1
NASB Financial, Inc.
2000 Annual Report
--------------------------------------------------------------------------------
Contents
2 Letter to Shareholders
3 Selected Consolidated Financial and Other Data
4-9 Management's Discussion and Analysis of Financial Condition and Results of
Operations
10-33 Consolidated Financial Statements
34 Report of Independent Auditors
35 Summary of Unaudited Quarterly Operating Results
35-36 Listing of Directors and Officers
37 Branch Offices, Investor Information, Common Stock Prices and Dividends
Financial Highlights
<TABLE>
2000 1999 1998
----------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
For the year ended September 30:
Net interest income $ 35,838 30,455 27,849
Net income 14,721 12,900 13,586
Net income per share 1.66 1.43 1.52
Return on average assets 1.63% 1.65% 1.85%
Return on average equity 18.12% 17.35% 21.06%
Dividend payout ratio 22.89% 21.11% 15.63%
At year end:
Assets $ 984,525 825,737 736,054
Loans 914,012 751,040 658,357
Customer deposit accounts 621,665 565,463 545,504
Stockholders' equity 83,661 78,863 69,833
Stockholders' equity to assets 8.50% 9.55% 9.49%
Book value per share $ 9.84 8.81 7.84
Selected year end information:
Stock price per share: Bid $ 14.50 10.375 12.50
Ask 15.50 10.500 13.75
</TABLE>
<PAGE>
(LOGO)
December 20, 2000
Dear Shareholder:
The fiscal year ending September 30, 2000, was a period of substantial
growth for NASB. Our total assets increased 19.4%, to $985mm. Earnings, adjusted
for extraordinary items, improved for the tenth consecutive year, to $14,721m, a
14.5% increase over the previous year.
During these past ten years, our total assets have increased 153%, to $985
million, and book value per share has increased from $1.83 to $9.63, an 18.06%
annually compounded increase.
As in previous years, we continued to upgrade the retail facilities that
will insure our future growth. In July, we moved into our new facility in
Independence, at 11400 23rd Street, across the street from our previous building
there. In September, we began construction of an additional office in North
Kansas City, at the corner of Barry Road and Winter Avenue, to compliment our
existing office, at 8501 North Oak Trafficway.
In July, we completed the repurchase of over 500,000 shares of our common
stock. This was accomplished by a formal tender offer to all shareholders, at
$12.50 per share.
Competition in the real estate lending markets remains intense. Many of our
competitors are determined to increase market share, without regard to
profitability. It is important to note that many national lenders have reduced
their reliance on residential lending, and/or have changed their policies to
increase profits. The focus on volume remains among a handful of managers in
most local markets. Compounding this problem is the increase in short-term
rates, relative to longer, residential mortgage rates. During the year, the
one-year treasury obligation increased from 5.17%, to 6.06%, while mortgage
rates decreased. At this time, I see no indication that either of these
situations will change.
As in previous years, we are cautiously optimistic about our future
profitability, and continue to appreciate your support.
Sincerely,
David H. Hancock
Board Chairman
<PAGE>
Selected Consolidated Financial and Other Data
The following tables include selected information concerning the financial
position of NASB Financial, Inc., (including consolidated data from the
operations of subsidiaries) for the years ended September 30. Dollar amounts are
expressed in thousands, except per share data.
<TABLE>
SUMMARY STATEMENT OF OPERATIONS 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 78,962 63,557 62,391 60,031 56,002
Interest expense 43,124 33,102 34,542 35,254 33,760
-----------------------------------------------------
Net interest income 35,838 30,455 27,849 24,777 22,242
Provision for loan losses 600 300 64 477 633
-----------------------------------------------------
Net interest income after provision for loan losses 35,238 30,155 27,785 24,300 21,609
Other income 9,409 11,382 11,424 8,596 9,045
General and administrative expenses 20,120 20,129 17,067 14,888 18,085
-----------------------------------------------------
Income before income tax expense 24,527 21,408 22,142 18,008 12,569
Income tax expense 9,806 8,508 8,556 6,937 4,838
-----------------------------------------------------
Net income $ 14,721 12,900 13,586 11,071 7,731
=====================================================
Earnings per share:
Basic $ 1.66 1.43 1.52 1.23 0.85
Diluted 1.63 1.40 1.48 1.19 --
Average shares outstanding (in thousands) 8,863 8,998 8,938 9,004 9,116
</TABLE>
<TABLE>
SUMMARY BALANCE SHEET 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Bank deposits $ 1,577 7,317 -- 513 10,087
Stock in Federal Home Loan Bank 13,222 8,405 5,961 9,812 9,012
Securities available for sale 10,006 19,510 24,951 33,603 25,095
Loans receivable held for sale 88,320 92,232 131,845 138,869 33,963
Mortgage-backed securities 10,445 13,019 21,612 30,016 25,072
Loans receivable held for investment 825,692 658,808 528,847 497,873 585,299
Non-interest earning assets 35,263 26,446 22,838 22,778 22,560
-----------------------------------------------------
Total assets $ 984,525 825,737 736,054 733,464 711,088
=====================================================
Liabilities:
Customer deposit accounts $ 621,665 565,463 545,504 520,544 499,631
Advances from Federal Home Loan Bank 264,436 168,088 109,210 143,226 145,242
Other borrowings 100 150 200 1,680 1,565
Non-interest costing liabilities 14,663 13,173 11,307 8,818 13,501
-----------------------------------------------------
Total liabilities 900,864 746,874 666,221 674,268 659,939
Stockholders' equity 83,661 78,863 69,833 59,196 51,149
-----------------------------------------------------
Total liabilities and stockholders' equity $ 984,525 825,737 736,054 733,464 711,088
=====================================================
Book value per share $ 9.84 8.81 7.84 6.62 5.65
=====================================================
OTHER DATA 2000 1999 1998 1997 1996
-----------------------------------------------------
Loans serviced for others $ 706,668 667,644 546,198 454,169 370,817
Number of full service branches 8 8 7 7 7
Number of employees 307 322 296 267 267
Shares outstanding (in thousands) 8,500 8,949 8,904 8,944 9,056
</TABLE>
<PAGE>
General
NASB Financial, Inc. ("the Company") was formed in April 1998 to become a
unitary thrift holding company of North American Savings Bank, F.S.B. ("the
Bank" or "North American"). The Company's principal business 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 lending activities. Expenses consist primarily of interest payments
on customer deposits and other borrowings and general and administrative costs.
The Bank operates eight deposit branch locations, eight residential loan
origination branch offices, and two residential construction loan origination
offices, primarily in the greater Kansas City area. Consumer loans are also
offered through the Bank's branch network. Customer deposit accounts are insured
up to allowable limits by the Savings Association Insurance Fund ("SAIF"), a
division of the Federal Deposit Insurance Corporation ("FDIC"). The Bank is
regulated by the Office of Thrift Supervision ("OTS") and the FDIC.
Financial Condition
Total assets as of September 30, 2000, were $984.5 million, an increase of
$158.8 million from the prior year-end. Average interest-earning assets
increased $139.2 million from the prior year to $875.3 million.
As the Bank originates 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 are sold with servicing released or converted into
mortgage-backed securities ("MBS") and sold with the 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 the portfolio or sold and if sold, which method
of sale is appropriate. During the year ended September 30, 2000, the Bank
originated $288.1 million in mortgage loans held for sale, $374.4 million in
mortgage loans held for investment, and $31.5 million in other loans. This total
of $694.1 million in loan originations was an increase of $7.3 million over the
prior fiscal year.
Included in the $88.3 million in loans held for sale as of September 30,
2000, are $11.5 million in residential mortgage loans held for sale with
servicing released. Also included in loans held for sale at September 30, 2000,
are $0.4 million in commercial residential loans insured by the 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 balance of total loans held for investment at September 30, 2000, was
$825.7 million, an increase of $166.9 million from the balance at September 30,
1999. During fiscal 2000, total originations and purchases of mortgage loans and
other loans held for investment were $442.4 million. A significant portion of
the increase in loans held for investment were residential construction loans.
The gross balance of construction and development loans was $246.8 million at
September 30, 2000, an increase of $49.8 million (25%).
Mortgage servicing rights increased $970,000 during fiscal 2000 as a result
of loans sold with servicing retained. In relationship to this increase, the
total balance of mortgage loans serviced for others was $706.7 million, an
increase of $39.0 million from the prior fiscal year-end.
Total liabilities were $900.9 million at September 30, 2000, an increase of
$154.0 million (21%) from the previous year. Average interest-costing
liabilities during fiscal year 2000 were $812.8 million, an increase of $135.3
million from fiscal 1999.
Total customer deposit accounts increased $56.2 million during fiscal year
2000. This was comprised of increases of $59.6 million in certificates of
deposit and $5.0 million in demand deposit accounts, offset by decreases of $7.9
million in savings accounts and $0.5 million in money market demand accounts.
The average interest rate on customer deposits at September 30, 2000, was 5.46%,
a decrease of 63 basis points from the prior year-end. The average balance of
customer deposits during fiscal 2000 was $592.8 million, an increase of $40.6
million from fiscal 1999.
<PAGE>
Advances from the FHLB were $264.4 million at September 30, 2000, an
increase of $96.3 million from the prior fiscal year-end. During fiscal year
2000, the Bank borrowed $303.2 million of new advances and made $206.9 million
of repayments. Management continues to use FHLB advances as a primary funding
source to provide operating liquidity and to fund the origination of mortgage
loans.
During the year ended September 30, 2000, the Company repurchased a total
of 603,037 shares of its common stock at a cost of $7.4 million. Included in
these repurchases were 517,265 shares, which the Company purchased pursuant to
an Issuer Tender Offer of $12.50 per share that settled on July 5, 2000. Total
fees and expenses incurred for the offer were approximately $10,000. Also during
fiscal 2000, the Company paid a total of $3.4 million in cash dividends to its
stockholders.
Net Interest Margin
The Bank'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, FHLB advances, 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.
During fiscal year 2000, average interest-earning assets exceeded average
interest-costing liabilities by $62.5 million, which was 6.9% of average total
assets. In fiscal year 1999, average interest-earning assets exceeded average
interest-costing liabilities by $58.6 million, which was 7.7% of average total
assets.
The table below presents the total dollar amounts of interest income and
expense on the indicated amounts of average interest-earning assets or
interest-costing liabilities, with the average interest rates for the year and
at the end of each year. Average yields reflect yield reductions due to
non-accrual loans. Average balances and weighted average yields at year-end
include all accrual and non-accrual loans. Dollar amounts are expressed in
thousands.
<TABLE>
As of As of As of
Fiscal 2000 9/30/00 Fiscal 1999 9/30/99 Fiscal 1998 9/30/98
------------------------ ----------------------- ----------------------
Average Yield/ Yield/ Average Yield/ Yield/ Average Yield/ Yield/
Balance Interest Rate Rate Balance Interest Rate Rate Balance Interest Rate Rate
-------------------------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 832,898 76,078 9.13% 8.75% $ 681,004 60,247 8.85% 8.28% $ 639,956 57,714 9.02% 8.09%
Mortgage-backed securities 20,042 1,330 6.64% 7.84% 26,757 2,060 7.70% 6.04% 42,443 3,056 7.20% 6.57%
Investments 16,563 1,217 7.35% 7.94% 17,523 887 5.06% 7.49% 18,890 1,186 6.28% 7.81%
Bank deposits 5,840 337 5.77% 6.28% 10,827 363 3.35% 4.86% 6,291 435 6.92% --
-------------------------------- -------------------------------- ------------------------------
Total earning assets 875,343 78,962 9.02% 8.71% 736,111 63,557 8.63% 8.15% 707,580 62,391 8.82% 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 29,641 5.00% 5.46% $ 552,226 26,083 4.72% 4.83% $ 533,097 27,014 5.07% 5.04%
FHLB advances 219,909 13,476 6.13% 6.67% 125,116 7,006 5.60% 5.51% 124,774 7,478 5.99% 5.77%
Other borrowings 115 7 6.07% 7.50% 165 13 7.86% 7.50% 875 50 5.71% 7.50%
-------------------------------- ------------------------------- ------------------------------
Total costing liabilities 812,804 43,124 5.31% 5.82% 677,507 33,102 4.89% 4.99% 658,746 34,542 5.24% 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% 2.89% 3.74% 3.16% 3.58% 2.83%
================= ================ ===============
Average interest-earning
assets $ 875,343 $ 736,111 $ 707,580
======== ======= =======
Net interest 35,838 30,455 27,849
======= ======== ========
Net yield spread on avg.
Interest-earning assets 4.09% 4.14% 3.94%
======== ======== ========
</TABLE>
The following tables set forth 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 rates (change in rate multiplied by the old volume), (2) changes
in volume (change in volume multiplied by the old rate), 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.
<PAGE>
<TABLE>
Year ended September 30, 2000
compared to
year ended September 30, 1999
-----------------------------------------------------------
Rate/
Rate Volume Volume Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Components of interest income:
Loans receivable $ 1,907 13,443 481 15,831
Mortgage-backed securities (284) (517) 71 (730)
Investments 401 (49) (22) 330
Bank deposits 262 (167) (121) (26)
-----------------------------------------------------------
Net change in interest income 2,286 12,710 409 15,405
-----------------------------------------------------------
Components of interest expense:
Customer deposit accounts 1,546 1,914 98 3,558
FHLB advances 663 5,309 498 6,470
Other borrowings (3) (4) 1 (6)
-----------------------------------------------------------
Net change in interest expense 2,206 7,219 597 10,022
-----------------------------------------------------------
Increase (decrease) in net interest income $ 80 5,491 (188) 5,383
===========================================================
</TABLE>
<TABLE>
Year ended September 30, 1999
compared to
year ended September 30, 1998
-----------------------------------------------------------
Rate/
Rate Volume Volume Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Components of interest income:
Loans receivable $ (1,088) 3,703 (82) 2,533
Mortgage-backed securities 212 (1,130) (78) (996)
Investments (230) (86) 17 (299)
Bank deposits (225) 314 (161) (72)
-------------------------------------------------------------
Net change in interest income (1,331) 2,801 (304) 1,166
-------------------------------------------------------------
Components of interest expense:
Customer deposit accounts (1,866) 970 (35) (931)
FHLB advances (487) 21 (6) (472)
Other borrowings 19 (41) (15) (37)
-------------------------------------------------------------
Net change in interest expense (2,334) 950 (56) (1,440)
-------------------------------------------------------------
Increase (decrease) in net interest income $ 1,003 1,851 (248) 2,606
=============================================================
</TABLE>
Comparison of Years Ended September 30, 2000 and 1999
For the fiscal year ended September 30, 2000, the Company had net income of
$14.7 million, or $1.66 per share, compared to net income $12.9 million, or
$1.43 per share in the prior year.
Total interest income for the year ended September 30, 2000, was $79.0
million, an increase of $15.4 million (24%) over fiscal year 1999. $12.7 million
of this increase was the result of an increase in average interest-earning
assets of $139.2 million during the period from $736.1 million during fiscal
1999 to $875.3 million during fiscal 2000. The average yield on assets also
increased during fiscal 2000 to 9.02% from 8.63% during fiscal 1999, which
accounted for $2.3 million of the increase in total interest income.
Interest income on loans increased $15.8 million to $76.1 million in fiscal
2000, compared to $60.2 million during fiscal 1999. Approximately $13.4 million
of this increase was the result of an increase in the average balance of loans
outstanding of $151.9 million over the prior period and $1.9 million of the
increase was a result of a 28 basis point increase in the average yield on
loans. The weighted average rate on loans receivable at the year ended September
30, 2000, was 8.75%, a 47 basis point increase from September 30, 1999.
Interest on MBS declined during fiscal year 2000 due to a decrease in the
average balance of MBS of $6.7 million and a decrease in yield on MBS of 106
basis points. In recent years, North American has focused its growth on the
<PAGE>
commercial real estate, residential construction, and residential "whole loan"
portfolios, so there have been no purchases of MBS. Management plans to continue
using MBS repayments as a source of funding for loan originations.
Total interest expense during the year ended September 30, 2000, increased
$10.0 million (30%) from the same period in the prior year. Specifically,
interest on customer deposits increased $3.6 million due to an increase in the
average balance of $40.6 million and a 28 basis point increase in the average
rate paid on interest-costing liabilities. The average rate paid on FHLB
advances increased 53 basis points and the average balance increased $94.8
million. Management continues to use FHLB advances as a primary source of
short-term financing.
The Bank's net interest income is impacted by changes in market interest
rates, which have varied greatly over time. Changing interest rates also affect
the level of loan prepayments and the demand for new loans. Management monitors
the Bank'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 Bank's assets with liabilities
of a similar duration to minimize the impact of changing interest rates on the
Bank's net interest margin. Since the relative spread between financial assets
and liabilities is constantly changing, North American's current net interest
spread may not be an indication of future net interest income.
Management records a provision for loan losses in amounts sufficient to
cover current net charge-offs and an estimate of probable losses based on an
analysis of risks that management believes to be inherent in the loan portfolio.
The General Valuation Allowance ("GVA") recognizes the inherent risks associated
with lending activities but, unlike specific allowances, have not been allocated
to particular problem assets but to a homogenous pool of loans. The provision
for losses on loans was $600,000 during the year ended September 30, 2000,
compared to $300,000 during fiscal 1999. Management analyzes the adequacy of the
allowance on a monthly basis and believes that the Bank's specific loss
allowances and GVA are adequate. While management uses information currently
available to determine these allowances, they can fluctuate based on changes in
economic conditions and changes in the information available to management.
Also, regulatory agencies review the Bank's allowances for loan loss as part of
their examination, and they may require the Bank to recognize additional loss
provisions based on the information available at the time of their examinations.
Total other income for fiscal year 2000 was $9.4 million, an decrease of
$2.0 million from the amount earned in fiscal year 1999. Specifically, gains on
loans held for sale decreased $2.2 million due to an decrease in the volume of
loans sold. The valuation of mortgage servicing rights during fiscal 2000
resulted in an impairment provision of $164,000 compared to a recovery of
impairment during fiscal 1999 of $118,000. This was partially offset by an
increase in loan servicing fees of $0.4 million due to a decrease in
amortization of capitalized mortgage servicing rights, which was a result of a
decrease in prepayments of the underlying mortgage loans. Also, customer service
fees and charges increased $0.2 million.
Total general and administrative expenses for fiscal year 2000 were
relatively unchanged from the prior year. Specifically, the increase in
compensation expense of $0.5 million (4.6%) million was offset by decreases in
Federal deposit insurance premiums of $150,000, advertising expenses of
$283,000, and other expenses of $153,000.
Comparison of Years Ended September 30, 1999 and 1998
For the fiscal year ended September 30, 1999, the Company had net income of
$12.9 million, or $1.43 per share, compared to net income in the prior year of
$13.6 million, or $1.52 per share.
Total interest income for the year ended September 30, 1999, was $63.6
million, an increase of $1.2 million (2%) over fiscal year 1998. This was the
result of an increase in average interest-earning assets of $28.5 million during
the period from $707.6 million during fiscal 1998 to $736.1 million during
fiscal 1999. This was partially offset by a decrease in the average yield on
assets during the period of 19 basis points from 8.82% during fiscal 1998 to
8.63% during fiscal 1999.
Interest income on loans increased $2.5 million to $60.2 million in fiscal
1999, compared to $57.7 million during fiscal 1998. This increase was the result
of an increase in the average balance of loans outstanding of $41.0 million over
the prior period, partially offset by a decrease in the average yield on loans
of 17 basis points. The weighted average rate on loans receivable at September
30, 1999, was 8.28%, a 19 basis point increase from September 30, 1998. However,
the weighted average yield on the Bank's loan portfolio decreased 17 basis
points during fiscal 1999 to 8.85%, due to a decrease in the amortization of
deferred fees and discounts on loans, which occurred because of a decease in
loan repayments.
<PAGE>
Interest on MBS declined during fiscal year 1999 due to a decrease in the
average balance of MBS of $15.7 million, partially offset by an increase in
yield on MBS of 50 basis points.
Total interest expense during the year ended September 30, 1999, decreased
$1.4 million (4%) from the same period in the prior year. Specifically, interest
on customer deposits decreased $931,000 due to a 35 basis point decrease in the
average rate paid on interest-costing liabilities, partially offset by a $19.1
million increase in the average balances. The average rate paid on FHLB advances
decreased 39 basis point from the prior year, partially offset by $342,000
increase in average balances.
The provision for losses on loans was $300,000 during the year ended
September 30, 1999, compared to $64,000 during fiscal 1998. The provision was
lower during fiscal 1998 as the result of a loan recovery.
Total other income for fiscal year 1999 was $11.4 million, unchanged in
total from the amount recorded in fiscal year 1998. Specifically, loan servicing
fees increased $0.5 million due to a decrease in amortization of capitalized
mortgage servicing rights, which was a result of a decrease in prepayments of
the underlying mortgage loans. During the quarter ended September 30, 1998, a
valuation allowance of $651,000 was established for impairment of mortgage
servicing rights. The valuation of mortgage servicing rights during fiscal 1999
resulted in a recovery of impairment of $118,000. Provision for losses on real
estate owned for fiscal 1998 was a net recovery of $2.0 million as a result of
the sale of one large commercial property. Gains on loans held for sale
increased $593,000 due to an increase in the volume of loans sold.
Total general and administrative expenses for fiscal year 1999 increased
$3.1 million from the prior year. Specifically, compensation expense increased
$1.5 million, due primarily to an increase in staffing in the residential,
construction, and consumer lending departments. Other operating expense
increased $938,000, due primarily to increased expenses related to the increase
in total loan origination volume, start-up expenses to open one new retail
deposit branch and two new loan origination branches, and costs associated with
the renovation of the Bank's automated systems for year 2000 compliance.
Asset/Liability Management
Management recognizes that there are certain market risk factors present in
the structure of the Bank's financial assets and liabilities. Since the Bank
does not have material amounts of derivative securities, equity securities, or
foreign currency positions, interest rate risk ("IRR") is the primary market
risk that is inherent in the Bank's portfolio.
The objective of the Bank's IRR management process is to maximize net
interest income over a range of possible interest rate paths. The monitoring of
interest rate sensitivity on both the interest-earning assets and the
interest-costing liabilities are key to effectively managing IRR. Management
maintains an IRR policy, which outlines a methodology for monitoring interest
rate risk. The Board of Directors reviews this policy and approves changes on a
quarterly basis. The IRR policy also identifies the duties of the Bank's
Asset/Liability Committee ("ALCO"). Among other things, the ALCO is responsible
for developing the Bank's annual business plan and investment strategy,
monitoring anticipated weekly cashflows, establishing prices for the Bank's
various products, and implementing strategic IRR decisions.
On a quarterly basis, the Bank monitors the estimate of changes that would
potentially occur to its net portfolio value ("NPV") of assets, liabilities, and
off-balance sheet items assuming a sudden change in market interest rates.
Management presents a NPV analysis to the Board of Directors each quarter and
NPV policy limits are reviewed and approved.
The following table is an interest rate sensitivity analysis, which
summarizes information provided by the OTS, which estimates the changes in NPV
of the Bank's portfolio of assets, liabilities, and off-balance sheet items
given a range of assumed changes in market interest rates. These computations
estimate the effect on the Bank's NPV of an instantaneous and sustained change
in market interest rates of plus and minus 300 basis points, as well as the
Bank's current IRR policy limits on such estimated changes. The computations of
the estimated effects of interest rate changes are based on numerous
assumptions, including a constant relationship between the levels of various
market interest rates and estimates of prepayments of financial assets. The OTS
compiled this information using data from the Bank's Thrift Financial Report as
of September 30, 2000. Dollar amounts are expressed in thousands.
<PAGE>
<TABLE>
NPV as % of PV of Assets
Changes in Net Portfolio Value --------------------------------
Market ------------------------------------------------------ Board approved
Interest Rates $ Amount $ Change % Change Actual minimum
------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
+ 3% 84,135 (25,829) -23% 8.9% 6%
+ 2% 94,825 (15,139) -14% 9.8% 6%
+ 1% 103,664 (6,301) -6% 10.5% 7%
no change 109,964 -- -- 11.0% 8%
- 1% 112,499 2,534 +2% 11.1% 8%
- 2% 114,183 4,219 +4% 11.1% 8%
- 3% 118,382 8,417 +8% 11.4% 8%
</TABLE>
Management cannot predict future interest rates and the effect of changing
interest rates on future net interest margin, net income, or NPV can only be
estimated. However, management believes that its overall system of monitoring
and managing IRR is effective.
Impact of Inflation and Changing Prices
The consolidated financial statements and related data presented have been
prepared in accordance with accounting principles generally accepted in the
United States of America, which require the measurement of financial position
and operating results in terms of historical dollars without considering changes
in the relative purchasing power of money over time due to inflation. Unlike
most industrial companies, most of the Bank's assets and liabilities are
monetary in nature. Except for inflation's impact on general and administrative
expenses, interest rates have a more significant impact on the Bank's
performance than do the effects of inflation. However, the level of interest
rates may be significantly affected by the potential changes in the monetary
policies of the Board of Governors of the Federal Reserve System in an attempt
to impact inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services.
Changing interest rates impact the demand for new loans, which affect the
value and profitability of North American's loan origination department. Rate
fluctuations inversely affect the value of the Bank's mortgage servicing
portfolio because of their impact on mortgage prepayments. Falling rates usually
stimulate a demand for new loans, which makes the mortgage banking operation
more valuable, but also encourages mortgage prepayments, which depletes the
value of mortgage servicing. Rising rates generally have the opposite effect on
these operations.
Liquidity and Capital Resources
The OTS specifies a required minimum liquidity ratio for thrift
institutions, defined as liquid assets as a percentage of net withdrawable
deposits and current borrowings. The Bank's liquidity ratio may increase or
decrease depending on the availability of funds and the comparative yields on
investment alternatives. For secondary sources of liquidity, the Bank may sell
assets available for sale, borrow from primary securities dealers on a
collateralized basis, or may use the FHLB's credit facility.
North American maintains a balance of liquid assets above the minimum
regulatory requirement and at a level adequate to meet the requirements of
normal banking activities, including the repayment of maturing debt and
potential deposit withdrawals. The required liquidity ratio, which may vary from
time to time, was 4% during September 2000 and 1999. For the months of September
2000 and 1999, North American's liquidity ratios were 9.8% and 11.5%,
respectively.
The OTS also requires thrift institutions to maintain specified levels of
regulatory capital. As of September 30, 2000, the Bank's regulatory capital
exceeded all minimum capital requirements, which consist of three components:
tangible, core, and risk-based. A schedule, which more fully describes the
Bank's regulatory capital requirements, is provided in the notes to the
consolidated financial statements.
Fluctuations in the level of interest rates typically impact prepayments on
mortgage loans and mortgage related securities. During periods of falling rates,
these prepayments increase and a greater demand exists for new loans. The
availability of customer deposits is 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.
<PAGE>
NASB Financial, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
September 30, September 30,
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>
ASSETS <C> <C>
Cash and cash equivalents $ 3,647 10,870
Securities available for sale, at market value (Note 3) (amortized cost of $5,595
at September 30, 2000 and 1999) 4,775 4,913
Stock in Federal Home Loan Bank, at cost 13,222 8,405
Mortgage-backed securities (Notes 4 and 5):
Available for sale, at market value (amortized cost of $5,246 and $9,200 at
September 30, 2000 and 1999, respectively) 5,231 9,098
Held to maturity, at cost (market value of $10,795 and $13,268 at
September 30, 2000 and 1999, respectively) 10,445 13,019
Loans receivable (Note 6):
Held for sale, at lower of amortized cost or market value (estimated market value
of $90,013 and $93,413 at September 30, 2000 and 1999, respectively) 88,320 92,232
Held for investment, net 825,692 658,808
Accrued interest receivable 6,291 4,832
Real estate owned, net (Note 7) 3,683 2,702
Premises and equipment, net (Note 8) 5,823 4,719
Mortgage servicing rights, net (Note 16) 14,851 13,881
Other assets 2,545 2,258
----------------- ---------------
$ 984,525 825,737
================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposit accounts (Note 9) $ 621,665 565,463
Advances from Federal Home Loan Bank (Note 10) 264,436 168,088
Other borrowings 100 150
Escrows 6,897 6,310
Income taxes payable (Note 11) 5,845 2,965
Accrued expenses and other liabilities 1,921 3,898
----------------- ---------------
Total liabilities 900,864 746,874
----------------- ---------------
Commitments and contingencies (Note 18)
Stockholders' equity (Notes 12, 13 and 15)
Common stock of $0.15 par value: 20,000,000 authorized; 9,651,160 shares and
9,497,312 shares issued at September 30, 2000 and 1999, respectively 1,448 1,425
Serial preferred stock of $1.00 par value: 7,500,000 shares authorized; none
outstanding -- --
Additional paid-in capital 14,737 13,856
Retained earnings 81,055 69,704
Treasury stock, at cost; 1,150,911 shares and 547,874 shares at September 30,
2000 and 1999, respectively (13,078) (5,640)
Accumulated other comprehensive loss (501) (482)
----------------- ---------------
Total stockholders' equity 83,661 78,863
----------------- ---------------
$ 984,525 825,737
================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Income
Years Ended September 30,
2000 1999 1998
-----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except share data)
<S> <C> <C> <C>
Interest on loans receivable $ 76,078 60,247 57,714
Interest on mortgage-backed securities 1,330 2,060 3,056
Interest and dividends on securities 1,217 887 1,186
Other interest income 337 363 435
---------------- ----------------- ----------------
Total interest income 78,962 63,557 62,391
---------------- ----------------- ----------------
Interest on customer deposit accounts 29,641 26,083 27,014
Interest on advances from Federal Home Loan Bank and
other borrowings 13,483 7,019 7,528
---------------- ----------------- ----------------
Total interest expense 43,124 33,102 34,542
---------------- ----------------- ----------------
Net interest income 35,838 30,455 27,849
Provision for loan losses 600 300 64
---------------- ----------------- ----------------
Net interest income after provision for loan losses 35,238 30,155 27,785
---------------- ----------------- ----------------
Other income (expense):
Loan servicing fees 1,211 854 351
Impairment (loss) recovery on mortgage servicing rights (164) 118 (651)
Customer service fees and charges 2,854 2,651 2,594
Provision for losses on real estate owned -- -- 1,987
Gain on sale of securities available for sale -- 95 --
Gain on sale of mortgage servicing rights 2 -- --
Gain on sale of loans receivable held for sale 4,038 6,236 5,643
Other 1,468 1,428 1,500
---------------- ----------------- ----------------
Total other income 9,409 11,382 11,424
---------------- ----------------- ----------------
General and administrative expenses:
Compensation and fringe benefits 12,321 11,781 10,285
Premises and equipment 2,459 2,422 2,312
Advertising and business promotion 640 923 403
Federal deposit insurance premiums 175 325 327
Other 4,525 4,678 3,740
---------------- ----------------- ----------------
Total general and administrative expenses 20,120 20,129 17,067
---------------- ----------------- ----------------
Income before income tax expense 24,527 21,408 22,142
---------------- ----------------- ----------------
Income tax expense:
Current 8,557 6,799 7,582
Deferred 1,249 1,709 974
---------------- ----------------- ----------------
Total income tax expense 9,806 8,508 8,556
---------------- ----------------- ----------------
Net income $ 14,721 12,900 13,586
================ ================= ================
Basic earnings per share $ 1.66 1.43 1.52
================ ================= ================
Diluted earnings per share $ 1.63 1.40 1.48
================ ================= ================
Weighted average shares outstanding 8,863,432 8,997,552 8,937,740
================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years ended September 30,
-------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,721 12,900 13,586
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 954 1,056 1,044
Amortization and accretion, net (303) (1,221) (1,066)
Deferred income tax expense 1,249 1,709 974
Gain on sale of securities available for sale -- (95) --
Impairment loss (recovery) of mortgage servicing rights 164 (118) 651
Gain on sale of mortgage servicing rights (2) -- --
Gain on sale of loans receivable held for sale (4,038) (6,236) (5,643)
Provision for loan losses 600 300 64
Provision for losses on real estate owned -- -- (1,987)
Origination and purchase of loans receivable held for sale (288,100) (388,317) (378,760)
Sale of loans receivable held for sale 285,854 384,693 344,502
Changes in:
Accrued interest receivable (1,459) (377) 268
Accrued expenses and other liabilities and income taxes payable 903 (62) 1,522
------------- ------------- ---------------
Net cash provided by (used in) operating activities 10,543 4,232 (24,845)
Cash flows from investing activities:
Principal repayments of mortgage-backed securities:
Held to maturity 2,604 8,520 6,059
Available for sale 3,946 5,100 12,037
Principal repayments of mortgage loans receivable held for
investment and held for sale 255,174 229,323 221,560
Principal repayments of other loans receivable 25,954 20,441 17,406
Principal repayments of securities available for sale -- 31 32
Loan origination - mortgage loans receivable held for investment (374,443) (265,514) (186,393)
Loan origination - other loans receivable (31,511) (32,885) (21,821)
Purchase of mortgage loans receivable held for investment (36,489) (37,696) (26,703)
Sale (purchase) of Federal Home Loan Bank stock (4,817) (2,444) 3,851
Purchase of securities available for sale -- -- (5,147)
Proceeds from sale of securities available for sale -- 1,948 11,960
Proceeds from sale of real estate owned 2,410 1,653 5,908
Purchases of premises and equipment, net (2,058) (957) (553)
Other (1,719) 213 546
------------- ------------- ---------------
Net cash provided by (used in) investing activities (160,949) (72,267) 38,742
</TABLE>
<PAGE>
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows (continued)
<TABLE>
Years ended September 30,
--------------------------------------------------
2000 1999 1998
----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in customer deposit accounts 56,202 19,959 24,960
Proceeds from advances from Federal Home Loan Bank 303,200 259,100 291,000
Repayment of advances from Federal Home Loan Bank (206,852) (200,222) (325,016)
Repayment of other borrowings (50) (50) (1,480)
Cash dividends paid (3,370) (2,723) (2,123)
Stock options exercised 904 685 72
Repurchase of common stock (7,438) (1,570) (1,107)
Change in escrows 587 395 (139)
-------------- -------------- --------------
Net cash provided by (used in) financing activities 143,183 75,574 (13,833)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (7,223) 7,539 64
Cash and cash equivalents at beginning of period 10,870 3,331 3,267
-------------- -------------- --------------
Cash and cash equivalents at end of period $ 3,647 10,870 3,331
============== ============== ==============
Supplemental disclosure of cash flow information:
Cash paid for income taxes (net of refunds) $ 6,905 6,973 7,563
Cash paid for interest 43,035 33,224 34,619
Supplemental schedule of non-cash investing and financing activities:
Conversion of loans receivable to real estate owned $ 3,468 1,782 3,459
Conversion of real estate owned to loans receivable 94 314 766
Conversion of loans receivable to securities available
for sale (FHA debentures) -- -- 2,012
Capitalization of originated mortgage servicing rights 3,170 7,656 5,735
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
<TABLE>
Accumulated
Additional other Total
Common paid-in Retained Treasury comprehensive stockholders'
stock capital earnings stock loss equity
----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1997 $ 1,396 13,128 48,064 (2,963) (429) 59,196
Comprehensive income:
Net income -- -- 13,586 -- -- 13,586
Other comprehensive income, net of tax
Unrealized gain on securities -- -- -- -- 209 209
---------------
Total comprehensive income -- -- -- -- -- 13,795
Cash dividends paid -- -- (2,123) -- -- (2,123)
Stock options exercised 4 68 -- -- -- 72
Purchase of common stock for treasury -- -- -- (1,107) -- (1,107)
--------------------------------------------------------------------------
Balance at September 30, 1998 $ 1,400 13,196 59,527 (4,070) (220) 69,833
Comprehensive income:
Net income -- -- 12,900 -- -- 12,900
Other comprehensive loss, net of tax
Unrealized loss on securities of $357,
net of reclassification adjustment for gains
included in net income of $95 -- -- -- -- (262) (262)
---------------
Total comprehensive income -- -- -- -- -- 12,638
Cash dividends paid -- -- (2,723) -- -- (2,723)
Stock options exercised 25 660 -- -- -- 685
Purchase of common stock for treasury -- -- -- (1,570) -- (1,570)
--------------------------------------------------------------------------
Balance at September 30, 1999 $ 1,425 13,856 69,704 (5,640) (482) 78,863
Comprehensive income:
Net income -- -- 14,721 -- -- 14,721
Other comprehensive loss, net of tax
Unrealized loss on securities -- -- -- -- (19) (19)
---------------
Total comprehensive income -- -- -- -- -- 14,702
Cash dividends paid -- -- (3,370) -- -- (3,370)
Stock options exercised 23 881 -- -- -- 904
Purchase of common stock for treasury -- -- -- (7,438) -- (7,438)
--------------------------------------------------------------------------
Balance at September 30, 2000 $ 1,448 14,737 81,055 (13,078) (501) 83,661
==========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of NASB
Financial, Inc. (the "Company"), its wholly-owned subsidiary, North American
Savings Bank, F.S.B. (the "Bank"), and the Bank's wholly-owned subsidiary,
Nor-Am Service Corporation. All significant inter-company transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand plus interest-bearing
deposits in the Federal Home Loan Bank of Des Moines totaling $1.6 million and
$7.3 million as of September 30, 2000 and 1999, respectively.
Securities and Mortgage-Backed Securities Available for Sale
Debt securities are classified as held to maturity when the Company has the
positive intent and ability to hold the securities to maturity. Debt securities
not classified as held to maturity or trading are classified as available for
sale. As of September 30, 2000, and 1999, the Company had no assets designated
as trading. Securities and mortgage-backed securities classified as available
for sale are recorded at their fair values, with unrealized gains and losses,
net of income taxes, reported as accumulated other comprehensive income or loss.
Premiums and discounts are recognized as adjustments to interest income
over the life of the securities using a method that approximates the level yield
method. Gains or losses on the disposition of securities are based on the
specific identification method. Market prices are obtained from broker-dealers
and reflect estimated offer prices.
To the extent management determines a decline in value in a security or
mortgage-backed security available for sale to be other than temporary, the Bank
will include such expense in the consolidated statements of income.
Mortgage-Backed Securities Held to Maturity
Mortgage-backed securities held to maturity are stated at cost, adjusted
for amortization of premiums and discounts, which are recognized as adjustments
to interest income over the life of the securities using the level-yield method.
To the extent management determines a decline in value in a mortgage-backed
security held to maturity to be other than temporary, the Company will adjust
the carrying value and include such expense in the consolidated statements of
income.
Loans Receivable Held for Sale
Loans receivable held for sale consist of loans that management does not
intend to hold for the foreseeable future or until maturity. Accordingly, such
loans are carried at the lower of amortized cost (outstanding principal balance
adjusted for deferred loan fees and costs) or market value. Market values for
such loans are determined based on sale commitments or dealer quotations. Gains
or losses on such sales are recognized using the specific identification method.
Interest, including amortization and accretion of deferred loan fees and costs,
is included in interest income.
Loans Receivable Held for Investment, Net
Loans are stated at the amount of unpaid principal less an allowance for
loan losses, undisbursed loan funds and unearned discounts and loan fees, net of
certain direct loan origination costs. Interest on loans is credited to income
as earned and accrued only when it is deemed collectible. Loans are placed on
nonaccrual status when, in the opinion of management, the full timely collection
of principal or interest is in doubt. As a general rule, the accrual of interest
is discontinued when principal or interest payments become doubtful. When a loan
is placed on nonaccrual status, previously accrued but unpaid interest is
reversed against current income. Subsequent collections of cash may be applied
as reductions to the principal balance, interest in arrears or recorded as
income, depending on Bank management's assessment of the ultimate collectibility
of the loan. Nonaccrual loans may be restored to accrual status when principal
and interest become current and the full payment of principal and interest is
expected.
Deferred Loan Origination Fees and Costs
Net loan fees and direct loan origination costs are deferred and amortized
to interest income using the level-yield method over the life of the loan.
<PAGE>
Provisions for Loan Losses
The Bank considers a loan to be impaired when management believes it will
be unable to collect all principal and interest due according to the contractual
terms of the loan. If a loan is impaired, the Bank records a loss valuation
equal to the excess of the loan's carrying value over the present value of the
estimated future cash flows discounted at the loan's effective rate based on the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. One-to-four family residential loans and consumer loans
are collectively evaluated for impairment. Loans on residential properties with
greater than four units, on construction and development properties and on
commercial properties are evaluated for impairment on a loan by loan basis. The
allowance for loan losses is increased by charges to income and decreased by
charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. Assessing the adequacy of the
allowance for loan losses is inherently subjective as it requires making
material estimates, including the amount and timing of future cash flows
expected to be received on impaired loans, that may be susceptible to
significant change. In management's opinion, the allowance, when taken as a
whole, is adequate to absorb reasonable estimated loan losses inherent in the
Bank's loan portfolio.
Real Estate Owned
Real estate owned represents foreclosed assets held for sale and is
initially recorded at fair value as of the date of foreclosure less 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. Adjustments for estimated losses are charged to operations
when the fair value declines to an amount less than the carrying value. Costs
and expenses related to major additions and improvements are capitalized, while
maintenance and repairs that do not improve or extend the lives of the
respective assets are expensed. Applicable gains and losses on the sale of real
estate owned are recognized when the asset is disposed depending on the adequacy
of the down payment and other requirements.
Premises and Equipment
Premises and equipment are recorded at cost, less accumulated depreciation.
Depreciation of premises and equipment is provided over the estimated useful
lives of the respective assets (three to forty years) using the straight-line
method. Maintenance and repairs are charged to expense. Major renewals and
improvements are capitalized. Gains and losses on dispositions are credited or
charged to earnings as incurred.
Income Taxes
The Company files a consolidated Federal income tax return with its
subsidiaries using the accrual method of accounting.
The provision for deferred income taxes is based on the liability method
and represents the change in the consolidated deferred income tax liability or
asset during the year. Deferred income taxes arise from temporary differences in
the carrying values of various assets and liabilities for financial reporting
and income tax purposes. Deferred tax liabilities or assets are recorded at the
tax rate that will be in effect at the time the temporary differences are
expected to reverse.
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 the
specific charge off method. The percentage method for additions to the tax bad
debt reserve was used prior to the fiscal year ended September 30, 1997. Under
the current tax rules, Banks 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 of the excess reserve will be completed over a
six-year phase-in-period beginning with the fiscal year ended September 30,
1999. A deferred income tax liability is required to the extent the tax bad debt
reserve exceeds the 1988 base year amount. Retained earnings include
approximately $2 million representing such bad debt reserve for which no
deferred taxes have been provided. Distributing the Bank's capital in the form
of stock redemptions has caused the Bank to recapture a significant amount of
its bad debt reserve prior to the phase-in period.
Mortgage Servicing Rights
Servicing assets and other retained interests in transferred assets are
measured by allocating the previous carrying amount between the assets sold, if
any, and retained interest, if any, based on their relative fair values at the
date of the transfer, and servicing assets and liabilities are subsequently
measured by (1) amortization in proportion to and over the period of estimated
net servicing income or loss, and (2) assessment for asset impairment or
increased obligation based on their fair values.
<PAGE>
Originated mortgage servicing rights are recorded at cost based upon the
relative fair values of the loans and the servicing rights. Servicing release
fees paid on comparable loans and discounted cash flows are used to determine
estimates of fair values. Purchased mortgage servicing rights are acquired from
independent third-party originators and are recorded at the lower of cost or
fair value. These rights are amortized in proportion to and over the period of
expected net servicing income or loss.
Impairment Evaluation - The Bank evaluates the carrying value of
capitalized mortgage servicing rights on a periodic basis based on their
estimated fair value. For purposes of evaluating and measuring impairment of
capitalized servicing rights, the Bank stratifies the rights based on their
predominant risk characteristics. The significant risk characteristics
considered by the Bank are loan type, period of origination and stated interest
rate. If the fair value estimated, using a discounted cash flow methodology, is
less than the carrying amount of the portfolio, the portfolio is written down to
the amount of the discounted expected cash flows utilizing a valuation
allowance. The Bank utilizes consensus market prepayment assumptions and
discount rates to evaluate its capitalized servicing rights, which considers the
risk characteristics of the underlying servicing rights. A valuation allowance
of $651,000 was established during the period ended September 30, 1998. During
the year ended September 30, 1999, the value of servicing rights increased,
which resulted in a recovery of the valuation allowance of $118,000. During the
year ended September 30, 2000, the Bank recognized a net impairment of $164,000.
Recently Issued Accounting Standards
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance on accounting for the costs of internal use computer software at
various stages of development. The adoption of this SOP on October 1, 1999, did
not have a material impact on the Company's consolidated financial statements as
of and for the year ended September 30, 2000.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." As amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement No.
133," the Statement establishes accounting and reporting standards for
derivative instruments including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and hedging
activities. The Statement requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Statements are effective for the Company's
consolidated financial statements on October 1, 2000. As the Company does not
hold any derivatives or embedded derivatives as defined by the Statements, the
adoption of the Statements on October 1, 2000, did not result in a transition
adjustment.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's view
on applying GAAP to revenue recognition in financial statements. Due to the
issuance of SAB No. 101B, SAB No. 101 must be implemented no later than the
fourth fiscal quarter of the Company's fiscal year ending September 30, 2001.
The Company does not believe that the implementation of SAB No. 101 will have a
material effect on the Company's consolidated financial statements.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" and rescinds SFAS No. 127,
"Deferral of Effective Date of Certain Provisions of FASB Statement No. 125." It
revises the standards for accounting for securitizations and other transfers of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. This Statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001. This
Statement is effective for recognition and reclassification of collateral and
for disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. The Company does not believe that
the implementation of this Statement will have a material effect on the
Company's consolidated financial statements.
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses during the reported periods. Estimates
were used to establish loss reserves, the valuation of mortgage servicing
rights, and fair values of financial instruments. Actual results could differ
from those estimates.
<PAGE>
Reclassifications
Certain amounts for 1999 and 1998 have been reclassified to conform to the
current year presentation.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires the Company to disclose fair value information about financial
instruments for which it is practicable to estimate, whether or not such fair
values are reflected in the consolidated balance sheets. Estimated fair value
amounts have been determined using available market information and a selection
from a variety of valuation methodologies. However, considerable judgment is
required to interpret market data in developing the estimates of fair value.
Accordingly, the estimates presented are not necessarily indicative of the
amount that could be realized in a current market exchange. The use of different
market assumptions and estimation methodologies may have a material effect on
the estimated fair value amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument presented as of September 30, 2000 and
1999:
Cash and cash equivalents
The carrying amount reported in the consolidated balance sheets is a
reasonable estimate of fair value.
Securities available for sale
Fair values are based on quoted market prices, where available.
Mortgage-backed securities available for sale and held to maturity
Fair values are based on quoted market prices, where available. When quoted
market prices are unavailable, fair values are computed using consensus
estimates of prepayment speeds and market spreads to treasury securities.
Stock in Federal Home Loan Bank ("FHLB")
The carrying value of stock in Federal Home Loan Bank approximates its fair
value.
Loans receivable held for sale
Fair values of mortgage loans held for sale are based on quoted market
prices for loans with no current commitment to sell. Fair values of mortgage
loans sold forward are based on the committed prices.
Loans receivable held for investment
Fair values are computed for each loan category using market spreads to
treasury securities for similar existing loans in the portfolio and management's
estimates of prepayments.
Accrued interest receivable
The carrying amount reported in the consolidated balance sheets is a
reasonable estimate of fair value.
Mortgage servicing rights
The estimated fair values of mortgage servicing rights are determined by
discounting estimated future cash flows using a market rate of interest and
consensus estimates of prepayment speeds.
Customer deposit accounts
The estimated fair values of demand deposits and savings accounts are equal
to the amount payable on demand at the reporting date. Fair values of
certificates of deposit are computed at fixed spreads to treasury securities
with similar maturities.
Advances from Federal Home Loan Bank
The estimated fair values of advances from FHLB are determined by
discounting the future cash flows of existing advances using rates currently
available for new advances with similar terms and remaining maturities.
Other borrowings
Fair values are estimated using rates currently available to the Bank for
debt with similar terms and remaining maturities.
<PAGE>
Accrued interest payable
The carrying amount reported in the consolidated balance sheets is a
reasonable estimate of fair value.
Off balance sheet items
The estimated fair value of commitments to originate, purchase, or sell
loans is based on the fees currently charged to enter into similar agreements
and the difference between current levels of interest rates and the committed
rates.
(2) 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 common
stock for each share they already 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.
(3) SECURITIES AVAILABLE FOR SALE
Summaries of securities available for sale are provided in the following
tables. Dollar amounts are expressed in thousands.
<TABLE>
September 30, 2000
------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $ 2,857 -- (7) 2,850
Equity securities 2,738 -- (813) 1,925
------------------------------------------------------
Total $ 5,595 -- (820) 4,775
======================================================
</TABLE>
<TABLE>
September 30, 1999
------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $ 2,857 -- (7) 2,850
Equity securities 2,738 -- (675) 2,063
------------------------------------------------------
Total $ 5,595 -- (682) 4,913
======================================================
</TABLE>
There were no sales of securities available for sale during the year ended
September 30, 2000. During the year ended September 30, 1999, gross gains of
$95,000 and no losses were recognized on the sale of securities available for
sale. During the year ended September 30, 1998, there were no gross gains or
losses recognized on sales of securities available for sale.
<PAGE>
The scheduled maturities of securities available for sale at September 30,
2000, are presented in the following table. Dollar amounts are expressed in
thousands.
<TABLE>
Gross Gross Estimated
Amortized Unrealized unrealized market
cost Gains losses value
------------------------------------------------------
<S> <C> <C> <C> <C>
No stated maturity $ 2,738 -- (813) 1,925
Due from five to ten years 2,857 -- (7) 2,850
------------------------------------------------------
Total $ 5,595 -- (820) 4,775
======================================================
</TABLE>
(4) MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
The following tables present a summary of mortgage-backed securities
available for sale. Dollar amounts are expressed in thousands.
<TABLE>
September 30, 2000
-------------------------------------------------------
Gross Gross Estimated
Amortized unrealized Unrealized market
cost gains Losses value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Pass-through certificates guaranteed by GNMA - fixed rate $ 3,976 20 (3) 3,993
FNMA pass-through certificates - fixed rate 1,167 -- (36) 1,131
Mortgage-backed derivatives (including CMO residuals
and interest-only securities) 103 4 -- 107
-------------------------------------------------------
Total $ 5,246 24 (39) 5,231
=======================================================
</TABLE>
<TABLE>
September 30, 1999
-------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Pass-through certificates guaranteed by GNMA - fixed rate $ 5,005 -- (10) 4,995
FNMA pass-through certificates - fixed rate 4,053 -- (97) 3,956
Mortgage-backed derivatives (including CMO residuals
and interest-only securities) 142 5 -- 147
------------------------------------------------------
Total $ 9,200 5 (107) 9,098
======================================================
</TABLE>
There were no sales of mortgage-backed securities available for sale during
the years ended September 30, 2000, 1999, or 1998.
The scheduled maturities of mortgage-backed securities available for sale
at September 30, 2000, are presented in the following table. Dollar amounts are
expressed in thousands.
<TABLE>
Gross Gross Estimated
Amortized unrealized Unrealized market
cost gains Losses value
--------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,167 -- (36) 1,131
Due after ten years 4,079 24 (3) 4,100
------------------------- ------------------------------
Total $ 5,246 24 (39) 5,231
========================================================
</TABLE>
Actual maturities of mortgage-backed securities available for sale may
differ from scheduled maturities depending on the repayment characteristics and
experience of the underlying financial instruments, on which borrowers have the
right to call or prepay certain obligations.
<PAGE>
(5) MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The following tables present a summary of mortgage-backed securities held
to maturity. Dollar amounts are expressed in thousands.
<TABLE>
September 30, 2000
-------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------------------
<S> <C> <C> <C> <C>
FHLMC participation certificates:
Fixed rate $ 1,877 27 (21) 1,883
Balloon maturity and adjustable rate 3,980 -- (35) 3,945
FNMA pass-through certificates:
Fixed rate 224 -- (9) 215
Balloon maturity and adjustable rate 434 -- (7) 427
Pass-through certificates guaranteed by GNMA - fixed rate 391 9 (2) 398
Collateralized mortgage obligation bonds 945 251 (1) 1,195
Other asset-backed securities 2,594 138 -- 2,732
-------------------------------------------------------
Total $ 10,445 425 (75) 10,795
=======================================================
</TABLE>
<TABLE>
September 30, 1999
------------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
------------------------------------------------------
<S> <C> <C> <C> <C>
FHLMC participation certificates:
Fixed rate $ 2,514 29 (24) 2,519
Balloon maturity and adjustable rate 4,928 14 (30) 4,912
FNMA pass-through certificates:
Fixed rate 356 -- (11) 345
Balloon maturity and adjustable rate 583 -- (13) 570
Pass-through certificates guaranteed by GNMA - fixed rate 447 21 -- 468
Collateralized mortgage obligation bonds 1,139 63 -- 1,202
Other asset-backed securities 3,052 200 -- 3,252
------------------------------------------------------
Total $ 13,019 327 (78) 13,268
======================================================
</TABLE>
The scheduled maturities of mortgage-backed securities held to maturity at
September 30, 2000, are presented in the following table. Dollar amounts are
expressed in thousands.
<TABLE>
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Due from one to five years $ 4,174 4 (36) 4,142
Due from five to ten years 3,893 397 (6) 4,284
Due after ten years 2,378 24 (33) 2,369
-------------------------------------------------------
Total $ 10,445 425 (75) 10,795
=======================================================
</TABLE>
Actual maturities of mortgage-backed securities held to maturity may differ
from scheduled maturities depending on the repayment characteristics and
experience of the underlying financial instruments, on which borrowers have the
right to call or prepay certain obligations.
<PAGE>
The principal balances of mortgage-backed securities held to maturity that
are pledged to secure certain obligations of the Bank as of September 30 are as
follows. Dollar amounts are expressed in thousands.
September 30, 2000
--------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------------
Customer deposit accounts $ 3,823 13 (42) 3,794
September 30, 1999
-------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------------
Customer deposit accounts $ 4,325 6 (30) 4,301
All dispositions of mortgage-backed securities held to maturity during
fiscal 2000, 1999, and 1998 were the result of maturities or calls.
(6) LOANS RECEIVABLE
The following table provides a detail of loans receivable as of September
30. Dollar amounts are expressed in thousands.
<TABLE>
HELD FOR INVESTMENT 2000 1999
--------------------------
<S> <C> <C>
Mortgage loans:
Permanent loans on:
Residential properties $ 371,201 315,934
Business properties 214,882 153,549
Partially guaranteed by VA or insured by FHA 26,711 34,500
Construction and development 246,822 197,041
--------------------------
Total mortgage loans 859,616 701,024
Commercial loans 7,143 4,335
Installment loans and lease financing to individuals 48,646 41,737
--------------------------
Total loans receivable held for investment 915,405 747,096
Less:
Undisbursed loan funds (76,872) (76,474)
Unearned discounts and fees on loans, net of deferred costs (5,684) (5,143)
Allowance for losses on loans (7,157) (6,671)
--------------------------
Net loans receivable held for investment $ 825,692 658,808
==========================
</TABLE>
<TABLE>
HELD FOR SALE 2000 1999
--------------------------
<S> <C> <C>
Mortgage loans:
Permanent loans on:
Residential properties $ 97,796 114,701
Partially insured by FHA 427 445
--------------------------
98,223 115,146
Less:
Undisbursed loan funds (9,861) (22,878)
Unearned discounts and fees on loans, net of deferred costs (42) (36)
---------------------------
Net loans receivable held for sale $ 88,320 92,232
===========================
</TABLE>
<PAGE>
Included in the loans receivable balances are participating interests in
mortgage loans and wholly owned mortgage loans serviced by other institutions of
approximately $4.4 million and $5.1 million at September 30, 2000 and 1999,
respectively.
Whole loans and participations serviced for others were approximately
$706.7 million and $667.6 million at September 30, 2000 and 1999, respectively.
Loans serviced for others are not included in the accompanying consolidated
balance sheets.
First mortgage loans were pledged to secure FHLB advances in the amount of
approximately $330.5 million and $210.1 million at September 30, 2000 and 1999,
respectively.
Aggregate loans to executive officers, directors and their associates,
including companies in which they have partial ownership interest, did not
exceed 5% of equity as of September 30, 2000 and 1999. Such loans were made
under terms and conditions substantially the same as loans made to parties not
affiliated with the Bank.
As of September 30, 2000 and 1999, loans with an aggregate principal
balance of approximately $4.4 million and $4.1 million, respectively, were on
nonaccrual status. Gross interest income would have increased by $264,000,
$248,000 and $236,000 for the years ended September 30, 2000, 1999 and 1998,
respectively, if the nonaccrual loans had been performing.
The following table presents the activity in the allowance for losses on
loans for 2000, 1999, and 1998. Allowance for losses on mortgage loans includes
specific valuation allowances and valuation allowances associated with
homogenous pools of loans. Dollar amounts are expressed in thousands.
Amount
-------------
Balance at October 1, 1997 $ 6,272
Provisions 64
Charge-offs (7)
Recoveries 76
-------------
Balance at September 30, 1998 $ 6,405
Provisions 300
Charge-offs (57)
Recoveries 23
-------------
Balance at September 30, 1999 $ 6,671
Provisions 600
Charge-offs (116)
Recoveries 2
-------------
Balance at September 30, 2000 $ 7,157
=============
Although the Bank has a diversified loan portfolio, a substantial portion
is secured by real estate. The following table presents information as of
September 30 about the location of real estate that secures loans in the Bank's
mortgage loan portfolio. The line item "Other" includes total investments in
other states of less than $10 million each. Dollar amounts are expressed in
thousands.
<TABLE>
2000
--------------------------------------------------------------------------
Residential Construction
----------------------------
1-4 5 or more Commercial and
State family family real estate development Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Missouri $ 220,826 987 130,994 106,674 459,481
Kansas 90,365 -- 30,021 140,148 260,534
Iowa 25,865 -- 10,542 -- 36,407
Oklahoma 4,231 -- 16,516 -- 20,747
Nebraska 4,920 -- 9,353 -- 14,273
Minnesota 11,794 -- -- -- 11,794
Indiana 8,889 -- 1,841 -- 10,730
Other 26,201 3,834 15,615 -- 45,650
---------------------------------------------------------------------------
$ 393,091 4,821 214,882 246,822 859,616
===========================================================================
</TABLE>
<PAGE>
<TABLE>
1999
--------------------------------------------------------------------------
Residential Construction
----------------------------
1-4 5 or more Commercial and
State family family real estate development Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Missouri $ 209,126 1,104 101,945 104,582 416,757
Kansas 82,565 -- 20,904 88,374 191,843
Iowa 14,345 -- 6,290 -- 20,635
Oklahoma 4,503 -- 9,964 4,085 18,552
Other 35,205 3,586 14,446 -- 53,237
--------------------------------------------------------------------------
$ 345,744 4,690 153,549 197,041 701,024
==========================================================================
</TABLE>
Proceeds from the sale of loans receivable held for sale during fiscal
2000, 1999 and 1998, were $285.9 million, $384.7 million, and $344.5 million,
respectively. In fiscal 2000, the Bank realized gross gains of $4.5 million and
gross losses of $0.5 million on those sales. In fiscal 1999, gross gains of $6.3
million and gross losses of $60,000 were realized. In fiscal 1998, the Bank
realized gross gains of $5.7 million and $0.1 million of gross losses.
(7) REAL ESTATE OWNED
The following table presents real estate owned and other repossessed
property as of September 30. Dollar amounts are expressed in thousands.
<TABLE>
2000 1999
--------------------------
<S> <C> <C>
Real estate acquired through (or deed in lieu of) foreclosure $ 4,912 3,991
Less: allowance for losses (1,229) (1,289)
--------------------------
Total $ 3,683 2,702
==========================
</TABLE>
The allowance for losses on real estate owned includes the following
activity for the years ended September 30. Dollar amounts are expressed in
thousands.
<TABLE>
2000 1999 1998
----------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,289 1,336 1,680
Provisions -- -- (1,987)
Charge-offs (349) (262) (434)
Recoveries 289 215 2,077
----------------------------------------
Balance at end of year $ 1,229 1,289 1,336
========================================
</TABLE>
(8) PREMISES AND EQUIPMENT
The following table summarizes premises and equipment as of September 30.
Dollar amounts are expressed in thousands.
<TABLE>
2000 1999
--------------------------
<S> <C> <C>
Land $ 2,516 1,913
Buildings and improvements 5,010 3,851
Furniture, fixtures and equipment 6,738 6,898
---------------------------
14,264 12,662
Accumulated depreciation (8,441) (7,943)
---------------------------
Total $ 5,823 4,719
===========================
</TABLE>
<PAGE>
Certain facilities of the Bank are leased under various operating leases.
Amounts paid for rent expense for the fiscal years ended September 30, 2000,
1999, and 1998 were approximately $694,000, $584,000, and $510,000,
respectively.
Future minimum rental commitments under noncancelable leases are presented
in the following table. Dollar amounts are expressed in thousands.
Fiscal year ended
September 30, Amount
--------------------------------------------
2001 $ 554
2002 330
2003 64
2004 8
-------------
Total $ 956
=============
(9) CUSTOMER DEPOSIT ACCOUNTS
Customer deposit accounts as of September 30 are illustrated in the
following table. Dollar amounts are expressed in thousands.
<TABLE>
2000 1999
---------------------- ---------------------
Amount % Amount %
------------------------------------------------
<S> <C> <C> <C> <C>
Demand deposit accounts $ 63,010 10 57,987 10
Savings accounts 77,839 13 85,758 15
Money market demand accounts 6,505 1 7,004 1
Certificate accounts 474,311 76 414,714 74
---------------------- ---------------------
$ 621,665 100 565,463 100
====================== =====================
Weighted average interest rate 5.46% 4.83%
=============== =============
</TABLE>
The aggregate amount of certificate accounts in excess of $100,000 was
approximately $47.9 million and $40.8 million as of September 30, 2000 and 1999,
respectively.
The following table presents contractual maturities of certificate accounts
as of September 30, 2000. Dollar amounts are expressed in thousands.
<TABLE>
Maturing during the fiscal year ended September 30,
-------------------------------------------------------------------------------
After
2001 2002 2003 2004 2005 2005 Total
------------------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Certificate accounts $ 349,775 97,324 16,346 5,564 3,032 2,270 474,311
</TABLE>
The following table presents interest expense on customer deposit accounts
for the years ended September 30. Dollar amounts are expressed in thousands.
<TABLE>
2000 1999 1998
-----------------------------------------
<S> <C> <C> <C>
Savings accounts $ 3,400 3,257 3,048
Money market demand and demand deposit accounts 952 994 1,121
Certificate accounts 25,289 21,832 22,845
-----------------------------------------
$ 29,641 26,083 27,014
</TABLE>
<PAGE>
(10) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the FHLB are secured by all stock held in the FHLB,
mortgage-backed securities and first mortgage loans with aggregate unpaid
principal balances equal to at least 150% of outstanding advances not secured by
FHLB stock. The following table provides a summary of advances by year of
maturity as of September 30. Dollar amounts are expressed in thousands.
<TABLE>
2000 1999
----------------------- -----------------------
Weighted Weighted
Average Average
Year ending September 30, Amount Rate Amount Rate
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 $ -- -- $ 134,352 5.46%
2001 183,965 6.75% 5,265 5.80%
2002 4,279 6.56% 278 5.25%
2003 72,293 6.57% 24,293 5.78%
2004 307 5.25% 387 5.25%
2005 through 2014 3,592 5.25% 3,513 5.25%
----------------------- ------------------------
$ 264,436 6.67% $ 168,088 5.51%
======================= ========================
</TABLE>
(11) INCOME TAXES PAYABLE
The differences between the effective income tax rates and the statutory
federal corporate tax rate for the years ended September 30 are as follows:
<TABLE>
2000 1999 1998
---------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.0 1.5 0.4
Other, net 2.0 3.2 3.2
---------------------------------------
40.0% 39.7% 38.6%
=======================================
</TABLE>
Deferred income tax expense (benefit) results from temporary differences in
the recognition of income and expense for tax purposes and financial statement
purposes. The following table lists these temporary differences and their
related tax effect for the years ended September 30. Dollar amounts are
expressed in thousands.
<TABLE>
2000 1999 1998
----------------------------------------
<S> <C> <C> <C>
Deferred loan fees and costs $ (926) 344 282
Accrued interest receivable -- (15) (10)
Book depreciation in excess of tax depreciation (21) (122) (108)
Basis difference on investments 10 6 (1)
Loan loss reserves (182) (173) 157
Mark-to-market adjustment (79) 165 (314)
Mortgage servicing rights 2,635 1,545 964
Prepaid expenses (20) 7 1
Other (168) (48) 3
---------------------------------------
$ 1,249 1,709 974
=======================================
</TABLE>
<PAGE>
The tax effect of significant temporary differences representing deferred
tax assets and liabilities are presented in the following table. Dollar amounts
are expressed in thousands.
<TABLE>
2000 1999
-------------------------------
<S> <C> <C>
Deferred income tax assets:
Loan loss reserves $ 1,926 1,744
Book depreciation in excess of tax depreciation 362 341
Unrealized loss on securities available for sale 334 318
Mark-to-market adjustment 110 31
Deferred loan fees and costs 76 --
Other 74 --
--------------------------------
2,882 2,434
--------------------------------
Deferred income tax liabilities:
Mortgage servicing rights (5,804) (3,169)
Accrued interest receivable (21) (21)
Basis difference on investments (441) (431)
Prepaid expenses (60) (80)
Deferred loan fees and costs -- (850)
Other -- (94)
-------------------------------
(6,326) (4,645)
-------------------------------
Net deferred tax liability $ (3,444) (2,211)
===============================
</TABLE>
(12) STOCKHOLDERS' EQUITY
During fiscal 2000, the Company paid quarterly cash dividends on common
stock of $0.10 per share on February 25, 2000, May 26, 2000, and August 25,
2000, and $0.08 per share on November 26, 1999.
During fiscal 1999, the Company paid quarterly cash dividends on common
stock of $0.08 per share on February 26, 1999, May 28, 1999, and August 27,
1999, and $0.0625 per share on November 30, 1998.
During fiscal 1998, the Company paid quarterly cash dividends on common
stock of $0.0625 per share on February 27, 1998, May 29, 1998, and August 31,
1998, and $0.05 per share on December 1, 1997.
During fiscal 2000, the Company repurchased 603,037 shares of its own stock
with a total value of $7.4 million at the time of repurchase. Of those, 517,265
shares were repurchased in conjunction with an issuer tender offer at a price of
$12.50 with a total value of $6.5 million. During fiscal 1999, 115,926 shares
were repurchased with a total value of $1.6 million at the time of repurchase.
(13) REGULATORY CAPITAL REQUIREMENTS
The Bank is required to maintain capital in excess of certain minimum
requirements as prescribed by the Office of Thrift Supervision ("0TS"). Any
institution that fails to meet these minimum regulatory capital requirements
will be subject to action by the regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under the capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures have been established by regulation to ensure capital
adequacy require the Bank to maintain minimum capital amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). As of September 30, 2000, the Bank
meets all capital adequacy requirements.
As of September 30, 2000, the most recent notification from the OTS
categorized the Bank as "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
<PAGE>
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the tables presented. Management does not believe that there are
any conditions or events occurring since notification that would change the
Bank's classification. Also, management is not aware of any existing or
potential conditions that would change the Bank's capital adequacy
classification.
The following tables summarize the relationship between the Bank's capital
and regulatory requirements. Dollar amounts are expressed in thousands.
<TABLE>
At September 30, 2000 Amount
--------------------------------------------------------------------------------------------
<S> <C>
GAAP capital (Bank only) $ 81,070
Adjustment for regulatory capital:
Intangible assets (1,385)
Disallowed servicing asset (96)
Reverse the effect of SFAS No. 115 14
------------
Tangible capital 79,603
Qualifying intangible assets 1,274
------------
Tier 1 capital (core capital) 80,877
Qualifying valuation allowance 5,035
------------
Risk-based capital $ 85,912
============
</TABLE>
<TABLE>
As of September 30, 2000
---------------------------------------------------------------------------
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 $ 85,912 11.8% 58,053 >=8% 72,566 >=10%
Core capital to adjusted tangible assets 80,877 8.2% 39,295 >=4% 49,119 >=5%
Tangible capital to tangible assets 79,603 8.1% 14,736 >=1.5% -- --
Tier 1 capital to risk-weighted assets 80,877 11.1% -- -- 43,540 >=6%
</TABLE>
<TABLE>
As of September 30, 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 $ 78,714 13.3% 47,371 >=8% 59,213 >=10%
Core capital to adjusted tangible assets 74,264 9.0% 32,949 >=4% 41,187 >=5%
Tangible capital to tangible assets 72,843 8.8% 12,356 >=1.5% -- --
Tier 1 capital to risk-weighted assets 74,264 12.5% -- -- 35,528 >=6%
</TABLE>
(14) EMPLOYEES' RETIREMENT PLAN
Substantially all of the Bank's full-time employees participate in a 401(k)
retirement plan (the "Plan"). The Plan is administered by American United Life
Insurance Company ("AUL"), through which employees can choose from a variety of
retail mutual funds to invest their fund contributions. Under the terms of the
Plan, the Bank makes monthly contributions for the benefit of each participant
in an amount that matches one-half of the participant's contribution, not to
exceed 3% of the participants' monthly base salary, provided that the
participant makes a monthly contribution of at least 1% of his or her monthly
base salary and no greater than 15%. All contributions made by participants are
immediately vested and cannot be forfeited. Contributions made by the Bank, and
related earnings thereon, become vested to the participants according to length
of service requirements as specified in the Plan. Any forfeited portions of the
contributions made by the Bank and the allocated earnings thereon are used to
reduce future contribution requirements of the Bank. The Plan may be modified,
amended or terminated at the discretion of the Bank.
<PAGE>
The Bank's contributions to the Plan amounted to $227,000, $226,000, and
$195,000 for the years ended September 30, 2000, 1999, and 1998, respectively.
These amounts have been included as compensation and fringe benefits expense in
the accompanying consolidated statements of income.
(15) STOCK OPTION PLAN
The Bank maintains a stock option plan ("Option Plan") through which
options to purchase up to 10% of the number of shares of common stock originally
issued, as adjusted for the stock split discussed in Note 2 and the stock
dividends discussed below, were granted to officers and employees of the Bank.
Options were granted for a period of ten years. The option price may not be less
than 100% of the fair market value of the shares on the date of the grant. As of
September 30, 2000, the time frame for issuing new option agreements under the
Option Plan had expired.
The following table summarizes Option Plan activity during fiscal 2000,
1999, and 1998. The number of shares and price per share have been adjusted to
reflect the four-for-one stock split in fiscal 1999 (Note 2).
<TABLE>
Weighted avg. Range of
Number exercise price exercise price
of shares per share per share
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at October 1, 1997 558,836 5.80 1.02 - 8.97
Exercised (37,036) (2.78) (1.02 - 7.78)
----------------------------------------------------
Options outstanding at September 30, 1998 521,800 6.02 1.02 - 8.97
Exercised (162,000) (4.23) (2.25 - 5.06)
----------------------------------------------------
Options outstanding at September 30, 1999 359,800 6.82 $ 2.25 - 8.97
Exercised (153,848) (5.88) (5.88)
----------------------------------------------------
Options outstanding at September 30, 2000 205,952 7.52 $ 2.25 - 8.97
====================================================
</TABLE>
The weighted average remaining contractual life of options outstanding at
September 30, 2000, 1999 and 1998 were 2.9 years, 2.6 years and 3.9 years,
respectively.
The following table provides information regarding the expiration dates of
the stock options outstanding at September 30, 2000.
<TABLE>
Number Weighted average
of shares exercise price
------------------------------------------
<S> <C> <C>
Expiring on:
June 13, 2001 109,952 $ 7.50
December 22, 2002 12,000 2.25
August 23, 2004 4,000 5.06
September 26, 2005 8,000 7.53
January 23, 2006 8,000 7.63
June 12, 2006 12,000 7.50
January 21, 2007 52,000 8.97
------------------------------------------
205,952 $ 7.52
==========================================
</TABLE>
Of the options outstanding at September 30, 2000, 159,162 are immediately
exercisable and 46,790 are exercisable at future dates in accordance with the
vesting schedules outlined in each stock option agreement.
<PAGE>
The following table illustrates the range of exercise prices and the
weighted average remaining contractual lives for options outstanding under the
Option Plan as of September 30, 2000.
<TABLE>
Options Outstanding Options Exercisable
------------------------------------------------------ --------------------------------
Weighted avg. Weighted avg. Weighted avg.
Range of remaining exercise exercise
exercise prices Number contractual life price Number price
--------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$7.50 109,952 0.7 years $ 7.50 87,962 $ 7.50
2.25 12,000 2.2 years 2.25 12,000 2.25
5.06 4,000 3.9 years 5.06 4,000 5.06
7.50 - 7.63 28,000 5.4 years 7.55 24,000 7.54
8.97 52,000 6.3 years 8.97 31,200 8.97
------------ ------------
205,952 159,162
============ =============
</TABLE>
The Company applies Accounting Principles Board Opinion ("APB") No. 25 in
accounting for its Option Plan, under which no compensation cost has been
recognized for stock option awards. For purposes of computing the pro forma
effects of stock option grants under the fair value accounting method, the fair
value of each stock option grant was estimated on the date of the grant using
the Black-Scholes option pricing model. Had compensation cost for the Option
Plan been determined in accordance with the fair value accounting method
prescribed under SFAS 123, "Accounting for Stock-Based Compensation," the
Company's net income and net income per share on a pro forma basis would have
been as presented in the following table. Dollar amounts are expressed in
thousands, except per share data.
<TABLE>
2000 1999 1998
--------------------------------------
<S> <C> <C> <C>
Net Income:
As reported $ 14,721 12,900 13,586
Pro forma 14,691 12,870 13,557
Basic earnings per share:
As reported $ 1.66 1.43 1.52
Pro forma 1.66 1.43 1.52
Diluted earnings per share:
As reported 1.63 1.40 1.48
Pro forma 1.63 1.40 1.48
</TABLE>
(16) MORTGAGE SERVICING RIGHTS
The following provides information about the Bank's mortgage servicing
rights for the years ended September 30. Dollar amounts are expressed in
thousands.
<TABLE>
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 13,881 7,853 4,161
Additions:
Originated mortgage servicing rights 4,391 7,672 5,736
Reductions:
Amortization (1,997) (1,762) (1,393)
Sale of mortgage servicing rights (1,260) -- --
Impairment recovery (loss) (164) 118 (651)
-----------------------------
Balance at end of year $ 14,851 13,881 7,853
=============================
</TABLE>
<PAGE>
(17) SEGMENT INFORMATION
In accordance with SFAS No. 131, the Company has identified two principal
operating segments for purposes of financial reporting: Banking and Mortgage
Banking. These segments were determined based on the Company's internal
financial accounting and reporting processes and are consistent with the
information that is used to make operating decisions and to assess the Company's
performance by the Company's key decision makers.
The Mortgage Banking segment originates mortgage loans for sale to
investors and for the portfolio of the Banking segment. The Banking segment
provides a full range of banking services through the Bank's branch network,
exclusive of mortgage loan originations. A portion of the income presented in
the Mortgage Banking segment is derived from sales of loans to the Banking
segment based on a transfer pricing methodology that is designed to approximate
economic reality. The Other and Eliminations segment includes financial
information from the parent company plus inter-segment eliminations.
The following table presents financial information from the Company's
operating segments for the years ended September 30, 2000, 1999, and 1998.
Dollar amounts are expressed in thousands.
<TABLE>
Mortgage Other and
Year ended September 30, 2000 Banking Banking Eliminations Consolidated
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 35,570 -- 268 35,838
Provision for loan losses 600 -- -- 600
Other income 6,694 9,366 (6,651) 9,409
General and administrative expenses 8,482 10,191 1,447 20,120
Income tax expense 13,273 (330) (3,137) 9,806
----------------------------------------------------------------------
Net income $ 19,909 (495) (4,693) 14,721
======================================================================
</TABLE>
<TABLE>
Mortgage Other and
Year ended September 30, 1999 Banking Banking Eliminations Consolidated
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 30,180 -- 275 30,455
Provision for loan losses 300 -- -- 300
Other income 8,575 11,527 (8,720) 11,382
General and administrative expenses 11,138 10,983 (1,992) 20,129
Income tax expense 10,927 217 (2,636) 8,508
----------------------------------------------------------------------
Net income $ 16,390 327 (3,817) 12,900
======================================================================
</TABLE>
<TABLE>
Mortgage Other and
Year ended September 30, 1998 Banking Banking Eliminations Consolidated
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 27,690 -- 159 27,849
Provision for loan losses 64 -- -- 64
Other income 8,144 10,478 (7,198) 11,424
General and administrative expenses 9,725 9,112 (1,770) 17,067
Income tax expense 10,027 526 (1,997) 8,556
----------------------------------------------------------------------
Net income $ 16,018 840 (3,272) 13,586
======================================================================
</TABLE>
(18) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Bank has entered into financial
agreements with off-balance-sheet risk to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
standby letters of credit and financial guarantees. Those instruments involve,
to varying degrees, elements of credit risk, interest rate risk, and liquidity
risk, which may exceed the amount recognized in the consolidated financial
statements. The contract amounts or notional amounts of those instruments
express the extent of involvement the Bank has in particular classes of
financial instruments.
<PAGE>
With regard to financial instruments for commitments to extend credit,
standby letters of credit, and financial guarantees, the Bank's exposure to
credit loss because of non-performance by another party is represented by the
contractual amount of those instruments. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for
on-balance-sheet instruments.
As of September 30, 2000, the Bank had outstanding commitments to originate
$18.5 million in commercial real estate loans, $27.2 million of fixed rate
residential first mortgage loans and $10.1 million of adjustable rate
residential first mortgage loans. Commercial real estate loan commitments have
approximate average committed rates of 8.9%. Residential mortgage loan
commitments have an approximate average committed rate of 8.6% and approximate
average fees and discounts of 0.7%. The interest rate commitments on residential
loans generally expire 60 days after the commitment date. Interest rate
commitments on commercial real estate loans have varying terms to expiration.
At September 30, 2000 and 1999, the Bank had commitments to sell loans of
approximately $53.2 million and $58.3 million, respectively. These instruments
contain an element of risk in the event that other parties are unable to meet
the terms of such agreements. In such event, the Bank's loans receivable held
for sale would be exposed to market fluctuations. Management does not expect any
other party to default on its obligations and, therefore, does not expect to
incur any costs due to such possible default. Any unrealized loss on these
commitment obligations is considered in conjunction with the Bank's lower of
cost or market valuation on its loans receivable held for sale.
(19) RECONCILIATION OF BASIC EARNINGS PER SHARE TO DILUTED EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of
common shares outstanding. The dilutive effect of potential common shares
outstanding are included in diluted earnings per share. The computations of
basic and diluted earnings per share are presented in the following table.
Dollar amounts are expressed in thousands, except per share data.
<TABLE>
Year Ended September 30,
-------------------------------------------
2000 1999 1998
-------------------------------------------
<S> <C> <C> <C>
Net income $ 14,721 12,900 13,586
Basic weighted average shares 8,863,432 8,997,552 8,937,740
Effect of stock options 159,577 189,049 216,832
-------------------------------------------
Dilutive potential common shares 9,023,009 9,186,601 9,154,572
Earnings per share:
Basic $ 1.66 1.43 1.52
Diluted 1.63 1.40 1.48
</TABLE>
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 (Note 15).
<PAGE>
(20) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying values and fair values of the
Company's financial instruments presented in accordance with SFAS No. 107.
Dollar amounts are expressed in thousands.
<TABLE>
September 30, 2000 September 30, 1999
------------------------------- -------------------------------
Estimated Estimated
Carrying fair Carrying fair
value value value value
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 3,647 3,647 10,870 10,870
Securities available for sale 4,775 4,775 4,913 4,913
Stock in Federal Home Loan Bank 13,222 13,222 8,405 8,405
Mortgage-backed securities:
Available for sale 5,231 5,231 9,098 9,098
Held to maturity 10,445 10,795 13,019 13,268
Loans receivable:
Held for sale 88,320 90,013 92,232 93,413
Held for investment 825,692 838,004 658,692 664,531
Accrued interest receivable 6,291 6,291 4,832 4,832
Mortgage servicing rights 14,851 16,394 13,881 14,825
Financial Liabilities:
Customer deposit accounts 621,665 621,174 565,463 566,707
Advances from FHLB 264,436 265,131 168,088 166,200
Other borrowings 100 99 150 149
</TABLE>
<TABLE>
September 30, 2000 September 30, 1999
------------------------------- -------------------------------
Contract or Estimated Contract or Estimated
notional unrealized notional unrealized
amount gain (loss) amount gain (loss)
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Unrecognized financial instruments:
Lending commitments - fixed rate, net $ 26,215 258 43,994 324
Lending commitments - floating rate 29,728 500 21,582 345
Commitments to sell loans 53,206 290 58,308 (227)
</TABLE>
The fair value estimates presented are based on pertinent information
available to management as of September 30, 2000 and 1999. Although management
is not aware of any factors that would significantly affect the estimated fair
values, such amounts have not been comprehensively revalued for purposes of
these consolidated financial statements since that date. Therefore, current
estimates of fair value may differ significantly from the amounts presented
above.
<PAGE>
Independent Auditors' Report
--------------------------------------------------------------------------------
The Board of Directors and Stockholders
NASB Financial, Inc., and Subsidiary
We have audited the accompanying consolidated balance sheets of NASB
Financial, Inc. and Subsidiary (the "Company") as of September 30, 2000 and
1999, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended September 30,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of September 30,
2000 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
November 28, 2000
Kansas City, Missouri
<PAGE>
Summary of Unaudited Quarterly Operating Results
--------------------------------------------------------------------------------
The following tables include certain information concerning the quarterly
consolidated results of operations of the Company at the dates indicated. Dollar
amounts are expressed in thousands, except per share data.
<TABLE>
First Second Third Fourth
2000 Quarter Quarter Quarter Quarter Total
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 17,796 18,724 20,804 21,638 78,962
Interest expense 9,391 9,994 11,177 12,562 43,124
------------------------------------------------
Net interest income 8,405 8,730 9,627 9,076 35,838
Provision for loan losses 150 150 150 150 600
------------------------------------------------
Net interest income after provision for loan losses 8,255 8,580 9,477 8,926 35,238
Other income 2,186 2,199 2,598 2,426 9,409
General and administrative expenses 4,962 4,872 5,133 5,153 20,120
------------------------------------------------
Income before income tax expense 5,479 5,907 6,942 6,199 24,527
Income tax expense 2,191 2,362 2,775 2,478 9,806
------------------------------------------------
Net income $ 3,288 3,545 4,167 3,721 14,721
================================================
Earnings per share $ 0.37 0.39 0.46 0.44 1.66
================================================
Average shares outstanding 8,919 8,980 9,018 8,540 8,863
</TABLE>
<TABLE>
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 15,472 15,262 15,811 17,012 63,557
Interest expense 8,359 7,965 8,071 8,707 33,102
-------------------------------------------------
Net interest income 7,113 7,297 7,740 8,305 30,455
Provision for loan losses 75 75 75 75 300
-------------------------------------------------
Net interest income after provision for loan losses 7,038 7,222 7,665 8,230 30,155
Other income 2,821 3,177 2,675 2,709 11,382
General and administrative expenses 4,922 4,721 5,092 5,394 20,129
-------------------------------------------------
Income before income tax expense 4,937 5,678 5,248 5,545 21,408
Income tax expense 1,922 2,270 2,099 2,217 8,508
-------------------------------------------------
Net income $ 3,015 3,408 3,149 3,328 12,900
=================================================
Earnings per share $ 0.33 0.38 0.35 0.37 1.43
=================================================
Average shares outstanding 8,935 9,042 9,023 8,991 8,998
</TABLE>
<TABLE>
Board of Directors of NASB Financial Inc., and North American Savings Bank,
F.S.B.
--------------------------------------------------------------------------------
<S> <C> <C>
David H. Hancock Frederick V. Arbanas W. Russell Welsh
Chairman President, Fred Arbanas, Inc. Managing Partner
Chief Executive Officer National Yellow Pages Service Polsinelli, White, Vardeman &
NASB Financial, Inc. and Jackson County Legislature Shalton
North American Savings Bank Kansas City, Missouri Kansas City, Missouri
Walter W. Pinnell Barrett Brady Linda S. Hancock
President President, J.C. Nichols Company Linda Smith Hancock Interiors
NASB Financial, Inc. and Kansas City, Missouri Kansas City, Missouri
North American Savings Bank
James A. Watson
Executive Vice President
North American Savings Bank
</TABLE>
<PAGE>
<TABLE>
Officers of NASB Financial, Inc.
--------------------------------------------------------------------------------
<S> <C> <C>
David H. Hancock Rhonda Nyhus John M. Nesselrode
Chairman Vice President and Vice President
Chief Executive Officer Corporate Secretary
Walter W. Pinnell James A. Watson Joe O'Flaherty
President Vice President Vice President
Keith B. Cox Brad Lee Bruce Thielen
Vice President and Treasurer Vice President Vice President
</TABLE>
<TABLE>
Officers of North American Savings Bank, F.S.B.
--------------------------------------------------------------------------------
<S> <C> <C> <C>
David H. Hancock Brad Lee Roger Campbell Ron Reagan
Chairman Senior Vice President Vice President Vice President
Chief Executive Officer Construction Lending Construction Lending Residential Lending
Walter W. Pinnell John M. Nesselrode Barbara Cornwell Lisa M. Reynolds
President Senior Vice President Vice President Vice President
Chief Investment Officer Human Resources Construction Lending
James A. Watson Joe O'Flaherty Pat Cox Dena Sanders
Executive Vice President Senior Vice President Vice President Vice President
Operations and Branch Admin. Residential Lending Residential Lending Construction Lending
Keith B. Cox Bruce Thielen Wade Hall Cheryl Thompson
Executive Vice President Senior Vice President Vice President Vice President
Chief Financial Officer Residential Lending Residential Lending Construction Lending
Rhonda Nyhus Mike Anderson Lisa Lillard Neil Volkmann
Vice President Vice President Vice President Vice President
Corporate Secretary Construction Lending Commercial Lending Residential Lending
</TABLE>
<TABLE>
Branch Offices
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Headquarters Independence, Missouri Residential Lending Residential Lending (cont.)
Grandview, Missouri 11221 East 23rd Street 949 NE Columbus 1611 Des Peres Road
12498 South 71 Highway Lee's Summit, Missouri St. Louis, Missouri
Lee's Summit, Missouri Leawood, Kansas 3322 S. Campbell - Suite W 1014 Country Club Road
646 N. 291 Highway 8840 State Line Road Springfield, Missouri St. Charles, Missouri
St. Joseph, Missouri Harrisonville, Missouri 12900 Metcalf - Suite 140 Construction Lending
920 North Belt 2002 East Mechanic Overland Park, Kansas 12125-D Blue Ridge Ext.
3011-B North Belt Loan Administration 5620 SW 29th St. 11237 Nall Avenue
12125-D Blue Ridge Ext. Topeka, Kansas Leawood, Kansas
Kansas City, Missouri
8501 North Oak Trafficway
</TABLE>
<PAGE>
Investor Information
--------------------------------------------------------------------------------
Annual Meeting of Stockholders:
The Annual Meeting of Stockholders will be held on Tuesday, January 23,
2001, at 10:00 a.m. at North American Savings Bank, 12125-D Blue Ridge
Extension, Grandview, Missouri.
Annual Report on 10-K:
Copies of NASB Financial, Inc. Form 10-K Report to the Securities and
Exchange Commission are available without charge upon written request to Keith
B. Cox, Vice President and Treasurer, NASB Financial, Inc., 12498 South 71
Highway, Grandview, Missouri 64030.
Transfer Agent:
UMB Bank, n.a., P.O. Box 64, Kansas City, Missouri 64141
Stock Trading Information:
The common stock of NASB Financial, Inc. and subsidiaries is traded in the
over-the-counter market. The Company's symbol is NASB.
Independent Auditors:
Deloitte & Touche LLP, 1010 Grand Avenue, Suite 400, Kansas City, Missouri
64106
Shareholder and Financial Information:
Contact Keith B. Cox, NASB Financial, Inc., 12498 South 71 Highway,
Grandview, Missouri 64030, (816) 765-2200.
Common Stock Prices and Dividends
--------------------------------------------------------------------------------
At September 30, 2000, stockholders held 8,500,249 outstanding shares of
NASB Financial, Inc. common stock. The Company paid cash dividends of $0.0625
per share were paid in February, May, August, and November of 1998. Cash
dividends of $0.08 per share were paid in February, May, August and November of
1999. Cash dividends of $0.10 per share were paid in February, May, and August
of 2000.
The table below reflects the Company's high and low bid prices. The
quotations represent intra-dealer quotations without retail markups, markdowns
or commissions, and do not necessarily represent actual transactions.
Fiscal 2000 Fiscal 1999
Quarter ended High Low High Low
December 31 $ 11.81 10.31 13.75 10.00
March 31 11.44 9.50 23.00 12.75
June 30 11.44 9.63 14.06 12.63
September 30 14.75 10.44 10.38 14.00
