FOR
IMMEDIATE RELEASE
PRESS
RELEASE
TEAM
FINANCIAL, INC.’s LARGEST OUTSIDE SHAREHOLDER TO VOTE GOLD PROXY IN FAVOR OF
KEITH B. EDQUIST’S NOMINEES
OMAHA, NE (June 9, 2008)
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Keith B. Edquist today announced that Bicknell Family Holding Company, LLC, has
indicated its intention to vote the GOLD Proxy in favor of the election of
independent nominees Keith B. Edquist, Lloyd A. Byerhof and Jeffrey L. Renner to
the Team Financial, Inc., Board of Directors. Together with related
parties, Bicknell Family Holding Company, LLC, is the largest
shareholder of Team Financial, Inc., after the Company’s Employee Stock
Ownership Plan.
On June
6, 2008, Bicknell Family Holding Company, LLC delivered a letter to the
Company’s Board of Directors expressing concern over the deterioration of the
Company’s financial condition and performance, the loss of stockholder value,
the determination by the Office of the Comptroller of the Currency that the
banks owned by the Company are in “troubled condition,” numerous instances of
poor corporate governance, excessive executive compensation, and other matters
described in that letter. The letter states there is clearly a need for a change
in the composition of the Board of Directors in order to produce greater
independence, more active and effective oversight, fresh thinking, financial
discipline and better leadership. The letter also calls upon the Board of
Directors to make changes in management to improve the financial performance of
the Issuer and the accountability of management. The letter is set
forth in its entirety below. On June 6, 2008, the letter was filed
with the SEC as Exhibit 99.1 to Bicknell Family Holding Company, LLC’s Schedule
13D, as amended.
Keith B.
Edquist commented, “We are honored to have the support of Team Financial’s
largest outside shareholder, who obviously shares our deep concern over the
Company’s future and has joined our call for change at this critical
time. We strongly urge like-minded shareholders to do as the Bicknell
family has done and vote the GOLD proxy card.”
Shareholders
that need assistance in voting their shares can call Morrow & Co., LLC, the
firm assisting Keith B. Edquist with the proxy solicitation, at
800-662-5200.
Contact:
Keith B.
Edquist
teamedquist@gmail.com
Bicknell
Family Holding Company, LLC
7400
College Blvd., Suite 205
Overland
Park, KS 66210
Via
U.S. Mail and Facsimile (913-259-3500)
June 6,
2008
Board of
Directors
Team
Financial, Inc.
One South
Pearl
Paola, KS
66071
Dear
Directors:
The
Bicknell Family Holding Company, LLC and certain related parties are part of a
group (the "Bicknell Group") that, after the Employee Stock Ownership Plan, is
the largest stockholder of Team Financial, Inc. (the "Company"). The Bicknell
Group is not an activist investor. Our philosophy is to rely on management and
the board of directors to operate the companies in which we invest in a manner
that produces an attractive rate of return and fulfills their fiduciary
obligations to act in the best interests of the Company and all of its
stockholders.
We have
become alarmed, however, by the dramatic deterioration in the Company's
financial condition and performance, the loss of stockholder value, the
determination by the Office of the Comptroller of the Currency ("OCC") that the
banks owned by the Company (the "Banks") are in "troubled condition," numerous
instances of poor corporate governance, excessive executive compensation and the
other factors described herein. We believe that the Company's operating
performance, stewardship of our investment and corporate culture are not
acceptable and must be improved.
The
primary responsibility of any board of directors is to select and oversee a
senior management team that is capable of operating the business effectively and
in the best interests of the stockholders. The current board of directors of the
Company is failing to fulfill its fiduciary obligations to the stockholders of
the Company. The currently entrenched executive management team is ignoring its
fiduciary obligations to stockholders, as evidenced by the dramatic destruction
of stockholder value resulting from major asset write-offs, earnings that are
well below its peers, a regulatory crisis and a corporate culture that appears
to disregard the legitimate interests of unaffiliated stockholders.
We have
read the Schedule 14A filings of Keith B. Edquist, filed on June 2 and 3, 2008,
in which he nominates himself, Jeffrey L. Renner and Lloyd A. Byerhof (the
"Edquist Nominees") to serve as directors of the Company. Mr. Edquist makes a
compelling case for the election of new directors that are not hand-picked and
beholden to the current management of the Company. The Bicknell Group plans to
vote its shares to elect the Edquist Nominees at or prior to the upcoming
stockholders meeting.
Board of
Directors
Team
Financial, Inc.
Page
2
For the
reasons described below, it is time for the board of directors to lead the
Company in a new direction. The reference in the Company's June 2, 2008 Schedule
14A filing to Mr. Edquist's solicitation as merely "sour grapes" is clear
evidence of lack of objectivity and the desire of the board and management to
remain entrenched in their positions. It is obvious to outside stockholders that
Mr. Edquist was one of the few directors of the Company who questioned
managements’ performance and voted against unwarranted compensation, and for
this reason, he was not renominated. In our view, his stated reasons are
legitimate concerns to all the Company's stockholders, and his nomination of
directors is anything but sour grapes.
We call
upon the board of directors to face up to the current realities and recognize
that it must promptly address the dismal financial performance of the Company
and its current management. Robert J. Weatherbie, Chairman of the Board and
Chief Executive Officer, Carolyn S. Jacobs, Treasurer, and Sandra Moll, Chief
Operating Officer, each had their employment agreements amended in the first
quarter of this year to significantly increase their golden parachute payments
upon their termination. These changes were made at a time when the Company's
financial condition, results of operations and regulatory status were
dramatically deteriorating – which was clearly foreseeable to senior management
and to the board of directors. We note in particular that Mr. Weatherbie
entered into an Employment Agreement with the Company, dated April 15,
2008, just prior to the receipt of the OCC Letter on April 24, 2008 notifying
the banks that they are deemed to be in "troubled condition" – which condition
prohibits entering into agreements providing for severance payments, subject to
certain exceptions not relevant here.
The board
of directors must accept responsibility for a failure of oversight over senior
management. Giving the current directors the benefit of the doubt, senior
management may not have furnished the board of directors with the type of
information it needed to foresee the many difficulties currently confronting the
Company. In today's governance environment, particularly in view of the higher
standards expected of a bank holding company, stockholders have a right to
expect more active and effective monitoring by the board. At a minimum, a system
should be in place to ensure that the board receives the information it needs on
a timely basis to monitor operating performance, safe and sound financial
condition and regulatory compliance. As detailed in Appendix A, there have also
been a series of "red flags" that should have put the board of directors on
notice that changes were needed in management, operation and strategic direction
of the Company.
There is
clearly a need for a change in the composition of the board of directors in
order to produce greater independence, more active and effective oversight,
fresh thinking, financial discipline and better leadership. As the true owners
of the Company, the voice of the stockholders deserves to be heard, and not
ignored as has been the case with the current board and senior management team.
It is time for the board to make changes in management to improve the financial
performance of the Company and the accountability of
management.
Board of Directors
Team
Financial, Inc.
Page
3
We
sincerely hope that the board will reflect objectively and dispassionately upon
our concerns, fulfill its fiduciary obligations, and take the actions to
implement needed changes on a timely basis.
Very
truly yours,
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BICKNELL
FAMILY HOLDING COMPANY, LLC
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By:
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/s/
Martin C. Bicknell,
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Name:
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Martin
C. Bicknell
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Title:
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Manager
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"Red
Flag" Issues in Performance,
Compliance
and Governance
of
Team Financial, Inc.
A.
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Performance
Failures
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1.
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Loss
of Approximately $34 Million of Stockholder Value or Approximately 55% of
Stockholder Value.
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a.
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June
2007 to Present: Price per share has declined approximately 58% from a 52
week high of $17.20 to the closing trading price per share on June 3, 2008
of $7.76.
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b.
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The
Company incurred a net loss of $6.4 million, or $1.79 basic and $1.77
diluted loss per share, resulting a negative return on assets of 3.09%.
This loss was driven by a $6 million impairment charge for the write off
of all of the goodwill associated with the Colorado National Bank. This
loss and related write-off have further reduced the equity value of
outstanding shares as well as regulatory capital. The goodwill write off
also demonstrates that the Company dramatically overpaid for the Colorado
National Bank and that it has not been properly
managed.
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c.
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As
a result of the liquidity and capital inadequacies of the Company, loans
are being curtailed and investments are not being made by the Company in
the securities markets which will further reduce the return on assets. In
addition, the Company will cease its dividend and stock repurchase program
and will not make acquisitions which will further destroy stockholder
value.
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2.
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Continuing
Acceptance of and Further Deterioration of Below Market Operating
Performance.
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a.
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December
2005 to December 2007: Experienced a return on average assets for the
fiscal years ending December 31, 2005, 2006 and 2007 of .59%, 0.55% and
0.53%, respectively, which compare poorly to peer group averages (i) of
1.05%, 1.17% and 1.08% for similar periods. To us this suggests that
management is significantly behind its peer group as it relates to the
effective management of corporate assets.
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b.
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December
2005 to December 2007: Experienced a return on average equity for the
fiscal years ending December 31, 2005, 2006 and 2007 of 7.46%, 7.98% and
7.48%, respectively, which compare poorly to peer group averages (i) of
12.00%, 13.32%, and 11.69% for similar periods. To us this suggests that
management is ineffective when it comes to the profitable deployment of
shareholders’ equity.
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c.
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December
2005 to December 2007: Experienced an efficiency ratio for the fiscal
years ending December 31, 2005, 2006 and 2007 of 79.91%, 80.86% and
81.89%, respectively, which compare poorly to peer group averages (i) of
64.58%, 62.61% and 63.16% for similar periods. In addition, only once in
three years has any
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A-1
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member
of the Company’s peer group exceeded an 80.00% efficiency ratio (which was
subsequently reduced to 74.95%). To us this suggests that management has
created an inefficient cost structure contributing to the Company’s
“troubled condition.”
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d.
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December
2007: Agreed to $1.4 million settlement regarding the sale of the
Company's former insurance agency subsidiary. The Company's portion of the
settlement is approximately $630,000, with the Company's corporate
insurance policy paying approximately $856,500, for a total settlement of
approximately $1,486,500.
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e.
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December
2007: Experienced quarterly income declines for the quarters ending March
2007, June 2007, September 2007 and December 2007 of $1.2 million, $1.4
million, $0.9 million and $0.6 million, respectively.
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f.
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May
2008: Announcement that the Company is in technical default of its
revolving credit agreement due to its status as being in “troubled
condition.”
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3.
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Excessive
Concentration in Real Estate Backed Loans and Related Write
Offs.
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a.
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As
of March 31, 2008, the Banks had 85.6% of their outstanding loans
secured by real estate. Item 1A of the Company's Quarterly Report on Form
10-Q for the first quarter of 2008 ("First Quarter 10-Q") describes
numerous risks to the Company that have been created by this excessive
loan concentration in real estate.
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b.
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Non-performing
assets, made up largely of non-performing loans, have grown by $6.8
million, or 86.1%, from December 31, 2007 to March 31,
2008.
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c.
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The
First Quarter 10-Q states that the Banks are experiencing a trend of
increasing non-performing loans and classified loans that are not yet
considered non-performing. In view of current economic conditions and the
depressed real estate market, the amount of non-performing loans can be
expected to grow significantly. In this regard, during the period from
March 31, 2008 through May 12, 2008, non-accrual loans increased
by an additional $12.6 million, or 6.8%.
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d.
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In
addition, substandard loans (i.e. the ability of borrowers to meet
existing repayment terms is doubtful) totaled $31.9 million as of
March 31, 2008, an increase of 20.3% since December 31,
2007.
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e.
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Due
to pressure from the OCC, the allowance for loan losses was increased by
$2.6 million by charging the provision for loan losses which decreased
earnings by this amount. The allowance for loan losses can be expected to
increase significantly, further depressing earnings, as a result of the
misguided concentration in real-estate backed loans, the growing level of
classified assets, inadequate loan loss allowance methodologies, and
deficiencies in credit administration practices and loan risk rating
systems – which have culminated in
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A-2
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the
Banks' "troubled condition", as reflected in the OCC's letters to the
Banks on April 24, 2008 (the "OCC Letters").
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4.
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Inadequate Liquidity
.
As a result of the OCC Letters and the resulting restrictions on the
Banks, the Company is in default on its $6 million credit line. While a
waiver of this default was granted through the renewal date of the line of
credit on June 30, 2008, there is serious doubt that U.S. Bank will
grant this renewal. Even if U.S. Bank does grant the renewal, only $2
million of additional funds remain to be borrowed under that line of
credit. The amount of remaining borrowing capacity will not be adequate to
supply the capital that will be necessary to meet further loan
write-offs.
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5.
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Difficult to Raise
Capital
. The reputational risk, liquidity risk and credit risk
that have been created by the deficiencies noted in the OCC Letter, as
well as the other instances of mismanagement noted herein, will make it
difficult to raise the necessary capital. Raising capital at the holding
Company level will be more problematic because the OCC can be expected to
restrict dividend payments from the Banks to the Company in order to
preserve their capital. If the capital can be raised, it will be
expensive.
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B.
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Compliance
Failures
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1.
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Troubled Condition.
The
OCC Letter states that the Banks are in "troubled condition" for purposes
of Section 914 of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989. The OCC Letters are based on the OCC staff's
determination that the Banks had deficiencies in credit administration
practices, loan risk rating systems, loan loss allowance methodologies,
and levels of classified assets. As a result of this determination by the
OCC, the Banks are subject to the following
restrictions: (a) the Banks must notify the OCC 90 days
before adding or replacing a member of the respective Banks' board of
directors or employing any, or promoting any existing employee, as a
senior executive officer, and (b) the Banks may not, except under
certain circumstances, enter into any agreements to make severance or
indemnification payments or make any such payments to
institution–affiliated parties.
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2.
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Increase Loan Loss
Reserve.
The First Quarter 10-A states that the Company expects
that the OCC's examination report will advise the Banks to continue to
increase their loan loss reserves, increase their regulatory capital
ratios, and closely monitor classified and non-performing
assets.
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3.
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Restrictions of
Dividend.
As a result of the Bank’s troubled condition, and further
fallout from the OCC's examination report, it can be expected that further
adverse actions may be pursued by the OCC – which may include suspension
of, or restrictions on, dividends from the Banks to the Company. In
apparent anticipation of this restriction and its capital shortfall, the
Company communicated, on May 6, 2008, that it is considering
suspending the annual dividend of 32 cents a share.
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4.
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Dilution of Stockholder
Value.
In order to provide additional capital, the Company also
communicated on May 6, 2008 that it expects to consider several
alternatives, including
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A-3
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seeking
additional equity. We expect that action will be necessary and will
further dilute stockholder value.
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C.
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Governance
Failures
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1.
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Continuing Loss or Termination
of Key Employees and Directors
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a.
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May
2007: Terminated the employment agreement with the Company's President of
Corporate Development.
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b.
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June
2007: Accepted the resignation of the Chairman of the Audit Committee of
the Board of Directors and the Company's Nomination Committee and
Executive Committee.
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c.
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April
22, 2008: Accepted the resignation of the Company's chief financial
officer, Rick Tremblay. Stock trades at $12.35.
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2.
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Entrenchment
of Management Teams and Board Positions.
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a.
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November
2007: The Company held a special meeting and stockholders voted to
eliminate cumulative voting for directors in the Company's Articles of
Incorporation, making it more difficult for large stockholders to elect a
director to the Company's board of directors.
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3.
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Enrichment of Compensation
Packages and Extensions of Golden Parachutes Which Have Been Deemed
Unacceptable by the OCC
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a.
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January
2007: Amended employment agreement between the Company and Robert J.
Weatherbie increasing his salary, bonus and "golden
parachute".
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b.
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March
2007: Amended employment agreement between the Company and Carolyn S.
Jacobs increasing her salary, bonus and "golden
parachute".
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c.
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March
2007: Amended employment agreement between the Company and Sandra J. Moll
increasing her salary, bonus and "golden
parachute".
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A-4