<PAGE 1>
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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 March 31, 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 April 30, 2000, there were 1,209,488 outstanding shares of the
Registrant's Common Stock.
Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)
=============================================================================
<PAGE 2>
NORTH BANCSHARES, INC.
Table of Contents
Part I - FINANCIAL INFORMATION (UNAUDITED)
Item 1. Consolidated Financial Statements 3
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 4. Recent Regulatory Developments 11
Part II - OTHER INFORMATION 12
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
FORM 10-QSB SIGNATURE PAGE 13
<PAGE 3>
Part I. Financial Information
Item 1. Consolidated Financial Statements
NORTH BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS MARCH 31, 2000 DEC 31, 1999
- ----------------------------------------------------------------------------
Cash and due from banks $ 1,403 $ 1,712
Interest-bearing deposits 1,683 1,260
Federal funds sold 1,175 2,439
Investment in dollar-denominated mutual funds 238 466
- --------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 4,499 5,877
Investment securities available for sale 17,049 17,050
Mortgage-backed securities available for sale 14,182 14,528
Stock in Federal Home Loan Bank of Chicago 2,205 2,205
Loans receivable, net of allowance for loan
losses of $235 at March 31, 2000 and $231 at
December 31, 1999 90,746 88,989
Accrued interest receivable 971 941
Due from broker 1,254 -
Premises and equipment, net 1,011 1,033
Other assets 96 66
- --------------------------------------------------------------------------
TOTAL ASSETS 132,013 130,689
==========================================================================
LIABLITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------
Deposit accounts 78,281 76,506
Borrowed funds 40,835 41,100
Advance payments by borrowers for
taxes and insurance 686 1,092
Accrued interest payable and other liabilities 1,195 738
- -------------------------------------------------------------------------
TOTAL LIABILITIES 120,997 119,436
- -------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
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 13,291 13,393
Retained earnings, substantially restricted 11,093 11,115
Treasury stock at cost (702,705 shares at
March 31, 2000 and 682,868 shares at
December 31, 1999) (11,109) (11,025)
Accumulated other comprehensive loss (1,973) (1,916)
Common stock acquired by Employee Stock
Ownership Plan (305) (333)
- --------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 11,016 11,253
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $132,013 $130,689
==========================================================================
See accompanying notes to unaudited consolidated financial statements
<PAGE 4>
NORTH BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1999 1998
- -----------------------------------------------------------------------------
INTEREST INCOME:
Loans receivable $1,657 $1,528
Interest-bearing deposits and federal funds sold 39 80
Investment securities available for sale 302 252
Mortgage-backed securities available for sale 230 230
Investment in mutual funds 6 13
Dividends on FHLB stock 41 29
- ----------------------------------------------------------------------------
TOTAL INTEREST INCOME 2,275 2,132
- ----------------------------------------------------------------------------
INTEREST EXPENSE:
Deposit accounts 840 797
Borrowed funds 558 470
- ----------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 1,398 1,267
- ----------------------------------------------------------------------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 877 865
PROVISION FOR LOAN LOSSES 4 -
- ----------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 873 865
- ----------------------------------------------------------------------------
NON-INTEREST INCOME:
Gain on sale of investment securities
available for sale - 33
Fees and service charges 79 77
Other 4 4
- ----------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME 83 114
- ----------------------------------------------------------------------------
NON-INTEREST EXPENSE:
Compensation and benefits 421 400
Occupancy expense 130 112
Professional fees 49 43
Data processing 49 51
Advertising and promotion 44 23
Federal deposit insurance premium 4 9
Other 89 70
- ---------------------------------------------------------------------------
TOTAL NON-INTEREST EXPENSE 786 708
- ---------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 170 271
INCOME TAX EXPENSE 57 95
- ---------------------------------------------------------------------------
NET INCOME 113 176
===========================================================================
EARNINGS PER SHARE:
Basic .10 .15
Diluted .09 .14
===========================================================================
AVERAGE SHARES OUTSTANDING:
Basic 1,187,579 1,204,652
Diluted 1,198,768 1,252,295
===========================================================================
See accompanying notes to unaudited consolidated financial statements
<PAGE 5>
NORTH BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional other
Common paid-in Retained Treasury comprehensive
stock capital earnings stock income(loss)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ 19 13,437 11,127 (10,664) (153)
Comprehensive loss:
Net Income - - 176 - -
Change in unrealized loss on
securities available for sale, net - - - - (231)
Comprehensive loss - - - - -
Payment on ESOP loan - - - - -
Market adjustment for common ESOP shares - 20 - - -
Purchase of treasury stock, 17,308 shares - - - (205) -
Cash dividend ($.11 per share) - - (138) - -
Options exercised and reissuance of treasury
stock, 6,500 shares - (63) - 107 -
- --------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1999 19 13,394 11,165 (10,762) (384)
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 19 13,393 11,115 (11,025) (1,916)
Comprehensive income:
Net income - - 113 - -
Change in unrealized loss on
securities available for sale, net - - - - (57)
Comprehensive income - - - - -
Payment on ESOP loan - - - - -
Market adjustment for common ESOP shares - 11 - - -
Purchase of treasury stock, 32,451 shares - - - (287)
Cash dividend ($.11 per share) - - (135) -
Options exercised and reissuance of
treasury stock, 12,614 shares - (113) - 203 -
- -----------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2000 $19 13,291 11,093 (11,109) (1,973)
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Common
stock
acquired
ESOP Total
- -------------------------------------------------------------------------------------
Balance at December 31, 1998 (444) 13,322
Comprehensive loss:
Net income - 176
Change in unrealized loss on
securities available for sale, net - (231)
--------
Comprehensive loss - (55)
Payment on ESOP loan 27 27
Market adjustment for common ESOP shares - 20
Purchase of treasury stock, 17,308 - (205)
Cash dividend ($.11 per share) - (138)
Options exercised and reissuance of
treasury stock, 6,500 shares - 44
- ----------------------------------------------------------------------------------------
Balance at March 31, 1998 (417) 13,015
- ----------------------------------------------------------------------------------------
Balance at December 31, 1999 (333) 11,253
Comprehensive income:
Net income - 113
Change in unrealized loss on
securities available for sale, net - (57)
-------
Comprehensive income - (56)
Payment on ESOP loan 28 28
Market adjustment for common ESOP shares - 11
Purchase of treasury stock, 32,451 shares - (287)
Cash dividend ($.11 per share) - (135)
Options exercised and reissuance of
treasury stock, 12,614 shares - 90
- -----------------------------------------------------------------------------------------------
Balance at March 31, 2000 (305) 11,016
================================================================================================
See accompanying notes to unaudited consolidated financial statements.
<PAGE 6>
NORTH BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<Cation>
FOR THE THREE MONTHS ENDED MARCH 31,
- ---------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 113 176
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 22 24
Deferred loan fees, net of amortization 9 9
Amortization of premiums and discounts (1) (43)
ESOP expense 39 47
Provision for loan losses 4 -
Gain on sale of investment securities available
for sale - (33)
Changes in assets and liabilities:
(Increase) decrease in accrued interest
receivable (30) 48
Increase in due from broker (1,254) -
Increase in other assets (30) (18)
Increase in other liabilities 490 564
- -----------------------------------------------------------------------------
Net cash (used in) provided by operating activities (638) 774
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Maturities of investment securities available
for sale - 2,039
Purchase of investment securities available
for sale - (3,987)
Proceeds from sales of investment securities
available for sale - 64
Proceeds from sales of mortgage-backed securities
available for sale - 411
Repayment of mortgage-backed securities
available for sale 258 634
Loan originations (4,389) (5,918)
Loan repayments 2,619 5,261
Purchase of Federal Home Loan Bank of Chgo Stock - (150)
Purchase of premises and equipment - (16)
- ----------------------------------------------------------------------------
Net cash used in investing activities (1,512) (1,662)
- ----------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in deposit accounts 1,775 (1,541)
Proceeds from in borrowed funds 18,735 3,000
Repayments of borrowed funds (19,000) -
Decrease in advance payments by borrowers for
taxes and insurance (406) (370)
Payment of cash dividend (135) (138)
Proceeds from stock options exercised 90 44
Purchase of treasury stock (287) (205)
- ----------------------------------------------------------------------------
Net cash provided by financing activities 772 790
- ----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,378) (98)
Cash and cash equivalents at beginning of period 5,877 9,746
- ----------------------------------------------------------------------------
Cash and cash equivalents at end of period $4,499 9,648
============================================================================
Supplemental disclosures of cash flow information:
Cash payments during the period for:
Interest $1,057 928
Taxes 25 -
Supplemental disclosures of noncash activities:
Transfer of mortgage-backed securities from held
to maturity to available for sale - 4,478
============================================================================
See accompanying notes to unaudited consolidated financial statements.
<PAGE 7>
NORTH BANCSHARES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and notes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the 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 March 31,
2000 and results of operations for the three-month periods ended March 31,
2000 and March 31, 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.
- ------------------------------------------------------------------------------
For the three months
ended March 31,
(In thousands, except share data) 2000 1999
- ------------------------------------------------------------------------------
Numerator:
Net Income $ 113 176
Denominator:
Basic earnings per share-weighted
average shares outstanding 1,187,579 1,204,652
Effect of dilutive stock options
outstanding 11,189 47,642
Diluted earnings per share-adjusted
weighted average shares outstanding 1,198,768 1,252,295
Basic earnings per share .10 .15
Diluted earnings per share .09 .14
==============================================================================
<PAGE 8>
(4) Comprehensive income
The following table sets forth the required disclosures of the
reclassification amounts 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.
Before Tax Net
Tax (Expense) of Tax
(In thousands) Amount or Benefit Amount
- -----------------------------------------------------------------------------
Three months ended March 31, 2000
Change in unrealized loss on
securities available for sale, net $ (87) 30 (57)
- -----------------------------------------------------------------------------
Three months ended March 31, 1999
Change in unrealized holding 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 net unrealized loss on
securities available for sale, net $(350) 119 (231)
- -----------------------------------------------------------------------------
(5) Stock Repurchase Program
On January 27, 2000, the Company announced the completion of its
twelfth stock repurchase program and the begining of the thirteenth. The
completed program amounted to 50,000 shares at an average cost of $10.31 per
share. The new repurchase program amounts 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 March 31, 2000, 21,910 shares had
been repurchased under the new program at an average cost of $8.15 per share.
Management continues to believe that stock repurchase programs provide
enhanced value to both the Company and its Stockholders.
(6) Dividend Declaration
On January 19, 2000, the company announced that the Board of Directors
declared a quarterly dividend of $.11 per share, which was paid on February
15, 2000 to stockholders of record on February 1, 2000. On April 14, 2000,
the Company announced that the Board of Directors declared a quarterly
dividend of $.11 per share, to be paid on May 15, 2000 to stockholders of
record on May 1, 2000.
(7) Commitments and Contingencies
At March 31, 2000, the Bank had outstanding commitments to originate
loans in the amount of $2.1 million at an average rate of 9.29% and unused
equity lines of credit totaling $1.4 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.
<PAGE 9>
The Company's consolidated results of operations are primarily dependent
on net interest income, which is the difference between the interest income
earned on interest-earning assets and the interest paid on deposits and other
borrowings and loan loss reserves, 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 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 but
not limited to, changes in economic conditions in the Company's market
area, changes in policies by regulatory agencies, fluctuations in interest
rates, demand for loans in the Company's market area and competition, that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The Company wishes to advise readers
that the factors listed above could affect the Company's financial
performance and could cause the Company's actual results for future periods
to differ materially from any opinions or statements expressed with respect
to future periods in any current statements.
The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
Year 2000
The Year 2000 issue arose from the inability of some computer systems to
recognize the year 2000. Many computer programs and systems originally were
programmed with six digit dates that provided only two digits to identify the
calendar year in the date field.
The comapny experienced no problems with hardware or software systems at
the beginning of the year 2000 and continues to experience no problems or
issues related to the millenium issue. The company is not aware of any
borrowers experiencing significant Year 2000 related difficulties or any
vendors used by the Company which have experienced significant Year 2000
related difficulties. The Company spent approximately $40,000 during 1998
and 1999 on Year 2000 related hardware, software and contingency planning.
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 Banks'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, to purchase investment
securities 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.
<PAGE 10>
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 March
31, 2000, the Bank's liquidity ratio was 4.0% compared with 8.9% at March
31, 1999. The decrease in liquidity was the result of funds reinvested into
loans from shorter term liquid assets.
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 March 31, 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 $11.9 million, $11.9 million
and $12.2 million, respectively, exceeded the applicable minimum requirements
by $9.9 million or 7.4%, $7.9 million or 5.9% and $7.4 million or 12.4%,
respectively.
Changes In Financial Condition
Total assets amounted to $132.0 million at March 31, 2000, an increase of
$1.3 million from $130.7 million at December 31, 1999.
Loans receivable amounted to $90.7 million at March 31, 2000, an
increase of $1.7 million from $89.0 million at December 31, 1999. The Company
originated $4.4 million in mortgage, consumer and commercial loans during the
three months ended March 31, 2000 compared with $5.9 million for the three
months ended March 31, 1999. Repayments of loans during the three months
ended March 31, 2000 amounted to $2.6 million compared with $5.3 million
during the three months ended March 31, 1999. The decrease in repayments was
primarily due to the effect of higher interest rates on prepayments and
refinances.
Total deposits amounted to $78.3 million at March 31, 2000, compared with
$76.5 million at December 31, 1999. The $1.8 million increase was primarily
attributable to a $1.9 million increase in certificates of deposit due to a
deposit promotion and a brokered certificate of deposit which amounted to $1.2
million.
Borrowed funds decreased $265,000 to $40.8 million at March 31, 2000 from
$41.1 million at December 31, 1999. The decrease was attributable to partial
repayment of a $3.0 million FHLB advance, the balance of which was refinanced
during the quarter.
Accrued interest payable and other liabilities amounted to $1.2 milion at
March 31, 2000, an increase of $457,000 from $738,000 at December 31, 1999.
The increase is primarily attributable to accrued interest on certificates of
deposit that pay interest once a year in December.
Stockholders' equity totaled $11.0 million at March 31, 2000 compared
with $11.2 million at December 31, 1999. The decrease was primarily
attributable to the purchase of treasury stock, dividends paid and an increase
in the unrealized loss on securities available for sale, partially offset by
net income and proceeds from the exercise of stock options.
Comparison Of Operating Results For the three Months ended March 31, 2000 And
March 31, 1999
General. Net income was $113,000 for the three months ended March 31,
2000, a decrease of $63,000 from $176,000 for the three months ended March
31, 1999. Diluted earnings per share amounted to $.09 for the three months
ended March 31, 2000, a decrease of $.05 from $.14 per share for the three
months ended March 31, 1999. The decrease in net income and earnings per
share is primarily related to a $33,000 decrease in gain on the sale of
investment securities available for sale. In addition, there was a $21,000
increase in advertising and promotion expense and a $21,000 increase in
compensation and benefits expense over the prior year quarter, offset
partially by lower income tax expense.
Interest Income. Interest income increased by $143,000 and amounted to
$2.3 million for the three months ended March 31, 2000 compared with $2.1
million for the three months ended March 31, 1999. There was an increase in
the annualized yield on average interest-earning assets from 6.95% for the
three months ended March 31, 1999 to 7.07% for the three months ended March
31, 2000. In addition, there was an increase in average interest-earning
assets to $128.6 million for the three months ended March 31, 2000 compared
with $122.6 million for the three months ended March 31, 1999.
<PAGE 11>
Interest Expense. Interest expense increased $131,000 and amounted to
$1.4 million for the three months ended March 31, 2000, compared with $1.3
million for the three months ended March 31, 1999. The annualized average
cost of interest-bearing liabilities increased to 4.85% for the three months
ended March 31, 2000 from 4.66% for the three months ended March 31, 1999.
The increase was due primarily to an increase in the average cost of money
market accounts and borrowed funds. In addition, there was an increase in
average interest-bearing liabilities to $115.3 million for the three months
ended March 31, 2000 from $108.8 million for the three months ended March 31,
1999.
Provision For Loan Losses. The Company provided for an addition $4,000
to its allowance for loan losses for the three months ended March 31, 2000
compared with no provision for the three months ended March 31, 1999. The
allowance for loan losses was $235,000 at March 31, 2000 and $214,000 at
March 31, 1999. The allowance for loan losses amounted to .26% of loans
receivable at March 31, 2000 and at March 31, 1999. There were no loans
delinquent 90 days or more at March 31, 2000. Future additions to the
Company's allowance are dependent upon various factor 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 $83,000 for the
three months ended March 31, 2000, an decrease of $31,000 from $114,000 for
the three months ended March 31, 1999. The decrease was primarily
attributable to a $33,000 decrease in gain on the sale of investment
securities available for sale.
Non-Interest Expense. Non-interest expense increased by $78,000 to
$786,000 for the three months ended March 31, 2000, compared with $708,000
for the three months ended March 31, 1999. There was a $21,000 increase in
advertising and promotion expense primarily related to a deposit account
promotion and a $21,000 increase in compensation and benefits expense related
to salary increases and increased health insurance costs. In addition, there
was an $18,000 increase in occupancy expense primarily related to increased
real estate taxes and expenses related to the sale of the Bank's employee
parking lot.
Income Tax Expense. Income tax expense amounted to $57,000 for the
three months ended March 31, 2000 compared with $95,000 for the three months
ended March 31, 1999. The decrease was primarily attributable to a decrease
in income before taxes. The effective tax rate amounted to 33.5% for the
three months ended March 31, 2000 compared with 35.1% for the three months
ended March 31, 1999.
Item 4. Recent Regulatory Developments
On November 12, 1999, the Graham-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 threat to the safety and soundness of the
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 saviangs association or savings and loan holding company unless
the acquiring company engages 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.
<PAGE 12>
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 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
EX-27 Financial Data Schedule
(B) 1. Form 8-K dated January 19, 2000, Registrant issued press
release dated January 19, 2000 regarding fourth quarter
1999 earnings and a regular quarterly dividend.
2. Form 8-K dated January 27, 2000 regarding the completion of
a stock repurchase program and the beginning of a new stock
repurchase program.
3. Form 8-K dated February 25, 2000 regarding a planned asset
sale.
4. Form 8-K dated February 28, 2000 regarding the hiring of
Joseph M. Perri as loan department manager.
<PAGE 13>
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 May 11, 2000 /S/ Joseph A. Graber
Joseph A. Graber
President and Chief Executive Officer
------------------------------
Date May 11, 2000 /S/ Martin W. Trofimuk
Martin W. Trofimuk
Vice President and
Treasurer