Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 OR 15(d) of the Securities Exchange Act
of 1934
For the period ended September 30, 2000
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)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.15 par value
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 aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the asking price of its Common Stock on December 15,
2000, was approximately $109.4 million.
As of December 15, 2000, there were issued and outstanding 8,500,249 shares
of the Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
1. Part II - Annual report to Stockholders for the Fiscal Year Ended September
30, 2000.
2. Part III - Proxy Statement for the 2001 Annual Meeting of Stockholders.
<PAGE>
PART I
ITEM 1. Business
-----------------
General Description
-------------------
NASB Financial, Inc. (the "Company") was formed in 1998 as a unitary thrift
holding company of North American Savings Bank, F.S.B. ("North American" or the
"Bank"). The Bank is a federally chartered stock savings bank, with its
headquarters in the Kansas City area. The Bank began operating in 1927, and
became a member of the Federal Home Loan Bank of Des Moines ("FHLB") in 1940.
Its customer deposit accounts are insured by the Savings Association Insurance
Fund ("SAIF"), a division of the Federal Deposit Insurance Corporation ("FDIC").
The Bank converted to a stock form of ownership in September 1985.
The Bank's market area includes the counties of Jackson, Cass, Clay,
Buchanan, Andrew, and Lafayette in Missouri, and Johnson and Wyandotte counties
in Kansas. The Bank currently has eight customer deposit offices including one
in Leawood, Kansas, one each in Grandview, Lee's Summit, Independence,
Harrisonville, Gladstone, and two in St. Joseph in Missouri. North American also
operates loan production offices in Lee's Summit, St. Louis, St. Charles and
Springfield in Missouri, and in Topeka and Overland Park in Kansas. The economy
of the Kansas City area is diversified with major employers in agribusiness,
greeting cards, automobile production, transportation, telecommunications, and
government.
The Bank's principal business is to attract deposits from the general
public and to originate real estate loans, other loans and short-term
investments. The Bank obtains funds mainly from deposits received from the
general public, sales of loans and loan participations, advances from the FHLB,
and principal repayments on loans and mortgage-backed securities ("MBS"). The
Bank's primary sources of income include interest on loans, interest on MBS,
customer service fees, and mortgage banking fees. Its primary expenses are
interest payments on customer deposit accounts and borrowings and normal
operating costs.
Year-End Weighted Average Yields and Rates
------------------------------------------
The following table presents the year-end balances of interest-earning
assets and interest-costing liabilities with weighted average yields and rates.
Balances and weighted average yields include all accrual and non-accrual loans.
Dollar amounts are expressed in thousands.
<TABLE>
As of 9/30/00 As of 9/30/99 As of 9/30/98
-------------------- ---------------------- ---------------------
Yield/ Yield/ Yield/
Balance Rate Balance Rate Balance Rate
-------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 832,898 9.13% $ 681,004 8.28% $ 639,956 8.09%
Mortgage-backed securities 20,042 6.64% 26,757 6.04% 42,443 6.57%
Investments 16,563 7.35% 17,523 7.49% 18,890 7.81%
Bank deposits 5,840 5.77% 10,827 4.86% 6,291 --
-------------------- -------------------- ---------------------
Total earning assets 875,343 9.02% 736,111 8.15% 707,580 7.99%
---------- ---------- ----------
Non-earning assets 33,990 26,603 25,274
---------- ---------- -----------
Total $ 909,333 $ 762,714 $ 732,854
========== ========== ===========
Interest-costing liabilities:
Customer deposit accounts $ 592,780 5.00% $ 552,226 4.83% $ 533,097 5.04%
FHLB advances 219,909 6.13% 125,116 5.51% 124,774 5.77%
Other borrowings 115 6.07% 165 7.50% 875 7.50%
-------------------- --------------------- -------------------
Total costing liabilities 812,804 5.31% 677,507 4.99% 658,746 5.16%
---------- ---------- ----------
Non-costing liabilities 13,290 9,999 8,982
Stockholders' equity 83,239 75,208 65,126
---------- ---------- -----------
Total $ 909,333 $ 762,714 $ 732,854
========== ========== ===========
Net earning balance $ 62,539 $ 58,604 $ 48,834
========== ========== ===========
Earning yield less costing rate 3.71% 3.16% 2.83%
========== ========== ==========
</TABLE>
<PAGE>
Ratios
------
The following table sets forth, for the periods indicated, the Company's
return on assets (net income divided by average total assets), return on equity
(net income divided by average equity), equity-to-assets ratio (average equity
divided by average total assets), and dividend payout ratio (total cash
dividends paid divided by net income).
<TABLE>
Year ended September 30,
------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return on assets 1.63% 1.65% 1.85% 1.53% 1.14%
Return on equity 18.12% 17.35% 21.06% 20.07% 15.89%
Equity to assets ratio 8.50% 9.55% 8.78% 8.07% 7.19%
Dividend payout ratio 22.89% 21.11% 15.63% 15.38% 17.51%
</TABLE>
The following table sets forth the amount of cash dividends per share paid
on the Company's common stock during the months indicated.
<TABLE>
Calendar year
------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February $0.10 $0.08 0.0625 0.05 0.0390625
May 0.10 0.08 0.0625 0.05 0.0390625
August 0.10 0.08 0.0625 0.05 0.0390625
November 0.10 0.08 0.0625 0.05 0.0390625
</TABLE>
ASSET ACTIVITIES
----------------
Lending Activities
------------------
The Bank, like most other savings institutions, has traditionally
concentrated its lending activities on mortgage loans secured by residential
property and, to a lesser extent, commercial property. The residential mortgage
loan originations have predominantly long-term fixed and adjustable rates. The
Bank also has a portfolio of mortgage loans that are secured by multifamily,
construction, development, and commercial real estate properties. The remaining
part of North American's loan portfolio consists of non-mortgage commercial
loans and installment loans. The following table presents the Bank's total loans
receivable, held for investment plus held for sale, for the periods indicated.
The related discounts, premiums, deferred fees and loans-in-process accounts are
excluded. Dollar amounts are expressed in thousands.
<TABLE>
September 30,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
--------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Permanent Loans on:
Residential properties $ 468,997 46 % 430,635 50 455,503 61 450,240 64 427,458 64
Business properties 214,882 21 153,549 18 79,460 11 92,477 13 102,286 15
Partially guaranteed by VA
or insured by FHA 27,138 3 34,945 4 25,533 3 25,790 4 49,308 7
Construction and development 246,822 24 197,041 23 150,729 20 102,131 14 62,881 10
---------------- ---------------- --------------- ---------------- ----------------
Total mortgage loans 957,839 94 816,170 95 711,225 95 670,638 95 641,933 96
Commercial loans 7,143 -- 4,335 -- 7,225 1 10,973 2 14,668 2
Installment loans to individuals 48,646 4 41,737 5 28,524 4 22,071 3 12,305 2
---------------- ---------------- --------------- ---------------- ----------------
$ 1,013,628 100 862,242 100 746,974 100 703,682 100 668,906 100
================ ================ =============== ================ ================
</TABLE>
<PAGE>
The following table sets forth information at September 30, 2000, regarding
the dollar amount of loans maturing in the Bank's portfolio based on their
contractual terms to maturity. Demand loans, which have no stated schedule of
repayment and no stated maturity, are reported as due in one year or less.
Scheduled repayments are reported in the maturity category in which the payment
is due. As of September 30, 2000, net real estate loans totaled 85% of the
Bank's assets. Dollar amounts are expressed in thousands.
<TABLE>
2002
Through After
2001 2005 2005 Total
------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Loans:
Permanent:
- at fixed rates $ 3,784 27,292 298,454 329,530
- at adjustable rates 3,017 4,424 374,046 381,487
Construction and development:
- at fixed rates 8,213 9,646 3,969 21,828
- at adjustable rates 205,862 18,598 534 224,994
------------------------------------------------------
Total mortgage loans 220,876 59,960 677,003 957,839
Commercial loans 163 3,716 3,264 7,143
Installment loans to individuals 2,470 9,527 36,649 48,646
------------------------------------------------------
Total loans receivable $ 223,509 73,203 716,916 1,013,628
======================================================
</TABLE>
Residential Real Estate Loans
-----------------------------
The Bank offers a range of residential loan programs. At September 30,
2000, 49% of total loans receivable were permanent loans on residential
properties. Also, the Bank is authorized to originate loans guaranteed by the
Veteran's Administration ("VA") and loans insured by the Federal Housing
Administration ("FHA"). Included in residential loans as of September 30, 2000,
are $27.1 million or 3% of the Bank's total loans that were insured by the FHA
or VA.
The Bank's residential loans come from several sources. The loans that the
Bank originates are generally a result of direct solicitations of real estate
brokers, builders, or developers. North American periodically purchases real
estate loans from other savings institutions or mortgage bankers. Loan
originations and purchases must be approved by various levels of management and,
depending on the loan amount, are subject to ratification by the Board of
Directors.
At the time a potential borrower applies for a single family residential
mortgage loan, it is designated as either a portfolio loan, which is held for
investment and carried at amortized cost, or a loan held-for-sale in the
secondary market and carried at the lower of cost or fair value. All the loans
on single family property that the Bank holds for sale conform to secondary
market underwriting criteria established by the Federal Home Loan Mortgage
Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA").
All loans originated, whether held for sale or held for investment, conform to
internal underwriting guidelines, which consider a property's loan-to-value
ratio and the borrower's ability to repay the loan.
Construction and Development Loans
----------------------------------
Construction and land development loans are offered to owner/occupants, to
persons building a residence for seasonal use or for investment purposes, and to
builders/developers who build properties to be sold. As of September 30, 2000,
24% of the Bank's total loans receivable were construction and development
loans. Construction loans are originated at interest rates that adjust daily
based on a pre-determined percentage indexed to the prime lending rate. Most
construction loans are due and payable within one year or else converted to a
permanent loan. In some cases extensions are permitted if payments are current
and the construction has continued satisfactorily. Land acquisition and
development loans for the purpose of developing raw land into residential or
commercial property typically have three-year terms at floating interest rates.
<PAGE>
The Bank's requirements for a construction loan are similar to those of a
mortgage on an existing residence. In addition, the borrower must submit
accurate plans, specifications, and cost projections of the property to be
constructed. North American's staff performs periodic inspections of each
property during construction to ensure adequate progress is achieved before
scheduled loan disbursements are made.
Commercial Real Estate Loans
----------------------------
The Bank purchases and originates several different types of commercial
real estate loans. As of September 30, 2000, commercial real estate loans on
business properties were $214.9 million or 21% of the Bank's total loan
portfolio. Permanent multifamily mortgage loans on properties of 5 to 36
dwelling units have a 50% risk-weight for risk-based capital requirements if
they have an initial loan-to-value ratio of not more than 80% and if their
annual average occupancy rate exceeds 80%. All other performing commercial real
estate loans have 100% risk-weights.
Consumer Loans
--------------
As of September 30, 2000, consumer installment loans and lease financing to
individuals represented approximately 4% of loans receivable. These loans
consist primarily of loans on savings accounts and consumer lines of credit that
are secured by a customer's equity in their primary residence.
Sales of Mortgage Loans
------------------------
The Bank is an active seller of loans in the national secondary mortgage
market. A portion of loans originated are sold to various investors along with
the rights to service the loans (servicing released). Another portion are
originated for sale with loan servicing rights kept by the Bank (servicing
retained). At the time of each loan commitment, management decides if the loan
will be held in portfolio or sold and, if sold, which investor is appropriate.
During fiscal 2000, the Bank sold $95.9 million in loans with servicing
released.
The Bank records loans held for sale at the lower of cost or estimated fair
value, and any adjustments made to record them at estimated fair value are made
through the income statement. As of September 30, 2000, the Bank had loans held
for sale with a carrying value of $88.3 million, which included $0.4 million in
loans on multi-family residential properties that are insured by the FHA. The
Bank holds options to put these loans back to the FHA during specified periods
in the future. Management plans to exercise the options if future market
conditions are favorable, which precludes management's intention to hold them to
maturity.
Classified Assets, Delinquencies, and Allowance for Loss
--------------------------------------------------------
Classified Assets. In accordance with the asset classification system
outlined by the Office of Thrift Supervision ("OTS"), North American's problem
assets are classified as either "substandard," "doubtful," or "loss."
An asset is considered substandard if it is inadequately protected by the
borrower's current net worth, the borrower's ability to repay, or the value of
collateral. Substandard assets include those characterized by the distinct
possibility that the insured institution will sustain some loss if the
deficiencies are not corrected. Assets classified as doubtful have the same
weaknesses of those classified as substandard with the added characteristic that
the weaknesses present make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly questionable and
improbable. Assets classified as loss are considered uncollectible and of such
little value that their existence without establishing a specific loss reserve
is not warranted.
When the Bank classifies a problem asset, it establishes a specific loss
allowance needed to reduce its book value to the present value of the expected
future cash flows discounted at the loan's initial effective interest rate, or
as a practical expedient, to the loan's observable market price or the fair
value of the collateral, if the loan is dependent on collateral. In addition,
general valuation allowances ("GVA") are established by management. GVA
represents allowances that recognize inherent risks associated with distinct and
homogenous loans pools. When the Bank classifies all or part of problem assets
as loss, it establishes a specific loss allowance equal to 100% of the loss
classification. The OTS reviews North American's asset classification during
each examination and can require changes to asset classifications, specific loss
allowances, GVA, and loan loss provision.
<PAGE>
Each month, management reviews the problem loans in its portfolio to
determine whether changes to the asset classifications or allowances are needed.
The following table summarizes the Bank's classified assets. Dollar amounts are
expressed in thousands.
<TABLE>
As of September 30,
------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Classification
Substandard $ 17,235 12,287 10,772 10,263 9,482
Doubtful -- -- 8 12 15
Loss 2,857 2,738 1,956 2,944 2,967
-----------------------------------------------------------------
Total Classified 20,092 15,025 12,736 13,219 12,464
Allowance for loan/REO losses (8,386) (7,960) (7,701) (7,952) (7,551)
-----------------------------------------------------------------
Net classified assets $ 11,706 7,065 5,035 5,267 4,913
=================================================================
Net classified to total classified assets 58% 47% 40% 40% 39%
=================================================================
</TABLE>
When a loan becomes 90 days past due, the Bank stops accruing interest and
establishes a reserve for the interest accrued-to-date. The following table
summarizes non-performing assets, troubled debt restructurings, and real estate
acquired through foreclosure or in-substance foreclosure. Dollar amounts are
expressed in thousands.
<TABLE>
September 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $ 984,525 825,797 736,054 733,464 711,088
===================================================================
Non-accrual loans $ 4,447 4,074 3,854 3,679 3,303
Troubled debt restructurings 8,142 4,004 6,031 10,051 11,766
Net real estate and other assets
acquired through foreclosure 3,683 2,702 3,232 4,184 4,377
------------------------------------------------------------------
Total $ 16,272 10,780 13,117 17,914 19,446
==================================================================
Percent of total assets 1.65% 1.31% 1.78% 2.44% 2.73%
==================================================================
</TABLE>
Delinquencies. The following table summarizes delinquent loan information.
<TABLE>
As of September 30, 2000
-----------------------------------------------------------------------------
Number of Percent of
Loans delinquent for Loans Amount Total Loans
---------------------------------------------- ---------------------------
<S> <C> <C> <C>
30 to 89 days 136 $ 7,921 0.8%
90 or more days 69 4,447 0.4%
-------------- ---------------------------
Total 205 $ 12,368 1.2%
============== ===========================
</TABLE>
<TABLE>
As of September 30, 1999
-----------------------------------------------------------------------------
Number of Percent of
Loans delinquent for: Loans Amount Total Loans
---------------------------------------------- ---------------------------
<S> <C> <C> <C>
30 to 89 days 162 $ 4,957 0.6%
90 or more days 73 3,978 0.5%
-------------- ---------------------------
Total 235 $ 8,935 1.1%
============== ===========================
</TABLE>
<PAGE>
The effect of non-performing loans on interest income for fiscal year 2000
is presented below. Dollar amounts are expressed in thousands.
Principal amount of non-performing loans
as of September 30, 2000 $ 4,447
============
Gross amount of interest income that would
have been recorded during fiscal 2000 if
these loans had been performing $ 395
Actual amount included in interest income for
fiscal 2000 131
------------
Interest income not recognized on non-performing
loans $ 264
============
Allowance for loss. Management records a provision for estimated loan
losses in an amount sufficient to cover current net charge-offs and probable
losses based on an analysis of risks inherent in the loan portfolio. Management
continually monitors the performance of the loan portfolio and establishes
specific loss allowances when warranted. Specifically, when it appears that a
property and borrower are no longer capable of full repayment, management
establishes a specific loss allowance to reduce the loan's book value to fair
value based on the anticipated results of collections. In addition, management
establishes a GVA through charges to the provision for loan loss based on an
assessment of the portfolio's credit risk, other than specifically identified
problem loans. Management attempts to maintain a GVA proportionate to the level
of risk in the Bank's performing loan portfolio.
The following table sets forth the activity in the allowance for loan
losses. Dollar amounts are expressed in thousands.
<TABLE>
September 30,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $ 6,671 6,405 6,272 5,836 5,484
Total provisions 600 300 64 477 633
Net recoveries (charge-offs) (114) (34) 69 (41) (281)
---------------------------------------------------------------------
Balance at end of year $ 7,157 6,671 6,405 6,272 5,836
=====================================================================
</TABLE>
Real Estate Acquired Through Foreclosure
----------------------------------------
The Bank's staff attempts to contact borrowers who fail to make scheduled
payments, generally after a payment is more than 15 days past due. In most
cases, delinquencies are cured promptly. If a delinquency exceeds 90 days, North
American will implement measures to remedy the default, such as accepting a
voluntary deed for the property in lieu of foreclosure or commencing a
foreclosure action. If a foreclosure occurs, the property is classified as real
estate owned ("REO") until the property is sold. North American sometimes
finances the sale of foreclosed real estate ("loan to facilitate"). Loans to
facilitate may involve a reduced down payment, a reduced rate, or a longer term
than the Bank's typical underwriting standards.
If a loan has a specific loss reserve at the time it is foreclosed, the
specific reserve is netted against the loan balance in recording the foreclosed
loan as REO. Management records a provision for losses on REO when, subsequent
to foreclosure, the estimated net realizable value of a repossessed asset
declines below its book value. The following table sets forth activity in the
allowance for loss on REO. Dollar amounts are expressed in thousands.
<TABLE>
September 30,
--------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning allowance for loss $ 1,289 1,336 1,680 1,715 1,576
Provisions -- -- (1,987) (172) 3
Net recoveries (charge-offs) (60) (47) 1,643 137 136
--------------------------------------------------------
Allowance for loss at year-end $ 1,229 1,289 1,336 1,680 1,715
========================================================
</TABLE>
Securities and Mortgage-Backed Securities Available for Sale
------------------------------------------------------------
Management classifies debt securities as available for sale if the Bank
does not have the intention and ability to hold until maturity. Assets available
for sale are carried at estimated fair value, with all fair value adjustments
recorded as accumulated other comprehensive income or loss. The Bank does not
<PAGE>
actively trade in derivative financial instruments and management does not
currently use derivative financial instruments for interest rate risk management
or to accomplish any hedging strategies.
Mortgage-Backed Securities Held to Maturity
-------------------------------------------
The Bank's MBS portfolio consists primarily of securities issued by the
FHLMC and FNMA. As of September 30, 2000, the Bank had $2.5 million in fixed
rate and $4.4 million in balloon and adjustable rate mortgage-backed securities
("MBS") issued by these agencies. The Bank also had $945,000 in CMO bonds and
$2.6 million in other asset-backed securities held to maturity.
Investment Securities
---------------------
As of September 30, 2000, the Bank held no investment security from a
single issuer for which the market value exceeded 10% of the Bank's
stockholders' equity.
Source of Funds
---------------
In addition to customer deposits, the Bank obtains funds from loan and MBS
repayments, sales of loans held-for-sale and securities available-for-sale,
investment maturities, FHLB advances, and other borrowings. Loan repayments, as
well as the availability of customer deposits, are influenced significantly by
the level of market interest rates. Borrowings may be used to compensate for
insufficient customer deposits or to support expanded loan and investment
activities.
Customer Deposits
-----------------
The following table sets forth the composition of various types of customer
deposit accounts. Dollar amounts are expressed in thousands.
<TABLE>
September 30,
--------------------------------------------------------------------------------------
2000 1998 1997 1996 1996
--------------- ---------------- ---------------- ---------------- ----------------
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
--------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Type of Account and Rate:
Demand deposit accounts $ 63,010 10 57,987 10 60,803 11 51,934 10 43,073 8
Savings accounts 77,839 13 85,758 15 78,991 14 70,457 13 63,495 11
Money market demand accounts 6,505 1 7,004 1 8,276 2 9,723 2 19,560 4
Certificates of deposit 474,311 76 414,714 74 397,434 73 388,430 75 373,503 77
--------------- ---------------- ---------------- ---------------- ----------------
$ 621,665 100 565,463 100 545,504 100 520,544 100 499,631 100
================================= ================ ================ ================
Weighted average interest rate 5.46% 4.83% 5.04% 5.29% 5.29%
========== =========== =========== =========== ==========
</TABLE>
The following table presents the deposit activities at the Bank. Dollar
amounts are expressed in thousands.
<TABLE>
For the years ended September 30,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Deposit receipts $ 884,054 741,718 582,168 540,220 473,035
Withdrawals 857,358 744,325 576,831 537,489 485,992
-----------------------------------------------------------------
Deposit receipts and purchases in
excess of (less than) withdrawals 26,696 (2,607) 5,337 2,731 (12,957)
Deposits sold -- -- -- -- (36,225)
Interest credited 29,506 22,566 19,623 18,182 19,185
-----------------------------------------------------------------
Net increase (decrease) $ 56,202 19,959 24,960 20,913 (29,997)
=================================================================
Balance at end of year $ 621,665 565,463 545,504 520,544 499,631
=================================================================
</TABLE>
Customers who wish to withdraw certificates of deposit prior to maturity
are subject to a penalty for early withdrawal.
<PAGE>
FHLB Advances and Other Borrowings
----------------------------------
FHLB advances are an important source of borrowing for North American. The
FHLB functions as a central reserve bank providing credit for thrifts and other
member institutions. As a member of the FHLB, North American is required to own
stock in the FHLB of Des Moines and can apply for advances, collateralized by
the stock and certain types of residential mortgages, provided that certain
standards related to credit-worthiness are met.
The Bank has historically relied on customer deposits and loan repayments
as its primary sources of funds. Advances are sometimes used as a funding
supplement, particularly when management determines that it can profitably
invest the advances over their term. During fiscal 2000, the Bank borrowed an
additional $303.2 million in advances, repaid $206.9 million, and as of
September 30, 2000, had a balance of $264.4 million (29% of total liabilities)
of advances from the FHLB.
The following table presents, for the periods indicated, certain
information as to the Bank's advances from the FHLB and other borrowings. Dollar
amounts are expressed in thousands.
<TABLE>
As of September 30,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FHLB advances $ 264,436 168,088 109,210 143,226 145,242
Other notes payable 100 150 200 1,680 1,565
-----------------------------------------------------------------
Total $ 264,536 168,238 109,410 144,906 146,807
=================================================================
Weighted average rate 6.67% 5.51% 5.77% 6.03% 6.00%
=================================================================
</TABLE>
As of September 30, 2000, the Bank had no category of short-term borrowings
for which the average balance outstanding during the year was more than
stockholders' equity.
Other Activities
----------------
Service Corporation Activities
------------------------------
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")
substantially limits the types of service corporation activities permissible by
the Bank. North American's service corporation, Nor-Am, was incorporated in
1972. Nor-Am sells tax-deferred annuities and mutual funds through the Bank's
branch offices and credit life and disability insurance to loan customers.
Other Information
-----------------
Employees
---------
As of September 30, 2000, the Bank and its subsidiaries had 307 employees.
Management considers its relations with the employees to be excellent.
The Bank currently maintains a comprehensive employee benefit program
including a qualified pension plan, hospitalization and major medical insurance,
paid vacations, paid sick leave, long-term disability insurance, life insurance,
and reduced loan fees for employees who qualify. The Bank's employees are not
represented by any collective bargaining group.
Competition
-----------
The Bank, like other savings institutions, is operating in a changing
environment. Non-depository financial service companies such as securities
dealers, insurance agencies, and mutual funds have become competitors for retail
savings and investments. In addition to offering competitive interest rates, a
savings institution can attract customer deposits by offering a variety of
services and convenient office locations and business hours. Mortgage
banking/brokerage firms compete for the residential mortgage business. The
primary factors in competing for loans are interest rates and rate adjustment
provisions, loan maturity, loan fees, and the quality of service to borrowers
and brokers.
<PAGE>
Regulation
----------
General
-------
Federal savings institutions are members of the FHLB System and their
deposits are insured by the SAIF, a division of the Federal Deposit Insurance
Corporation ("FDIC"). They are subject to extensive regulation by the OTS as the
chartering authority and now, since the passage of the FIRREA, the FDIC. SAIF
insured institutions are limited in the transactions in which they may engage by
statute and regulation, which in certain instances may require an institution to
conform with regulatory standards or to receive prior approval from regulators.
Institutions must also file periodic reports with these government 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. If it is deemed appropriate, the FDIC can require a re-valuation
of the Bank's assets based on examinations and they can require the Bank to
establish specific allowances for loss that reflect any such re-valuation. This
supervision and regulation is intended primarily for the protection of
depositors. Savings institutions are also subject to certain reserve
requirements under Federal Reserve Board regulations.
The enforcement provisions of the Federal Deposit Insurance Act ("FDI Act")
are applicable to savings institutions and savings and loan holding companies.
While the OTS is primarily responsible for enforcing those provisions, the FDIC
also has authority to impose enforcement action on savings institutions in
certain situations. The jurisdiction of the FDI Act's enforcement powers cover
all "insured-related parties" including stockholders, attorneys, appraisers and
accountants who knowingly or recklessly participate in wrongful action likely to
have an adverse effect on an insured institution. Regulators have broad
flexibility to impose enforcement action on an institution that fails to comply
with its regulatory requirements, particularly with respect to the capital
requirements. Possible enforcement action ranges from requiring a capital plan,
restricting operations, or terminating deposit insurance. The FDIC can recommend
to the director of the OTS (the "Director") enforcement action, and if action is
not taken by the Director, the FDIC has the authority to compel such action
under certain circumstances.
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
------------------------------------------------------------------------
Key provisions of FDICIA allow the Bank Insurance Fund ("BIF") of the FDIC
to increase its borrowing from the Treasury Department. The BIF can also borrow
up to 90% of the fair market value of its assets to provide working capital.
These borrowed funds will be repaid from assessments on the banking industry.
The FDICIA required the FDIC to formulate safety and soundness standards,
effective December 31, 1993. The standards address matters such as underwriting
and documentation standards, internal controls and audit systems, interest rate
risk, and compensation and other employee benefits.
Federal Home Loan Banking System
--------------------------------
The Bank is a member of the FHLB System, which consists of 12 regional
Federal Home Loan Banks each subject to OTS supervision and regulation. The
FHLBs provide a central credit facility for member institutions. The Bank, as a
member of the FHLB of Des Moines, is required to hold shares of capital stock of
the FHLB in an amount equal to at least 1% of the aggregate principal amount of
its unpaid residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 1/20 of its advances from the FHLB
of Des Moines, whichever is greater. The Bank complies with this requirement and
holds stock in the FHLB of Des Moines at September 30, 2000, of $13.2 million.
FHLB advances must be secured by specified types of collateral. Also, standards
of community investment and community service must be met by members that apply
for FHLB advances.
Liquidity
---------
As a member of the FHLB System, the Bank is required to maintain an average
balance of liquid assets equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term borrowings.
This liquidity requirement, which is currently 4%, may be changed from time to
time by the OTS to an amount within the range of 4% to 10%, depending on
economic conditions and the savings flows of member banks. Federal regulations
also require each member institution to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently 1%) of the total
of its net withdrawable savings accounts and borrowings payable in one year or
less. Monetary penalties may be imposed for failure to meet liquidity
requirements. The Bank's average liquidity for the month of September 2000 was
9.8%.
<PAGE>
Insurance on Customer Deposit Accounts
--------------------------------------
The SAIF insures the Bank's deposit accounts to a maximum of $100,000 for
each insured member. Deposit 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 subgroups. The capital
groups are an objective measure of risk based on regulatory capital calculations
and include well capitalized, adequately capitalized, and undercapitalized. The
supervisory subgroups (A, B, and C) are more subjective and are determined by
the FDIC based on recent regulatory examinations. Member institutions are
eligible for reclassification every six months.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 ("Funds
Act") was signed into law. The Funds Act outlined a one-time assessment of 65.7
basis points of insured deposits, which was used to increase the SAIF to 1.25%
of total insured deposits. Beginning January 1, 1997, annual deposit insurance
premiums range from 0 to 27 basis points of insured deposits based on where an
institution fits on the RRPS. North American is considered to be "well
capitalized" and has been placed in the most favorable capital subgroup. In
addition to deposit insurance premiums, SAIF-insured institutions are currently
assessed a premium, which is used to service the interest on the Financing
Corporation ("FICO") debt.
The FDIC has authority to conduct examinations of, require reporting of,
and initiate enforcement actions against a thrift. Regardless of an
institution's capital level, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS.
Regulatory Capital Requirements
-------------------------------
Regulations require that thrifts maintain minimum levels of regulatory
capital, which are at least as stringent as those imposed on national banks by
the Office of the Comptroller of the Currency ("OCC").
Leverage Limit. The leverage limit requires that a thrift maintain "core
capital" of at least 4% of its adjusted tangible assets. "Core capital" includes
(i) common stockholders' equity, including retained earnings; non-cumulative
preferred stock and related earnings; and minority interest in the equity
accounts of consolidated subsidiaries, minus (ii) those intangibles (including
goodwill) and investments in and loans to subsidiaries not permitted in
computing capital for national banks, plus (iii) certain purchased mortgage
servicing rights and certain qualifying supervisory goodwill. At September 30,
2000, the Bank had no supervisory goodwill and $96,000 of the Bank's servicing
rights were deducted from its regulatory capital. At September 30, 2000, the
Bank's core capital ratio was 8.2%
Tangible Capital Requirement. The tangible capital requirement mandates
that a thrift maintain tangible capital of at least 1.5% of tangible assets. For
the purposes of this requirement, adjusted total assets are generally calculated
on the same basis as for the leverage ratio requirement. Tangible capital is
defined in the same manner as core capital, except that all goodwill and certain
other intangible assets must be deducted. As of September 30, 2000, North
American's regulatory tangible capital was 8.1% of tangible assets.
Risk-Based Capital Requirement. The OTS's standards require that
institutions maintain risk-based capital equal to at least 8% of risk-weighted
assets. Total risk-based capital includes core capital plus supplementary
capital. In determining risk-weighted assets, all assets including certain
off-balance-sheet items are multiplied by a risk weight factor from 0% to 100%,
based on risk categories assigned by the OTS. The RRPS categorizes bank
risk-based capital ratio over 10% as well capitalized, 8% to 10% as adequately
capitalized, and under 8% as undercapitalized. As of September 30, 2000, the
Bank's current risk-based regulatory capital was 11.8% of risk-weighted assets.
Interest Rate Risk Rule. The OTS has adopted a rule, which requires that
thrifts 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 an 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,
<PAGE>
liabilities, and off-balance sheet items. 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.
OTS Assessments
---------------
The OTS has a sliding scale assessment formula to provide funding for its
operations. Troubled savings associations are charged a "premium assessment" at
a rate of 50% higher than non-troubled savings associations at the same level of
assets. Non-troubled institutions are charged "general assessments." The changes
in assessment fees reflect the increased supervisory attention that troubled
institutions require from the OTS, which in turn increases the cost of
regulation and examinations.
Equity Risk Investments
-----------------------
OTS regulations limit the aggregate amount that an insured institution may
invest in real estate, service corporations, equity securities, and
nonresidential construction loans and loans with loan-to-value ratios greater
than 80%. Under the regulations, savings associations which meet their minimum
regulatory capital requirements and have tangible capital of less than 6% of
total liabilities may make aggregate equity risk investments equal to the
greater of 3% of assets or two and one-half times their tangible capital.
Savings associations that meet their minimum regulatory capital requirements and
have tangible capital equal to or greater than 6% of total liabilities may make
aggregate equity risk investments of up to three times their tangible capital.
Loans to One Borrower
---------------------
FIRREA prohibits an institution from investing in any one real estate
project in an amount in excess of the applicable loans-to-one-borrower limit,
which is an amount equal to 15% of unimpaired capital on an unsecured basis and
an additional amount equal to 10% of unimpaired capital and surplus if the loan
is secured by certain readily marketable collateral. Renewals that exceed the
loans-to-one-borrower limit are permissible if the original borrower remains
liable for the debt and no additional funds are disbursed. As of September 30,
2000, North American had no loans that exceeded its 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 September 30, 2000, the Bank did not have any investments in or
advances to subsidiaries engaged in activities not permissible for national
banks.
Federal Reserve System
----------------------
Regulations require that institutions maintain reserves of 3% against
transaction accounts up to a specified level and an initial reserve of 10%
against that portion of total transaction accounts in excess of such amount. In
addition, an initial reserve of 3% must be maintained on non-personal time
deposits, which include borrowings with maturities of less than four years. Such
reserves are non-interest bearing. These percentages are subject to change by
the Federal Reserve Board. The balance maintained to meet these reserve
requirements may also be used to satisfy the liquidity requirements imposed by
the OTS. As of September 30, 2000, North American met its reserve requirements.
Savings institutions have authority to borrow from the Federal Reserve
Bank's "discount window," but only after exhausting all FHLB sources of
borrowing.
Taxation
--------
The Company is subject to the general applicable corporate tax provisions
of the Internal Revenue Code ("Code") and the Bank is subject to certain
additional provisions of the Code which apply to savings institutions and other
types of financial institutions. The Company most recently underwent an
examination by the IRS during fiscal year 1996.
Bad Debt Reserves
-----------------
Prior to October 1, 1996, the Bank was allowed a special bad debt deduction
for additions to tax bad debt reserves established for the purpose of absorbing
losses. This deduction was either based on an institution's actual loss
experience (the "experience method") or, subject to certain tests relating to
<PAGE>
the composition of assets, based on a percentage of taxable income ("percentage
method"). Under the percentage method, qualifying institutions generally
deducted 8% of their taxable income.
As a result of changes in the Federal tax code, the Bank's bad debt
deduction for the year ended September 30, 2000 and 1999, was based on actual
experience as the percentage method for additions to the tax bad debt reserve
has been eliminated. Under the new tax rules, thrift institutions are required
to recapture their accumulated tax bad debt reserve, except for the portion that
was established prior to 1988, the "base-year." The recapture will be completed
over a six-year phase-in period. The phase-in period will be delayed for two
years for institutions who meet certain residential lending requirements. As of
September 30, 2000, North American had approximately $2 million established as a
tax bad debt reserve in the base-year, and zero tax bad debt reserve after the
base year. Distributing the Bank's capital in the form of purchasing treasury
stock has forced North American to recapture its after base-year bad debt
reserve prior to the phase-in period. Management believes that accelerating the
recapture is more than offset by opportunity to buy treasury stock at lower
average market prices.
Minimum Tax
-----------
For taxable years beginning after December 31, 1986, the alternative
minimum tax rate is 20%. The alternative minimum tax generally applies to a base
of regular taxable income plus certain tax preferences and is payable to the
extent such preferences exceed an exemption amount.
State Taxation
--------------
The Bank is subject to a special financial institution tax based on
approximately 7% of net income. This tax is in lieu of all other taxes on thrift
institutions except taxes on real estate, tangible personal property owned by
the Bank, contributions paid to the State unemployment insurance fund, and
sales/use taxes.
ITEM 2. Properties
-------------------
North America's main office is located at 12498 South 71 Highway,
Grandview, Missouri. In addition to its main office, the Bank has 7 branch
offices, 7 loan origination offices, and one customer service office. Net book
value of premises owned and leasehold improvement (net of accumulated
depreciation) at September 30, 2000, was approximately $4.9 million.
<TABLE>
Date Owned/ Lease
Location Occupied Leased Expiration
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12498 South 71 Highway 1972 Owned
Grandview, Missouri
646 N, 291 Highway 1992 Leased November 2002
Lees Summit, Missouri
8501 North Oak Trafficway 1994 Owned
Kansas City, Missouri
920 North Belt 1979 Owned
St. Joseph, Missouri
3011-B North Belt 1999 Leased January 2004
St. Joseph, Missouri
8840 State Line Road 1994 Owned
Leawood, Kansas
2002 E Mechanic 1975 Owned
Harrisonville, Missouri
</TABLE>
<PAGE>
<TABLE>
Date Owned/ Lease
Location Occupied Leased Expiration
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11400 E 23rd St. 1990 Owned
Independence, Missouri
12125-D Blue Ridge Extension 1990 Leased January 2002
Grandview, Missouri
949 NE Columbus 1993 Leased November 2002
Lee's Summit, Missouri
12900 Metcalf - Suite 140 1996 Leased December 2001
Overland Park, Kansas
1611 Des Peres Rd. - Suite 110 1994 Leased February 2001
St. Louis, Missouri
1014 Country Club Road 1997 Leased January 2002
St. Charles, Missouri
11237 Nall Avenue 1997 Leased May 2002
Leawood, Kansas
5620 SW 29th Street 1998 Leased August 2001
Topeka, Kansas
3322 South Campbell - Suite W 1993 Leased August 2001
Springfield, Missouri
</TABLE>
ITEM 3. Legal Proceedings
--------------------------
The Company is involved in various legal actions that arose in the normal
course of business. There are no legal proceedings to which the Company or its
subsidiaries is a party that would have a material impact on its consolidated
financial statements.
PART II
ITEM 4. Submission of matters to a Vote of Security Holders
------------------------------------------------------------
None.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------
The information appearing on page 36 of the 2000 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 6. Selected Financial Data
--------------------------------
The information appearing on page 3 of the 2000 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------
The information appearing on pages 4 through 9 in the 2000 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
----------------------------------------------------
The information appearing on pages 10 through 32 of the 2000 Annual Report
to Stockholders is incorporated herein by reference. See Item 14 below for a
list of the financial statements and notes so incorporated.
<PAGE>
ITEM 9. Change in and Disagreements with Accountants on Accounting and Finance
--------------------------------------------------------------------------------
Disclosure
----------
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
------------------------------------------------------------
The information appearing on pages 3 through 11 of the Company's Proxy
Statement for the 2001 Annual Meeting is incorporated herein by reference.
ITEM 11. Executive Compensation
--------------------------------
The information appearing on pages 7 through 10 of the Company's Proxy
Statement for the 2001 Annual Meeting is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
The information appearing on pages 3 and 4 of the Company's Proxy Statement
for the 2001 Annual Meeting is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions
--------------------------------------------------------
The information appearing on page 11 of the Company's Proxy Statement for
the 2001 Annual Meeting is incorporated herein by reference.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial Statements
The following consolidated financial statements of NASB Financial, Inc. and
the independent auditors' report thereon which appear in the Company's 2000
Annual report to Stockholders ("Annual Report") have been incorporated herein by
reference to Item 8.
Consolidated Balance Sheets at September 30, 2000, and 1999 (Annual Report
- Page 10).
Consolidated Statements of Income for the years ended September 30, 2000,
1999, and 1998 (Annual Report - Page 11).
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 2000, 1999, and 1998 (Annual Report - Page 14).
Consolidated Statements of Cash Flows for the years ended September 30,
2000, 1999, and 1998 (Annual Report - Pages 12 and 13).
Notes to Consolidated Financial Statements (Annual Report - Pages 15
through 32).
Report of Independent Auditors (Annual Report - Page 33).
(2) Financial Statement Schedules.
Schedules are provided in the Consolidated Financial Statements.
<PAGE>
(3) Exhibits.
Exhibit
Number
-------
2 Agreement and Plan of Merger by and among North American Savings Bank,
F.S.B., NASB Interim Savings Bank, F.S.B., and NASB Financial Inc. Exhibit
2 to Form 8-K, dated April 15, 1998, and incorporated herein by reference.
3 Federal Stock Savings Bank Charter and Bylaws. Exhibit 3 to Form 10-K for
fiscal year ended September 30, 1992, dated December 27, 1992, and
incorporated herein by reference.
3.1 Articles of Incorporation of NASB Financial, Inc. Exhibit 3.1 to Form 8-K,
dated April 15, 1998, and incorporated herein by reference.
3.2 Bylaws of NASB Financial, Inc. Exhibit 3.2 to Form 8-K, dated April 15,
1998, and incorporated herein by reference.
10.1 Employees' Stock Option Plan and specimen copy of Option Agreement entered
into between the Company and the Plan participants. (Exhibit 10.4 to Form
10-K for fiscal year ended September 30, 1986, dated December 26, 1986, and
incorporated herein by reference.)
10.2 Amended and Restated Retirement Income Plan for Employees of North American
Savings Bank dated September 30, 1988, dated December 20, 1988, and
incorporated herein by reference).
*13 2000 Annual Report to Stockholders.
22 Subsidiaries of the Registrant at September 30, 2000, listed on page 1.
23 Proxy Statement of NASB Financial, Inc. for the 2001 Annual Meeting of
Stockholders filed with the SEC (certain portions of such proxy Statement
are incorporated herein by reference to page numbers in the text of this
report on Form 10-K).
* Filed Herewith
(b) Reports of Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) 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.
By: /s/ David H. Hancock
David H. Hancock
Chairman
Date: December 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 28, 2000, by the following persons on
behalf of the Registrant and in the capacities indicated.
Signature Title
/s/ David H. Hancock Chairman (Chief Executive Officer)
David H. Hancock
/s/ Walter W. Pinnell President
Walter W. Pinnell
/s/ Keith B. Cox Chief Financial Officer
Keith B. Cox (Principal Accounting Officer)
/s/ Frederick V. Arbanas Director
Frederick V. Arbanas
/s/ Barrett Brady Director
Barrett Brady
/s/ Linda S. Hancock Director
Linda S. Hancock
/s/ W. Russell Welsh Director
W. Russell Welsh
/s/ James A. Watson Director
James A. Watson
