<page> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
FORM 10-QSB
---------------------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending June 30, 2001
-------------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission File Number 0-25814
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N S & L Bancorp, Inc.
---------------------
(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
- ---------------------------------
(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 AUGUST 2, 2001, THERE WERE 646,884 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
JUNE 30, 2001
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 COMPRESHENSIVE INCOME (unaudited) 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 6-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 8-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11-16
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN SECURITIES 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES
HOLDERS 17
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES
<page> 3
<table>
<caption>
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
------------------------------------------------------------------
(Unaudited)
JUNE 30, SEPTEMBER 30,
2001 2000
--------- ----------
(Dollars in thousands)
ASSETS
------
<s> <c> <c>
Cash and cash equivalents, including
interest-bearing accounts of $15,513 at $ 15,914 $ 2,982
June 30, 2001 and $2,437 at September 30, 2000
Certificates of deposit 80 80
Investment securities available-for-sale, at fair value 93 173
Investment securities held-to-maturity
(estimated market value of $9,641 at June 30, 2001
and $19,243 at September 30, 2000) 9,522 19,639
Investment in Federal Home Loan Bank stock, at cost 657 657
Mortgage-backed securities held-to-maturity
(estimated market value of $2,511 at June 30, 2001
and $2,924 at September 30, 2000.) 2,434 2,907
Loans held for sale 1,206 386
Loans receivable, net (reserves for loan losses of $66
at June 30, 2001 and $63 at September 30, 2000) 41,838 44,091
Income taxes recoverable-current 16 --
Accrued interest receivable 430 560
Property and equipment, less accumulated
depreciation 1,071 1,063
Intangible assets 73 75
Other assets 246 196
------------------ -------------
Total assets $ 73,580 $ 72,809
================== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Customers deposits $ 56,957 $ 48,257
Advances from FHLB 5,508 13,117
Advances from borrowers for taxes and insurance 304 379
Income taxes payable - current -- 81
Deferred income taxes 261 290
Other Liabilities 509 561
------------------ -------------
Total liabilities 63,539 62,685
------------------ -------------
Commitments and contingencies -- --
See accompanying notes to Consolidated Financial Statements.
1
</table>
<page> 4
<table>
<caption>
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
------------------------------------------------------------------
(Unaudited)
JUNE 30, SEPTEMBER 30,
2001 2000
--------- ----------
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
- ------------------------------------------------
<s> <c> <c>
Preferred stock, $.01 par value; 2,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value; 8,000,000 shares
authorized, 1,013,941 issued and 646,884 outstanding
at June 30, 2001 and 664,946
outstanding at September 30, 2000 10 10
Paid-in capital 10,397 10,389
Retained earnings - substantially restricted 5,122 5,051
Treasury Stock - at cost; 367,057 shares at June 30,
2001 and 347,495 at September 30, 2000 (5,171) (4,960)
Unearned compensation (325) (375)
Accumulated other comprehensive income 8 9
------------- -----------
Total stockholders' equity 10,041 10,124
------------- -----------
Total liabilities and stockholders' equity $ 73,580 $ 72,809
============= ===========
</table>
See accompanying notes to Consolidated Financial Statements.
2
<page> 5
<table>
<caption>
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------
(Unaudited)
QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
2001 2000 2001 2000
------------ ----------- ----------- ----------
(Dollars in thousands) (Dollars in thousands)
<s> <c> <c> <c> <c>
Interest Income:
Loan receivable $ 931 $ 818 $ 2,720 $ 2,391
Investment securities 189 327 821 978
Mortgage-backed and
related securities 50 53 156 135
Other interest-earning assets 96 30 151 100
--------- -------- -------- ---------
Total interest income 1,266 1,228 3,848 3,604
========= ======== ======== =========
Interest Expense:
Customer deposits 657 533 1,867 1,590
Borrowed funds 93 172 458 410
--------- -------- -------- ---------
Total interest expense 750 705 2,325 2,000
--------- -------- -------- ---------
Net interest income 516 523 1,523 1,604
Provision for loan losses 5 (4) 9 8
--------- -------- -------- ---------
Net interest income after
provision for loan losses 511 527 1,514 1,596
--------- -------- -------- ---------
Noninterest Income:
Gain on sale of investments -- -- 24 --
Gain on sale of loans 55 29 109 45
Banking service charges
and fees 79 56 194 157
Loan late charges 4 2 11 7
Mortgage banking fees 44 36 107 85
Other 8 3 14 7
--------- -------- -------- ---------
Total non interest income 190 126 459 301
--------- -------- -------- ---------
Non interest Expense:
Compensation and
employee benefits 309 286 863 806
Occupancy and equipment 46 47 138 141
Deposit insurance premium 2 3 7 13
Data processing 37 31 111 99
See accompanying notes to Consolidated Financial Statements.
</table>
3
<page> 6
<table>
<caption>
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
------------------------------------------------------------
(Unaudited)
QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
2001 2000 2001 2000
--------- --------- -------- ---------
(Dollars in thousands) (Dollars in thousands)
<s> <c> <c> <c> <c>
Printing , postage, stationery
and supplies 28 15 72 53
Professional fees 12 13 45 40
Advertising 23 13 56 41
Other 55 52 159 147
-------- ------ -------- ----
Total noninterest expense 512 460 1,451 1,340
-------- ------ -------- -----
Income before taxes 189 193 522 557
Income Taxes 64 53 169 184
-------- ------ -------- ----
Net income $ 125 $ 140 $ 353 $ 373
======== ====== ======== ======
Basic earnings per share $ .20 $ .22 $ .57 $ .56
======= ====== ======= ======
Diluted earnings per share $ .20 $ .22 $ .57 $ .56
======= ====== ======= ======
Dividend per share $ .1125 $ .16 $ .4325 $ .48
======= ====== ======= ======
</table>
See accompanying notes to Consolidated Financial Statements.
4
<page> 7
<table>
<caption>
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
----------------------------------------------------------
(Unaudited)
QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
2001 2000 2001 2000
-------- -------- -------- --------
(Dollars in thousands) (Dollars in thousands)
<s> <c> <c> <c> <c>
Net income $ 125 $ 140 $ 353 $ 373
Unrealized gains (losses) on securities:
Gains (losses) arising during
period, net of tax 1 (5) 14 (17)
Reclassification
adjustment, net of tax -- -- (15) --
-------- ------- -------- ---------
Other comprehensive
income (loss) 1 (5) (1) (17)
-------- ------- -------- ---------
Comprehensive income $ 126 $ 135 $ 352 $ 356
======== ======= ======== =========
</table>
See accompanying notes to Consolidated Financial Statements.
5
<page> 8
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------
NINE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
--------- ---------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 353 $ 373
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 60 64
Amortization 2 2
Premiums and discounts on mortgage-backed
securities and investment securities (71) (59)
Origination of loans held for sale (12,205) (2,733)
Proceeds from sale of loans held for sale 11,494 2,731
Loss on loans, net of recoveries 9 8
Release of ESOP shares 30 64
Vesting of MRDP shares 28 61
Gain on sale of loans (109) (45)
Gain on sale of investments (24) --
Net change in operating accounts:
Accrued interest receivable 130 (30)
Other assets (50) 11
Other liabilities (19) 121
Income taxes payable - deferred (30) (16)
Income taxes payable - current (97) 124
-------- --------
Net cash from (used in) operating activities (499) 676
-------- --------
Cash flows from investing activities:
Proceeds from sales of investment securities
available-for-sale 105 --
Purchase of investment securities held-to-maturity -- (498)
Proceeds from maturities of investment securities
held-to-maturity 10,181 750
Net change in certificates of deposit -- 1,584
Net change in loan receivable 2,244 (3,384)
Proceeds from principal payments and maturities
of mortgage-backed securities held-to-maturity 480 496
Purchase of mortgage-backed securities held-to-maturity -- (1,109)
Purchases of property and equipment (68) (20)
-------- --------
Net cash from (used in) investing activities $ 12,942 $ (2,181)
-------- --------
See accompanying notes to Consolidated Financial Statements.
6
<page> 9
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
------------------------------------------------------------------
NINE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
------- --------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings
accounts, and certificates of deposit $ 8,700 $ (3,307)
Net decrease in mortgage escrow funds (75) (56)
Cash advances from FHLB -- 6,100
Repayment of cash advances from FHLB (7,609) (303)
Purchase of treasury stock (211) (710)
Cash dividends paid (316) (344)
-------- --------
Net cash from financing activities 489 1,380
-------- --------
Net increase (decrease) in cash and
cash equivalents 12,932 (125)
Cash and cash equivalents -
beginning of period 2,982 2,317
-------- --------
Cash and cash equivalents -
end of period $ 15,914 $ 2,192
======== ========
See accompanying notes to Consolidated Financial Statements.
7
<page> 10
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 June 30, 2001 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 June 30, 2001 interim
financial statements. The results of operations for the period ended June 30,
2001 and 2000 are not necessarily indicative of the operating results for the
full year. The September 30, 2000 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.
<table>
<caption>
FOR THE THREE MONTHS ENDED JUNE 30,
2001 2000
---- ----
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------- ----------- ------------- --------
<s> <c> <c> <c> <c> <c> <c>
Basic EPS:
Income available to
Common Stockholders $125,000 612,983 $.20 $140,000 640,085 $.22
Effect of dilutive securities:
Stock options -- 8,889 -- --
-------- -------- -------- -------
Diluted EPS:
Income available to common
stockholders plus stock
options $125,000 621,872 $.20 $140,000 640,085 $.22
======== ======== ==== ======== ======= ====
</table>
<table>
<caption>
FOR THE NINE MONTHS ENDED JUNE 30
2001 2000
---- ----
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------- ----------- ------------- --------
<s> <c> <c> <c> <c> <c> <c>
Basic EPS:
Income available to
Common Stockholders $353,000 620,327 $.57 $373,000 662,716 $.56
Effect of dilutive securities:
Stock options -- -- -- --
Diluted EPS:
Income available to common
stockholders plus stock
options $353,000 620,327 $.57 $373,000 662,716 $.56
======== ======= ==== ======== ======= ====
</table>
8
<page> 11
N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE C - Employee Stock Ownership Plan
- --------------------------------------
The Company established an internally - leveraged 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 loan is secured by the shares purchased and will be repaid by the
contributions to 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 five years. As of June 30, 2001, the loan
had an outstanding balance of $393,819 and an interest rate of 9%.
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 or separation of service. Since the Association's annual
contributions are discretionary, benefits payable under the ESOP cannot be
estimated.
The Association 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 $15,975 and $21,179 for the three months
ended June 30, 2001 and 2000 and $47,115 and $64,550 for the nine months ended
June 30, 2001 and 2000 respectively.
A summary of ESOP shares at June 30, 2001 is as follows:
Shares allocated 43,674
Shares committed for release 6,162
Unreleased shares 32,383
------
Total 82,219
======
Fair value of unreleased shares $453,362
9
<page> 12
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 approved by
the stockholders on January 17, 1996. The MRDP is administered by the Board of
Directors of the Company. Collectively, the Board issued 41,109 shares of the
Company's common stock, of which currently there are 39,138 shares awarded to
employees at a cost of $426,745. The MRDP shares are vesting and being expensed
over a five-year period. The value of the common stock contributed to the MRDP
is amortized to compensation expense as the shares vest. MRDP expense was $2,987
and $20,206 for the three months ended June 30, 2001 and 2000 and $28,024 and
$60,618 for the nine months ended June 30, 2001 and 2000 respectively.
Also adopted on January 17, 1996 was a Stock Option plan whereby 102,774 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 June 30, 2001, 1,000 shares had been exercised.
NOTE E - Stock Repurchase Program
- ---------------------------------
At August 2, 2001, The Company has repurchased 367,057 shares of the
Corporation's outstanding stock at a cost of $5,170,973.
NOTE F - New Accounting Pronouncements
- --------------------------------------
In July 2001, the Financial Accounting Standards Board issued Statement No. 141,
Business Combinations, and Statement No. 142, Goodwill and Other Intangible
Assets. Statement No. 141 requires the use of the purchase method of accounting
for all business combination initiated after June 30, 2001, thereby eliminating
the pooling-of-interests methods. Statement No. 141 also provides new criteria
that determine whether an acquired intangible asset should be recognized
separately from goodwill. Statement No. 142 provides guidance on how to account
for goodwill and intangible assets after a business combination has been
completed. Under Statement No. 142 goodwill and certain other intangible assets
will no longer be amortized and will be tested for impairment at least annually.
Intangible assets with a definite life will continue to be amortized. Th
nonamortization and impairment rules will apply to existing goodwill and
intangible assets beginning with fiscal years starting after December 15, 2001.
The Company believes that the adoption of Statements No. 141 and 142 will not
have a material impact on the results of operations and financial condition of
the Company.
10
<page> 13
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, 2000, as well as certain changes in results of operations during the three
and nine month periods ended June 30, 2001 and 2000.
The following should be read in conjunction with the Company's Form
10-KSB for the year ended September 30, 2000, which contains the latest audited
financial statements and notes thereto, together with Management's Discussion
and Analysis of Financial Condition and Results of Operations as of September
30, 2000, and for the year then ended. Therefore, only material changes in
financial condition and results of operations are discussed herein.
This report contains certain "forward-looking statements" concerning
the future operations of NS&L Bancorp, Inc. We have used forward-looking
statements to describe future plans and strategies, including our expectations
of our future financial results. Management's ability to predict results or the
effect of future plans or strategies is inherently uncertain. Factors which
could affect actual results include interest rate trends, the general economic
climate in our market area and the country as a whole, our loan delinquency
rates, and changes in federal and state regulation. These factors should be
considered in evaluation of the forward-looking statements contained in this
report and undue reliance should not be placed on such statements.
CHANGES IN FINANCIAL CONDITION
- ------------------------------
Total assets increased $771,000 from September 30, 2000. Cash and cash
equivalents increased $12.9 million and other assets increased $50,000 during
the nine months ended June 30, 2001. This increases was partially offset by
decreases in loans of $1.4 million, decreases in mortgage-backed securities of
$473,000, accrued interest receivable of $130,000 and investment securities of
$10.2 million during the nine months ended June 30, 2001. Customer deposits
increased $8.7 million due to some special rate offerings on certificates of
deposit and a new more aggressive checking account program. Cash advances from
Federal Home Loan Bank of Des Moines decreased $7.6 million as investments were
called and the funds were used to pay off maturing advances form Federal Home
Loan Bank.
Nonperforming assets were $58,000 or .08% of total assets at June 30,
2001, compared to $49,000, or .07% of total assets at September 30, 2000. There
were no nonaccrual loans at June 30, 2001 and $3,000 at September 30, 2000.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2001 TO THE THREE MONTHS ENDED
- ----------------------------------------------------------------------------
JUNE 30, 2000
- -------------
NET INCOME. Net income was $125,000 for the quarter ended June 30, 2001
compared to $140,000 for the quarter ended June 30, 2000. Net interest income
after provision for loan losses was $511,000 for the quarter compared to
$527,000 for the same quarter last year. Noninterest income increased $64,000
and noninterest expense increased $52,000. Income tax expense increased $11,000.
11
<page> 14
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
NET INTEREST INCOME. Net interest income of $516,000 for the quarter
ended June 30, 2001 decreased from $523,000 for the quarter ended June 30, 2000.
Interest income increased $38,000 while interest expense increased $45,000.
INTEREST INCOME. Interest income increased by $38,000, or 3.1%, to
$1,266,000 for the quarter ended June 30, 2001 from $1,228,000 for the quarter
ended June 30, 2000. Interest income from loans receivable increased $113,000 to
$931,000 for the quarter ended June 30, 2001 from $818,000 for the quarter ended
June 30, 2000. The increase was primarily attributable to the increase in the
average balance of loans outstanding. Interest income from investment securities
decreased by $138,000 to $189,000 for the quarter ended June 30, 2001 from
$327,000 for the quarter ended June 30, 2000. This decrease was due to a
decrease in the average balances in investment securities as many have been
called by FHLB as market interest rates have dropped and these securities have a
higher than market rate. Interest income from mortgage-backed securities
decreased by $3,000 to $50,000 for the quarter ended June 30, 2001 from $53,000
for the quarter ended June 30, 2000. Interest income from other interest-earning
assets increased by $66,000 to $96,000 for the quarter ended June 30, 2001 from
$30,000 for the quarter ended June 30, 2000. This increase was primarily due to
an increase in the interest paid on larger average balances of cash invested at
Federal Home Loan Bank of Des Moines as cash was received from called
investments.
INTEREST EXPENSE. Interest expense of $750,000 for the quarter ended
June 30, 2001 increased $45,000, or 6.4%, from $705,000 for the quarter ended
June 30, 2000. The increase is primarily attributable to an increase in the
average balances of customer deposits and to some special rate offerings on
those deposits.
PROVISION FOR LOAN LOSSES. Loan loss provision increased by $9,000 for
the quarter ending June 30, 2001 compared to the quarter ending June 30, 2000
and actual loan losses net of recoveries were zero for the quarter ending June
30, 2001 and $9,000 for the comparable quarter last year.
NONINTEREST INCOME. Noninterest income of $190,000 for the quarter
ended June 30, 2001 increased $64,000 from $126,000 for the quarter ended June
30, 2000. This increase was due to an increase of $26,000 to $55,000 on the gain
on the sale of loans for the quarter ended June 30, 2001 from $29,000 for the
quarter ended June 30, 2000, an increase in mortgage banking fees of $8,000, and
an increase of $23,000 in banking service charges and fees.
NONINTEREST EXPENSE. Noninterest expense increased $52,000, or 11.3%,
to $512,000 for the quarter ended June 30, 2001 from $460,000 for the quarter
ended June 30, 2000. This increase was due to an increase of $23,000 in
compensation and employee benefits as a result of annual salary increases
effective October 1, 2000 and additional personnel needed in the normal
operations of business and a $10,000 increase in advertising expense, a $13,000
increase in printing, postage and supplies, a $6,000 increase in data processing
fees, a $3,000 increase in other expenses which was partially offset by a
decrease of $1,000 in occupancy and equipment, a $1,000 decrease in deposit
insurance premium and a $1,000 decrease in professional fees.
12
<page> 15
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
NET INTEREST MARGIN. Net interest margin was 2.93% for the three months
ended June 30, 2001 compared to 2.98% for the three months ended June 30, 2000.
Income from earning assets increased by $38,000, or 3.1%, between the two
quarters and interest expense increased by $45,000, or 6.4%. The average earning
asset base increased by $349,000, or .5%. The average interest-bearing liability
base increased by $495,000, or .8%.
COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 2001 TO THE NINE MONTHS ENDED
- --------------------------------------------------------------------------
JUNE 30, 2000
- -------------
NET INCOME. Net income decreased $20,000 to $353,000 for the nine
months ended June 30, 2001 compared to $373,000 for the nine months ended June
30, 2000. Net interest income after provision for loan losses decreased by
$82,000 to $1.5 million for the nine months ended June 30, 2001 compared to $1.6
million for the nine months ended June 30, 2000. Noninterest income increased
$158,000 and noninterest expense increased $111,000. Income tax expense
decreased $15,000.
NET INTEREST INCOME. Net interest income of $1.5 million for the nine
months ended June 30, 2001 decreased by $81,000 from net interest income of $1.6
million for the nine months ended June 30, 2000. Total interest income increased
$244,000 while interest expense increased $325,000.
INTEREST INCOME. Total interest income increased $244,000 to $3.8
million for the nine months ended June 30, 2001 from $3.6 million for the nine
months ended June 30, 2000. Interest income from loans receivable increased
$329,000 to $2.7 million for the nine months ended June 30, 2001 from $2.4
million for the nine months ended June 30, 2000. This increase was primarily
attributable to the increase in the average balance of loans between the two
periods. Interest income from investment securities decreased by $157,000 to
$821,000 for the nine months ended June 30, 2001 from $978,000 for the nine
months ended June 30, 2000 as a result of the calling by FHLB of callable
securities. Interest income from mortgage-backed securitites increased by
$21,000 to $156,000 for the nine months ended June 30, 2001 from $135,000 for
the nine months ended June 30, 2000. This increase was primarily due to an
increase in the interest paid on larger average balances of mortgage-backed
securities. Income from other interest earning assets increased $51,000 to
$151,000 at June 30, 2001 from $100,000 for the period ending June 30, 2000. The
increase in income of other interest earning assets was a result of larger
average balance in those investments.
INTEREST EXPENSE. Total interest expense of $2.3 million for the nine
months ended June 30, 2001, increased $325,000 from $2.0 million for the quarter
ended June 30, 2000. An increase in customer deposits increased interest paid on
deposits by $277,000 and an increase of $48,000 in interest on FHLB advances
resulted from an increase in the average balance of FHLB advances during the
comparable periods.
PROVISION FOR LOAN LOSSES. Loan loss provision increased by $1,000 for
the nine months ending June 30, 2001 from the comparable period in 2000 and
actual loan losses net of recoveries
13
<page> 16
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
were $4,000 for the periods ending June 30, 2001 and $13,000 for the period
ending June 30, 2000.
NONINTEREST INCOME. Noninterest income of $459,000 for the nine months
ended June 30, 2001 increased $158,000 from $301,000 for the nine months ended
June 30, 2000. This increase was primarily attributable to a $64,000 increase in
the gain on the sale of loans and a $24,000 gain on the sale of an investments
with no gain in the prior comparable period. In addition, there was an increase
of $37,000 in banking service charges and fees and a $22,000 increase in
mortgage banking fees for the nine months ending June 30, 2001 when compared to
the period ending June 30, 2000.
NONINTEREST EXPENSE. Noninterest expense increased $111,000 to $1.5
million for the nine months ended June 30, 2001 from $1.4 million for the nine
months ended June 30, 2000. Compensation and employee benefits increased by
$57,000 as a result of annual salary increases effective October 1, 2000 and
additional personnel needed in the normal operations of business. Data
processing increased $12,000, printing, postage and stationery increased
$19,000, advertising expenses increased by $15,000 as a result of normal
operation of the Company and some special direct mail advertising used in a new
checking account program, other expenses increased $12,000 as a result of normal
operations of the Company, and professional fees increased $5,000 from the
comparable period last year. These increases were partially offset by a decrease
of $6,000 in deposit insurance premiums.
NET INTEREST MARGIN. Net interest margin was 2.88% for the nine months
ended June 30, 2001 compared to 3.10% for the nine months ended June 30, 2000.
Income from earning assets increased by $244,000, or 6.8%, between the two
periods while interest expense increased by $325,000, or 16.3%. The average
earning asset base increased by $1.6 million, or 2.3%. The average
interest-bearing liability base increased by $1.8 million, or 3.1%.
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, 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.
The Association 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 the fiscal year 2001 and 2000, the Association used cash advances from
Federal Home Loan Bank of Des Moines as part of its investment strategy. At June
30, 2001, the Association had FHLB advances of $5.5 million that were used to
offset fixed rate mortgage loans and provide liquidity and had approved loan
commitments totaling $2.3 million and undisbursed loans in process of $939,000.
14
<page> 17
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquid funds necessary for normal daily operations of the Association
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 2.7% is
expected to remain basically constant. Interest expense is expected to gradually
increase as the average balance of customer accounts has increased. However,
overall interest expense should remain stable because interest is now being paid
on a smaller average balance of cash advances. The cash advance expenses are
being offset as the funds have been invested at rates higher than the expense
incurred by them. Loan interest income is expected to continue to increase as
the average balance of loans increases although rates on adjustable-rate loans
may not continue to rise as those loans reprice at the annual adjustment dates.
Customer deposits have increased in the past nine months as a result of some
special rate offerings and a more aggressive checking account program, but
increased competition as new financial institutions enter the market area may
make increasing deposits more difficult.
At June 30, 2001, certificates of deposit amounted to $37.8 million, or 66.3% of
the Association total deposits, including $33.4 million of fixed rate
certificates scheduled to mature within twelve months. Historically, the
Association 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, maturities of investment
securities and advances from Federal Home Loan Bank of Des Moines.
15
<page> 18
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 generally 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 at June 30, 2001.
Percent of Adjusted
Amount Total Assets
---------------------------------
(Unaudited)
(Dollars in thousands)
Tangible capital $ 7,306 10.00%
Minimum tangible capital requirement 1,096 1.50
-------- -----
Excess $ 6,210 8.50%
======== =====
Core capital $ 7,306 10.00%
Minimum core capital requirement 2,922 4.00
-------- -----
Excess $ 4,384 6.00
======== =====
Risk-based capital $ 7,373 23.99%
Minimum risk-based capital requirement 2,459 8.00
-------- -----
Excess $ 4,914 15.99%
======== =====
16
<page> 19
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
A. Exhibits
None.
B. Forms 8-K
None.
17
<page> 20
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 August 7, 2001 By: /s/ C.R. Butler
--------------------- -----------------------------
C. R. 'Rick' Butler
President
CEO
Date August 7, 2001 By: /s/ Carol Guest
--------------------- -----------------------------
Carol Guest
Treasurer