Attached files
(LOGO)
December 9, 2009
Dear Shareholder:
We have had better years, in better economic environments, but our
strategy of attempting to make loans to able borrowers, secured by
sufficient collateral, continues to be successful. In the past year,
we approximately doubled our net income, to $18,709,000, as our net
interest margin increased from 2.55% to 3.41%, and we enjoyed a large
increase in non-interest income, primarily from increased residential
lending and gains from securities transactions. We also substantially
increased our provisions for loan losses. We don't have a crystal ball
to predict how long or how deep this "Great Recession" will continue to
create problems in almost every aspect of real estate lending, but we
are continuing to position ourselves to deal with present and future
issues.
This is the twentieth year that has been my privilege of writing
the annual letter to NASB Financial shareholders. As in 1990, I remain
confident that there is a place in our financial markets for a small
institution that specializes in real estate lending. I am still
optimistic that our best results will be in the future.
Thank you for your continuing support of NASB.
Sincerely,
/s/ David H. Hancock
David H. Hancock
Board Chairman
1
FINANCIAL, INC.
2009 ANNUAL REPORT
-------------------------------------------------------------------
CONTENTS
1 Letter to Shareholders
2 Contents and Financial Highlights
3 Selected Consolidated Financial and Other Data
4-15 Management's Discussion and Analysis of Financial Condition and
Results of Operations
16-51 Consolidated Financial Statements
52 Report of Independent Registered Public Accounting Firm
53 Summary of Unaudited Quarterly Operating Results and Listing
of Directors
54 Listing of Officers and Other Disclosures
55 Listing of Branch Offices and Investor Information
56 Common Stock Prices and Dividends
FINANCIAL HIGHLIGHTS
2009 2008 2007 2006 2000 1990
---------------------------------------------------------------
Dollars in thousands, except per share data
For the year ended September 30:
Net interest income $ 47,405 39,015 41,679 46,611 35,838 7,983
Net interest spread 2.95% 2.36% 2.53% 2.87% 3.71% 1.99%
Other income $ 40,494 18,407 21,198 24,524 9,409 2,774
General and administrative expenses 46,716 36,819 36,329 37,248 20,120 8,169
Net income (loss) 18,790 9,296 15,319 20,768 14,721 (369)
Basic earnings per share 2.38 1.18 1.89 2.47 1.66 (0.18)
Cash dividends paid 7,080 7,080 7,337 9,468 3,370 --
Dividend payout ratio 37.84% 76.16% 47.90% 45.59% 22.89% --
At year end:
Assets $ 1,559,562 1,516,761 1,506,483 1,524,796 984,525 388,477
Loans, net 1,320,362 1,344,520 1,316,592 1,338,171 914,012 180,348
Investment securities 80,618 60,059 80,881 97,634 20,451 179,599
Customer and brokered deposit accounts 904,625 769,379 855,536 851,042 621,665 333,634
Stockholders' equity 166,388 152,412 149,392 156,572 83,661 16,772
Book value per share 21.15 19.37 18.99 18.82 9.84 1.83
Basic shares outstanding (in thousands) 7,868 7,868 7,868 8,319 8,500 9,148
Other financial data:
Return on average assets 1.22% 0.61% 1.01% 1.35% 1.63% (0.20)%
Return on average equity 11.74% 6.16% 10.01% 13.60% 18.12% (2.50)%
Stockholders' equity to assets 10.67% 10.05% 9.92% 10.27% 8.50% 4.30%
Average shares outstanding (in thousands) 7,868 7,868 8,101 8,397 8,863 8,116
Selected year end information:
Stock price per share: Bid $ 25.96 29.41 35.76 39.79 14.50 1.03
Ask 26.27 31.00 35.80 39.90 15.50 1.13
Per share amounts have been adjusted to give retroactive effect to the
four-for-one stock split, which occurred during the fiscal year ended
September 30, 1999.
2
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables include selected information concerning the
financial position of NASB Financial, Inc., (including consolidated
data from the operations of subsidiaries) for the years ended September
30. Dollar amounts are expressed in thousands, except per share data.
SUMMARY STATEMENT OF OPERATIONS 2009 2008 2007 2006 2005
-----------------------------------------------------------------------------------------
Interest income $ 89,825 95,521 103,818 99,132 83,773
Interest expense 42,420 56,506 62,139 52,521 32,474
------------------------------------------------
Net interest income 47,405 39,015 41,679 46,611 51,299
Provision for loan losses 11,250 6,200 1,634 745 522
------------------------------------------------
Net interest income after provision
for loan losses 36,155 32,815 40,045 45,866 50,777
Other income 40,494 18,407 21,198 24,524 28,512
General and administrative expenses 46,716 36,819 36,329 37,248 38,851
------------------------------------------------
Income before income tax expense 29,933 14,403 24,914 33,142 40,438
Income tax expense 11,224 5,107 9,595 12,374 14,612
------------------------------------------------
Net income $ 18,709 9,296 15,319 20,768 25,826
================================================
Earnings per share:
Basic $ 2.38 1.18 1.89 2.47 3.06
Diluted 2.38 1.18 1.88 2.46 3.05
Average shares outstanding (in thousands) 7,868 7,868 8,101 8,397 8,451
SUMMARY BALANCE SHEET 2009 2008 2007 2006 2005
-----------------------------------------------------------------------------------------
Assets:
Bank deposits $ 60,771 6,331 18,847 6,511 27,523
Stock in Federal Home Loan Bank 26,640 26,284 22,307 24,043 22,390
Securities 80,618 60,059 80,881 97,584 129,970
Loans receivable held for sale, net 81,367 64,030 47,233 50,462 94,130
Loans receivable held for
investment, net 1,238,995 1,280,490 1,269,359 1,287,709 1,226,514
Non-interest earning assets 71,171 79,567 67,856 58,487 55,817
-------------------------------------------------
Total assets $1,559,562 1,516,761 1,506,483 1,524,796 1,556,344
=================================================
Liabilities:
Customer & brokered deposit accounts $ 904,625 769,379 855,536 851,042 802,694
Advances from Federal Home Loan Bank 441,026 550,091 458,933 499,357 465,907
Subordinated debentures 25,774 25,774 25,774 -- --
Securities sold under agreements to
repurchase -- -- -- -- 122,000
Non-interest costing liabilities 21,749 19,105 16,848 17,825 16,856
-------------------------------------------------
Total liabilities 1,393,174 1,364,349 1,357,091 1,368,224 1,407,457
Stockholders' equity 166,388 152,412 149,392 156,572 148,887
-------------------------------------------------
Total liabilities and
stockholders' equity $1,559,562 1,516,761 1,506,483 1,524,796 1,556,344
=================================================
Book value per share $ 21.15 19.37 18.99 18.82 17.65
=================================================
OTHER DATA 2009 2008 2007 2006 2005
-------------------------------------------------
Loans serviced for others $ 93,350 65,253 84,735 101,076 107,131
Number of full service branches 9 9 9 8 8
Number of employees (full-time
equivalents) 367 322 312 362 441
Basic shares outstanding (in thousands) 7,868 7,868 7,868 8,319 8,437
3
GENERAL
NASB Financial, Inc. ("the Company") was formed in April 1998 to
become a unitary thrift holding company of North American Savings Bank,
F.S.B. ("the Bank" or "North American"). The Company's principal
business is to provide banking services through the Bank.
Specifically, the Bank obtains savings and checking deposits from the
public, then uses those funds to originate and purchase real estate
loans and other loans. The Bank also purchases mortgage-backed
securities ("MBS") and other investment securities from time to time as
conditions warrant. In addition to customer deposits, the Bank obtains
funds from the sale of loans held-for-sale, the sale of securities
available-for-sale, repayments of existing mortgage assets, and
advances from the Federal Home Loan Bank ("FHLB"). The Bank's primary
sources of income are interest on loans, MBS, and investment securities
plus income from lending activities and customer service fees.
Expenses consist primarily of interest payments on customer and
brokered deposits and other borrowings and general and administrative
costs.
The Bank operates nine deposit branch locations, three residential
loan origination branch offices, and one residential construction loan
origination office, primarily in the greater Kansas City area. The
Bank also operates one commercial real estate loan origination office
at it's headquarters in Grandview, Missouri. Consumer loans are also
offered through the Bank's branch network. Customer deposit accounts
are insured up to allowable limits by the Deposit Insurance Fund
("DIF"), a division of the Federal Deposit Insurance Corporation
("FDIC"). The Bank is regulated by the Office of Thrift Supervision
("OTS") and the FDIC.
FORWARD-LOOKING STATEMENTS
We may from time to time make written or oral "forward-looking
statements", including statements contained in our filings with the
Securities and Exchange Commission ("SEC"). These forward-looking
statements may be included in this annual report to shareholders and in
other communications by the Company, which are made in good faith by us
pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements include statements about our
beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, that are subject to significant risks and
uncertainties, and are subject to change based on various factors, some
of which are beyond our control. The words "may," "could," "should,"
"would," "believe," "anticipate," "estimate," "expect," "intend,"
"plan," and similar expressions are intended to identify forward-
looking statements. The following factors, among others, could cause
our financial performance to differ materially from the plans,
objectives, goals, expectations, anticipations, estimates and
intentions expressed in the forward-looking statements:
- the strength of the U.S. economy in general and the strength of the
local economies in which we conduct operations;
- the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve
Board;
- the effects of, and changes in, foreign and military policy of the
United States Government; inflation, interest rate, market and monetary
fluctuations;
- the timely development and acceptance of our new products and
services and the perceived overall value of these products and services
by users, including the features, pricing and quality compared to
competitors' products and services;
- the willingness of users to substitute competitors' products and
services for our products and services;
- our success in gaining regulatory approval of our products, services
and branching locations, when required;
- the impact of changes in financial services' laws and regulations,
including laws concerning taxes, banking, securities and insurance;
- technological changes;
- acquisitions and dispositions;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in our business.
This list of important factors is not all-inclusive. We do not
undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company
or the Bank.
4
FINANCIAL CONDITION
Total assets as of September 30, 2009, were $1,559.6 million, an
increase of $42.8 million from the prior year-end. Average interest-
earning assets increased $19.0 million from the prior year to $1,491.1
million.
As the Bank originates loans each month, management evaluates the
existing market conditions to determine which loans will be held in the
Bank's portfolio and which loans will be sold in the secondary market.
Residential mortgage loans sold in the secondary market are sold with
servicing released or converted into mortgage-backed securities ("MBS")
and sold with the servicing retained by the Bank. At the time of each
loan commitment, a decision is made to either hold the loan for
investment, hold it for sale with servicing retained, or hold it for
sale with servicing released. Management monitors market conditions to
decide whether loans should be held in the portfolio or sold and if
sold, which method of sale is appropriate. During the year ended
September 30, 2009, the Bank originated $1,563.4 million in mortgage
loans held for sale, $234.9 million in mortgage loans held for
investment, and $4.4 million in other loans. This total of $1,802.6
million in loan originations was an increase of $567.8 million over the
prior fiscal year.
Loans held for sale as of September 30, 2009, were $81.4 million,
and consisted entirely of residential mortgage loans held for sale with
servicing released. As of October 1, 2008, the Company elected to
carry loans held for sale at fair value, as permitted under GAAP.
The balance of total loans held for investment at September 30,
2009, was $1,259.7 million, a decrease of $34.6 million from September
30, 2008. This decrease related primarily to the Bank's construction
and development loan portfolio. During fiscal 2009, total originations
and purchases of mortgage loans and other loans held for investment
were $240.8 million. The gross balance of loans on business properties
was $474.5 million at September 30, 2009, compared to $478.9 million as
of the previous year-end. The gross balance of construction and
development loans was $329.5 million at September 30, 2009, a decrease
of $67.3 million.
The balance of mortgage servicing rights at September 30, 2009,
was $351,000, a decrease of $365,000 from September 30, 2008.
Originated mortgage servicing rights of $10,000 were capitalized during
the year ended September 30, 2009. The total outstanding balance of
mortgage loans serviced for others was $93.3 million, an increase of
$28.0 million from the prior fiscal year-end.
The following graphs summarize the Company's total assets as of
September 30, 2009 and 2008:
Total Assets - Fiscal 2009
Percent of
Asset Category Total Assets
-------------- -------------
Permanent loans on business properties 30%
Permanent loans on residential properties 28%
Construction and development loans 18%
Cash and investments 11%
Other loans 9%
Other non-earning assets 4%
------
100%
======
5
Total Assets - Fiscal 2008
Percent of
Asset Category Total Assets
-------------- -------------
Permanent loans on business properties 33%
Permanent loans on residential properties 28%
Construction and development loans 21%
Cash and investments 7%
Other loans 7%
Other non-earning assets 4%
------
100%
======
Total liabilities were $1,393.2 million at September 30, 2009, an
increase of $28.8 million from the previous year. Average interest-
costing liabilities during fiscal year 2009 were $1,383.9 million, an
increase of $17.4 million from fiscal 2008.
Total customer deposit accounts at September 30, 2009, were $696.8
million, an increase of $5.2 million from the prior year-end. The
total change in customer deposits was comprised of increases of $3.6
million in demand deposit accounts, $1.6 million in money market demand
accounts and $10.4 million in savings accounts, offset by a decrease of
$10.4 million in certificate of deposit accounts. Additionally, the
Company held a total of $207.8 million in brokered deposits at
September 30, 2009, an increase of $130.0 million from September 30,
2008. The average interest rate on customer and brokered deposits at
September 30, 2009, was 2.23%, a decrease of 115 basis points from the
prior year-end. The average balance of customer and brokered deposits
during fiscal 2008 was $867.9 million, an increase of $62.7 million
from fiscal 2008.
Advances from the FHLB were $441.0 million at September 30, 2009,
a decrease of $109.1 million from the prior fiscal year-end. During
fiscal year 2009, the Bank borrowed $444.0 million of new advances and
made $553.0 million of repayments. Management continues to use FHLB
advances as a primary funding source to provide operating liquidity and
to fund the origination of mortgage loans.
Subordinated debentures were $25.8 million as of September 30,
2009. Such debentures resulted from the issuance of pooled Trust
Preferred Securities through the Company's wholly owned statutory trust,
NASB Preferred Trust I during fiscal 2007. The Trust used the proceeds
from the offering to purchase a like amount of the Company's
subordinated debentures. The debentures, which have a variable rate of
1.65% over the 3-month LIBOR and a 30-year term, are the sole assets of
the Trust. The debentures are callable, in whole or in part, after
five years from the issuance date.
During the year ended September 30, 2009, the Company paid a total
of $7.1 million in cash dividends to its stockholders.
6
NET INTEREST MARGIN
The Bank's net interest margin is comprised of the difference
("spread") between interest income on loans, MBS, and investments and
the interest cost of customer and brokered deposits, FHLB advances, and
other borrowings. Management monitors net interest spreads and,
although constrained by certain market, economic, and competition
factors, it establishes loan rates and customer deposit rates that
maximize net interest margin.
During fiscal year 2009, average interest-earning assets exceeded
average interest-costing liabilities by $107.1 million, which was 6.9%
of average total assets. In fiscal year 2008, average interest-earning
assets exceeded average interest-costing liabilities by $105.6 million,
which was 6.9% of average total assets.
The net interest spread (earning yield less costing rate) for the
fiscal year ended September 30, 2009, was 2.95%, an increase of 59
basis points from the prior year. The net interest spread for the
fiscal year ended September 30, 2008, was 2.36%, a decrease of 17 basis
points from the prior year.
The table below presents the total dollar amounts of interest
income and expense on the indicated amounts of average interest-earning
assets or interest-costing liabilities, with the average interest rates
for the year and at the end of each year. Average yields reflect yield
reductions due to non-accrual loans. Average balances and weighted
average yields at year-end include all accrual and non-accrual loans.
Dollar amounts are expressed in thousands.
As of
Fiscal 2009 9/30/09
---------------------------
Average Yield/ Yield/
Balance Interest Rate Rate
----------------------------------------
Interest-earning assets:
Loans receivable $ 1,352,561 84,934 6.28% 6.29%
Mortgage-backed securities 54,674 2,042 3.73% 4.48%
Investments 57,554 2,750 4.78% 3.51%
Bank deposits 26,264 99 0.38% 0.01%
----------------------------------------
Total earning assets 1,491,053 89,825 6.02% 5.88%
-----------------------------
Non-earning assets 65,063
----------
Total $ 1,556,116
==========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 169,124 1,487 0.88% 0.80%
Customer and brokered
certificates of deposit 698,747 23,524 3.37% 2.58%
FHLB advances 491,040 16,552 3.37% 2.99%
Subordinated debentures 25,000 857 3.42% 2.14%
----------------------------------------
Total costing liabilities 1,383,911 42,420 3.07% 2.47%
-----------------------------
Non-costing liabilities 13,617
Stockholders' equity 158,588
----------
Total $ 1,556,116
==========
Net earning balance $ 107,142
==========
Earning yield less costing rate 2.95% 3.41%
===================
Average interest-earning
assets $ 1,491,053
==========
Net interest 47,405
========
Net yield spread on avg.
Interest-earning assets 3.18%
========
As of
Fiscal 2008 9/30/08
---------------------------
Average Yield/ Yield/
Balance Interest Rate Rate
----------------------------------------
Interest-earning assets:
Loans receivable $ 1,363,032 91,635 6.72% 6.49%
Mortgage-backed securities 71,196 2,546 3.58% 4.10%
Investments 25,909 1,086 4.19% 4.00%
Bank deposits 11,953 254 2.12% 1.22%
----------------------------------------
Total earning assets 1,472,090 95,521 6.49% 6.32%
-----------------------------
Non-earning assets 61,057
----------
Total $ 1,533,147
==========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 166,076 1,925 1.16% 1.01%
Customer and brokered
certificates of deposit 639,113 28,814 4.51% 4.21%
FHLB advances 536,344 24,410 4.55% 4.07%
Subordinated debentures 25,000 1,357 5.43% 4.45%
----------------------------------------
Total costing liabilities 1,366,533 56,506 4.13% 3.77%
-----------------------------
Non-costing liabilities 15,291
Stockholders' equity 151,323
----------
Total $ 1,533,147
==========
Net earning balance $ 105,557
==========
Earning yield less costing rate 2.36% 2.55%
===================
Average interest-earning
assets $ 1,472,090
==========
Net interest 39,015
========
Net yield spread on avg.
Interest-earning assets 2.65%
========
As of
Fiscal 2007 9/30/07
---------------------------
Average Yield/ Yield/
Balance Interest Rate Rate
----------------------------------------
Interest-earning assets:
Loans receivable $ 1,339,370 99,067 7.40% 7.15%
Mortgage-backed securities 89,972 3,157 3.51% 4.19%
Investments 25,145 1,254 4.99% 4.25%
Bank deposits 7,506 340 4.53% 4.27%
----------------------------------------
Total earning assets 1,461,993 103,818 7.10% 6.90%
-----------------------------
Non-earning assets 63,799
----------
Total $ 1,525,792
==========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 169,264 2,036 1.20% 1.20%
Customer and brokered
certificates of deposit 650,273 31,476 4.84% 5.09%
FHLB advances 512,341 26,811 5.23% 5.08%
Subordinated debentures 20,269 1,421 7.01% 7.01%
Repurchase agreements 7,546 395 5.23% --%
----------------------------------------
Total costing liabilities 1,359,693 62,139 4.57% 4.62%
-----------------------------
Non-costing liabilities 12,668
Stockholders' equity 153,431
----------
Total $ 1,525,792
==========
Net earning balance $ 102,300
==========
Earning yield less costing rate 2.53% 2.28%
===================
Average interest-earning
assets $ 1,461,993
==========
Net interest 41,679
========
Net yield spread on avg.
Interest-earning assets 2.85%
========
7
The following tables set forth information regarding changes in
interest income and interest expense. For each category of interest-
earning asset and interest-costing liability, information is provided
on changes attributable to (1) changes in rates (change in rate
multiplied by the old volume), (2) changes in volume (change in volume
multiplied by the old rate), and (3) changes in rate and volume
(change in rate multiplied by the change in volume). Average balances,
yields and rates used in the preparation of this analysis come from the
preceding table. Dollar amounts are expressed in thousands.
Year ended September 30, 2009
compared to
year ended September 30, 2008
----------------------------------------
Rate/
Rate Volume Volume Total
----------------------------------------
Components of interest income:
Loans receivable $ (5,998) (704) 1 (6,701)
Mortgage-backed securities 107 (591) (20) (504)
Investments 153 1,326 185 1,664
Bank deposits (208) 303 (250) (135)
----------------------------------------
Net change in interest income (5,946) 334 (84) (5,696)
----------------------------------------
Components of interest expense:
Customer and brokered
deposit accounts (7,568) 2,394 (554) (5,728)
FHLB advances (6,329) (2,061) 532 (7,858)
Subordinated debentures (503) -- 3 (155)
----------------------------------------
Net change in
interest expense (14,400) 333 (19) (14,086)
----------------------------------------
Increase (decrease) in net
interest income $ 8,454 1 (65) 8,390
========================================
Year ended September 30, 2008
compared to
year ended September 30, 2007
----------------------------------------
Rate/
Rate Volume Volume Total
----------------------------------------
Components of interest income:
Loans receivable $ (9,108) 1,751 (75) (7,432)
Mortgage-backed securities 63 (659) (15) (611)
Investments (201) 38 (5) (168)
Bank deposits (181) 201 (106) (86)
----------------------------------------
Net change in interest income (9,427) 1,331 (201) (8,297)
----------------------------------------
Components of interest expense:
Customer and brokered
deposit accounts (2,213) (587) 27 (2,773)
FHLB advances (3,484) 1,255 (172) (2,401)
Subordinated debentures (320) 332 (76) (64)
Repurchase agreements -- -- (395) (395)
----------------------------------------
Net change in
interest expense (6,017) 1,000 (616) (5,633)
----------------------------------------
(Decrease) increase in net
interest income $ (3,410) 331 415 (2,664)
========================================
COMPARISON OF YEARS ENDED SEPTEMBER 30, 2009 AND 2008
For the fiscal year ended September 30, 2009, the Company had net
income of $18.7 million, or $2.38 per share, compared to net income
$9.3 million, or $1.18 per share in the prior year.
Total interest income for the year ended September 30, 2009, was
$89.8 million, a decrease of $5.7 million from fiscal year 2008. The
average yield on interest-earning assets decreased during fiscal 2009
to 6.02% from 6.49% during fiscal 2008, which resulted in a decrease in
interest income of $5.9 million. The average balance of interest-
earning assets increased from $1,472.1 million during fiscal 2008 to
$1,491.1 million during fiscal 2009, resulting in an increase in
interest income of $334,000.
8
Interest income on loans decreased $6.7 million to $84.9 million
in fiscal 2009, compared to $91.6 million during fiscal 2008. A
decrease of $6.0 million resulted from a 44 basis point decrease in the
average yield on loans outstanding during the fiscal year. The
weighted average rate on loans receivable at September 30, 2009, was
6.29%, a 20 basis point decrease from September 30, 2008.
Additionally, interest income on loans decreased $704,000 resulting
from a $10.5 million decrease in the average balance of loans
outstanding over the prior year. Interest income on mortgage-backed
securities decreased $504,000 to $2.0 million in fiscal 2009, compared
to $2.5 million during fiscal 2008. A decrease of $591,000 resulted
from a $16.5 million decrease in the average balance of mortgage-backed
securities from the prior year. This decrease was partially offset by
a 15 basis point increase in the average yield on mortgage-backed
securities during the fiscal year. Interest and dividend income on
investment securities increased $1.7 million to $2.8 million in fiscal
2009, compared to $1.1 million during fiscal 2008. An increase of $1.3
million resulted from a $31.6 million increase in the average balance
of investment securities from the prior year. In addition, interest
and dividend income on investment securities increased as a result of a
59 basis point increase in the average yield on investment securities
during the fiscal year.
Total interest expense during the year ended September 30, 2009,
decreased $14.1 million from the prior year. Specifically, interest on
customer and brokered deposit accounts decreased $5.7 million during
fiscal 2009. Of that decrease, approximately $7.6 million resulted
from a 94 basis point decrease in the average rate paid on such
interest-costing liabilities. This decrease was partially offset by a
$62.7 million increase in the average balance of customer and brokered
deposits accounts from the prior year. The average rate paid on FHLB
advances decreased 118 basis points, which resulted in a decrease in
interest on FHLB advances of approximately $6.3 million from fiscal
year 2008. In addition, a decrease in interest on FHLB advances of
approximately $2.1 resulted from a $45.3 million decrease in the
average balance of FHLB advances over the prior period. Management
continues to use FHLB advances as a primary source of short-term
financing. Interest expense on subordinated debentures decreased
$500,000 resulting from a 201 basis point decrease in the average rate
paid on such liabilities from the prior year.
The Bank's net interest income is impacted by changes in market
interest rates, which have varied greatly over time. Changing interest
rates also affect the level of loan prepayments and the demand for new
loans. Management monitors the Bank's net interest spreads (the
difference between yields received on assets and paid on liabilities)
and, although constrained by market conditions, economic conditions,
and prudent underwriting standards, it offers deposit rates and loan
rates that maximize net interest income. Since the relative spread
between financial assets and liabilities is constantly changing, North
American's current net interest spread may not be an indication of
future net interest income.
The provision for losses on loans was $11.3 million during the
year ended September 30, 2009, compared to $6.2 million during fiscal
2008. The allowance for loan losses was $20.7 million or 1.64% of the
total loan portfolio held for investment and approximately 51% of total
nonaccrual loans as of September 30, 2009. This compares with an
allowance for loan losses of $13.8 million or 1.07% of the total loan
portfolio held for investment and approximately 39% of the total
nonaccrual loans as of September 30, 2008. The increase in the
allowance for loan loss of $6.9 million resulted from the $11.3 million
provision for loss, which was partially offset by net charge-offs for
the year of $4.4 million. The increase in the provision for loss from
the prior year related primarily to significant increases in loans
classified as substandard or loss. Additionally, management determined
that the significant increase in the allowance for loan loss was
appropriate due to the continued deterioration in the real estate
markets. With regard to loan portfolio concentrations at September 30,
2009, loans secured by business properties made up thirty-four percent
of the Bank's total loans receivable, and forty-three percent of the
allowance for loan losses was allocated to such loans. This compares
to thirty-four percent of total loans receivable and forty-one percent
of the allowance at September 30, 2008. At September 30, 2009, loans
secured by residential properties made up thirty-four percent of the
Bank's total loans receivable, and eighteen percent of the allowance for
loan losses was allocated to such loans. This compares to thirty-one
percent of total loans receivable and nine percent of the allowance at
September 30, 2008. At September 30, 2009, construction and
development loans made up twenty-three percent of the Bank's total loans
receivable, and thirty percent of the allowance for loan losses was
allocated to such loans. This compares to twenty-seven percent of
total loans receivable and forty-one percent of the allowance at
September 30, 2008. Management believes that the provision for loan
losses is sufficient to provide for a level of loan loss allowance at
year end that would adequately absorb all estimated credit losses on
outstanding balances over the subsequent twelve-month period.
9
Total other income for fiscal year 2009 was $40.5 million, an
increase of $22.1 million from the amount earned in fiscal year 2008.
Specifically, gain on sale of loans held for sale increased $15.0
million due to increased mortgage banking volume from the prior year.
Gain on sale of securities available for sale increased $4.4 million
due to the sale of corporate debt securities during the year.
Provision for loss on real estate owned decreased $1.3 million due to a
decrease in charge-offs of foreclosed assets during the year and due to
the elimination of general reserves related to foreclosed assets held
for sale, which are carried at fair value less estimated selling costs.
Customer service fees and charges increased $1.3 million due primarily
to an increase in miscellaneous loan origination fees resulting from
the increase in mortgage banking volume.
Total general and administrative expenses for fiscal 2009 were
$46.7 million, an increase of $9.9 million from the prior year.
Specifically, compensation and fringe benefits increased $2.1 million
due primarily to the addition of personnel in the Company's information
technology, mortgage banking, training, and loan servicing departments.
Commission-based mortgage banking compensation increased $6.0 million
due primarily to an increase in mortgage banking volume from the prior
year. Additionally, advertising and business promotion expense
increased $438,000 due primarily to increased costs related to the
mortgage banking operation. Federal deposit insurance premium expense
increased $1.1 million due to an increase in insurance rates during the
year and due to a $717,000 special assessment that was payable on
September 30, 2009.
COMPARISON OF YEARS ENDED SEPTEMBER 30, 2008 AND 2007
For the fiscal year ended September 30, 2008, the Company had net
income of $9.3 million, or $1.18 per share, compared to net income
$15.3 million, or $1.89 per share in the prior year.
Total interest income for the year ended September 30, 2008, was
$95.5 million, a decrease of $8.3 million from fiscal year 2007. The
average yield on interest-earning assets decreased during fiscal 2008
to 6.49% from 7.10% during fiscal 2007, which resulted in a decrease in
interest income of $9.4 million. The average balance of interest-
earning assets increased from $1,462.0 million during fiscal 2007 to
$1,472.1 million during fiscal 2008, resulting in an increase in
interest income of $1.3 million.
Interest income on loans decreased $7.4 million to $91.6 million
in fiscal 2008, compared to $99.1 million during fiscal 2007. A
decrease of $9.1 million resulted from a 68 basis point decrease in the
average yield on loans outstanding during the fiscal year. The
weighted average rate on loans receivable at September 30, 2008, was
6.49%, a 66 basis point decrease from September 30, 2007. This
decrease was partially offset by a $1.8 million increase in interest
income on loans resulting from a $23.7 million increase in the average
balance of loans outstanding over the prior year. Interest income on
mortgage-backed securities decreased $611,000 to $2.5 million in fiscal
2008, compared to $3.2 million during fiscal 2007. A decrease of
$659,000 resulted from a $18.8 million decrease in the average balance
of mortgage-backed securities from the prior year. This decrease was
partially offset by a 7 basis point increase in the average yield on
mortgage-backed securities during the fiscal year.
Total interest expense during the year ended September 30, 2008,
decreased $5.6 million from the prior year. Specifically, interest on
customer and brokered deposit accounts decreased $2.8 million during
fiscal 2008. Of that decrease, approximately $2.2 million resulted
from a 27 basis point decrease in the average rate paid on such
interest-costing liabilities, and a decrease of approximately $587,000
resulted from a $14.3 million decrease in the average balance of
customer and brokered deposits accounts from the prior year. The
average rate paid on FHLB advances decreased 68 basis points, which
resulted in a decrease in interest on FHLB advances of approximately
$3.5 million from fiscal year 2007. This decrease was partially offset
by a $1.3 million increase, which resulted from a $24.0 million
increase in the average balance of FHLB advances over the prior period.
Management continues to use FHLB advances as a primary source of short-
term financing. Interest expense on securities sold under agreements
to repurchase decreased $395,000 from the prior year due to the fact
that the Company had no such liabilities outstanding during fiscal
2008.
10
The provision for losses on loans was $6.2 million during the year
ended September 30, 2008, compared to $1.6 million during fiscal 2007.
The allowance for loan losses was $13.8 million or 1.07% of the total
loan portfolio held for investment and approximately 39% of total
nonaccrual loans as of September 30, 2008. This compares with an
allowance for loan losses of $8.1 million or 0.63% of the total loan
portfolio held for investment and approximately 245% of the total
nonaccrual loans as of September 30, 2007. The increase in the
allowance for loan loss of $5.7 million was due to the aforementioned
provision for loan loss resulting from management's analysis of the
Bank's loan portfolios, which was partially offset by net charge-offs
for the year of $490,000. The provision for loss on loans related
primarily to the significant increase in loans secured by business and
residential construction properties classified as substandard or loss
over the prior year. Additionally, management determined that the
significant increase in the allowance for loan loss was appropriate due
to the continued deterioration in the residential housing market. With
regard to loan portfolio concentrations at September 30, 2008, loans
secured by business properties made up thirty-four percent of the
Bank's total loans receivable, and forty-one percent of the allowance
for loan losses was allocated to such loans. This compares to thirty-
three percent of total loans receivable and fifty-three percent of the
allowance at September 30, 2007. At September 30, 2008, loans secured
by residential properties made up thirty-one percent of the Bank's
total loans receivable, and nine percent of the allowance for loan
losses was allocated to such loans. This compares to twenty-nine
percent of total loans receivable and thirteen percent of the allowance
at September 30, 2007. At September 30, 2008, construction and
development loans made up twenty-seven percent of the Bank's total
loans receivable, and forty-one percent of the allowance for loan
losses was allocated to such loans. This compares to thirty-three
percent of total loans receivable and twenty-one percent of the
allowance at September 30, 2007. Management believes that the
provision for loan losses is sufficient to provide for a level of loan
loss allowance at year end that would adequately absorb all estimated
credit losses on outstanding balances over the subsequent twelve-month
period.
Total other income for fiscal year 2008 was $18.4 million, a
decrease of $2.8 million from the amount earned in fiscal year 2007.
Specifically, provision for loss on real estate owned increased $1.5
million due to increased charge-offs on residential construction and
business properties. Customer service fees and charges decreased
$270,000 due to a decrease in miscellaneous loan origination fees
resulting from the decrease in mortgage banking volume, and a decrease
in appraisal fee income resulting from the elimination of the Company's
internal appraisal department in March 2008. Gain on sale of loans
receivable held for sale decreased $375,000 due to a decrease in
mortgage banking volume from the prior year. In addition, other income
decreased $742,000 due to decreases in income received on foreclosed
assets held for sale, loan prepayment penalties, official check
processing fee income, and the effect of recording the net fair value
of certain loan-related commitments in accordance with FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." These decreases were partially offset by a $122,000
increase in gain on sale of securities due to the redemption of Visa,
Inc. common stock during their initial public offering in March 2008.
Total general and administrative expenses for fiscal 2008 were
$36.8 million, an increase of $490,000 from the prior year.
Specifically, compensation, fringe benefits, and commission-based
mortgage banking compensation increased $158,000 due primarily to an
increase in mortgage banking spreads over the prior year. Premises and
equipment expense increased $510,000 due primarily to costs related to
a new loan origination system implemented in fiscal 2007.
Additionally, advertising and business promotion expense increased
$127,000 due primarily to increased costs related to the mortgage
banking operation. These increases were partially offset by a $306,000
decrease in other expense due to decreases in professional fees and
other lending-related costs resulting from the consolidation of loan
origination offices in fiscal 2007 and from the decrease in mortgage
banking volume for the fiscal year.
ASSET/LIABILITY MANAGEMENT
Management recognizes that there are certain market risk factors
present in the structure of the Bank's financial assets and
liabilities. Since the Bank does not have material amounts of
derivative securities, equity securities, or foreign currency
positions, interest rate risk ("IRR") is the primary market risk that
is inherent in the Bank's portfolio.
The objective of the Bank's IRR management process is to maximize
net interest income over a range of possible interest rate paths. The
monitoring of interest rate sensitivity on both the interest-earning
assets and the interest-costing liabilities are key to effectively
managing IRR. Management maintains an IRR policy, which outlines a
methodology for monitoring interest rate risk. The Board of Directors
reviews this policy and approves changes on a quarterly basis. The IRR
policy also identifies the duties of the Bank's Asset/Liability
Committee ("ALCO"). Among other things, the ALCO is responsible for
developing the Bank's annual business plan and investment strategy,
monitoring anticipated weekly cashflows, establishing prices for the
Bank's various products, and implementing strategic IRR decisions.
On a quarterly basis, the Bank monitors the estimate of changes
that would potentially occur to its net portfolio value ("NPV") of
assets, liabilities, and off-balance sheet items assuming a sudden
change in market interest rates. Management presents a NPV analysis to
the Board of Directors each quarter and NPV policy limits are reviewed
and approved.
11
The following table is an interest rate sensitivity analysis,
which summarizes information provided by the OTS that estimates the
changes in NPV of the Bank's portfolio of assets, liabilities, and off-
balance sheet items given a range of assumed changes in market interest
rates. These computations estimate the effect on the Bank's NPV of an
instantaneous and sustained change in market interest rates of plus and
minus 300 basis points, as well as the Bank's current IRR policy limits
on such estimated changes. The computations of the estimated effects
of interest rate changes are based on numerous assumptions, including a
constant relationship between the levels of various market interest
rates and estimates of prepayments of financial assets. The OTS
compiled this information using data from the Bank's Thrift Financial
Report as of September 30, 2009. The model output data associated with
the -200 and -300 basis point scenarios was suppressed because of the
relatively low current interest rate environment. Dollar amounts are
expressed in thousands.
NPV as % of PV of Assets
Changes in Net Portfolio Value ------------------------
Market ------------------------------------ Board approved
Interest rates $ Amount $ Change % Change Actual minimum
---------------------------------------------------- ------------------------
+ 3% 187,021 (42,905) -19% 12.1% 6%
+ 2% 200,815 (29,111) -13% 12.8% 6%
+ 1% 216,194 (13,732) -6% 13.6% 7%
no change 229,926 -- -- 14.2% 8%
- 1% 243,691 13,765 +6% 14.8% 8%
- 2% -- -- -- -- 8%
- 3% -- -- -- -- 8%
Management cannot predict future interest rates and the
effect of changing interest rates on future net interest
margin, net income, or NPV can only be estimated. However,
management believes that its overall system of monitoring and
managing IRR is effective.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and related data presented
have been prepared in accordance with accounting principles generally
accepted in the United States of America, which require the measurement
of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of
money over time due to inflation. Unlike most industrial companies,
most of the Bank's assets and liabilities are monetary in nature.
Except for inflation's impact on general and administrative expenses,
interest rates have a more significant impact on the Bank's performance
than do the effects of inflation. However, the level of interest rates
may be significantly affected by the potential changes in the monetary
policies of the Board of Governors of the Federal Reserve System in an
attempt to impact inflation. Interest rates do not necessarily move in
the same direction or in the same magnitude as the prices of goods and
services.
Changing interest rates impact the demand for new loans, which
affect the value and profitability of North American's loan origination
department. Rate fluctuations inversely affect the value of the Bank's
mortgage servicing portfolio because of their impact on mortgage
prepayments. Falling rates usually stimulate a demand for new loans,
which makes the mortgage banking operation more valuable, but also
encourages mortgage prepayments, which depletes the value of mortgage
servicing rights. Rising rates generally have the opposite effect on
these operations.
IMPACT OF CURRENT ECONOMIC CONDITIONS
The current economic environment presents financial institutions
with unprecedented circumstances and challenges which in some cases
have resulted in large declines in the fair values of investments and
other assets, constraints on liquidity and significant credit quality
problems, including severe volatility in the valuation of real estate
and other collateral supporting loans. The financial statements have
been prepared using values and information currently available to the
Company.
Given the volatility of current economic conditions, the values of
assets and liabilities recorded in the financial statements could
change rapidly, resulting in material future adjustments in asset
values, the allowance for loan losses, and capital that could
negatively impact the Company's ability to meet regulatory capital
requirements and maintain sufficient liquidity.
12
LIQUIDITY AND CAPITAL RESOURCES
Effective July 18, 2001, the OTS adopted a rule that removed the
regulation to maintain a specific average daily balance of liquid
assets, but retained a provision that requires institutions to maintain
sufficient liquidity to ensure their safe and sound operation. North
American maintains a level of liquid assets adequate to meet the
requirements of normal banking activities, including the repayment of
maturing debt and potential deposit withdrawals. The Bank's primary
sources of liquidity are the sale and repayment of loans, retention of
existing or newly acquired retail deposits, and FHLB advances.
Management continues to use FHLB advances as a primary source of short-
term funding. FHLB advances are secured by a blanket pledge agreement
of the loan and securities portfolio, as collateral, supported by
quarterly reporting of eligible collateral to FHLB. Available FHLB
borrowings are limited based upon a percentage of the Bank's assets and
eligible collateral, as adjusted by appropriate eligibility and
maintenance levels. Management continually monitors the balance of
eligible collateral relative to the amount of advances outstanding.
At September 30, 2009, the Bank had a total borrowing capacity at FHLB
of $535.9 million, and outstanding advances of $441.0 million. The
Bank has established relationships with various brokers, and, as a
secondary source of liquidity, the Bank may purchase brokered deposit
accounts. At September 30, 2009, the Bank has $207.8 million in
brokered deposits, and it could purchase up to an additional $354.7
million in brokered deposits and remain "well capitalized" as defined
by the OTS.
Fluctuations in the level of interest rates typically impact
prepayments on mortgage loans and mortgage related securities. During
periods of falling rates, these prepayments increase and a greater
demand exists for new loans. The Bank's ability to attract and retain
customer deposits is partially impacted by area competition and by
other alternative investment sources that may be available to the
Bank's customers in various interest rate environments. Management is
not currently aware of any other trends, market conditions, or other
economic factors that could materially impact the Bank's primary
sources of funding or affect its future ability to meet obligations as
they come due. Although future changes to the level of market interest
rates is uncertain, management believes its sources of funding will
continue to remain stable during upward and downward interest rate
environments. In the unlikely event of a significant change in the
availability of the Bank's funding sources, the Bank could obtain
funding through the various capital market alternatives available such
as an issuance of corporate debt, commercial paper or fed funds.
The OTS also requires thrift institutions to maintain specified
levels of regulatory capital. As of September 30, 2009, the Bank's
regulatory capital exceeded all minimum capital requirements, which
consist of three components: tangible, core, and risk-based. A
schedule, which more fully describes the Bank's regulatory capital
requirements, is provided in the notes to the consolidated financial
statements.
Any dividend or capital distribution that the Bank makes to the
Company is subject to a thirty-day review by the OTS, who can take
exception to any proposed dividend. Declared dividends remain unpaid
until management receives written notification of "no exception" from
the OTS.
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
Various commitments and contingent liabilities arise in the normal
course of business, which are not required to be recorded on the
balance sheet. The most significant of these are loan commitments and
standby letters of credit. The bank had outstanding commitments to
originate mortgage loans for its portfolio and standby letters of
credit totaling $1.3 million and $2.3 million, respectively, at
September 30, 2009. In addition, the Bank had outstanding commitments
to originate mortgage loans totaling $155.0 million at September 30,
2009, which it had committed to sell to outside investors. Since
commitments may expire unused or be only partially used, these totals
do not necessarily reflect future cash requirements. Management does
not anticipate any material losses arising from commitments and
contingent liabilities and believes that there are no material
commitments to extend credit that represent risk of an unusual nature.
Management anticipates that the Company will continue to have
sufficient funds through repayments and maturities of loans and
securities, deposits and borrowings, to meet its commitments.
13
The following table discloses payments due on the Company's
contractual obligations at September 30, 2009:
Due in Due from Due from Due in
Total < 1 year 1-3 years 3-5 years > 5 years
----------------------------------------------------------
Advances from FHLB $ 441,026 230,026 211,000 -- --
Subordinated debentures 25,774 -- -- -- 25,774
Operating leases 2,340 554 826 890 70
----------------------------------------------------------
Total contractual obligations $ 469,140 230,580 211,826 890 25,844
==========================================================
CRITICAL ACOOUNTING POLICIES
The Company has identified the accounting policies below as
critical to the Company's operations and to understanding the Company's
consolidated financial statements. Following is an explanation of the
methods and assumptions underlying their application.
ALLOWANCE FOR LOAN AND LEASE LOSSES
Management records an Allowance for Loan and Lease Losses ("ALLL")
sufficient to cover current net charge-offs and an estimate of probable
losses based on an analysis of risks that management believes to be
inherent in the loan portfolio. The ALLL recognizes the inherent risks
associated with lending activities but, unlike a specific allowance,
has not been allocated to particular problem assets but to a homogenous
pool of loans. Management analyzes the adequacy of the allowance on a
monthly basis and believes that the Bank's specific loss allowances and
ALLL are adequate. While management uses information currently
available to determine these allowances, they can fluctuate based on
changes in economic conditions and changes in the information available
to management. Also, regulatory agencies review the Bank's allowances
for loan loss as part of their examination, and they may require the
Bank to recognize additional loss provisions based on the information
available at the time of their examinations.
Management estimates the required level of ALLL using a formula
based on various subjective and objective factors. ALLL is established
and maintained in the form of a provision on loss charged to earnings.
Based on its analysis, management may determine that ALLL is above
appropriate levels. If so, a negative loss provision would be recorded
to reduce the ALLL. This could occur due to significant asset
recoveries or significant reductions in the level of classified assets.
Each quarter management assesses the risk of the assets in the loan
portfolio using historical loss data and current economic conditions in
order to determine impairment of the various loan portfolios and
adjusts the level of ALLL. At any given time, the ALLL should be
sufficient to absorb at least all estimated credit losses on
outstanding balances over the next twelve months.
When considering the adequacy of ALLL, management's evaluation of
the asset portfolio has two primary components: foreclosure
probability and loss severity. Foreclosure probability is the
likelihood of loans not repaying in accordance with their original
terms, which would result in the foreclosure and subsequent liquidation
of the property. Loss severity is any potential loss resulting from
the loan's foreclosure and subsequent liquidation. Management
calculates estimated foreclosure frequency and loss severity ratios for
each homogenous loan pool based upon objective factors such as
historical data and loan characteristics, plus an estimate of certain
subjective factors including future market trends and economic
conditions. These ratios are applied to the balances of the
homogeneous loan pools to determine the adequacy of the ALLL each
month.
In addition to analyzing homogenous pools of loans for impairment,
management reviews individual loans for impairment each month. A loan
becomes impaired when management believes 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 Bank records a specific allowance
equal to the excess of the loan's carrying value over the present value
of the estimated future cash flows discounted at the loan's effective
rate based on the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Loans on
residential properties with greater than four units and loans on
construction/development and commercial properties are evaluated for
impairment on a loan by loan basis.
14
VALUATION OF DERIVATIVE INSTRUMENTS
The Bank has commitments outstanding to extend credit that have
not closed prior to the end of the period. As the Bank enters into
commitments to originate loans, it also enters into commitments to sell
the loans in the secondary market. Additionally, the Bank has
commitments to sell loans that have closed prior to the end of the
period. Such commitments to originate loans held for sale and to sell
loans are considered derivative instruments in accordance with GAAP,
which requires the Bank to recognize all derivative instruments in the
balance sheet and to measure those instruments at fair value.
Commitments to originate loans held for sale and forward sales
commitments are valued using a valuation model which considers
differences between current market interest rates and committed rates.
The model also includes assumptions which estimate fall-out percentages
for commitments to originate loans.
VALUCATION OF MORTGAGE SERVICING RIGHTS
The Bank creates mortgage servicing rights ("MSRs") through the
securitization and sale of residential mortgage loans. MSRs are
recorded at cost based upon the relative fair values of the servicing
rights on the underlying loans. The fair value is determined by
discounting estimated future cash flows at the market rate of interest.
These rights are amortized in proportion to and over the period of
expected net servicing income or loss.
The Bank evaluates the carrying value of MSRs on a monthly basis
based on their estimated fair value. For purposes of evaluating and
measuring impairment of MSRs, the Bank stratifies the rights based on
their predominant risk characteristics. Management considers the
significant risks to be loan type, period of origination and stated
interest rate. If the estimated fair value, using a discounted cash
flow methodology, is less than the carrying amount of the portfolio,
the portfolio is written down to the amount of the discounted expected
cash flows utilizing a valuation allowance. The Bank utilizes consensus
market prepayment assumptions and discount rates to evaluate its
capitalized servicing rights, which considers the risk characteristics
of the underlying servicing rights. Prepayment assumptions have the
greatest impact on the market value of MSRs. Generally, if current
rates are lower than the rates on the underlying loans, prepayments
will accelerate, reducing the value of the MSRs. The Bank utilizes
prepayment assumptions compiled by the mortgage research departments of
several large broker/dealers. The measurement of the fair value of
MSRs is limited by the conditions existing and the assumptions utilized
as of a particular point in time, and those assumptions may not be
appropriate if applied at a different point in time.
15
NASB Financial, Inc. and Subsidiary
Consolidated Balance Sheets
September 30,
-----------------------
2009 2008
-----------------------
(Dollars in thousands)
ASSETS
Cash and cash equivalents $ 63,250 21,735
Securities:
Available for sale, at fair value 21,654 35
Held to maturity, at cost 1,290 --
Stock in Federal Home Loan Bank, at cost 26,640 26,284
Mortgage-backed securities:
Available for sale, at fair value 46,549 59,889
Held to maturity, at cost 11,125 135
Loans receivable:
Held for sale, at fair value at September 30, 2009,
and at lower of amortized cost or fair value at
September 30, 2008, net 81,367 64,030
Held for investment, net 1,259,694 1,294,297
Allowance for loan losses (20,699) (13,807)
Accrued interest receivable 6,195 6,886
Foreclosed assets held for sale, net 10,140 6,038
Premises and equipment, net 13,393 14,599
Investment in LLCs 21,045 20,683
Mortgage servicing rights, net 351 716
Deferred income tax asset, net 6,651 6,293
Other assets 10,917 8,948
-----------------------
$ 1,559,562 1,516,761
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposit accounts $ 696,781 691,615
Brokered deposit accounts 207,844 77,764
Advances from Federal Home Loan Bank 441,026 550,091
Subordinated debentures 25,774 25,774
Escrows 10,178 9,776
Income taxes payable 4,210 4,002
Liability for unrecognized tax benefits 326 850
Accrued expenses and other liabilities 7,035 4,477
-----------------------
Total liabilities 1,393,174 1,364,349
-----------------------
Stockholders' equity:
Common stock of $0.15 par value: 20,000,000 authorized; 9,857,112
shares issued at September 30, 2009 and 2008 1,479 1,479
Additional paid-in capital 16,525 16,484
Retained earnings 184,891 172,612
Treasury stock, at cost; 1,989,498 shares at September 30, 2009
and 2008 (38,418) (38,418)
Accumulated other comprehensive income 1,911 255
-----------------------
Total stockholders' equity 166,388 152,412
-----------------------
$ 1,559,562 1,516,761
=======================
See accompanying notes to consolidated financial statements.
16
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Income
Years Ended September 30,
------------------------------------
2009 2008 2007
------------------------------------
(Dollars in thousands, except per share data)
Interest on loans receivable $ 84,934 91,635 99,067
Interest on mortgage-backed securities 2,042 2,546 3,157
Interest and dividends on securities 2,750 1,086 1,254
Other interest income 99 254 340
------------------------------------
Total interest income 89,825 95,521 103,818
------------------------------------
Interest on customer and brokered deposit accounts 25,011 30,739 33,512
Interest on advances from Federal Home Loan Bank 16,552 24,410 26,811
Interest on subordinated debentures 857 1,357 1,421
Interest on securities sold under agreements
to repurchase -- -- 395
------------------------------------
Total interest expense 42,420 56,506 62,139
------------------------------------
Net interest income 47,405 39,015 41,679
Provision for loan losses 11,250 6,200 1,634
------------------------------------
Net interest income after provision
for loan losses 36,155 32,815 40,045
------------------------------------
Other income (expense):
Loan servicing fees, net (173) 18 103
Impairment recovery on mortgage servicing
rights 43 48 34
Customer service fees and charges 6,873 5,547 5,817
Provision for loss on real estate owned (727) (2,050) (595)
Gain on sale of securities available for sale 4,565 122 --
Gain from loans receivable held for sale 29,042 14,043 14,418
Other 871 679 1,421
------------------------------------
Total other income 40,494 18,407 21,198
------------------------------------
General and administrative expenses:
Compensation and fringe benefits 17,615 15,553 15,567
Commission-based mortgage banking compensation 13,518 7,482 7,310
Premises and equipment 3,972 4,147 3,637
Advertising and business promotion 4,743 4,305 4,178
Federal deposit insurance premiums 1,246 104 103
Other 5,622 5,228 5,534
------------------------------------
Total general and administrative expenses 46,716 36,819 36,329
------------------------------------
Income before income tax expense 29,933 14,403 24,914
------------------------------------
Income tax expense (benefit):
Current 13,027 9,989 9,429
Deferred (1,803) (4,882) 166
------------------------------------
Total income tax expense 11,224 5,107 9,595
------------------------------------
Net income $ 18,709 9,296 15,319
====================================
Basic earnings per share $ 2.38 1.18 1.89
====================================
Diluted earnings per share $ 2.38 1.18 1.88
====================================
Basic weighted average shares outstanding 7,867,614 7,867,614 8,100,904
====================================
See accompanying notes to consolidated financial statements.
17
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years ended September 30,
---------------------------------
2009 2008 2007
---------------------------------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 18,709 9,296 15,319
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,768 1,809 1,220
Amortization and accretion, net (5,387) (1,068) (1,668)
Deferred income tax expense (benefit) (1,803) (4,882) 166
Gain on sale of securities available for sale (4,565) (122) --
Loss from investment in LLCs 117 265 197
Impairment recovery on mortgage servicing rights (43) (48) (34)
Gain from loans receivable held for sale (29,042) (14,043) (14,418)
Provision for loan losses 11,250 6,200 1,634
Provision for loss on real estate owned 727 2,050 595
Origination of loans receivable held for sale (1,563,400) (884,725) (1,001,663)
Sale of loans receivable held for sale 1,576,436 899,486 1,019,310
Stock based compensation - stock options 41 84 89
Changes in:
Net fair value of loan-related commitments (637) 31 (42)
Accrued interest receivable 691 1,512 (192)
Accrued expenses, other liabilities and
income taxes payable 2,145 996 (529)
---------------------------------
Net cash provided by operating activities 7,006 16,841 19,984
---------------------------------
Cash flows from investing activities:
Principal repayments of mortgage-backed securities:
Held to maturity 649 82 108
Available for sale 13,408 21,972 17,887
Principal repayments of mortgage loans receivable held
for investment 256,076 309,108 412,833
Principal repayments of other loans receivable 5,415 10,524 8,741
Principal repayments of securities available for sale 6 7 8
Loan origination - mortgage loans receivable
held for investment (234,868) (342,219) (401,520)
Loan origination - other loans receivable (4,355) (7,847) (9,141)
Purchase of mortgage loans receivable held for investment (1,610) (9,500) --
Proceeds from sale (purchases) of Federal Home Loan
Bank stock (356) (3,977) 1,736
Purchase of mortgage-backed securities held to maturity (11,632) -- --
Purchase of securities available for sale (110,005) -- --
Purchase of securities held to maturity (1,283) -- --
Proceeds from sale of securities available for sale 96,135 122 --
Proceeds from sale of real estate owned 10,259 5,427 6,785
Purchase of premises and equipment, net (562) (643) (4,097)
Investment in LLC (479) (1,890) (2,517)
Other (1,334) (330) (2,261)
---------------------------------
Net cash provided by (used in) investing activities 15,464 (19,164) 28,562
---------------------------------
18
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows (continued)
Years ended September 30,
---------------------------------
2009 2008 2007
---------------------------------
(Dollars in thousands)
Cash flows from financing activities:
Net (decrease) increase in customer and brokered
deposit accounts 134,723 (86,570) 3,622
Proceeds from advances from Federal Home Loan Bank 444,000 378,000 353,650
Repayment of advances from Federal Home Loan Bank (553,000) (286,650) (393,848)
Proceeds from subordinated debentures -- -- 25,774
Proceeds from sale of securities under agreements to
repurchase -- -- 30,900
Repayment of securities sold under agreements to
repurchase -- -- (30,900)
Cash dividends paid (7,080) (7,080) (7,337)
Repurchase of common stock for treasury -- -- (16,357)
Change in escrows 402 308 558
---------------------------------
Net cash provided by (used in) financing activities 19,045 (1,992) (33,938)
---------------------------------
Net increase (decrease) in cash and cash equivalents 41,515 (4,315) 14,608
Cash and cash equivalents at beginning of period 21,735 26,050 11,442
---------------------------------
Cash and cash equivalents at end of period $ 63,250 21,735 26,050
=================================
Supplemental disclosure of cash flow information:
Cash paid for income taxes (net of refunds) $ 13,114 6,613 10,771
Cash paid for interest 41,812 58,686 61,965
Supplemental schedule of non-cash investing and financing
activities:
Conversion of loans receivable to real estate owned $ 18,884 10,465 13,690
Conversion of real estate owned to loans receivable 391 2,772 5,617
Capitalization of originated mortgage servicing rights 10 -- 6
Transfer of loans from held for investment to held for
sale -- 17,515 --
See accompanying notes to consolidated financial statements.
19
NASB Financial, Inc. and Subsidiary
Consolidated Statements of Stockholders' Equity
Accumulated
Additional other Total
Common paid-in Retained Treasury comprehensive stockholders'
stock capital earnings stock (loss) income equity
---------------------------------------------------------------------
(Dollars in thousands)
Balance at October 1, 2006 $ 1,479 16,311 162,631 (22,061) (1,788) 156,572
Comprehensive income:
Net income -- -- 15,319 -- -- 15,319
Other comprehensive income,
net of tax:
Unrealized loss on securities -- -- -- -- 1,106 1,106
----------
Total comprehensive income 16,425
Cash dividends paid -- -- (7,337) -- -- (7,337)
Stock based compensation expense -- 89 -- -- -- 89
Purchase of common stock
for treasury -- -- -- (16,357) -- (16,357)
---------------------------------------------------------------------
Balance at September 30, 2007 $ 1,479 16,400 170,613 (38,418) (682) 149,392
Comprehensive income:
Net income -- -- 9,296 -- -- 9,296
Other comprehensive income,
net of tax:
Unrealized gain on securities -- -- -- -- 937 937
----------
Total comprehensive income 10,233
Cash dividends paid -- -- (7,080) -- -- (7,080)
Stock based compensation expense -- 84 -- -- -- 84
Adjustment for the adoption of
FIN 48 -- -- (217) -- -- (217)
---------------------------------------------------------------------
Balance at September 30, 2008 $ 1,479 16,484 172,612 (38,418) 255 152,412
Comprehensive income:
Net income -- -- 18,709 -- -- 18,709
Other comprehensive income,
net of tax:
Unrealized gain on securities -- -- -- -- 1,656 16,56
----------
Total comprehensive income 20,365
Cash dividends paid -- -- (7,080) -- -- (7,080)
Stock based compensation expense -- 41 -- -- -- 41
Adjustment for the adoption of
FAS 159, net of tax -- -- 650 -- -- 650
---------------------------------------------------------------------
Balance at September 30, 2009 $ 1,479 16,525 184,891 (38,418) 1,911 166,388
======================================================================
Year ended
September 30, 2009
------------------
Reclassification disclosure:
Unrealized gain on available for sale securities,
net of income taxes of $2,794 $ 4,463
Reclassification adjustment for gain included in
net income, net of income taxes of $1,758 (2,807)
--------
Gain in unrealized gain (loss) on available for sale
securities, net of income tax of $1,037 $ 1,656
========
See accompanying notes to consolidated financial statements.
20
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NASB
Financial, Inc. (the "Company"), its wholly-owned subsidiary, North
American Savings Bank, F.S.B. (the "Bank"), and the Bank's wholly-owned
subsidiary, Nor-Am Service Corporation. All significant inter-company
transactions have been eliminated in consolidation. The consolidated
financial statements do not include the accounts of our wholly owned
statutory trust, NASB Preferred Trust I (the "Trust"). The Trust
qualifies as a special purpose entity that is not required to be
consolidated in the financial statements of NASB Financial, Inc. The
Trust Preferred Securities issued by the Trust are included in Tier I
capital for regulatory capital purposes.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand plus interest-
bearing deposits in the Federal Home Loan Bank of Des Moines totaling
$60.8 million and $6.3 million as of September 30, 2009 and 2008,
respectively. The Federal Reserve Board ("FRB") requires federally
chartered savings banks to maintain non-interest-earnings cash reserves
at specified levels against their transaction accounts. Required
reserves may be maintained in the form of vault cash, a non-interest-
bearing account at a Federal Reserve Bank, or a pass-through account,
as defined by FRB. At September 30, 2009, the Bank's reserve
requirement was $4.4 million.
SECURITIES AND MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Debt securities are classified as held to maturity when the
Company has the positive intent and ability to hold the securities to
maturity. Debt securities not classified as held to maturity or
trading are classified as available for sale. As of September 30, 2009
and 2008, the Company had no assets designated as trading. Securities
and mortgage-backed securities classified as available for sale are
recorded at their fair values, with unrealized gains and losses, net of
income taxes, reported as accumulated other comprehensive income or
loss.
Premiums and discounts are recognized as adjustments to interest
income over the life of the securities using a method that approximates
the level yield method. Gains or losses on the disposition of
securities are based on the specific identification method. Market
prices are obtained from broker-dealers and reflect estimated offer
prices.
To the extent management determines a decline in value in a
security or mortgage-backed security available for sale to be other
than temporary, the Bank will include such expense in the consolidated
statements of income.
SECURITIES AND MORTGAGE-BACKED SECURITIES HELD TO MATURITY
Debt securities and mortgage-backed securities held to maturity
are stated at cost, adjusted for amortization of premiums and
discounts, which are recognized as adjustments to interest income over
the life of the securities using the level-yield method.
To the extent management determines a decline in value in a
mortgage-backed security held to maturity to be other than temporary,
the Company will adjust the carrying value and include such expense in
the consolidated statements of income.
LOANS RECEIVABLE HELD FOR SALE
As the Bank originates loans each month, management evaluates the
existing market conditions to determine which loans will be held in the
Bank's portfolio and which loans will be sold in the secondary market.
Loans sold in the secondary market are sold with servicing released or
converted into mortgage-backed securities ("MBS") and sold with the
servicing retained by the Bank. At the time of each loan commitment, a
decision is made to either hold the loan for investment, hold it for
sale with servicing retained, or hold it for sale with servicing
released. Management monitors market conditions to decide whether
loans should be held in the portfolio or sold and if sold, which method
of sale is appropriate.
As of September 30, 2008, loans held for sale were carried at the
lower of amortized cost or fair value. As of October 1, 2008, the
Company elected to carry loans held for sale at fair value, which is
determined based on sale commitments or dealer quotations. Gains or
losses on such sales are recognized using the specific identification
method. Transfers of loan receivable held for sale are accounted for
as sales when control over the asset has been surrendered. The Bank
issues various representations and warranties and standard recourse
provisions associated with the sale of loans. As of September 30,
2009, the Bank has an accrued liability of $1.1 million related to
estimated future losses in accordance with such recourse provisions.
21
LOANS RECEIVABLE HELD FOR INVESTMENT, NET
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are stated at the amount
of unpaid principal less an allowance for loan losses, undisbursed loan
funds and unearned discounts and loan fees, net of certain direct loan
origination costs. Interest on loans is credited to income as earned
and accrued only when it is deemed collectible. Loans are placed on
nonaccrual status when, in the opinion of management, the full timely
collection of principal or interest is in doubt. The accrual of
interest is discontinued when principal or interest payments become
doubtful. As a general rule, this occurs when the loan becomes ninety
days past due. When a loan is placed on nonaccrual status, previously
accrued but unpaid interest is reversed against current income.
Subsequent collections of cash may be applied as reductions to the
principal balance, interest in arrears or recorded as income, depending
on Bank management's assessment of the ultimate collectibility of the
loan. Nonaccrual loans may be restored to accrual status when
principal and interest become current and the full payment of principal
and interest is expected.
Net loan fees and direct loan origination costs are deferred and
amortized as yield adjustments to interest income using the level-yield
method over the contractual lives of the related loans.
ALLOWANCE FOR LOAN LOSSES
The Bank considers a loan to be impaired when management believes
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 Bank
records a loss valuation equal to the excess of the loan's carrying
value over the present value of the estimated future cash flows
discounted at the loan's effective rate based on the loan's observable
market price or the fair value of the collateral if the loan is
collateral dependent. One-to-four family residential loans and
consumer loans are collectively evaluated for impairment. Loans on
residential properties with greater than four units, on construction
and development and commercial properties are evaluated for impairment
on a loan by loan basis. The allowance for loan losses is increased by
charges to income and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is
based on the Bank's past loan loss experience, known and inherent
losses in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. Assessing the adequacy of
the allowance for loan losses is inherently subjective as it requires
making material estimates, including the amount and timing of future
cash flows expected to be received on impaired loans, that may be
susceptible to significant change. In management's opinion, the
allowance, when taken as a whole, is adequate to absorb reasonable
estimated loan losses inherent in the Bank's loan portfolio.
FORECLOSED ASSETS HELD FOR SALE
Foreclosed assets held for sale are initially recorded at fair
value as of the date of foreclosure less any estimated selling costs
(the "new basis") and are subsequently carried at the lower of the new
basis or fair value less selling costs on the current measurement date.
Adjustments for estimated losses are charged to operations when the
fair value declines to an amount less than the carrying value. Costs
and expenses related to major additions and improvements are
capitalized, while maintenance and repairs that do not improve or
extend the lives of the respective assets are expensed. Applicable
gains and losses on the sale of real estate owned are realized when the
asset is disposed depending on the adequacy of the down payment and
other requirements.
PREMISES AND EQUIPMENT
Premises and equipment are recorded at cost, less accumulated
depreciation. Depreciation of premises and equipment is provided over
the estimated useful lives (from three to forty years for buildings and
improvements, and from three to ten years for furniture, fixtures, and
equipment) of the respective assets using the straight-line method.
Maintenance and repairs are charged to expense. Major renewals and
improvements are capitalized. Gains and losses on dispositions are
credited or charged to earnings as incurred.
INVESTMENT IN LLCs
The Company is a partner in two limited liability companies, which
were formed for the purpose of purchasing and developing vacant land in
Platte County, Missouri. These investments are accounted for using the
equity method of accounting.
STOCK OPTIONS
The Company has a stock-based employee compensation plan which is
described more fully in Note 18. The Company recognizes compensation
cost over the five-year service period for its stock option awards.
Stock based compensation expense for stock options totaled $41 thousand
($25 thousand, net of tax), $84 thousand ($52 thousand, net of tax) and
$89 thousand ($55 thousand, net of tax) during the years ended
September 30, 2009, 2008 and 2007, respectively.
22
INCOME TAXES
The Company files a consolidated Federal income tax return with
its subsidiaries using the accrual method of accounting.
The Company provides for income taxes using the asset/liability
method. Deferred income taxes are recognized for the tax consequences
of temporary differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
The Bank's bad debt deduction for the years ended September 30,
2009, 2008 and 2007, was based on the specific charge off method. The
percentage method for additions to the tax bad debt reserve was used
prior to the fiscal year ended September 30, 1997. Under the current
tax rules, Banks are required to recapture their accumulated tax bad
debt reserve, except for the portion that was established prior to
1988, the "base-year." The recapture of the excess reserve was
completed over a six-year phase-in-period that began with the fiscal
year ended September 30, 1999. A deferred income tax liability is
required to the extent the tax bad debt reserve exceeds the 1988 base
year amount. Retained earnings include approximately $3.7 million
representing such bad debt reserve for which no deferred taxes have
been provided. Distributing the Bank's capital in the form of stock
redemptions caused the Bank to recapture a significant amount of its
bad debt reserve prior to the phase-in period.
MORTGAGE SERVICING RIGHTS
Servicing assets and other retained interests in transferred
assets are measured by allocating the previous carrying amount between
the assets sold, if any, and retained interest, if any, based on their
relative fair values at the date of the transfer, and servicing assets
and liabilities are subsequently measured by (1) amortization in
proportion to and over the period of estimated net servicing income or
loss, and (2) assessment for asset impairment or increased obligation
based on their fair values.
Originated mortgage servicing rights are recorded at cost based
upon the relative fair values of the loans and the servicing rights.
Servicing release fees paid on comparable loans and discounted cash
flows are used to determine estimates of fair values. Purchased
mortgage servicing rights are acquired from independent third-party
originators and are recorded at the lower of cost or fair value. These
rights are amortized in proportion to and over the period of expected
net servicing income or loss.
Impairment Evaluation - The Bank evaluates the carrying value of
capitalized mortgage servicing rights on a periodic basis based on
their estimated fair value. For purposes of evaluating and measuring
impairment of capitalized servicing rights, the Bank stratifies the
rights based on their predominant risk characteristics. The
significant risk characteristics considered by the Bank are loan type,
period of origination and stated interest rate. If the fair value
estimated, using a discounted cash flow methodology, is less than the
carrying amount of the portfolio, the portfolio is written down to the
amount of the discounted expected cash flows utilizing a valuation
allowance. The Bank utilizes consensus market prepayment assumptions
and discount rates to evaluate its capitalized servicing rights, which
considers the risk characteristics of the underlying servicing rights.
During the years ended September 30, 2009 and 2008, the value of
mortgage servicing rights increased, which resulted in a recovery of
valuation allowance of $43,000 and $48,000, respectively.
DERIVATIVE INSTRUMENTS
The Bank regularly enters into commitments to originate and sell
loans held for sale. Such commitments are considered derivative
instruments under GAAP, which requires the Bank to recognize all
derivative instruments in the balance sheet and to measure those
instruments at fair value. As of September 30, 2009 and 2008, the fair
value of loan related commitments resulted in a net asset of $645,000
and $8,000, respectively
REVENUE RECOGNITION
Interest income, loan servicing fees, customer service fees and
charges and ancillary income related to the Bank's deposits and lending
activities are accrued as earned.
EARNINGS PER SHARE
Basic earnings per share is computed based upon the weighted-
average common shares outstanding during the year. Diluted earnings
per share is computed using the weighted average common shares and all
potential dilutive common shares outstanding during the year. Dilutive
securities consist entirely of stock options granted to employees as
incentive stock options under Section 442A of the Internal Revenue Code
as amended.
23
The computations of basic and diluted earnings per share are
presented in the following table. Dollar amounts are expressed in
thousands, except per share data.
Year Ended September 30,
--------------------------------------
2009 2008 2007
--------------------------------------
Net income $ 18,709 9,296 15,319
Average common shares outstanding 7,867,614 7,867,614 8,100,904
Average common share stock
options outstanding -- -- 66,970
--------------------------------------
Average diluted common shares 7,867,614 7,867,614 8,167,874
Earnings per share:
Basic earnings per share $ 2.38 1.18 1.89
Diluted earnings per share 2.38 1.18 1.88
At September 30, 2009 and 2008, options to purchase 62,038 shares
and 72,038 shares, respectively, of the Company's stock were
outstanding. These options were not included in the calculated of
diluted earnings per share, as they were considered anti-dilutive.
RECENTLY ISSUED ACCOUNTING STANDARDS
On June 29, 2009, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Codification (ASC) 105-10 which establishes
the Codification as the source of authoritative GAAP recognized by the
FASB to be applied to nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under federal
laws are also sources of authoritative GAAP for SEC registrants. All
guidance contained in the Codification carries an equal level of
authority. Accounting Standard Updates issued after the effective date
of this update will not be considered authoritative in their own right.
Instead, the Accounting Standard Updates will serve only to update the
Codification, provide background information about the guidance, and
provide the basis for conclusions on the change(s) in the Codification.
After the effective date of this statement, all non-grandfathered non-
SEC accounting literature not included in the Codification is
superseded and deemed non-authoritative. ASC 105-10 is effective for
interim and annual reporting periods after September 15, 2009
(effective September 30, 2009 for the Company). There was no material
impact from the adoption of this update.
In September 2006, the FASB issued ASC 820-10, which defines fair
value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. The standard is effective
for financial statements issued for fiscal years beginning after
November 2, 2007, and interim periods within those fiscal years. The
adoption of the standard on October 1, 2008, resulted in additional
disclosures in the Company's financial statements.
In February 2007, the FASB issued ASC 825-10, more commonly known
as the "The Fair Value Option for Financial Assets and Financial
Liabilities." This standard provides companies with an option to
measure eligible financial assets and liabilities at fair value. The
fair value option may be applied instrument by instrument and is
irrevocable once made. If a company elects the fair value option for
an eligible instrument, changes in fair value must be reported as
unrealized gains and loses in earnings at each subsequent reporting
date. The standard is effective for fiscal years beginning after
November 15, 2007. The Company adopted the standard on October 1,
2008, and elected to measure loans held for sale at fair value. This
election resulted in a $650,000 increase in retained earnings.
In December 2007, the FASB issued ASC 805-10. The standard
revises certain principles, including the definition of a business
combination, the recognition and measurement of assets acquired and
liabilities assumed in a business combination, the accounting for
goodwill, and financial statement disclosure. This update is effective
for annual periods beginning after December 15, 2008. There is
currently no impact from the adoption of this update on the Company's
consolidated financial statements.
In March 2008, the FASB issued ASC 815-10-65 which establishes the
disclosure requirements for derivative instruments and for hedging
activities. This standard amends and expands the disclosure
requirements of ASC 815-10, and is effective for fiscal years and
interim periods beginning after November 15, 2008. The Company's
disclosure regarding derivative instruments reflects the adoption of
this standard.
In April 2009, the FASB issued ASC 825-10-50 and ASC 825-10-55 to
require disclosures about fair value of financial instruments for
interim reporting periods of publicly traded companies as well as in
annual financial statements. These topics were effective for interim
reporting periods ending after June 15, 2009.
24
In April 2009, the FASB issued ASC 320-10-65 which amends the
other-than-temporary impairment guidance in U.S. GAAP for debt
securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt
and equity securities in the financial statements. This standard does
not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities and is effective
for interim and annual reporting periods ending after June 15, 2009.
There is currently no material impact from the adoption of this
standard on the Company's consolidated financial statements.
In April 2009, the FASB issued ASC 820-10-65 which provides
additional guidance for estimating fair value when the volume and level
of activity for the asset or liability have significantly decreased.
This standard also includes guidance on identifying circumstances that
indicate a transaction is not orderly. The standard is effective for
interim and annual reporting periods ending after June 15, 2009, and
should be applied prospectively. There is currently no material impact
from the adoption of this standard on the Company's consolidated
financial statements.
In May 2009, the FASB issued ASC 855-10 which establishes general
standards of accounting for and disclosure of events that occur after
the balance sheet date, but before the financial statements are issued
or available to be issued. The standard sets forth the period after
the balance sheet date during which management should evaluate events
or transactions that may occur for potential recognition or disclosure
in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance
sheet date in its financial statements, and the required financial
statement disclosures. In addition, the standard requires disclosure
of the date through which an entity has evaluated subsequent events and
the basis for the date, that is, whether the date represents the date
the financial statements were issued or available to be issued. This
standard was effective for interim or annual financial periods ending
after June 15, 2009. There is currently no material impact from the
adoption of the standard.
In June 2009, the FASB issued ASC 860-10, ASC 860-40 and ASC 860-
50 which enhances information reported to users of financial statements
by providing greater transparency about transfers of financial assets
and the company's continuing involvement in transferred assets. This
standard removes the concept of qualifying special purpose entity,
changes the requirements for derecognizing financial assets, and
requires enhanced disclosures to provide financial statement users with
greater transparency about transfers of financial assets and a
transferor's continuing involvement with transfers of financial assets
accounted for as sales. This standard is effective for annual
reporting periods beginning after November 15, 2009, for interim
periods within the first annual reporting period and for interim and
annual reporting periods thereafter (effective October 1, 2010 for the
Company). Management does not anticipate it will have a material
impact on the Company's consolidated financial statements.
In June 2009, the FASB issued ASC 805-20 and ASC 810-10 which
requires a company to perform a qualitative analysis when determining
whether it must consolidate a variable interest entity. This analysis
identifies the primary beneficiary of a variable interest entity as the
company that has both the power to direct the activities of the
variable interest entity that most significantly impact the entity's
economic performance, and the obligation to absorb losses of the entity
that could be significant to the variable interest entity or the right
to receive benefits from the entity that could potentially be
significant to the variable interest entity. This standard requires
the company to perform ongoing reassessments to determine if it must
consolidate a variable interest entity. This standard requires
disclosures about the company's involvement with the variable interest
entities and any significant changes in risk exposure due to that
involvement, how the involvement affects the company's financial
statements, and significant judgments and assumptions made in
determining whether it must consolidate the variable interest entity.
This standard is effective for annual reporting periods beginning after
November 15, 2009, for interim periods within the first annual
reporting period and for interim and annual reporting periods
thereafter (effective October 1, 2010 for the Company). Management
does not anticipate that this update will have a material impact on the
Company's consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of
America ("GAAP") requires management to make estimates and assumptions
that affect the amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues
and expenses during the reported periods. Estimates were used to
establish loss reserves, the valuation of mortgage servicing rights,
accruals for loan recourse provisions, and fair values of financial
instruments. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts for 2008 and 2007 have been reclassified to
conform to the current year presentation.
SUBSEQUENT EVENTS
Subsequent events have been evaluated through December 14, 2009,
which is the date the financial statements were issued.
25
FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair value amounts have been determined using available
market information and a selection from a variety of valuation
methodologies. However, considerable judgment is required to interpret
market data in developing the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amount
that could be realized in a current market exchange. The use of
different market assumptions and estimation methodologies may have a
material effect on the estimated fair value amounts.
The following methods and assumptions were used to estimate the
fair value of each class of financial instrument presented as of
September 30, 2009 and 2008:
CASH AND CASH EQUIVALENTS
The carrying amount reported in the consolidated balance sheets is a
reasonable estimate of fair value.
SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
Fair values are based on quoted market prices, where available.
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
Fair values are based on quoted market prices, where available. When
quoted market prices are unavailable, fair values are computed using
consensus estimates of prepayment speeds and market spreads to treasury
securities.
STOCK IN FEDERAL HOME LOAN BANK ("FHLB")
The carrying value of stock in Federal Home Loan Bank approximates its
fair value.
LOANS RECEIVABLE HELD FOR SALE
Fair values of mortgage loans held for sale are based on quoted market
prices for loans with similar characteristics.
LOANS RECEIVABLE HELD FOR INVESTMENT
Fair values are computed for each loan category using market spreads to
treasury securities for similar existing loans in the portfolio and
management's estimates of prepayments.
MORTGAGE SERVICING RIGHTS
The estimated fair values of mortgage servicing rights are determined
by discounting estimated future cash flows using a market rate of
interest and consensus estimates of prepayment speeds.
CUSTOMER AND BROKERED DEPOSIT ACCOUNTS
The estimated fair values of demand deposits and savings accounts are
equal to the amount payable on demand at the reporting date. Fair
values of certificates of deposit are computed at fixed spreads to
treasury securities with similar maturities.
ADVANCES FROM FEDERAL HOME LOAN BANK
The estimated fair values of advances from FHLB are determined by
discounting the future cash flows of existing advances using rates
currently available for new advances with similar terms and remaining
maturities.
SUBORDINATED DEBENTURES
The estimated fair values of subordinated debentures is determined by
discounting the future cash flows of existing debentures using a market
rate of interest. As these are variable rate securities, cost
approximates fair value.
COMMITMENTS TO ORIGINATE, PURCHASE AND SELL LOANS
The estimated fair value of commitments to originate, purchase, or sell
loans is based on the fees currently charged to enter into similar
agreements and the difference between current levels of interest rates
and the committed rates.
26
(2) SECURITIES AVAILABLE FOR SALE
The following tables present a summary of securities available for
sale. Dollar amounts are expressed in thousands.
September 30, 2009
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
Corporate debt securities $ 19,099 2,526 -- 21,625
Municipal securities 29 -- -- 29
-----------------------------------------------------
Total $ 19,128 2,526 -- 21,654
=====================================================
September 30, 2008
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
Municipal securities 35 -- -- 35
-----------------------------------------------------
Total $ 35 -- -- 35
=====================================================
During the year ended September 30, 2009, the Company realized
gross gains of $4.6 million and no gross losses on the sale of
securities available for sale. There were no sales of securities
available for sale during the years ended September 30, 2008, or 2007.
The scheduled maturities of securities available for sale at
September 30, 2009, are presented in the following table. Dollar
amounts are expressed in thousands.
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-------------------------------------------
Due in less than one year $ 5 -- -- 5
Due from one to five years 1,020 73 -- 1,093
Due from five to ten years 18,103 2,453 -- 20,556
-------------------------------------------
Total $ 19,128 2,526 -- 21,654
===========================================
(3) SECURITIES HELD TO MATURITY
The following tables present a summary of securities held to
maturity. Dollar amounts are expressed in thousands.
September 30, 2009
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
Asset-backed securities $ 1,290 85 -- 1,375
----------------------------------------------------
Total $ 1,290 85 -- 1,375
=====================================================
27
The scheduled maturities of securities held to maturity at
September 30, 2009, are presented in the following table. Dollar
amounts are expressed in thousands.
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------------------------------------------
Due after ten years $ 1,290 85 -- 1,375
---------------------------------------------
Total $ 1,290 85 -- 1,375
=============================================
Actual maturities of securities held to maturity may differ from
scheduled maturities depending on the repayment characteristics and
experience of the underlying financial instruments which are callable.
There were no dispositions of securities held to maturity during
the year ended September 30, 2009.
(4) MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
The following tables present a summary of mortgage-backed
securities available for sale. Dollar amounts are expressed in
thousands.
September 30, 2009
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
Pass-through certificates guaranteed
by GNMA - fixed rate $ 114 -- -- 114
Pass-through certificates guaranteed
by FNMA - adjustable rate 5,924 67 -- 5,991
FHLMC participation certificates:
Fixed rate 546 33 -- 579
Adjustable rate 39,384 481 -- 39,865
-----------------------------------------------------
Total $ 45,968 581 -- 46,549
=====================================================
September 30, 2008
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
Pass-through certificates guaranteed
by GNMA - fixed rate $ 130 -- (1) 129
Pass-through certificates guaranteed
by FNMA - adjustable rate 7,762 58 -- 7,820
FHLMC participation certificates:
Fixed rate 741 -- (45) 696
Adjustable rate 50,841 461 (58) 51,244
-----------------------------------------------------
Total $ 59,474 519 (104) 59,889
=====================================================
There were no sales of mortgage-backed securities available for
sale during the years ended September 30, 2009, 2008, or 2007.
28
There were no unrealized losses on mortgage-backed securities
available for sale at September 30, 2009. The following tables present
a summary of the fair value and gross unrealized losses of those
mortgage-backed securities available for sale which had unrealized
losses at September 30, 2008. Dollar amounts are expressed in
thousands.
Less Than 12 Months 12 Months or Longer
--------------------- --------------------
Estimated Gross Estimated Gross
fair unrealized fair unrealized
value losses value losses
---------------------------------------------
Pass-through certificates
guaranteed by GNMA -
fixed rate $ 129 1 $ -- --
FHLMC participation
certificates:
Fixed rate -- -- 696 45
Adjustable rate -- -- 9,685 58
---------------------------------------------
Total $ 129 1 $ 10,381 103
=============================================
Based upon evaluation of available evidence at September 30, 2008,
including changes in market interest rates during the fiscal year, it
was management's opinion that the declines in fair value of these
securities, which consisted almost exclusively of moderately-seasoned
5/1 adjustable rate mortgage-backed securities, was temporary. The
decline in fair value was due to significant changes in interest rates
and market conditions which occurred after the securities were
purchased. However, it was management's opinion that as these
securities approached their reset dates, they would no longer be
impaired. Should the impairment of these securities become other than
temporary, the cost basis of the investment will be reduced and the
resulting loss recognized in net income in the period the other-than-
temporary impairment is identified. The Company has the ability to
hold these securities to maturity.
The scheduled maturities of mortgage-backed securities available
for sale at September 30, 2009, are presented in the following table.
Dollar amounts are expressed in thousands.
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-------------------------------------------
Due from five to ten years $ 546 33 -- 579
Due after ten years 45,422 548 -- 45,970
-------------------------------------------
Total $ 45,968 581 -- 46,549
===========================================
Actual maturities of mortgage-backed securities available for sale
may differ from scheduled maturities depending on the repayment
characteristics and experience of the underlying financial instruments,
on which borrowers have the right to prepay certain obligations.
The principal balances of mortgage-backed securities available for
sale that are pledged to secure certain obligations of the Bank as of
September 30 are as follows. Dollar amounts are expressed in
thousands.
September 30, 2009
----------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------
Customer deposit accounts $ 984 14 -- 998
FHLB advances 43,468 527 -- 43,995
---------------------------------------------
Total $ 44,452 541 -- 44,993
==============================================
29
September 30, 2008
----------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------
Customer deposit accounts $ 1,135 3 (9) 1,129
FHLB advances 56,232 513 (49) 56,696
---------------------------------------------
Total $ 57,367 516 (58) 57,825
==============================================
(5) MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The following tables present a summary of mortgage-backed
securities held to maturity. Dollar amounts are expressed in
thousands.
September 30, 2009
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
FHLMC participation certificates:
Fixed rate $ 59 4 -- 63
FNMA pass-through certificates:
Fixed rate 10 -- -- 10
Balloon maturity and
adjustable rate 43 -- -- 43
Collateralized mortgage obligations 11,013 214 -- 11,227
----------------------------------------------------
Total $ 11,125 218 -- 11,343
=====================================================
September 30, 2008
-----------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
-----------------------------------------------------
FHLMC participation certificates:
Fixed rate $ 74 4 -- 78
FNMA pass-through certificates:
Fixed rate 13 -- -- 13
Balloon maturity and
adjustable rate 47 -- -- 47
Pass-through certificates guaranteed
by GNMA - fixed rate 1 -- -- 1
----------------------------------------------------
Total $ 135 4 -- 139
=====================================================
The scheduled maturities of mortgage-backed securities held to
maturity at September 30, 2009, are presented in the following table.
Dollar amounts are expressed in thousands.
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------------------------------------------
Due from five to ten years $ 112 4 -- 116
Due after ten years 11,013 214 -- 11,227
---------------------------------------------
Total $ 11,125 218 -- 11,343
=============================================
Actual maturities of mortgage-backed securities held to maturity
may differ from scheduled maturities depending on the repayment
characteristics and experience of the underlying financial
instruments, on which borrowers have the right to prepay certain
obligations.
30
The principal balances of mortgage-backed securities held to
maturity that are pledged to secure certain obligations of the Bank as
of September 30 are as follows. Dollar amounts are expressed in
thousands.
September 30, 2009
----------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------
Customer deposit accounts $ 37 2 -- 39
==============================================
September 30, 2008
----------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
----------------------------------------------
Customer deposit accounts $ 41 2 -- 43
==============================================
All dispositions of mortgage-backed securities held to maturity
during fiscal 2009, 2008, and 2007 were the result of maturities.
(6) LOANS RECEIVABLE
The following table provides a detail of loans receivable as of
September 30. Dollar amounts are expressed in thousands.
HELD FOR INVESTMENT 2009 2008
---------------------------
Mortgage loans:
Permanent loans on:
Residential properties $ 363,132 384,258
Business properties 474,487 478,883
Partially guaranteed by VA or
insured by FHA 4,771 2,812
Construction and development 329,457 396,777
---------------------------
Total mortgage loans 1,171,847 1,262,730
Commercial loans 121,168 93,600
Installment loans and lease financing
to individuals 13,861 14,920
---------------------------
Total loans receivable held
for investment 1,306,876 1,371,250
Less:
Undisbursed loan funds (38,807) (69,300)
Unearned discounts and fees on
loans, net of deferred costs (8,375) (7,653)
---------------------------
Net loans receivable held
for investment $ 1,259,694 1,294,297
===========================
HELD FOR SALE 2009 2008
---------------------------
Mortgage loans:
Permanent loans on:
Residential properties $ 129,526 73,829
Business properties -- 17,788
Less:
Undisbursed loan funds (48,159) (27,314)
Unearned discounts and fees on loans,
net of deferred costs -- (273)
--------------------------
Net loans receivable held for sale $ 81,367 64,030
==========================
31
During the quarter ended September 30, 2008, the Bank transferred
a permanent mortgage loan on a business property with an amortized
cost of $17.5 million from the held for investment category to the
held for sale category. The decision was made to transfer the loan
after the borrower defaulted under the terms of the note and the Bank
began foreclosure. The basis at which the loans were transferred was
amortized cost, which was lower than market value at the time of
transfer.
Included in the loans receivable balances are participating
interests in mortgage loans and wholly owned mortgage loans serviced
by other institutions of approximately $40,000 and $64,000 at
September 30, 2009 and 2008, respectively.
Whole loans and participations serviced for others were
approximately $93.3 million and $65.3 million at September 30, 2009
and 2008, respectively. Loans serviced for others are not included in
the accompanying consolidated balance sheets.
First mortgage loans were pledged to secure FHLB advances in the
amount of approximately $808.8 million and $800.3 million at September
30, 2009 and 2008, respectively.
Aggregate loans to executive officers, directors and their
associates, including companies in which they have partial ownership
interest, did not exceed 5% of equity as of September 30, 2009 and
2008. Such loans were made under terms and conditions substantially
the same as loans made to parties not affiliated with the Bank.
As of September 30, 2009 and 2008, loans with an aggregate
principal balance of approximately $40.6 million and $35.1 million,
respectively, were on nonaccrual status. Gross interest income would
have increased by $2.3 million, $1.8 million and $167,000 for the
years ended September 30, 2009, 2008 and 2007, respectively, if the
nonaccrual loans had been performing
The following table presents the activity in the allowance for
losses on loans for 2009, 2008, and 2007. Allowance for losses on
mortgage loans includes specific valuation allowances and valuation
allowances associated with homogenous pools of loans. Dollar amounts
are expressed in thousands.
2009 2008 2007
---------------------------------
Balance at beginning of year $ 13,807 8,097 7,991
Provisions 11,250 6,200 1,634
Charge-offs (4,377) (504) (1,528)
Recoveries 19 14 --
---------------------------------
Balance at end of year $ 20,699 13,807 8,097
=================================
The following tables provide a summary of information on impaired
loans. Dollar amounts are expressed in thousands.
September 30,
-----------------
2009 2008
-----------------
Impaired loans with a valuation allowance $ 40,691 10,287
Impaired loans without a valuation allowance 11,400 --
-----------------
$ 52,091 10,287
=================
Allowance for loan losses applicable to
impaired loans $ 5,825 1,383
=================
2009 2008 2007
------------------------
Average balance of impaired loans $ 52,605 10,842 262
Interest income recognized on
impaired loans 1,946 489 120
Interest income received on a cash basis
on impaired loans 2,320 635 120
32
Although the Bank has a diversified loan portfolio, a substantial
portion is secured by real estate. The following table presents
information as of September 30 about the location of real estate that
secures loans in the Bank's mortgage loan portfolio. The line item
"Other" includes total investments in other states of less than $10
million each. Dollar amounts are expressed in thousands.
2009
-------------------------------------------------------------
Residential
---------------------- Construction
1-4 5 or more Commercial and
State family family real estate development Total
------------------------------------------------------------------------------
Missouri $ 165,424 30,606 71,003 134,556 401,589
Kansas 43,945 10,378 24,090 176,163 254,576
Texas 16,880 8,611 51,153 6,088 82,732
Colorado 4,963 2,039 59,957 -- 66,959
Arizona 11,623 584 19,306 6,050 37,563
Florida 19,215 917 14,552 -- 34,684
Oklahoma 2,891 3,006 20,774 -- 26,671
North Carolina 6,632 -- 17,076 -- 23,708
Illinois 5,969 332 11,969 -- 18,270
Indiana 2,397 -- 14,591 -- 16,988
California 14,564 -- 2,358 -- 16,922
Iowa 3,619 3,603 6,423 2,650 16,295
Washington 5,090 -- 10,294 -- 15,384
Ohio 3,470 -- 9,308 -- 12,778
Georgia 6,032 964 5,731 -- 12,727
Michigan 500 -- 9,982 -- 10,482
Other 63,516 219 55,834 3,950 123,519
-------------------------------------------------------------
$ 376,730 61,259 404,401 329,457 1,171,847
=============================================================
2008
-------------------------------------------------------------
Residential
---------------------- Construction
1-4 5 or more Commercial and
State family family real estate development Total
------------------------------------------------------------------------------
Missouri $ 179,167 30,470 74,592 177,373 461,602
Kansas 48,023 11,935 23,606 197,756 281,320
Colorado 5,557 4,089 63,463 -- 73,109
Texas 13,708 9,329 42,804 4,648 70,489
Arizona 13,126 632 19,543 9,900 43,201
Florida 19,396 936 12,184 -- 32,516
Oklahoma 2,314 3,046 21,627 -- 26,987
North Carolina 6,137 3,648 16,255 -- 26,040
California 14,679 -- 4,500 -- 19,179
Illinois 5,964 571 11,054 500 18,089
Indiana 2,610 -- 15,016 -- 17,626
Washington 4,950 -- 10,576 -- 15,526
Iowa 4,800 3,640 4,184 2,650 15,274
Ohio 2,887 -- 9,618 -- 12,505
Georgia 5,611 283 6,181 -- 12,075
Michigan 752 -- 10,181 -- 10,933
New Jersey 5,180 -- 5,441 -- 10,621
Pennsylvania 2,403 -- 7,871 -- 10,274
Other 58,110 236 43,068 3,950 105,364
-------------------------------------------------------------
$ 395,374 68,815 401,764 396,777 1,262,730
=============================================================
31
Proceeds from the sale of loans receivable held for sale during
fiscal 2009, 2008 and 2007, were $1,576.4 million, $899.5 million, and
$1,019.3 million, respectively. In fiscal 2009, the Bank realized
gross gains of $29.1 million and $53,000 of gross losses. In fiscal
2008, the Bank realized gross gains of $14.3 million and gross losses
of $312,000 on those sales. In fiscal 2007, gross gains of $14.6
million and gross losses of $231,000 were realized.
(7) FORECLOSED ASSETS HELD FOR SALE
The following table presents real estate owned and other
repossessed property as of September 30. Dollar amounts are expressed
in thousands.
2009 2008
-------------------
Real estate acquired through (or deed in
lieu of) foreclosure $ 10,140 6,707
Less: allowance for losses -- (669)
--------------------
Total $ 10,140 6,038
====================
The allowance for losses on real estate owned includes the
following activity for the years ended September 30. Dollar amounts
are expressed in thousands.
2009 2008 2007
--------------------------
Balance at beginning of year $ 669 204 275
Provision for loss (recovery) 727 2,050 595
Charge-offs (1,691) (1,819) (1,222)
Recoveries 295 234 556
--------------------------
Balance at end of year $ -- 669 204
==========================
(8) PREMISES AND EQUIPMENT
The following table summarizes premises and equipment as of
September 30. Dollar amounts are expressed in thousands.
2009 2008
-------------------
Land $ 4,308 4,308
Buildings and improvements 12,428 12,491
Furniture, fixtures and equipment 9,220 10,066
-------------------
25,956 26,865
Accumulated depreciation (12,563) (12,266)
-------------------
Total $ 13,393 14,599
===================
Certain facilities of the Bank are leased under various operating
leases. Amounts paid for rent expense for the fiscal years ended
September 30, 2009, 2008, and 2007, were approximately $568,000,
$622,000, and $884,000, respectively.
34
Future minimum rental commitments under noncancelable leases are
presented in the following table. Dollar amounts are expressed in
thousands.
Fiscal year ended
September 30, Amount
-----------------------------------
2010 $ 554
2011 312
2012 514
2013 517
2014 373
Thereafter 70
(9) INVESTMENT IN LLCs
During the year ended September 30, 2004, the Company became a
partner in Central Platte Holdings, LLC, which was formed for the
purpose of purchasing and developing eight hundred acres of vacant land
in Platte County, Missouri for residential development. This
investment is accounted for using the equity method of accounting. The
company is owner of a fifty-percent (50%) membership interest in
Central Platte Holdings, LLC. The Company's investment in this
partnership was $18.6 million and $18.2 million at September 30, 2009
and 2008, respectively.
During the year ended September 30, 2002, the Company became a
partner in NBH, LLC, which was formed for the purpose of purchasing and
developing eighty-six acres of vacant land in Platte County, Missouri
for residential and commercial development. This investment is
accounted for using the equity method of accounting. The company is
owner of a fifty-percent (50%) membership interest in NBH, LLC. The
Company's investment in this partnership was $2.5 million at September
30, 2009 and 2008.
(10) MORTGAGE SERVICING RIGHTS
The following provides information about the Bank's mortgage
servicing rights for the years ended September 30. Dollar amounts are
expressed in thousands.
2009 2008 2007
----------------------------
Balance at beginning of year $ 716 911 1,089
Originated mortgage servicing rights 10 -- 6
Amortization (418) (243) (218)
Impairment recovery 43 48 34
----------------------------
Balance at end of year $ 351 716 911
============================
35
(11) CUSTOMER AND BROKERED DEPOSIT ACCOUNTS
Customer and brokered deposit accounts as of September 30 are
illustrated in the following table. Dollar amounts are expressed in
thousands.
2009 2008
----------------- ----------------
Amount % Amount %
-------------------------------------------------------------------
Demand deposit accounts $ 80,201 9 76,621 10
Savings accounts 81,572 9 71,193 9
Money market demand accounts 14,991 2 13,352 2
Certificate accounts 520,017 57 530,449 69
Brokered accounts 207,844 23 77,764 10
----------------- -----------------
$ 904,625 100 769,379 100
================= =================
Weighted average interest rate 2.23% 3.38%
=========== ============
The aggregate amount of certificate accounts in excess of $100,000
was approximately $120.2 million and $105.9 million as of September 30,
2009 and 2008, respectively.
The following table presents contractual maturities of certificate
and brokered accounts as of September 30, 2009. Dollar amounts are
expressed in thousands.
Maturing during the fiscal year ended September 30,
---------------------------------------------------------
2015 and
2010 2011 2012 2013 2014 after Total
---------------------------------------------------------
Certificate
accounts $ 372,037 82,106 45,003 16,233 2,433 2,205 520,017
Brokered
accounts 191,004 16,840 -- -- -- -- 207,844
---------------------------------------------------------
Total $ 563,041 98,946 45,003 16,233 2,433 2,205 727,861
=========================================================
The following table presents interest expense on customer deposit
accounts for the years ended September 30. Dollar amounts are
expressed in thousands.
2009 2008 2007
--------------------------------
Savings accounts $ 886 1,123 1,231
Money market demand and
demand deposit accounts 500 701 705
Certificate and brokered
accounts 23,625 28,915 31,576
--------------------------------
$ 25,011 30,739 33,512
================================
36
(12) ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the FHLB are secured by all stock held in the FHLB,
mortgage-backed securities and first mortgage loans with aggregate
unpaid principal balances equal to approximately 160% of outstanding
advances not secured by FHLB stock. The following table provides a
summary of advances by year of maturity as of September 30. Dollar
amounts are expressed in thousands.
2009 2008
----------------- -----------------
Weighted Weighted
Average Average
Year ended September 30, Amount Rate Amount Rate
--------------------------------------------------------------------
2006 $ -- -- $ 234,065 4.55%
2010 230,026 2.02% 130,026 2.89%
2011 186,000 4.30% 186,000 4.30%
2012 25,000 2.18% -- --%
------------------ -----------------
$ 441,026 2.99% $ 550,091 4.07%
================== =================
The Bank's advances have a fixed interest rate and require monthly
interest payments, with a single principal payment due at maturity. At
September 30, 2009 and 2008, the Bank had advances totaling $5.0
million that are callable at the option of the Federal Home Loan Bank.
(13) SUBORDINATED DEBENTURES
On December 13, 2006, NASB Financial, Inc., through its wholly
owned statutory trust, NASB Preferred Trust I (the "Trust"), issued $25
million of pooled Trust Preferred Securities. The Trust used the
proceeds from the offering to purchase a like amount of NASB Financial
Inc.'s subordinated debentures. The debentures, which have a variable
rate of 1.65% over the 3-month LIBOR and a 30-year term, are the sole
assets of the Trust. In exchange for the capital contributions made to
the Trust by NASB Financial, Inc. upon formation, NASB Financial. Inc.
owns all the common securities of the Trust.
In accordance with Financial Accounting Standards Board
Interpretation No. 46R, Consolidation of Variable Interest Entities
(FIN 46R), the Trust qualifies as a special purpose entity that is not
required to be consolidated in the financial statements of the Company.
The $25.0 million Trust Preferred Securities issued by the Trust will
remain on the records of the Trust. The Trust Preferred Securities are
included in Tier I capital for regulatory capital purposes.
The Trust Preferred Securities have a variable interest rate of
1.65% over the 3-month LIBOR, and are mandatorily redeemable upon the
30-year term of the dentures, or upon earlier redemption as provided in
the Indenture. The debentures are callable, in whole or in part, after
five years of the issuance date. The Company did not incur a placement
or annual trustee fee related to the issuance. The securities are
subordinate to all other debt of the Company and interest may be
deferred up to five years.
37
(14) INCOME TAXES PAYABLE
The differences between the effective income tax rates and the
statutory federal corporate tax rate for the years ended September 30
are as follows:
2009 2008 2007
--------------------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.1 3.0 3.0
Other, net (0.6) (2.5) 0.5
--------------------------
37.5% 35.5% 38.5%
==========================
Deferred income tax expense (benefit) results from temporary
differences in the recognition of income and expense for tax purposes
and financial statement purposes. The following table lists these
temporary differences and their related tax effect for the years ended
September 30. Dollar amounts are expressed in thousands.
2009 2008 2007
----------------------------
Deferred loan fees and costs $ 30 101 34
Accrued interest receivable 463 (726) --
Tax depreciation vs. book
depreciation 41 80 209
Basis difference on investments (3) (5) (15)
Loan loss reserves (2,402) (3,160) 961
Mark-to-market adjustment 186 (1,008) (656)
Mortgage servicing rights (99) (51) (49)
Other (19) (113) (318)
----------------------------
$ (1,803) (4,882) 166
============================
The tax effect of significant temporary differences representing
deferred tax assets and liabilities are presented in the following
table. Dollar amounts are expressed in thousands.
2009 2008
-----------------
Deferred income tax assets:
Loan loss reserves $ 7,990 5,588
Book depreciation in excess of tax depreciation 160 201
Accrued interest receivable 461 924
Unrealized loss on securities available for sale -- --
Mark-to-market adjustment -- 565
-----------------
8,611 7,278
-----------------
Deferred income tax liabilities:
Mortgage servicing rights (85) (184)
Basis difference on investments (20) (23)
Deferred loan fees and costs (430) (400)
Unrealized gain on securities available for sale (1,200) (160)
Mark-to-market adjustment (25) --
Other (200) (218)
----------------
(1,960) (985)
----------------
Net deferred tax asset $ 6,651 6,293
================
Effective October 1, 2007, the Company adopted ASC 740-10 related
to accounting for uncertainty in income taxes. The Company recognized
a $217,000 increase in the liability for unrecognized tax benefits,
which was accounted for as a decrease to the October 1, 2007 balance of
retained earnings.
38
The following table reconciles the liability for unrecognized tax
benefits from the beginning to the end of the fiscal year ended
September 30. Dollar amounts are expressed in thousands.
2009 2008
-----------------
Balance at beginning of year $ 850 --
Reclassification of deferred tax liability -- 1,070
FIN 48 adoption adjustment to retained earnings -- 217
------- -------
Adjusted balance at beginning of year 850 1,287
Increases attributable to tax positions taken
during a prior period -- 872
Reductions attributable to tax positions taken
during a prior period (300) --
Settlements attributable to tax positions taken
during a prior period (224)
Decreases attributable to lapse of statute of
limitations -- (1,309)
------- -------
Liability for unrecognized tax benefits at
end of year $ 326 850
======== =======
The Company's liability for unrecognized tax benefit is expected
to decrease in the next twelve months as a result of the settlements
with various taxing authorities.
The Company's liability for unrecognized tax benefits included
$96,000 and $149,000 of related interest and penalties as of September
30, 2009 and 2008, respectively. The Company's policy is to recognize
interest and penalties related to unrecognized tax benefits within
income tax expense in the consolidated statements of income
The Company's federal and state income tax returns for fiscal years
2006 through 2008 remain subject to examination by the Internal Revenue
Service and various state jurisdictions, based on the statute of
limitations.
(15) STOCKHOLDERS' EQUITY
During fiscal 2009, the Company paid quarterly cash dividends on
common stock of $0.225 per share on November 28, 2008, February 27,
2009, May 29, 2009, and August 28, 2009.
During fiscal 2008, the Company paid quarterly cash dividends on
common stock of $0.225 per share on November 30, 2007, February 22,
2008, May 23, 2008, and August 22, 2008.
During fiscal 2007, the Company paid quarterly cash dividends on
common stock of $0.225 per share on November 24, 2006, February 23,
2007, May 25, 2007, and August 24, 2007.
During fiscal 2007, the Company repurchased 451,028 shares of its
own stock with a total value of $16.4 million at the time of
repurchase. During fiscal 2009 and 2008, the Company did not
repurchase any shares of its own stock.
(16) REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements as
administered by Federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by the regulators that, if
undertaken, could have a direct material effect on the Bank's financial
statements. Under the capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by regulators
about components, risk weightings, and other factors.
39
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum capital amounts and
ratios (set forth in the table below). The Bank's primary regulatory
agency, the Office of Thrift Supervision ("OTS"), requires that the
Bank maintain minimum ratios of tangible capital (as defined in the
regulations) of 1.5%, core capital (as defined) of 4%, and total risk-
based capital (as defined) of 8%. The Bank is also subject to prompt
corrective action capital requirement regulations set forth by the
FDIC. The FDIC requires the Bank to maintain a minimum of Tier 1,
total and core capital (as defined) to risk-weighted assets (as
defined), and of core capital (as defined) to adjusted tangible assets
(as defined). Management believes that, as of September 30, 2009, the
Bank meets all capital adequacy requirements, to which it is subject.
As of September 30, 2009 and 2008, the most recent guidelines from
the OTS categorized the Bank as "well capitalized" under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the table.
Management does not believe that there are any conditions or events
occurring since notification that would change the Bank's category.
The following tables summarize the relationship between the Bank's
capital and regulatory requirements. Dollar amounts are expressed in
thousands.
September 30,
------------------
2009 2008
-------------------------------------------------------------
GAAP capital (Bank only) $167,168 153,460
Adjustment for regulatory capital:
Intangible assets (2,671) (2,771)
Disallowed servicing and deferred
tax assets (39) (6,293)
Reverse the effect of SFAS No. 115 (1,911) (255)
------------------
Tangible capital 162,547 144,141
Qualifying intangible assets -- --
------------------
Tier 1 capital (core capital) 162,547 144,141
Qualifying valuation allowance 14,284 12,366
------------------
Risk-based capital $176,831 156,507
==================
As of September 30, 2009
--------------------------------------------------------------
Actual Minimum Required for Minimum Required to be
Capital Adequacy "Well Capitalized"
---------------- ------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
---------------- ------------------ ---------------------
Total capital to risk-weighted assets $176,831 13.5% 105,140 >=8% 131,425 >=10%
Core capital to adjusted tangible assets 162,547 10.6% 61,236 >=4% 76,545 >=5%
Tangible capital to tangible assets 162,547 10.6% 22,963 >=1.5% -- --
Tier 1 capital to risk-weighted assets 162,547 12.4% -- -- 78,855 >=6%
As of September 30, 2008
--------------------------------------------------------------
Actual Minimum Required for Minimum Required to be
Capital Adequacy "Well Capitalized"
---------------- ------------------- ---------------------
Amount Ratio Amount Ratio Amount Ratio
---------------- ------------------ ---------------------
Total capital to risk-weighted assets $156,507 12.5% 100,470 >=8% 125,588 >=10%
Core capital to adjusted tangible assets 144,141 9.7% 59,397 >=4% 74,247 >=5%
Tangible capital to tangible assets 144,141 9.7% 22,274 >=1.5% -- --
Tier 1 capital to risk-weighted assets 144,141 11.5% -- -- 75,353 >=6%
(17) EMPLOYEES' RETIREMENT PLAN
Substantially all of the Bank's full-time employees participate in
a 401(k) retirement plan (the "Plan"). The Plan is administered by
Standard Insurance Company, through which employees can choose from a
variety of retail mutual funds to invest their fund contributions.
Under the terms of the Plan, the Bank makes monthly contributions for
the benefit of each participant in an amount that matches one-half of
the participant's contribution, not to exceed 3% of the participants'
monthly base salary. All contributions made by participants are
immediately vested and cannot be forfeited. Contributions made by the
Bank, and related earnings thereon, become vested to the participants
according to length of service requirements as specified in the Plan.
Any forfeited portions of the contributions made by the Bank and the
allocated earnings thereon are used to reduce future contribution
requirements of the Bank. The Plan may be modified, amended or
terminated at the discretion of the Bank.
The Bank's contributions to the Plan amounted to $468,000,
$337,000, and $324,000 for the years ended September 30, 2009, 2008,
and 2007, respectively. These amounts have been included as
compensation and fringe benefits expense in the accompanying
consolidated statements of income.
(18) STOCK OPTION PLAN
During fiscal year 1986, the Company's stockholders approved a
stock option plan ("1986 Option Plan") through which options to
purchase up to 10% of the number of shares of common stock originally
issued, as adjusted for a 4-for-1 stock split in March 1999 and stock
dividends, were granted to officers and employees of the Bank. The
time frame for issuing new options under the 1986 Option Plan has
expired and, as of September 30, 2009, there are no options granted
under this plan that remain outstanding. Options were granted for a
period of ten years. The option price could not be less than 100% of
the fair market value of the shares on the date of the grant.
On January 27, 2004, the Company's stockholders approved a new
equity stock option plan ("2004 Option Plan") through which options to
purchase up to 250,000 shares of common stock may be granted to
officers and employees of the Company. Options may be granted over a
period of ten years. The option price may not be less than 100% of the
fair market value of the shares on the date of the grant.
The following table summarizes Option Plan activity during fiscal
years 2009, 2008, and 2007. The number of shares and price per share
have been adjusted to reflect the 4-for-1 stock split in fiscal 1999.
All options outstanding at September 30, 2009, were granted under the
2004 Option Plan.
Weighted avg. Range of
Number exercise price exercise price
Of shares per share per share
-------------------------------------
Options outstanding
at October 1, 2006 58,000 $ 37.70 $ 32.91-42.53
Granted 21,657 32.82 30.33-39.33
Forfeited (1,000) 42.17 42.17
-------------------------------------
Options outstanding
at September 30, 2007 78,657 $ 36.30 $ 30.33-42.53
Forfeited (6,619) 35.08 30.33-42.17
-------------------------------------
Options outstanding
at September 30, 2008 72,038 $ 36.42 $ 30.33-42.53
Forfeited (10,000) 35.50 35.50
-------------------------------------
Options outstanding
at September 30, 2009 62,038 $ 36.56 $ 30.33-42.53
=====================================
The weighted average remaining contractual life of options
outstanding at September 30, 2009, 2008 and 2007 were 5.6 years, 5.8
years and 7.0 years, respectively.
41
The following table provides information regarding the expiration
dates of the stock options outstanding at September 30, 2009.
Number Weighted average
of shares exercise price
-------------------------------------
Expiring on:
August 1, 2010 12,500 $ 42.17
July 27, 2014 3,000 35.50
November 30, 2014 500 39.79
August 1, 2015 10,000 42.17
August 4, 2015 500 42.53
July 21, 2016 15,500 32.91
November 29, 2016 6,000 39.33
July 24, 2017 14,038 30.33
-------------------------------------
62,038 $ 36.56
=====================================
Of the options outstanding at September 30, 2009, 39,115 are
immediately exercisable and 22,923 are exercisable at future dates in
accordance with the vesting schedules outlined in each stock option
agreement.
The following table illustrates the range of exercise prices and
the weighted average remaining contractual lives for options
outstanding under the Option Plan as of September 30, 2009.
Options Outstanding Options Exercisable
----------------------------------------------- ---------------------------
Weighted Avg. Weighted Avg. Weighted Avg.
Range of remaining exercise exercise
exercise prices Number contractual life price Number price
-------------------------------------------------------------- ---------------------------
$ 42.17 12,500 0.8 years $ 42.17 10,000 $ 42.17
35.50 3,000 4.8 years 35.50 3,000 35.50
39.79 500 5.2 years 39.79 400 39.79
42.17-42.53 10,500 5.8 years 42.18 8,400 42.18
32.91 15,500 6.8 years 32.91 9,300 32.91
39.33 6,000 7.2 years 39.33 2,400 39.33
30.33 14,038 7.8 years 30.33 5,615 30.33
--------- ---------
62,038 39,115
========= =========
(19) SEGMENT INFORMATION
The Company has identified two principal operating segments for
purposes of financial reporting: Banking and Mortgage Banking. These
segments were determined based on the Company's internal financial
accounting and reporting processes and are consistent with the
information that is used to make operating decisions and to assess the
Company's performance by the Company's key decision makers.
The Mortgage Banking segment originates mortgage loans for sale to
investors and for the portfolio of the Banking segment. Effective
October 1, 2007, the National Mortgage Banking and Local Mortgage
Banking segments were combined for reporting purposes due to the
consolidation of substantial operating and occupancy resources. The
Banking segment provides a full range of banking services through the
Bank's branch network, exclusive of mortgage loan originations. A
portion of the income presented in the Mortgage Banking segment is
derived from sales of loans to the Banking segment based on a transfer
pricing methodology that is designed to approximate economic reality.
The Other and Eliminations segment includes financial information from
the parent company plus inter-segment eliminations.
42
The following table presents financial information from the
Company's operating segments for the years ended September 30, 2009,
2008, and 2007. Dollar amounts are expressed in thousands.
Year ended Mortgage Other and
September 30, 2009 Banking Banking Eliminations Consolidated
------------------------------------------------------------------------
Net interest income $ 48,213 -- (808) 47,406
Provision for
loan losses 11,250 -- -- 11,250
Other income 8,419 34,212 (2,137) 40,494
General and admin.
expenses 20,941 26,667 (892) 46,716
Income tax expense 9,410 2,905 (1,091) 11,224
---------------------------------------------------
Net income (loss)$ 15,031 4,640 (962) 18,709
====================================================
Total assets $ 1,536,640 1,716 21,206 1,559,562
====================================================
Year ended Mortgage Other and
September 30, 2008 Banking Banking Eliminations Consolidated
------------------------------------------------------------------------
Net interest income $ 40,299 -- (1,284) 39,015
Provision for
loan losses 6,200 -- -- 6,200
Other income 1,157 21,114 (3,864) 18,407
General and admin.
expenses 17,494 20,159 (834) 36,819
Income tax expense 6,838 368 (2,099) 5,107
---------------------------------------------------
Net income (loss)$ 10,924 587 (2,215) 9,296
====================================================
Total assets $ 1,494,589 2,617 19,555 1,516,761
====================================================
Local National
Year ended Mortgage Mortgage Other and
September 30, 2007 Banking Banking Banking Eliminations Consolidated
----------------------------------------------------------------------------------
Net interest income $ 43,027 -- -- (1,348) 41,679
Provision for
loan losses 1,634 -- -- -- 1,634
Other income 4,035 6,608 13,022 (2,467) 21,198
General and admin.
expenses 16,249 7,242 13,150 (312) 36,329
Income tax expense 11,234 (244) (49) (1,346) 9,595
-----------------------------------------------------------
Net income (loss)$ 17,945 (390) (79) (2,157) 15,319
============================================================
Total assets $ 1,485,602 2,790 348 17,743 1,506,483
============================================================
(20) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank has entered into
financial agreements with off-balance-sheet risk to meet the financing
needs of its customers. These financial instruments include
commitments to extend credit, standby letters of credit and financial
guarantees. Those instruments involve, to varying degrees, elements of
credit risk, interest rate risk, and liquidity risk, which may exceed
the amount recognized in the consolidated financial statements. The
contract amounts or notional amounts of those instruments express the
extent of involvement the Bank has in particular classes of financial
instruments.
With regard to financial instruments for commitments to extend
credit, standby letters of credit, and financial guarantees, the Bank's
exposure to credit loss because of non-performance by another party is
represented by the contractual amount of those instruments. The Bank
uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
43
As of September 30, 2009, the Bank had outstanding commitments to
originate $140.4 million of fixed rate residential first mortgage loans
and $15.9 million of adjustable rate residential first mortgage loans.
Such commitments have an approximate average committed rate of 4.9% and
approximate average fees and discounts of 0.3%. The interest rate
commitments on residential loans generally expire 60 days after the
commitment date. As of September 30, 2009, the Bank had outstanding
commitments related to stand-by letters of credit of $2.3 million.
As of September 30, 2008, the Bank had outstanding commitments to
originate $8.0 million in commercial real estate loans, $90.3 million
of fixed rate residential first mortgage loans and $4.9 million of
adjustable rate residential first mortgage loans. Commercial real
estate loan commitments have approximate average committed rates of
6.9%. Residential mortgage loan commitments have an approximate
average committed rate of 6.1% and approximate average fees and
discounts of 0.7%. The interest rate commitments on residential loans
generally expire 60 days after the commitment date. Interest rate
commitments on commercial real estate loans have varying terms to
expiration. As of September 30, 2008, the Bank had outstanding
commitments related to stand-by letters of credit of $7.3 million.
At September 30, 2009 and 2008, the Bank had commitments to sell
loans of approximately $154.7 million and $89.1 million, respectively.
These instruments contain an element of risk in the event that other
parties are unable to meet the terms of such agreements. In such
event, the Bank's loans receivable held for sale would be exposed to
market fluctuations. Management does not expect any other party to
default on its obligations and, therefore, does not expect to incur any
costs due to such possible default.
(21) LEGAL CONTINGENCIES
Various legal claims arise from time to time within the normal
course of business which, in the opinion of management, will have no
material effect on the Company's consolidated financial statements.
(22) SIGNIFICANT ESTIMATES AND CONCENTRATIONS
The current economic environment presents financial
institutions with unprecedented circumstances and challenges which
in some cases have resulted in large declines in the fair values
of investments and other assets, constraints on liquidity and
significant credit quality problems, including severe volatility
in the valuation of real estate and other collateral supporting
loans. The financial statements have been prepared using values
and information currently available to the Company.
Given the volatility of current economic conditions, the values of
assets and liabilities recorded in the financial statements could
change rapidly, resulting in material future adjustments in asset
values, the allowance for loan losses, and capital that could
negatively impact the Company's ability to meet regulatory capital
requirements and maintain sufficient liquidity.
(23) FAIR VALUE OPTION
On October 1, 2008, the Company elected to measure loans held for
sale at fair value. This portfolio is made up entirely of mortgage
loans held for immediate sale with servicing released. Such loans are
sold prior to origination at a contracted price to outside investors on
a best-efforts basis (i.e., the loan becomes mandatorily deliverable to
the investor only when, and if, it closes) and remain on the Company's
balance sheet for a very short period of time, typically less than one
month. It is management's opinion, given the short-term nature of
these loans, that fair value provides a reasonable measure of the
economic value of these assets. In addition, carrying such loans at
fair value eliminates some measure of volatility created by the timing
of sales proceeds from outside investors, which typically occur in the
month following origination.
44
The Company elected the fair value option for the following item
(in thousands):
Balance Sheet Balance Sheet
Prior to Adoption Gain Upon After Adoption
10/1/08 Adoption 10/1/08
--------------------------------------------
Loans held for sale $ 64,030 1,058 65,088
============================================
Pre-tax cumulative effect of
adoption $ 1,058
Decrease in deferred tax asset (408)
------
Cumulative effect of adoption $ 650
======
The difference between the aggregate fair value and the aggregate
unpaid principal balance of these loans was $2.0 million at September
30, 2009. Interest income on loans held for sale is included in
interest on loans receivable in the accompanying statements of income.
(24) DERIVATIVE INSTRUMENTS
The Company has commitments outstanding to extend credit that have
not closed prior to the end of the period. As the Company enters into
commitments to originate loans, it also enters into commitments to sell
the loans in the secondary market. Such commitments to originate loans
held for sale are considered derivative instruments in accordance with
GAAP, which requires the Company to recognize all derivative
instruments in the balance sheet and to measure those instruments at
fair value. As a result of marking to market commitments to originate
loans, the Company recorded an increase in other assets of $646,000, a
decrease in other liabilities of $50,000, and an increase in other
income of $696,000 for the year ended September 30, 2009. The Company
recorded an increase in other assets of $543,000, an increase in other
liabilities of $257,000, and an increase in other income of $287,000
for the year ended September 30, 2008.
Additionally, the Company has commitments to sell loans that have
closed prior to the end of the period. Due to the mark to market
adjustment on commitments to sell loans held for sale, the Company
recorded an increase in other assets of $89,000, an increase in other
liabilities of $147,000, and a decrease in other income of $59,000
during the year ended September 30, 2009. The Company recorded an
increase in other assets of $163,000, an increase in other liabilities
of $481,000, and a decrease in other income of $318,000 during the year
ended September 30, 2008.
The balance of derivative instruments related to commitments to
originate and sell loans at September 30, 2009 and 2008, is disclosed
in Footnote 25, Fair Value Measurements.
(25) FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would likely be received
to sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants at the measurement date. GAAP
identifies three primary measurement techniques: the market approach,
the income approach, and the cost approach. The market approach uses
prices and other relevant information generated by market transactions
involving identical or comparable assets or liabilities. The income
approach uses valuations or techniques to convert future amounts, such
as cash flows or earnings, to a single present amount. The cost
approach is based on the amount that currently would be required to
replace the service capability of an asset.
45
GAAP establishes a fair value hierarchy and prioritizes the inputs
to valuation techniques used to measure fair value into three broad
levels. The fair value hierarchy gives the highest priority to
observable inputs such as quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). The maximization of observable inputs and the
minimization of the use of unobservable inputs are required.
Classification within the fair value hierarchy is based upon the
objectivity of the inputs that are significant to the valuation of an
asset or liability as of the measurement date. The three levels within
the fair value hierarchy are characterized as follows:
- Level 1 - Quoted prices in active markets for identical assets
or liabilities that the Company has the ability to access at the
measurement date.
- Level 2 - Inputs other than quoted prices included with Level 1
that are observable for the asset or liability, either directly or
indirectly. Level 2 inputs include: quoted prices for similar
assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not
active; inputs other than quoted prices that are observable for
the asset or liability; and inputs that are derived principally
from, or corroborated by, observable market data by correlation or
other means.
- Level 3 - Unobservable inputs for the asset or liability for which
there is little, if any, market activity for the asset or
liability at the measurement date. Unobservable inputs reflect
the Company's own assumptions about what market participants would
use to price the asset or liability. These inputs may include
internally developed pricing models, discounted cash flow
methodologies, as well as instruments for which the fair value
determination requires significant management judgment.
The Company measures certain financial assets and liabilities at
fair value in accordance with GAAP. These measurements involve various
valuation techniques and assume that the transactions would occur
between market participants in the most advantageous market for the
Company.
The following is a summary of valuation techniques utilized by the
Company for its significant financial assets and liabilities measured
at fair value on a recurring basis and recognized in the accompanying
balance sheets, as well as the general classification of such assets
and liabilities pursuant to the valuation hierarchy:
Available for sale securities
Securities available for sale consist of corporate debt and
municipal securities and are valued using quoted market prices in an
active market. This measurement is classified as Level 1 within the
hierarchy.
Mortgage-backed available for sale securities are valued using
industry-standard pricing models that consider assumptions, including
market yield and prepayment speeds. These measurements are classified
as Level 2.
Loans held for sale
Loans held for sale are valued using quoted market prices for
loans with similar characteristics. This measurement is classified as
Level 2 within the hierarchy.
Mortgage Servicing Rights
Mortgage servicing rights do not trade in an active market with
readily observable market prices. Therefore, fair value is assessed
using a valuation model that calculates the discounted cash flow using
assumptions such as estimates of prepayment speeds, market discount
rates, servicing fee income, and cost of servicing. These measurements
are classified as Level 3. Mortgage servicing rights are carried on
the Company's books at fair value and are amortized over the period of
net servicing income. Additionally, they are evaluated for impairment
monthly.
Commitments to Originate Loans and Forward Sales Commitments
Commitments to originate loans and forward sales commitments are
valued using a valuation model which considers differences between
current market interest rates and committed rates. The model also
includes assumptions which estimate fall-out percentages for
commitments to originate loans. These measurements use significant
unobservable inputs and are classified as Level 3 within the hierarchy.
46
The following table presents the fair value measurements of assets
recognized in the accompanying balance sheets measured at fair value on
a recurring basis and the level within the fair value hierarchy in
which the measurements fall at September 30, 2009 (in thousands):
Quoted Prices in Significant Significant
Active Markets for Other Unobservable
Fair Identical Assets Observable Inputs
Value (Level 1) Inputs (Level 2) (Level 3)
-------------------------------------------------------
Assets:
Securities, available for sale
Corporate debt securities $ 21,625 21,625 -- --
Municipal securities 29 29
Mortgage-backed securities,
available for sale
Pass through certificates
guaranteed by GNMA 114 -- 114 --
Pass through certificates
guaranteed by FNMA 5,991 -- 5,991 --
FHLMC participation certificates:
Fixed rate 579 -- 579 --
Adjustable rate 39,865 -- 39,865 --
Loans held for sale 81,367 -- 81,367 --
Mortgage servicing rights 351 -- -- 351
Commitments to originate loans 1,230 -- -- 1,230
Forward sales commitments 260 -- -- 260
-------------------------------------------------------
Total assets $ 151,411 21,654 127,916 1,841
=======================================================
Liabilities:
Commitments to originate
loans $ 206 -- -- 206
Forward sales commitments 638 -- -- 638
-------------------------------------------------------
Total liabilities $ 844 -- -- 844
=======================================================
The following table is a reconciliation of the beginning and
ending balances of recurring fair value measurements recognized in the
accompanying balance sheet using significant unobservable (Level 3)
inputs (in thousands):
Mortgage Commitments
Servicing to Originate Forward Sales
Rights Loans Commitments
---------------------------------------------
Balance at October 1, 2008 $ 716 327 (319)
Total realized and unrealized
gains (losses):
Included in net income (375) 696 (59)
Included in other comprehensive
income -- -- --
Purchases, issuances, and settlements 10 -- --
Transfers in (out) of Level 3 -- -- --
---------------------------------------------
Balance at September 30, 2009 $ 351 1,023 (378)
=============================================
47
Realized and unrealized gains and losses noted in the table above
and included in net income for the year ended September 30, 2009, are
reported in the consolidated statements of income as follows (in
thousands):
Impairment
Loan Recovery
Servicing on Mortgage Other
Fees Servicing Rights Income
----------------------------------------
Total gains (losses) $ (418) 43 637
========================================
Changes in unrealized gains
(losses) relating to assets
still held at the balance
sheet date $ -- -- --
========================================
The following is a summary of valuation techniques utilized by the
Company for its significant financial assets and liabilities measured
at fair value on a nonrecurring basis and recognized in the
accompanying balance sheets, as well as the general classification of
such assets and liabilities pursuant to the valuation hierarchy:
Impaired loans
Loans for which it is probable that the Company will not collect
principal and interest due according to contractual terms are measured
for impairment in accordance with GAAP. Allowable methods for
estimating fair value include using the fair value of the collateral
for collateral dependent loans, or, where the loan is determined not to
be collateral dependent, using the discounted cash flows.
If the impaired loan is identified as collateral dependent, then
the fair value method of measuring the amount of impairment is
utilized. This method requires obtaining a current independent
appraisal of the collateral and other internal assessments of value.
If the impaired loan is determined not to be collateral dependent, then
the discounted cash flow method is used. The method requires the
impaired loan to be recorded at the present value of expected future
cash flows discounted at the loans effective interest rate. Impaired
loans are classified within Level 3 of the fair value hierarchy.
The carrying value of impaired loans was $46.3 million at September
30, 2009.
The following tables present the carrying values and fair values
of the Company's financial instruments. Dollar amounts are expressed
in thousands.
September 30, 2009 September 30, 2008
-------------------------- -------------------------
Estimated Estimated
Carrying fair Carrying fair
value value value value
-------------------------- -------------------------
Financial Assets:
Cash and cash equivalents $ 63,250 63,250 21,735 21,735
Securities:
Available for sale 21,654 21,654 35 35
Held to maturity 1,290 1,375 -- --
Stock in Federal Home Loan Bank 26,640 26,640 26,284 26,284
Mortgage-backed securities:
Available for sale 46,549 46,549 59,889 59,889
Held to maturity 11,125 11,343 135 139
Loans receivable:
Held for sale 81,367 81,367 64,030 66,248
Held for investment 1,238,995 1,272,543 1,280,490 1,316,964
Mortgage servicing rights 351 351 716 716
Lending commitments on mortgage loans
held for sale - fixed rate 1,079 1,079 578 578
Lending commitments on mortgage loans
held for sale - floating rate 150 150 6 6
Commitments to sell loans 260 260 171 171
48
September 30, 2009 September 30, 2008
-------------------------- -------------------------
Estimated Estimated
Carrying fair Carrying fair
value value value value
-------------------------- -------------------------
Financial Liabilities:
Customer deposit accounts $ 696,781 706,330 691,615 691,915
Brokered deposit accounts 207,844 208,634 77,764 78,210
Advances from FHLB 441,026 449,613 550,091 556,370
Subordinated debentures 25,774 25,774 25,774 25,774
Lending commitments on mortgage loans
held for sale - fixed rate 198 198 233 233
Lending commitments on mortgage loans
held for sale - floating rate 8 8 24 24
Commitments to sell loans 638 638 490 490
September 30, 2009 September 30, 2008
-------------------------- -------------------------
Contract or Estimated Contract or Estimated
notional unrealized notional unrealized
amount gain amount gain
-------------------------- -------------------------
Unrecognized financial instruments:
Lending commitments - fixed
rate, net $ 1,326 47 11,788 54
Lending commitments - floating
rate -- -- 2,290 1
Commitments to sell loans -- -- -- --
The fair value estimates presented are based on pertinent
information available to management as of September 30, 2009 and 2008.
Although management is not aware of any factors that would
significantly affect the estimated fair values, such amounts have not
been comprehensively revalued for purposes of these consolidated
financial statements since that date. Therefore, current estimates of
fair value may differ significantly from the amounts presented above.
49
(26) PARENT COMPANY FINANCIAL INFORMATION
NASB Financial, Inc.
Balance Sheets
NASB Financial, Inc.
Statements of Cash Flows
Years ended September 30,
-----------------------------
2008 2008 2007
-----------------------------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 18,709 9,296 15,319
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from investment in LLCs 117 265 197
Equity in undistributed earnings of subsidiary (11,361) (326) --
Change in income taxes payable (50) (62) (42)
Change in accrued interest payable (102) (111) 306
----------------------------
Net cash provided by operating activities 7,313 9,062 15,780
----------------------------
Cash flows from investing activities:
Distributions in excess of net income of subsidiary -- -- 11,662
Principal repayments of loans receivable 166 275 26
Investment in subsidiary -- -- (25,000)
Investment in NASB Trust Preferred I -- -- (774)
Investment in LLC (479) (1,890) (2,518)
Other (302) -- --
----------------------------
Net cash used in investing activities (615) (1,615) (16,604)
----------------------------
Cash flows from financing activities:
Proceeds from subordinated debentures -- -- 25,774
Cash dividends paid (7,080) (7,080) (7,337)
Repurchase of common stock -- -- (16,357)
Change in escrows (5) 1 --
-----------------------------
Net cash provided by (used in) financing activities (7,085) (7,079) 2,080
-----------------------------
Net increase (decrease) in cash and cash equivalents (387) 368 1,256
Cash and cash equivalents at beginning of period 2,559 2,191 935
-----------------------------
Cash and cash equivalents at end of period $ 2,172 2,559 2,191
=============================
51
Report of Independent Registered Public Accounting Firm
----------------------------------------------------------------------
Audit Committee, Board of Directors and Stockholders
NASB Financial, Inc.
Grandview, Missouri
We have audited the accompanying consolidated balance sheets of
NASB Financial, Inc. (the "Company") as of September 30, 2009 and 2008,
and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended
September 30, 2009. The Company's management is responsible for these
financial statements. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. Our audits included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of NASB Financial, Inc. as of September 30, 2009 and 2008, and the
results of its operations and its cash flows for each of the three
years in the period ended September 30, 2009, in conformity with
accounting principles generally accepted in the United States of
America.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), NASB
Financial, Inc.'s internal control over financial reporting as of
September 30, 2009 based on criteria established in, Internal Control-
Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated
December 14, 2009 expressed an unqualified opinion on the effectiveness
of the Company's internal
control over financial reporting.
As discussed in Note 25 to the consolidated financial statements,
the Company has changed its method of accounting for fair value
measurements, effective October 1, 2008, in accordance with Financial
Accounting Standards Board Accounting Standards Codification (ASC) 820-
10. In addition, as discussed in Note 23 to the consolidated financial
statements, the Company has elected to change its method of accounting
for mortgage loans held for sale, effective October 1, 2008, by
applying the fair value option in accordance with ASC 825-10.
/s/ BKD LLP
Kansas City, Missouri
December 14, 2009
52
SUMMARY OF UNAUDITED QUARTERLY OPERATING RESULTS
----------------------------------------------------------------------
The following tables include certain information concerning the
quarterly consolidated results of operations of the Company at the
dates indicated. Dollar amounts are expressed in thousands except per
share data.
First Second Third Fourth
2009 Quarter Quarter Quarter Quarter Total
-------------------------------------------------------------------------------------
Interest income $ 22,955 21,758 22,527 22,585 89,825
Interest expense 12,373 10,752 10,339 8,956 42,420
--------------------------------------------------------
Net interest income 10,582 11,006 12,188 13,629 47,405
Provision for loan losses 250 1,000 4,000 6,000 11,250
--------------------------------------------------------
Net interest income after
provision for loan losses 10,332 10,006 8,188 7,629 36,155
Other income 5,199 9,230 12,742 13,323 40,494
General and administrative
expenses 9,599 11,544 14,032 11,541 46,716
--------------------------------------------------------
Income before income taxes 5,932 7,692 6,898 9,411 29,933
Income tax expense 2,284 2,961 2,656 3,323 11,224
--------------------------------------------------------
Net income $ 3,648 4,731 4,242 6,088 18,709
========================================================
Earnings per share - basic $ 0.46 0.60 0.54 0.77 2.38
========================================================
Average shares outstanding 7,868 7,868 7,868 7,868 7,868
First Second Third Fourth
2008 Quarter Quarter Quarter Quarter Total
-------------------------------------------------------------------------------------
Interest income $ 25,545 24,014 23,188 22,774 95,521
Interest expense 15,456 14,962 13,330 12,758 56,506
--------------------------------------------------------
Net interest income 10,089 9,052 9,858 10,016 39,015
Provision for loan losses 700 700 1,600 3,200 6,200
--------------------------------------------------------
Net interest income after
provision for loan losses 9,389 8,352 8,258 6,816 32,815
Other income 2,288 5,390 6,772 3,957 18,407
General and administrative
expenses 8,638 9,145 9,908 9,128 36,819
--------------------------------------------------------
Income before income taxes 3,039 4,597 5,122 1,645 14,403
Income tax expense 1,170 1,791 1,512 634 5,107
--------------------------------------------------------
Net income $ 1,869 2,806 3,610 1,011 9,296
========================================================
Earnings per share - basic $ 0.24 0.36 0.46 0.13 1.18
========================================================
Average shares outstanding 7,868 7,868 7,868 7,868 7,868
BOARD OF DIRECTORS OF NASB FINANCIAL INC., AND NORTH AMERICAN SAVINGS
BANK, F.S.B.
----------------------------------------------------------------------
DAVID H. HANCOCK
Chairman and Chief Executive Officer
NASB Financial, Inc. and North American Savings Bank
KEITH B. COX
President
NASB Financial, Inc. and North American Savings Bank
PAUL L. THOMAS
Vice President
NASB Financial, Inc.
Executive Vice President and Chief Credit Officer
North American Savings Bank
FREDERICK V. ARBANAS
Retired
Jackson County Legislature
BARRETT BRADY
Retired
LAURA BRADY
Vice President and General Manager of Franchise Operations
and E-Commerce, Three Dog Bakery
Kansas City, Missouri
LINDA S. HANCOCK
Linda Smith Hancock Interiors
Kansas City, Missouri
W. RUSSELL WELSH
President & CEO, Polsinelli Shughart PC
Kansas City, Missouri
53
OFFICERS OF NASB FINANCIAL, INC.
--------------------------------------------------------------------
DAVID H. HANCOCK
Chairman
Chief Executive Officer
KEITH B. COX
President
RHONDA NYHUS
Vice President and Treasurer
SHAUNA OLSON
Corporate Secretary
MIKE ANDERSON
Vice President
WADE HALL
Vice President
JOHN M. NESSELRODE
Vice President
DENA SANDERS
Vice President
BRUCE THIELEN
Vice President
PAUL L. THOMAS
Vice President
OFFICERS OF NORTH AMERICAN SAVINGS BANK, F.S.B.
--------------------------------------------------------------------
DAVID H. HANCOCK
Chairman
Chief Executive Officer
KEITH B. COX
President
PAUL L. THOMAS
Executive Vice President
Chief Credit Officer
RHONDA NYHUS
Senior Vice President
Chief Financial Officer
SHAUNA OLSON
Corporate Secretary
MIKE ANDERSON
Senior Vice President, Construction Lending
WADE HALL
Senior Vice President, Commercial Lending
JOHN M. NESSELRODE
Senior Vice President, Chief Investment Officer
DENA SANDERS
Senior Vice President, Retail Banking
BRUCE THIELEN
Senior Vice President, Residential Lending
PHIL CRAVEN
Vice President, Commercial Lending
SHERRIE EIMER
Vice President, Branch Administration
CATHLEEN GWIN
Vice President, Residential Lending
SCOTT HAASE
Vice President, Residential Lending
JEFF JACKSON
Vice President, Information Technology
KAREN JACOBSON
Vice President, Branch Operations
LISA LILLARD
Vice President, Loan Servicing
MARQUISE MANSAW
Vice President, Residential Lending
DAN MORTON
Vice President, Information Technology
DAN REYNOLDSON
Vice President, Residential Lending
CHRISTINE SCHABEN
Vice President, Human Resources
RICK SPECIALE
Vice President, Internal Audit
RON STAFFORD
Vice President, Residential Lending
CHRISTINE TODD
Vice President, Risk Management
DRAKE VIDRINE
Vice President, Construction Lending
JAMES A. WATSON
Vice President, Banking Compliance
DONNA WILLIAMS
Vice President, Construction Lending
OTHER DISCLOSURES REGARDING DIRECTORS, OFFICERS, AND EMPLOYEES OF NASB
FINANCIAL, INC.
----------------------------------------------------------------------
AUDIT COMMITTEE
Directors Barrett Brady, Fred Arbanas, and Laura Brady serve on
the Company's audit committee. Director Barrett Brady serves as the
audit committee chairman and financial expert. Director Barrett Brady
meets the audit committee independence requirements as prescribed by
provisions of the Sarbanes-Oxley Act.
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
All Senior Financial Officers are required to abide by a Code of
Ethics, which meets the requirements of Section 406 of the Sarbanes-
Oxley Act. A copy of the Company's Code of Ethics for Senior Financial
Officers will be provided upon written request to: Keith B. Cox, NASB
Financial, Inc., 12498 South 71 Highway, Grandview, Missouri 64030.
54
PROCEDURE FOR ANNONYMOUS COMPLAINTS
The Company has procedures in place to receive, retain, and treat
complaints received regarding accounting, internal controls, or
auditing matters. These procedures allow for confidential and
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
BRANCH OFFICES
----------------------------------------------------------------------
Headquarters
12498 South 71 Highway
Grandview, Missouri
646 N. 291 Highway
Lee's Summit, Missouri
1001 North Jesse James Road
Excelsior Springs, Missouri
920 North Belt
St. Joseph, Missouri
11400 East 23rd Street
Independence, Missouri
2002 East Mechanic
Harrisonville, Missouri
8501 North Oak Trafficway
Kansas City, Missouri
7012 NW Barry Road
Kansas City, Missouri
2707 NW Prairie View Road
Platte City, Missouri
RESIDENTIAL LENDING
10950 El Monte, Suite 210
Overland Park, Kansas
789 NE Rice Road
Lee's Summit, Missouri
4350 S National Avenue, Suite A100
Springfield, Missouri
CONSTRUCTION LENDING
12520 South 71 Highway
Grandview, Missouri
LOAN ADMINISTRATION
12520 South 71 Highway
Grandview, Missouri
INVESTOR INFORMATION
-------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS:
The Annual Meeting of Stockholders will be held on Tuesday,
January 26, 2010, at 8:30 a.m. in the lobby of North American Savings
Bank, 12498 South 71 Highway, Grandview, Missouri.
ANNUAL REPORT ON 10-K:
Copies of NASB Financial, Inc. Form 10-K Report to the Securities
and Exchange Commission are available without charge upon written
request to Keith B. Cox, President, NASB Financial, Inc., 12498 South
71 Highway, Grandview, Missouri 64030.
TRANSFER AGENT:
Registrar & Transfer Co., 10 Commerce Drive, Cranford, New Jersey
07016
STOCK TRADING INFORMATION:
The common stock of NASB Financial, Inc. and subsidiaries is
traded in the over-the-counter market. The Company's symbol is NASB.
INDEPENDENT AUDITORS:
BKD LLP, 120 West 12th Street, Suite 1200, Kansas City, Missouri
64105
SHAREHOLDER AND FINANCIAL INFORMATION:
Contact Keith B. Cox, NASB Financial, Inc., 12498 South 71
Highway, Grandview, Missouri 64030, (816) 765-2200.
55
COMMON STOCK PRICES AND DIVIDENDS
-------------------------------------------------------------------
At September 30, 2009, stockholders held 7,867,614 outstanding
shares of NASB Financial, Inc. common stock. The company paid cash
dividends of $0.225 per share in February, May, August, and November
2007. Cash dividends of $0.225 per share were paid in February, May,
August, and November 2008. The Company paid cash dividends of $0.225
per share in February, May, and August 2009.
The table below reflects the Company's high and low bid prices.
The quotations represent intra-dealer quotations without retail
markups, markdowns or commissions, and do not necessarily represent
actual transactions.
Fiscal 2009 Fiscal 2008
---------------- ----------------
Quarter ended High Low High Low
-----------------------------------------------------------
December 31 $ 29.74 21.00 36.74 24.22
March 31 26.81 12.48 28.58 19.80
June 30 31.10 20.60 28.70 17.75
September 30 31.94 23.55 32.50 16.06
56
