NORTH BANCSHARES INC
10QSB, 2000-08-11
SAVINGS INSTITUTION, FEDERALLY CHARTERED
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                     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 June 30, 2000


( )  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 July 31, 2000,  there were 1,194,487  outstanding  shares of the
Registrant's Common Stock.


      Transitional Small Business Disclosure Format (Check one): Yes ( )  No (X)

                                         1

<PAGE>





                                              NORTH BANCSHARES, INC.

                                                 Table of Contents




Part I - FINANCIAL INFORMATION (UNAUDITED)
         Item 1. Consolidated Financial Statements                         3
                 Notes to Consolidated Financial Statements                7

         Item 2. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                       9

         Item 4. Recent Regulatory Developments                           13


Part II - OTHER INFORMATION                                               14
         Item 1. Legal Proceedings                                        14
         Item 4. Submission of Matters to a Vote of Security Holders.     14
         Item 6. Exhibits and Reports on Form 8-K                         14


FORM 10-QSB SIGNATURE PAGE                                                15








                                       2

<PAGE>






Part I. Financial Information

Item 1. Consolidated Financial Statements

<TABLE>
<CAPTION>


                                                       NORTH BANCSHARES, INC.
                                           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                  (IN THOUSANDS, EXCEPT SHARE DATA)
                                                            (UNAUDITED)


ASSETS                                                                 JUNE 30, 2000  DEC 31, 1999
<S>                                                                        <C>           <C>
Cash and due from banks                                                    $   1,553     $   1,712
Interest-bearing deposits                                                      1,373         1,260
Federal funds sold                                                             2,163         2,439
Investment in dollar-denominated mutual funds                                  1,389           466
------------------------------------------------------------------------------------ -------------
   TOTAL CASH AND CASH EQUIVALENTS                                             6,478         5,877
Investment securities available for sale                                      16,854        17,050
Mortgage-backed securities available for sale                                 13,910        14,528
Stock in Federal Home Loan Bank of Chicago                                     1,805         2,205
Loans receivable, net of allowance for loan losses of $262 at
 June 30, 2000 and $231 at December 31, 1999                                  91,175        88,989
Accrued interest receivable                                                      951           941
Premises and equipment, net                                                      812         1,033
Other assets                                                                     179            66
------------------------------------------------------------------------------------ -------------
   TOTAL ASSETS                                                              132,164       130,689
------------------------------------------------------------------------------------ -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------ -------------
Deposit accounts                                                              81,131        76,506
Borrowed funds                                                                36,265        41,100
Advance payments by borrowers for taxes and insurance                          1,140         1,092
Accrued interest payable and other liabilities                                 1,672           738
------------------------------------------------------------------------------------ -------------
   TOTAL LIABILITIES                                                         120,208       119,436
------------------------------------------------------------------------------------ -------------

Preferred stock, $.01 par value. Authorized 500,000 shares; none
  outstanding                                                                      -             -
Common stock, $.01 par value. Authorized 3,500,000 shares; issued
  1,914,075 shares                                                                19            19
Additional paid in capital                                                    13,258        13,393
Retained earnings, substantially restricted                                   11,994        11,115
Treasury stock, at cost (715,588 shares at June 30, 2000
  and 682,868 shares at December 31, 1999)                                   (11,192)      (11,025)
Accumulated other comprehensive loss                                          (1,845)       (1,916)
Common stock acquired by Employee Stock Ownership Plan                          (278)         (333)
------------------------------------------------------------------------------------ -------------
   TOTAL STOCKHOLDERS' EQUITY                                                 11,956        11,253
------------------------------------------------------------------------------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $132,164      $130,689
------------------------------------------------------------------------------------ -------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.





                                                                 3

<PAGE>

<TABLE>
<CAPTION>

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

                                                                               THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                                    JUNE 30,                  JUNE 30,
                                                                               2000          1999          2000         1999

INTEREST INCOME:
<S>                                                                          <C>           <C>           <C>           <C>
  Loans receivable                                                            $1,690       $1,556        $3,347        $3,084
  Interest-bearing deposits and federal funds sold                                59           51            98           131
  Investment securities available for sale                                       314          304           616           556
  Mortgage-backed securities available for sale                                  226          242           456           472
  Investment in mutual funds                                                       5            3            11            16
  Dividends on FHLB stock                                                         36           31            77            60
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME                                                          2,330        2,187         4,605         4,319
-----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
  Deposit accounts                                                               877          804         1,717         1,601
  Borrowed funds                                                                 572          507         1,130           977
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                                         1,449        1,311         2,847         2,578
-----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES                             881          876         1,758         1,741
PROVISION FOR LOAN LOSSES                                                         27            8            31             8
-----------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                              854          868         1,727         1,733
-----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME:
  Gain (loss) on sale of investment securities available for sale               (90)           49          (90)            82
  Other than temporary decline in value of securities available for sale        (24)            -          (24)             -
  Gain on sale of real estate                                                  1,322            -         1,322             -
  Fees and service charges                                                        70           65           149           142
  Other                                                                            6            5            10             9
-----------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME                                                      1,284          119         1,367           233
-----------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE:
  Compensation and benefits                                                      429          395           850           795
  Occupancy expense                                                              111          107           241           219
  Professional fees                                                               66           49           115            92
  Data processing                                                                 55           52           104           103
  Advertising and promotion                                                       41           38            85            61
  Federal deposit insurance premium                                                4            2             8            11
  Other                                                                           93          100           182           170
-----------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSE                                                       799          743         1,585         1,451
-----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                                     1,339          244         1,509           515
INCOME TAX EXPENSE                                                               306           94           363           189
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                     1,033          150         1,146           326
-----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE:
  Basic                                                                          .88          .12           .97           .27
  Diluted                                                                        .87          .12           .96           .26
-----------------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OUTSTANDING:
  Basic                                                                    1,171,405    1,196,851     1,181,380     1,202,731
  Diluted                                                                  1,180,442    1,248,706     1,190,906     1,252,032
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.






                                                                 4

<PAGE>


<TABLE>
<CAPTION>

                                                     NORTH BANCSHARES, INC.
                                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                     (DOLLARS IN THOUSANDS)
                                             SIX MONTHS ENDED JUNE 30, 1999 AND 2000
                                                          (UNAUDITED)

                                                                                            Accumulated     Common
                                                          Additional                        other           stock
                                                  Common  paid in     Retained   Treasury   comprehensive   acquired
                                                  Stock   capital     earnings   stock      income (loss)   by ESOP     Total

<S>                                               <C>      <C>        <C>        <C>         <C>           <C>
Balance at December 31, 1998                      $19      13,437     11,127     (10,664)      (153)         (444)     13,322
Comprehensive loss:
 Net income                                         -           -        326           -          -             -         326
 Change in unrealized loss on securities
  available for sale, net                           -           -          -           -       (995)            -        (995)
                                                                                                                      -------
Comprehensive loss                                  -           -          -           -          -             -        (669)
Payment on ESOP loan                                -           -          -           -          -            55          55
Market adjustment for common ESOP shares            -          46          -           -          -             -          46
Purchase of treasury stock, 36,358 shares           -           -          -        (470)         -             -        (470)
Cash dividend ($.22 per share)                      -           -       (276)          -          -             -        (276)
Options exercised and reissuance of treasury
 stock, 9,500 shares                                -         (85)         -         157          -             -          72
-------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999                           19      13,398     11,177     (10,977)    (1,148)         (389)     12,080
===============================================================================================================================

Balance at December 31, 1999                       19      13,393     11,115     (11,025)    (1,916)         (333)     11,253
Comprehensive income:
 Net income                                         -           -      1,146           -          -             -       1,146
 Change in unrealized loss on securities
  available for sale, net                           -           -          -           -         71             -          71
                                                                                                                       ------
Comprehensive income                                -           -          -           -          -             -       1,217
Payment on ESOP loan                                -           -          -           -          -            55          55
Market adjustment for common ESOP shares            -          19          -           -          -             -          19
Purchase of treasury stock, 49,830 shares           -           -          -        (442)         -             -        (442)
Cash dividend ($.22 per share)                      -           -       (267)          -          -             -        (267)
Options exercised and reissuance of treasury
 stock, 17,110 shares                               -        (154)         -         275          -             -         121
-------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000                          $19      13,258      11,994    (11,192)     (1,845)         (278)     11,956
===============================================================================================================================
</TABLE>

See accompanying notes to unaudited consolidated financial statements.




                                                               5

<PAGE>

<TABLE>
<CAPTION>

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

                                                                         FOR THE SIX MONTHS ENDED JUNE 30,
                                                                                2000          1999
Cash flows from operating activities:
<S>                                                                          <C>             <C>
  Net Income                                                                 $ 1,146           326
  Adjustments to reconcile net income to net cash provided by
    operating activities:
     Depreciation and amortization                                                51            54
     Deferred loan costs, net of amortization                                     15             8
     Amortization of premiums and discounts, net                                   2           (53)
     ESOP expense                                                                 74           101
     Provision for loan losses                                                    31             8
     Gain on sale of real estate                                              (1,322)            -
     Loss (gain) on sale of investment securities available for sale             114           (82)
     Changes in assets and liabilities:
      Decrease (increase) in accrued interest receivable                          14           (81)
      Increase in other assets, net                                             (137)         (119)
      Increase in other liabilities                                              897           996
---------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                        885         1,158
---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Maturities of investment securities available for sale                           -         2,135
  Purchase of investment securities available for sale                        (1,991)       (6,192)
  Proceeds from sales of investment securities available for sale              2,191           255
  Purchase of mortgage-backed securities available for sale                        -        (3,680)
  Proceeds from sales of mortgage-backed securities available for sale             -         1,713
  Repayment of mortgage-backed securities available for sale                     606         1,006
  Loan originations                                                           (7,382)      (13,745)
  Loan repayments                                                              5,150        10,594
  Procees from sale of real estate                                             1,500             -
  Sale (purchase) of Federal Home Loan Bank of Chicago stock                     477          (150)
  Federal Home Loan Bank of Chicago stock dividend                               (77)            -
  Purchase of premises and equipment                                              (8)          (62)
---------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                              466        (8,126)
---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Increase (decrease) in deposit accounts                                      4,625          (691)
  Proceeds  from borrowed funds                                               25,745         5,500
  Repayments of borrowed funds                                               (30,580)        2,000
  Increase in advance payments by borrowers for taxes and insurance               48           112
  Payment of cash dividend                                                      (267)         (276)
  Proceeds from stock options exercised                                          121            72
  Purchase of treasury stock                                                    (442)         (470)
---------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities                             (750)        2,247
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                             601        (4,721)
Cash and cash equivalents at beginning of period                               5,877         9,746
---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                    $6,478         5,025
---------------------------------------------------------------------------------------------------
Supplemental  disclosures  of cash flow  information:
  Cash payments during the period for:
  Interest                                                                    $2,233         1,971
  Taxes                                                                          125            55
Supplemental disclosures of noncash activities:
  Transfer of mortgage-backed securities from held to maturity to
    available for sale                                                             -         4,478
---------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                                               6

<PAGE>




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  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 June 30, 2000
and results of  operations  for the three and six month  periods  ended June 30,
2000 and June 30, 1999, but are not necessarily  indicative of the results which
may be expected for the entire year.

(2)  Principles of Consolidation

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

(3)  Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings per share for the periods indicated.
<TABLE>
<CAPTION>

                                                         For the three months         For the six months
                                                            ended June 30,               ended June 30,

(In thousands, except share data)                          2000           1999          2000          1999
----------------------------------------------------------------------------------------------------------
Numerator:
<S>                                                   <C>            <C>          <C>           <C>
 Net Income                                              $1,033            150         1,146           326
Denominator:
 Basic earnings per share-weighted average
  shares outstanding                                  1,171,405      1,196,851     1,181,380     1,204,731
 Effect of dilutive stock options outstanding             9,037         51,855         9,526        49,301
 Diluted earnings per share-adjusted weighted
  average shares outstanding                          1,180,442      1,248,706     1,190,906     1,254,032
Basic earnings per share                                    .88            .12           .97           .27
Diluted earnings per share                                  .87            .12           .96           .26
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>




                                                               7

<PAGE>



4) Comprehensive income

         The  following  table  sets  forth the  required  disclosures  of other
comprehensive  income  (loss)  as  presented  on the  statement  of  changes  in
stockholders'  equity and the related tax effects allocated to each component of
other comprehensive income for the periods indicated.
<TABLE>
<CAPTION>

                                                                   Before         Tax             Net
                                                                   Tax            (Expense)       of Tax
(In thousands)                                                     Amount         or Benefit      Amount
--------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>            <C>
Three months ended June 30, 2000
Change in unrealized loss on securities available for sale
 arising during the period, net                                      309           (106)           203
Less: reclassification adjustment for gain on securities
 available for sale included in net income                          (114)            39            (75)
--------------------------------------------------------------------------------------------------------
Change in unrealized loss on securities available
for sale, net                                                      $ 195            (67)           128
--------------------------------------------------------------------------------------------------------
Three months ended June 30, 1999
Change in unrealized loss on securities available for
sale arising during the period, net                                $(383)           130           (253)
Less: reclassification adjustment for gain on
  securities available for sale included in net income                33            (11)            22
--------------------------------------------------------------------------------------------------------
Change in unrealized gain on securities available
for sale, net                                                     $ (350)           119           (231)
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------

Six months ended June 30, 2000
Unrealized holding loss on securities available for
 sale arising during the period                                     $221            (75)           146
Less: reclassification adjustment for gain on
 securities available for sale included in net income               (114)            39            (75)
-------------------------------------------------------------------------------------------------------
Change in net unrealized loss on securities available
 for sale                                                          $ 107            (36)            71
-------------------------------------------------------------------------------------------------------
Six months ended June 30, 1999
Unrealized holding loss on securities available for
 sale arising during the period                                 $ (1,589)           540         (1,049)
Less: reclassification adjustment for gain on
 securities available for sale included in net income                 82            (28)            54
-------------------------------------------------------------------------------------------------------
Change in net unrealized loss on securities available
 for sale                                                      $  (1,507)           512           (995)
-------------------------------------------------------------------------------------------------------
</TABLE>


(5) Stock Repurchase Program

         On January  27,  2000,  the  Company  announced  the  beginning  of the
thirteenth stock repurchase  program.  The repurchase  program amounts to 50,000
shares or  approximately  4.0% of the  outstanding  shares of the  Company.  The
Company intends to repurchase shares in open market transactions or in privately
negotiated  transactions over a one year period. At June 30, 2000, 39,289 shares
had been  repurchased  under the new  program  at an  average  cost of $8.91 per
share.  Management  continues to believe that stock repurchase  programs provide
enhanced value to both the Company and its stockholders.

(6) Dividend Declaration

         On April 14, 2000,  the Company  announced  that the Board of Directors
declared a quarterly  dividend of $.11 per share, which was paid on May 15, 2000
to  stockholders  of  record  on May 1,  2000.  On July 14,  2000,  the  Company
announced that the Board of Directors  declared a quarterly dividend of $.11 per
share,  to be paid on August  15,  2000 to  stockholders  of record on August 1,
2000.





                                                               8

<PAGE>



(7) Commitments and Contingencies

         At June 30, 2000,  the Bank had  outstanding  commitments  to originate
loans in the  amount of $4.0  million  at an  average  rate of 9.50% and  unused
equity lines of credit totaling $1.8 million.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

General

         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 or  borrows  funds  and uses  such  funds to
originate or acquire one-to-four family residential mortgages,  loans secured by
small  apartment  buildings  or mixed  use  properties,  equity  lines of credit
secured by real estate and  commercial  real  estate  loans.  The  Company  also
invests in U.S. Government and agency securities, federal agency mortgage-backed
securities,  investment  grade  securities,  common  stocks  of other  financial
institutions 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,  loan loss  provisions and to a lesser degree on non-interest
income less non-  interest  expense and income taxes.  The  Company's  operating
expenses consist  principally of employee  compensation and benefits,  occupancy
expenses,  and other non-interest  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.

Forward-Looking Statements

         When used in this Form 10-QSB, and in other filings by the Company with
the SEC,  in the  Company's  press  releases  or  other  public  or  shareholder
communications,  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 results 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.



                                   9

<PAGE>



         A contingency  plan,  which  involves  processing  transactions  at the
third-party data processors back-up recovery site, disaster recovery programs in
the event of electrical failures, manual bookkeeping systems and additional cash
requirements  was approved by the board of directors  and will be  maintained by
management during the year 2000 in the event that unanticipated Year 2000 issues
arise.

Liquidity and Capital Resources

         The Bank's primary  sources of funds are deposits,  borrowings from the
FHLB of  Chicago,  amortization  and  prepayment  of loans  and  mortgage-backed
securities,  sales and maturities of investment and mortgage- backed  securities
and occasionally  the use of reverse  repurchase  agreements.  The Bank can also
borrow from its correspondent  banks. The Bank uses its liquid resources to fund
loan commitments,  to meet operating expenses, and to invest and to fund deposit
withdrawals.  Management  believes  that loan  repayments  and the Bank's  other
sources of funds will be adequate to meet the liquidity needs of the Bank.

         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 4% of the sum of its average daily balance of net withdrawable
accounts  and  borrowings  payable in one year or less.  At June 30,  2000,  the
Bank's  liquidity  ratio was 5.8%  compared with 4.6% for the quarter ended June
30, 1999.

         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 June 30, 2000, the Bank exceeded all of its regulatory
capital  requirements.  At such date, the Bank's tangible capital,  core capital
and  risk-based  capital of $12.9  million,  $12.9  million  and $13.2  million,
respectively,  exceeded the applicable minimum  requirements by $10.9 million or
8.2%, $8.9 million or 6.7%, and $8.5 million or 14.4%, respectively.

Changes In Financial Condition

         Total assets  amounted to $132.2 million at June 30, 2000, an increase
of $1.5  million  from $130.7  million at December  31,  1999.  The increase was
primarily  attributable  to a $2.2  million  increase  in net  loans  receivable
partially offset by a $600,000 decrease in mortgage-backed  securities available
for sale.

         Loans  receivable  amounted  to  $91.4  million  at June 30,  2000,  an
increase of $2.2  million from $89.2  million at December 31, 1999.  The Company
originated  $7.4 million in residential  mortgage,  consumer and commercial real
estate  loans  during the six months  ended June 30,  2000  compared  with $13.7
million  during the six months ended June 30, 1999.  Repayments  of loans during
the six months ended June 30, 2000 amounted to $5.1 million  compared with $10.6
million during the six months ended June 30, 1999. The decrease in  originations
and repayments was primarily due to higher market rates of interest.

         Total deposits amounted to $81.1 million at June 30, 2000 compared with
$76.5  million at December 31, 1999.  The $4.6  million  increase was  primarily
attributable  to an  increase  in  certificates  of  deposit.  The  increase  in
certificates was primarily due to the use of brokered certificates of deposit as
a funding source for short term  construction  and commercial  real estate loans
and to reduce borrowed funds.  Non-interest  bearing checking balances increased
$1.0  million to $3.3 million at June 30, 2000 from $2.3 million at December 31,
1999.

         Borrowed funds decreased $4.8 million to $36.3 million at June 30, 2000
from $41.1  million at December 31,  1999.  The  decrease  was  attributable  to
repayments  of FHLB  advances or other  borrowings  which matured or were called
prior to maturity during the six months ended June 30, 2000.

         Accrued interest payable and other liabilities amounted to $1.7 million
at June 30, 2000,  an increase of $934,000  from  $738,000 at December 31, 1999.
The increase was primarily attributable  to accrued  interest on certificates of
deposit that pay interest once a year in December.

         Stockholders'  equity was $12.0  million at June 30, 2000 compared with
$11.3 million at December 31, 1999. The increase was primarily attributable to a
$1.1 million increase in retained earnings, primarily due to net income for the
six month period, which was partially offset by $267,000 in dividend payments.
In addition, there was a $167,000 increase in treasury stock.

                                    10
<PAGE>



Average Balance Sheet

         The  following  table  presents  certain  information  relating  to the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs are
derived  by  dividing  income or  expense  by the  average  balance of assets or
liabilities,  respectively  for the periods shown.  Average balances are derived
from  average  monthly  balances.  The yields and costs  include  fees which are
considered adjustments to yield.
<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,                      Six Months Ended June 30,
                                             2000                          1999                           2000
                                --------------------------------------------------------------------------------------------
                                            Interest  Average              Interest  Average            Interest   Average
                                  Average    Earned\   Yield\   Average     Earned\   Yield\  Average    Earned\    Yield\
                                  Balance     Paid    Cost(3)   Balance      Paid      Cost   Balance     Paid       Cost
                                --------------------------------------------------------------------------------------------
                                                                   (Dollars in thousands)
                                --------------------------------------------------------------------------------------------


Interest-earnings assets:
<S>                                <C>        <C>       <C>     <C>        <C>        <C>      <C>      <C>        <C>
  Loans receivable                 $90,543    $1,690    7.47%   $84,622    $1,556     7.36%    $89,890  $3,347     7.45%
  Investment securities             19,051       319     6.70    18,308       333      7.28     18,765     627     6.68
  Mortgage-backed securities        14,891       226     6.07    15,912       242      6.08     15,039     456     6.06
  Federal funds sold                 2,357        43     7.30     2,651        36      5.43      2,248      68     6.05
  Other                              3,581        52     5.81     3,786        20      2.11      3,640     107     5.88
-----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets      130,423     2,330     7.15   125,279     2,187      6.98    129,582   4,605     7.11
Non-interest-earning assets          2,202                        3,075                          2,124
-----------------------------------------------------------------------------------------------------------------------
Total Assets                      $132,625                     $128,354                       $131,706
-----------------------------------------------------------------------------------------------------------------------

Interest-bearing liabilities:
  MMDA & NOW accounts               23,821       241     4.05    21,490       202      3.76     23,880     475     3.98
  Passbook accounts                 12,884        88     2.73    13,609        93      2.73     12,912     177     2.74
  Certificate accounts              40,213       548     5.45    38,167       509      5.33     39,043   1,065     5.46
  Borrowed funds                    39,192       572     5.84    37,225       507      5.38     39,724   1,130     5.69
-----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 116,110     1,449     4.99   110,491     1,311      4.72    115,559   2,847     4.93
Non-interest bearing deposits        2,825                        1,962                          2,664
Other liabilities                    2,255                        3,247                          2,131
------------------------------------------------------------------------------------------------------------------------
Total liabilities                  121,190                      115,700                        120,354
Stockholders' equity                11,435                       12,654                         11,352
------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
 equity                           $132,625                     $128,354                       $131,706
------------------------------------------------------------------------------------------------------------------------

Net interest income/interest rate
 spread (1)                                      881     2.16%                876      2.26%             1,758     2.18%
------------------------------------------------------------------------------------------------------------------------

Net earning assets/net interest
margin (2)                         $14,313               2.70%  $14,288                2.80%   $14,023             2.71%
------------------------------------------------------------------------------------------------------------------------
Percentage of interest-earning
 assets to interest-bearing
liabilities                                  112.33%                       112.87%                      112.13%
------------------------------------------------------------------------------------------------------------------------

1. Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of
    interest-bearing liabilities.
2. Net interest margin represents net interest income divided by average interest-earning assets.
3. Average yield and costs for the three and six month periods presented are annualized for presentation purposes.

</TABLE>




                                                             11

<PAGE>



Comparison Of Operating Results For The Three Months Ended June 30, 2000 And
June 30, 1999

         General.  Net income was $1.0  million for the three  months ended June
30, 2000, an increase of $883,000, from $150,000 for the three months ended June
30, 1999. Diluted earnings per share amounted to $.87 for the three months ended
June 30,  2000,  an increase of $.75,  from $.12 per share for the three  months
ended June 30,  1999. The increase in net income and dilurted earnings per share
was primarily related to a $1.3 million pre tax gain on the sale of real estate.
The gain was partially offset by a $212,000 increase in income tax expense and a
$139,000  decrease in gain on the sale of  investment  securities  available for
sale.

         Interest Income.  Interest income increased by $143,000 and amounted to
$2.3 million for the three months ended June 30, 2000 compared with $2.2 million
for the  three  months  ended  June  30,  1999.  There  was an  increase  in the
annualized  yield on  average  interest-earning  assets  to 7.15%  for the three
months ended June 30, 2000 from 6.98% for the three months ended June 30, 1999
due primarily to an increase in higher yielding multi-family and commercial real
estate lending. In addition there was an increase in average interest-earning
assets to $130.4 million for the three months ended June 30, 2000 compared with
$125.3 million for the three months ended June 30, 1999 due primarily to
increased mortgage lending during the period.

         Interest Expense.  Interest expense increased  $138,000 and amounted to
$1.4  million  for the three  months  ended June 30,  2000,  compared  with $1.3
million for the three months ended June 30, 1999. The annualized average cost of
interest-bearing  liabilities increased to 4.99% for the three months ended June
30, 2000 from 4.72% for the three months  ended June 30, 1999.  The increase was
due  primarily  to an  increase  in the  average  cost of money  market  deposit
accounts  and  borrowed  funds.  In  addition,  there was an increase in average
interest-bearing  liabilities  to $116.1 million for the three months ended June
30, 2000 from $110.5 million for the three months ended June 30, 1999.

         Provision For Loan Losses.  The Company provided an additional  $27,000
to its  allowance  for loan  losses for the three  months  ended  June 30,  2000
compared with $8,000 for the three months ended June 30, 1999. The allowance for
loan losses was  $262,000 at June 30, 2000 and  $222,000 at June 30,  1999.  The
allowance for loan losses amounted to .29% of loans  receivable at June 30, 2000
and  .26%  at June  30,  1999.  The  increase  in the  allowance  was  primarily
attributable  to an  increase  in  commercial  real  estate  lending and general
economic conditions.  There were no loans delinquent 90 days or more at June 30,
2000.  Future  additions to the Company's  allowance are dependent  upon various
factors such as the performance and composition 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 amounted to $1.3 million for
the three months ended June 30, 2000,  an increase of $1.2 million from $119,000
for  the  three  months  ended  June  30,  1999.   The  increase  was  primarily
attributable to a $1.3 million gain on the sale of real estate due to the sale
of the Bank's employee parking facility, partially offset by a 139,000 change
from a gain to a loss on the sale of investment securities available for sale
and $24,000 increase in other than temporary decline in value of securities
available for sale.  The decrease in gain on the sale of investment securities
was primarily attributable to the sale of equity securities held by the Company.
The capital loss generated by the sale was used to partially offset the capital
gain generated by the sale of the parking facility for income tax purposes.

         Non-Interest  Expense.  Non-interest  expense  increased  by $56,000 to
$799,000 for the three months ended June 30, 2000,  compared  with  $743,000 for
the  three  months  ended  June  30,  1999.  There  was a  $34,000  increase  in
compensation and benefits expense related to increased salary and benefit costs.
In  addition,  there was a $17,000  increase  in  professional  fees  primarily
related to the sale of the Bank's parking facility.

         Income Tax  Expense.  Income tax expense  amounted to $306,000  for the
three  months  ended June 30, 2000  compared  with  $94,000 for the three months
ended June 30, 1999.  The increase  was  primarily  due to an increase in income
before taxes.  The  effective  tax rate  amounted to 22.9% for the three months
ended June 30, 2000 compared with 38.5% for the three months ended June 30, 1999
The effective tax rate for the quarter ended June 30, 2000 was lower due
primarily to the utilization of capital loss carryforwards which had been
previously reserved for and would have expired at the end of this fiscal year.


Comparison Of Operating Results For The Six Months Ended June 30, 2000 And
June 30, 1999


                                                             12

<PAGE>

         General.  Net income  amounted to $1.1 million for the six months ended
June 30, 2000,  an increase of $820,000  from  $326,000 for the six months ended
June 30, 1999.  Diluted  earnings per share  amounted to $.96 for the six months
ended June 30, 2000,  an increase of $.70 from $.26 per share for the six months
ended June 30, 1999. The increase was primarily  attributable  to a $1.1 million
increase in non- interest income primarily related to a $1.3 million gain on the
sale of real estate. This increase was partially offset by a $174,000 increase
in income tax expense and a $134,000 increase in non-interest expense.

         Interest  Income.  Interest income  increased  $286,000 and amounted to
$4.6 million for the six months ended June 30, 2000  compared  with $4.3 million
for the six months ended June 30, 1999. The increase was primarily  attributable
to an increase in average  interest earning assets to $129.6 million for the six
months ended June 30, 2000 from $124.0 million for the six months ended June 30,
1999. The increase was primarily attributable to a reallocation of liquid assets
into higher yielding intermediate and longer term assets. In addition, there was
an increase in the annualized yield on average  interest-earning assets to 7.11%
for the six months  ended June 30, 2000 from 6.97% for the six months ended June
30, 1999. The increase in the annualized yield was primarily  attributable to an
improvement in the average yield on loans receivable to 7.45% for the six months
ended June 30, 2000 from 7.39% for the six months ended June 30, 1999 due
primarily to a change inthe portfolio mix.

         Interest Expense.  Interest expense increased  $269,000 and amounted to
$2.8 million for the six months ended June 30, 2000  compared  with $2.6 million
for the six months ended June 30, 1999. The increase was primarily  attributable
to an increase in the average balance of interest-bearing  liabilities to $115.6
million for the six months  ended June 30, 2000 from $109.9  million for the six
months  ended June 30, 1999.  In addition,  there was an increase in the average
cost of interest-bearing  liabilities to 4.93% for the six months ended June 30,
2000 from 4.69% for the six months  ended June 30, 1999 due to higher  borrowing
costs and an increase in the cost of  certificates  of deposit and money  market
deposit accounts.

         Provision  For Loan Losses.  The Company added $31,000 to its allowance
for loan losses for the six months ended June 30, 2000  compared with $8,000 for
the six months ended June 30, 1999.  The  allowance for loan losses was $262,000
at June 30, 2000 and amounted to .29% of loans  receivable.  The  allowance  for
loan losses was $222,000 and  amounted to .26% of loans  receivable  at June 30,
1999. The increase in the allowance was primarily attributable to an increase in
commercial real estate lending and general  economic  conditions.  There were no
loans  delinquent  90 days or more at June 30,  2000.  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 various
factors such as the performance and composition 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 $1.1 million and
amounted to $1.4  million for the six months ended June 30, 2000  compared  with
$233,000  for the six months ended June 30,  1999.  The  increase was  primarily
attributable to a $1.3 million gain on the sale of real estate related to the
sale of an employee parking facility, partially offset by a $172,000 change from
a gain to a loss on the sale of securities available for sale and a $24,000
increase in other than temporary decline  in value of  securities available for
sale. The decrease in gain on the sale of investment securities was primarily
attributable to the sale of equity securities held by the Company.  The capital
loss generated by the sale was used to partially offset the capital gain
generated by the sale of the parking facility for income tax purposes.

         Non-Interest  Expense.  Non-interest  expense  increased  $134,000  and
amounted to $1.5  million for the six months ended June 30, 2000  compared  with
$1.4 million for the six months ended June 30, 1999.  The increase was primarily
attributable to a $55,000  increase in compensation and benefits expense related
to increased  salaries and benefits  expense.  In addition,  there was a $24,000
increase  in  advertising  and  promotion  expense  related to  deposit  account
promotions and a $22,000 increase in professional  fees primarily related to the
sale of the Bank's parking facility.

         Income Tax Expense.  Income tax expense increased $174,000 and amounted
to $363,000 for the six months ended June 30, 2000  compared  with  $189,000 for
the six months ended June 30, 1999. The increase was primarily  attributable  to
an  increase in taxable  income.  The  effective  tax rate was 24.1% for the six
months ended June 30, 2000 compared with 36.7% for the six months ended June 30,
1999.  The effective tax rate for the waurter ended June 30, 2000 was lower due
primarily to the utilization of capital loss carryforwards which had been
previously reserved for and would have expired at the end of this fiscal year.


                                                             13

<PAGE>



Item 4. Recent Regulatory Developments

         On November 12, 1999,  the  Gramm-Leach  Bliley Act ("the  "Act"),  was
signed into law. The Act will allow bank holding  companies to engage in a wider
range of  nonbanking  activities,  including  greater  authority  to  engage  in
securities and insurance activities.  Under the Act, a bank holding company that
elects to become a financial holding company may engage in any activity that the
Federal Reserve System  determines by regulation or order is financial in nature
and does not pose a  substantial  risk to the safety and soundness of depository
institution or the financial system generally.

         The Act limits the  nonbanking  activities of unitary  savings and loan
holding companies by generally  prohibiting any savings and loan holding company
from engaging in any activity other than activities that are currently permitted
for multiple savings and loan holding companies or are permissible for financial
holding  companies.  The Act prohibits any company from  acquiring  control of a
savings  association  or savings and loan holding  company  unless the acquiring
company engages solely in permissible  activities.  The Act creates an exemption
from the general  prohibitions for unitary savings and loan holding companies in
existence  or formed  pursuant to an  application  pending  before the Office of
Thrift Supervision, on or before May 4, 1999, which includes the Company.

         Various bank  regulatory  agencies  have begun issuing  regulations  as
mandated by the Act. In addition,  all federal  bank  regulatory  agencies  have
jointly issued a proposed  regulation that would implement the privacy provision
of the Act.  At this time,  it is not  possible to predict the impact of the Act
and its implementing regulations may have on the Company.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 4. Submission of Matters to a Vote of Security Holders.

         On April 26, 2000, the annual meeting of stockholders  was held. At the
meeting, James L. Ferstel and Gregory W. Rose were elected to serve as directors
with terms  expiring in 2003.  Continuing on as directors were Mary Ann Hass and
Joseph A. Graber  whose  terms will expire in 2001 and Elmer L. Hass,  Robert H.
Rusher  and Frank J.  Donati,  whose  terms  will  expire in the year  2002.  In
addition, the stockholders ratified the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.

         The voting on each item presented at the annual meeting was as follows:

         Election of Directors                       For              Withheld
         James L. Ferstel                            926,300          201,070
         Gregory W. Rose                             934,052          193,318

         Ratification of the
         appointment of KPMG LLP as
         the Company's auditors for
         the fiscal year ending                                      Broker
         December 31, 2000          For        Against    Abstain    Non-votes
                                    1,109,347   10,448      7,575    None

 Item 6. Exhibits and Reports on Form 8-K

 (A)     Exhibits:
         EX-27 Financial Data Schedule

 (B)     1. Form 8-K dated April 14, 2000, Registrant issued a press release
            dated April 14, 2000  regarding  first  quarter 2000 earnings and a
            regular quarterly dividend.

                                                             15

<PAGE>








                                  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   August 11, 2000                    /S/ Joseph A. Graber
                                          ----------------------------
                                          Joseph A. Graber
                                          President and Chief Executive Officer




Date   August 11, 2000                    /S/ Martin W. Trofimuk
                                          ----------------------------
                                          Martin W. Trofimuk
                                          Vice President and Treasurer








                                                             16

<PAGE>



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