areas also compete intenselyfor assets and deposits. This competition may adversely affect our ability togrow our asset and deposit base profitability.

 

*Loss ofkey personnel could have an adverse effect.*

 

The loss of certain key personnel could adverselyaffect our operations. Our success depends in large part on the retention of alimited number of key persons, including: Michael W. Gullion, our Chairman andChief Executive Officer; Malcolm M. Aslin, our President and Chief OperatingOfficer; and Rick J. Tremblay, our Executive Vice President and Chief FinancialOfficer. We will likely undergo a difficult transition period if we lose theservices of any or all of these individuals. In recognition of this risk, weown, and are the beneficiary of, an insurance policy on the life of Mr. Gullionproviding death benefits of $3.5 million and have entered into employmentagreements with Messrs. Gullion and Aslin.

 

We also place great value on the experience of thepresidents of our subsidiaries and the branches of our subsidiaries and ontheir relationships with the communities they serve. The loss of these keypersons could negatively impact the affected banking locations. There is noassurance we will be able to retain our current key personnel or attractadditional qualified key persons as needed.

 

*Localeconomic conditions could adversely affect operations.*

 

Changes in the local economic conditions could adverselyaffect our loan portfolio. Our success depends to a certain extent upon thegeneral economic conditions of the local markets that we serve. Unlike largerbanks that are more geographically diversified, we provide banking andfinancial services to customers in those markets in Kansas, Oklahoma, Missouriand Florida, including a number of rural markets, where our subsidiary banksoperate or are expected to operate. Our commercial, real estate andconstruction loans, and the ability of the borrowers to repay these loans andthe value of the collateral securing these loans, are impacted by the localeconomic conditions. In the rural markets we serve, the predominant economicsector is agriculture. We cannot assure you that favorable economic conditionswill exist in such markets.

 

*Allowancefor loan losses may not be adequate.*

 

Our allowance for loan losses may not be adequate tocover actual loan losses. As a lender, we are exposed to the risk that ourcustomers will be unable to repay their loans according to their terms and thatany collateral securing the payment of their loans may not be sufficient toassure repayment. Credit losses are inherent in the lending business and couldhave a material adverse effect on our operating results. Our credit risk withrespect to our real estate and construction loan portfolio relates principallyto the general creditworthiness of individuals and the value of real estateserving as security for the repayment of loans. Our credit risk with respect toour commercial and consumer installment loan portfolio relates principally tothe general creditworthiness of businesses and individuals within our localmarkets.

 

We make various assumptions and judgments about thecollectability of our loan portfolio and provide an allowance for potentiallosses based on a number of factors. If our assumptions are wrong, ourallowance for loan losses 

 

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may not be sufficient to cover our loan losses. We may have to increasethe allowance in the future. Material additions to our allowance for loanlosses would decrease our net earnings.

 

*Changesin interest rates could adversely affect profitability.*

 

We may be unable to manage interest rate risk thatcould reduce our net interest income. Like other financial institutions, ourresults of operations are impacted principally by net interest income, which isthe difference between interest earned on loans and investments and interestexpense paid on deposits and other borrowings. We cannot predict or controlchanges in interest rates. Regional and local economic conditions and thepolicies of regulatory authorities, including monetary policies of the FederalReserve, affect interest income and interest expense. Interest rate cuts by theFederal Reserve throughout 2001 have generally reduced our net interest income.While we continually take measures intended to manage the risks from changes inmarket interest rates, changes in interest rates can still have a materialadverse effect on our profitability.

 

*Technologicalchange may impair our competitiveness.*

 

We cannot predict how changes in technology willimpact our business. The financial services market, including banking services,is increasingly affected by advances in technology including developments in:telecommunications; data processing; automation; Internet-based banking;telebanking; and debit cards and so-called “smart cards.” Our ability tocompete successfully in the future will depend on whether we can anticipate andrespond to technological changes. To develop these and other new technologies,we will likely have to make additional capital investments. Although wecontinually invest in new technology, we cannot assure you that we will havesufficient resources or access to the necessary proprietary technology toremain competitive in the future.

 

*Thebanking business is highly competitive.*

 

We operate in a competitive environment. In themetropolitan and suburban areas in which we compete, other commercial banks,savings and loan associations, credit unions, finance companies, mutual funds,insurance companies, brokerage and investment banking firms and other financialintermediaries offer similar services. We also face competition in our ruralmarkets. Many of these competitors have substantially greater resources andlending limits and may offer certain services our subsidiary banks andbusinesses do not currently provide. In addition, some of the non-bankcompetitors are not subject to the same extensive regulations that govern our subsidiarybanks and businesses. Our profitability depends upon the ability of oursubsidiaries to compete in our primary market areas.

 

*Effectsof regulatory changes cannot be predicted.*

 

We are subject to extensive regulation. The bankingindustry is heavily regulated under both federal and state law. Theseregulations are primarily intended to protect depositors and the FederalDeposit Insurance Corporation, not our creditors or stockholders. Our non-banksubsidiaries are also subject to the supervision of the Federal Reserve Board,in addition to other regulatory and self-regulatory agencies including theSecurities and Exchange Commission, the National Association of SecuritiesDealers, and state securities and insurance regulators. Regulations affectingbanks and financial services businesses are undergoing continuous change, andthe ultimate effect of such changes cannot be predicted. Regulations and lawsmay be modified at any time, and new legislation may be enacted that affectsus, our subsidiary banks or our non-bank subsidiaries. We cannot assure youthat such modifications or new laws will not adversely affect us.

 

*FDICassessments may adversely affect us and our subsidiary banks.*

 

Our subsidiary banks may be forced to pay for anylosses the Federal Deposit Insurance Corporation incurs if it providesassistance to any of our other subsidiary banks. Federal law contains a “crossguarantee” provision that could require any of our insured subsidiary banks topay for losses incurred by the Federal Deposit Insurance Corporation if itprovides assistance to another of our insured subsidiary banks or in the eventa subsidiary bank fails. If another of our subsidiary banks is assessed for anyassistance the Federal Deposit Insurance Corporation may provide, suchassessment could materially effect that subsidiary bank’s financial conditionas well as ours.

 

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**QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Asset/liability management refers to management’sefforts to minimize fluctuations in net interest income caused by interest ratechanges. This is accomplished by managing the repricing of interest ratesensitive interest-earning assets and interest-bearing liabilities. An interestrate sensitive balance sheet item is one that is able to reprice quickly,through maturity or otherwise. Controlling the maturity or repricing of aninstitution’s liabilities and assets in order to minimize interest rate risk iscommonly referred to as gap management. Close matching of the repricing ofassets and liabilities will normally result in little change in net interestincome when interest rates change. A mismatched gap position will normallyresult in changes in net interest income as interest rates change.

 

Along with internal gap management reports, theCompany and the Banks use an asset/liability modeling service to analyze eachBank’s current gap position. The system simulates the Banks’ asset andliability base and projects future net interest income results under severalinterest rate assumptions. The Company strives to maintain an aggregate gapposition such that each 100 basis point change in interest rates will notaffect net interest income by more than 10%. The Company has not engaged inderivative transactions for its own account.

 

The following table indicates that, at March 31, 2002,in the event of a sudden and sustained increase in prevailing market rates, theCompanies net interest income would be expected to increase, while a decreasein rates would indicate a decrease in income. 

 
| **Changes in Interest Rates** |   | **Net  Interest Income** |        | **Actual  Change** |        | **Percent  Change Actual** |   |
|-------------------------------|--------|--------------------------|-------------|--------------------|-------------|----------------------------|--------|
|                          |   |                     |        |               |        |                       |   |
| 200  basis point rise         |   | $                        | 101,626,000 |               | $           | 2,667,000                  |   | 2.7 | % |
| 100  basis point rise         |   | $                        | 100,755,000 |               | $           | 1,796,000                  |   | 1.8 | % |
| Base  Rate Scenario           |   | $                        | 98,959,000  |               | —      |                       | — |   |
| 100  basis point decline      |   | $                        | 94,420,000  |               | ($4,539,000 | )                          | (4.6)  | % |
| 200  basis point decline      |   | $                        | 91,263,000  |               | ($7,696,000 | )                          | (7.8)  | % |

 

 

**PARTII**

**OTHERINFORMATION**

 

**ITEM 6****EXHIBITS AND REPORTS ON FORM 8-K**

 

(a)                                  EXHIBITSREQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K

 
| 99.1   |   | Certification of Chief  Executive Officer of Gold Banc Corporation, Inc. dated May 15, 2003, which is  accompanying this Quarterly Report on Form 10-Q/A for the three months ended  March 31, 2002 and is not treated as filed in reliance on the SEC’s Interim  Guidance Regarding Filing Procedures. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                         |
| 99.2   |   | Certification of Chief  Financial Officer of Gold Banc Corporation, Inc. dated May 15, 2003, which is  accompanying this Quarterly Report on Form 10-Q/A for the three months ended  March 31, 2002 and is not treated as filed in reliance on the SEC’s Interim  Guidance Regarding Filing Procedures. |

 

 

(b)                                 REPORTSON FORM 8-K

 

The Company filed thefollowing Current Reports on Form 8-K during the first quarter of 2002:

 

(1)     Form 8-K filed on January 2, 2002,reporting under Item 5.

 

(2)     Form 8-K filed on February 26, 2002,reporting under Item 5.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                     | GOLD BANC CORPORATION,  INC.                          |
|--------------------------|-------------------------------------------------------|
|                     |                                                  |
|                     | By:                                                   | /s/ Rick J. Tremblay |   |
|                     | Rick J. Tremblay                                      |
|                     | Executive Vice  President and Chief Financial Officer |
| Date:  May 15, 2003 |                                                  |

 

(Authorized officer andprincipal financial officer of the registrant)

 

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**CERTIFICATIONPURSUANT TO**

**RULE13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,**

**ASADOPTED PURSUANT TO**

**SECTION302 OF THE SARBANES-OXLEY ACT OF 2002**

 

The following certification is being provided in theform mandated by Section 302 of the Sarbanes-Oxley Act of 2002. Certificationnumbers four, five and six are omitted pursuant to the transition provisions forRule 13a-14(b) promulgated under the Securities Exchange Act of 1934.

 

I, Malcolm M. Aslin, Chief Executive Officer of GoldBanc Corporation, Inc. (the “registrant”), certify that:

 
| 1.     |   | I have reviewed the  registrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for  the three months ended March 31, 2002 (this “report”);                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                            |
| 2.     |   | Based on my knowledge,  this report does not contain any untrue statement of a material fact or omit  to state a material fact necessary to make the statements made, in light of  the circumstances under which such statements were made, not misleading with  respect to the periods covered by this report; |
|   |   |                                                                                                                                                                                                                                                                                                            |
| 3.     |   | Based on my knowledge,  the financial statements, and other financial information included in this  report, fairly present in all material respects the financial condition,  results of operations and cash flows of the registrant as of, and for, the  periods presented in this report.                     |

 
| Dated:  May 15, 2003 |                    |
|---------------------------|-------------------------|
|                      | By:                     |   |       /s/  Malcolm M. Aslin |   |
|                      | Malcolm M. Aslin        |
|                      | Chief Executive Officer |
|                           |                         |  |  |  |

 

 

**CERTIFICATIONPURSUANT TO**

**RULE13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,**

**ASADOPTED PURSUANT TO**

**SECTION302 OF THE SARBANES-OXLEY ACT OF 2002**

 

The following certification is being provided in theform mandated by Section 302 of the Sarbanes-Oxley Act of 2002. Certificationnumbers four, five and six are omitted pursuant to the transition provisionsfor Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934.

 

I, Rick J. Tremblay, Executive Vice President andChief Financial Officer of Gold Banc Corporation, Inc. (the “registrant”),certify that:

 
| 1.     |   | I have reviewed the  registrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A for  the three months ended March 31, 2002 (this “report”);                                                                                                                                   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                            |
| 2.     |   | Based on my knowledge,  this report does not contain any untrue statement of a material fact or omit  to state a material fact necessary to make the statements made, in light of  the circumstances under which such statements were made, not misleading with  respect to the periods covered by this report; |
|   |   |                                                                                                                                                                                                                                                                                                            |
| 3.     |   | Based on my knowledge,  the financial statements, and other financial information included in this  report, fairly present in all material respects the financial condition,  results of operations and cash flows of the registrant as of, and for, the  periods presented in this report.                     |

 
| Dated:  May 15, 2003 |                                                    |
|---------------------------|---------------------------------------------------------|
|                      |                                                    |
|                      |                                                    |
|                      | By:                                                     |  /s/ Rick J. Tremblay |   |
|                      | Rick J. Tremblay                                        |
|                      | Executive Vice  President and                           |
|                      | Chief Financial Officer  (Principal Accounting Officer) |
|                           |                                                         |  |  |

 

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