Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1999
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-24033
NASB Financial, Inc.
(Exact name of registrant as specified in its charter)
Missouri 43-1805201
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12498 South 71 Highway, Grandview, Missouri 64030
(Address of principal executive offices) (Zip Code)
(816) 765-2200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 X No
The number of shares of Common Stock of the Registrant outstanding as of
May 7, 1999, was 9,027,624.
<PAGE>
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In thousands)
March 31, September 30,
1999 1998
(Unaudited)
---------- -----------
ASSETS
Cash and cash equivalents $ 3,826 $ 3,331
Securities available for sale 5,542 7,209
Stock in Federal Home Loan Bank, at cost 5,961 5,961
Mortgage-backed securities:
Available for sale 16,116 17,742
Held to maturity (market value of $19,988
and $25,029 at March 31, 1999, and
September 30, 1998, respectively) 19,043 23,947
Loans receivable:
Held for sale 108,004 131,845
Held for investment, net 552,195 526,512
Accrued interest receivable 4,261 4,455
Real estate owned, net 2,845 3,232
Premises and equipment, net 5,038 4,818
Mortgage servicing rights, net 6,543 4,517
Other assets 2,976 2,485
---------- ----------
$ 732,350 $ 736,054
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposit accounts $ 542,544 $ 545,504
Advances from Federal Home Loan Bank 106,110 109,210
Other borrowings 150 200
Escrows 3,161 5,915
Income taxes payable 2,676 1,606
Accrued expenses and other liabilities 2,320 3,786
---------- ----------
Total liabilities 656,961 666,221
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock of $0.15 par value:
20,000,000 authorized; 9,475,312 issued
at March 31, 1999, and 9,335,312,
issued at September 30, 1998 1,421 1,400
Serial preferred stock of $1.00 par
value: 7,500,000 shares authorized;
none outstanding -- --
Additional paid-in capital 13,782 13,196
Retained earnings 64,668 59,527
Treasury stock, at cost; 431,948 shares
at March 31, 1999, and at September
30, 1998. (4,070) (4,070)
Unrealized net loss on securities
available for sale (412) (220)
---------- ----------
Total stockholders' equity 75,389 69,833
---------- ----------
732,350 736,054
========== ==========
See accompanying notes to consolidated financial statements.
1
<PAGE>
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Income (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ------------------------
1999 1998 1999 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Interest on loans $ 14,403 14,407 28,936 28,652
Interest on mortgage-backed securities 586 778 1,067 1,672
Interest and dividends on investments 214 329 448 705
Other interest income 59 118 282 275
--------- --------- --------- ---------
Total interest income 15,262 15,632 30,733 31,304
--------- --------- --------- ---------
Interest on customer deposit accounts 6,345 6,575 13,025 13,385
Interest on advances and notes payable 1,620 2,036 3,299 4,169
--------- --------- --------- ----------
Total interest expense 7,965 8,611 16,324 17,554
--------- --------- --------- ----------
Net interest income 7,297 7,021 14,409 13,750
Provision for loan losses 75 308 150 314
--------- --------- --------- ----------
Net interest margin after provision
for loan losses 7,222 6,713 14,259 13,436
--------- --------- --------- ----------
Other income (expense):
Loan servicing fees 266 160 (8) 333
Customer service fees and charges 386 464 918 908
Recovery of impairment on mortgage
servicing rights 207 -- 103 --
Gain on sale of securities held for sale -- (10) 95 (10)
Gain on sale of loans held for sale 1,833 1,572 4,072 2,809
Other 485 426 820 905
-------- -------- ---------- ----------
Total other operating income 3,177 2,612 6,000 4,945
-------- -------- ---------- ----------
General and administrative expenses:
Compensation and fringe benefits 2,784 2,463 5,705 4,929
Premises and equipment expense 596 549 1,178 1,120
Advertising and business promotion 228 86 410 139
Federal deposit insurance premiums 84 84 164 165
Other 1,029 937 2,187 1,728
-------- -------- --------- ----------
Total general and administrative expenses 4,721 4,119 9,644 8,081
-------- -------- --------- ----------
Income before income taxes 5,678 5,206 10,615 10,300
Income tax expense 2,270 2,004 4,193 3,965
-------- -------- --------- ----------
Net income $ 3,408 3,202 6,422 6,335
======== ======== ========= =========
Basic earnings per share $ 0.38 0.36 0.71 0.71
======== ======== ========= =========
Diluted earnings per share $ 0.37 0.35 0.70 0.69
======== ======== ========= =========
Weighted average shares outstanding 9,041,853 8,960,484 8,987,963 8,954,032
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Additional Unrealized Total
Common paid-in Retained Treasury Gains and stockholders'
stock capital earnings stock (losses) equity
-----------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 1,400 13,196 59,527 (4,070) (220) 69,833
Change in unrealized gains and
(losses), net of income taxes
of $128 -- -- -- -- (192) (192)
Cash dividends declared -- -- (1,281) -- -- (1,281)
Stock options exercised 21 586 -- -- -- 607
Net income for first fiscal quarter -- -- 3,014 -- -- 3,014
Net income for second fiscal quarter -- -- 3,408 -- -- 3,408
-----------------------------------------------------------------------
Balance at March 31, 1999 $ 1,421 13,782 64,668 (4,070) (412) 75,389
=======================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended March 31, Six months ended March 31,
--------------------------- ---------------------------
1999 1998 1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,408 3,202 6,422 6,335
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 259 258 503 505
Amortization and accretion 423 (497) 471 (988)
(Gain) loss on sale of securities available for sale -- 10 (95) 10
Recovery of impairment on originated mortgage servicing rights (207) -- (103) --
Gain on sale of loans held for sale (1,833) (1,572) (4,072) (2,809)
Provision for loan losses 75 308 150 314
Provision for losses on real estate owned -- (72) -- 13
Origination and purchase of loans held for sale (93,273) (89,779) (221,744) (178,892)
Sale of loans held for sale 112,059 78,040 231,635 154,525
Changes in:
Accrued interest receivable (114) 44 194 169
Accrued expenses and other liabilities and income taxes payable (5,829) (666) (396) 849
-------------------------- --------------------------
Net cash provided by (used in) operating activities 14,968 (10,724) 12,965 (19,969)
Cash flows from investing activities:
Principal repayments of mortgage-backed securities:
Held to maturity 1,693 1,232 4,117 2,546
Available for sale 1,072 6,939 2,351 8,906
Principal repayments of mortgage loans held for investment
and held for sale 49,879 50,156 102,318 104,717
Principal repayments of other loans 4,759 3,837 10,157 7,321
Principal repayments of securities:
Available for sale -- 2 30 32
Loan origination - mortgage loans held for investment (48,186) (43,560) (95,129) (82,103)
Loan origination - other loans (7,546) (4,001) (14,370) (8,168)
Purchase of mortgage loans held for investment (7,762) (5,126) (13,142) (9,566)
Purchase of investment securities available for sale -- (1,245) -- (1,245)
Proceeds from sale of securities available for sale -- 5,092 1,657 5,092
Proceeds for sale of real estate owned 186 2,827 874 3,515
Purchases of premises and equipment (371) (105) (723) (263)
Other (978) 697 (464) 456
-------------------------- --------------------------
Net cash provided by (used in) investing activities (7,254) 16,745 (2,324) 31,240
</TABLE>
4
<PAGE>
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended March 31, Six months ended March 31,
--------------------------- ---------------------------
1999 1998 1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in customer deposit accounts (3,864) 5,241 (2,960) 8,420
Proceeds from advances from FHLB 14,000 5,000 19,000 14,000
Repayment on advances from FHLB (22,060) (10,004) (22,100) (24,008)
Repayment of notes payable (50) (3,634) (50) (3,634)
Cash dividends paid (723) (560) (1,282) (1,007)
Repurchase of common stock -- (24) -- (66)
Proceeds from issuance of notes payable -- -- -- 2,154
Net increase (decrease) in escrows 1,925 1,911 (2,754) (2,733)
--------------------------- ---------------------------
Net cash used in financing activities (10,772) (2,070) (10,146) (6,874)
--------------------------- ---------------------------
Net increase (decrease) in cash and cash equivalents (3,058) 3,951 495 4,397
Cash and cash equivalents at beginning of the period 6,884 3,713 3,331 3,267
--------------------------- ---------------------------
Cash and cash equivalents at end of period $ 3,826 7,664 3,826 7,664
=========================== ============================
Supplemental disclosure of cash flow information:
Cash paid for income taxes (net of refunds) $ 2,993 3,400 2,993 3,365
Cash paid for interest 7,937 8,620 16,393 17,658
Supplemental schedule of non-cash investing and financing
activities:
Conversion of loans to real estate owned $ 536 689 766 1,066
Conversion of real estate owned to loans -- -- 78 --
Capitalization of originated mortgage servicing rights 1,471 1,551 2,770 2,127
Capitalization of originated mortgage servicing
interest only strips 691 456 1,496 799
Excess servicing reclassified to mortgage-backed securities
available for sale (interest only strip securities) -- -- -- 1,527
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements are
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information. Accordingly, they do not
include all of the information and footnotes required by GAAP for
complete financial statements. All adjustments are of a normal and
recurring nature and, in the opinion of management, the statements
include all adjustments considered necessary for fair presentation.
Operating results for the three months and six months ended March 31,
1999, are not necessarily indicative of the results that may be expected
for the fiscal year ended September 30, 1999.
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues
and expenses for the period. Material estimates that are particularly
susceptible to significant change in the near-term relate to the
determination of the allowances for losses on loans and real estate
owned. While management believes that these allowances are adequate,
future additions to the allowances may be necessary based on changes in
economic conditions.
Certain quarterly amounts for 1998 have been reclassified to
conform to the current quarter's presentation.
(2) REORGANIZATION AND MERGER
On April 1, 1998, NASB Financial, Inc. (the "Company") completed
a transaction whereby North American Savings Bank, F.S.B. (the "Bank")
became a wholly-owned subsidiary of the Company, through a merger of the
Bank with and into NASB Interim Savings Bank, F.S.B., a federally
chartered stock savings bank formed solely to facilitate this
transaction.
To complete the transaction, the Company issued an aggregate of
2,375,112 shares of Company common stock by exchanging one share of the
Company common stock for each share of common stock of the Bank. It
also exchanged an option to purchase one share of Company common stock
for each outstanding option to purchase one share of the Bank's common
stock.
The resulting Bank from the merger continues to operate under the
name "North American Savings Bank, F.S.B." The transaction was
intended to qualify as a tax-deferred reorganization under the Internal
Revenue Code of 1986, as amended, providing certain tax-deferred
benefits for income tax purposes for Bank stockholders. The merger was
accounted for as a pooling of interests, and accordingly, the
accompanying financial information has been restated to include the
accounts of the Bank and the Company for all periods presented.
(3) STOCK SPLIT, CHANGE IN PAR VALUE, AND CHANGE IN NUMBER OF AUTHORIZED
SHARES
On January 26, 1999, the stockholders of the Company voted to amend
the Company's Articles of Incorporation to increase the number of
authorized Common Stock from 3,000,000 to 20,000,000 shares. At the
same time, stockholders also approved a reduction in the par value of
Common Stock from $1.00 to $0.15.
On January 27, 1999, the Board of Directors declared a four-for-one
stock split. Each stockholder received three additional shares of the
Company's stock for each share they owned. The pay date of the split
was March 5, 1999.
All prior period amounts have been adjusted for the effect of the
stock split, change in par value of Common Stock, and change in number
of authorized shares of Common Stock.
(4) COMPREHENSIVE INCOME
For the period ended March 31, 1999, the Company reported net
income of $6,422,000. Total comprehensive income, reported pursuant to
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," was $6,230,000, which includes the
change in the accumulated unrealized net loss on available for sale
securities, net of income taxes of $192,000.
6
<PAGE>
(5) SECURITIES AVAILABLE FOR SALE
The following table presents a summary of securities available for
sale.
March 31, 1999
----------------------------------------- --
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
U.S. Government Obligations $ 3,150 -- (8) 3,142
Equity securities 2,738 -- (338) 2,400
-------------------------------------------
Total $ 5,888 -- (346) 5,542
===========================================
(6) MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
The following table presents a summary of mortgage-backed
securities available for sale.
March 31, 1999
----------------------------------------- --
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
Pass-through certificates
guaranteed by GNMA -
fixed rate $ 5,919 32 -- 5,951
FNMA pass-through
certificates - fixed rate 5,852 6 (2) 5,856
Mortgage-backed derivatives
(including CMO residuals
and interest-only
securities) 4,679 7 (377) 4,309
-------------------------------------------
Total $ 16,450 45 (379) 16,116
===========================================
(7) MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The following table presents a summary of mortgage-backed
securities held to maturity.
March 31, 1999
----------------------------------------- --
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
FHLMC participation
certificates:
Fixed rate $ 3,155 92 2 3,245
Balloon maturity
and adjustable rate 6,152 68 -- 6,220
FNMA pass-through
certificates:
Fixed rate 464 -- -- 464
Balloon maturity
and adjustable rate 625 -- 1 624
Pass-through certificates
guaranteed by GNMA
- fixed rate 475 32 -- 507
Collateralized mortgage
obligation bonds 3,318 289 1 3,606
Other asset-backed
Securities 4,854 996 528 5,322
-------------------------------------------
Total $ 19,043 1,477 532 19,988
===========================================
7
<PAGE>
(8) LOANS RECEIVABLE
Loans receivable are as follows:
March 31, 1999
----------------------
(Dollars in thousands)
LOANS HELD FOR INVESTMENT:
Mortgage loans:
Permanent loans on:
Residential properties $ 313,143
Business properties 80,081
Partially guaranteed by VA or
insured by FHA 29,851
Construction and development 172,596
-------------
Total mortgage loans 595,671
Commercial loans 6,515
Installment loans to individuals 32,927
-------------
Total loans held for investment 635,113
Less:
Undisbursed loan funds (70,924)
Unearned discounts and fees on loans, net (6,286)
Allowance for losses on loans (5,708)
-------------
Net loans held for investment $ 552,195
=============
March 31, 1999
----------------------
(Dollars in thousands)
LOANS HELD FOR SALE:
Mortgage loans:
Permanent loans on:
Residential properties $ 119,585
Partially insured by FHA 454
-------------
Total loans held for sale 120,039
Less:
Undisbursed loan funds (12,090)
Unearned discounts and fees on loans, net 55
-------------
Net loans held for sale $ 108,004
=============
Included in the loans receivable balances at March 31, 1999, are
participating interests in mortgage loans and wholly owned mortgage
loans serviced by other institutions in the approximate amounts of $5.5
million. Loans and participations serviced for others amounted to
approximately $596.5 million at March 31, 1999.
(9) REAL ESTATE OWNED AND OTHER REPOSSESSED PROPERTY
Real estate owned and other repossessed property consisted of the
following:
March 31, 1999
----------------------
(Dollars in thousands)
Real estate acquired through (or deed
in lieu of) foreclosure $ 4,226
Less: allowance for losses (1,381)
-------------
Total $ 2,845
=============
8
<PAGE>
Real estate owned is carried at fair value as of the date of
foreclosure minus any estimated disposal costs (the "new basis"), and
is subsequently carried at the lower of the new basis or fair value less
selling costs on the current measurement date.
(10) MORTGAGE SERVICING RIGHTS
On January 1, 1997, the Bank adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." SFAS No. 125 is required to be applied to transfers of
assets occurring after January 1, 1997. Among other things, this
Statement establishes a clear distinction between transactions that are
considered sales of assets and those that are considered financing
arrangements. According to the Statement, asset sales must meet
prescribed tests, which show that financial control of the asset has
been transferred to the buyer. If the transaction does not meet these
prescribed tests, the transaction is recorded as a financing activity,
and the asset remains on the balance sheet of the seller. The
implementation of this part of the Statement had no material impact on
the Bank.
The Bank is most affected by the provision of this Statement that
requires the recognition of all servicing assets at the time that
mortgage loans are sold with servicing retained. Prior to this
Statement, the Bank recognized a gain or loss only for any servicing
value in excess of stated contractual amounts at the time of loan sale
("excess servicing"). The excess servicing value was recorded as an
asset and amortized as an offset to servicing income over the lives of
the related mortgage loans.
SFAS No. 125 now requires the Bank to calculate and recognize all
retained servicing value (including "normal servicing") at the time of
a loan sale in which servicing is retained. These amounts for normal
originated mortgage servicing rights ("OMSRs") are recorded as assets
and amortized as offsets to future servicing income. Impairment of
OMSRs is assessed based on the fair value of the rights on a pool by
pool basis. Fair values are estimated using discounted cash flows based
on a market rate of interest.
In accordance with the Statement, servicing fees recognized in
excess of normal servicing fees are carried as interest-only strip
securities and classified as available for sale in accordance with SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Also, all previous amounts carried as excess servicing
assets were combined and reclassified as interest-only strip securities.
At March 31, 1999, the Bank had such interest-only strip securities in
the amount of $4.1 million, classified as available for sale.
(11) RECONCILIATION OF BASIC EARNINGS PER SHARE TO DILUTED EARNINGS PER
SHARE
The following table presents a reconciliation of basic earnings per
share to diluted earnings per share for the periods indicated.
Three months ended Six months ended
------------------ ------------------
3/31/99 3/31/98 3/31/99 3/31/98
------------------ ------------------
Net income (in thousands) $ 3,408 3,202 6,422 6,335
Basic weighted average
shares 9,041,853 8,960,484 8,987,963 8,954,032
Effect of stock options 147,466 212,291 174,506 228,219
---------------------- --------------------
Dilutive potential
common shares 9,189,319 9,172,775 9,162,469 9,182,251
Net income per share:
Basic $ 0.38 0.36 0.71 0.71
Dilutive 0.37 0.35 0.70 0.69
The dilutive securities included for each period presented above
consist entirely of stock options granted to employees as incentive
stock options under Section 442A of the Internal Revenue Code as
amended.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
The principal business of the Company is to provide banking
services through the Bank. Specifically, the Bank obtains savings and
checking deposits from the public, then uses those funds to originate
and purchase real estate loans and other loans. The Bank also purchases
mortgage-backed securities ("MBS") and other investment securities
from time to time as conditions warrant. In addition to customer
deposits, the Bank obtains funds from the sale of loans held-for-sale,
the sale of securities available-for-sale, repayments of existing
mortgage assets, and advances from the Federal Home Loan Bank
("FHLB"). The Bank's primary sources of income are interest on loans,
MBS, and investment securities plus customer service fees and income
from mortgage banking activities. Expenses consist primarily of
interest payments on customer deposits and other borrowings and general
and administrative costs.
The Bank is regulated by the Office of Thrift Supervision ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC"), and is subject
to periodic examination by both entities. The Bank is also subject to
the regulations of the Board of Governors of the Federal Reserve System
("FRB"), which establishes rules regarding reserves that must be
maintained against customer deposits.
FINANCIAL CONDITION
ASSETS
The Company's total assets as of March 31, 1999, were $732.4
million, a decrease of $3.7 million from September 30, 1998, the prior
fiscal year end.
During the six months ended March 31, 1999, securities available
for sale decreased $1.7 million, which was the result of the sale of a
taxable municipal obligation.
Included in mortgage-backed securities available for sale as of
March 31, 1999, are $4.1 million in interest-only strips, which consist
of excess mortgage servicing rights established at the time of various
loan sales in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." These are
more fully described in the notes to consolidated financial statements.
Derivative financial instruments are carried at estimated fair value in
accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Bank does not actively trade in
derivative financial instruments and management does not currently use
derivative financial instruments to manage interest rate risk or for
other hedging strategies.
As the Bank originates mortgage loans each month, management
evaluates the existing market conditions to determine which loans will
be held in the Bank's portfolio and which loans will be sold in the
secondary market. Loans sold in the secondary market can be sold with
servicing released or converted into MBS and sold with the loan
servicing retained by the Bank. At the time of each loan commitment, a
decision is made to either hold the loan for investment, hold it for
sale with servicing retained, or hold it for sale with servicing
released. Management monitors market conditions to decide whether
loans should be held in portfolio or sold and if sold, which method of
sale is appropriate. During the six months ended March 31, 1999, the
Bank originated $221.7 million in mortgage loans held for sale, $95.1
million in mortgage loans held for investment, and $14.4 million in
other loans. This total of $331.2 million in loans originated was an
increase of $62.0 million over the six months ended March 31, 1998.
10
<PAGE>
Included in the $108.0 million in loans held for sale as of March
31, 1999, are $7.3 million in mortgage loans held for sale with
servicing released. Also included in loans held for sale as of March
31, 1999, are $0.5 million in commercial residential loans insured by
the Federal Housing Administration ("FHA"). The Bank holds options to
sell these insured loans back to the FHA during specified periods in the
future at specified prices. All loans held for sale are carried at the
lower of cost or fair value.
The Bank classifies problem assets as "substandard," "doubtful"
or "loss." Substandard assets have one or more defined weaknesses,
and it is possible that the Bank will sustain some loss unless the
deficiencies are corrected. Doubtful assets have the same defects as
substandard assets plus other weaknesses that make collection or full
liquidation improbable. Assets classified as loss are considered
uncollectible and of such little value that a specific loss allowance is
warranted.
The following table summarizes the Bank's classified assets as
reported to the OTS. Dollar amounts are expressed in thousands.
3/31/99 9/30/98 3/31/98
-----------------------------
Asset Classification:
Substandard $ 12,535 10,772 10,889
Doubtful 6 8 10
Loss 2,500 1,956 3,245
-----------------------------
15,041 12,736 14,144
Allowance for losses (7,921) (7,701) (10,002)
-----------------------------
$ 7,120 5,035 4,142
=============================
Total classified assets increased $2.3 million during the six
months ended March 31, 1999, primarily due to the classification of one
commercial mortgage-backed security. The issuers of this security,
which is secured by a retirement complex, did not pay the most recent
semi-annual payment. $2.3 million of this security was classified as
substandard and $0.6 million was classified as loss. Management is
currently negotiating an amended payment schedule with the borrowers.
When an insured institution classifies problem assets as either
substandard or doubtful, regulations require specific loss allowances to
reduce their book value to fair value. In addition, management
establishes GVA ("general valuation allowances") for other possible
loan losses. GVA are allowances that recognize the inherent risks
associated with lending activities but, unlike specific allowances, have
not been allocated to particular problem assets. When an association
classifies a problem asset as loss, it is required to establish a
specific allowance for 100% of the asset balance. The Bank's
classification of its assets and the amount of its valuation allowances
are subject to review by the OTS who may require additional GVA or
specific loss allowances.
Management believes that the specific loss allowances and GVA are
adequate. While management uses available information to determine
these allowances, future allowances may be necessary because of changes
in economic conditions. Also, regulatory agencies (OTS and FDIC) review
the Bank's allowance for loss as part of their examinations, and they
may require the Bank to recognize additional loss provisions based on
the information available at the time of their examinations.
LIABILITIES AND EQUITY
Customer deposit accounts decreased $3.0 million during the six
months ended March 31, 1999. The weighted average rate on customer
deposits as of March 31, 1999, was 4.79%, a decrease from 5.18% as of
March 31, 1998.
11
<PAGE>
Advances from the Federal Home Loan Bank were $106.1 million as of
March 31, 1999, a decrease of $3.1 million from September 30, 1998.
During the six-month period, the Bank borrowed $19.0 million of new
advances and repaid $22.1 million. Management uses FHLB advances at
various times as an alternate funding source to provide operating
liquidity and to fund the origination and purchase of mortgage loans.
Escrows were $3.1 million as of March 31, 1999, a decrease of $2.8
million from September 30, 1998. This decrease is primarily due to
amounts paid for borrowers' taxes during the fourth calendar quarter of
1998.
Total stockholders' equity as of March 31, 1999, was $75.4 million
(10.29% of total assets). This compares to a book value of $69.8
million (9.49% of total assets) at September 30, 1998. On a per share
basis, stockholders' equity was $8.34 on March 31, 1999, compared to
$7.72 on September 30, 1998.
The Company paid cash dividends on its common stock of $0.0625 on
November 30, 1998, and $0.08 on February 26, 1999. Subsequent to the
quarter ended March 31, 1999, the Company announced a cash dividend of
$0.08 per share to be paid on May 28, 1999, to stockholders of record as
of May 7, 1999.
Total stockholders' equity as of March 31, 1999, includes an
unrealized loss of $412,000, net of income tax, on available for sale
securities in accordance with SFAS No. 115.
RATIOS
The following table illustrates the Company's return on assets
(annualized net income divided by average total assets); return on
equity (annualized net income divided by average equity); equity-to-
assets ratio (ending equity divided by ending total assets); and
dividend payout ratio (dividends paid divided by net income).
Six months ended
----------------------
3/31/99 3/31/98
----------------------
Return on average assets 1.75% 1.73%
Return on average equity 17.69% 20.41%
Equity-to-assets ratio 10.29% 8.84%
Dividend payout ratio 19.96% 15.90%
RESULTS OF OPERATIONS - Comparison of three months and six months ended
March 31, 1999, and 1998.
For the three months ended March 31, 1999, the Company had net
income of $3,408,000 or $0.38 per share. This compares to net income of
$3,202,000 or $0.36 per share for the quarter ended March 31, 1998.
Net income for the six months ended March 31, 1999, was $6,422,000
or $0.71 per share compared to net income of $6,335,000 or $0.71 per
share during the same period in the prior year.
NET INTEREST MARGIN
The Company's net interest margin is comprised of the difference
("spread") between interest income on loans, MBS and investments and
the interest cost of customer deposits and other borrowings. Management
monitors net interest spreads and, although constrained by certain
market, economic, and competition factors, it establishes loan rates and
customer deposit rates that maximize net interest margin.
12
<PAGE>
The following table presents the total dollar amounts of interest
income and expense on the indicated amounts of average interest-earning
assets or interest-costing liabilities for the three months ended March
31, 1999, and 1998. Average yields reflect reductions due to non-
accrual loans. Once a loan becomes 90 days delinquent, any interest
that has accrued up to that time is reserved and no further interest
income is recognized unless the loan is paid current. Average balances
and weighted average yields for the periods include all accrual and non-
accrual loans. The table also presents the interest-earning assets and
yields for each respective period. Dollar amounts are expressed in
thousands.
Six months ended 3/31/99 As of
--------------------------- 3/31/99
Average Yield/ Yield/
Balance Interest Rate Rate
-------------------------------------
Interest-earning assets
Loans $ 660,039 28,936 8.77% 7.93%
Mortgage-backed securities 29,780 1,067 7.17% 6.48%
Investments 17,298 448 5.18% 7.93%
Bank deposits 11,750 282 4.80% 4.43%
-------------------------------------
Total earning assets 718,868 30,733 8.55% 7.85%
---------------------------
Non-earning assets 22,827
---------
Total $ 741,695
=========
Interest-costing liabilities
Customer deposits accounts $ 545,994 13,025 4.77% 4.79%
FHLB Advances 112,729 3,292 5.84% 5.76%
Other borrowings 179 7 7.84% 7.50%
-------------------------------------
Total costing liabilities 658,902 16,324 4.95% 4.95%
---------------------------
Non-costing liabilities 9,752
Stockholders' equity 73,041
---------
Total $ 741,695
=========
Net earning balance $ 59,966
=========
Earning yield less costing rate 3.60% 2.90%
================
Average interest-earning assets,
net interest, and net yield
spread on average interest-
earning assets $ 718,868 14,409 4.01%
==========================
Six months ended 3/31/98 As of
--------------------------- 3/31/98
Average Yield/ Yield/
Balance Interest Rate Rate
-------------------------------------
Interest-earning assets
Loans $ 628,589 28,652 9.12% 8.09%
Mortgage-backed securities 48,957 1,672 6.83% 6.84%
Investments 20,475 705 6.89% 6.90%
Bank deposits 9,347 275 5.91% 5.13%
-------------------------------------
Total earning assets 707,368 31,304 8.85% 7.96%
---------------------------
Non-earning assets 25,433
---------
Total $ 732,801
=========
Interest-costing liabilities
Customer deposits accounts $ 524,702 13,385 5.10% 5.18%
FHLB Advances 135,365 4,126 6.10% 6.05%
Other borrowings 1,454 43 5.91% 7.50%
-------------------------------------
Total costing liabilities 661,521 17,554 5.31% 5.36%
---------------------------
Non-costing liabilities 8,899
Stockholders' equity 62,391
---------
Total $ 732,801
=========
Net earning balance $ 45,847
=========
Earning yield less costing rate 3.54% 2.60%
================
Average interest-earning assets,
net interest, and net yield
spread on average interest-
earning assets $ 707,368 13,750 3.89%
==========================
The following table provides information regarding changes in
interest income and interest expense. For each category of interest-
earning asset and interest-costing liability, information is provided on
changes attributable to (1) changes in volume (change in volume
multiplied by the old rate), (2) changes in rates (change in rate
multiplied by the old volume), and (3) changes in rate and volume
(change in rate multiplied by the change in volume). Average balances,
yields and rates used in the preparation of this analysis come from the
preceding table. Dollar amounts are expressed in thousands.
<TABLE>
<CAPTION>
Six months ended March 31, 1999, compared to
six months ended March 31, 1998
-----------------------------------------------
Yield/
Yield Volume Volume Total
-----------------------------------------------
<S> <C> <C> <C> <C>
Components of interest income:
Loans $ (1,100) 1,434 (50) 284
Mortgage-backed securities 84 (655) (34) (605)
Investments (175) (109) 27 (257)
Other assets (52) 71 (12) 7
-----------------------------------------------
Net change in interest income (1,243) 741 (69) (571)
-----------------------------------------------
Components of interest expense:
Customer deposit accounts (866) 543 (37) (360)
FHLB Advances (176) (690) 32 (834)
Other borrowings 14 (38) (12) (36)
-----------------------------------------------
Net change in interest expense (1,028) (185) (17) (1,230)
-----------------------------------------------
Increase (decrease) in net
interest margin $ (215) 926 (52) 659
===============================================
</TABLE>
13
<PAGE>
Net interest margin before loan loss provision in the three months
ended March 31, 1999, increased $276,000 from the quarter ended March
31, 1998. Of the decrease in total interest income of $370,000,
approximately $307,000 occurred in the MBS and investments categories
due to a decrease in average balances. These decreases in interest
income were more than offset by a decrease in interest expense of
$646,000. This decrease in interest expense was due primarily to a
decrease in the average balance of FHLB Advances.
Net interest margin before loan loss provision in the six months
ended March 31, 1999, increased $659,000 from the six months ended March
31, 1998. Although the average balances of total interest-earning
assets increased $11.5 million from the prior year, this was more than
offset by a decrease in the yield on average interest earning assets of
30 basis points. Total interest income for the six months ended March
31, 1999, decreased $571,000 from the prior year. The decrease in total
interest expense of $1.2 million was due primarily to a $22.6 million
decrease in the average balance of FHLB Advances. Also, the average
cost of advances during the six months ended March 31, 1999, was 5.84%,
down 26 basis points from the same period in the prior year. Customer
deposits had an average cost of 4.77% during the six months ended March
31, 1999, compared to 5.10% in the prior year. This was offset by an
increase in the average balance of customer deposits of $21.3 million.
The remainder of the increase in net interest margin is attributed to
the increase in retained earnings, which increased the net earning
balance.
The Company's net interest margin is impacted by changes in market
interest rates, which have varied greatly over time. Changing interest
rates affect the level of prepayments on mortgages, the demand for new
mortgage loans, and the supply and interest cost of customer deposits
and borrowings used to fund interest-earning assets. Management
monitors the Company's net interest spreads (the difference between
yields received on assets and paid on liabilities) and, although
constrained by market conditions, economic conditions, and prudent
underwriting standards, it offers deposit rates and loan rates that
maximize net interest income. Management does not predict interest
rates, but instead attempts to fund the Company's assets with
liabilities of a similar duration to minimize the impact of changing
interest rates on the Company's net interest margin. Since the relative
spread between financial assets and liabilities is constantly changing,
the Company's current net interest spread may not be an indication of
future net interest income.
PROVISION FOR LOAN LOSSES
The Company's provision for loan losses of $75,000 during the
quarter ended March 31, 1998, was a decrease of $233,000 over the three
months ended March 31, 1998. The provision for loan losses of $150,000
during the six months ended March 31, 1999, decreased $164,000 over the
six month period ended March 31, 1998. During the three months and six
months ended March 31, 1998, the provision for loan losses was increased
to adjust the valuation allowances to levels proportionate with the
increased amount of mortgage lending activities.
As stated above, management believes that the provisions for loss
are adequate. These provisions can fluctuate based on changes in
economic conditions or changes in the information available to
management. Also, regulatory agencies review the Company's allowances
for loss as a part of their examination process and they may require
changes in loss provision amounts based on information available at the
time of their examination. Management establishes allowances for loss
based on current economic values and any disruptions in the real estate
market could cause management to increase the provision for loss.
OTHER OPERATING INCOME
Other operating income for the three months ended March 31, 1999,
increased $565,000 from the same period in the prior year.
Specifically, loan servicing fees increased $106,000 and gains on sale
of loans held for sale increased $261,000 due to an increase in loan
sale volume. Also during the quarter ended March 31, 1999, the reserve
for impairment on capitalized mortgage servicing rights was reduced by
$207,000, which was the result of a decrease in prepayments and
estimated prepayment speeds of the underlying mortgage loans. These
increases to other operating income were offset by a decrease in
customer service fees of $78,000.
Other operating income for the six months ended March 31, 1999,
increased $1.1 million from the same period in the prior year.
Specifically, loan servicing fees decreased $341,000 due to an increase
in amortization of capitalized mortgage servicing rights. This was
offset by an increase of $1.3 million in gains on loan sales due to an
increase in loan sale volume.
14
<PAGE>
Also, the reserve for impairment on capitalized mortgage servicing
rights was reduced by $103,000 during the six months ended March 31,
1999, which was a result of an decrease in prepayments and estimated
prepayment speeds of the underlying mortgage loans.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses for the quarter ended
March 31, 1999, increased $602,000 from the same quarter in the prior
year. Total general and administrative expenses for the six months
ended March 31, 1999, increased $1.6 million from the prior year. These
increases for the three-month and six-month periods were primarily due
to increases in compensation and fringe benefits, which was related to
an increase in staffing and other expenses in the construction lending
and mortgage loan origination departments commensurate with an increase
in loan origination volume.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes." The most recent audit of the
Bank's tax returns by the Internal Revenue Service was completed during
the quarter ended June 30, 1996.
YEAR 2000 ISSUE
The Board of Directors and the management of the Company have
established a formal plan to evaluate and correct the problems that the
year 2000 could cause to the Company's critical automated systems. The
year 2000 problem exists because many automated systems use only two
digit fields to represent the year, such as "98" representing 1998.
However, with the two digit format, the year 2000 is indistinguishable
from 1900, 2001 from 1901, and so on. Should these critical systems
fail in the year 2000, the Company would have difficulty in processing
transactions for loan and deposit customers, which could cause
significant damage to the Company's important customer relationships.
Since the Company does not develop any of the software programs that are
utilized, the process is focused on follow-up and testing of software
provided by third party vendors and data centers to ensure their
renovation.
In calendar year 1997, management implemented a year 2000 process
using the standard framework set forth by the Federal Financial
Institutions Examination Council, which includes separate phases for
awareness, assessment, renovation, validation, and implementation. In
the awareness phase, management committed resources and established a
year 2000 committee consisting of managers from all departments of the
Company. This committee proceeded through the assessment phase, which
included an analysis of the year 2000 impact on all hardware, software,
and electronic equipment; identifying the Company's critical business
processes; developing priorities by risk; gaining commitment from
vendors and service providers; and evaluating the impact on the Bank's
customers. The renovation phase included the replacement or elimination
of non-compliant software, hardware, and vendors. In the validation
phase, the committee tested all renovated systems and all data exchanges
with outside organizations. In the implementation phase, all renovated
systems were put into service. The validation and implementation phases
were completed as of March 31, 1999. During fiscal 1998, the OTS
performed an on-site examination of the Bank's year 2000 process. The
Bank underwent a second year 2000 examination by the OTS during February
1999.
Data processing of the Bank's core operations is provided by a
third party service bureau. In November 1998, the Bank's service bureau
installed its fully renovated year 2000 compliant software. The Bank
has actively participated in testing procedures and it continues to
prudently monitor the progress reports received from the vendor. The
Company's year 2000 plan also includes the evaluation of phone systems,
alarm systems, funds transfer providers, and all hardware and software
on its wide-area network ("WAN"). Management estimates that the year
2000 implementation plan will cost approximately $400,000, most of which
is the cost of capitalized computer hardware for the WAN. Approximately
90% of this cost has been incurred as of March 31, 1999.
The Company finalized its year 2000 contingency plan and business
resumption contingency plan during the quarter ended March 31, 1999, for
each of the Company's critical automated systems. The contingency plan
will be implemented if any of the critical systems should fail to become
year 2000 compliant by certain target dates. The business resumption
plan
15
<PAGE>
will be implemented if any of the critical systems should fail on
January 1, 2000. Management plans to make updates to the contingency
plans on an ongoing basis throughout the 1999 calendar year. The third
party service bureau has also formulated contingency and business
resumption plans, which management has incorporated into the Company's
overall contingency plans.
The Board of directors are updated on the status of the year 2000
plan at regular intervals. Management believes that the Company's year
2000 plan is adequate to ensure that all mission critical systems will
be year 2000 compliant.
REGULATION
The Bank is a member of the FHLB System and its customers' deposits
are insured by the Savings Association Insurance Fund ("SAIF") of the
FDIC. The Bank is subject to regulation by the OTS as its chartering
authority. Since passage of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA" or the "Act"), the
FDIC also has regulatory control over the Bank. The transactions of
SAIF-insured institutions are limited by statute and regulations that
may require prior supervisory approval in certain instances.
Institutions also must file reports with regulatory agencies regarding
their activities and their financial condition. The OTS and FDIC make
periodic examinations of the Bank to test compliance with the various
regulatory requirements. The OTS can require an institution to re-value
its assets based on appraisals and to establish specific valuation
allowances. This supervision and regulation is intended primarily for
the protection of depositors. Also, savings institutions are subject to
certain reserve requirements under Federal Reserve Board regulations.
INSURANCE OF ACCOUNTS
The SAIF insures the Bank's customer deposit accounts to a maximum
of $100,000 for each insured member. Deposit insurance premiums are
determined using a Risk-Related Premium Schedule ("RRPS"), a matrix
which places each insured institution into one of three capital groups
and one of three supervisory groups. Currently, deposit insurance
premiums range from 0 to 27 basis points of the institution's total
deposit accounts, depending on the institution's risk classification.
The Bank is currently considered "well capitalized", which is the most
favorable capital group and supervisory subgroup. SAIF-insured
institutions are also assessed a premium of 0.61% of insured deposits to
service the interest on Financing Corporation ("FICO") debt.
REGULATORY CAPITAL REQUIREMENTS
At March 31, 1999, the Bank exceeds all capital requirements
prescribed by the OTS. To calculate these requirements, a thrift must
deduct any investments in and loans to subsidiaries that are engaged in
activities not permissible for a national bank. As of March 31, 1999,
the Bank did not have any investments in or loans to subsidiaries
engaged in activities not permissible for national banks.
The following tables summarize the relationship between the Bank's
capital and regulatory requirements. Dollar amounts are expressed in
thousands.
At March 31, 1999 Amount
- ----------------------------------------------------------------
GAAP capital (Bank only) $ 70,280
Adjustment for regulatory capital:
Intangible assets (1,624)
Disallowed portion of servicing assets (554)
Reverse the effect of SFAS No. 115 205
---------
Tangible capital 68,307
Qualifying intangible assets 1,495
---------
Tier 1 capital (core capital) 69,802
Qualifying general valuation allowance 4,555
---------
Risk-based capital $ 74,357
=========
16
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 1999
-------------------------------------------------------------------
Minimum required for Minimum required to be
Actual Capital Adequacy "Well Capitalized"
------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital to risk-weighted assets $ 74,357 14.5% 41,066 >=8% 51,333 >=10%
Core capital to adjusted tangible assets 69,802 9.6% 29,187 >=4% 36,483 >=5%
Tangible capital to tangible assets 68,307 9.4% 10,945 >=1.5% -- --
Tier 1 capital to risk-weighted assets 69,802 13.6% -- -- 30,800 >=6%
</TABLE>
INTEREST RATE RISK COMPONENT
The OTS has adopted a rule which requires savings institutions with
a "greater than normal" level of interest rate exposure to deduct
amounts from their total capital for the purpose of calculating the
risk-based capital requirement. The deduction is an amount equal to
one-half of the difference between the institution's measured exposure
and the "normal" exposure level (i.e., 2% of the estimated economic
value of the institution's assets). The rule measures interest rate
risk as the decline in Net Portfolio Value that would result from a 200
basis point increase or decrease in market interest rates. The rule
sets forth a description of valuation methodologies for assets,
liabilities, and off-balance sheet items. Subsidiaries that are deemed
to be controlled by an institution under generally accepted accounting
principles will be consolidated for purposes of calculating interest
rate risk. Although the interest rate component was originally
scheduled to become effective by December 31, 1994, the OTS has notified
institutions to delay implementation until further notice.
LOANS TO ONE BORROWER
Institutions are prohibited from lending to any one borrower in
excess of 15% of the Bank's unimpaired capital plus unimpaired surplus,
or 25% of unimpaired capital plus unimpaired surplus if the loan is
secured by certain readily marketable collateral. Renewals that exceed
the loans-to-one-borrower limit are permitted if the original borrower
remains liable and no additional funds are disbursed. As of March 31,
1999, the Bank had no loans that exceeded the loans to one borrower
limit.
INVESTMENT IN SUBSIDIARIES
Investments in and extensions of credit to subsidiaries not engaged
in activities permissible for national banks must generally be deducted
from capital. As of March 31, 1999, the Bank did not have any
investments in or advances to subsidiaries engaged in activities not
permissible for national banks.
LIQUIDITY AND CAPITAL RESOURCES
The Bank generates liquidity primarily from savings deposits and
repayments on loans, investments, and mortgage-backed securities.
Liquidity measures the ability to meet deposit withdrawals and lending
commitments. For secondary sources of liquidity, the Bank has the
ability to sell assets held for sale, can borrow from primary securities
dealers on a collateralized basis, and can use the FHLB of Des Moines'
credit facility. The Bank, as a member of the FHLB System, is subject
to regulations that require the maintenance of liquidity ratios (daily
average liquid assets as a percentage of net withdrawable customer
deposits and current borrowings). The regulatory liquidity requirement
may vary depending on economic conditions and activity of customer
deposits. For the month of March 1999, the required liquidity ratio was
4%, and the Bank's average regulatory liquidity ratio was 16.7%.
Fluctuations in the level of interest rates typically impact
prepayments on mortgage loans and MBS. During periods of falling
interest rates, these prepayments increase and a greater demand exists
for new loans. The Bank's customer deposits are partially impacted by
area competition. Management is not currently aware of any other market
or economic conditions that could materially impact the Bank's future
ability to meet obligations as they come due.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no material proceedings pending other than ordinary
and routine litigation incidental to the business of the
Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual stockholders' meeting was held on January 26, 1999.
The following persons were elected to NASB Financial Inc.'s
Board of Directors:
Barrett Brady
Walter W. Pinnell
James A. Watson
The firm of Deloitte & Touche was ratified for appointment as
independent auditors for the 1999 fiscal year.
The stockholders approved a proposed amendment to the
Company's Articles of Incorporation to increase the authorized
Common Stock of the Company from 3,000,000 shares to
20,000,000 shares and to reduce the par value of Common Stock
from $1.00 per share to $0.15 per share.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
18
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NASB FINANCIAL, INC.
(Registrant)
May 13, 1999 By: /s/ David H. Hancock
David H. Hancock
Chairman and
Chief Executive Officer
May 13, 1999 By: /s/ Keith B. Cox
Keith B. Cox
Vice President and Treasurer
19
<PAGE>
19
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1999
<PERIOD-END> MAR-31-1999 MAR-31-1999
<CASH> 3,826 3,826
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 27,619 27,619
<INVESTMENTS-CARRYING> 19,043 19,043
<INVESTMENTS-MARKET> 19,988 19,988
<LOANS> 660,199 660,199
<ALLOWANCE> 7,120 7,120
<TOTAL-ASSETS> 732,350 732,350
<DEPOSITS> 542,544 542,544
<SHORT-TERM> 106,110 106,110
<LIABILITIES-OTHER> 8,157 8,157
<LONG-TERM> 150 150
0 0
0 0
<COMMON> 1,421 1,421
<OTHER-SE> 73,968 73,968
<TOTAL-LIABILITIES-AND-EQUITY> 732,350 732,350
<INTEREST-LOAN> 14,403 28,936
<INTEREST-INVEST> 800 1,515
<INTEREST-OTHER> 59 282
<INTEREST-TOTAL> 15,262 30,733
<INTEREST-DEPOSIT> 6,345 13,025
<INTEREST-EXPENSE> 7,965 16,324
<INTEREST-INCOME-NET> 7,297 14,409
<LOAN-LOSSES> 75 150
<SECURITIES-GAINS> 0 95
<EXPENSE-OTHER> 4,721 9,644
<INCOME-PRETAX> 5,678 10,615
<INCOME-PRE-EXTRAORDINARY> 5,678 10,615
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,408 6,422
<EPS-PRIMARY> 0.38 0.71
<EPS-DILUTED> 0.37 0.70
<YIELD-ACTUAL> 4.01 4.01
<LOANS-NON> 3,582 3,582
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 7,089 7,089
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 6,657 6,365
<CHARGE-OFFS> 130 654
<RECOVERIES> 1,079 1,311
<ALLOWANCE-CLOSE> 5,708 5,708
<ALLOWANCE-DOMESTIC> 5,708 5,708
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 4,555 4,555
</TABLE>
