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, 1996
---------------
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
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 [ ]
The registrant became subject to the filing requirements of the Act on June
7, 1995 upon consummation of the conversion of Neosho Savings and Loan
Association, F.A. from the mutual to stock form of ownership.
As of August 5, 1996, there were 759,082 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
N S & L BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
JUNE 30, 1995
INDEX PAGE
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PART I-FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited) 1
CONSOLIDATED STATEMENTS OF INCOME (unaudited) 2-3
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 4-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 6-8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES
HOLDERS 15-16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
June 30, September 30,
1996 1995
------- -------
ASSETS (Dollars in thousands)
Cash and cash equivalents, including
interest-bearing accounts of $5,363 $ 5,837 $ 10,240
at June 30 and $9,748 at September 30
Certificates of deposit 2,319 1,942
Investment securities available-for-sale,
at fair value 871 --
Investment securities held-to-maturity
(estimated market value of $11,364 at
June 30 and $13,259 at September 30) 11,534 13,192
Mortgage-backed securities held-to-maturity
(estimated market value of $5,696 at
June 30 and $6,104 at September 30) 5,607 5,870
Loans receivable, net (reserves for loan
losses of $43 at June 30 and $38 at
September 30) 29,715 25,933
Accrued interest receivable 395 436
Property and equipment, less accumulated
depreciation 885 928
Income taxes receivable - current -- 65
Other assets 125 152
------- -------
Total assets $ 57,288 $ 58,758
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits $ 42,997 $ 44,088
Advances from borrowers for taxes
and insurance 258 309
Income taxes payable - current 35 --
Deferred income taxes 366 393
Other liabilities 281 239
------- -------
Total liabilities 43,937 45,029
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, 887,814 and 856,449 issued and
843,424 and 856,449 outstanding at June 30,
1996 and September 30, 1995, respectively 9 9
Paid-in capital 8,407 7,989
Retained earnings - substantially restricted 6,526 6,402
Treasury Stock - at cost; 44,390 shares at
June 30, 1996 (585) --
Unearned compensation (1,007) (671)
Unrealized gain on investment securities
available-for-sale, net of applicable
deferred income taxes 1 --
------- -------
Total stockholders' equity 13,351 13,729
------- -------
Total liabilities and stockholders' equity $ 57,288 $ 58,758
See accompanying notes to Consolidated Financial Statements.
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) (Unaudited)
Quarter Ended June 30, Nine Months Ended June 30,
1996 1995 1996 1995
------ ------ ------ ------
(Dollars in thousands) (Dollars in thousands)
Interest Income:
Loans receivable $ 526 $ 432 $ 1,527 $ 1,264
Investment securities 166 189 553 575
Mortgage-backed and
related securities 106 95 322 296
Other interest-earning assets 136 121 385 253
------ ------ ------ ------
Total interest income 934 837 2,787 2,388
Interest Expense:
Customer deposits 472 440 1,402 1,203
------ ------ ------ ------
Net interest income 462 397 1,385 1,185
Provision for loan losses -- -- 5 2
------ ------ ------ ------
Net interest income after
provision for loan losses 462 397 1,380 1,183
Noninterest Income:
Gain on sale of investments -- -- 55 --
Gain on sale of loans -- -- -- 1
Banking service charges&fees 37 34 107 116
Loan late charges 1 2 5 6
Other 31 2 35 8
------ ------ ------ ------
Total noninterest income 69 38 202 131
Noninterest Expense:
Compensation and
employee benefits 162 135 483 391
Occupancy and equipment 34 34 104 102
Deposit insurance premium 24 25 75 76
Data processing 22 23 70 69
Printing, postage, stationery
and supplies 16 10 46 36
Professional fees 11 4 53 11
Other 43 41 122 123
------ ------ ------ ------
Total noninterest expense 312 272 953 808
------ ------ ------ ------
Income before taxes 219 163 629 506
Income Taxes 78 55 204 159
------ ------ ------ ------
Net income $ 141 $ 108 $ 425 $ 347
Earnings per share $ .19 $ .14 $ .52 $ .44
Dividends per share $ .125 $ .00 $ .350 $ .00
See accompanying notes to Consolidated Financial Statements.
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
------ ------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 425 $ 347
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 62 61
Premiums and discounts on mortgage-backed
securities and investment securities (92) (114)
Loss on loans, net of recoveries 5 --
Income reinvested FHLB Stock (8) --
Release of ESOP shares 45 --
Vesting of MRDP shares 37 --
Gain on sale of investments, available-for-sale (55) --
Gain on sale of loans -- (1)
Net change in operating accounts:
Accrued interest receivable 41 (133)
Other assets 26 12
Other liabilities 23 68
Income taxes payable - deferred (26) 24
Income taxes payable - current 100 (99)
------ ------
Net cash from operating activities 583 165
Cash flows from investing activities:
Purchase of investment securities
held-to-maturity (7,786) (3,993)
Purchase of investment securities
available-for-sale (1,080) --
Proceeds from maturities of investment
securities held-to-maturity 9,528 1,725
Proceeds from sale of investment securities
available-for-sale 266 --
Net change in certificates of deposit (377) 748
Proceeds from sales of loans -- 132
Net change in loans receivable (3,786) (730)
Proceeds from principal payments and maturities
of mortgage-backed securities held-to-maturity 648 445
Purchase of mortgage-backed securities
held-to-maturity (371) --
Purchase of property and equipment (19) (9)
------ ------
Net cash used in investing activities $ (2,977) $ (1,682)
See accompanying notes to Consolidated Financial Statements.
N S & L BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Nine Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
------ ------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings
accounts, and certificates of deposit $ (1,090) $ (2,123)
Net decrease in mortgage escrow funds (52) (52)
Cash dividend paid (282) --
Purchase of treasury stock (585) --
Proceeds from sale of common stock -- 7,304
------ ------
Net cash from (used in) financing activities (2,009) 5,129
------ ------
Net increase (decrease) in cash and
cash equivalents (4,403) 3,612
Cash and cash equivalents -
beginning of period 10,240 4,035
------ ------
Cash and cash equivalents -
end of period $ 5,837 $ 7,647
See accompanying notes to Consolidated Financial Statements.
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, 1996 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, 1996
interim financial statements. The results of operations for the periods ended
June 30, 1996 and 1995 are not necessarily indicative of the operating results
for the full year. The September 30, 1995 Consolidated Statement of Financial
Condition presented with the interim financial statements was audited and
received an unqualified opinion.
NOTE B - Formation of Holding Company and Conversion to Stock Form
On June 7, 1995, N S & L Bancorp, Inc. ("Registrant" or "Company") became
the holding company for Neosho Savings and Loan Association, F.A. ("Neosho
Savings and Loan" or "Association") upon the Association's conversion from a
federally chartered mutual savings and loan association to a federally
chartered capital stock savings and loan association. The conversion was
accomplished through the sale and issuance by the Registrant of 856,449 shares
of common stock at $10.00 per share. Proceeds from the sale of common stock,
net of issuance costs incurred of $575,000 were $7,989,490, inclusive of
$685,160 related to shares held by the ESOP plan. The financial statements
included herein have not been restated as a result of the consummation of the
conversion.
NOTE C - Earnings per Share
Earnings per share are presented based on the average shares issued and
outstanding during the periods. Common stock equivalents, composed of stock
options outstanding, are not included in the calculations since the effect is
immaterial to the periods presented.
NOTE D - Employee Stock Ownership Plan
In connection with the conversion to stock form as described in Note B, the
Association 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 ten years.
N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE D - Employee Stock Ownership Plan (continued)
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 compensation 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 $14,816 for the
three months and $45,223 for the nine months ended June 30, 1996.
A summary of ESOP shares at June 30, 1996 is as follows:
Shares allocated 1,396
Shares committed for release 3,474
Unreleased shares 63,646
------
Total 68,516
Fair value of unreleased shares $ 795,575
NOTE E - Accounting Changes
On October 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which established three
classifications of investment securities: held-to-maturity, trading and
available-for-sale. Trading securities are acquired principally for the
purpose of near term sales. Such securities are reported at fair value and
unrealized gains and losses are included in income. Securities which are
designated as held-to-maturity are designated as such because the investor has
the ability and the intent to hold these securities to maturity. Such
securities are reported at amortized cost.
N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE E - Accounting Changes (continued)
All other securities are designated as available-for-sale, a designation
which provides the investor with certain flexibility in managing its
investment portfolio. Such securities are reported at fair value: net
unrealized gains and losses are excluded from income and reported net of
applicable income taxes as a separate component of stockholders' equity.
In adopting SFAS No. 115, the Company modified its accounting policies and
designated its securities in accordance with the three classifications. The
Company's adoption of SFAS No. 115 resulted in the classification of all
securities to the held-to-maturity portfolio. Purchases since the adoption of
SFAS No. 115 have resulted in the designation of some securities as available-
for-sale. At June 30, 1996, the Company had securities designated as
available-for-sale with a face value of $870,000.
Effective June 7, 1995, the Company adopted Statement of Position ("SOP")
93-6, "Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6
applies to shares acquired by employee stock ownership plans after December
31, 1992 but not yet committed to be released as of the beginning of the year
SOP 93-6 is adopted. SOP 93-6 changes the measure of compensation expense
recorded by employers for leveraged employee stock ownership plans from the
cost of the ESOP shares to the fair value of the ESOP shares. Under SOP 93-6,
the Company recognizes the compensation cost equal to the fair value of the
ESOP shares during the periods in which they become committed to be released.
To the extent that fair value of the Association's employee stock ownership
plan share differ from the cost of such shares, this differential will be
charged or credited to equity. Employers with internally leveraged employee
stock ownership plans such as the Company will not report the loans receivable
from the ESOP as an asset and will not report the ESOP debt from the employer
as a liability.
Effective October 1, 1995, the association implemented SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This statement requires a
lender to consider a loan to be impaired if the lender believes it is probable
it will be unable to collect all principal and interest due according to the
contractual terms of the loan. If a loan is impaired, the lender will be
required to record a loan valuation allowance equal to the present value of
the estimated future cash flows discounted at the loan s effective rate. Also
implemented was SFAS No. 118, "Accounting for Creditors for Impairment of a
Loan - Income Recognition and Disclosures", which amends SFAS No. 114 to allow
a creditor to use existing methods for recognizing interest income on impaired
loans and eliminates the income recognition provisions in SFAS No. 114. The
association monitors and evaluates all loans monthly. Any loans over 90 days
are non accrual loans but not necessarily impaired. An impaired loan is
considered by management, based on current information and events, to be
probable that all amounts due according to the contractual terms of the loan
agreement will be uncollectable. The probability of uncollectability is based
on management s normal review procedures. All insignificant delays and short
falls in the amount of payments are not considered to impair a loan. At the
period ending June 30, 1996, the Association considered none of its loans to
be impaired.
N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Unaudited)
(continued)
NOTE F - 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
Bank. Collectively, the Board issued 34,258 shares of the Bank s common
stock, of which 31,365 shares have been awarded at a cost of $407,745 . The
MRDP shares will vest and be 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
$20,388 for the three months and $37,377 for the nine months ended June 30,
1996.
Also adopted on January 17, 1996 was a Stock Option plan whereby 85,645
shares of the Bank'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.
NOTE G - Recapitalization of SAIF and Proposed Recapture of Bad Debt Reserve
In 1995, the FDIC substantially reduced deposit insurance premiums for well
- -capitalized, well-managed financial institutions that are members of the Bank
Insurance Fund ( BIF ). Under the new assessment schedule, approximately 92%
of BIF members pay the statutory minimum annual assessment of $2,000. With
respect to SAIF members institutions, the FDIC has retained the existing rate
schedule of 23 to 31 basis points.
Proposed federal legislation would recapitalize the SAIF and resolve the
current premium disparity by requiring savings associations like the
Association to pay a one-time assessment to increase the SAIF s reserves to
$1.25 per $100 of deposits. The assessment is expected to be approximately 80
basis points on the amount of deposits held by a SAIF-member institution at
March 31, 1995 The payment of a one-time fee would have the effect of
immediately reducing the capital and pre-tax earnings of SAIF-member
institutions by the amount of the fee. Based on the Association s assessable
deposits of $43.1 million at March 31, 1995, a one-time assessment of 80 basis
points would equal approximately $345,000. Management cannot predict whether
any legislation, including legislation imposing such a fee, will be enacted,
or, if enacted, the amount of any one-time fee or whether ongoing SAIF
premiums will be reduced to a level equal to that of BIF premiums.
Proposed legislation would repeal the reserve method of accounting for
thrift bad debt reserves (the percentage-of-taxable-income method) for tax
years beginning after December 31, 1995. This would require the Association
to account for bad debts using the experience method or specific charge-off
method. Under the proposed legislation, the change in accounting method that
eliminates the special reserve method would trigger bad debt reserve recapture
for post-1987 excess reserves over a six-year period. At September 30, 1995,
the Association's post-1987 excess reserves amounted to $326,000. A special
provision suspends recapture of post-1987 excess reserves for up to two years
if, during those years, the institution satisfies a residential loan
requirement . This requirement would be met if the principal amount of the
institution's residential loans exceeds a base year amount, which is
determined by reference to the average of the institution s loans during the
six taxable years ending before January 1, 1996.
N S & L BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE G - Recapitalization of SAIF and Proposed Recapture of Bad Debt Reserve
(continued)
However, not withstanding this special provision, recapture would be
required to begin no later than the first taxable year beginning after
December 31, 1997. Management cannot predict whether the legislation
providing for the recapture of bad debt reserves will be enacted, or, if
enacted, the final form of such legislation and its ultimate impact on the
Company.
NOTE H - Stock Repurchase Program
NS&L Bancorp, Inc. received approval from the Office of the Thrift
Supervision to begin a stock repurchase program to acquire up to approximately
44,390 shares, or approximately 5% of the Corporation s outstanding common
stock. The program began on April 10, 1996 and was completed on May 6, 1996.
The repurchases were conducted through open market purchases, although
unsolicited negotiated transactions or other types of repurchases could have
been effected. The price paid for the shares purchased in the open market did
not exceed the lowest current independent offer quotation reported on the
NASDAQ Small-Cap Market. The number of shares purchased in the open market
during any day generally was not to exceed 25% of the average daily trading
volume of the common stock over the preceding four weeks, except for block
purchases. When the stock repurchase was completed, 44,390 shares had been
repurchased in the open market at a cost of $584,768.
The Company applied for another stock repurchase program on June 28, 1996 to
repurchase 10% of the Corporation s outstanding common stock, or approximately
84,342 shares. On July 26, 1996, the Company received regulatory approval of
the stock repurchase program. The Company completed this repurchase on August
1, 1996 under the same guidelines as the previous 5% repurchase program. A
total of 84,342 shares were purchased at a cost of $1,091,175.
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,
1995, as well as certain changes in results of operations during the three and
nine month periods ended June 30, 1996 and 1995.
The following should be read in conjunction with the Company's 10-KSB for
the year ended September 30, 1995, 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,
1995, 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 decreased $4.4 million during the nine months
ended June 30, 1996. Net loans increased $3.8 million during the nine month
period to $29.7 million as of June 30, 1996 from $25.9 million at September
30, 1995. Investment securities decreased $787,000 to $12.4 million. Loans
for 1 to 4 family dwellings comprised the majority of the increase in loans.
Cash on hand and proceeds from maturing investments primarily funded the
growth in loans. Certificates of deposit increased $377,000 to $2.3 million.
Nonperforming assets were $11,000 or .02% of total assets at June 30,
1996, compared to $89,000, or .1% of total assets at September 30, 1995.
There were no nonaccrual loans at June 30, 1996, decreasing from $49,000 at
September 30, 1995.
Comparison of the Three Months Ended June 30, 1996 to the Three Months Ended
June 30, 1995
Net Income. Net income was $141,000 for the quarter ended June 30, 1996
compared to $108,000 for the quarter ended June 30, 1995. Net interest income
after provision for loan losses increased $65,000, noninterest income
increased $31,000 and noninterest expense increased $40,000. Income tax
expense increased $23,000 due to the increase in income before income tax.
Net Interest Income. Net interest income of $462,000 for the quarter
ended June 30, 1996 increased by $65,000, or 16.4% from $397,000 for the
quarter ended June 30, 1995. Interest income increased $97,000 while interest
expense increased $32,000.
Interest Income. Interest income increased by $97,000 or 11.6% to
$934,000 for the quarter ended June 30, 1996 from $837,000 for the quarter
ended June 30, 1995. Interest income from loans receivable increased $94,000
to $526,000 for the quarter ended June 30, 1996 from $432,000 for the quarter
ended June 30, 1995. The increase was primarily attributable to the increase
in average loans outstanding and to a lesser extent to interest rate increases
on existing adjustable rate loans. Cash on hand from the proceeds of the
Company's stock offering completed in June 1995 funded the increased balances
in loans. Interest income from investment securities decreased by $23,000 to
$166,000 for the quarter ended June 30, 1996 from $189,000 for the quarter
ended June 30, 1995. This decrease was due to a decrease in the balances and
average rates in investment securities. Interest income from mortgage-backed
securities increased by $11,000 to $106,000 for the quarter ended June 30,
1996 from $95,000 for the quarter ended June 30, 1995.
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The increase was due to an increase in the average balances in
mortgage-backed securities. Interest income from other interest-earning
assets increased by $15,000 to $136,000 for the quarter ended June 30, 1996
from $121,000 for the quarter ended June 30, 1995. This increase was
primarily due to proceeds from the stock conversion being invested in daily
interest-bearing deposits and an increase in the interest rates paid on these
deposits.
Interest Expense. Interest expense of $472,000 for the quarter ended
June 30, 1996 increased $32,000, or 7%, from $440,000 for the quarter ended
June 30, 1995. The increase is attributable to an increase in the rates paid
on customer deposits caused by increases in market rates of interest.
Provision for Loan Losses. Loan loss provisions were zero for both
quarters. Actual loan losses net of recoveries were zero for both quarters.
Noninterest Income. Noninterest income of $69,000 for the quarter ended
June 30, 1996 increased $31,000 from $38,000 for the quarter ended June 30,
1995. This increase was primarily due to the gain on the sale of equity in
assets sold by the Association's data processor.
Noninterest Expense. Noninterest expense increased $40,000, or 14.7%, to
$312,000 for the quarter ended June 30, 1996 from $272,000 for the quarter
ended June 30, 1995. This increase was largely due to a $27,000 increase in
compensation and employee benefits which is due to the implementation of the
ESOP and MRDP and annual salary increases effective October 1, 1995.
Professional fees increased $7,000 to $11,000 for the quarter ended June 30,
1996 from $4,000 for the quarter ended June 30, 1995. The increase in
professional fees is attributable to legal and accounting services necessary
in the normal operations of the Company.
Net Interest Margin. Net interest margin increased to 3.29% for the
three months ended June 30, 1996 from 3.03% for the three months ended June
30, 1995. Income from earning assets increased by $97,000, or 11.6%, between
the two quarters while interest expense increased by $32,000, or 7.3%. The
average earning asset base increased by $3.9 million, or 7.5%. The average
interest-bearing liability base decreased by $1.6 million, or 3.6%.
Comparison of the Nine Months Ended June 30, 1996 to the Nine Months Ended
June 30, 1995
Net Income. Net income increased $78,000 to $425,000 for the nine months
ended June 30, 1996 from $347,000 for the nine months ended June 30, 1995.
Net interest income after provision for loan losses increased by $197,000 to
$1.4 million for the nine months ended June 30, 1996 from $1.2 million for the
nine months ended June 30, 1995. Noninterest income increased by $71,000,
noninterest expense increased by $145,000 and income taxes increased by
$45,000 due to the increase in income before income tax expense.
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 $1.4 million for the nine
months ended June 30, 1996 increased $197,000 from net interest income of $1.2
million for the nine months ended June 30, 1995. Total interest income
increased by $399,000 while interest expense increased by $199,000.
Interest Income. Total interest income increased $399,000 to $2.8
million for the nine months ended June 30, 1996 from $2.4 million for the nine
months ended June 30, 1995. The increase was comprised primarily of increases
in income from loans receivable, daily interest-earning deposits and
mortgage-backed securities. The interest income from loans increased by
$263,000 to $1.5 million for the nine months ended June 30, 1996 from $1.3
million for the nine months ended June 30, 1995. This increase was primarily
due to the increase in the average outstanding loan balances and increased
average loan rates during the two periods. Income on mortgage-backed
securities increased by $26,000 to $322,000 for the nine months ended June 30,
1996 from $296,000 for the nine months ended June 30, 1995. This increase was
primarily due to the increase in the average balance of investments in
mortgage-backed securities. Income from daily interest-earning assets
increased by $132,000 to $385,000 for the nine months ended June 30, 1996 from
$253,000 for the nine months ended June 30, 1995. Conversion proceeds
increased the average balances in interest bearing accounts and loans during
the nine months ended June 31, 1996, resulting in increased income.
Interest Expense. Total interest expense was $1.4 million for the nine
months ended June 30, 1996, a $199,000 increase from $1.2 million for the nine
months ended June 30, 1995. An increase in the average rates paid on customer
deposits was primarily responsible for this increase.
Provision for Loan Losses. Provision for loan losses increased by $3,000
to $5,000 for the nine months ended June 30, 1996 from $2,000 for the nine
months ended June 30, 1995. Actual loan losses, net of recoveries, were zero
for the nine months ended June 30, 1996 and June 30, 1995.
Noninterest Income. Noninterest income of $202,000 for the nine months
ended June 30, 1996 increased by $71,000 from $131,000 for the nine months
ended June 30, 1995. This increase was due to the gain on the sale of
investments of $55,000 and equity in assets sold by the Association s data
processor of $27,000 and was offset by a decrease in service charges of $9,000
to $107,000 for the nine months ended June 30, 1996 from $116,000 for the nine
months ended June 30, 1995.
Noninterest Expense. Noninterest expense increased by $145,000 to
$953,000 for the nine months ended June 30, 1996 from $808,000 for the nine
months ended June 30, 1995. Compensation and employee benefits increased by
$92,000 due to the implementation of the ESOP and MRDP and annual salary
increases effective October 1, 1995. Professional fees increased $42,000 to
$53,000 for the period ending June 30, 1996 from $11,000 for the period ending
June 30, 1995. The increase was primarily attributable to accounting and legal
expenses necessary in the normal operations of the Company.
N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net Interest Margin. Net interest margin of 3.31% for the nine months
ended June 30, 1996 increased .10% from 3.21% for the nine months ended June
30, 1995. Income from earning assets increased by $399,000, or 16.7% between
the two periods while interest expense increased by $199,000, or 16.5%. The
average earning asset base increased by $6.6 million or 13.3%. The average
interest-bearing liability base decreased by $887,000 or 2%.
Liquidity and Capital Resources
Neosho Savings and Loan's primary sources of funds are deposits, proceeds
from principal and interest payments on loans, mortgage-backed securities,
investment securities and net operating income. 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. At June 30, 1996, Neosho Savings and Loan had approved loan
commitments totaling $309,000 and undisbursed loans in process of $315,000.
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 2% is expected to
remain basically constant. Interest expense is expected to gradually increase
as the rates on existing interest bearing transaction accounts are increased
and maturing certificates of deposit are reinvested at currently higher
interest rates. The interest expense increase is expected to be partially
offset as interest rates are increased on current adjustable-rate loans and
securities and as maturing investments are reinvested at higher interest
rates. Customer deposits are expected to remain stable.
At June 30, 1996, certificates of deposit amounted to $27 million, or 63%
of Neosho Savings and Loan's total deposits, including $20.4 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.
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 37.25% and its short-term liquidity ratio was 14.60% at
June 30,1996. 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 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, 1996.
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in thousands)
------- ------------
Tangible capital $10,240 18.6%
Tangible capital requirement 826 1.5
Excess $ 9,414 17.1%
Core capital $10,240 18.6%
Core capital requirement 1,652 3.0
Excess $ 8,588 15.6%
Risk-based capital $10,284 49.6%
Risk-based capital requirement 1,660 8.0
Excess $ 8,624 41.6%
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
In a Form 8-K filed on April 11, 1996, the Company announced it had
received approval from the OTS to commence a stock repurchase program to
acquire up to approximately 44,390 shares, or approximately 5% of its
outstanding common stock over a twelve month period.
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 2, 1996 By: /s/ C.R. Butler
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C.R. "Rick" Butler
President & CEO
By: /s/ Carol Guest
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Carol Guest
Treasurer