**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

----

 

**FORM 10-Q/A**

 

**Amendment No. 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 June 30, 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 of registrant  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) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the past 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has been subject tosuch filing requirements for past 90 days. Yes  ý  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 August 12, 2002** |   |
|--------------------------------|--------|-------------------------------------|--------|
|                           |   |                                |   |
| Common Stock, $1.00 par  value |   | 33,711,009                          |   |

 

 

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**GOLD BANC CORPORATION, INC.**

 

**INDEX TO 10-Q FOR THE QUARTERLY**

**Period Ended June 30, 2002**

 
| **PART I:**  | **FINANCIAL  INFORMATION**                                                                                                                               |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                                                     |
| ITEM  1:     | FINANCIAL  STATEMENTS                                                                                                                                    |
|         |                                                                                                                                                     |
|         | Consolidated Balance Sheets  at June 30, 2002 and December 31, 2001 (unaudited)                                                                          |
|         |                                                                                                                                                     |
|         | Consolidated  Statements of Earnings—Six Months Ended June 30, 2002 and June 30, 2001  (unaudited)                                                  |
|         |                                                                                                                                                     |
|         | Consolidated Statements of Earnings—Three  Months Ended June 30, 2002 and June 30, 2001 (unaudited)                                                 |
|         |                                                                                                                                                     |
|         | Consolidated  Statements of Stockholders’ Equity and Comprehensive Income-Six Months Ended  June 30,  2002 and June 30, 2001  (unaudited) |
|         |                                                                                                                                                     |
|         | Consolidated Statements  of Cash Flows—Six Months Ended June 30, 2002 and June 30, 2001 (unaudited)                                                 |
|         |                                                                                                                                                     |
|         | Notes to  Consolidated Financial Statements                                                                                                              |
|         |                                                                                                                                                     |
| ITEM  2:     | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                              |
|         |                                                                                                                                                     |
| **PART II:** | **OTHER INFORMATION**                                                                                                                                    |
|         |                                                                                                                                                     |
| ITEM 6:      | EXHIBITS AND REPORTS ON FORM 8-K                                                                                                                         |
|         |                                                                                                                                                     |
|         | SIGNATURES                                                                                                                                               |

 

**EXPLANATORY NOTE**

 

We are filing this Amendment No. 1 to ourQuarterly Report on Form 10-Q/A for the quarter ended June 30, 2002 solelyfor the purpose of amending Items 1 and 2 of Part I and Item 6of Part II of that Quarterly Report due to the recent developmentsdescribed below.

 

On March 14, 2003, we issued a press release andfiled a Current Report on Form 8-K announcing that Malcolm M. Aslinwould replace Michael W. Gullion as our Chief Executive Officer and asPresident and Chief Executive Officer of our subsidiary, Gold Bank-Kansas,effective March 17, 2003.  Mr.Gullion was replaced due to improper conduct discovered during an internalinvestigation that was conducted in close cooperation with bank regulatoryauthorities as part of their regularly scheduled examination of GoldBank-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 a review oftransactions, accounts, assets, loans and other matters involving Mr. Gullion,his family members or related entities that were identified as possiblysuspicious during the investigation or otherwise by Gold Bank-Kansas personnelor regulatory officials.  The internalinvestigation is complete.  A report onthe results of the internal investigation was issued on March 31, 2003 and wassupplemented on April 9, 2003.  Theinternal investigation generally covered the period commencing January 1,1998 through April 12, 2003. However, the underlying documentation for some transactions in 1998 andearly 1999 was incomplete.  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 additionalinformation related to the investigation.

 

2

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As a result of theinvestigation, we determined that it was necessary to restate our financialstatements for the years ended December 31, 2001 and 2000.  The restatement principally relates tocertain transactions totaling approximately $136,000, $1.1 million and $1.3million in 2002, 2001 and 2000, respectively, in which Michael W. Gullion, ourformer Chief Executive Officer, diverted funds of Gold Bank-Kansas for personaluse, as well as the use of his company credit card for personal use andimproper reimbursement of personal expenses charged to his personal creditcard.  The financial statementsreflecting this restatement were included in our 2002 Annual Report.  See “Item 6 — Selected ConsolidatedFinancial Data” and the restatement of our consolidated financial statementsand 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 financial statementsfor 2002 and 2001.  On May 15, 2003, wefiled with the SEC an amended Quarterly Report on Form 10-Q/A for the quarterlyperiod ended March 31, 2002.  Thatreport restated our financial statements for the first quarter of 2002.  This report includes the restatement of thefinancial statements for the second quarter of 2002 and 2001 and includes allof the adjustments relating to the restatement for such prior periods includingthose required by Staff Accounting Bulletin No. 99 (“SAB 99”).  In addition, this report also includesadjustments relating to the reclassification of expenses related to Mr.Gullion’s misconduct and other minor adjustments. See Note 2 to theconsolidated financial statements included elsewhere in this report.  This report also includes an amended Item 2– Management’s Discussion and Analysis of Operations and Results of Operationsto reflect the restatement of the financial statements and an amended Item 6 –Exhibit List.  Except as described inthis paragraph, we are not modifying our previous disclosures (which were madebased upon the information that was then available) to address or account forevents that have occurred subsequent to the date we filed our original Form10-Q.  In the near future, we will filea Form 10-Q/A with the SEC for the third quarter of 2002 containing restatedfinancial statements for the third quarters of 2002 and 2001.

 

3

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**PART I**

 

**FINANCIAL INFORMATION**

 

**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands)**

**(unaudited)**

 
|                                                                                                                                         |   | **June  30, 2002** |      | **Dec. 31,  2001** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|--------------------|--------|
|                                                                                                                                         |   | **(Restated)**          |      | **(Restated)**     |   |
| **ASSETS**                                                                                                                                   |   |                    |      |               |   |
| Cash  and due from banks                                                                                                                     |   | $                       | 70,641    |               | $      | 73,675 |   |
| Federal  funds sold and interest-bearing deposits                                                                                            |   | 19,693                  |      | 98                 |   |
| Total  cash and cash equivalents                                                                                                             |   | 90,334                  |      | 73,773             |   |
| Investment  securities:                                                                                                                      |   |                    |      |               |   |
| Available-for-sale                                                                                                                           |   | 574,622                 |      | 567,746            |   |
| Held-to-maturity                                                                                                                             |   | 23,383                  |      | 14,364             |   |
| Trading                                                                                                                                      |   | 4,209                   |      | 6,668              |   |
| Total  investment securities                                                                                                                 |   | 602,214                 |      | 588,778            |   |
| Mortgage  loans held for sale, net                                                                                                           |   | 16,499                  |      | 11,335             |   |
| Loans,  net                                                                                                                                  |   | 2,394,277               |      | 2,124,973          |   |
| Premises  and equipment, net                                                                                                                 |   | 70,132                  |      | 57,738             |   |
| Goodwill,  net                                                                                                                               |   | 34,857                  |      | 35,184             |   |
| Intangible  assets, net                                                                                                                      |   | 3,863                   |      | 3,984              |   |
| Cash  surrender value of bank owned life insurance                                                                                           |   | 54,935                  |      | 53,038             |   |
| Accrued  interest and other assets                                                                                                           |   | 54,398                  |      | 66,152             |   |
| Total  assets                                                                                                                                |   | $                       | 3,321,509 |               | $      | 3,014,955 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY:**                                                                                              |   |                    |      |               |   |
| Liabilities:                                                                                                                                 |   |                    |      |               |   |
| Deposits                                                                                                                                     |   | $                       | 2,435,078 |               | $      | 2,163,866 |   |
| Securities  sold under agreements to repurchase                                                                                              |   | 125,981                 |      | 103,672            |   |
| Federal  funds purchased and other short-term borrowings                                                                                     |   | 936                     |      | 30,908             |   |
| Subordinated  debt and guaranteed preferred beneficial interests in company’s debentures                                                |   | 111,749                 |      | 111,749            |   |
| Long-term  borrowings                                                                                                                        |   | 448,453                 |      | 416,413            |   |
| Accrued  interest and other liabilities                                                                                                      |   | 26,666                  |      | 23,807             |   |
| Total  liabilities                                                                                                                           |   | 3,148,863               |      | 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, 38,431,693 issued at  June 30, 2002 and 38,352,074 issued at December 31, 2001 |   | 38,432                  |      | 38,352             |   |
| Additional  paid-in capital                                                                                                                  |   | 76,734                  |      | 76,584             |   |
| Retained  earnings                                                                                                                           |   | 95,736                  |      | 83,987             |   |
| Accumulated  other comprehensive income (loss), net                                                                                          |   | 4,547                   |      | (8                 | )      |
| Unearned  compensation                                                                                                                       |   | (9,683                  | )         | (3,440             | )      |
|                                                                                                                                         |   | 205,766                 |      | 195,475            |   |
| Less  treasury stock—4,721,510 shares at June 30, 2002 and 4,417,010 shares at  December 31, 2001                                       |   | (33,120                 | )         | (30,935            | )      |
| Total  stockholders’ equity                                                                                                             |   | 172,646                 |      | 164,540            |   |
| Total  liabilities and stockholders’ equity                                                                                             |   | $                       | 3,321,509 |               | $      | 3,014,955 |   |

 

See accompanyingnotes to consolidated financial statements.

 

4

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**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

 

**CONSOLIDATEDSTATEMENTS OF EARNINGS**

**For the Six Months Ended June 30,2002 and June 30, 2001**

**(In thousands, except per share data)**

**(unaudited)**

 
|                                                 |   | **June 30,  2002** |   | **June 30,  2001** |   |
|------------------------------------------------------|--------|-------------------------|--------|-------------------------|--------|
|                                                 |   | **(Restated)**          |   | **(Restated)**          |   |
| Interest  Income:                                    |   |                    |   |                    |   |
| Loans,  including fees                               |   | $                       | 79,943 |                    | $      | 86,113 |   |
| Investment  securities                               |   | 16,962                  |   | 15,259                  |   |
| Other                                                |   | 1,027                   |   | 2,730                   |   |
|                                                 |   | 97,932                  |   | 104,102                 |   |
| Interest  Expense:                                   |   |                    |   |                    |   |
| Deposits                                             |   | 31,466                  |   | 46,625                  |   |
| Borrowings  and other                                |   | 17,072                  |   | 13,701                  |   |
|                                                 |   | 48,538                  |   | 60,326                  |   |
| Net  interest income                                 |   | 49,394                  |   | 43,776                  |   |
| Provision  for loan losses                           |   | 9,955                   |   | 4,340                   |   |
| Net  interest income after provision for loan losses |   | 39,439                  |   | 39,436                  |   |
| Other  income:                                       |   |                    |   |                    |   |
| Service  fees                                        |   | 8,520                   |   | 5,494                   |   |
| Investment  trading fees and commissions             |   | 2,634                   |   | 3,024                   |   |
| Net  gains on sale of mortgage loans                 |   | 838                     |   | 1,244                   |   |
| Net  securities gains                                |   | 3,360                   |   | 1,289                   |   |
| Gain  on sale of branch facilities                   |   | 2,381                   |   | —                  |   |
| Information  technology services                     |   | 9,595                   |   | 3,886                   |   |
| Other                                                |   | 3,370                   |   | 4,935                   |   |
|                                                 |   | 30,698                  |   | 19,872                  |   |
| Other  expense:                                      |   |                    |   |                    |   |
| Salaries  and employee benefits                      |   | 25,277                  |   | 22,052                  |   |
| Net  occupancy expense                               |   | 3,016                   |   | 2,982                   |   |
| Depreciation  expense                                |   | 3,046                   |   | 3,092                   |   |
| Goodwill  amortization expense                       |   | —                  |   | 1,104                   |   |
| Core  deposit intangible amortization                |   | 250                     |   | —                  |   |
| Losses  resulting from misapplication of bank funds  |   | 103                     |   | 930                     |   |
| Information  technology services                     |   | 6,488                   |   | 2,365                   |   |
| Other                                                |   | 14,093                  |   | 10,392                  |   |
|                                                 |   | 52,273                  |   | 42,917                  |   |
| Earnings  before income taxes                        |   | 17,864                  |   | 16,391                  |   |
| Income  tax expense                                  |   | 4,767                   |   | 5,535                   |   |
| Net  earnings                                        |   | $                       | 13,097 |                    | $      | 10,856 |   |
| Net  earnings per share-basic and diluted            |   | $                       | 0.39   |                    | $      | 0.31 |   |

 

See accompanying notesto consolidated financial statements.

 

5

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**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

 

**CONSOLIDATED****STATEMENTSOF EARNINGS**

**For the Three Months Ended June 30,2002 and June 30, 2001**

**(In thousands, except per share data)**

**(unaudited)**

 
|                                                 |   | **June 30, 2002** |   | **June 30, 2001** |   |
|------------------------------------------------------|--------|-----------------------------|--------|-----------------------------|--------|
|                                                 |   | **(Restated)**              |   | **(Restated)**              |   |
| Interest  Income:                                    |   |                        |   |                        |   |
| Loans,  including fees                               |   | $                           | 41,077 |                        | $      | 41,969 |   |
| Investment  securities                               |   | 8,625                       |   | 8,128                       |   |
| Other                                                |   | 432                         |   | 1,019                       |   |
|                                                 |   | 50,134                      |   | 51,116                      |   |
| Interest  Expense:                                   |   |                        |   |                        |   |
| Deposits                                             |   | 16,069                      |   | 22,301                      |   |
| Borrowings  and other                                |   | 8,632                       |   | 7,298                       |   |
|                                                 |   | 24,701                      |   | 29,599                      |   |
| Net  interest income                                 |   | 25,433                      |   | 21,517                      |   |
| Provision  for loan losses                           |   | 4,920                       |   | 1,795                       |   |
| Net  interest income after provision for loan losses |   | 20,513                      |   | 19,722                      |   |
| Other  income:                                       |   |                        |   |                        |   |
| Service  fees                                        |   | 4,550                       |   | 2,899                       |   |
| Investment  trading fees and commissions             |   | 1,172                       |   | 1,557                       |   |
| Net  gains on sale of mortgage loans                 |   | 142                         |   | 374                         |   |
| Net  securities gains                                |   | 2,825                       |   | 310                         |   |
| Gain  on sale of branch facilities                   |   | 2,381                       |   | —                      |   |
| Information  technology services                     |   | 4,780                       |   | 2,493                       |   |
| Other                                                |   | 1,018                       |   | 2,227                       |   |
|                                                 |   | 16,868                      |   | 9,860                       |   |
| Other  expense:                                      |   |                        |   |                        |   |
| Salaries  and employee benefits                      |   | 13,329                      |   | 11,447                      |   |
| Net  occupancy expense                               |   | 1,538                       |   | 1,518                       |   |
| Depreciation  expense                                |   | 1,537                       |   | 1,544                       |   |
| Goodwill  amortization expense                       |   | —                      |   | 552                         |   |
| Core  deposit intangible amortization                |   | 125                         |   | —                      |   |
| Losses  resulting for misapplication of bank funds   |   | 78                          |   | 860                         |   |
| Information  technology services                     |   | 3,317                       |   | 1,570                       |   |
| Other                                                |   | 7,580                       |   | 4,965                       |   |
|                                                 |   | 27,504                      |   | 22,456                      |   |
| Earnings  before income tax                          |   | 9,877                       |   | 7,126                       |   |
| Income  tax expense                                  |   | 2,837                       |   | 2,333                       |   |
| Net  earnings                                        |   | $                           | 7,040  |                        | $      | 4,793 |   |
| Net  earnings per share-basic and diluted            |   | $                           | 0.21   |                        | $      | 0.14 |   |

 

See accompanyingnotes to consolidated financial statements.

 

6

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**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OFSTOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME**

**For the Six Months Ended June 30,2002 (Restated) and June 30, 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 earnings for the six months ended June 30,  2001                    |   | —               |   | —            |   | —                           |   | 10,856                 |   | —                                               |   | —                     |   | —              |   | 10,856    |   |
| Change in unrealized gain on available-for-sale  securities             |   | —               |   | —            |   | —                           |   | —                 |   | 1,820                                                |   | —                     |   | —              |   | 1,820     |   |
| Total comprehensive income for the six months  ended June 30, 2001 |   | —               |   | —            |   | —                           |   | 10,856                 |   | 1,820                                                |   | —                     |   | —              |   | 12,676    |   |
| Exercise of 50,467 stock options                                        |   | —               |   | 50                |   | 234                              |   | —                 |   | —                                               |   | —                     |   | —              |   | 284       |   |
| Purchase of 2,444,600 shares of treasury stock                          |   | —               |   | —            |   | —                           |   | —                 |   | —                                               |   | —                     |   | (16,387             | )      | (16,387   | )      |
| Decrease in unearned compensation                                       |   | —               |   | —            |   | —                           |   | —                 |   | —                                               |   | 1,000                      |   | —              |   | 1,000     |   |
| Dividends paid ($0.04 per common share)                                 |   | —               |   | —            |   | —                           |   | (1,443                 | )      | —                                               |   | —                     |   | —              |   | (1,443    | )      |
| Balance at June 30, 2001                                                |   | $                    | — |              | $      | 38,336                           |   | $                      | 76,386 |                                                 | $      | 72,947                     |   | $                   | 2,656  |      | $      | (2,802 | ) | $ | (22,182 | ) | $ | 165,341 |   |
|                                                                    |   |                 |   |              |   |                             |   |                   |   |                                                 |   |                       |   |                |   |      |   |
| Balance at December 31, 2001                                            |   | $                    | — |              | $      | 38,352                           |   | $                      | 76,584 |                                                 | $      | 83,987                     |   | $                   | (8     | )         | $      | (3,440 | ) | $ | (30,935 | ) | $ | 164,540 |   |
| Net earnings for the six months ended June 30,  2002                    |   | —               |   | —            |   | —                           |   | 13,097                 |   | —                                               |   | —                     |   | —              |   | 13,097    |   |
| Change in unrealized gain on available-for-sale  securities             |   | —               |   | —            |   | —                           |   | —                 |   | 4,555                                                |   | —                     |   | —              |   | 4,555     |   |
| Total comprehensive income for the six months  ended June 30, 2002 |   | —               |   | —            |   | —                           |   | 13,097                 |   | 4,555                                                |   | —                     |   | —              |   | 17,652    |   |
| Exercise of 79,619 stock options                                        |   | —               |   | 80                |   | 150                              |   | —                 |   | —                                               |   | —                     |   | —              |   | 230       |   |
| Purchase of 304,500 shares of treasury stock                            |   | —               |   | —            |   | —                           |   | —                 |   | —                                               |   | —                     |   | (2,185              | )      | (2,185    | )      |
| Increase in unearned compensation                                       |   | —               |   | —            |   | —                           |   | —                 |   | —                                               |   | (6,243                     | )      | —              |   | (6,243    | )      |
| Dividends paid ($0.04 per common share)                                 |   | —               |   | —            |   | —                           |   | (1,348                 | )      | —                                               |   | —                     |   | —              |   | (1,348    | )      |
| Balance at June 30, 2002                                                |   | $                    | — |              | $      | 38,432                           |   | $                      | 76,734 |                                                 | $      | 95,736                     |   | $                   | 4,547  |      | $      | (9,683 | ) | $ | (33,120 | ) | $ | 172,646 |   |

 

See accompanyingnotes to consolidated financial statements.

 

7

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**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For the Six Months Ended June 30,2002 and June 30, 2001**

**(In thousands)**

**(unaudited)**

 
|                                                                                                                          |   | **June 30,  2002** |   | **June 30,  2001** |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|-------------------------|--------|
|                                                                                                                          |   | **(Restated)**          |   | **(Restated)**          |   |
| Cash  flows from operating activities:                                                                                        |   |                    |   |                    |   |
| Net  earnings                                                                                                                 |   | $                       | 13,097 |                    | $      | 10,856 |   |
| Adjustments  to reconcile net earnings to net cash provided by (used in) operating  activities, net of purchase acquisitions: |   |                    |   |                    |   |
| Provision  for loan losses                                                                                                    |   | 9,955                   |   | 4,340                   |   |
| Gains  on sales of securities                                                                                                 |   | (3,426                  | )      | (1,289                  | )      |
| Amortization  of investment securities’ premiums, net of accretion                                                       |   | (320                    | )      | (101                    | )      |
| Depreciation                                                                                                                  |   | 3,046                   |   | 3,092                   |   |
| Amortization  of intangible assets                                                                                            |   | 250                     |   | —                  |   |
| Amortization  of goodwill                                                                                                     |   | —                  |   | 1,104                   |   |
| Gain  on sale of mortgage loans, net                                                                                          |   | (838                    | )      | (1,244                  | )      |
| Bank  owned life insurance                                                                                                    |   | (1,897                  | )      | —                  |   |
| Net  decrease in trading securities                                                                                           |   | 2,459                   |   | (1,880                  | )      |
| Proceeds  from sale of loans held for sale                                                                                    |   | 51,297                  |   | 58,522                  |   |
| Origination  of loans held for sale, net of repayments                                                                        |   | (55,623                 | )      | (17,488                 | )      |
| Other  changes:                                                                                                               |   |                    |   |                    |   |
| Accrued  interest receivable and other assets                                                                                 |   | 11,754                  |   | (8,165                  | )      |
| Accrued  interest payable and other liabilities                                                                               |   | 5,345                   |   | (2,629                  | )      |
| Net  cash provided by operating activities                                                                                    |   | 35,099                  |   | 45,118                  |   |
| Cash  flows from investing activities:                                                                                        |   |                    |   |                    |   |
| Net  increase in loans                                                                                                        |   | (279,258                | )      | (85,688                 | )      |
| Principal  collections and proceeds from sales and maturities of available-for-sale  securities                               |   | 336,379                 |   | 212,641                 |   |
| Purchases  of available-for-sale securities                                                                                   |   | (337,504                | )      | (265,700                | )      |
| Purchases  of held-to-maturity securities                                                                                     |   | (9,021                  | )      | (11,360                 | )      |
| Purchase  of bank owned life insurance policy                                                                                 |   | —                  |   | (50,505                 | )      |
| Net  additions to premises and equipment                                                                                      |   | (15,441                 | )      | (1,727                  | )      |
| Cash  paid, net of cash received, in purchase acquisition                                                                     |   | —                  |   | (3,363                  | )      |
| Net  cash used in investing activities                                                                                        |   | (304,845                | )      | (205,702                | )      |
| Cash  flows from financing activities:                                                                                        |   |                    |   |                    |   |
| Increase  (decrease) in deposits                                                                                              |   | 271,212                 |   | (76,456                 | )      |
| Net  (decrease) increase in short-term borrowings                                                                             |   | (7,663                  | )      | 139,844                 |   |
| Proceeds  from FHLB & long-term borrowings                                                                                |   | 25,797                  |   | 94,644                  |   |
| Proceeds  from issuance of common stock                                                                                       |   | 230                     |   | 284                     |   |
| Purchase  of treasury stock                                                                                                   |   | (2,185                  | )      | (16,387                 | )      |
| Dividends  paid                                                                                                               |   | (1,348                  | )      | (1,443                  | )      |
| Net  cash provided by financing activities                                                                                    |   | 286,043                 |   | 140,486                 |   |
| Increase  (decrease) in cash and cash equivalents                                                                             |   | 16,561                  |   | (20,098                 | )      |
| Cash  and cash equivalents, beginning of period                                                                               |   | 73,773                  |   | 118,891                 |   |
| Cash  and cash equivalents, end of period                                                                                     |   | $                       | 90,334 |                    | $      | 98,793 |   |
| **Supplemental  schedule of non-cash activities :**                                                                           |   |                    |   |                    |   |
| Non-cash  investing activities related to the securitization of loans held for sale:                                          |   |                    |   |                    |   |
| Increase  in investment securities                                                                                            |   | —                  |   | $                       | 41,199 |   |
| Decrease  in mortgage loans held for sale                                                                                     |   | —                  |   | 41,199                  |   |
| Non-cash  activities related to purchase acquisitions:                                                                        |   |                    |   |                    |   |
| Increase  in land, buildings, and equipment                                                                                   |   | —                  |   | $                       | 298    |   |
| Increase  in other assets                                                                                                     |   | —                  |   | 4,213                   |   |
| Increase  in other liabilities                                                                                                |   | —                  |   | 1,148                   |   |
| **Supplemental  disclosure of cash flow information:**                                                                        |   |                    |   |                    |   |
| Cash  paid for interest                                                                                                       |   | $                       | 24,071 |                    | $      | 30,007 |   |
| Cash  paid for income taxes                                                                                                   |   | 1,717                   |   | 4,270                   |   |

 

See accompanyingnotes to consolidated financial statements.

 

8

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**GOLD BANC CORPORATION, INC. ANDSUBSIDIARIES**

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

**1.    Basis of 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 June 30,2002 and for the three and six months ended June 30, 2002 and 2001 areunaudited but include all adjustments (consisting only of normal recurringadjustments) which the Company considers necessary for a fair presentation ofits financial position and results of its operations and its cash flows forthose periods. The consolidated statements of earnings for the three and sixmonths ended June 30, 2002 are not necessarily indicative of the results to beexpected for the entire year.

 

**2.    Restatement and 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 SAB 99.  Weare also filing amended Form 10-Qs with respect to the first three quarters of2002 to reflect the restatement of the financial information for suchperiods.  Based on discussions with thestaff of the SEC, we do not plan to file amended Form 10-Ks or Form 10-Qs for2001 and 2000.  The accompanyingconsolidated financial statements restate our financial statements for thethree and six months ended June 30, 2002 and June 30, 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 discovered transactions, see“Item 13 — Certain Relationships and Related Transactions” in the 2002 AnnualReport.

 

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 June 30:** |   |                                                      |   |   |   |   |   |   |   |
| 2002                                  |   | $                                                         | (255   | ) | $ | (183 | ) | $ | (72 | ) | 1.01 | % |
| 2001                                  |   | $                                                         | (1,416 | ) | $ | (132 | ) | $ | (1,284 | ) | 22.55 | % |
|                                  |   |                                                      |   |   |   |   |   |   |   |
| **Six  Months Ended June 30:**   |   |                                                      |   |   |   |   |   |   |   |
| 2002                                  |   | $                                                         | (488   | ) | $ | (366 | ) | $ | (122 | ) | 0.92 | % |
| 2001                                  |   | $                                                         | (1,455 | ) | $ | (264 | ) | $ | (1,191 | ) | 9.88 | % |

 

9

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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****June 30:** |   |                          | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| 2002                                     |   | $                             | 0.21       |                            | $          | 0.21 |   | $ | 0.21 |   | $ | 0.21 |   |
| 2001                                     |   | $                             | 0.17       |                            | $          | 0.14 |   | $ | 0.17 |   | $ | 0.14 |   |
|                                     |   |                          |       |                            |       |   |   |   |   |
| **Six  Months Ended****June 30:**   |   |                          | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| 2002                                     |   | $                             | 0.39       |                            | $          | 0.39 |   | $ | 0.39 |   | $ | 0.39 |   |
| 2001                                     |   | $                             | 0.33       |                            | $          | 0.31 |   | $ | 0.33 |   | $ | 0.31 |   |

 

**3.    Earnings per Common Share.**

 

Earnings per share are computed in accordance withSFAS No. 128, *Earnings per Share*. Basic earnings per share is based uponthe weighted 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 and dilutedincome per share for the three and six months ended June 30, 2002 andJune 30, 2001 are shown below (in thousands):

 
|                                                      |   | **For the  Three  Months ended  June 30** |   | **For the  Six  Months ended  June 30** |   |
|-----------------------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------------|--------|
|                                                      |   | **(Restated)**                                 |   | **(Restated)**                               |   |
|                                                      |   | **2002**                                       |   | **2001**                                     |   | **2002** |   | **2001** |   |
| Weighted  average common shares outstanding               |   | 33,199                                         |   | 34,842                                       |   | 33,080 |   | 35,577 |   |
| Unallocated  ESOP Shares                                  |   | (947                                           | )      | (742                                         | )      | (857 | ) | (742 | ) |
| Total  basic weighted average common shares outstanding   |   | 32,252                                         |   | 34,100                                       |   | 32,223 |   | 34,835 |   |
| Stock  options                                            |   | 225                                            |   | 48                                           |   | 156 |   | 40 |   |
| Total  diluted weighted average common shares outstanding |   | 32,477                                         |   | 34,052                                       |   | 32,379 |   | 34,875 |   |

 

10

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**4.    Intangible Assets 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.

 
|                                                     |   | **June 30,  2002**          |   | **June 30,  2001**            |   |
|----------------------------------------------------------|--------|-----------------------------|--------|-------------------------------|--------|
|                                                     |   | **(Restated)**              |   |                          |   |   |   |
|                                                     |   | **Gross  Carrying  Amount** |   | **Accumulated  Amortization** |   | **Gross  Carrying  Amount** |   | **Accumulated  Amortization** |   |
|                                                     |   | **(In  thousands)**         |   |
| Amortized  intangible assets:                            |   |                        |   |                          |   |   |   |   |   |
| Core  deposit premium                                    |   | $                           | 4,156  |                          | $      | 293 |   | $ | — |   | $ | — |   |
| Total                                                    |   | $                           | 4,156  |                          | $      | 293 |   | $ | — |   | $ | — |   |
|                                                     |   |                        |   |                          |   |   |   |   |   |
| Aggregate  amortization expense for the six months ended |   |                        |   | $                             | 250    |   |   |   | $ | — |   |

 

Restated estimated amortization expense for the yearsending December 31 (in thousands):

 
| 2002 |   | $ | 500 |   |
|------|--------|---|-----|--------|
| 2003 |   | $ | 500 |   |
| 2004 |   | $ | 500 |   |
| 2005 |   | $ | 500 |   |
| 2006 |   | $ | 500 |   |

 

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 for the three and six months ended June 30, 2002 and June 30,2001.

 
|                             |   | **For the Three Months  ended June 30** |   | **For the  Six Months  ended June 30**                     |   |
|----------------------------------|--------|-------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                             |   | **2002**                                                    |   | **2001**                                                   |   | **2002** |   | **2001** |   |
|                             |   | **(Restated)**                                              |   | **(Restated)**                                             |   |
|                             |   | **(In  thousands,  except per share data)**  |   | **(In  thousands,  except per share data)** |   |
| **Reported  net income:**        |   | $                                                           | 7,040  |                                                       | $      | 4,793 |   | $ | 13,097 |   | $ | 10,856 |   |
| Add  back goodwill amortization  |   | —                                                      |   | 552                                                        |   | — |   | 1,104 |   |
| Adjusted  net income             |   | $                                                           | 7,040  |                                                       | $      | 6,223 |   | $ | 13,097 |   | $ | 11,960 |   |
| **Basic  earnings per share:**   |   |                                                        |   |                                                       |   |   |   |   |   |
| Reported  net income             |   | $                                                           | 0.22   |                                                       | $      | 0.14 |   | $ | 0.41 |   | $ | 0.31 |   |
| Add  back goodwill amortization  |   | —                                                      |   | 0.02                                                       |   | — |   | 0.03 |   |
| Adjusted  net income             |   | $                                                           | 0.22   |                                                       | $      | 0.16 |   | $ | 0.41 |   | $ | 0.34 |   |
| **Diluted  earnings per share:** |   |                                                        |   |                                                       |   |   |   |   |   |
| Reported  net income             |   | $                                                           | 0.22   |                                                       | $      | 0.14 |   | $ | 0.41 |   | $ | 0.31 |   |
| Add  back goodwill amortization  |   | —                                                      |   | 0.02                                                       |   | — |   | 0.03 |   |
| Adjusted  net income             |   | $                                                           | 0.22   |                                                       | $      | 0.16 |   | $ | 0.41 |   | $ | 0.34 |   |

 

11

----

 

**5.    Comprehensive Income.**

 

Comprehensive income was $11.8 million and $6.1million for the three months ended June 30, 2002 and 2001, respectively.Comprehensive income was $17.7 million and $12.7 million for the six monthsended June 30, 2002 and June 30, 2001, respectively. The difference betweencomprehensive income and net earnings presented in the consolidated statementsof earnings is attributed solely to unrealized gains and losses on available-for-salesecurities. During the three months ended June 30, 2002 and June 30, 2001, theCompany recorded reclassification adjustments of $1.8 million and $198,000associated with gains included in net earnings for the respective periods.During the six months ended June 30, 2002 and June 30, 2001, the Companyrecorded reclassification adjustments of $2.2 million and $825,000 associatedwith gains included in net income for the respective periods.

 

**6.    Mergers, Acquisitions, Dispositionsand Consolidations**

 

*OttFinancial Corporation*.    On March 30,2001, Gold Capital Management, Inc., the Company’s 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 approximately $1.5 million. Ott had totalassets of approximately $1.3 million at the time of the acquisition.  The following schedule reflects the allocationof the purchase price to the various assets and liabilities acquired in theacquisition.

 
|                       |   | **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 |   |

 

*InformationProducts, Inc.*  On April 26, 2001, CompuNetEngineering, Inc., a wholly owned subsidiary of the Company, acquired theassets of Information Products, Inc. for approximately $1 million. InformationProducts provides technology services, including LAN, WAN, product support,telecommunication line monitoring, hardware maintenance and systems design andinstallation across all industry sectors. The asset acquisition was accountedfor using the purchase method of accounting. The excess of cost over fair valueof the underlying assets acquired was approximately $822 thousand.  The following schedule reflects theallocation of the purchase price to the various assets and liabilities acquiredin the acquisition.

 

12

----

 
|                       |   | **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 purchased from North American Savings Bank, F.S.B.,Grandview, Missouri, North American’s deposit base of approximately $51 millionand physical assets at 8840 State Line Road, Leawood, Kansas. The excess ofcost over fair value of the underlying assets acquired was approximately $4.2million. Such amount has been recorded as other intangible assets and is beingamortized over ten years on a straight-line basis.  The following schedule reflects the allocation of the purchaseprice to the various assets and liabilities acquired in the acquisition.

 
|              |   | **Historical  Basis** |        | **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 | ) |

 

13

----

 

*Mergerof Provident Savings into Gold Bank-Kansas*.    OnJuly 6, 2001, Provident Bank, F.S.B., a federal savings bank and ourwholly-owned subsidiary, merged with and into Gold Bank-Kansas. As a result ofthe merger, Provident Bank’s two offices in St. Joseph, Missouri became branchoffices of Gold Bank-Kansas. In connection with the Provident merger, theREIT-related subsidiaries of Gold Bank-Kansas and Provident Bank were combined.Gold Bank-Kansas’ wholly-owned subsidiary, Gold IHC, Inc., a Nevadacorporation, merged with and into Provident Bank’s wholly-owned subsidiary,Gold IHC-I, LLC, a Delaware limited liability company. Also, Gold RE Holdings,Inc., a Nevada corporation and REIT subsidiary of Gold IHC, Inc., merged withand into Gold RE Holdings-I, LLC., a Delaware limited liability company andREIT subsidiary of Gold IHC-I, LLC. As a result of these two REIT-relatedmergers, Gold IHC-I, LLC became a wholly-owned subsidiary of Gold Bank-Kansas,and Gold RE Holdings-I, LLC remained a subsidiary of Gold IHC-I, LLC. GoldIHC-I, LLC and Gold RE Holding, LLC now conduct our REIT operations fromoffices in St. Joseph, Missouri.

 

*Salesof Rural Branches*.    On May 3, 2002, theCompany sold four branches of Gold Bank-Kansas located in rural Kansas. Bankbranches in Oberlin, Colby and Norcatur, with deposits of $24.7, $11.2, and$8.6 million, respectively, were sold to one purchaser.  The branch in Alma, with deposits of $23.3million, was sold to a second purchaser. The Company recorded a gain in the second quarter of 2002 of $2.4million in connection with the sale of the four branches.

 

**7.    Treasury Stock**

 

In August 2001, the Company completed a common stockrepurchase program whereby the Company acquired 1,839,000 shares of commonstock, or approximately 5% of the shares outstanding as of March 7, 2001. InSeptember 2001, the Company announced the approval of another common stockrepurchase program whereby the Company was authorized to acquire up to1,750,336 additional shares of the Company’s common stock, or approximately 5%of the shares outstanding as of September 17, 2001. As of June 30, 2002, theCompany had acquired 3,216,110 shares under these programs at prices rangingfrom $6.55 to $7.85 per share. On July 24, 2002, the Company terminated theshare repurchase programs.

 

**8.    Consolidation/Repositioning/MortgageSubsidiary Closing Expense**

 

During the fourth quarter of  1999, the Company consolidated its nine Kansas subsidiary banksinto a single Kansas-chartered bank. In the fourth quarter of 2000, the Companyconsolidated its three Oklahoma subsidiary banks into a singleOklahoma-chartered bank. The plan for the consolidations was formed with theintention to reposition the Company to improve service to its customers,achieve higher profitability and enhance its visibility in each state.

 

The plan primarily involved exiting certain duplicatebranch banking facilities, resulting in asset write-downs to estimated fairvalue, eliminating duplicate back office functions, abandoning certain leasesand reducing the number of full-time employees. Accordingly, the Companyrecognized repositioning expenses of approximately $4.0 million in the yearended December 31, 2000. Details of the Kansas and Oklahoma repositioningaccrual for the three and six months ended June 30, 2002 and June 30, 2001 areas follows (in thousands):

 
|                              |   | **Activity  for Quarter Ended June 30, 2002** |   |
|-----------------------------------|--------|-----------------------------------------------|--------|
|                              |   | **Accrual at  March 31, 2002**      |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2002** |   |
| Salaries,  benefits and severance |   | $                                             | 70     |   | — |   | $ | 5 |   | $ | 65 |   |
|                                   |        |                                               |        |  |  |  |  |  |  |  |  |  |

 

14

----

 
|                                      |   | **Activity for Quarter  ended June 30, 2001** |   |
|-------------------------------------------|--------|---------------------------------------------------------|--------|
|                                      |   | **Accrual at  March 31, 2001**                |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2001** |   |
| Salaries,  benefits and severance         |   | $                                                       | 318    |   | $ | — |   | $ | 75 |   | $ | 243 |   |
| Asset  write-downs and lease abandonments |   | 7                                                       |   | — |   | 7 |   | — |   |
| Other  repositioning expenses             |   | 113                                                     |   | — |   | 44 |   | 69 |   |
|                                      |   | $                                                       | 438    |   | $ | — |   | $ | 126 |   | $ | 312 |   |

 
|                              |   | **Activity for Six Months  ended June 30, 2002** |   |
|-----------------------------------|--------|-----------------------------------------------------------------|--------|
|                              |   | **Accrual at  December 31, 2001**                |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2002** |   |
| Salaries,  benefits and severance |   | $                                                               | 177    |   | — |   | $ | 112 |   | $ | 65 |   |
|                                   |        |                                                                 |        |  |  |  |  |  |  |  |  |  |

 

15

----

 
|                                      |   | **Activity  for Six Months ended June 30, 2001** |   |
|-------------------------------------------|--------|--------------------------------------------------|--------|
|                                      |   | **Accrual at  December 31, 2000**      |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2001** |   |
| Salaries,  benefits and severance         |   | $                                                | 392    |   | $ | — |   | $ | 149 |   | $ | 243 |   |
| Asset  write-downs and lease abandonments |   | 24                                               |   | — |   | 24 |   | — |   |
| Other  repositioning expenses             |   | 227                                              |   | — |   | 158 |   | 69 |   |
|                                      |   | $                                                | 643    |   | $ | — |   | $ | 331 |   | $ | 312 |   |

 

During the fourth quarter of 2000, the Companyannounced it would close its separate mortgage banking subsidiary, Gold BancMortgage, Inc. As a result of this decision, the Company recorded expenses of$19.8 million in 2000. Details of the Gold Banc Mortgage closing accrual forthe three and six months ended June 30, 2002 and June 30, 2001 are as follows(in thousands):

 
|                              |   | **Activity  for Quarter ended June 30, 2002** |   |
|-----------------------------------|--------|-----------------------------------------------|--------|
|                              |   | **Accrual at  March 31, 2002**      |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2002** |   |
| Salaries,  benefits and severance |   | $                                             | 22     |   | — |   | $ | 16 |   | $ | 6 |   |
|                                   |        |                                               |        |  |  |  |  |  |  |  |  |  |

 

 

16

----

 
|                                                   |   | **Activity  for Quarter ended June 30, 2001** |   |
|--------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                   |   | **Accrual at  March 31, 2001**      |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2001** |   |
|                                                   |   | **(Restated)**                                |   | **(Restated)** |   |   |   | **(Restated)** |   |
| Salaries,  benefits and severance                      |   | $                                             | 286    |   | $ | — |   | $ | 82 |   | $ | 204 |   |
| Asset  and goodwill write-downs and lease abandonments |   | 56                                            |   | — |   | 56 |   | — |   |
| Other  closing expenses                                |   | 536                                           |   | — |   | 536 |   | — |   |
|                                                   |   | $                                             | 878    |   | $ | — |   | $ | 674 |   | $ | 204 |   |

 
|                              |   | **Activity  for Six Months ended June 30, 2002** |
|-----------------------------------|--------|-------------------------------------------------------|
|                              |   | **Accrual at  December 31, 2001**           |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2002** |   |
|                              |   | **(Restated)**                                        |   |   |   |   |   | **(Restated)** |   |
| Salaries,  benefits and severance |   | $                                                     | 39 |   | — |   | $ | 33 |   | $ | 6 |   |
|                                   |        |                                                       |  |  |  |  |  |  |  |  |  |  |

 

17

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|                                                   |   | **Activity  for Six Months ended June 30, 2001** |   |
|--------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                   |   | **Accrual at  December 31, 2000**      |   | **Expense** |   | **Paid** |   | **Accrual at  June 30, 2001** |   |
|                                                   |   | **(Restated)**                                   |   | **(Restated)** |   |   |   | **(Restated)** |   |
| Salaries, benefits and severance                       |   | $                                                | 341    |   | $ | — |   | $ | 1 37 |   | $ | 204 |   |
| Asset and goodwill write-downs and lease  abandonments |   | 174                                              |   | — |   | 174 |   | — |   |
| Other closing expenses                                 |   | $                                                | 1,095  |   | — |   | 1,095 |   | — |   |
|                                                   |   | $                                                | 1,610  |   | $ | — |   | $ | 1,406 |   | $ | 204 |   |

 

**9.    Subsequent Events:**

 

On July 18, 2002, the Company entered into a contractto acquire four branches, with approximately $144 million of deposits, fromEncore Bank. The branches, which are located in Johnson County, Kansas, willbecome branches of Gold Bank-Kansas. The purchases closed in the third quarterof 2002.

 

18

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**10.    Legal proceedings.**

 

*Regional Holding Litigation*

 

The following legal proceedings all relate to theCompany’s acquisition of Regional Holding Company, Inc. in 1999. The Companypurchased all of the capital stock of Regional Holding from Brad D. Ives, DavidW. Murrill and Robert E. McGannon on August 2, 1999, for a purchase price ofapproximately $13.2 million, pursuant to a Stock Purchase Agreement, dated July1, 1999, between the Company, Regional Holding and Ives, Murrill and McGannon(the “Regional Acquisition”).

 

**The First Regional Arbitration.**    TheCompany prosecuted a claim against Ives, Murrill and McGannon, which was filedbefore the American Arbitration Association (“AAA”) in June 2000. The Companyasserted 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 the Company to them as part ofthe acquisition, seeking a principal amount of $4.08 million, plus interest.Ives, Murrill and McGannon also counter-claimed for declaratory judgmentrelated to the Company’s set-off of its claim against the notes, and for fraudin connection with amendments to the notes, Ives’ and McGannon’s employmentagreements and the Stock Purchase Agreement.

 

The Company also gave Ives, Murrill and McGannonnotice invoking an alternative dispute resolution (“ADR”) provision of theStock Purchase 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. TheCompany demanded that Ives, Murrill and McGannon join in submitting the disputeto Ernst & Young, LLP, as set forth in the Stock Purchase Agreement. Ives,Murrill and McGannon disputed the timeliness of the demand, and asked the AAAPanel to declare that the Company had not timely invoked the procedure.

 

The Company obtained an award in its favor after anarbitration hearing held July 16-24, 2001. A three-person AAA panel made anaward in the Company’s favor, canceling the $4.08 million promissory notes fromit to Ives, Murrill and McGannon, and awarding the Company additional damagesof $489,000 against Ives, Murrill and McGannon. In addition, the AAA panelruled in the Company’s favor on all of Ives’, Murrill’s and McGannon’scounter-claims. The AAA panel denied a request for costs and fees, and denied amotion to reallocate or amend the award. As a result of the AAA panel’s ruling,the Company recorded the cancellation of the notes payable and the monetaryaward as a reduction of other expense in the third quarter of 2001. Withrespect to the accounting dispute, the AAA panel ruled in the Company’s favor,ordering the parties to submit the matter in accordance with the contractprocedures. As of August 13, 2002, it had not yet been submitted to Ernst &Young, LLP for decision.

 

**Civil Court Challenges of First Arbitration Award.**    OnNovember 9, 2001, Ives and Murrill filed a Petition to Vacate or ModifyArbitration Award in Jackson County, Missouri Circuit 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 sought to have the court set asidethe AAA panel’s award on the grounds that the panel exceeded its authorityand/or violated Ives’, Murrill’s and McGannon’s due process rights in makingthe award. The Company answered the petitions and asserted counterclaims onDecember 3, 2001. The Company’s counterclaim sought confirmation of thearbitration award, interest on the award from August 31, 2001 until the finaljudgment and its fees and costs incurred in defending this challenge. Ives andMurrill replied to the Company’s counterclaim on December 10, 2001. McGannonfiled his reply on December 28, 2001. The Company filed motions for summaryjudgment on January 8, 2002. Ives and Murrill opposed the Company’s motion andfiled a cross motion for summary judgment on March 11, 2002. McGannon opposedthe Company’s motion and filed a cross motion for summary judgment on March 21,2002. In April 2002, the Company responded to these pleadings and participatedin a hearing to (i) discuss the status of summary judgment briefing and (ii)schedule a tentative trial date in June 2002. On June 20, 2002, the CircuitCourt granted the Company’s summary judgment motion and denied the summaryjudgment motions of Ives and Murrill. The court also confirmed the originalarbitration award. The Circuit Court ruling became final on July 22, 2002. Ivesand Murrill posted a cash bond, and filed their Notice of Appeal on July 26,2002.

 

In mid-June 2002, the Company reached a tentativesettlement with Robert McGannon. In the settlement, Gold Banc reserves itsright to pursue claims against Ives and Murrill.

 

19

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**Civil Fraud and Employment Claims Suit.**    Ives,Murrill and McGannon filed a civil case on September 5, 2000 against Gold BancMortgage, Inc., Michael Gullion and Jerry Bengtson (“Defendants”) in theCircuit Court of Jackson County, Missouri. As subsequently amended, Ives,Murrill and McGannon in the Jackson County case allege three counts:

 

•             that(parallel 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 a constructivetermination under his employment agreement entitling him to certain 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

 

Gold Banc Mortgage answered, denying the claimsagainst it and asserting affirmative defenses. In light of obtainingconfirmation of the original arbitration award, the Company believes that GoldBanc Mortgage’s defenses to the fraud claim are very strong and that theplaintiffs’ fraud claim is without merit. Gold Banc Mortgage will file a motionfor summary judgment on the fraud claim. Because of his settlement, McGannonwill be dismissing all of his claims with prejudice in this case. With regardto Ives’ employment claims in this case, discovery has begun. The Companybelieves Gold Banc Mortgage’s defense to this claim to be strong.

 

**Second Regional Arbitration.**    TheCompany filed a second arbitration claim against Ives, Murrill and McGannonbefore the American Arbitration Association on January 10, 2002. The Companyhas asserted:

 

•             acontractual claim against Ives, Murrill and McGannon for additional breaches ofthe representations and warranties made in the Stock Purchase Agreement relatedto the acquisition of Regional Holding and

 

•             anindemnification claim for litigation expenses and other specified damagesincurred by it after the closing date of the acquisition of Regional Holdingrelated to acts, or omissions, that occurred prior to the closing date of theacquisition.

 

20

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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. The Company seeks damages of approximately $616,594.25 and itsattorneys’ fees. On February 8, 2002, McGannon responded to the Company’s claimwith a general denial of the allegations. Ives and Murrill also responded onFebruary 8, 2002 with a general denial of the allegations, a counterclaimalleging that the Company willfully breached the Stock Purchase Agreement andits duties thereunder, and a prayer for a declaratory judgment and compensatoryand punitive damages. The Company has responded with a denial of all Ives’s andMurrill’s counterclaims. Pursuant to its tentative settlement with McGannon,the Company will withdraw its claims against him in this arbitration.

 

**CUNA Trademark Lawsuit**

 

The Company filed suit against the Credit UnionNational Association, Inc. (“CUNA”) on July 26, 2001, in the United StatesDistrict Court for the District of Kansas to defend its MORE THAN MONEY®service mark. Suit was filed to protect the Company’s rights againstinfringement by CUNA and other infringers. The lawsuit alleges CUNA hasinfringed the Company’s service mark MORE THAN MONEY by using the service markWHERE PEOPLE ARE WORTH MORE THAN MONEY in its national brand campaign promotingcredit unions throughout the country. The Complaint includes claims for (i)trademark infringement and unfair competition under federal and common law, and(ii) trademark dilution under federal and state law. Several types of reliefare requested in the suit, including entry of a permanent injunctionprohibiting CUNA and credit unions from using the service mark WHERE PEOPLE AREWORTH MORE THAN MONEY, an order that CUNA’s two registrations for its mark becancelled, and money damages, including a sum to compensate the Company forcorrective advertising. CUNA filed its Answer to the Complaint on September 17,2001. In March 2002, the Company participated in a court ordered mediation butthe parties were unable to reach a resolution. The Company has agreed torevisit the possibility of settlement at a later date following additionaldiscovery. Fact discovery has now closed and expert witness reports onliability issues have been produced by both sides. CUNA’s damages expert reportis due August 7, 2002. CUNA’s expert reports were due July 19, 2002. A summaryjudgment motion was filed by CUNA and the Company filed its response on July19, 2002.  As of August 13, 2002, thematter has been set for a final pretrial conference in September 2002 and hasbeen placed on the January 2003 trial docket of the presiding judge. TheCompany cannot predict with certainty the outcome of this litigation.

 

21

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**MANAGEMENT’S DISCUSSION****ANDANALYSIS OF FINANCIALCONDITION AND 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 affectingresults of operations and any significant changes in financial condition forthe three- and six-month periods ended June 30, 2002. This review should beread in conjunction with the consolidated financial statements and relatednotes appearing elsewhere in this report as well as the Company’s 2001 AnnualReport on Form 10-K and the Company’s 2002 Annual Report on Form 10-K/A (the“2002 Annual Report”). Results of operations for the three- and six-monthperiods ended June 30, 2002 are not necessarily indicative of results to beattained for any other period.

 

**Summary**

 

Consolidated net earnings for the six months endedJune 30, 2002 was $13.1 million; a $2.2 million increase over the $10.9 millionfor the first six months of 2001. Net income for the three months ended June30, 2002 was $7.0 million compared with $4.8 million for the three months endedJune 30, 2001. Diluted earnings per share were $0.41 for the first six monthsof 2002 compared to $0.31 per share for the first six months of 2001. Earningsper share were $0.22 for the quarter ended June 30, 2002 compared to $0.14 forthe quarter ended June 30, 2001. The return on average assets and equity was0.83% and 15.75%, respectively, for the six months ended June 30, 2002 comparedto 0.78% and 12.88%, respectively, for the six months ended June 30, 2001. Thereturn on average assets and equity was 0.86% and 16.66%, respectively, for thethree months ended June 30, 2002 compared to 0.69% and 11.40%, respectively,for the three months ended June 30, 2001. The stockholders’ equity to total assets ratio was 5.20% and 5.79% atJune 30, 2002 and June 30, 2001, respectively. The dividend to net income ratio for the three months ended June 30, 2002and June 30, 2001 was 9.57% and 15.05%, respectively.

 

**Recent Events 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 and six months endedJune 30, 2002 and June 30, 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. The transactionswere discovered by an internal investigation conducted by our Audit Committee,with assistance from its independent legal counsel and forensicaccountants.  For a detailed discussionof the internal investigation and the discovered transactions, see “Item 13 —Certain Relationships and Related Transactions” in the 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**  **June 30:** |   |                                                      |       |   |   |   |   |   |   |
| 2002                                       |   | $                                                         | (255       | ) | $ | (183 | ) | $ | (72 | ) | 1.01 | % |
| 2001                                       |   | $                                                         | (1,416     | ) | $ | (132 | ) | $ | (1,284 | ) | 22.55 | % |
|                                       |   |                                                      |       |   |   |   |   |   |   |
| **Six  Months Ended June 30:**        |   |                                                      |       |   |   |   |   |   |   |
| 2002                                       |   | $                                                         | (488       | ) | $ | (366 | ) | $ | (122 | ) | 0.92 | % |
| 2001                                       |   | $                                                         | (1,455     | ) | $ | (264 | ) | $ | (1,191 | ) | 9.88 | % |

 

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The impact of theseamounts (as described in Note 2 “Restatement and Impact on Earnings” to theconsolidated 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**  **June 30:** |   |                          | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| 2002                                            |   | $                             | 0.21       |                            | $          | 0.21 |   | $ | 0.21 |   | $ | 0.21 |   |
| 2001                                            |   | $                             | 0.17       |                            | $          | 0.14 |   | $ | 0.17 |   | $ | 0.14 |   |
|                                            |   |                          |       |                            |       |   |   |   |   |
| **Six  Months Ended**  **June 30:**   |   |                          | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| 2002                                            |   | $                             | 0.39       |                            | $          | 0.39 |   | $ | 0.39 |   | $ | 0.39 |   |
| 2001                                            |   | $                             | 0.33       |                            | $          | 0.31 |   | $ | 0.33 |   | $ | 0.31 |   |

 

**Results of Operations**

 

*Net Interest Income*

 

Total interest income for the six months ended June30, 2002 was $97.9 million compared to $104.1 million for the six months endedJune 30, 2001 or a decrease of $6.2 million. This decrease resulted from a $6.2million decrease in loan interest, a $1.7 million increase in investmentsecurity interest, and a $1.7 million decrease in other interest income. Totalinterest income for the three months ended June 30, 2002 was $50.1 millioncompared with $51.1 million for the three months ended June 30, 2001, resultingin a decrease of $982,000, or 1.9%. The decrease was primarily the result of a$892,000 decline in loan interest income. Average loans increased to $2.3billion for the three months ended June 30, 2002 compared to $1.9 billion forthe three months ended June 30, 2001 or a 16.9% increase. This increase in loanvolume was also accompanied by an increase in net interest margin from 3.35%for the three months ended June 30, 2001 to 3.57% for the three months endedJune 30, 2002. Average earning assets were $2.9 billion for the six monthsended June 30, 2002 compared with $2.5 billion for the first six months of2001.

 

Total interest expense for the six months ended June30, 2002 was $48.5 million compared to $60.3 million for the six months endedJune 30, 2001. Total interest expense for the three months ended June 30, 2002was $24.7 million compared with $29.6 million for the three months ended June30, 2001, resulting in a decrease of $4.9 million, or 16.5%. The decrease wasthe result of a $6.2 million decrease in interest on deposits and a $1.3million increase in interest expense on other borrowings.

 

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Net interest income was $49.4 million for the sixmonths ended June 30, 2002 compared with $43.8 million for the six months endedJune 30, 2001. Net interest income was $25.4 million for the three months endedJune 30, 2002, compared to $21.5 million for the same period in 2001; anincrease of 18.2%. The Company’s net interest margin increased from 3.46% forthe six months ended June 30, 2001 to 3.57% for the six months ended June 30,2002. Net interest margin increased from 3.35% for the three months ended June30, 2001 to 3.57% for the three months ended June 30, 2002. The increase in netinterest income and net interest margin was the result of a significantincrease in loans during the periods and also of the repricing of bank depositsat lower interest rates. For the three months ended June 30, 2002, averageinterest bearing liabilities decreased $77.1 million compared to a decrease of$82.8 million in average interest earning assets.

 

*Provision/Allowance for 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 were 72% of the Company’s total assets as of June 30, 2002.Credit losses are inherent in the lending business. The risk of loss will varywith general economic conditions, the type of loan being made, thecreditworthiness of the borrower over the term of the loan and the value of thecollateral in the case of a collateralized loan, among other things.  The allowance for loan losses totaled $30.5million and $26.1 million at June 30, 2002 and December 31, 2001, respectively,and represented 1.25% and 1.21% of total loans at each date. The provision forloan losses for the six months ended June 30, 2002 was $10.0 million comparedto $4.3 million for the six months ended June 30, 2001.  The increase in allowance for loan lossesfor the six months ended June 30, 2002 was due primarily to significantloan growth in the first six months of 2002. Net charge-offs for the six months ended June 30, 2002 were $5.6 millioncompared to $6.4 million for the six months ended June 30, 2001.Management has continued to review the loan portfolios of the banks, toincrease the provision and to charge-off those credits when collection isconsidered to be doubtful.

 

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 tocalculate the 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 subsidiary in an effort to minimize creditlosses, and monitors asset quality to maintain an adequate loan loss allowance.Although management believes its allowance for loan losses is adequate for eachbank and on an aggregate basis, the allowance may not prove sufficient to coverfuture loan losses. Further, although management uses the best informationavailable to make determinations with respect to the allowance for loan losses,future adjustments may be necessary if economic conditions differ substantiallyfrom the assumptions used, or adverse developments arise with respect tonon-performing or performing loans. Accordingly, the allowance for loan lossesmay not be adequate to cover loan losses, and significant increases to theallowance may be required in the future if economic conditions should worsen.Material additions to the allowance for loan losses would result in a decreaseof the Company’s net income and capital.

 

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The Company considers non-performing assets to includenon-accrual loans, other loans past due 90 days or more as to principal andinterest (with the exception of those loans which in management’s opinion arewell collateralized or exhibit other characteristics suggesting they arecollectible), other real estate owned and repossessed assets. Totalnon-performing loans were $18.1 million and $23.0 million at June 30, 2002 andDecember 31, 2001, respectively.  The$4.9 million decrease in non-performing loans can generally be attributedto loans charged off and added to other repossessed assets.  Total non-performing loans were 0.74% and1.06% of gross loans at June 30, 2002 and December 31, 2001, respectively.  Total non-performing assets were $19.9million and $27.5 million at June 30, 2002 and December 31, 2001,respectively.  The $7.6 million decreasein non-performing assets can generally be attributed to a combination ofcharge offs and liquidation of property held in the Other Real Estate categoryduring the six month period.  Totalnon-performing assets were 0.60% and 0.91% of total assets at June 30,2002 and December 31, 2001, respectively.

 

*Other Income*

 

Other income for the six months ended June 30, 2002was $30.7 million compared to $19.9 million for the first six months of 2001.The increase of $10.8 million resulted from an increase of $3.0 million inservice fees, a $390,000 decrease in investment trading fees and commissions,an increase of $2.1 million in net securities gains, and a $5.7 millionincrease in sales from information technology services.

 

For the three months ended June 30, 2002, other incomewas $16.9 million compared to $9.9 million for the three months ended June 30,2001. This equated to an increase of $7.0 million, or 71.1%. A significantchange was an increase in sales from information technology sales, whichincreased from $2.5 million in the second quarter of 2001 to $4.8 million inthe second quarter of 2002. This increase was the result of increased salesrevenue derived from Information Products, Inc., which was acquired in thesecond quarter of 2001. The increase also resulted from an increase in servicefees of $1.7 million compared with the second quarter of 2001, and a $385,000decline in investment trading fees and commissions. Net securities gains fromrelated securities sales increased $2.5 million. This was the result of theliquidation of equity securities for a before-tax gain of $2.9 million.

 

*Other Expense*

 

For the first six months of 2002, other expense was$52.3 million compared to $42.9 million for the same period of 2001. Salariesand employee benefits increased from $22.1 million in the first six months of2001 to $25.3 million in the first six months of 2002, or an increase of $3.2million. Goodwill expense was $1.1 million during the first six months of 2001,which was reduced to zero in 2002 due to the adoption of a new accountingstandard. Losses resulting from misapplication of bank funds decreased $827,000from the six month period ended June 30, 2001, due to the Company recording asexpense a $900,000 check that was intended to be deposited into the Company’saccount, which was diverted into the personal account of Mr. Mike Gullion,former Chief Executive Officer of the Company. A $4.1 million increase resulted from the cost of sales component forhardware and software sold by CompuNet. This directly relates to the $5.7million increase in information technology sales described above in the OtherIncome section. The remaining expenses classified as other expense increasedfrom $10.4 million to $14.1 million. This increase of $3.1 million was derivedfrom a $1.2 million increase in software and data processing expense, a $1.6million increase in advertising and marketing costs, an $800,000 increase inlegal costs, and an increase of $1.0 million in other miscellaneous expenses.

 

Other expense for the three months ended June 30, 2002was $27.5 million, compared to $21.2 million for the three months ended June30, 2001. This is an increase of $5.9 million, or 27.6%. Salaries and employeebenefits increased $1.9 million, cost of sales for information technology salesincreased $1.7 million, and other miscellaneous expenses increased $2.7 millionin comparing the quarter ended June 30, 2002 with the quarter ended June 30,2001.

 

*Income Tax Expense*

 

Income tax expense for the six months ended June 30,2002 was $4.8 million compared to $5.5 million for the six months ended June30, 2001. The effective tax rate was 26.7% and 34.0% for each period,respectively. The decrease in the effective tax rate from 34.0% to 26.7% wasthe result of non-taxable income from bank owned life insurance policies andthe cessation of amortization of non-deductible goodwill. Income tax expensefor the three months ended June 30, 2002 and 2001 was $2.8 million and $2.3million, respectively. The effective tax rate for each time period was 28.7%and 33.0%, respectively.

 

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

 

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**Financial Condition**

 

From December 31, 2001 to June 30, 2002, total assetsgrew from $3.0 billion to $3.3 billion, respectively.  Net loans increased from $2.1 billion to $2.4 billion during thissame period.  Deposits have increasedfrom $2.2 billion to $2.4 billion from December 31, 2001 to June 30,2002.  Investment securities were $602.2million at June 30, 2002, compared to $588.8 million at December 31, 2001; anincrease of $13.4 million or 2.3%.  Mortgageloans held for sale increased from $11.3 million at December 31, 2001to $16.5 million at June 30, 2002. Net premises and equipment increased from $57.7 million to$70.1 million.  Cash surrendervalue of BOLI life insurance increased from $53.0 million to$54.9 million. Total liabilities increased from $2.9 billion to$3.1 billion.  Securities soldunder agreements to repurchase increased from $104 million to $126 million.  Total long and short-term borrowingsincreased $2.1 million, or 0.4%, from December 31, 2001.

 

During the first six months of 2002, loans increased$269 million, or 12.7%, over balances at December 31, 2001. Theincrease was the result of increased loan activity. Mortgage loans held forsale increased $5.2 million over the balance at December 31, 2001.The increase was due to an increase in fixed rate single-family mortgage loansoriginated during the six-month period ended June 30, 2002.

 

Investment securities at June 30, 2002, increased$13.4 million compared to the balance at December 31, 2001. Most ofthe increase resulted from a $6.9million increase in available for sale securities and  a $9.0 million increase in held-to-maturity securities.  The total investment securitiesportfolio amounted to $602.2 million at June 30, 2002, and wascomprised mainly of U.S. government and agencies (19.0%), mortgage-backed(58.5%), and other asset-backed (22.5%) investment securities.

 

Bank owned life insurance at June 30, 2002,increased $1.9 million compared to the balance sheet amount atDecember 31, 2001. The increase in the balance resulted from the earningsrecorded on the Company’s investment in bank owned life insurance. The Companydid not purchase any additional bank owned life insurance during the three monthsended June 30, 2002.

 

Total deposits increased $271.2 million atJune 30, 2002, compared to December 31, 2001, mainly due to****an increase of $213.6 million in longterm retail certificates of deposit and $62.8 million in money marketaccounts and a $5.2 million decrease in other deposits.

 

Compared to 2001 year-end balances, borrowings atJune 30, 2002 increased $2.1 million.  The Company’s short-term borrowings of federal funds purchasedand securities sold under agreements to repurchase vary depending on dailyliquidity requirements. These borrowings declined $30.0 million during thefirst six months of 2002 to a balance of $936,000 thousand million atJune 30, 2002.  Long termborrowings, consisting mainly of FHLB borrowings and other long term borrowingsfrom LaSalle Bank, increased $32.0 million to $560.2 millionoutstanding at June 30, 2002.

 

During the first six months of 2002, accrued interestand other liabilities increased $2.9 million, or 12.0%, due to an increasein accrued income taxes.

 

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*Contractual Obligations and Commercial Commitments*

 

The following table presents the Company’s contractualcash obligations, defined as operating lease obligations, principal paymentsdue on non-deposit obligations and guarantees with maturities in excess of oneyear, as of June 30, 2002 for the periods indicated.

 
| **Contractual Cash Obligations** |      | **Payments  Due by Period** |                        |
|----------------------------------|-----------|-----------------------------|-----------------------------|
|                             | **Total** |                        | **One Year  and Less** |   | **One to Three  Years** |   | **Four to Five  Years** |   | **More than  Five Years** |   |
|                             |      | **(dollars  in thousands)** |                        |
| Operating  leases                |      | $                           | 7,657                       |   | $ | 1,746 |   | $ | 2,712 |   | $ | 1,433 |   | $ | 1,766 |   |
| FHLB  advances (1)               |      | 412,887                     |                        | 46,000 |   | 13,946 |   | 40,830 |   | 312,111 |   |
| Subordinated  debt (1)           |      | 81,876                      |                        | 1,734 |   | 3,468 |   | 3,468 |   | 73,206 |   |
| Trust  preferred securities      |      | 278,782                     |                        | 7,321 |   | 14,642 |   | 14,642 |   | 242,177 |   |
| Total  contractual obligations   |      | $                           | 781,202                     |   | $ | 56,801 |   | $ | 34,768 |   | $ | 60,373 |   | $ | 629,260 |   |

 

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(1)   For floating interest rate obligations, basedupon interest rate in effect on June 30, 2002.

 

*Liquidity and 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 borrowings, cash dividends and tax payments from itssubsidiary Banks. The Company has a $25 million line of credit with acorrespondent bank with $15 million in outstanding borrowings at June 30, 2002.Total loans increased $274 million compared to December 31, 2001 while totaldeposits increased $271 million compared to the same period. Even with thisincrease in the balance sheet, the basic liquidity ratio for June 30, 2002 was12.83%.

 

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

 

Cash and cash equivalents and investment securitiestotaled $692.5 million, or 20.9%, of total assets at June 30, 2002 compared to$662.5 million, or 22.0%, at December 31, 2001. Cash provided by operatingactivities for the six months ended June 30, 2002 was $35.0 million, consistingprimarily of net earnings and proceeds from the sale of loans. Cash used byinvesting activities was $304.8 million, consisting primarily of an increase inloans of $279.2 million and the purchase of fixed assets of $15.4 million. Cashprovided by financing activities was $286.0 million, consisting primarily of anincrease in deposits of $271.2 million and of an increase in net borrowings of$24.4 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. Underthe risk-based capital method of capital measurement, the ratio computed isdependent on the amount and composition of assets recorded on the balance sheetand the amount and composition of off-balance sheet items, in addition to thelevel of capital. Historically, the Banks have increased core capital throughretention 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 June 30, 2002 were 10.40%, 7.13% and 5.80%, respectively.These same ratios at December 31, 2001 were 11.35%, 7.76% and 6.20%,respectively. Total loans increased $274 million compared to December 31, 2001while total deposits increased $271 million compared to the same period. Evenwith this increase in the balance sheet, the Company’s ratios exceed thenecessary levels to be considered well capitalized. The principal source offunds at the holding company level is dividends from the Banks. The payment ofdividends is subject to restrictions imposed by federal and state banking lawsand regulations. At June 30, 2002, the subsidiary banks could pay $29.3 millionin dividends to the holding company and still remain well capitalized.Management believes funds generated from the dividends from its subsidiariesand its existing line of credit will be sufficient to meet its current cashrequirements. However, if the Company continues at its current rate of internalgrowth, the Company will need to raise additional equity to remain “wellcapitalized.”

 

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In August 2001, the Company completed a common stockrepurchase program whereby the Company acquired 1,839,000 shares of commonstock, or approximately 5%, of the shares outstanding as of March 7, 2001. InSeptember 2001, the Company announced the approval of another common stockrepurchase program whereby the Company was authorized to acquire up to1,750,336 additional shares of the Company’s common stock, or approximately 5%,of the shares outstanding as of September 17, 2001. As of June 30, 2002,the Company had acquired 3,216,110 shares under these programs at pricesranging from $6.55 to $7.85 per share. On July 24, 2002, the Company terminatedthe share repurchase program.

 

*Boli Policies*

 

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 June 30,2002, Gold Bank-Kansas had $28.0 million of BOLI (equal to 19.0% of itscapital and surplus), Gold Bank-Oklahoma had $16.1 million of BOLI (equalto 20.5% of its capital and surplus) and Gold Bank-Florida had$10.7 million of BOLI (equal to 23.3% of its capital and surplus). TheBanks monitor the financial condition and credit rating of each of the threelife insurance companies that issued the BOLI policies. The Company believesthat these BOLI investments will not have any significant impact on the capitalor liquidity of the banks subsidiaries.

 

*CompuNet Activities*

 

CompuNet Engineering, Inc., which was acquired inMarch 1999, provides information technology, e-commerce services and networkingsolutions for banks and other businesses. Under current Federal Reserveregulations, the data processing activities of a bank holding company and itssubsidiaries must be done primarily for financial companies, and non-financialdata processing activities must be limited to 30% of the bank holding company’stotal consolidated annual data processing revenues. When the Company acquiredCompuNet, the aggregate data processing activities of the Company and CompuNetcomplied with this 30% limitation.

 

On December 21, 2000, the Federal Reserve published aproposed regulation that would permit a financial holding company to generateup to 80% of its consolidated data processing revenue from non-financial dataprocessing activities. The proposed regulation limits the investment of afinancial holding company in such data processing activities to 5% of thefinancial holding company’s Tier 1 capital. The comment period on the proposedregulation expired on February 16, 2001. The Company has been advised that theFederal Reserve plans to publish a final regulation during the second half of2002.

 

In 2001, CompuNet acquired the assets of InformationProducts, Inc., which provides technology services, including LAN, WAN, productsupport, telecommunication line monitoring, hardware, maintenance and systemsdesign 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 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 we may not be able if we are requiredto divest our merchant banking investments), selling part or all of CompuNet’sbusiness to an unaffiliated third party, or other curative action.

 

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**Accounting and 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 each reportingunit by assigning the assets and liabilities, including the existing goodwilland intangible assets, to those reporting units as of January 1, 2002. TheCompany has identified its reporting units to be at the individual subsidiarylevel. The Statement allows until June 30, 2002 to determine the fair value ofeach reporting unit and compare it to the carrying amount of the reportingunit. To the extent the carrying amount of a reporting unit exceeds the fairvalue of the reporting unit, an indication exists that the reporting unitgoodwill may be impaired and the Company must perform the second step of thetransitional impairment test. In the second step, the Company must compare theimplied fair value of the reporting unit goodwill with the carrying amount ofthe reporting unit goodwill, both of which would be measured as of January 1,2002. The implied fair value of goodwill is determined by allocating the fairvalue of the reporting unit to all of the assets (recognized and unrecognized)and liabilities 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.

 

The Company completed the first step in thetransitional goodwill impairment valuation, which was to compare the fair valueof its reporting units with the carrying amount of the reporting units. Becausethe fair value of the reporting units exceeded the carrying value of the units,no indication of reporting unit goodwill impairment exists. As a result,performance of the second step on the transitional impairment test describedabove was not necessary, and no impairment loss will be recognized as acumulative effect of a change in accounting principle in the Company’s 2002 statementof income.

 

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 Statement 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.

 

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**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.

 

*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-Looking Statements*

 

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 business of the Company and itssubsidiaries, including, without limitation:

 

•                  statements thatare not historical in nature

 

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

 

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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 the Company and itsacquisition targets may be greater than expected

 

•                  changes in theinterest rate environment may reduce interest margins

 

•                  general economicconditions, either nationally or in our markets, may be less favorable thanexpected

 

•                  legislative orregulatory changes may adversely affect the business in which the Company andits subsidiaries are engaged

 

•                  technologicalchanges may be more difficult or expensive than anticipated

 

•                  changes mayoccur in the securities markets

 

The Company has described under “Factors That MayAffect Future Results of Operations, Financial Condition or Business”additional factors that could cause actual results to be materially differentfrom those described in the forward-looking statements. Other factors that theCompany has not identified in this report could also have this effect. You arecautioned not to put undue reliance on any forward-looking statement whichspeaks only as of the date it was made.

 

*Factors That May Affect FutureResults of Operations, Financial Condition or Business*

 

The Company is identifying important risks anduncertainties that could affect the Company’s results of operations, financialcondition or business and that could cause them to differ materially from theCompany’s historical results of operations, financial condition or business, orthose contemplated by forward-looking statements made herein or elsewhere, by,or on behalf of, the Company. Factors that could cause or contribute to suchdifferences include, but are not limited to, those factors described below.

 

*The Company may not be able tomaintain its growth rate.*

 

It may be difficult for the Company to maintain itsrapid rate of growth. The rural market areas the Company now serves offer morelimited opportunities for growth than the metropolitan markets the Companyserves. The Company believes future growth in its revenues and net earningswill depend primarily on its internal growth in the metropolitan markets whereit is located. Other financial institutions in these metropolitan markets alsocompete intensely for assets and deposits. This competition may adverselyaffect the Company’s ability to profitably grow its asset and deposit base.

 

During the period from 1996 to 2000, the Company grewsignificantly through acquisitions. While the Company may supplement itsinternal growth through future acquisitions in metropolitan markets, primarilyin the Midwest and the west coast of Florida, there is great competition forsuch acquisition candidates. The Company may not be successful in identifying,or evaluating risks inherent in, any such acquisition candidates or be able toacquire such acquisition candidates on terms the Company feels are favorable.In addition, the Company plans to open several new branches in the next twelvemonths. The increased operating expenses incurred in opening these branches maynot be offset by increases in net interest income and other income from thesenew branches.

 

The Company’s objectives for earnings growth, returnon equity and return on assets have been achieved primarily through extensivegrowth in loans in Kansas and Florida. Satisfying these objectives in thefuture will require increasing amounts of capital to meet regulatoryrequirements. The Company may not be able to obtain such capital in adequateamounts or on attractive terms.

 

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*The Company’s allowance for loanlosses may not be adequate.*

 

The Company’s allowance for loan losses may not beadequate to cover actual loan losses. As a lender, the Company is exposed tothe risk that its customers will be unable to repay their loans according tothe terms of the loans and that any collateral securing the payment of thecustomers’ loans may not be sufficient to cover repayment. Credit losses areinherent in the lending business and could have a material adverse effect onthe Company’s operating results. Additionally, approximately 84.8% of theCompany’s loan portfolio on June 30, 2002 consisted of construction loans,agricultural loans, loans secured by commercial real estate, and commercialbusiness loans. These loans generally involve a greater degree of risk ofnonpayment or late payment than home equity loans or residential mortgage loansand carry higher loan balances. The risk of loss will vary with generaleconomic conditions, the type of loan being made, the creditworthiness of theborrower over the term of the loan and the quality and value of the collateralin the case of collateralized loans, among other things. The Company’s creditrisk with respect to its real estate and construction loan portfolio relatesprincipally to the general creditworthiness of individuals and the value ofreal estate serving as security for the repayment of such loans. The Company’scredit risk with respect to its commercial and consumer installment loanportfolio relates principally to the general creditworthiness of businesses andindividuals within the Company’s local markets. The Company’s credit risk withrespect to its agricultural loan portfolio relates principally to commodityprices and weather patterns.

 

As the Company has completed numerous acquisitionsfrom 1996 through 2000 that significantly enhanced its growth, a significantportion of the Company’s existing loan portfolio was not originallyunderwritten by the Company but was added through these acquisitions. While theCompany had the opportunity to review the loan portfolios of the banks itacquired before completing the transactions and has conformed the credit andunderwriting policies and procedures of these banks to those of the Companyfollowing the acquisitions, these loans may not have undergone the same levelof rigorous analysis and review at inception as loans that the Companyoriginates, and may not have the level and quality of supporting documentationin the loan files as the Company’s policies require. Therefore, these acquiredloans are subject to greater risk than if the Company had originallyunderwritten these loans itself.

 

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.

 

*Changes in interest rates couldadversely affect profitability.*

 

The Company may be unable to manage interest rate riskthat could reduce its net interest income. Like other financial institutions,the Company’s results of operations are impacted principally by net interestincome, which is the difference between interest earned on loans andinvestments and interest expense paid on deposits and other borrowings. TheCompany cannot predict or control changes in interest rates. Regional and localeconomic conditions and the policies of regulatory authorities, includingmonetary policies of the Federal Reserve, affect interest income and interestexpense. Interest rate cuts by the Federal Reserve throughout 2001 havegenerally reduced the Company’s net interest income. While the Companycontinually takes measures intended to manage the risks from changes in marketinterest rates, changes in interest rates can still have a material adverseeffect on its profitability.

 

*Funding the Company’s substantialcash requirements with dividends from the Company’s bank subsidiaries willreduce the capital levels of the banks and thus their ability to grow.*

 

The Company is a separate legal entity from itssubsidiaries and does not have significant operations of its own. The Companydepends primarily on dividends it receives from its subsidiaries, which may belimited by statute and regulations, and its cash and liquid investments, to paydividends on the Company’s common stock and to pay its operating expenses. Inaddition, the Company currently has an aggregate outstanding amount of $111.7million in subordinated debt and trust preferred securities, as compared tototal equity of $173.8 million outstanding. As of June 30, 2002, the Company’sannual interest payments due on these borrowings were approximately $9.3million. The Company is also dependent on dividends from its bank subsidiariesto service these borrowings, and ultimately for principal repayment atmaturity, as well as to service the Company’s line of credit.

 

Even if the Company’s subsidiaries are able togenerate sufficient earnings to pay dividends to it, the boards of directors ofthe subsidiaries may decide to retain a greater portion of their earnings tomaintain existing capital or achieve additional capital necessary in light ofthe financial condition, asset quality or regulatory requirements of thesubsidiaries or other business considerations. The extent to which the Company’sbank subsidiaries pay it a significant portion of their retained earnings asdividends to fund the Company’s substantial cash requirements may also reducethe ability of the bank subsidiaries to grow while maintaining regulatorycapital ratios at “well capitalized” standards set by federal regulators.

 

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*Loss of key personnel could have anadverse effect on the Company’s operations.*

 

The loss of certain key personnel could adverselyaffect the Company’s operations. The Company’s success depends in large part onthe retention of a limited number of key persons, including: Michael W.Gullion, the Company’s Chairman and Chief Executive Officer; Malcolm M. Aslin,the Company’s President and Chief Operating Officer;Rick J. Tremblay, the Company’s Executive Vice President and ChiefFinancial Officer; and John Price, the Company’s Executive Vice President andChief Credit Officer. The Company will likely undergo a difficult transitionperiod if it loses the services of any or all of these individuals. Inrecognition of this risk, the Company owns, and is the beneficiary of,insurance policies on the lives of these key employees and the Company hasentered into employment agreements with Messrs. Gullion and Aslin.

 

The Company also places great value on the experienceof the presidents of its subsidiary banks and the community bank presidents ineach of the Company’s markets and on their relationships with the communitiesthey serve. The loss of these key persons could negatively impact the affectedbanking locations. The Company may not be able to retain its current keypersonnel or attract additional qualified key persons as needed.

 

*Local economic conditions couldadversely affect the Company’s operations.*

 

Changes in the local economic conditions couldadversely affect the Company’s loan portfolio and results of operations. TheCompany’s success depends to a certain extent upon the general economicconditions of the local markets that it serves. Unlike larger banks that aremore geographically diversified, the Company provides banking and financialservices to customers in those markets in Kansas, Oklahoma, Missouri andFlorida, including a number of rural markets, where its subsidiary banksoperate or are expected to operate. The Company’s commercial, agricultural,real estate and construction loans, and the ability of the borrowers to repaythese loans and the value of the collateral securing these loans, are impactedby the local economic conditions. Favorable economic conditions may notcontinue in such markets.

 

*Technological change may impair theCompany’s competitiveness.*

 

The Company cannot predict how changes in technologywill impact its business. The financial services market, including bankingservices, is increasingly affected by advances in technology includingdevelopments in: telecommunications; data processing; automation;Internet-based banking; telebanking; and debit cards and so-called “smartcards.” The Company’s ability to compete successfully in the future will dependon whether it can anticipate and respond to technological changes. To developthese and other new technologies, the Company will likely have to makeadditional capital investments, and its current systems implementation andtransition efforts may be unsuccessful. Although the Company continuallyinvests in new technology, it may not have sufficient resources or access tothe necessary proprietary technology to remain competitive in the future.

 

*The banking business is highlycompetitive.*

 

The Company operates in a competitive environment. Inthe metropolitan and suburban areas in which the Company competes, othercommercial banks, savings and loan associations, credit unions, financecompanies, mutual funds, insurance companies, brokerage and investment bankingfirms and other financial intermediaries offer similar services. The Companyalso faces competition in its rural markets. Many of these competitors havesubstantially greater resources and lending limits and may offer certain servicesthe Company’s subsidiary banks and businesses do not currently provide. Inaddition, some of the non-bank competitors are not subject to the sameextensive regulations that govern the Company’s subsidiary banks andbusinesses. The Company’s profitability depends upon the ability of itssubsidiaries to compete in its primary market areas.

 

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*Effects of regulatory changes cannotbe predicted.*

 

The Company is subject to extensive regulation. Thebanking industry is heavily regulated under both federal and state law. Theseregulations are primarily intended to protect depositors and the FederalDeposit Insurance Corporation, not the Company’s creditors or stockholders. TheCompany’s non-bank subsidiaries are also subject to the supervision of theFederal Reserve Board, in addition to other regulatory and self-regulatoryagencies including the Securities and Exchange Commission, the NationalAssociation of Securities Dealers, Inc., and state securities and insuranceregulators. Regulations affecting banks and financial services businesses areundergoing continuous change, and the Company cannot predict the ultimateeffect of such changes. Regulations and laws may be modified at any time, andnew legislation may be enacted that affects the Company, its subsidiary banksor its non-bank subsidiaries. Such modifications or new laws could adverselyaffect the Company.

 

*The Company’s ability to paydividends on its common stock is limited by the ability of the Company’ssubsidiary banks to pay dividends under applicable law and by contractsrelating to the Company’s trust preferred securities.*

 

The Company’s ability to pay dividends on its commonstock largely depends on the Company’s receipt of dividends from its subsidiarybanks. The amount of dividends that the Company’s subsidiary banks may pay toit is limited by federal and state banking laws and regulations. As a financialholding company, the Company’s subsidiary banks are required to maintaincapital sufficient to meet the “well capitalized” standard set by theregulators and will be able to pay dividends to the Company only so long astheir capital continues to exceed these levels. The Company or its banks maydecide to limit the payment of dividends even when the Company or the bankshave the legal ability to pay them in order to retain earnings for use in theCompany’s or its banks’ business. Under contracts relating to the Company’strust preferred securities, it is prohibited from paying dividends on its commonstock if it has not made required payments on, or has elected to defer paymentsof interest on, the junior subordinated debentures that support the Company’strust preferred securities or if an event of default has occurred and iscontinuing with respect to such debentures. Substantially similar contractualprovisions related to the trust preferred securities for American Bank-Floridalimit the payment of dividends by the Company’s Florida intermediate holdingcompany.

 

*The Company’s shareholder rightsplan and provisions in the Company’s articles of incorporation and its by-lawsmay delay or prevent an acquisition of the Company by a third party.*

 

The Company’s board of directors has implemented ashareholder rights plan. The rights, which are attached to the Company’s sharesand trade together with its common stock, have certain anti-takeover effects.The plan may discourage or make it more difficult for another party to completea merger or tender offer for the Company’s shares without negotiating with itsboard of directors or to launch a proxy contest or to acquire control of alarger block of the Company’s shares. If triggered, the rights will causesubstantial dilution to a person or group that attempts to acquire the Companywithout approval of its board of directors, and under certain circumstances,the rights beneficially owned by the person or group may become void. Inaddition, the Company’s executive officers may be more likely to retain theirpositions with the Company as a result of the plan, even if their removal wouldbe beneficial to shareholders generally.

 

The Company’s articles of incorporation and its bylawscontain provisions, including a staggered board and advance notice ofstockholder proposals, that make it more difficult for a third party to gaincontrol or acquire the Company without the consent of its board of directors.These provisions also could discourage proxy contests and may make it moredifficult for dissident shareholders to elect representatives as directors andtake other corporate actions. These provisions of the Company’s governingdocuments may also have the effect of delaying, deferring or preventing atransaction or a change in control that might be in the best interest of theCompany’s shareholders.

 

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**QUANTITATIVE AND 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 interest incomewhen interest rates change. A mismatched gap position will normally result inchanges 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 following table indicates that, at June 30, 2002,in the event of a sudden and sustained increase in prevailing market rates, theCompany’s net interest income would be expected to increase, while a decreasein rates would indicate a decrease in net interest income.

 
| **Changes in Interest Rates** |   | **Net  Interest Income** |        | **Actual  Change** |   | **Percent  Change  Actual** |   |
|-------------------------------|--------|--------------------------|-------------|--------------------|--------|-----------------------------|--------|
| 200  basis point rise         |   | $                        | 106,607,000 |               | $      | 2,868,000                   |   | 2.76 | % |
| 100  basis point rise         |   | $                        | 105,570,000 |               | $      | 1,831,000                   |   | 1.77 | % |
| Base  Rate Scenario           |   | $                        | 103,739,000 |               | — |                        | — |   |
| 100  basis point decline      |   | $                        | 96,486,000  |               | $      | (7,253,000                  | )      | (6.99 | )% |
| 200  basis point decline      |   | $                        | 93,687,000  |               | $      | (10,052,000                 | )      | (9.69 | )% |

 

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**PARTII**

 

**OTHER INFORMATION**

 

**ITEM 6****:     *EXHIBITS ANDREPORTS ON FORM 8-K***

 

(a)  ExhibitsRequired to be Filed by Item 601 of Regulation S-K

 
| 3.4    |   | Amendment  to Amended and Restated By-laws of Gold Banc Corporation, Inc. adopted by the  Board of Directors on April 24, 2002.   (Previously filed as Exhibit 3.4 to our Quarterly Report on Form 10-Q  filed with the SEC on August 13, 2002 as of and for the period ended  June 30, 2002 and the same is incorporated herein by reference.)                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.36  |   | Amended  and Restated Loan Agreement, dated as of December 1, 1998, between Gold Banc  Corporation, Inc. and LaSalle National Bank. (Previously filed as Exhibit  10.36 to our Quarterly Report on Form 10-Q filed with the SEC on August 13,  2002 as of and for the period ended June 30, 2002 and the same is  incorporated herein by reference.)                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.37  |   | First  Amendment to Amended and Restated Loan Agreement, dated as of April 26, 1999,  between Gold Banc Corporation, Inc. and LaSalle National Bank. (Previously  filed as Exhibit 10.37 to our Quarterly Report on Form 10-Q filed with the  SEC on August 13, 2002 as of and for the period ended June 30, 2002 and the  same is incorporated herein by reference.)                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.38  |   | Second  Amendment to Amended and Restated Loan Agreement, dated as of May 1, 2000,  between Gold Banc Corporation, Inc. and LaSalle Bank National Association.  (Previously filed as Exhibit 10.38 to our Quarterly Report on Form 10-Q filed  with the SEC on August 13, 2002 as of and for the period ended June 30, 2002  and the same is incorporated herein by reference.)       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.39  |   | Third  Amendment to Amended and Restated Loan Agreement, dated as of July 1, 2000,  between Gold Banc Corporation, Inc. and LaSalle Bank National Association.  (Previously filed as Exhibit 10.39 to our Quarterly Report on Form 10-Q filed  with the SEC on August 13, 2002 as of and for the period ended June 30, 2002  and the same is incorporated herein by reference.)       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.40  |   | Fourth  Amendment to Amended and Restated Loan Agreement, dated as of January 23,  2001, between Gold Banc Corporation, Inc. and LaSalle Bank National  Association. (Previously filed as Exhibit 10.40 to our Quarterly Report on  Form 10-Q filed with the SEC on August 13, 2002 as of and for the period  ended June 30, 2002 and the same is incorporated herein by reference.)  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.41  |   | Fifth  Amendment to Amended and Restated Loan Agreement, dated as of July 1, 2001,  between Gold Banc Corporation, Inc. and LaSalle Bank National Association.  (Previously filed as Exhibit 10.41 to our Quarterly Report on Form 10-Q filed  with the SEC on August 13, 2002 as of and for the period ended June 30, 2002  and the same is incorporated herein by reference.)       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.42  |   | Sixth  Amendment to Amended and Restated Loan Agreement, dated as of September 28,  2001, between Gold Banc Corporation, Inc. and LaSalle Bank National  Association. (Previously filed as Exhibit 10.42 to our Quarterly Report on  Form 10-Q filed with the SEC on August 13, 2002 as of and for the period  ended June 30, 2002 and the same is incorporated herein by reference.) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.43  |   | Seventh  Amendment to Amended and Restated Loan Agreement, dated as of July 1, 2002,  between Gold Banc Corporation, Inc. and LaSalle Bank National Association.  (Previously filed as Exhibit 10.43 to our Quarterly Report on Form 10-Q filed  with the SEC on August 13, 2002 as of and for the period ended June 30, 2002  and the same is incorporated herein by reference.)     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.44  |   | Replacement  Revolving Note, dated as of July 1, 2002, in favor of LaSalle Bank National  Association. (Previously filed as Exhibit 10.44 to our Quarterly Report on  Form 10-Q filed with the SEC on August 13, 2002 as of and for the period  ended June 30, 2002 and the same is incorporated herein by reference.)                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.45  |   | Amended  and Restated Third Party Pledge Agreement, dated as of June 1, 2002, between  GBC Kansas, Inc. and LaSalle Bank National Association. (Previously filed as  Exhibit 10.45 to our Quarterly Report on Form 10-Q filed with the SEC on  August 13, 2002 as of and for the period ended June 30, 2002 and the same is  incorporated herein by reference.)                       |

 

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| 99.1   |   | Certification  of Chief Executive Officer of Gold Banc Corporation, Inc. dated July 24,  2003, which is accompanying this Quarterly Report on Form 10-Q/A as of and  for the three and six months ended June 30, 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 July 24,  2003, which is accompanying this Quarterly Report on Form 10-Q/A as of and  for the three and six months ended June 30, 2002 and is not treated as filed  in reliance on the SEC’s Interim Guidance Regarding Filing Procedures. |

 

(b)  REPORTS ONFORM 8-K

 

The Company filed the following Current Report on Form8-K during the second quarter of 2002:

 

(1)  Form8-K, dated June 17, 2002, filed with the Securities and Exchange Commission onJune 19, 2002, reporting under Item 5.

 

37

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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:  July 25, 2003

 

(Authorizedofficer and principal financial officer of the registrant)

 

38

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**CERTIFICATIONPURSUANT TORULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TOSECTION 302 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, Malcolm M. Aslin, Chief Executive Officer of GoldBanc Corporation, Inc. (the “registrant”), certify that:

 

1.               I have reviewed theregistrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A forthe quarterly period ended June 30, 2002 (this “report”);

 

2.               Based on myknowledge, this report does not contain any untrue statement of a material factor omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, notmisleading with respect to the periods covered by this report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report.

 

Dated:  July25, 2003

 
|   | By:    | /s/  Malcolm M. Aslin   |   |
|--------|--------|-------------------------|--------|
|   |   | Malcolm M. Aslin        |   |
|   |   | Chief Executive Officer |   |

 

**CERTIFICATIONPURSUANT TORULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TOSECTION 302 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 theregistrant’s Amendment No. 1 to its Quarterly Report on Form 10-Q/A forthe quarterly period ended June 30, 2002 (this “report”);

 

2.               Based on myknowledge, this report does not contain any untrue statement of a material factor omit to state a material fact necessary to make the statements made, inlight of the circumstances under which such statements were made, notmisleading with respect to the periods covered by this report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report.

 

Dated:  July 25, 2003

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

 

39

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