Attached files
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the period ended SEPTEMBER 30, 2010
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-24033
NASB FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-1805201
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12498 South 71 Highway, Grandview, Missouri 64030
(Address of principal executive offices) (Zip Code)
(816) 765-2200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.15 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
[ ]Yes [ X ]No
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) if the Exchange Act.
[ ]Yes [ X ]No
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. [ X ]Yes [ ]No
Indicate by check mark whether the Registrant has submitted
electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
[ ]Yes [ ]No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or non-accelerated filer, or
a small reporting company. See definition of "large accelerated
filer", "accelerated filer" and "small reporting company" in Rule 12b-
2 of the Exchange Act. [ ]Large accelerated filer
[ X ] Accelerated filer [ ]Non-accelerated filer [ ]Small
reporting Company
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
[ ]Yes [ X ]No
The aggregate market value of the voting stock held by non-
affiliates of the Registrant, based on the asking price of its Common
Stock on March 31, 2010, was approximately $84.7 million.
As of December 10, 2010, there were issued and outstanding
7,867,614 shares of the Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Part II - Annual report to Stockholders for the Fiscal Year Ended
September 30, 2010.
2. Part III - Proxy Statement for the 2011 Annual Meeting of
Stockholders.
PART I
ITEM 1. BUSINESS
General Description
NASB Financial, Inc. (the "Company") was formed in 1998 as a
unitary thrift holding company of North American Savings Bank, F.S.B.
("North American" or the "Bank"). The Bank is a federally chartered
stock savings bank, with its headquarters in the Kansas City area.
The Bank began operating in 1927, and became a member of the Federal
Home Loan Bank of Des Moines ("FHLB") in 1940. Its customer deposit
accounts are insured by the Deposit Insurance Fund ("DIF"), a division
of the Federal Deposit Insurance Corporation ("FDIC"). The Bank
converted to a stock form of ownership in September 1985.
The Bank's primary market area includes the counties of Jackson,
Cass, Clay, Buchanan, Andrew, Platte, and Ray in Missouri, and Johnson
and Wyandotte counties in Kansas. The Bank currently has nine retail
deposit offices in Missouri including one each in Grandview, Lee's
Summit, Independence, Harrisonville, Excelsior Springs, Platte City,
and St. Joseph, and two in Kansas City. North American also operates
loan production offices in Lee's Summit and Springfield in Missouri,
and Overland Park in Kansas. The economy of the Kansas City area is
diversified with major employers in agribusiness, greeting cards,
automobile production, transportation, telecommunications, and
government.
The Bank's principal business is to attract deposits from the
general public and to originate real estate loans, other loans and
short-term investments. The Bank obtains funds mainly from deposits
received from the general public, sales of loans and loan
participations, advances from the FHLB, and principal repayments on
loans and mortgage-backed securities ("MBS"). The Bank's primary
sources of income include interest on loans, interest on MBS, customer
service fees, and mortgage banking fees. Its primary expenses are
interest payments on customer deposit accounts and borrowings and
normal operating costs.
WEIGHTED AVERAGE YIELDS AND RATES
The following table presents the balances of interest-earning
assets and interest-costing liabilities with weighted average yields
and rates. Average balances and weighted average yields include all
accrual and non-accrual loans. Dollar amounts are expressed in
thousands.
Fiscal 2010
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 1,262,456 6.22%
Mortgage-backed securities 65,420 4.85%
Investments 35,806 4.25%
Bank deposits 20,384 0.06%
----------------------
Total earning assets 1,384,066 6.01%
Non-earning assets 79,656 ---------
-----------
Total $ 1,463,722
===========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 185,281 0.60%
Customer and brokered
certificates of deposit 699,011 2.34%
FHLB advances 380,112 3.00%
Subordinated debentures 25,000 2.02%
----------------------
Total costing liabilities 1,289,404 2.28%
Non-costing liabilities 6,269 ---------
Stockholders' equity 168,049
-----------
Total $1,463,722
===========
Net earning balance $ 94,662
===========
Earning yield less costing rate 3.73%
=========
Fiscal 2009
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 1,352,561 6.28%
Mortgage-backed securities 54,674 3.73%
Investments 57,554 4.78%
Bank deposits 26,264 0.38%
----------------------
Total earning assets 1,491,053 6.02%
Non-earning assets 65,063 ---------
-----------
Total $ 1,556,116
===========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 169,124 0.88%
Customer and brokered
certificates of deposit 698,747 3.37%
FHLB advances 491,040 3.37%
Subordinated debentures 25,000 3.42%
----------------------
Total costing liabilities 1,383,911 3.07%
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%
=========
Fiscal 2008
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 1,363,032 6.72%
Mortgage-backed securities 71,196 3.58%
Investments 25,909 4.19%
Bank deposits 11,953 2.12%
----------------------
Total earning assets 1,472,090 6.49%
Non-earning assets 61,057 ---------
-----------
Total $ 1,533,147
===========
Interest-costing liabilities:
Customer checking and savings
deposit accounts $ 166,076 1.16%
Customer and brokered
certificates of deposit 639,113 4.51%
FHLB advances 536,344 4.55%
Subordinated debentures 25,000 5.43%
----------------------
Total costing liabilities 1,366,533 4.13%
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%
=========
1
RATIOS
The following table sets forth, for the periods indicated, the
Company's return on assets (net income divided by average total
assets), return on equity (net income divided by average equity), and
equity-to-assets ratio (average equity divided by average total
assets), and dividend payout ratio (total cash dividends paid divided
by net income).
Year ended September 30,
---------------------------------------
2010 2009 2008 2007 2006
---------------------------------------
Return on average assets 0.42% 1.22% 0.61% 1.01% 1.35%
Return on average equity 3.78% 11.74% 6.16% 10.01% 13.60%
Equity to asset ratio 11.70% 10.67% 10.05% 9.92% 10.27%
Dividend payout ratio 55.99% 37.84% 76.16% 47.90% 45.59%
The following table sets forth the amount of cash dividends per
share paid on the Company's common stock during the months indicated.
Calendar year
-----------------------------------------------
2010 2009 2008 2007 2006
-----------------------------------------------
February $ 0.225 0.225 0.225 0.225 0.225
May -- 0.225 0.225 0.225 0.225
August -- 0.225 0.225 0.225 0.225
November -- 0.225 0.225 0.225 0.225
ASSET ACTIVITIES
LENDING ACTIVITIES
The Bank, has traditionally concentrated its lending activities
on mortgage loans secured by residential and business property and, to
a lesser extent, development lending. The residential mortgage loans
originated have predominantly long-term fixed and adjustable rates.
The Bank also has a portfolio of mortgage loans that are secured by
multifamily, construction, development, and commercial real estate
properties. The remaining part of North American's loan portfolio
consists of non-mortgage commercial loans and installment loans. The
following table presents the Bank's total loans receivable, held for
investment plus held for sale, for the periods indicated. The related
discounts, premiums, deferred fees and loans-in-process accounts are
excluded. Dollar amounts are expressed in thousands.
As of September 30,
-------------------------------------------------------------------------
2010 2009 2008 2007 2006
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
------------- ------------ ------------ ------------ ------------
Mortgage loans:
Permanent Loans on:
Residential properties $633,943 46 492,658 34 458,087 31 428,520 29 441,123 29
Business properties 450,305 32 474,487 34 496,671 34 489,978 33 482,029 32
Partially guaranteed
by VA or insured
by FHA 3,801 -- 4,771 -- 2,812 -- 1,541 -- 1,890 --
Construction and
development 208,039 15 329,457 23 396,777 27 476,081 33 506,034 34
------------- ------------- ------------- ------------- ------------
Total mortgage loans 1,296,088 93 1,301,373 91 1,354,347 92 1,396,120 95 1,431,076 95
Commercial loans 79,138 6 121,168 8 93,600 7 63,801 4 60,692 4
Installment loans to
individuals 11,573 1 13,861 1 14,920 1 17,729 1 17,279 1
------------- ------------- ------------- ------------- -------------
$1,386,799 100 1,436,402 100 1,462,867 100 1,477,650 100 1,509,047 100
============= ============= ============= ============= =============
2
The following table sets forth information at September 30, 2010,
regarding the dollar amount of loans maturing in the Bank's portfolio
based on their contractual terms to maturity. Demand loans, which
have no stated schedule of repayment and no stated maturity, are
reported as due in one year or less. Scheduled repayments are
reported in the maturity category in which the payment is due. Dollar
amounts are expressed in thousands.
2012
Through After
2011 2015 2015 Total
------------------------------------------
Mortgage Loans:
Permanent:
- at fixed rate $ 4,529 9,020 555,878 569,427
- at adjustable rates 8,596 11,651 498,375 518,622
Construction and development:
- at fixed rates 2,875 -- 182 3,057
- at adjustable rates 193,658 11,324 -- 204,982
-----------------------------------------
Total mortgage loans 209,658 31,995 1,054,435 1,296,088
Commercial loans 25,749 9,395 43,994 79,138
Installment loans to
individuals 1,521 1,969 8,083 11,573
------------------------------------------
Total loans receivable $ 236,928 43,359 1,106,512 1,386,799
==========================================
RESIDENTIAL REAL ESTATE LOANS
The Bank offers a range of residential loan programs. At
September 30, 2010, 46% of total loans receivable were permanent loans
on residential properties. Also, the Bank is authorized to originate
loans guaranteed by the Veterans Administration ("VA") and loans
insured by the Federal Housing Administration ("FHA"). Included in
residential loans as of September 30, 2010, are $3.8 million or less
than 1% of the Bank's total loans that were insured by the FHA or VA.
The Bank's residential loans come from several sources. The
loans that the Bank originates are generally a result of direct
solicitations of real estate brokers, builders, developers, or
potential borrowers via the internet. North American periodically
purchases real estate loans from other financial institutions or
mortgage bankers.
The bank's residential real estate loan underwriters are grouped
into three different levels, based upon each underwriter's experience
and proficiency. Underwriters within each level are authorized to
approve loans up to prescribed dollar amounts. Any loan over $1
million must also be approved by either the CEO or the EVP/Chief
Credit Officer. Conventional residential real estate loans are
underwritten using FNMA's Desktop Underwriter or FHLMC's Loan
Prospector automated underwriting systems, which analyze credit
history, employment and income information, qualifying ratios, asset
reserves, and loan-to-value ratios. If a loan does not meet the
automated underwriting standards, it is underwritten manually. Full
documentation to support each applicant's credit history, income, and
sufficient funds for closing is required on all loans. An appraisal
report, performed in conformity with the Uniform Standards of
Professional Appraisers Practice by an outside licensed appraiser, is
required for all loans. Typically, the Bank requires borrowers to
purchase private mortgage insurance when the loan-to-value ratio
exceeds 80%.
NASB originates Adjustable Rate Mortgages (ARMs), which fully
amortize and typically have initial rates that are fixed for one to
seven years before becoming adjustable. Such loans are underwritten
based on the initial interest rate and the borrower's ability to repay
based on the maximum first adjustment rate. Each underwriting
decision takes into account the type of loan and the borrower's
ability to pay at higher rates. While lifetime rate caps are taken
into consideration, qualifying ratios may not be calculated at this
level due to an extended number of years required to reach the fully-
indexed rate. NASB does not originate any hybrid loans, such as
payment option ARMs, nor does the Bank originate any subprime loans,
generally defined as high risk or loans of substantially impaired
quality.
3
At the time a potential borrower applies for a single family
residential mortgage loan, it is designated as either a portfolio
loan, which is held for investment and carried at amortized cost, or a
loan held-for-sale in the secondary market and carried at fair value.
All the loans on single family property that the Bank holds for sale
conform to secondary market underwriting criteria established by
various institutional investors. All loans originated, whether held
for sale or held for investment, conform to internal underwriting
guidelines, which consider, among other things, a property's value and
the borrower's ability to repay the loan.
During the year ended September 30, 2010, the Bank modified
residential real estate loans totaling $16.3 million, the majority of
which involved a restructuring of loan terms such as a temporary
reduction in the payment amount or an extension of the maturity date.
A restructuring of debt is considered a Troubled Debt Restructuring
(TDR) if, because of a debtor's financial difficulty, a creditor
grants concessions that it would not otherwise consider. At September
30, 2010, the Bank had TDRs in its residential real estate loan
portfolio of $7.1 million. TDRs are placed in non-accrual status
until they have made a minimum of six consecutive timely payments
under the restructured terms. Loans are removed from the TDR
classification after twelve consecutive months of satisfactory
repayment performance under the new loan terms.
CONSTRUCTION AND DEVELOPMENT LOANS
Construction and land development loans are made primarily to
builders/developers, who construct properties for resale. As of
September 30, 2010, 15% of the Bank's total loans receivable were
construction and development loans. The Bank originates both fixed
and variable rate construction loans, and most are due and payable
within one year. In some cases, extensions are permitted if payments
are current and construction has progressed satisfactorily.
The Bank's requirements for a construction loan are similar to
those of a mortgage on an existing residence. In addition, the
borrower must submit accurate plans, specifications, and cost
projections of the property to be constructed. All construction and
development loans are manually underwritten using NASB's internal
underwriting standards. All construction and development loans must
be approved by the CEO and either the EVP/ Chief Credit Officer or
SVP/Construction Lending. The bank has adopted internal loan-to-value
limits consistent with regulations, which are 65% for raw land, 75%
for land development, and 85% for residential and non-residential
construction. An appraisal report performed in conformity with the
Uniform Standards of Professional Appraisers Practice by an outside
licensed appraiser is required on all loans in excess of $250,000.
Generally, the Bank will commit to a term of 12 to 18 months on
construction loans, and up to 36 months on land acquisition and
development loans. Interest rates on construction loans typically
adjust daily and are tied to a predetermined index. NASB's staff
regularly performs inspections of each property during its
construction phase to ensure adequate progress is achieved before
making scheduled loan disbursements.
The Bank typically obtains full personal guarantees from the
primary individuals involved in the transaction. Guarantor's
financial statements and tax returns are reviewed annually to
determine their continuing ability to perform under such guarantees.
The Bank typically pursues repayment from guarantors when the primary
source of repayment is not sufficient to service the debt. However,
the Bank may decide not to pursue a guarantor if, given the
guarantor's financial condition, it is likely that the estimated legal
fees would exceed the probable amount of any recovery. Although the
Bank does not typically release guarantors from their obligation, the
Bank may decide to delay the decision to pursue civil enforcement of a
deficiency judgment. During Fiscal 2010, the Bank collected
deficiency judgments totaling $88,000 from guarantors of construction
and development loans subsequent to the foreclosure or charge-off of
loans.
At September 30, 2010, the Bank had permitted extensions for 333
loans, totaling $179.5 million, in its construction and land
development loan portfolio. The reason for the extensions related
primarily to slower home and lot sales in the current economic
environment. Such extensions were accounted for as TDRs if the
restructuring was related to the borrower's financial difficulty, and
if the Bank made concessions that it would not otherwise consider. It
has historically been the Bank's practice to renew construction and
development loans for a six-month term upon maturity. This allows the
Bank to more frequently evaluate the credit, including current market
conditions, and to modify loan terms accordingly. This portfolio
consists primarily of prime-based assets, and in most cases, the
conditions for loan extension/renewal included an increase in the
interest rate "floor" in accordance with the current market
conditions. In order to determine whether or not an extension/renewal
should be accounted for as a TDR, management reviewed the borrower's
current financial information, including an analysis of income and
liquidity in relation to debt service requirements. The large
majority of these modifications did not result in a reduction in the
contractual interest rate or a write-off of the principal balance
(although the Bank does commonly require the borrower to make a
principal reduction at extension/renewal). If such concessions were
made and the modification was the result of the borrower's financial
difficulty, the extension/renewal was accounted for as a TDR. The
Bank expects to collect all principal and interest, including accrued
interest, during the term of the extension for loans not accounted for
as a TDR. At September 30, 2010, the Bank had TDRs in its
construction and development loan portfolio of $16.0 million.
4
COMMERCIAL REAL ESTATE LOANS
The Bank purchases and originates several different types of
commercial real estate loans. As of September 30, 2010, commercial
real estate loans on business properties were $450.3 million or 32% of
the Bank's total loan portfolio. Permanent multifamily mortgage loans
on properties of 5 to 36 dwelling units have a 50% risk-weight for
risk-based capital requirements if they have an initial loan-to-value
ratio of not more than 80% and if their annual average occupancy rate
exceeds 80%. All other performing commercial real estate loans have
100% risk-weights.
The Bank's commercial real estate loans are secured primarily by
multi-family and nonresidential properties. Such loans are manually
underwritten using NASB's internal underwriting standards, which
evaluate the sources of repayment, including the ability of income
producing property to generate sufficient cash flow to service the
debt, the capacity of the borrower or guarantors to cover any
shortfalls in operating income, and, as a last resort, the ability to
liquidate the collateral in such a manner as to completely protect the
Bank's investment. All commercial real estate loans must be approved
by the CEO and either the EVP/ Chief Credit Officer or SVP/Commercial
Lending. Typically, loan-to-value ratios do not exceed 80%; however,
exceptions may be made when it is determined that the safety of the
loan is not compromised, and the rational for exceeding this limit is
clearly documented. An appraisal report performed in conformity with
the Uniform Standards of Professional Appraisers Practice by an
outside licensed appraiser is required on all loans in excess of
$250,000. Interest rates on commercial loans may be either fixed or
tied to a predetermined index and adjusted daily.
The Bank typically obtains full personal guarantees from the
primary individuals involved in the transaction. Guarantor's
financial statements and tax returns are reviewed annually to
determine their continuing ability to perform under such guarantees.
The Bank typically pursues repayment from guarantors when the primary
source of repayment is not sufficient to service the debt. However,
the Bank may decide not to pursue a guarantor if, given the
guarantor's financial condition, it is likely that the estimated legal
fees would exceed the probable amount of any recovery. Although the
Bank does not typically release guarantors from their obligation, the
Bank may decide to delay the decision to pursue civil enforcement of a
deficiency judgment. During Fiscal 2010, the Bank did not collect any
deficiency judgments from guarantors of commercial real estate loans
subsequent to the foreclosure or charge-off of loans.
At least once during each calendar year, a review is prepared for
each loan included in a borrower relationship in excess of $5 million
and for each individual loan over $1 million. It is management's
opinion that loans over this threshold comprise the predominate risk
to the portfolio, totaling approximately 79% of all commercial real
estate loans. Collateral inspections are obtained on an annual basis
for each loan over $1 million, and on a triennial basis for each loan
between $500 thousand and $1 million. Financial information, such as
tax returns, is requested annually for all commercial real estate
loans over $500 thousand, which is consistent with industry practice,
and the Bank has sufficient monitoring procedures in place to identify
potential problem loans. A loan is deemed impaired when, based on
current information and events, it is probable that a creditor will be
unable to collect all amounts due in accordance with the contractual
terms of the loan agreement. Any loans deemed impaired, regardless of
their balance, are reviewed by management at the time of the
impairment determination, and monitored on a quarterly basis
thereafter, including calculation of specific valuation allowances, if
applicable.
During the year the Bank modified $68.5 million in commercial
real estate loans, the majority of which included a restructuring of
loan terms following a significant principal payment or a renewal or
extension of the maturity date. A restructuring of debt is considered
a Troubled Debt Restructuring (TDR) if, because of a debtor's
financial difficulty, a creditor grants concessions that it would not
otherwise consider. In order to determine whether or not a
modification should be accounted for as a TDR, the Bank reviews the
current financial information of the borrower(s) and , if applicable,
guarantor(s) , including an analysis of income, assets and credit
history. In addition, a market analysis of the property is prepared.
All pertinent information is considered, including debt service
requirements. The majority of these modifications did not result in a
reduction in the contractual interest rate or a write-down of the
principal balance. If such concessions were made and the modification
was the result of the borrower's financial difficulty, the extension
was accounted for as a TDR. The Bank expects to collect all principal
and interest, including accrued interest, for loans not accounted for
as a TDR. At September 30, 2010, the Bank had TDRs in its commercial
real estate loan portfolio of $623,000.
5
INSTALLMENT LOANS
As of September 30, 2010, consumer installment loans and lease
financing to individuals represented approximately 1% of loans
receivable. These loans consist primarily of loans on savings
accounts and consumer lines of credit that are secured by a customer's
equity in their primary residence.
SALES OF MORTGAGE LOANS
The Bank is an active seller of loans in the national secondary
mortgage market. A portion of loans originated are sold to various
institutional investors with the rights to service the loans
(servicing released). Another portion are originated for sale with
loan servicing rights kept by the Bank (servicing retained), or with
servicing rights sold to a third party servicer. At the time of each
loan commitment, management decides if the loan will be held in
portfolio or sold and, if sold, which investor is appropriate. During
fiscal 2010, the Bank sold $1,821.3 million in loans with servicing
released.
The Bank records loans held for sale at fair value, and any
adjustments made to record them at estimated fair value are made
through the income statement. As of September 30, 2010, the Bank had
loans held for sale with a carrying value of $179.8 million.
CLASSIFIED ASSETS, DELINQUENCIES, AND ALLOWANCE FOR LOSS
Classified Assets. In accordance with the asset classification
system outlined by the Office of Thrift Supervision ("OTS"), North
American's problem assets are classified as either "substandard,"
"doubtful," or "loss."
An asset is considered substandard if it is inadequately
protected by the borrower's ability to repay, or the value of
collateral. Substandard assets include those characterized by a
possibility that the institution will sustain some loss if the
deficiencies are not corrected. Assets classified as doubtful have
the same weaknesses of those classified as substandard with the added
characteristic that the weaknesses present make collection or
liquidation in full, on the basis of currently existing facts,
conditions, and values, highly questionable and improbable. Assets
classified as loss are considered uncollectible and of such little
value that their existence without establishing a specific loss
allowance is not warranted.
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. Once a loan has been deemed impaired,
the impairment must be measured by comparing the recorded investment
in the loan to the present value of the estimated future cash flows
discounted at the loan's effective rate, or to the fair value of the
loan based on the loan's observable market price, or to the fair value
of the collateral if the loan is collateral dependent. The Bank
records a specific loss allowance equal to the amount of measured
impairment. The OTS reviews North American's asset classifications
and impairment analyses during each examination.
Each quarter, management reviews the problem loans in its
portfolio to determine whether changes to the asset classifications or
allowances are needed. The following table summarizes the Bank's
classified assets as reported to the OTS, plus any classified assets
of the holding company. Dollar amounts are expressed in thousands.
As of September 30,
-------------------------------------------
2010 2009 2008 2007 2006
-------------------------------------------
Asset Classification
Substandard $ 142,085 69,158 34,320 11,726 12,361
Doubtful -- -- -- -- --
Loss* 16,965 6,415 1,442 357 434
-------------------------------------------
Total Classified 159,050 75,573 35,762 12,083 12,795
Allowance for loan/REO
losses (34,643) (20,699) (14,476) (8,301) (8,266)
-------------------------------------------
Net classified assets $ 124,407 54,874 21,286 3,782 4,529
===========================================
Net classified to total
classified assets 78% 73% 60% 31% 35%
===========================================
* Assets classified as loss represent the amount of measured
impairment for impaired loans and REO. The Bank records a specific
loss allowance equal to the amount of measured impairment. These
specific allowances are included in the balance of the allowance for
loan/REO losses above.
6
When a loan becomes 90 days past due, the Bank stops accruing
interest and establishes a reserve for the interest accrued-to-date.
The following table summarizes non-performing assets, troubled debt
restructurings, and real estate acquired through foreclosure or in-
substance foreclosure. Dollar amounts are expressed in thousands.
September 30,
-------------------------------------------------
2010 2009 2008 2007 2006
-------------------------------------------------
Total Assets $1,434,196 1,559,562 1,516,761 1,506,483 1,524,796
=================================================
Non-accrual loans $ 29,368 40,639 35,075 3,284 6,396
Troubled debt
restructurings 23,730 23,366 -- -- 3,477
Net real estate and
other assets acquired
through foreclosure 38,362 10,140 6,038 6,511 5,231
-------------------------------------------------
Total $ 91,460 74,145 41,113 9,795 15,104
=================================================
Percent of total assets 6.38% 4.75% 2.71% 0.65% 0.99%
=================================================
Delinquencies. The following table summarizes delinquent loan
information.
As of September 30, 2010
----------------------------------------------------------------------
Number of Percent of
Loans delinquent for Loans Amount Total Loans
----------------------------------------------------------------------
30 to 89 days 86 $ 8,575 0.6%
90 or more days 105 29,368 2.1%
----------- -----------------------------
Total 191 $ 37,943 2.7%
=========== =============================
As of September 30, 2009
----------------------------------------------------------------------
Number of Percent of
Loans delinquent for Loans Amount Total Loans
----------------------------------------------------------------------
30 to 89 days 84 $ 8,900 0.6%
90 or more days 142 40,639 2.8%
----------- -----------------------------
Total 226 $ 49,539 3.4%
=========== =============================
The effect of non-accrual loans on interest income for fiscal
year 2010 is presented below. Dollar amounts are expressed in
thousands.
Principal amount of non-accrual loans
as of September 30, 2010 $ 29,368
========
Gross amount of interest income that would
have been recorded during fiscal 2010 if
these loans had been accruing $ 2,479
Actual amount included in interest income for
fiscal 2010 719
--------
Interest income not recognized on non-performing
loans $ 1,760
========
7
Allowance for loan and lease losses. The Allowance for Loan and
Lease Losses ("ALLL") recognizes the inherent risks associated with
lending activities for individually identified problem assets as well
as the entire homogenous and non-homogenous loan portfolios. ALLLs
are established by charges to the provision for loan losses and
carried as contra assets. Management analyzes the adequacy of the
allowance on a quarterly basis and appropriate provisions are made to
maintain the ALLLs at adequate levels. 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. 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.
The ALLL is determined based upon two components. The first is
made up of specific reserves for loans which have been deemed impaired
in accordance with Generally Accepted Accounting Principles ("GAAP").
The second component is made up of general reserves for loans that are
not impaired. 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. Once a loan has been deemed
impaired, the impairment must be measured by comparing the recorded
investment in the loan to the present value of the estimated future
cash flows discounted at the loan's effective rate, or to the fair
value of the loan based on the loan's observable market price, or to
the fair value of the collateral if the loan is collateral dependent.
The Bank records a specific allowance equal to the amount of measured
impairment.
Loans that are not impaired are evaluated based upon the Bank's
historical loss experience, as well as various subjective factors, to
estimate potential unidentified losses with the various loan
portfolios. These loans are categorized into pools based upon certain
characteristics such as loan type, collateral type and repayment
source. The Bank's loss history is analyzed in terms of loss
frequency and loss severity. Loss frequency represents 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 represents any potential loss resulting from
the loan's foreclosure and subsequent liquidation. Management
calculates estimated loss frequency and loss severity ratios for each
loan pool. In addition to analyzing historical losses, the Bank also
evaluates the following subjective factors for each loan pool to
estimate future losses: changes in lending policies and procedures,
changes in economic and business conditions, changes in the nature and
volume of the portfolio, changes in management and other relevant
staff, changes in the volume and severity of past due loans, changes
in the quality of the Bank's loan review system, changes in the value
of the underlying collateral for collateral dependent loans, changes
in the level of lending concentrations, and changes in other external
factors such as competition and legal and regulatory requirements.
Historical loss ratios are adjusted accordingly, based upon the effect
that the subjective factors have in estimated future losses. These
adjusted ratios are applied to the balances of the loan pools to
determine the adequacy of the ALLL each quarter. In addition, the
Bank applies ALLLs for unimpaired loans classified as Special Mention,
Substandard and Doubtful in the amount of 2%, 10%, and 50%,
respectively.
The provision for losses on loans was $30.5 million during the
year ended September 30, 2010, compared to $11.3 million during fiscal
2009. The allowance for loan losses was $32.3 million or 3.01% of the
total loan portfolio held for investment and approximately 110% of
total nonaccrual loans as of September 30, 2010. This compares with
an allowance for loan losses of $20.7 million or 1.64% of the total
loan portfolio held for investment and approximately 51% of the total
nonaccrual loans as of September 30, 2009. The increase in the
allowance for loan loss of $11.6 million resulted from the $30.5
million provision for loss, which was partially offset by net charge-
offs for the year of $18.9 million. The increase in the provision for
loss from the prior year resulted primarily from increases in loans
classified as substandard or loss during fiscal 2010. In addition,
the Company enhanced its ALLL methodology during the fiscal year to
incorporate a shorter historical loss "look-back" period, and to more
formally document qualitative factors used to determine the
appropriate level of allowance for losses on loans. 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. The provision can fluctuate based on
changes in economic conditions, changes in the level of classified
assets, changes in the amount of loan charge-offs and recoveries, or
changes in other information available to management
8
The Bank makes construction and development loans within the
metropolitan Kansas City area. Commercial real estate loan are
originated through a network of brokers throughout the United States.
Residential loans are originated through retail lending offices
located in the Kansas City metro area and in all fifty states through
the Bank's internet lending division; however, the majority of
residential real estate loans originated by the Bank are subsequently
sold on the secondary market. Although the Bank's residential and
commercial lending is national in scope, its concentrations are
primarily in markets areas where deterioration has not been as severe
as national trends. At September 30, 2010, $529.8 million (or 52.5%)
of the loans in the Bank's held to maturity portfolio were located
within Kansas or Missouri, which have experienced some of the lowest
declines in property values. The Bank does not have significant
lending concentrations in Arizona, California, Nevada, or Florida,
which have experienced some of the largest declines in property
values.
During the year ended September 30, 2010, the Bank's net charge-
offs totaled $18.9 million, an increase of $14.5 million from the
prior fiscal year. Of this increase, $1.1 million related to an
increase in charge-offs on loans secured by residential properties,
$1.5 million related to an increase in charge-offs on loan secured by
business properties, and $12.1 million related to an increase in
charge-offs on construction and development loans. These increases
related primarily to the continued deterioration in the housing
market, evidenced by declining prices, fewer home and lot sales, and
increasing inventories. The Bank recorded a $6.7 million charge-off
on one loan within the Bank's land development portfolio. The
original plan for the property was a high-end residential development,
which proved infeasible in the current market. Thus, the appraised
value declined significantly due to longer estimated absorption
periods, lower estimated lot prices, and the decline in demand for
speculative development ground.
Based upon the significant increase in foreclosure frequency and
loss severity ratios within the Bank's portfolios and other
qualitative factors related to the current economic conditions, the
Bank increased its general component of allowance for loan losses
during the year ended September 30, 2010. The balance of general
reserves in the allowance for loan losses increased to $17.7 million,
from $14.3 million in the prior year. During the same time period,
the balance of loans receivable held to maturity decreased during the
fiscal year from $1,259.7 million to $1,073.4 million at September 30,
2010. The Bank does not routinely obtain updated appraisals for their
collateral dependent loans. However, when analyzing the adequacy of
its allowance for loan losses, the Bank considers potential changes in
the value of the underlying collateral for such loans as one of the
subjective factors used to estimate future losses in the various loan
pools.
The following table sets forth the activity in the allowance for
loan losses. Dollar amounts are expressed in thousands.
September 30,
-----------------------------------------
2010 2009 2008 2007 2006
-----------------------------------------
Balance at beginning of year $20,699 13,807 8,097 7,991 7,536
Total provisions 30,500 11,250 6,200 1,634 745
Charge-offs on:
Residential properties (3,371) (2,327) (15) (40) (26)
Business properties (1,723) (254) (5) (386) (280)
Construction and
development (13,439) (1,326) (362) (842) (2)
Commercial loans (173) (339) -- -- --
Installment loans (178) (132) (123) (260) (6)
Recoveries on:
Residential properties 1 18 4 -- 24
Business properties -- -- -- -- --
Construction and development -- -- -- -- --
Commercial loans -- -- -- -- --
Installment loans -- 2 11 -- --
-----------------------------------------
Total net charge-offs (18,883) (4,358) (490) (1,528) (290)
-----------------------------------------
Balance at end of year $32,316 20,699 13,807 8,097 7,991
=========================================
9
The following table sets forth the allocation of the allowance
for loan losses. Dollar amounts are expressed in thousands.
As of September 30,
--------------------------------------------------------------------------
2010 2009 2008 2007 2006
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
------------- ------------ ------------ ------------ ------------
Residential properties $ 4,437 14% 3,680 18 1,286 9 1,013 13 789 10
Business properties 6,708 21 8,936 43 5,723 41 4,289 53 4,574 57
Construction and
development 19,018 59 6,272 30 5,638 41 1,704 21 1,783 22
Commercial loans 1,015 3 1,123 6 952 7 728 9 613 8
Installment loans 1,138 3 688 3 208 2 363 4 232 3
------------- ------------- ------------- -------------- -------------
$ 32,316 100 20,699 100 13,807 100 8,097 100 7,991 100
============= ============= ============= ============== =============
SOURCE OF FUNDS
In addition to customer and brokered deposits, the Bank obtains
funds from loan and MBS repayments, sales of loans held-for-sale and
securities available-for-sale, investment maturities, FHLB advances,
and other borrowings. Loan repayments, as well as the availability of
customer deposits, are influenced significantly by the level of market
interest rates. Borrowings may be used to compensate for insufficient
customer deposits or to support expanded loan and investment
activities.
CUSTOMER DEPOSIT AND BROKERED DEPOSIT ACCOUNTS
The following table sets forth the composition of various types
of deposit accounts. Dollar amounts are expressed in thousands.
FHLB ADVANCES AND OTHER BORROWINGS
FHLB advances are an important source of borrowing for North
American. The FHLB functions as a central reserve bank providing
credit for thrifts and other member institutions. As a member of the
FHLB, North American is required to own stock in the FHLB of Des
Moines and can apply for advances, collateralized by the stock and
certain types of mortgages, provided that certain standards related to
credit-worthiness are met.
The Bank has historically relied on customer deposits and loan
repayments as its primary sources of funds. Advances are sometimes
used as a funding supplement, when management determines that it can
profitably invest the advances over their term. During fiscal 2010,
the Bank borrowed an additional $98.0 million in advances, repaid
$253.0 million, and as of September 30, 2010, had a balance of $286.0
million (23% of total liabilities) of advances from the FHLB.
The following table presents, for the periods indicated, certain
information as to the Bank's advances from the FHLB and other
borrowings. Dollar amounts are expressed in thousands.
As of September 30,
--------------------------------------------------
2010 2009 2008 2007 2006
--------------------------------------------------
FHLB advances $ 286,000 441,026 550,091 458,933 499,357
Other borrowings -- -- -- -- --
--------------------------------------------------
Total $ 286,000 441,026 550,091 458,933 499,357
==================================================
Weighted average
rate 3.44% 2.99% 4.07% 5.08% 5.21%
==================================================
OTHER INFORMATION
EMPLOYEES
As of September 30, 2010, the Bank and its subsidiaries had 414
employees. Management considers its relations with the employees to
be excellent.
The Bank currently maintains a comprehensive employee benefit
program including a qualified pension plan, hospitalization and major
medical insurance, paid vacations, paid sick leave, long-term
disability insurance, life insurance, and reduced loan fees for
employees who qualify. The Bank's employees are not represented by
any collective bargaining group.
COMPETITION
The Bank, like other savings institutions, is operating in a
changing environment. Non-depository financial service companies such
as securities dealers, insurance agencies, and mutual funds have
become competitors for retail savings and investments. In addition to
offering competitive interest rates, a savings institution can attract
customer deposits by offering a variety of services and convenient
office locations and business hours. Mortgage banking/brokerage firms
compete for the residential mortgage business. The primary factors in
competing for loans are interest rates and rate adjustment provisions,
loan maturity, loan fees, and the quality of service to borrowers and
brokers.
UNRESOLVED STAFF COMMENTS
The Company received an SEC staff comment letter dated November
18, 2010, which remains unresolved as of December 14, 2010. The staff
comments related to the Company's impairment analyses for its
investments in LLCs at September 30, 2009 and December 31, 2009. The
staff requested a description of the Company's internal model used to
measure impairment, including the qualitative inputs considered.
12
REGULATION
GENERAL
Federal savings institutions are members of the FHLB System and
their deposits are insured by the DIF, a division of the Federal
Deposit Insurance Corporation ("FDIC"). They are subject to extensive
regulation by the OTS as the chartering authority and now, since the
passage of the FIRREA, the FDIC. DIF insured institutions are limited
in the transactions in which they may engage by statute and
regulation, which in certain instances may require an institution to
conform with regulatory standards or to receive prior approval from
regulators. Institutions must also file periodic reports with these
government agencies regarding their activities and their financial
condition. The OTS and FDIC make periodic examinations of the Bank to
test compliance with the various regulatory requirements. If it is
deemed appropriate, the FDIC can require a re-valuation of the Bank's
assets based on examinations and they can require the Bank to
establish specific allowances for loss that reflect any such re-
valuation. This supervision and regulation is intended primarily for
the protection of depositors. Savings institutions are also subject
to certain reserve requirements under Federal Reserve Board
regulations.
The enforcement provisions of the Federal Deposit Insurance Act
("FDI Act") are applicable to savings institutions and savings and
loan holding companies. While the OTS is primarily responsible for
enforcing those provisions, the FDIC also has authority to impose
enforcement action on savings institutions in certain situations. The
jurisdiction of the FDI Act's enforcement powers cover all "insured-
related parties" including stockholders, attorneys, appraisers and
accountants who knowingly or recklessly participate in wrongful action
likely to have an adverse effect on an insured institution.
Regulators have broad flexibility to impose enforcement action on an
institution that fails to comply with its regulatory requirements,
particularly with respect to the capital requirements. Possible
enforcement action ranges from requiring a capital plan, restricting
operations, or terminating deposit insurance. The FDIC can recommend
to the director of the OTS (the "Director") enforcement action, and if
action is not taken by the Director, the FDIC has the authority to
compel such action under certain circumstances.
FEDERAL HOME LOAN BANKING SYSTEM
The Bank is a member of the FHLB System, which consists of 12
regional Federal Home Loan Banks each subject to OTS supervision and
regulation. The FHLBs provide a central credit facility for member
institutions. The Bank, as a member of the FHLB of Des Moines, is
required to hold shares of capital stock of the FHLB in an amount
equal to at least 1% of the aggregate principal amount of its unpaid
residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 1/20 of its advances
from the FHLB of Des Moines, whichever is greater. The Bank complies
with this requirement and holds stock in the FHLB of Des Moines at
September 30, 2010, of $15.9 million. FHLB advances must be secured
by specified types of collateral. Also, standards of community
investment and community service must be met by members that apply for
FHLB advances.
LIQUIDITY
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, 2010, the Bank had a total borrowing
capacity at FHLB of $495.0 million, and outstanding advances of $286.0
million. The Bank has established relationships with various brokers,
and, as a secondary source of liquidity, the Bank may purchase
brokered deposit accounts.
The Bank entered into a Supervisory Agreement with the Office of
Thrift Supervision on April 30, 2010, which, among other things,
required the Bank to reduce its reliance on brokered deposits. The OTS
subsequently approved the Bank's plan to reduce brokered deposits to
$145.0 million by June 30, 2010, to $135.0 million by June 30, 2011
and to $125.0 million by June 30, 2012. As of September 30, 2010, the
Bank's brokered deposits totaled $66.9 million. Thus, the Bank could
acquire an additional $78.1 million in brokered deposits and still
comply with the plan as of September 30, 2010.
13
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
believes that the Bank will retain most of its maturing time deposits
in the foreseeable future. However, any material funding needs that
may arise in the future can be reasonably satisfied through the use of
additional FHLB advances and/or brokered deposits. The Bank's
contingency liquidity sources include the Federal Reserve discount
window and sales of securities available for sale. 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
INSURANCE ON CUSTOMER DEPOSIT ACCOUNTS
Deposit insurance reform legislation was signed into law on
February 8, 2006. A key provision of this legislation was the merger
of the Bank Insurance Fund (BIF) and the Savings Association Insurance
Fund (SAIF) into a single fund, the Deposit Insurance Fund (DIF). The
merger of the funds was effective March 31, 2006. The DIF insures the
Bank's customer deposit accounts to a maximum of $100,000 for each
insured owner, with the exception of self-directed retirement
accounts, which are insured to a maximum of $250,000. On October 3,
2008, the Emergency Economic Stabilization Act of 2008 temporarily
raised the basic limit of federal deposit insurance coverage from
$100,000 to $250,000 per depositor. This legislation provided that
the basic deposit insurance limit will return to $100,000 after
December 31, 2009. On September 9, 2009, the FDIC Board of Directors
approved a rule to extend the temporary increase through December 31,
2013. The Dodd-Frank Wall Street Reform and Consumer Protection Act,
signed into law on July 21, 2010, made permanent the maximum deposit
insurance amount of $250,000.
Deposit premiums are determined using a Risk-Related Premium
Schedule ("RRPS"), a matrix which places each insured institution into
one of three capital groups and one of three supervisory subgroups.
The capital groups are an objective measure of risk based on
regulatory capital calculations and include well capitalized,
adequately capitalized, and undercapitalized. The supervisory
subgroups (A, B, and C) are more subjective and are determined by the
FDIC based on recent regulatory examinations. Member institutions are
eligible for reclassification every six months. On March 25, 2010,
North American was moved from supervisory category A to category B,
based upon the results of the Bank's OTS examination.
Annual deposit insurance premiums range from 7 to 77.5 basis
points of insured deposits based on where an institution fits on the
RRPS. In addition to deposit insurance premiums, institutions are
assessed a premium, which is used to service the interest on the
Financing Corporation ("FICO") debt.
On November 12, 2009, the FDIC adopted a rule requiring insured
institutions to prepay their estimated quarterly risk-based
assessments for the fourth quarter of 2009, and all of 2010, 2011, and
2012. The prepaid assessment for these periods was collected on
December 31, 2009, along with each institution's regular quarterly
risk-based deposit insurance assessment for the third quarter of 2009.
The FDIC has authority to conduct examinations of, require
reporting of, and initiate enforcement actions against a thrift.
Regardless of an institution's capital level, insurance of deposits
may be terminated by the FDIC upon a finding that the institution has
engaged in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS.
REGULATORY CAPITAL REQUIREMENTS
Regulations require that thrifts maintain minimum levels of
regulatory capital, which are at least as stringent as those imposed
on national banks by the Office of the Comptroller of the Currency
("OCC").
14
Leverage Limit. The leverage limit requires that a thrift
maintain "core capital" of at least 4% of its adjusted tangible
assets. "Core capital" includes (i) common stockholders' equity,
including retained earnings; non-cumulative preferred stock and
related earnings; and minority interest in the equity accounts of
consolidated subsidiaries, minus (ii) those intangibles (including
goodwill) and investments in and loans to subsidiaries not permitted
in computing capital for national banks, plus (iii) certain purchased
mortgage servicing rights and certain qualifying supervisory goodwill.
At September 30, 2010, intangible assets of $2.6 million and
disallowed servicing asset totaling an additional $23,000 were
deducted from the Bank's regulatory capital. At September 30, 2010,
the Bank's core capital ratio was 11.9%.
Tangible Capital Requirement. The tangible capital requirement
mandates that a thrift maintain tangible capital of at least 1.5% of
tangible assets. For the purposes of this requirement, adjusted total
assets are generally calculated on the same basis as for the leverage
ratio requirement. Tangible capital is defined in the same manner as
core capital, except that all goodwill and certain other intangible
assets must be deducted. As of September 30, 2010, North American's
regulatory tangible capital was 11.9% of tangible assets.
Risk-Based Capital Requirement. OTS standards require that
institutions maintain risk-based capital equal to at least 8% of risk-
weighted assets. Total risk-based capital includes core capital plus
supplementary capital. In determining risk-weighted assets, all
assets including certain off-balance-sheet items are multiplied by a
risk weight factor from 0% to 100%, based on risk categories assigned
by the OTS. The RRPS categorizes bank risk-based capital ratio over
10% as well capitalized, 8% to 10% as adequately capitalized, and
under 8% as undercapitalized. As of September 30, 2010, the Bank's
current risk-based regulatory capital was 12.9% of risk-weighted
assets.
OTS ASSESSMENTS
The OTS has a sliding scale assessment formula to provide funding
for its operations. Troubled savings associations are charged a
"premium assessment" at a rate of 50% higher than non-troubled savings
associations at the same level of assets. Non-troubled institutions
are charged "general assessments." The changes in assessment fees
reflect the increased supervisory attention that troubled institutions
require from the OTS, which in turn increases the cost of regulation
and examinations.
EQUITY RISK INVESTMENTS
OTS regulations limit the aggregate amount that an insured
institution may invest in real estate, service corporations, equity
securities, and nonresidential construction loans and loans with loan-
to-value ratios greater than 80%. Under the regulations, savings
associations which meet their minimum regulatory capital requirements
and have tangible capital of less than 6% of total liabilities may
make aggregate equity risk investments equal to the greater of 3% of
assets or two and one-half times their tangible capital. Savings
associations that meet their minimum regulatory capital requirements
and have tangible capital equal to or greater than 6% of total
liabilities may make aggregate equity risk investments of up to three
times their tangible capital.
LOANS TO ONE BORROWER
FIRREA prohibits an institution from investing in any one real
estate project in an amount in excess of the applicable loans-to-one-
borrower limit, which is an amount equal to 15% of unimpaired capital
on an unsecured basis and an additional amount equal to 10% of
unimpaired capital and surplus if the loan is secured by certain
readily marketable collateral. Renewals that exceed the loans-to-one-
borrower limit are permissible if the original borrower remains liable
for the debt and no additional funds are disbursed. The Bank has
received regulatory approval from the OTS under 12 CFR 560.93 which
increased its loans-to-one-borrower limit to $30 million for loans
secured by certain residential housing units. Such loans must, in the
aggregate, not exceed 150% of the Bank's unimpaired capital and
surplus.
INVESTMENT IN SUBSIDIARIES
Investments in and extensions of credit to subsidiaries not
engaged in activities permissible for national banks must generally be
deducted from capital. As of September 30, 2010, the Bank did not
have any investments in or advances to subsidiaries engaged in
activities not permissible for national banks.
15
FEDERAL RESERVE SYSTEM
Regulations require that institutions maintain reserves of 3%
against transaction accounts up to a specified level and an initial
reserve of 10% against that portion of total transaction accounts in
excess of such amount. In addition, an initial reserve of 3% must be
maintained on non-personal time deposits, which include borrowings
with maturities of less than four years. Such reserves are non-
interest bearing. These percentages are subject to change by the
Federal Reserve Board. As of September 30, 2010, North American met
its reserve requirements.
U.S. TREASURY TROUBLED ASSET RELIEF PROGRAM
On October 14, 2008, the U. S. Department of Treasury ("the
Treasury") announced the Troubled Asset Relief Program ("TARP
Program"), in an effort to improve the strength of financial
institutions and enhance market liquidity. Under the TARP Program,
the Treasury could purchase up to $250 billion in senior preferred
stock of participating financial institutions. The TARP program was
available to certain qualified financial institutions, and such
institutions would only be qualified if they elected to participate on
or before November 14, 2008. Institutions participating in the TARP
program were required to adopt the Treasury's standards for executive
compensation and corporate governance for the period during which the
Treasury holds equity issued under the TARP program. North American
did not participate in the TARP Program.
DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT
The Dodd-Frank Wall Street Reform and Consumer Protection Act
("The Dodd-Frank Act" or "The Act") was signed into law on July 21,
2010. The Bank's primary federal regulator, the Office of Thrift
Supervision, will be eliminated and existing federal thrifts will be
subject to regulation and supervision by the Office of the Comptroller
of the Currency, which supervises and regulates all national banks.
Existing savings and loan holding companies will be subject to
regulation and supervision by the Federal Reserve Board. The Dodd-
Frank Act creates a new Consumer Financial Protection Bureau with
broad powers to enforce consumer protection laws and ensure that
markets for consumer financial products and services are fair,
transparent, and competitive. The Act restricts the ability of banks
to apply trust preferred securities toward regulatory capital
requirements. However, Tier 1 capital treatment for trust preferred
securities issued before May 19, 2010 is grandfathered for bank
holding companies with assets under $15 billion. The Dodd-Frank Act
will require publically traded companies to give stockholders a non-
binding vote on executive compensation and so called "golden
parachute" payments. The Act authorizes the Securities and Exchange
Commission to promulgate rules that would allow stockholders to
nominate their own candidates using a company's proxy materials. The
Dodd-Frank Act also broadens the base for FDIC insurance assessments,
which will be based on average consolidated total assets less tangible
equity capital, rather than deposits. The Act also makes permanent
the maximum deposit insurance amount of $250,000 per depositor. The
federal agencies are given significant discretion in drafting the
rules and regulations required by The Dodd-Frank Act. Consequently,
the full impact of this legislation will not be known for some time.
TAXATION
The Company is subject to the general applicable corporate tax
provisions of the Internal Revenue Code ("Code") and the Bank is
subject to certain additional provisions of the Code, which apply to
savings institutions and other types of financial institutions.
BAD DEBT RESERVES
Prior to October 1, 1996, the Bank was allowed a special bad debt
deduction for additions to tax bad debt reserves established for the
purpose of absorbing losses. This deduction was either based on an
institution's actual loss experience (the "experience method") or,
subject to certain tests relating to the composition of assets, based
on a percentage of taxable income ("percentage method"). Under the
percentage method, qualifying institutions generally deducted 8% of
their taxable income.
16
As a result of changes in the Federal tax code, the Bank's bad
debt deduction was based on actual experience beginning with the
fiscal year ended September 30, 1997, as the percentage method for
additions to the tax bad debt reserve was eliminated. Under the new
tax rules, thrift institutions were required to recapture their
accumulated tax bad debt reserve, except for the portion that was
established prior to 1988, the "base-year". The recapture was
completed over a six-year phase-in period that began with the fiscal
year ended September 30, 1999. A deferred tax liability is required
to the extent the tax bad debt reserve exceeds the 1988 base year
amount. As of September 30, 2010, North American had approximately
$3.7 million established as a tax bad debt reserve in the base-year.
Distributing the Bank's capital in the form of purchasing treasury
stock forced North American to recapture its after base-year bad debt
reserve prior to the phase-in period. Management believes that
accelerating the recapture was more than offset by the opportunity to
buy treasury stock at lower average market prices.
MINIMUM TAX
For taxable years beginning after December 31, 1986, the
alternative minimum tax rate is 20%. The alternative minimum tax
generally applies to a base of regular taxable income plus certain tax
preferences and is payable to the extent such preferences exceed an
exemption amount.
STATE TAXATION
The Bank is subject to a special financial institution state tax
based on approximately 7% of net income. This tax is in lieu of all
other taxes on thrift institutions except taxes on real estate,
tangible personal property owned by the Bank, contributions paid to
the State unemployment insurance fund, and sales/use taxes.
ITEM 2. PROPERTIES
North American's main office is located at 12498 South 71
Highway, Grandview, Missouri. In addition to its main office, the
Bank has nine branch offices, three loan origination offices, and one
customer service office. Net book value of premises owned and
leasehold improvement (net of accumulated depreciation) at September
30, 2010, was approximately $10.1 million.
Date Owned/ Lease
Location Occupied Leased Expiration
----------------------------------------------------------------------
12498 South 71 Highway
Grandview, Missouri 1972 Owned
646 N 291 Highway
Lees Summit, Missouri 1992 Owned
8501 North Oak Trafficway
Kansas City, Missouri 1994 Owned
920 North Belt
St. Joseph, Missouri 1979 Owned
2002 E Mechanic
Harrisonville, Missouri 1975 Owned
11400 E 23rd St.
Independence, Missouri 2000 Owned
7012 NW Barry Road
Kansas City, Missouri 2001 Owned
17
1001 N Jesse James Road
Excelsior Springs, Missouri 2002 Owned
12520 South 71 Highway
Grandview, Missouri 2005 Owned
2707 NW Prairie View Road
Platte City, Missouri 2007 Owned
789 NE Rice Road
Lee's Summit, Missouri 2008 Leased March 2013
4350 S National, Suite A100
Springfield, Missouri 2005 Leased July 2015
10950 El Monte, Suite 210 2007 Leased May 2014
Overland Park, Kansas
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions that arose in
the normal course of business. There are no legal proceedings to
which the Company or its subsidiaries is a party that would have a
material impact on its consolidated financial statements.
ITEM 4. (REMOVED AND RESERVED)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information appearing on page 58 of the 2010 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 3 of the 2010 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information appearing on pages 4 through 15 in the 2010
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The information appearing on pages 12 through 14 in the 2010
Annual Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information appearing on pages 16 through 54 of the 2010
Annual Report to Stockholders is incorporated herein by reference.
See Item 15 below for a list of the financial statements and notes so
incorporated
18
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCE DISCLOSURE
On April 14, 2010, the audit committee of the board of
directors of NASB Financial, Inc. recommended and the board of
directors subsequently approved the dismissal of the Company's
independent accountant, KPMG LLP ("KPMG"), who was engaged on
September 22, 2009, as the principal accountant to audit the
consolidated financial statements of the Company for the fiscal year
ending September 30, 2010.
KPMG did not issue any audit reports on the consolidated
financial statements of the Company, and therefore, none exist that
contain an adverse opinion or a disclaimer of opinion or were
qualified or modified as to uncertainty, audit scope, or accounting
principles. KPMG did not issue any audit reports on the Company's
effectiveness of internal control over financial reporting and
therefore, none exist that contain an adverse opinion or a disclaimer
of opinion or were qualified or modified as to uncertainty, audit
scope, or accounting principles. During the period September 22, 2009
through April 14, 2010, there were no: (1) disagreements with KPMG on
any matter of accounting principles or practices, financial statement
disclosures, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction would have caused them to make
reference in connection with their opinion to the subject matter of
the disagreement, or (2) reportable events, except for the
disagreement and reportable event described below.
The Company applies the equity method of accounting to its
investment in Central Platte Holdings, LLC ("Central Platte"). During
the course of KPMG's review of the Company's consolidated financial
statements for the quarter ended December 31, 2009, KPMG informed the
Company that, based upon paragraph 25 of EITF Issue 03-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain
Investments, the Company should not evaluate the potential impairment
of its investment in Central Platte using an undiscounted cash flow
approach. Rather, KPMG believes that the Company should evaluate
potential impairment of the Company's investment in Central Platte by
comparing the Company's recorded investment to its estimated fair
value. KPMG also informed the Company that if the investment was
determined to be impaired, evidence existed which indicated that such
impairment may have occurred in a prior period. Finally, KPMG
informed the Company that if the Company's investment in Central
Platte was determined to have been impaired in a prior period, the
amount of impairment loss, if any, should be evaluated as the
correction of an error.
At September 30, 2009, the Company, with the concurrence of its
previous auditors, BKD, LLP, ("BKD") evaluated its investment in
Central Platte for possible impairment by comparing the recorded
investment to the Company's expected future cash flows to be received
on an undiscounted basis by analogy to Accounting Standards
Codification Topic 360, Property, Plant, and Equipment (formerly
referred to as Statement of Financial Accounting Standards No. 144
("SFAS 144")), since ASC 323-10, does not provide guidance on how to
determine impairment on equity method investments.
At KPMG's request, management estimated the fair value of the
investment in Central Platte. After reviewing management's estimate of
fair value, KPMG requested the Company obtain an independent third
party appraisal of the fair value of the investment. KPMG did not
complete their review of the fair value of the investment in Central
Platte prior to their dismissal.
Given the circumstances and dissenting opinions, on April 14,
2010, the Company re-engaged BKD to serve as its principal independent
accountant to review the Company's consolidated financial statements
for the quarter ended December 31, 2009, and for the duration of the
year ending September 30, 2010. BKD previously served as the
Company's independent accountant prior to the Company's engagement of
KPMG. At the Company's request, BKD consulted with the Company and
KPMG on KPMG's views regarding the Company's accounting method for
evaluating potential impairment of the Company's investment in Central
Platte.
The Company and BKD engaged in a conference call with the SEC's
Office of the Chief Accountant to present its interpretation of
authoritative accounting guidance for measuring impairment of the
investment in Central Platte on May 5, 2010. The Company and BKD
engaged in a follow-up conference call with the SEC's Office of the
Chief Accountant on May 13, 2010, in which the SEC staff informed the
Company that it did not concur with the Company's application of an
undiscounted cash flow method of evaluating impairment of its
investment in Central Platte.
It is the SEC staff's opinion that impairment should be measured
in accordance with the framework in APB 18, which states that an other
than temporary decline in the value of equity method investment should
be recognized. While APB 18 does not prescribe a specific model to
measure impairment, it is the SEC staff's opinion that value should be
measured under the following three scenarios:
- Value from liquidation of the property/assets of the LLC,
- Value from sale of the Company's ownership in the LLC to a third
party, and
- Value from an on-going business perspective (i.e., discounted
cash flow model).
19
The Company developed a multi-faceted approach to measure the
potential impairment of its investment in Central Platte under the
scenarios described above. The internal model utilizes liquidation or
appraised values determined by an independent third party appraisal;
an on-going business, or discounted cash flows value; and a
combination of both the previous approaches. The significant inputs
include raw land values, absorption rates of lot sales, and a market
discount rate. Management believes this multi-faceted approach is
reasonable given the highly subjective nature the assumptions and the
differences in valuation techniques that are utilized within each
approach (e.g., order of distribution of assets upon potential
liquidation). As a result of this analysis, the Company determined
that its investment in Central Platte was materially impaired and
recorded an impairment charge of $2.0 million during the quarter ended
December 31, 2009. The Company applied the same methodology to
Central Platte as of September 30, 2009, which indicated no
impairment. Inputs utilized in the model that differed from September
30, 2009 to December 31, 2009, included slower estimates of lot sales
and an approximately 8.5% decrease in raw land values, which was
supported by comparable independent third-party appraisals prepared
during that period.
ITEM 9a. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and
Procedures. Under the supervision and with the participation of our
management, including our principal executive officer and principal
financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities and Exchange Act of 1934. Based on
this evaluation, our principal executive officer and our principal
financial officer concluded that our disclosure controls and
procedures were effective at the end of the period covered by this
annual report.
Management's Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the
supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control -
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation
under the framework in Internal Control - Integrated Framework, our
management concluded that our internal control over financial
reporting was effective as of September 30, 2010.
Our internal control over financial reporting as of September 30,
2010, has been audited by BKD, LLP, an independent registered public
accounting firm, as stated in their report which follows.
ITEM 9b. OTHER INFORMATION
None.
20
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
NASB Financial, Inc.
Grandview, Missouri
We have audited NASB Financial, Inc.'s internal control over
financial reporting as of September 30, 2010, based on criteria
established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the
Company's internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness
exists, and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of
the company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of
changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, NASB Financial, Inc. maintained, in all material
respects, effective internal control over financial reporting as of
September 30, 2010, based on criteria established in Internal Control
- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements of NASB Financial, Inc. and our
report dated December 14, 2010 expressed an unqualified opinion
thereon.
/s/ BKD LLP
Kansas City, Missouri
December 14, 2010
21
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information appearing on pages 4 through 16 of the Company's
Proxy Statement for the 2011 Annual Meeting and information appearing
on pages 56 and 57 of the 2010 Annual Report to Stockholders is
incorporated herein by reference.
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.
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.
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.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing on pages 7 through 16 of the Company's
Proxy Statement for the 2011 Annual Meeting is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information appearing on page 14 through 15 of the Company's
Proxy Statement for the 2011 Annual Meeting is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information appearing on pages 15 and 16 of the Company's
Proxy Statement for the 2011 Annual Meeting is incorporated herein by
reference.
ITEM 14. PRINCIPAL ACCOUTING FEES AND SERVICES
The information appearing on pages 16 and 17 of the Company's
Proxy Statement for the 2011 Annual Meeting is incorporated herein by
reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(1) Financial Statements
The following consolidated financial statements of NASB
Financial, Inc. and the independent accountants' report thereon which
appear in the Company's 2010 Annual report to Stockholders ("Annual
Report") have been incorporated herein by reference to Item 8.
Consolidated Balance Sheets at September 30, 2010, and 2009
(Annual Report - Page 16).
Consolidated Statements of Income for the years ended September
30, 2010, 2009, and 2008 (Annual Report - Page 17).
Consolidated Statements of Cash Flows for the years ended
September 30, 2010, 2009, and 2008 (Annual Report - Pages 18 and 19).
22
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 2010, 2009, and 2008 (Annual Report - Page 20).
Notes to Consolidated Financial Statements (Annual Report - Pages
21 through 54).
Report of Independent Registered Public Accounting Firm (Annual
Report - Page 55).
(2) Financial Statement Schedules.
Schedules are provided in the Consolidated Financial Statements.
(3) EXHIBITS.
Exhibit
Number
---------
2) Agreement and Plan of Merger by and among North American Savings
Bank, F.S.B., NASB Interim Savings Bank, F.S.B., and NASB
Financial, Inc. Exhibit 2 to Form 8-K, dated April 15, 1998, and
incorporated herein by reference.
3) Federal Stock Savings Bank Charter and Bylaws. Exhibit 3 to Form
10-K for fiscal year ended September 30, 1992, dated December 27,
1992, and incorporated herein by reference.
3.1) Articles of Incorporation of NASB Financial, Inc. Exhibit 3.1 to
Form 8-K, dated April 15, 1998, and incorporated herein by
reference.
3.2) Bylaws of NASB Financial, Inc. Exhibit 3.2 to Form 8-K, dated
April 15, 1998, and incorporated herein by reference.
10.1)Employees' Stock Option Plan and specimen copy of Option
Agreement entered into between the Company and the Plan
participants. (Exhibit 10.4 to Form 10-K for fiscal year ended
September 30, 1986, dated December 26, 1986, and incorporated
herein by reference).
10.2)Amended and Restated Retirement Income Plan for Employees of
North American Savings Bank dated September 30, 1988, dated
December 20, 1988, and incorporated herein by reference).
10.3)NASB Financial, Inc. Equity Incentive Compensation Plan
dated adopted on October 28, 2003. (Exhibit B to the Company's
Proxy Statement for the 2004 Annual Meeting and incorporated
herein by Reference).
*13) 2010 Annual Report to Stockholders.
22) Subsidiaries of the Registrant at September 30, 2010, listed on
page 1.
23) Proxy Statement of NASB Financial, Inc. for the 2011 Annual
Meeting of Stockholders filed with the SEC (certain portions of
such proxy Statement are incorporated herein by reference to page
numbers in the text of this report on Form 10-K).
*31.1) Certification of Chief Executive Officer pursuant to Rules
13a-15(e) and 15d-15(e).
*31.2) Certification of Chief Financial Officer pursuant to Rules
13a-15(e) and 15d-15(e).
23
*32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
*32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Filed Herewith
24
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NASB FINANCIAL, INC.
By: /s/ David H. Hancock
David H. Hancock
Chairman
Date: December 14, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on December 14, 2010, by the
following persons on behalf of the Registrant and in the capacities
indicated.
Signature Title
/s/ David H. Hancock Chairman and Chief
David H. Hancock Executive Officer
/s/ Rhonda Nyhus Chief Financial Officer
Rhonda Nyhus (Principal Accounting
Officer)
/s/ Keith B. Cox Director
Keith B. Cox
/s/ Paul L. Thomas Director
Paul L. Thomas
/s/ Frederick V. Arbanas Director
Frederick V. Arbanas
/s/ Barrett Brady Director
Barrett Brady
/s/ Laura Brady Director
Laura Brady
/s/ Linda S. Hancock Director
Linda S. Hancock
/s/ W. Russell Welsh Director
W. Russell Welsh
25
