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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
[x] Transition Report Pursuant to Section 13 or 15(d) of
the Exchange Act
For the transition period from ______ to ______
Commission file number: 0-23525
NORTH ARKANSAS BANCSHARES, INC.
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(Exact Name of Small Business Issuer
as Specified in its Charter)
Tennessee [Application Pending]
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
200 Olivia Drive, Newport, Arkansas 72112
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(Address of Principal Executive Offices)
(870) 523-3611
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Registrant's Telephone Number, Including Area Code
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the pre-
ceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No [X]
The issuer has not been subject to such filing requirements for
the past 90 days.
As of December 24, 1997, the issuer had 370,300 shares of
Common Stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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On November 10, 1997, the Registrant's Registration
Statement on Form SB-2 was declared effective by the Securities
and Exchange Commission. The Registration Statement and the
related Prospectus which formed a part thereof related to the
offering of the Registrant's common stock in connection with the
conversion from mutual to stock form (the "Conversion") of
Newport Federal Savings Bank (the "Bank"). Upon consummation of
the Conversion, the Bank will become a wholly owned subsidiary
of the Registrant, and the Registrant will close the public
offering of its common stock. The Registrant has not engaged in
any business to date and is not expected to engage in any
business until the consummation of the Conversion. The
Registrant will not have any material assets or liabilities
prior to the consummation of the Conversion. The information
presented in this Form 10-QSB therefore relates solely to the
business conducted by the Bank.
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of
September 30, 1997 (unaudited) and June 30, 1997 . . . 3
Statements of Operations for the Three Months Ended
September 30, 1997 and 1996 (unaudited). . . . . . . . 4
Statement of Retained Earnings for the Three Months
Ended September 30, 1997 (unaudited) . . . . . . . . . 5
Statements of Cash Flows for the Three Months Ended
September 30, 1997 and 1996 (unaudited). . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . 9
Item 4. Submissions of Matters to a Vote of Security Holders . 9
Item 5. Other Information. . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
SIGNATURES
2<PAGE>
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PART I - FINANCIAL INFORMATION
NEWPORT FEDERAL SAVINGS BANK
Statements of Financial Condition
September 30, 1997 and June 30, 1997
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
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(Unaudited)
Assets
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<S> <C> <C>
Cash and amounts due from banks, includes
interest-bearing deposits of $568,431
and $603,729 in September 30, 1997 and
June 30, 1997, respectively $ 642,273 $ 884,002
Certificates of deposit with other financial
institutions 691,000 691,000
Investment securities held-to-maturity, at cost 5,189,826 5,922,956
Loans receivable, net 25,181,835 24,794,194
Office properties and equipment, net 1,655,175 1,651,298
Accrued interest receivable 210,177 227,356
Other assets 179,805 207,760
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Total assets $ 33,750,091 $ 34,378,566
============ ============
Liabilities and Retained Earnings
---------------------------------
Deposits $ 30,340,991 $ 31,072,533
Federal Home Loan Bank advances 814,337 618,389
Advances from borrowers for taxes and insurance 8,513 57,459
Other liabilities 300,385 363,916
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Total liabilities 31,464,226 32,112,297
Retained earnings - substantially restricted 2,285,865 2,266,269
Commitments and contingencies
Total liabilities and retained earnings $ 33,750,091 $ 34,378,566
============ ============
</TABLE>
See accompanying notes to financial statements.
3<PAGE>
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NEWPORT FEDERAL SAVINGS BANK
Statements of Operations
Three Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended
September 30,
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1997 1996
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<S> <C> <C>
Interest income:
Loans receivable $ 493,331 $ 488,862
Deposits in other financial institutions 16,366 23,252
Mortgage-backed securities 81,400 79,571
Investment securities 13,074 22,612
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Total interest income 604,171 614,297
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Interest expense:
Deposits 395,757 388,864
Federal Home Loan advances 10,034 2,022
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Total interest expense 405,791 390,886
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198,380 223,411
Net interest income
Provision for loan losses -- --
Net interest income after provision
for loan losses 198,380 223,411
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Non-interest income - other 45,002 22,279
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Non-interest expenses:
Salaries and employee benefits 100,503 90,977
Legal and professional fees 10,426 265
Data processing fees 23,360 14,678
Federal insurance expense 7,422 197,761
Furniture and equipment expense 8,834 6,384
Occupancy expense 12,112 21,960
Other 61,129 31,412
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223,786 363,437
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Income (loss) before income taxes 19,596 (117,747)
Income tax expense (benefit) -- --
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Net income (loss) $ 19,596 $ (117,747)
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</TABLE>
See accompanying notes to financial statements.
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NEWPORT FEDERAL SAVINGS BANK
Statement of Retained Earnings
Three Months Ended September 30, 1997
<TABLE>
<S> <C>
Balance at June 30, 1997 $ 2,266,269
Net Income 19,596
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Balance at September 30, 1997 $ 2,285,865
============
</TABLE>
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NEWPORT FEDERAL SAVINGS BANK
Statements of Cash Flows
Three Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three Months Ended
September 30,
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1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 19,596 $ (117,747)
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 15,342 10,898
Loss on sale of real estate owned 267 --
FHLB stock dividends (4,200) (3,964)
Net premium amortization on investments 2,727 2,539
Provision for loan losses -- --
Increase in interest receivable (17,179) (30,304)
Increase in other assets (27,955) (14,013)
Increase in other liabilities (63,531) 168,290
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Net cash provided by operating activities 15,335 15,699
Cash flows from investing activities:
Purchase of held to maturity ("HTM") securities -- (850,312)
Proceeds from maturities/principal repayments
of HTM securities 734,603 151,031
Net increase in loan receivable (404,647) (1,082,597)
Net decrease in certificates of deposit with
other financial institutions -- 100,000
Purchase of office properties and equipment (19,219) (5,741)
Proceeds from sale of real estate owned 16,739 --
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Net cash provided by (used in)
investing activities 327,476 (1,687,619)
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Cash flows from financing activities:
Net increase (decrease) in deposits and advances
from borrowers (780,488) 998,544
Net increase (decrease) in Federal Home Loan advances 195,948 849,201
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Net cash (used in) provided by
financing activities (584,540) 1,147,745
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Net decrease in cash and amounts due from banks (241,729) (524,175)
Cash and amounts due from banks at beginning of year 884,002 1,167,202
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Cash and amounts due from banks at end of year $ 642,273 $ 643,027
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year:
Transfers from real estate acquired through
foreclosure $ 17,006 $ --
Interest on deposits 397,036 389,978
Income taxes -- 2,102
============ ============
</TABLE>
See accompanying notes to financial statements.
6<PAGE>
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NEWPORT FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 1 - NORTH ARKANSAS BANCSHARES, INC.
North Arkansas Bancshares, Inc. (the "Company") was incorporated
under the laws of the State of Tennessee for the purpose of
becoming the holding company of Newport Federal Savings Bank
(the "Bank") in connection with the Bank's conversion from a
federally chartered mutual savings bank to a federally chartered
capital stock savings bank. On November 12, 1997, the Company
commenced a subscription offering of its shares in connection
with the Bank's conversion. The Company's offering and the
Bank's conversion closed on December 18, 1997. A total of
370,300 shares were sold at $10.00 per share. Prior to
consummation of the conversion, the Company had no assets or
liabilities and as of September 30, 1997, no shares had been
issued.
NOTE 2 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and
on the same basis as the Bank's audited financial statements.
In the opinion of management, all adjustments, consisting of
normal recurring accruals, necessary to present fairly the
financial position, results of operations, and cash flows for
the interim periods presented have been included. The results
of operations for such interim periods are not necessarily
indicative of the results expected for the full year.
NOTE 3 - EARNINGS PER SHARE
As of September 30, 1997, neither the Company nor the Bank had
issued any shares of common stock. As such the statements of
operations do not disclose earnings per share as would otherwise
be required.
NOTE 4 - PLAN OF CONVERSION
On May 29, 1997, the Bank's Board of Directors formally approved
a plan ("Plan") to convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank subject
to approval by the Bank's members and the Office of Thrift
Supervision. The Plan called for the common stock of the Bank
to be purchased by the Company and the common stock of the
Company to be offered to various parties in a subscription
offering at a price based upon an independent appraisal of the
Bank. All requisite approvals were obtained and the conversion
and the Company's offering were consummated effective December
18, 1997. Conversion costs at September 30, 1997 were deferred
and were deducted from the gross offering proceeds upon
consummation of the conversion.
Upon consummation of the conversion, the Bank established a
liquidation account in an amount equal to its retained earnings
as reflected in the latest statement of financial condition used
int he final conversion prospectus. The liquidation account
will be maintained for the benefit of certain depositors of the
Bank who continue to maintain their deposit accounts in the Bank
after conversion. In the event of a complete liquidation of he
Bank, such depositors will be entitled to receive a distribution
from the liquidation account before any liquidation may be made
with respect to the common stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company had only recently been formed and had no assets
or liabilities and had not issued any shares of stock at
September 30, 1997. Accordingly, the following discussion
relates only to the financial condition and results of
operations of the Bank.
The Bank's results of operations depend primarily on net
interest income, which is determined by (i) the differences
between the rates of interest earned on interest-earning assets
and the rates paid on interest-bearing liabilities (interest
rate spread) and (ii) the relative amounts of interest earning
assets and interest-bearing liabilities. The Bank's results of
operations are also affected by non-interest expense, including
primarily compensation and employee benefits, federal deposit
insurance premiums and office occupancy expenses. The Bank's
results of operations are also affected significantly by general
and economic and competitive conditions, particularly changes in
market interest rates, government policies and actions of
regulatory authorities, all of which are beyond the Bank's
control. Based on the Bank's review of its internal bookkeeping
practices and conferences with its third party service
companies, the Bank does not expect to incur significant
additional bookkeeping, data processing or other expenses or to
encounter significant difficulties with its data processing
provider in connection with issues related to the upcoming
millenium.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND JUNE
30, 1997
The Bank's total assets at September 30, 1997 were $33.8
million, a slight decrease from June 30, 1997's level of $34.4
million. The decrease was due to the combined effects of
decreases in cash and securities due to a $732,000 reduction in
deposits and payments on and maturities of investment
securities. Net loans receivable increased by $5.4 million, or
21.78%, which reflected the Bank's continued marketing efforts.
The $19,000 increase in retained earnings reflected earnings for
the period. At September 30, 1997, the Bank was in compliance
with all applicable regulatory capital requirements with total
core and tangible capital of $2.3 million (6.77% of adjusted
total assets) and total risk-based capital of $2.4 million
(13.08% of risk-weighted assets)
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND 1996
The Bank earned net income of $19,000 for the three months
ended September 30, 1997 as compared to a net loss of $117,000
for the three month period ended September 30, 1996. The
$136,000 improvement in our net income for the first three
months of fiscal year 1998 was due primarily to the absence of
any SAIF special assessment during the most recent period.
During the three months ended September 30, 1996, the Bank
incurred a special assessment equal to $179,000. This special
assessment was required to be paid by all institutions with
deposits insured by the SAIF. No similar special assessment was
incurred during the 1997 period.
Net interest income during the three months ended September
30, 1997 decreased by $25,000 as compared to the same period in
1996. During the three months ended September 30, 1997, the
Bank placed its largest loan on nonaccrual status. As such, the
Bank was required to deduct from interest income all previously
accrued interest that was unpaid which amounted to approximately
$21,000.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
varies from time to time depending upon economic conditions and
deposit flows, is based upon a percentage of our deposits and
short-term borrowings. The required ratio at September 30, 1997
was 5% for the month ended September 30, 1997 the Bank was in
compliance. As a result of the conversion, the Bank's liquidity
has increased due to the additional funds it received.
The Bank's primary sources of funds are deposits, repayment
of loans and mortgage-backed securities, maturities of
investments and interest-bearing deposits, funds provided from
operations and advances from the FHLB of Dallas. While
scheduled repayments of loans and mortgage-backed securities and
maturities of investment securities are predicable sources of
funds, deposit flows and loan prepayments are greatly influenced
by the general level of interest rates, economic conditions and
competition. The Bank uses its liquidity resources principally
to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to
invest in other interest-earning assets, to maintain liquidity,
and to meet operating expenses.
8<PAGE>
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule (EDGAR only)
(b) Reports on Form 8-K. During the quarter ended
September 30, 1997, the registrant did not file any current
reports on Form 8-K.
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SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
NORTH ARKANSAS BANCSHARES, INC.
Date: December 29, 1997 By: /s/ Brad Snider
--------------------------
Brad Snider, President, Chief
Executive Officer and Treasurer
(Duly Authorized and Principal
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 642,273
<INT-BEARING-DEPOSITS> 691,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 5,189,826
<INVESTMENTS-MARKET> 5,951,010
<LOANS> 25,181,835
<ALLOWANCE> 150
<TOTAL-ASSETS> 33,750,091
<DEPOSITS> 30,340,991
<SHORT-TERM> 814,337
<LIABILITIES-OTHER> 316,996
<LONG-TERM> 0
<COMMON> 0
0
0
<OTHER-SE> 2,277,767
<TOTAL-LIABILITIES-AND-EQUITY> 33,750,901
<INTEREST-LOAN> 493,331
<INTEREST-INVEST> 13,074
<INTEREST-OTHER> 97,766
<INTEREST-TOTAL> 604,171
<INTEREST-DEPOSIT> 395,757
<INTEREST-EXPENSE> 405,791
<INTEREST-INCOME-NET> 198,380
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 225,906
<INCOME-PRETAX> 19,596
<INCOME-PRE-EXTRAORDINARY> 19,596
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,596
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.33
<LOANS-NON> 657,429
<LOANS-PAST> 61,171
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 150
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 150
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 150
</TABLE>
