NORTH BANCSHARES INC
10QSB, 1997-11-04
SAVINGS INSTITUTION, FEDERALLY CHARTERED
Previous: WESTERFED FINANCIAL CORP, 8-K, 1997-11-04
Next: GLIMCHER REALTY TRUST, 8-K, 1997-11-04



                                                                               
- ----------------------------------------------------------------------------
             U.S. SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                           FORM 10-QSB

(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the quarterly period ended September 30, 1997

                                
( )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from              to               

                 Commission File Number 0-22800


                     NORTH BANCSHARES, INC.



(Exact name of small business issuer as specified in its charter)
                                
     Delaware                              36-3915073
(State or other jurisdiction               I.R.S. Employer
of Incorporation or organization           Identification Number


100 West North Avenue, Chicago, Illinois   60610-1399
(Address of Principal Executive Offices)   (Zip Code)

                         (312) 664-4320
      (Registrant's telephone number, including area code)

- ----------------------------------------------------------------------------  
check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

                   Yes (X)             No ( )

  As of October 31, 1997, there were 955,708 outstanding shares of the
Registrant's Common Stock.
        
  Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)




<PAGE 2>

                     NORTH BANCSHARES, INC.

                        Table of Contents




Part I - FINANCIAL INFORMATION (UNAUDITED)
           Item 1. Consolidated Financial Statements                 3
                   Notes to Consolidated Financial Statements        6

           Item 2. Management's Discussion and Analysis of
                   Financial Condition and Results of Operations     7

Part II - OTHER INFORMATION                                         13
           Item 1. Legal Proceedings                                13
           Item 6. Exhibits and Reports on Form 8-K                 13

FORM 10-QSB SIGNATURE PAGE                                          14


<PAGE 3>


Part I. Financial Information

Item 1. Consolidated Financial Statements

                          NORTH BANCSHARES, INC.
              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              (IN THOUSANDS)
<TABLE>
<CAPTION>



ASSETS                                        SEPT 30, 1997   DEC 31, 1996
                                               (UNAUDITED)     
<S>                                              <C>           <C>
Cash and due from banks                           $   669       $   618
Interest-bearing deposits                           2,664         2,644
Federal funds sold                                  5,100         4,800
Investment in dollar denominated mutual funds       1,635           547
                                                   ------        ------ 
   TOTAL CASH AND CASH EQUIVALENTS                 10,068         8,609

Investment securities available-for-sale           25,329        24,426
Mortgage-backed securities held-to-maturity         6,445         7,465
Loans receivable, net of allowance for loan
 losses of $208 at September 30, 1997 and
 at December 31, 1996                              76,379        73,378
Accrued interest receivable                           953         1,025
Premises and equipment, net                         1,064         1,061
Stock in Federal Home Loan Bank of Chicago          1,640         1,205
Other assets                                          203           304 
                                                   ------        ------
   TOTAL ASSETS                                  $122,081      $117,473
                                                  =======       =======  
                                            
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposit accounts                                 $ 73,125       $73,611
Borrowed funds                                     29,100        24,100
Advance payments by borrowers for
 taxes and insurance                                  625         1,203 
Other liabilities                                   2,839           736
                                                   ------        ------
   TOTAL LIABILITIES                              105,689        99,650

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value, 500,000   
 shares authorized; none outstanding                   -             -
Common stock, $.01 par value, 3,500,000 
 shares authorized; 1,437,501 shares issued            14            14
Additional paid-in capital                         13,534        13,688
Retained earnings, substantially restricted        11,133        10,988
Treasury stock at cost (475,631 shares at 
 September 30, 1997 and 379,551 shares at       
 December 31, 1996)                                (7,436)       (5,340)
Unrealized loss on securities
 available-for-sale, net of tax effect               (146)         (678)
Additional pension liability, net of tax             (108)         (108)
Common stock acquired by Employee Stock
   Ownership Plan                                    (583)         (667)
Deferred compensation                                 (16)          (74)
                                                   ------        ------
   TOTAL STOCKHOLDERS' EQUITY                      16,392        17,823
                                                   ------        ------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                          $122,081      $117,473
                                                  =======       =======
</TABLE>


   SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 4>

                          NORTH BANCSHARES, INC.
             CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
                              (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED SEPT 30,    NINE MONTHS ENDED SEPT 30,
                                                                     1997          1996           1997          1996

<S>                                                               <C>           <C>            <C>            <C>    
INTEREST INCOME
  Loans receivable                                                 $1,497        $1,348         $4,433         $3,729
  Interest-bearing deposits and federal funds sold                     82            94            164            246
  Investment securities available-for-sale                            443           581          1,420          1,748
  Investment securities held-to-maturity                                -             -              -              2
  Mortgage-backed securities available for sale                         -             -              -             90
  Mortgage-backed securities held-to-maturity                         119           148            365            440
  Dollar denominated mutual funds                                      29            12             81             ??
  Dividends on FHLB of Chicago stock                                   25            18             70             ??
                                                                    -----         -----          -----          -----
TOTAL INTEREST INCOME                                               2,195         2,201          6,533          6,302
                                                                    -----         -----          -----          -----
INTEREST EXPENSE
  Deposit accounts                                                    818           817          2,370          2,503
  Borrowed funds                                                      468           377          1,315            972 
                                                                    -----         -----          -----          -----
TOTAL INTEREST EXPENSE                                              1,286         1,194          3,685          3,475
                                                                    -----         -----          -----          -----

  NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES                909         1,007          2,848          2,827

PROVISION FOR LOAN LOSSES                                               -             -              -              8
                                                                    -----         -----          -----          -----
  NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                 909         1,007          2,848          2,819
                                                                    -----         -----          -----          ----- 
NON-INTEREST INCOME
  Gain (loss) on sale of investment securities available-for-sale      (1)           (1)            53              7
  Fees and service charges                                             53            46            156            133
  Other                                                                 4            18             13             30
                                                                    -----         -----          -----          -----  
TOTAL NON-INTEREST INCOME                                              56            63            222            170
                                                                    -----         -----          -----          -----
NON-INTEREST EXPENSE
  Compensation and benefits                                           409           362          1,221          1,039
  Occupancy expense                                                   131           106            361            307
  Professional fees                                                    32            22            118            125
  Data processing                                                      41            31            126             90
  Advertising and promotion                                            49            26            112            123
  Federal deposit insurance premium                                    13           538             36            642
  Recognition and retention plan                                       17            19             59             56
  Other                                                               106           102            307            258
                                                                    -----         -----          -----          -----
TOTAL NON-INTEREST EXPENSE                                            798         1,206          2,340          2,640
                                                                    -----         -----          -----          -----
INCOME (LOSS) BEFORE TAXES                                            167          (136)           730            349

INCOME TAX EXPENSE (BENEFIT)                                           55           (68)           214             97
                                                                    -----         -----          -----          -----
NET INCOME (LOSS)                                                   $ 112         $ (68)          $516          $ 252 
                                                                    =====         =====          =====          =====

EARNINGS (LOSS) PER SHARE PRIMARY                                    $.12         $(.06)          $.52           $.22
EARNINGS (LOSS) PER SHARE FULLY DILUTED                              $.12         $(.06)          $.52           $.22
WEIGHTED AVERAGE SHARES OUTSTANDING                               970,169     1,065,277        997,050      1,119,323

</TABLE>

   SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 5>

                         NORTH BANCSHARES, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (UNAUDITED)
                             (IN THOUSANDS)
<TABLE>
<CAPTION>


                                                              FOR THE NINE MONTHS ENDED SEPT 30,
                                                                    1997              1996

<S>                                                               <C>             <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                      $ 516           $   252
   Adjustments to reconcile net income to net 
    cash provided by (used in) operating activities:
      Depreciation and amortization                                   76                51
      Provision for loan losses                                        -                 8 
      Deferred loan fees, net of amortization                        (19)              (89)
      Amortization of premiums and discounts                          30               139 
      Amortization of cost of stock benefit plans                    142               140 
      Gain on sale of investment securities available-for-sale       (53)               (7)
      Changes in assets and liabilities:
        Increase (decrease) in accrued interest receivable            72              (296)
        Increase (decrease) in other assets, net                     101                (8)
        Increase in other liabilities                              1,554             1,331 
                                                                   -----             -----  
Net cash provided by operating activities                          2,419             1,521 
                                                                   -----             -----

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of investment securities available-for-sale           (7,219)          (14,893)
   Proceeds from sales of investment securities 
     available-for-sale                                            6,001             3,500
   Proceeds from sales of mortgage-backed securities
     available-for-sale                                                -             6,496
   Maturities of investment securities available-for-sale          1,000             6,600
   Maturities of investment securities held-to-maturity                -               500
   Loan originations                                             (12,121)          (21,681)
   Loan repayments                                                 9,139             7,929
   Repayments of mortgage-backed securities                        1,016             1,797
   Purchase of Federal Home Loan Bank of Chgo Stock                 (435)             (463)
   Purchase of premises and equipment                                (79)             (156)
   Decrease in payable to brokers                                      -            (1,000)
                                                                  ------            ------
Net cash used in investing activities                             (2,698)          (11,371)
                                                                  ------            ------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in deposit accounts                                     (486)           (2,712)
   Decrease in advance payments by borrowers
     for taxes and insurance                                        (578)             (494)
   Increase in borrowings                                          5,000            11,998  
   Purchase of treasury stock                                     (2,096)           (2,525)
   Exercise of stock options                                         269                14 
   Dividends paid                                                   (371)             (348)
                                                                  ------            ------
Net cash provided by financing activities                          1,738             5,933 
                                                                  ------            ------ 
Net increase (decrease) in cash and cash equivalents               1,459            (3,917)

Cash and cash equivalents at beginning of period                   8,609             8,293 
                                                                  ------            ------
Cash and cash equivalents at end of period                       $10,068           $ 4,376
                                                                  ======            ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash payments during the period for:
     Interest                                                      2,481             2,805
     Income taxes                                                      -                82

</TABLE>



   SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

<PAGE 5>

                        NORTH BANCSHARES, INC.
         NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   

(1)  Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X.   Accordingly, they do not include all the
information and notes required by generally accepted accounting principles
for complete financial statements.

     In the opinion of management, the audited and unaudited consolidated
financial statements contain all adjustments (which are normal and recurring
in nature) necessary for a fair presentation of the financial condition as of
September 30, 1997 and December 31, 1996 and results of operations for the
three month and nine month periods ended September 30, 1997 and September 30,
1996, but are not necessarily indicative of the results which may be expected
for the entire year.

     In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period.  Actual results could differ significantly from those estimates.
Estimates that are particularly susceptible to significant change relate to
the determination of the allowance for possible loan losses.
     
(2)  Principles of Consolidation

     The accompanying unaudited consolidated financial statements include the
accounts of North Bancshares, Inc. (the "Company"), and its wholly-owned
subsidiary North Federal Savings Bank (the "Bank"), and its subsidiary North
Financial Corporation.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

(3)  Earnings Per Share

     Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of shares of common stock
and common stock equivalents outstanding for the three months and nine months
ended September 30, 1997 and September 30, 1996.  Stock options are treated as
common stock equivalents and are therefore considered in both primary and
fully diluted earnings per share calculations.  Shares purchased by the
Employee Stock Ownership Plan but not allocated to participants have been
excluded from the primary and fully diluted earnings per share calculation.
Common stock equivalents are computed using the treasury stock method and
committed ESOP shares are computed using the released shares outstanding
method.  

(4) Stock Repurchase Program

     On August 7, 1997, the Company announced the completion of a stock
repurchase program of 100,000 shares or approximately 9.5% of its outstanding
shares of Common Stock.  Shares were repurchased in open market transactions
or in privately negotiated transactions at an average cost of $18.04 per
share.  On July 15, 1997, the Company announced another stock repurchase
program which amounts to 50,000 shares or approximately 5% of the outstanding
issue.  As of September 30, 1997, 20,800 shares had been repurchased at an
average price of $22.38 per share. Management continues to believe that stock
repurchase programs provide enhanced value to both the Stockholders and the
Company.

(5) Reclassifications

     Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform with the 1997 presentation.

<PAGE 7>

(6) Commitments and Contingencies

     At September 30, 1997 the Bank had outstanding commitments to originate
mortgage loans in the amount of $2.1 million. 
     
     
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL
    
     The Company is a Delaware corporation which was organized in 1993 by the
Bank for the purpose of becoming a savings and loan holding company.  The
Company owns all of the outstanding stock of the Bank issued on December 21,
1993, in connection with the completion of its conversion from the mutual to
the stock form of organization.  The Company issued 1,388,625 shares of
common stock at $10.00 per share with an additional 48,876 shares of common
stock issued from authorized and unissued shares as part of a Management
Recognition and Retention Plan.  
 
     The primary business of the Company is that of an independent community-
oriented financial institution offering a variety of financial services to
meet the needs of the communities it serves.  The Company attracts deposits
from the general public, borrows funds or enters into reverse repurchase
agreements and uses such funds to originate or acquire one-to-four family
residential mortgages, or loans secured by small apartment buildings or mixed
use properties.  To a lesser extent, but to a greater degree than in the past
, the Company originates consumer loans in its primary market area.  The
Company also invests in federal agency mortgage-backed securities, U. S.
Government and agency securities, investment grade securities, common stocks,
and money market accounts. 

     The Company's consolidated results of operations are primarily dependent
on net interest income, which is the difference between the interest income
earned on interest-earning assets and the interest paid on deposits and other
borrowings, and to a lesser degree on non-interest income and non-interest
expense.  The Company's operating expenses consist principally of employee
compensation and benefits, occupancy expenses, federal insurance premiums and
other general and administrative expenses.  The Company's results of
operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities. 

    The Company's net loans receivable increased $3.0 million or 4.1% from
$73.4 million at December 31, 1996 to $76.4 million at September 30, 1997.
The Bank is currently focusing its marketing efforts on both owner occupied
and non-owner occupied one-to-four unit dwellings, small apartment buildings,
and home equity loans.  In order to more effectively compete for loan
originations in its market area, the Bank offers 80% financing on non-owner
occupied properties with a cash out feature.  The Bank also offers low down
payment mortgages to homebuyers accompanied with appropriate mortgage
insurance.  The Bank, which has a First Time Homebuyer Program for purchases
within its assessment area, acquires loans from mortgage brokers and purchases
loans or participations from other financial institutions.  For the nine
months ended September 30, 1997 the Bank originated $12.1 million in mortgage
, consumer and commercial loans of which $6.6 million or 54.5% were adjustable
rate or balloon type mortgages.  The Bank received a $725,000 repayment on a
participation loan which was refinanced on September 29, 1997.  On October 2,
1997, the Bank funded a $1.0 million participation on the same property with
the original financial institution.

     The Company continues to believe that maintaining loan delinquencies at
the lowest possible levels is imperative to achieving adequate profitability,
and will continue its policy of underwriting loans that it originates and
acquires in what it believes is a conservative and consistent manner.  At
September 30, 1997 and December 31, 1996, there were no loans delinquent 90
days or more.  The allowance for loan losses $208,000 at both September 30,
1997 and December 31, 1996 which amounted to .27% and .28% of loans receivable
respectively at those dates. 
 
<PAGE 8>
FORWARD-LOOKING STATEMENTS

     When used in this 10-QSB, and in future filings by the Company with the
SEC, in the Company's press releases or other public or shareholder
ommunications, and in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are expected
to", "will continue", "is anticipated", "estimate", "project" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.  Such
statements are subject to certain risks and uncertainties - including,
changes in economic conditions in the Company's market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area and competition, that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected.  The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made.  The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any
current statements.

     The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.      

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds are deposits, amortization and
prepayment of loans and mortgage-backed securities, sales and maturities of
other investment securities, borrowings from the Federal Home Loan Bank of
Chicago and to a limited extent, reverse repurchase agreements.  The Company
uses its liquid resources to fund loan commitments, to meet operating
expenses, to purchase investment securities and to fund deposit withdrawals.
Management believes that these sources of funds will be adequate to meet the
liquidity needs of the Company for the balance of the fiscal year.

     The OTS requires minimum levels of liquid assets.  OTS regulations
currently require the Bank to maintain an average daily balance of liquid
assets equal to at least 5% of the sum of its average daily balance of net
withdrawable accounts and borrowings payable in one year or less.  At
September 30, 1997 the Bank's liquidity ratio was 12.5% compared with 15.6%
at December 31, 1996.  In addition, the Bank is required to maintain short
term liquid assets equal to at least 1.0% of the average sum of net
withdrawable deposits and other borrowings.  The Bank's short term liquidity
ratio was 9.5% at September 30, 1997 compared with 12.4% at December 31, 1996
 .  The decrease in liquidity is related to the funding of loans that do not
qualify as liquid assets and bear interest rates that are higher than the
liquid assets.

     The primary investing activities of the Company are lending on single
family and small multi-family residential properties, purchases of mortgage-
backed securities and the purchase of U.S. government and agency securities.
The Company's loan origination marketing efforts and mortgage broker
relationships have maintained adequate loan demand.  Management believes that
adequate liquidity will be available to fund any foreseeable increased loan
demand.  The Company does not have the same regulatory restrictions on
investments as the Bank and makes investments in debt and equity securities
of financial service firms.

     Current regulatory standards impose the following capital requirements
on the Bank and other thrifts: a tangible capital ratio expressed as a
percentage of total adjusted assets, a leverage ratio of core capital to
total adjusted assets, and a risk-based capital standard expressed as a
percentage of risk-adjusted assets.   At September 30, 1997, the Bank
exceeded all of its regulatory capital standards.  At such date, the Bank's
tangible capital, core capital and risk-based capital of $14.2 million, $14.2
million and $14.4 million, respectively, exceeded the applicable minimum
requirements by $12.4 million or 10.3%, $10.6 million or 8.8% and $10.8
million or 24.2%, respectively.  

<PAGE 9>
CHANGES IN FINANCIAL CONDITION 

     Total assets increased $4.6 million or 3.9% from $117.5 million at
December 31, 1996 to $122.1 million at September 30, 1997.  The increase was
primarily attributable to a $4.5 million increase in net loans receivable and
cash and cash equivalents.

     Net loans receivable increased $3.0 million or 4.1% from $73.4 million at
December 31, 1996 to $76.4 million at September 30, 1997.  The Company
originated $12.1 million in mortgage, consumer and commercial loans during
the nine months ended September 30, 1997 compared with $21.7 million during
the nine months ended September 30, 1996.  Repayments of loans during the
nine months ended September 30, 1997 amounted to $9.1 million compared with
$7.9 million during the nine months ended September 30, 1996.

     Investment securities increased $903,000 or 3.7% from $24.4 million at
December 31, 1996 to $25.3 million at September 30, 1997.  $4.0 million of
investment securities were sold or called by the issuing agency during the
quarter ended September 30, 1997.  The proceeds of these sales and calls were
reinvested in federal funds in anticipation of loan closings scheduled for
the fourth quarter of 1997.

     Deposit accounts increased by $1.5 million during the quarter due
primarily to a certificate of deposit promotion.  Total deposit accounts
decreased by $486,000 from $73.6 million at December 31, 1996 to $73.1
million at September 30, 1997.  The decrease can be attributed to customers
seeking higher returns on their investments in the equity and mutual fund
markets that have in the past year achieved all time highs.  

     Borrowed funds increased by $5.0 million or 20.8% from $24.1 million at
December 31, 1996 to $29.1 million at September 30, 1997.  The increase was
primarily attributable to a $3.9 million increse in net loans receivable and
investment securities. 

     Other liabilities increased by $2.1 million, or 285.3% from $736,000 at
December 31, 1996 to $2.8 million at September 30, 1997.  The increase was
primarily attributable to accrued interest payable on certificates of deposit
that pay interest annually on December 31st of each year and to outstanding
checks that are drawn on the Bank.
    
     Stockholders' equity totaled $16.4 million or 13.4% of total assets at
September 30, 1997.  Retained earnings increased by $145,000 from $11.0
million at December 31, 1996 to $11.1 million at September 30, 1997, a result
of $516,000 in net earnings for the nine months ended September 30, 1997,
offset by $371,000 in dividend payments.  A total of $146,000 in unrealized
losses, net of related tax effect, on securities available for sale at
September 30, 1997, an improvement of %532,000 from December 31, 1996, have
been recorded as a component of Stockholders' equity. Treasury stock
increased by $2.1 million or 39.6% from $5.3 million at December 31, 1996 to
$7.4 million at September 30, 1997, due to the repurchase of 120,800 shares
at an average cost of $18.98 per share, partially offset by the exercise of
24,720 options and the issuance of shares out of treasury stock.  Additional
paid in capital decreased by $154,000 due to stock option exercises amounting
to $269,000, partially offset by a credit for $115,000 in ESOP expense, which
represented the increase in value of the shares to be allocated under the
ESOP for 1997.


COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND SEPTEMBER 30, 1996

     GENERAL.  Net income increased $180,000 from a loss of $68,000 for the
three months ended September 30, 1996 to $112,000 for the three months ended
September 30, 1997.  Earnings per primary and fully diluted share increased
$.18 from a loss of $.06 per share for the three months ended September 30,
1996 to $.12 for the three months ended September 30, 1997.  The increases in
net income and earnings per share are attributed to the absence of the SAIF
special assessment which was recorded during the third quarter of 1996.  See
discussion of non-interest expense included below.  In addition, there was a
decrease in the total number of outstanding shares.  

<PAGE 10>
     INTEREST INCOME.  Interest income decreased $6,000 and remained at $2.2
million for the three months ended September 30, 1997.  The decrease was
primarily attributable to a general decline in market rates of interest
coupled with sales and calls of investment securities which bore higher rates
of interest.  The proceeds of the sales and calls were invested in lower
yielding federal funds in anticipation of funding approximately $5.0 million
in loan commitments and broker registrations made during the third quarter
which will not close until the fourth quarter of 1997.  As a result, there
was a decrease in the annualized yield on average interest-earning assets
from 7.44% for the three months ended September 30, 1996 to 7.42% for the
three months ended September 30, 1997.  
           
     INTEREST EXPENSE.  Interest expense increased $92,000 or 7.7%, from $1.2
million for the three months ended September 30, 1996 to $1.3 million for the
three months ended September 30, 1997.  The increase was primarily
attributable to a $91,000 increase in interest on borrowed funds, a result
of a $6.3 million increase in average outstanding Federal Home Loan Bank
advances from @22.2 million for the three months ended September 30, 1996 to
$28.5 million for the three months ended September 30, 1997.  In addition,
there was a increase in the annualized average cost of interest-bearing
liabilities from 4.93% for the three months ended September 30, 1996 to 5.16%
for the three months ended September 30, 1997, due primarily to increases in
interest rates on certificates of deposit that occured earlier in the year
and bonus interest paid during a certificate of deposit promotion this past
quarter. 
  
     PROVISION FOR LOAN LOSSES.  The Company did not add to its allowance for
loan losses for the three months ended September 30, 1997 or  September 30,
1996.  The allowance for loan losses to net loans receivable amounted to .27%
at September 30, 1997, however, there were no loans delinquent 90 days or
more at September 30, 1997.  Future additions to the Company's allowance for
loan losses and any change in the related ratio of the allowance for loan
losses to non-performing loans are dependent upon the performance of the
Company's loan portfolio, the economy, changes in real estate values,
interest rates, and the view of the regulatory authorities toward reserve
levels and inflation.

     NON-INTEREST INCOME.  Non-interest income decreased $7,000 or 11.1% from
$63,000 for the three months ended September 30, 1996 to $56,000 for the three
months ended September 30, 1997.  The decrease was  attributable to a $14,000
decrease in other non-interest income partially offset by a $7,000 increase in
fees and service charges related to an increase in the total number of
checking accounts and interchange fees resulting from foreign ATM
transactions and MasterCard Master Money transactions.

     NON-INTEREST EXPENSE.  Non-interest expense decreased by $408,000 from
$1.2 million for the quarter ended September 30, 1996 to $798,000 for the
quarter ended September 30, 1997.  The decrease was primarily attributable to
a $525,000 decrease in federal deposit insurance premiums related to a
$486,000 SAIF special assessment recorded during the third quarter of 1996,
and a reduction in FDIC insurance premiums.  These savings were partially
offset by a $47,000 increase in compensation and benefits expense, a $25,000
increase in occupancy expense related to the expansion of the Banks hours of
operation, and a $23,000 increase in advertising expense related to a
certificate of deposit promotion and the ongoing promotion of free checking
accounts.   The increase in compensation expense is primarily related to an
increase in the market price of the shares being allocated under the ESOP.
Although the Company is required to record compensation expense for the
increase in the value of the ESOP, an offsetting entry to additional paid in
capital is recorded on the consolidated statements of financial condition and
therefore stockholders' equity is unaffected.  For the three months ended
September 30, 1997, the Company recorded $36,000 in additional compensation
expense compared with $15,000 for the three months ended September 30, 1996,
and recorded an offsetting entry to additional paid in capital, related to
the increase in the value of the shares being allocated under the ESOP.  

     INCOME TAX EXPENSE.  The allocation for federal and state income taxes
increased by $123,000 from a benefit of $68,000 for the three months ended
September 30, 1996 to $55,000 for the three months ended September 30, 1997
for an effective tax rate of 33.0%.  The increase is attributable to the loss
recorded during the three months ended September 30, 1996.   

<PAGE 11>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996

     GENERAL.  Net income increased by $264,000 or 104.8% from $252,000 for
the nine months ended September 30, 1996 to $516,000 for the nine months ended
September 30, 1997.  Earnings per primary share increased $.30 or 136.4% from
$.22 for the nine months ended September 30, 1996 to $.52 for the nine months
ended September 30, 1997.  The increase was primarily attributable to the
$285,000 after tax SAIF assessment being recorded during the nine months
ended September 30, 1996.  In addition, there was a decrease in the total
number of outstanding shares.

     INTEREST INCOME.  Interest income increased $231,000 or 3.7% from $6.3
million for the nine months ended September 30, 1996 to $6.5 million for the
nine months ended September 30, 1997.  The increase was primarily
attributable to a $704,000 increase in interest on loans receivable,
partially offset by a $451,000 decrease in interest on mortgage-backed
securities, investment securities, and interest-bearing deposits.  There was
a $4.5 million increase in the average outstanding balance of interest-
earning assets from $113.0 million for the nine months ended September 30, 
1996 to $117.5 million for the nine months ended September 30, 1997.  There
was a slight decrease in the annualized yield on average interest-earning
assets from 7.44% for the nine months ended September 30, 1996 to 7.41% for
the nine months ended September 30, 1997.    
     
     INTEREST EXPENSE.  Interest expense increased by $210,000 or 6.0% from
$3.5 million for the nine months ended September 30, 1996 to $3.7 million for
the nine months ended September 30, 1997.  The increase was primarily
attributable to a $3.7 million or 3.9% increase in average interest-bearing
liabilities from $94.9 million for the nine months ended September 30, 1996
to $98.6 million for the nine months ended September 30, 1997.  The average
cost of interest-bearing liabilities increased from 4.88% for the nine months
ended September 30, 1996 to 4.98% for the nine months ended September 30, 1997

     PROVISION FOR LOAN LOSSES.  The Company did not add to its allowance for
loan losses for the nine months ended September 30, 1997 compared with a
provision of $8,000 during the nine months ended September 30, 1996.  The
allowance for loan losses to total loan receivable amounted to .27% at
September 30, 1997, however there were no loans 90 days or more delinquent
as of September 30, 1997.  Future additions to the Company's allowance for
loan losses and any change in the related ratio of the allowance for loan
losses to non-performing loans are dependent upon the performance of the
Company's loan portfolio, the economy, changes in real estate values,
interest rates, and the view of the regulatory authorities toward reserve
levels and inflation.

     NON-INTEREST INCOME.  Non-interest income increased by $52,000 or 30.6%
from $170,000 for the nine months ended September 30, 1996 to $222,000 for
the nine months ended September 30, 1997.  The increase was primarily
attributable to a $46,000 increase in gains on the sale of investment
securities, available for sale, and a $23,000 increase in fees and service
charges related to an increase in the total number of checking accounts and
interchange fees resulting from foreign ATM transactions and MasterCard
Master Money transactions.
   
     NON-INTEREST EXPENSE.  Non-interest expense decreased by $300,000 or 11.5%
from $2.6 million for the nine months ended September 30, 1996 to $2.3 million
for the nine months ended September 30, 1997.  The decrease was primarily
attributable to a $606,000 decrease in federal deposit insurance premiums
related to a $486,000 SAIF special assessment recorded during the third
quarter of 1996, and a reduction in FDIC insurance premiums.  These savings
were partially offset by a $182,000 increase in compensation and benefits
expense, a $54,000 increase in occupancy expense related to the expansion of
the Banks hours of operation and maintenance projects, and a $36,000 increase
in data processing expense related to an expansion of the Banks product
offerings.   The increase in compensation expense is related to an increase
in the market price of the shares being allocated under the ESOP and to staff
increases related to an expansion of the hours of operation.  Although the
Company is required to record compensation expense for the increase in the
value of the ESOP, an offsetting entry to additional paid in capital is
recorded on the consolidated statements of financial condition and therefore
stockholders' equity is unaffected.  For the first nine months of 1997, the
Company has recorded $115,000 in additional compensation expense compared
with $40,000 for the first nine months of 1996, and recorded an offsetting
entry to additional paid in capital, related to the increase in the value of
the shares. 

<PAGE 12>
   INCOME TAX EXPENSE.  The allocation for federal and state income taxes
increased by $117,000 from $97,000 for the nine months ended September 30,
1996 to $214,000 for the nine months ended September 30, 1997 for an
effective tax rate of 29.3%.  The effective tax rate is less than the
expected 34%, due to the utilization of capital losses.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS AND OTHER REGULATORY ISSUES

     In June 1996, FASB Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (Statement
125), was issued and is applicable to all entities, both public and non-
public.  Statement 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components
approach that focuses on control.  It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.  Under the
financial-components approach, after a transfer of financial assets, an entity
recognizes all financial and servicing assets it controls and liabilities it
has incurred and derecognizes financial assets it no longer controls and
liabilities that have been extinguished.  Statement 125 provides standards to
determine whether transfers of financial assets are to be accounted for as
sales or secured borrowings.  This statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996.  In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125."  This statement is effective December 31, 1996 and amends FASB
Statement No. 125 by delaying for one year the effective date for the
following types of transfers of financial assets:  secured borrowings and
collateral, repurchase agreements, dollar-rolls and securities lending.  The
Company adopted both Statements on January 1, 1997 without a material effect
on the Company's financial position or results of operations.

     In February 1997, FASB Statement No. 128, "Earnings Per Share" (Statement
128), was issued.  Statement 128 supersedes APB Opinion No. 15, Earnings Per
Share and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held
common stock or potential common stock.  Statement 128 was issued to simplify
the computation of EPS and to make the U. S. standard more compatible with
the EPS standards of other countries and that of the International Accounting
Standards Committee.  It replaces the presentation of primary EPS and fully
diluted EPS with a presentation of basic EPS and diluted EPS.  It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.

     Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period.  Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS under APB 15.

     Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997.  Earlier application is not
permitted (although pro forma EPS disclosure in the footnotes for periods
prior to required adoption is permitted).  After adoption, all prior-period
EPS data presented shall be restated to conform with Statement 128.  The
Company does not expect adoption of Statement 128 to have a significant
impact on the Company's financial statements.

<PAGE 13>
     In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income",
which is effective for fiscal years beginning after December 15, 1997.  This
statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full
set of general-purpose financial statements.  This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.

     In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997.  This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders.  It also establishes standards for related
disclosures about products and services, geographic areas, and major customers

     Legislation has been introduced in Congress that would eliminate the
federal thrift charter by requiring each federal thrift to convert to a
national bank or a state bank or thrift.  The pending legislation would allow
savings and loan holding companies, such as the Company, to continue to
engage in any activity they are currently allowed, provided they remain
"qualified bank holding companies."  A thrift institution which is a
subsidiary of a qualified bank holding company must continue to satisfy the
qualified thrift lender test and comply with certain investment limitations.
If a savings and loan holding company failed to meet these tests it would
become subject to certain restrictions applicable to bank holding companies. 
In addition, the Congress is also considering expanding the authority of
bank holding companies to engage in securities and insurance activities. 
Management cannot predict or determine the ultimate form of this legislation
or the impact such final legislation would have on the operations of the
Company or the Bank.

     On August 22, 1997, The Nasdaq Stock Market received approval from the
Securities and Exchange Commission to change its listing requirements.
Efective February 23, 1998, the Nasdaq Stock Market will require, among other
things, a minimum public float of 750,000 shares to maintain a listing on the
National Market system.  The Company currently does not meet this requirement
because public float does not include shares owned by insiders.  The Company,
however, currently does meet all the requirements to be listed on the Nasdaq
SmallCap Market.  The Company anticipates listing on the Nasdaq SmallCap
Market system on or before February 23, 1998, subject to meeting all the
Nasdaq SmallCap requirements at that time.  Stockholders who maintain margin
loan accounts with brokerage firms may be affected by this listing change.
The Company believes there will be no material effect on the operations of
the Company as a result of this change.    

     

PART II - OTHER INFORMATION

          Item 1. Legal Proceedings

          There are no material pending legal proceedings to which the
          Company or any of its subsidiaries is a party other than ordinary
          routine litigation incidental to their respective businesses.

          Item 6. Exhibits and Reports on Form 8-K

          (A)  Exhibits:
               EX-27 Financial Data Schedule

          (B)  Form 8-K dated July 15, 1997, Registrant issued press release
               dated July 15, 1997 regarding second quarter 1997 earnings, a
               regular quarterly dividend, and a stock repurchase program.
              
               
<PAGE 14>

                                SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                                              NORTH BANCSHARES,INC.
                                                  (Registrant)



Date November 4, 1997                          /S/ Joseph A. Graber     
                                                 Joseph A. Graber
                                                 President   
                                                                        


Date November 4, 1997                          /S/ Martin W. Trofimuk   
                                                 Martin W. Trofimuk
                                                 Vice President and
                                                 Treasurer


<TABLE> <S> <C>

<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Condition at September 30, 1997 (unaudited) and the
Consolidated Statement of Operations for the nine months ended September 30,
1996 (unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               SEP-30-1997
<CASH>                                             669
<INT-BEARING-DEPOSITS>                           2,664
<FED-FUNDS-SOLD>                                 5,100
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                     25,329
<INVESTMENTS-CARRYING>                          25,475
<INVESTMENTS-MARKET>                            25,329
<LOANS>                                         76,379
<ALLOWANCE>                                        208
<TOTAL-ASSETS>                                 122,081
<DEPOSITS>                                      73,125
<SHORT-TERM>                                    13,000
<LIABILITIES-OTHER>                              3,464
<LONG-TERM>                                     16,100
                               00
                                         00
<COMMON>                                            14
<OTHER-SE>                                      16,378
<TOTAL-LIABILITIES-AND-EQUITY>                 122,081
<INTEREST-LOAN>                                  4,433
<INTEREST-INVEST>                                1,949
<INTEREST-OTHER>                                   151
<INTEREST-TOTAL>                                 6,533
<INTEREST-DEPOSIT>                               2,370
<INTEREST-EXPENSE>                               1,315
<INTEREST-INCOME-NET>                            2,848
<LOAN-LOSSES>                                       00
<SECURITIES-GAINS>                                  53
<EXPENSE-OTHER>                                  2,340
<INCOME-PRETAX>                                    730
<INCOME-PRE-EXTRAORDINARY>                         730
<EXTRAORDINARY>                                     00
<CHANGES>                                           00
<NET-INCOME>                                       516
<EPS-PRIMARY>                                      .52
<EPS-DILUTED>                                      .52
<YIELD-ACTUAL>                                    4.01
<LOANS-NON>                                         00
<LOANS-PAST>                                        00
<LOANS-TROUBLED>                                    00
<LOANS-PROBLEM>                                     00 
<ALLOWANCE-OPEN>                                   208
<CHARGE-OFFS>                                       00
<RECOVERIES>                                        00
<ALLOWANCE-CLOSE>                                  208  
<ALLOWANCE-DOMESTIC>                               208
<ALLOWANCE-FOREIGN>                                 00
<ALLOWANCE-UNALLOCATED>                            208
        

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission