UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending December 31, 1997
-------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-25814
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N S & L Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Missouri 43-1709446
- -------------------------------------- --------------------
(State or other jurisdiction of I.R.S. (I.R.S. Employer
Employer Incorporation or organization) Identification No.)
P.O. Box 369, Neosho, MO 64850
- -------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(417) 451-0429
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(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 FEBRUARY 11, 1998, THERE WERE 685,858 SHARES OF THE REGISTRANT'S COMMON
STOCK, $.01 PAR VALUE PER SHARE, OUTSTANDING.
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N S & L BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
DECEMBER 31, 1997
INDEX PAGE
- ----- ----
PART I-FINANCIAL INFORMATION
- ----------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited) 1-2
CONSOLIDATED STATEMENTS OF INCOME (unaudited) 3-4
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 7-9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-13
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES
HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
------------------------------
(Unaudited)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(Dollars in thousands)
ASSETS
------
Cash and cash equivalents, including
interest-bearing accounts of $5,239 at $ 5,830 $ 5,521
December 31 and $4,844 at September 30
Certificates of deposit 773 377
Investment securities available-for-sale,
at fair value 282 267
Investment securities held-to-maturity
(estimated market value of $9,622 at
December 31 and $13,460 at September 30) 9,520 13,473
Mortgage-backed securities held-to-maturity
(estimated market value of $4,254 at
December 31 and $4,608 at September 30.) 4,167 4,473
Loans receivable, net (reserves for loan
losses of $49 at December 31 and $44
at September 30) 35,488 33,879
Accrued interest receivable 392 454
Property and equipment, less accumulated
depreciation 1,160 1,148
Intangible assets 83 84
Other assets 128 141
-------- ---------
Total assets $ 57,823 $ 59,817
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Customer deposits $ 44,575 $ 43,892
Advances from FHLB 1,000 3,000
Advances from borrowers for taxes
and insurance 63 317
Income taxes payable - current 81 35
Deferred income taxes 401 413
Other liabilities 291 335
-------- ---------
Total liabilities 46,411 47,992
-------- ---------
Commitments and contingencies -- --
Preferred stock, $.01 par value;
2,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value;
8,000,000 shares authorized,
886,314 issued and 685,858
outstanding at December 31 and
711,666 at September 30, 1997 9 9
Paid-in capital 8,476 8,461
See accompanying notes to Consolidated Financial Statements.
1
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
------------------------------
(Unaudited)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS'
- ----------------------------
EQUITY (Continued)
------------------
Retained earnings - substantially
restricted 6,502 6,494
Treasury Stock - at cost; 200,456
shares at December 31 and
174,648 at September 30, 1997 (2,895) (2,414)
Unearned compensation (744) (780)
Unrealized gain on investment
securities available-for-sale,
net of applicable deferred income taxes 64 55
-------- ---------
Total stockholders' equity 11,412 11,825
-------- ---------
Total liabilities and stockholders'
equity $ 57,823 $ 59,817
======== =========
See accompanying notes to Consolidated Financial Statements.
2
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
------------------------------
(Unaudited)
QUARTER ENDED DECEMBER 31,
1997 1996
------------- ------------
(Dollars in thousands)
Interest Income:
Loans receivable $ 643 $ 571
Investment securities 208 217
Mortgage-backed and
related securities 82 97
Other interest-earning assets 70 78
---------- ---------
Total interest income 1,003 963
---------- ---------
Interest Expense:
Customer deposits 496 489
Borrowed funds 24 25
---------- ---------
Total interest expense 520 514
---------- ---------
Net interest income 483 449
Provision for loan losses 5 1
---------- ---------
Net interest income after
provision for loan losses 478 448
---------- ---------
Noninterest Income:
Gain on sale of investments -- 24
Banking service charges
and fees 39 41
Loan late charges 2 2
Mortgage banking fees 46 --
Other -- 4
---------- ---------
Total noninterest income 87 71
---------- ---------
Noninterest Expense:
Compensation and
employee benefits 221 177
Occupancy and equipment 43 35
Deposit insurance premium 7 23
Data processing 24 23
Printing, postage, stationery
and supplies 20 16
Professional fees 19 16
Other 79 47
---------- ---------
Total noninterest expense 413 337
---------- ---------
Income before taxes 152 182
---------- ---------
Income Taxes 58 58
---------- ---------
See accompanying notes to Consolidated Financial Statements.
3
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
------------------------------
(Unaudited)
QUARTER ENDED DECEMBER 31,
1997 1996
------------- ------------
(Dollars in thousands)
Net income $ 94 $ 124
========== =========
Basic earnings per share $ .14 $ .18
========== =========
Diluted earnings per share $ .14 $ .18
========== =========
Dividends per share $ .125 $ .125
========== =========
See accompanying notes to Consolidated Financial Statements.
4
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
1997 1996
------------- ------------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 94 $ 124
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 21 21
Premiums and discounts on mortgage-
backed securities and investment
securities (37) (26)
Loss on loans, net of recoveries 5 1
Release of ESOP shares 32 24
Vesting of MRDP shares 19 20
Gain on call of investments (15) --
Gain on sale of investments -- (24)
Net change in operating accounts:
Accrued interest receivable 62 (39)
Other assets 13 10
Other liabilities (44) (308)
Income taxes payable - deferred (14) 25
Income taxes payable - current 46 25
Net cash from (used in) operating ---------- ---------
activities 182 (147)
---------- ---------
Cash flows from investing activities:
Purchase of investment securities held-
to-maturity -- (1,994)
Proceeds from maturity of investment
securities held-to-maturity 4,000 200
Proceeds from maturity of investment
securities available-for-sale -- 500
Proceeds from sale of investment
securities available-for-sale -- 214
Net change in certificates of deposit (396) 209
Net change in loans receivable (1,614) (552)
Proceeds from principal payments and
maturities of mortgage-backed
securities held-to-maturity 312 236
Purchase of mortgage-backed securities
held-to-maturity -- (315)
Purchases of property and equipment (34) (16)
Net cash from (used in) investing ---------- ---------
activities $ 2,268 $ (1,518)
---------- ---------
See accompanying notes to Consolidated Financial Statements.
5
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N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
------------------------------
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
1997 1996
------------- ------------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings
accounts, and certificates of deposit $ 683 $ (6,052)
Net decrease in mortgage escrow funds (254) (196)
Cash advances from FHLB -- 3,000
Repayment of cash advances from FHLB (2,000) --
Purchase of treasury stock (481) --
Cash dividends paid (89) (95)
---------- ---------
Net cash used in financing activities (2,141) (3,343)
---------- ---------
Net increase (decrease) in cash and
cash equivalents 309 (5,008)
Cash and cash equivalents -
beginning of period 5,521 8,853
Cash and cash equivalents - ---------- ---------
end of period $ 5,830 $ 3,845
========== =========
See accompanying notes to Consolidated Financial Statements.
8
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N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - Basis of Presentation
The consolidated interim financial statements as of December 31, 1997 included
in this report have been prepared by the Registrant without audit. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation are reflected in the December 31,
1997 interim financial statements. The results of operations for the periods
ended December 31, 1997 and 1996 are not necessarily indicative of the
operating results for the full year. The September 30, 1997 Consolidated
Statement of Financial Condition presented with the interim financial
statements was audited and received an unqualified opinion.
NOTE B - Earnings per Share
The following information shows the amounts used in computing earnings per
share and the effect on income and the weighted average number of shares of
dilutive potential common stock.
FOR THE QUARTER ENDED DECEMBER 31, 1997
---------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS:
Income available to Common Stockholders $94,000 653,304 $.14
====
Effect of dilutive securities:
Stock option -- 18,860
------- -------
Diluted EPS:
Income available to common stockholders
plus stock options $94,000 672,164 $.14
======= ======= ====
FOR THE QUARTER ENDED DECEMBER 31, 1997
---------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS:
Income available to Common Stockholders $124,000 700,141 $.18
====
Effect of dilutive securities:
Stock option -- 2,078
-------- -------
Diluted EPS:
Income available to common stockholders
plus stock options $124,000 702,219 $.18
======== ======= ====
7
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N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE C - Employee Stock Ownership Plan
The Association (Neosho Savings & Loan Association, F.A.) established an ESOP
for the exclusive benefit of participating employees (all salaried employees
who have completed at least 1000 hours of service in a twelve-month period and
have attained the age of 21). The ESOP borrowed funds from the Company in an
amount sufficient to purchase 68,516 shares (8% of the Common Stock issued in
the Conversion). The loan is secured by the shares purchased and will be
repaid by the ESOP with funds from contributions made by the Association,
dividends received by the ESOP and any other earnings on ESOP assets. The
Association presently expects to contribute approximately $106,762 including
interest annually to the ESOP. Contributions will be applied to repay interest
on the loan first, then the remainder will be applied to principal. The loan
is expected to be repaid in approximately eight years.
Shares purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is repaid. Contributions to the ESOP
and shares released from the suspense account are allocated among participants
in proportion to their compensation relative to total compensation of all
active participants. Benefits generally become 25% vested after each year of
credited service beyond one year. Vesting is accelerated upon retirement,
death or disability of the participant. Forfeitures are returned to the
Association or reallocated to other participants to reduce future funding
costs. Benefits may be payable upon retirement, death, disability or
separation from service. Since the Association's annual contributions are
discretionary, benefits payable under the ESOP cannot be estimated.
The Company accounts for its ESOP in accordance with Statement of Position
93-6, Employers Accounting for Employee Stock Ownership Plans. Accordingly,
the debt of the ESOP is eliminated in consolidation and the shares pledged as
collateral are reported as a part of unearned ESOP shares in the consolidated
balance sheets. Contributions to the ESOP shall be sufficient to pay principal
and interest currently due under the loan agreement. As shares are committed
to be released from collateral, the Company reports compensation expense equal
to the average market price of the shares for the respective period, and the
shares become outstanding for earnings per share computations. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings:
dividends on unallocated ESOP shares are recorded as a reduction of debt and
accrued interest. ESOP compensation expense was $32,092 and $23,724 for the
three months ended December 31, 1997 and 1996 respectively.
A summary of ESOP shares at December 31, 1997 is as follows:
Shares allocated 15,852
Shares committed for release 1,713
Unreleased shares 50,951
------
Total 68,516
======
Fair value of unreleased shares $961,700
8
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N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE D - Management Recognition and Development Plan and Stock Option Plan
- --------------------------------------------------------------------------
The 1995 Management Recognition and Development Plan ("MRDP") was adopted on
January 17, 1996. The MRDP is administered by the Board of Directors of the
Company. Collectively, the Board issued 34,258 shares of the Company's common
stock, of which currently there are 28,865 shares awarded to employees at a
cost of $383,370. The MRDP shares are vesting and being expensed over a
five-year period which began on January 17, 1996. The value of the common
stock contributed to the MRDP is amortized to compensation expense as the
shares vest. MRDP expense was $18,519 and $20,387 for the three months ended
December 31, 1997 and 1996 respectively.
Also adopted on January 17, 1996 was a Stock Option plan whereby 85,645 shares
of the Company's common stock have been reserved to be awarded to certain
officers, employees and directors. The Stock Option Plan is administered by a
committee of the Board of Directors. All options expire no later than ten
years from the date of grant. At February 10, 1998, 1,000 shares have been
exercised at the exercise price of $12.9375 per share.
NOTE E - Stock Repurchase Program
- ---------------------------------
The Company has completed its third stock repurchase program. At December 31,
1997, 204,640 shares have been repurchased at a cost of $2,949,551.
NOTE F - Business Acquisition
- -----------------------------
During 1997, the Association formed a new subsidiary, Crawford Acquisition
Company for the sole purpose of acquiring Crawford Mortgage and Financial
Services, Inc. On August 26, 1997, Crawford Acquisition Company acquired all
of the capital stock of Crawford Mortgage and Financial Services, Inc. and
became Crawford Mortgage, Inc. Crawford Mortgage, Inc. is engaged in
originating mortgage loans primarily in Missouri. The results of operations
are included in the financial statements.
9
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N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis included herein covers those material
changes in liquidity and capital resources that have occurred since September
30, 1997, as well as certain changes in results of operations during the three
month periods ended December 31, 1997 and 1996.
The following should be read in conjunction with the Company's Form
10-KSB for the year ended September 30, 1997, which contains the audited
financial statements and notes thereto, together with Management's Discussion
and Analysis of Financial Condition and Results of Operations as of September
30, 1997, and for the year then ended. Therefore, only material changes in
financial condition and results of operations are discussed herein.
CHANGES IN FINANCIAL CONDITION
- ------------------------------
Cash and cash equivalents increased $309,000 during the quarter ended
December 31, 1997. The increase was primarily from an increase of $683,000 in
customer deposits and was offset by the purchase of $396,000 of certificates
of deposit. Net loans increased during the quarter by $1.6 million to $35.5
million as of December 31, 1997. Investment securities decreased $3.9 million
to $9.8 million due to maturities and the Company purchased treasury stock for
$481,000 and repaid $2.0 million in cash advances to the FHLB of Des Moines.
Nonperforming assets were $126,000 or .2% of total assets at December
31, 1997, compared to $75,000, or .1% of total assets at September 30, 1997.
Nonaccrual loans were $9,000 at September 30 and $8,000 at December 31, 1997.
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1997 TO THE THREE MONTHS
- --------------------------------------------------------------------------
ENDED DECEMBER 31, 1996
- -----------------------
NET INCOME. Net income was $94,000 for the quarter ended December 31,
1997 compared to $124,000 for the quarter ended December 31, 1996. Net
interest income after provision for loan losses increased $30,000, noninterest
income increased $16,000 and noninterest expense increased $76,000. Income tax
expense remained stable due to an increase in non-deductible expense resulting
in approximately the same taxable income before income tax.
NET INTEREST INCOME. Net interest income of $483,000 for the quarter
ended December 31, 1997 increased by $34,000, or 7.6% from $449,000 for the
quarter ended December 31, 1996. Interest income increased $40,000 while
interest expense increased $6,000.
INTEREST INCOME. Interest income increased by $40,000 or 4.2%, to $1.003
million for the quarter ended December 31, 1997 from $963,000 for the quarter
ended December 31, 1996. Interest income from loans receivable increased
$72,000 to $643,000 for the quarter ended December 31, 1997 from $571,000 for
the quarter ended December 31, 1996. The increase was largely attributable to
the increase in average loans outstanding and partly to interest rate
increases on existing adjustable rate loans. Interest income from investment
securities decreased
10
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N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
by $9,000 to $208,000 for the quarter ended December 31, 1997 from $217,000
for the quarter ended December 31, 1996. This decrease was due to a decrease
in the average balances in investment securities. Interest income from
mortgage-backed securities decreased 15,000 to $82,000 for the quarter ended
December 31, 1997 from $97,000 for the quarter ended December 31, 1996. The
decrease was due to a decrease in the average balances in mortgage-backed
securities and a decrease in the rates of the adjustable mortgage-backed
securities. Interest income from other interest-earning assets decreased by
$8,000 to $70,000 for the quarter ended December 31, 1997 from $78,000 for the
quarter ended December 31, 1996. This decrease was primarily due to lower
interest rates being paid on daily time accounts.
INTEREST EXPENSE. Interest expense of $520,000 for the quarter ended
December 31, 1997 increased $6,000, or 1.2%, from $514,000 for the quarter
ended December 31, 1996. The increase is attributable to an increase in
interest paid on deposits due to a higher average balance in customer deposits
for the quarter ended December 31, 1997.
PROVISION FOR LOAN LOSSES. Loan loss provisions were $5,000 for the
quarter ended December 31, 1997 compared to $1,000 for the quarter ended
December 31, 1996. This slight increase is a result of an increase in the
average loan balances. Actual loan losses net of recoveries, were zero for
both quarters.
NONINTEREST INCOME. Noninterest income of $87,000 for the quarter ended
December 31, 1997 increased $16,000 from $71,000 for the quarter ended
December 31, 1996. This increase was primarily due to an increase of $46,000
in mortgage banking fees from the acquisition of Crawford Mortgage, Inc. and
was offset by the gain on the sale of investments of $24,000 for the quarter
ended December 31, 1996 with no comparable gain for the quarter ended December
31, 1997.
NONINTEREST EXPENSE. Noninterest expense increased $76,000, or 22.6%, to
$413,000 for the quarter ended December 31, 1997 from $337,000 for the quarter
ended December 31, 1996. This increase was largely due to a $44,000 increase
in compensation and employee benefits which is due to additional personnel in
the operation of Crawford Mortgage and annual salary increases effective
September 30, 1997 and was offset by a decrease in deposit insurance premiums
of $16,000 to $7,000 for the period ended December 31, 1997 from $23,000 for
the quarter ended December 31, 1996. Other expense increased $32,000 from
$47,000 for the quarter ended December 31, 1996 to $79,000 for the quarter
ended December 31, 1997. This increase was a result of increases in normal
operating expenses and a contribution of $10,000 to the Neosho Business &
Industrial Foundation, Inc. for the Neighborhood Assistance Program.
NET INTEREST MARGIN. Net interest margin increased to 3.43% for the
three months ended December 31, 1997 from 3.17% for the three months ended
December 31, 1996. Income from earning assets increased by $40,000, or 2.6%,
between the two quarters while interest expense increased by $6,000, or 12.5%.
The average earning asset base decreased by $377,000 , or 0.7%. The average
interest-bearing liability base increased by $482,000, or 1.1%.
11
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N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, proceeds from
principal and interest payments on loans, mortgage-backed securities,
investment securities and net operating income and cash advances from Federal
Home Loan Bank of Des Moines when appropriate. While maturities and scheduled
amortization of loans and mortgage-backed securities are a somewhat
predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
Neosho Savings and Loan must maintain an adequate level of liquidity to
ensure availability of sufficient funds to support loan growth and deposit
withdrawals, satisfy financial commitments and to take advantage of investment
opportunities. During fiscal year 1996, Neosho Savings and Loan used its
sources of funds primarily to fund loan commitments, pay maturing savings
certificates and deposit withdrawals. During the fiscal year 1997, Neosho
Savings and Loan began using cash advances from Federal Home Loan Bank of Des
Moines. At December 31, 1997, Neosho Savings and Loan had an FHLB advance of
$1 million that was used to purchase mortgage loans and had approved loan
commitments totaling $352,000 and undisbursed loans in process of $314,000.
Liquid funds necessary for normal daily operations of Neosho Savings and
Loan are maintained in a working checking account and a daily time account
with the Federal Home Loan Bank of Des Moines. It is the Association's current
policy to maintain adequate collected balances in those deposit accounts to
meet daily operating expense, customer withdrawals, and fund loan demand.
Funds received from daily operating activities are deposited, on a daily
basis, in the checking account and transferred, when appropriate, to the daily
time account to enhance income.
Normal daily operating expenses are not expected to significantly
change. Noninterest expense as a percentage of average assets at .3% is
expected to remain basically constant. Interest expense on deposits is
expected to gradually decrease as the rates on maturing certificates of
deposit are reinvested at currently slightly lower rates of interest. Overall
interest expense should decrease from the prior comparable period because
interest is now being paid on a smaller cash advance. Loan interest income is
expected to continue to increase as rates on adjustable-rate loans continue to
gradually rise as those loans reprice at the annual adjustment dates. Customer
deposits are expected to remain stable.
At December 31, 1997, certificates of deposit amounted to $28.9 million,
or 64.9% of Neosho Savings and Loan's total deposits, including $21 million of
fixed rate certificates scheduled to mature within twelve months.
Historically, Neosho Savings and Loan has been able to retain a significant
amount of its deposits as they mature. Management believes it has adequate
resources to fund all loan commitments from savings deposits, loan payments
and maturities of investment securities.
12
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N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Office of Thrift Supervision requires a thrift institution to
maintain an average daily balance of liquid assets (cash and eligible
investments) equal to at least 5% of the average daily balance of its net
withdrawable deposits and short-term borrowings. In addition, short-term
liquid assets currently must constitute 1% of the sum of net withdrawable
deposit accounts plus short-term borrowings. Neosho Savings and Loan liquidity
ratio was 32.01% at December 31, 1997 and its short-term liquidity ratio at
December 31, 1997 was 19.75%. Neosho Savings and Loan consistently maintains
liquidity levels in excess of regulatory requirements, and believes this is an
appropriate strategy for proper asset and liability management.
The Office of Thrift Supervision requires institutions such as the
Association to meet certain tangible, core, and risk-based capital
requirements. Tangible capital generally consists of stockholders' equity
minus certain intangible assets. Core capital general consists of
stockholders' equity. The risk-based capital requirements presently address
risk related to both recorded assets and off-balance sheet commitments and
obligations. The following table summarizes the Association's capital ratios
and the ratios required by federal regulations at December 31, 1997.
Percent of Adjusted
Amount Total Assets
------ ------------
(Unaudited)
(Dollars in thousands)
Tangible capital $ 8,935 15.7%
Tangible capital requirement 854 1.5
-------- ----
Excess $ 8,081 14.2%
======== ====
Core capital $ 8,935 15.7%
Core capital requirement 1,709 3.0
-------- ----
Excess $ 7,226 12.7%
======== ====
Risk-based capital $ 8,984 34.3%
Risk-based capital requirement 2,093 8.0
-------- ----
Excess $ 6,891 26.3%
======== ====
YEAR 2,000 ISSUE
- ----------------
The Company has researched the Year 2,000 problem from testing of personal
computers to contacts with companies providing equipment and services integral
to the normal operations of business. Although there are some expenditures
scheduled to be made within the next six months, there are no known problems
that would be material to the Company's business, operations or financial
condition.
13
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N S & L BANCORP, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1, LEGAL PROCEEDINGS
Neither the Registrant nor the Association is a party to any material legal
proceedings at this time. From time to time the Association is involved in
various claims and legal actions arising in the ordinary course of business.
ITEM 2, CHANGES IN SECURITIES
Not applicable.
ITEM 3, DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5, OTHER INFORMATION
None.
ITEM 6, EXHIBITS AND REPORT ON FORM 8-K
None.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
N S & L Bancorp, Inc.
Date: February 12, 1998 By: /s/ C.R. Butler
------------------------------------
C. R. 'Rick' Butler
President
CEO
By: /s/ Carol Guest
------------------------------------
Carol Guest
Treasurer
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<ARTICLE> 9
<S> <C>
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