| Changing regulatory structure—Industry regulators such as the Federal Reserve, the Comptroller of the Currency and the Federal Deposit Insurance Corporation may modify current regulations applicable to our operations |
| Additionally, future changes in legislation, including legislation governing publicly traded companies could impact our operations |
| We cannot predict the impact of implementing any future regulatory changes on the results of our operations or financial condition |
| Monetary policy and economic environment—The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of financial holding companies and their subsidiaries |
| Among the means available to the Federal Reserve to affect the money supply are open market operations in US Government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against member bank deposits |
| These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits |
| The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future |
| The nature of future monetary policies and the effect of these policies on our business and earnings cannot be predicted |
| Our growth strategy involves operating and acquisition risks that may negatively impact our profits—We face risks in our growth strategy, including the risks that we will be unable to expand our business through the acquisition of other financial institutions or bank branches or by internal growth, including the opening of new branch offices |
| Our ability to grow profitably through the opening of new branches involves risks that the growth depends primarily on our ability to identify attractive markets and acquire or establish branch locations in those markets at reasonable costs |
| In addition, we must attract the necessary deposits and generate sound loans in those markets |
| Acquiring other financial institutions or bank branches involves these same risks, as well as additional risks, including: · adverse change in the results of operations of the acquired entities; · unforeseen liabilities or asset quality problems of the acquired entities; · greater than anticipated costs of integrating acquisitions; · adverse personnel relations; · loss of customers; and · deterioration of local economic conditions |
| The risks discussed above may inhibit or restrict our strategy to grow through acquisition and branch expansion, and may negatively impact our revenue growth and ultimately reduce profits |
| If we are unable to successfully integrate acquisitions, our earnings could decrease—In connection with our acquisitions of other banks, bank branches or other financial service providers, we face risks in integrating and managing these businesses |
| We have a history of growth through acquisitions and plan to continue this strategy |
| To integrate an acquisition operationally, we must: · centralize and standardize policies, procedures, practices, and processes; · combine employee benefit plans; 14 ______________________________________________________________________ · implement a unified investment policy and adjust the combined investment portfolio to comply with the policy; · implement a unified loan policy and confirm lending authority; · implement a standard loan management system; and · implement a loan loss reserve policy |
| Integrating acquisitions may detract attention from our day-to-day business and may result in unexpected costs |
| Once an acquired business is integrated, our future prospects will be subject to a number of risks, including, among others: · our ability to compete effectively in new market areas; · our successful retention of earning assets, including loans acquired in acquisitions; · our ability to generate new earning assets; · our ability to attract deposits; · our ability to achieve cost savings |
| Historically, we have not implemented wholesale cost cutting after acquisitions, preferring to adjust operational costs on an ongoing basis in order to preserve market share and each acquired entity’s standing in its community; and · our ability to attract and retain qualified management and other appropriate personnel |
| An inability to manage these factors may have a material adverse effect on our financial condition and results of operations |
| Our growth may require us to raise additional capital in the future, but sufficient capital may not be available when it is needed—We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations |
| We anticipate that our existing capital resources will satisfy our immediate foreseeable capital requirements |
| However, to the extent that we further expand our asset base, primarily through loan growth, we will be required to support this growth by increasing our capital |
| Accordingly, we may need to raise additional capital in the future to support continued asset growth |
| Our ability to raise additional capital to support future loan growth will depend on conditions in the capital markets, which are outside of our control, and on our financial performance |
| Accordingly, we cannot assure our ability to raise additional capital when needed or on economical terms |
| If we cannot raise additional capital when needed, we will be subject to increased regulatory supervision and the imposition of restrictions on our growth and our business |
| Also, these restrictions could negatively impact our ability to further expand our operations through acquisitions or the establishment of additional branches and result in increases in operating expenses and reductions in revenues that would negatively affect our operating results |
| We rely heavily on our management team, and the unexpected loss of key managers may adversely affect our operations—Much of our success to date has been influenced strongly by our ability to attract and retain senior management experienced in banking and financial services |
| Our ability to retain executive officers, the current management teams and loan officers of our operating subsidiaries will continue to be important to the successful implementation of our strategies |
| It is also critical to be able to attract and retain qualified additional management and loan officers |
| The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations |
| 15 ______________________________________________________________________ We may not be able to successfully implement our strategy to enter new markets—Our strategic plan includes expansion into growing markets by acquisition or by establishing new offices |
| Expansion requires a significant expenditure of capital in order to prepare the facilities for operation and additional expense in order to staff these new facilities |
| As our new offices mature and grow, we are able to spread our overhead costs over a broader asset base |
| While our new offices are generating loan activity consistent with our expectations, we may encounter unanticipated difficulties that could adversely affect future profitability |
| In addition, we cannot ensure that we will be able to operate and manage our operations in new markets successfully or recover our initial capital investment in these operations |
| We may not be successful in implementing our internal growth strategy due to numerous factors, which would negatively affect earnings—We intend to continue pursuing an internal growth strategy, the success of which is subject to our ability to generate an increasing level of loans and deposits at acceptable risk levels without corresponding increases in non-interest expenses |
| We may not be successful in our internal growth strategies due to competition, delays, and other impediments resulting from regulatory oversight, lack of qualified personnel, scarcity of branch sites or deficient site selection of bank branches |
| In addition, the success of our internal growth strategy will depend on maintaining sufficient regulatory capital levels and on positive economic conditions in our primary market areas |
| We face intense competition in all phases of our business from other banks and financial institutions—We compete for deposits with a large number of depository institutions including commercial banks, savings and loan associations, credit unions, money market funds and other financial institutions and financial intermediaries serving our operating areas |
| Principal competitive factors with respect to deposits include interest rates paid on deposits, customer service, convenience, and location |
| We compete for loans with other banks located in our operating areas, with loan production offices of large banks headquartered in other states, as well as with savings and loan associations, credit unions, finance companies, mortgage bankers, leasing companies and other institutions |
| Competitive factors with respect to loans include interest rates charged, customer service and responsiveness in tailoring financial products to the needs of customers |
| We face significant competition from other financial institutions in making any potential acquisitions |
| Many of our acquisition competitors have substantially greater monetary resources than we do, as well as the ability to issue marketable equity securities with significantly greater value than we can to pay for part or all of the purchase price |
| Many of the entities that we compete with are substantially larger in size, and many non-bank financial intermediaries are not subject to the regulatory restrictions applicable to our bank subsidiaries |
| Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio—We establish an allowance for loan losses in consultation with management of our bank subsidiaries and maintain it at a level considered adequate by management to absorb loan losses that are inherent in our loan portfolio |
| The amount of future loan losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control and these losses may exceed current estimates |
| Although management believes that our allowance for loan losses is adequate to absorb losses on any existing loans that may become uncollectible, we cannot predict loan losses with certainty, and we cannot ensure that our allowance for loan losses will prove sufficient to cover actual loan losses in the future |
| Loan losses in excess of our allowance for loan losses may adversely affect our business, financial condition and results of operations |
| If economic conditions in general and in our primary market areas deteriorate, our revenues could decrease—Our financial results may be adversely affected by changes in prevailing economic conditions, including declines in real estate values, changes in interest rates which cause a decrease in interest rate 16 ______________________________________________________________________ spreads, adverse employment conditions and the monetary and fiscal policies of the federal government |
| Because we have a significant amount of real estate loans, declines in real estate values could adversely affect the value of property used as collateral |
| In addition, substantially all of our loans are to individuals and businesses in suburban Kansas City, Eastern Kansas, Western Missouri, the Colorado Springs metropolitan area, and the Omaha, Nebraska metropolitan area |
| Any decline in the economy of these market areas could have an adverse impact on our revenues |
| There can be no assurance that positive trends or developments discussed in this report will continue or that negative trends or developments will not have significant downward effects on our revenues |
| Our business is subject to credit risks, which may adversely affect our earnings—Our loan customers may not repay their loans according to their terms, and collateral securing their loans, if any, may not have a value equal to amounts owed under their loans |
| Should the economic climate deteriorate, borrowers may experience difficulty in repaying their loans, and the level of non-performing loans, charge-offs, and delinquencies could rise and require further increases in the provision for loan losses which would cause our net income to decline |
| Forward-Looking Statements Certain statements contained in this Annual Report on Form 10-K, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the Act), including, without limitation, the statements specifically identified as forward-looking statements within this document |
| In addition, certain statements in our future filings with the Securities and Exchange Commission, press releases or oral and written statements made by or with our approval, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Act |
| Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items, (ii) statements of plans and objectives of the Company’s, management or board of directors, including those relating to products or services, (iii) statements of future economic performance and (iv) statements such as “anticipates”, “expects”, “intends”, “plans”, “targets”, and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements |
| Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from those in such statements |
| Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (i) the strength of the US economy in general and the strength of the local economies in which operations are conducted; (ii) the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; (iii) inflation, interest rates, market and monetary fluctuations; (iv) the timely development of and acceptance of new products and services and perceived overall value of these products and services by users; (v) changes in consumer spending, borrowing, and savings habits; (vi) technological changes; (vii) acquisitions and our ability to assimilate them; (viii) the ability to increase market shares and control expenses; (ix) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, and securities) with which we must comply; (x) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board, (xi) changes in our organization, compensation, and benefits plans; (xii) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; (xiii) the risks discussed above under “Item 1A Risk Factors” and (xiv) our success at managing risks involved in the foregoing |
| 17 ______________________________________________________________________ Such forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events |