- Current report filing (8-K)
November 19 2008 - 5:22PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
November 13,
2008
(Date of earliest
event reported)
TEAM
FINANCIAL, INC.
(Exact name of
registrant as specified in its charter)
KANSAS
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000-26335
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48-1017164
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(State
or other jurisdiction
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(Commission
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(I.R.S.
Employer
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of
incorporation)
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File Number)
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Identification
No.)
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8 West
Peoria, Suite 200, Paola, Kansas, 66071
(Address of principal
executive offices) (Zip Code)
Registrants
telephone, including area code:
(913) 294-9667
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written
Communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Section 2
Financial Information
Item 2.06 Material
Impairments.
In connection with the
review and preparation of the financial statements for the period ended September 30,
2008, Team Financial, Inc. (the Company) determined that several of its
assets were deemed to be impaired as of that date. The Companys securities portfolio was
impaired by approximately $2.5 million.
The
reduction in fair value was the result of current market conditions related to
trust preferred securities and corporate bond obligations issued by other
financial institutions that the Company holds as investments, coupled with the
Companys lack of intent and ability to hold these investments.
The Companys loan portfolio was also deemed to be impaired by an
additional $11.5 million since June 30, 2008. Accordingly, the Company has recorded a total
provision for loan losses of not less than approximately $4.2 million for the
three month period ending September 30, 2008.
Also in connection with the review and preparation of the financial
statements
for the
period ended September 30, 2008, the Company deemed not less than
approximately $4.2 million of its deferred tax asset to be impaired as it
relates to the recoverability of certain deferred tax assets, as the Company
has determined that it is more likely than not that a deferred tax asset will
not be realized.
Section 8 Other
Events
Item 8.01 Other Events.
The following information in this
report is being furnished, not filed, for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and will not be incorporated by
reference into any filing under the Securities Act of 1933, as amended.
The Company will not be
able to file its Form 10-Q timely because it is still in the process of
assessing
certain accounting estimates and preparing information necessary to complete
the Form 10-Q, particularly including Managements Discussion and Analysis
of Financial Condition and Results of Operations. The Company now expects to report a net loss
for the three months ended September 30, 2008 of no less than $9.8
million, or $2.72 basic and diluted loss per share. The Form 10-Q will be filed as soon as
possible. The Company is however,
providing the following disclosures:
Regulatory Environment
On September 2, 2008
and September 3, 2008, respectively, both of the Companys subsidiary
banks (the Banks), TeamBank and Colorado National Bank, each consented and
agreed to the issuance of a Consent Order (the Consent Orders) by the Office
of the Comptroller of Currency (the OCC).
Among other things, the Consent Orders require the Banks to appoint a
compliance committee to monitor compliance with the Consent Orders; within 120
days develop a three year strategic plan establishing objectives for the Banks;
within 120 days develop a capital plan and increase Tier 1 capital to at least
8% of adjusted total assets and Tier 1 capital to at least 10% of risk-weighted
assets or approximately $3.5 million of capital; appoint a new senior loan
officer; develop within 30 days and maintain a liquidity management program
that addresses the Banks current and expected funding needs and ensure that
sufficient funds or access to funds exists to meet those needs; take action to
protect the Banks interests in assets criticized by the OCC; implement and
adhere to a written credit policy to improve the Banks loan portfolios management;
obtain current independent appraisals on any loan in excess of $500,000 in the
case of TeamBank and $300,000 in the case of Colorado National Bank that is
secured by real property where borrower has failed to comply with contractual
terms of the loan agreement and an analysis of current financial information
does not demonstrate the ongoing ability of the borrower or guarantor to
perform in accordance with the contractual terms of the loan agreement;
continue to employ an independent review annually of the lending function;
establish a program designed to manage the risk of the Banks commercial real
estate loan portfolio, and establish a program for the maintenance of an
adequate allowance for loan and lease losses.
Also, the Banks may not declare a dividend to the holding company
unless the Bank is in compliance with its approved capital plan both
before and after the payment of the dividend, the Bank is in compliance with
traditional regulation regarding dividend declaration amounts, and the Bank has
received a prior written determination of no supervisory objection by the
OCC. Subsequent to the issuance of the
Consent Orders, the OCC has requested daily liquidity reports in order to
monitor the Banks liquidity. The OCC
has expressed their ongoing concern regarding liquidity issues and related
matters of TeamBank, and has reiterated the need for comprehensive liquidity
plans and strategies, which they believe are currently deficient. TeamBank and
Colorado National Bank neither admitted nor denied any wrongdoing in consenting
to their respective Consent Orders. The foregoing description of the
Consent Orders is qualified in its
2
entirety by reference to
the terms of the Consent Orders, which are attached as Exhibit 10.32 and
10.34 in the Companys Current Report filed on Form 8-K on September 8,
2008.
The Consent Orders stem
from an examination of the Banks, from which both of the Banks received a
letter from the OCC, Kansas City South Field office on April 24, 2008,
indicating that it believes the Banks are deemed to be in troubled condition
for purposes of Section 914 of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, and, as a result, the Banks are subject
to specified restrictions on operations.
On July 13, 2008, the Company also received a similar troubled
condition letter from the Federal Reserve Bank of Kansas City with regard to
the holding company. These letters were
based upon the OCC staffs determination that the Banks had deficiencies in
credit administration practices, loan risk rating systems, loan loss allowance
methodologies, and levels of classified assets.
The restrictions provide that: (1) the
Banks must notify the OCC 90 days before adding or replacing a member of their
respective boards of directors or employing any, or promoting any existing
employee as a senior executive officer, and (2) 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. Similar restrictions also apply
to the Company as a result of the troubled condition letter received by the
Federal Reserve Bank of Kansas City.
The Company also expects
to enter into a supervisory agreement with the Federal Reserve Bank of Kansas
City relating to our operations as a bank holding company. We expect that any such agreement will
require that will not be able to declare or pay any dividends without prior
written approval of the Federal Reserve Bank of Kansas City, and that we will
not be able to take dividends or other forms of payment representing a
reduction in capital from our subsidiary banks without prior approval of the
Federal Reserve Bank of Kansas City. In
addition, we expect we will not be able to make any distributions of interest,
principal, or other sums on our trust preferred securities without prior
approval of the Federal Reserve Bank of Kansas City. We expect that the agreement would contract
restrictions on our debt levels and restrict us from incurring, increasing or
guaranteeing any debt without the prior written approval of the Federal Reserve
Bank of Kansas City, as well as a prohibition on purchasing or redeeming any
shares of our stock. We would also
expect that the agreement would require us to formulate a capital plan
requiring us to maintain sufficient capital at the holding company level and at
each of our subsidiary banks, and for us to provide cash flow projections. We also expect that the agreement would
require us not to increase any fees or written service agreements relating to
our subsidiary banks or imposing any new charges on our subsidiary banks.
Although the Company and
its subsidiaries are working on complying with the Consent Orders and
correcting the deficiencies identified by the OCC and the Federal Reserve Bank,
deficiencies still exist and the Companys subsidiaries are not currently in
compliance with the Consent Orders. The
Company and its subsidiary banks expect to continue to work with the OCC and
the Federal Reserve Bank to address any regulatory concerns. However, should either of the Companys
subsidiaries fail to meet the requirements of the Consent Orders by the
specified due dates, the regulators may take further enforcement actions, which
could include placing either or both banks into receivership, in which case our
ability to continue operations would be extremely doubtful.
A consequence of the
regulatory issues mentioned above is that the Company no longer qualifies as a
financial holding company under the Federal Reserve Banks guidelines. Since early 2005, the Company has not engaged
in any activities permissible only to financial holding companies, such as
owning and operating a broker-dealer or an insurance-related business as
defined in the Bank Holding Company Act.
Effective July 3, 2008, the Company became a bank holding company
under the Federal Bank Holding Company Act.
On May 5, 2008, the
Company infused $1,750,000 and $250,000 in capital to TeamBank, N.A. and
Colorado National Bank, respectively.
The capital infusions were funded through the Companys existing line of
credit. The Company has no remaining
borrowing capacity under this line of credit.
The Company is currently in default on this line of credit as a result
of the subsidiary banks not being in compliance with the Consent Orders,
mentioned above. As a result of the
Companys subsidiaries not being in compliance with
their Consent Orders at this time, the Company is currently in default on the
terms of this line of credit; however, US Bank has agreed to forbear any action
at this time.
Notes Payable and Other Borrowings.
Effective as of June 30,
2008, the Companys line of credit with US Bank was amended to lower the
Companys borrowing capacity under the line of credit from $6 million to $4
million, the outstanding balance as of September 30, 2008. Effective July 1, 2008, interest began
accruing at an annual rate of 2% over the prime rate announced by US Bank, which
will adjust each time that prime rate adjusts.
The line of credit matures on January 31, 2009, at which time the
Company will request that the maturity date be extended.
As a result of the
Companys
subsidiaries not being in compliance with their Consent Orders with the Office
of the Comptroller of Currency (OCC) at this
3
time, the Company is currently
in default on the terms of this line of credit; however, US Bank has agreed in
writing to forbear any action at this time.
The Consent Orders do not permit
the declaration of a
dividend from either bank to the holding company unless certain conditions are
met. As a result, should US Bank require
that the note be paid off because of the default, or should US Bank not extend
the maturity date upon its January 31, 2009 maturity date, the Company
does not anticipate that it will have the means to comply with the payoff
provisions stipulated in the line of credit agreement without sales of assets,
which will in turn require regulatory approval.
Accordingly, the Companys ability to conduct operations could be
jeopardized.
The Companys subsidiary banks have debt
arrangements at the Federal Home Loan Bank (FHLB) with aggregated balances
outstanding of $118.5 million as of September 30, 2008, which consists of
$10.5 million of overnight advances included in federal funds purchased and
$108.0 million in FHLB advances. FHLB
borrowings are collateralized by FHLB common stock, investment securities and
certain qualifying mortgage loans of our subsidiary banks. Classified loans are not considered eligible
collateral at the FHLB. Because the
Companys subsidiary banks, and TeamBank in particular, have had significant
increases in classified loans in recent months, the Banks have seen a
corresponding decrease in our loans that are considered eligible
collateral. As of the date of this
report, TeamBank currently does not have adequate eligible collateral pledged
with the FHLB to cover the outstanding obligation on these borrowings, but is
in the process of substituting other collateral it believes is adequate. TeamBank is in the process of moving this
collateral from the Federal Reserve Bank of Kansas City to the FHLB. TeamBank is also replacing the collateral moved
from the Federal Reserve with other qualifying collateral. As a result of the
current deficit in eligible pledged collateral at the FHLB, TeamBank has no
borrowing capacity at the FHLB. If
TeamBank were to have inadequate collateral at the FHLB and if the FHLB were to
declare a default on the applicable borrowing agreement, the entire balance
outstanding would become immediately due and payable and the FDIC could seize
and sell most of TeamBanks assets, which would in-turn result in substantial
losses and the Companys ability to continue operations would be extremely
doubtful.
Capital Adequacy
The Company and the
subsidiary banks are subject to the regulatory capital adequacy requirements of
the Federal Reserve Board, the Federal Deposit Insurance Corporation and the
Office of the Comptroller of the Currency, as applicable. A combination of risk-based guidelines and
leverage ratios are used to evaluate regulatory capital adequacy. Additionally, the Consent Orders stipulate
capital adequacy ratio minimums for the subsidiary banks. As of September 30, 2008, neither
TeamBank nor Colorado National Bank met all of the minimum capital ratios
required by their Consent Orders.
Additionally, based on the Banks current and projected levels of
capital, the Company can not assure that the Banks will be able to meet the
minimum capital ratios established in the Consent Orders without raising
additional capital. In the current
economic environment, there is significant risk that the Company will not be
able to raise additional capital to ensure compliance with the capital
requirements of the Consent Orders.
Failure to meet the regulatory capital guidelines in the Consent Orders
may result in the initiation by the Companys regulators of additional
supervisory actions which could include placing the Banks into receivership, in
which case our ability to continue operations would be extremely doubtful.
Section 9
Financial Statements and Exhibits
Item 9.01 Financial
Statements And Exhibits.
None.
SIGNATURES
Pursuant to the
requirement of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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TEAM FINANCIAL, INC.
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By:
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/s/ Bruce R. Vance
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Bruce R. Vance,
Interim Chief
Financial Officer
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Date: November 19,
2008
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