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, 2002
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 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
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 December 13, 2002, was approximately $209.4 million.
As of December 13, 2002, there were issued and outstanding
8,432,342 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, 2002.
2. Part III - Proxy Statement for the 2003 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 Savings Association Insurance Fund
("SAIF"), a division of the Federal Deposit Insurance Corporation
("FDIC"). The Bank converted to a stock form of ownership in
September 1985.
The Bank's market area includes the counties of Jackson, Cass,
Clay, Buchanan, Andrew, and Lafayette in Missouri, and Johnson and
Wyandotte counties in Kansas. The Bank currently has eight customer
deposit offices in Missouri including one each in Grandview, Lee's
Summit, Independence, Harrisonville, two in Kansas City, and two in
St. Joseph. North American also operates loan production offices in
Lee's Summit, St. Louis, St. Charles and Springfield in Missouri and
Overland Park and Leawood 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.
YEAR-END WEIGHTED AVERAGE YIELDS AND RATES
The following table presents the year-end balances of interest-
earning assets and interest-costing liabilities with weighted average
yields and rates. Balances and weighted average yields include all
accrual and non-accrual loans. Dollar amounts are expressed in
thousands.
As of 9/30/02
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 870,532 8.13%
Mortgage-backed securities 6,552 7.42%
Investments 24,455 4.48%
Bank deposits 22,521 1.52%
----------------------
Total earning assets 924,060 7.86%
Non-earning assets 29,193 ---------
-----------
Total $ 953,253
===========
Interest-costing liabilities:
Customer deposit accounts $ 567,717 3.47%
FHLB advances 274,717 4.84%
Other borrowings -- --
----------------------
Total costing liabilities 842,434 3.92%
Non-costing liabilities 10,157 ---------
Stockholders' equity 100,662
-----------
Total $ 953,253
===========
Net earning balance $ 81,626
===========
Earning yield less costing rate 3.94%
=========
As of 9/30/01
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 914,576 8.98%
Mortgage-backed securities 14,856 6.60%
Investments 23,261 6.18%
Bank deposits 18,350 3.96%
----------------------
Total earning assets 971,043 8.79%
Non-earning assets 38,849 ---------
-----------
Total $1,009,892
===========
Interest-costing liabilities:
Customer deposit accounts $ 616,393 5.14%
FHLB advances 290,658 6.23%
Other borrowings 46 6.50%
----------------------
Total costing liabilities 907,097 5.49%
Non-costing liabilities 15,187 ---------
Stockholders' equity 87,608
-----------
Total $1,009,892
===========
Net earning balance $ 63,946
===========
Earning yield less costing rate 3.30%
=========
As of 9/30/00
----------------------
Average Yield/
Balance Rate
----------------------
Interest-earning assets:
Loans $ 832,898 9.13%
Mortgage-backed securities 20,042 6.64%
Investments 16,563 7.35%
Bank deposits 5,840 5.77%
----------------------
Total earning assets 875,343 9.02%
Non-earning assets 33,990 ---------
-----------
Total $ 909,333
===========
Interest-costing liabilities:
Customer deposit accounts $ 592,780 5.00%
FHLB advances 219,909 6.13%
Other borrowings 115 6.07%
----------------------
Total costing liabilities 812,804 5.31%
Non-costing liabilities 13,290 ---------
Stockholders' equity 83,239
-----------
Total $ 909,333
===========
Net earning balance $ 62,539
===========
Earning yield less costing rate 3.71%
=========
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,
---------------------------------------
2002 2001 2000 1999 1998
---------------------------------------
Return on average assets 2.04% 1.67% 1.63% 1.65% 1.85%
Return on average equity 19.40% 18.25% 18.12% 17.35% 21.06%
Equity to asset ratio 11.19% 9.83% 8.50% 9.55% 8.78%
Dividend payout ratio 24.41% 24.87% 22.89% 21.11% 15.63%
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
-----------------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------------
February $ 0.15 0.125 0.10 0.08 0.0625
May 0.15 0.125 0.10 0.08 0.0625
August 0.15 0.125 0.10 0.08 0.0625
November 0.15 0.125 0.10 0.08 0.0625
ASSET ACTIVITIES
LENDING ACTIVITIES
The Bank, like most other savings institutions, has traditionally
concentrated its lending activities on mortgage loans secured by
residential property and, to a lesser extent, commercial property.
The residential mortgage loan originations 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,
--------------------------------------------------------------------------
2002 2001 2000 1999 1998
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
------------- ------------ ------------ ------------ ------------
Mortgage loans:
Permanent Loans on:
Residential properties $355,314 35% 387,828 38 468,997 46 430,635 50 455,503 61
Business properties 391,381 38 314,025 31 214,882 21 153,549 18 79,460 11
Partially guaranteed
by VA or insured
by FHA 8,042 1 30,898 3 27,138 3 34,945 4 25,533 3
Construction and
development 207,729 20 217,354 22 246,822 24 197,041 23 150,729 20
------------- ------------ ------------ ------------ ------------
Total mortgage loans 962,466 94 950,105 94 957,939 94 816,170 95 711,225 95
Commercial loans 15,822 2 10,857 1 7,143 1 4,335 -- 7,225 1
Installment loans to
individuals 37,904 4 49,075 5 48,646 5 41,737 5 28,524 4
------------- ------------ ------------ ------------ ------------
$1,016,192 100 1,010,037 100 1,013,628 100 862,242 100 746,974 100
============= ============ ============ ============ ============
2
The following table sets forth information at September 30, 2002,
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.
2004
Through After
2003 2007 2007 Total
------------------------------------------
Mortgage Loans:
Permanent:
- at fixed rate $ 1,197 52,662 264,705 318,564
- at adjustable rates 756 5,655 429,762 436,173
Construction and development:
- at fixed rates 29,698 6,720 -- 36,418
- at adjustable rates 159,193 12,118 -- 171,311
------------------------------------------
Total mortgage loans 190,844 77,155 694,467 962,466
Commercial loans 2,233 3,280 10,309 15,822
Installment loans to
Individuals 4,190 4,261 29,453 37,904
------------------------------------------
Total loans receivable $197,267 84,696 734,229 1,016,192
==========================================
RESIDENTIAL REAL ESTATE LOANS
The Bank offers a range of residential loan programs. At
September 30, 2002, 35% of total loans receivable were permanent loans
on residential properties. Also, the Bank is authorized to originate
loans guaranteed by the Veteran's Administration ("VA") and loans
insured by the Federal Housing Administration ("FHA"). Included in
residential loans as of September 30, 2002, are $8.0 million or 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, or developers. North
American periodically purchases real estate loans from other savings
institutions or mortgage bankers. Loan originations and purchases
must be approved by various levels of management and, depending on the
loan amount, are subject to ratification by the Board of Directors.
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 the lower of
cost or fair value. All the loans on single family property that the
Bank holds for sale conform to secondary market underwriting criteria
established by the Federal Home Loan Mortgage Corporation ("FHLMC")
and the Federal National Mortgage Association ("FNMA"). All loans
originated, whether held for sale or held for investment, conform to
internal underwriting guidelines, which consider a property's loan-to-
value ratio and the borrower's ability to repay the loan.
CONSTRUCTION AND DEVELOPMENT LOANS
Construction and land development loans are offered to
owner/occupants, to persons building a residence for seasonal use or
for investment purposes, and to builders/developers who build
properties to be sold. As of September 30, 2002, 20% of the Bank's
total loans receivable were construction and development loans.
Construction loans are originated at interest rates that adjust daily
based on a pre-determined percentage indexed to the prime lending
rate. Most construction loans are due and payable within one year or
else are converted to a permanent loan. In some cases extensions are
permitted if payments are current and the construction has continued
satisfactorily. Land acquisition and development loans for the
purpose of developing raw land into residential or commercial property
typically have three-year terms at floating interest rates.
3
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. North American's staff
performs periodic inspections of each property during construction to
ensure adequate progress is achieved before scheduled loan
disbursements are made.
COMMERCIAL REAL ESTATE LOANS
The Bank purchases and originates several different types of
commercial real estate loans. As of September 30, 2002, commercial
real estate loans on business properties were $391.4 million or 38% 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.
INSTALLMENT LOANS
As of September 30, 2002, consumer installment loans and lease
financing to individuals represented approximately 4% 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
investors along 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 2002, the Bank sold $269.5 million in loans with servicing
released.
The Bank records loans held for sale at the lower of cost or
estimated fair value, and any adjustments made to record them at
estimated fair value are made through the income statement. As of
September 30, 2002, the Bank had loans held for sale with a carrying
value of $73.6 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 current net worth, 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.
When the Bank classifies a problem asset, it establishes a
specific loss allowance needed to reduce its book value to the present
value of the expected future cash flows discounted at the loan's
initial effective interest rate, or as a practical expedient, to the
loan's observable market price or the fair value of the collateral, if
the loan is dependent on collateral. In addition, Allowances for Loan
and Lease Losses ("ALLL") are established by management. ALLL
represent allowances that recognize inherent risks associated with
distinct and homogenous loans pools. When the Bank classifies all or
part of problem assets as loss, it establishes a specific loss
allowance equal to 100% of the loss classification. The OTS reviews
North American's asset classification during each examination and can
require changes to asset classifications, specific loss allowances,
ALLL, and loan loss provision.
Each month, 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.
4
As of September 30,
-----------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------
Asset Classification
Substandard $ 14,822 18,780 17,235 12,287 10,772
Doubtful -- -- -- -- 8
Loss 1,395 1,851 2,857 2,738 1,956
-----------------------------------------
Total Classified 16,217 20,631 20,092 15,025 12,736
Allowance for loan/REO
Losses (6,854) (7,035) (8,386) (7,960) (7,701)
-----------------------------------------
Net classified assets $ 9,363 13,596 11,706 7,065 5,035
=========================================
Net classified to total
classified assets 58% 66% 58% 47% 40%
=========================================
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,
------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------
Total Assets $ 978,222 972,056 984,525 825,797 736,054
==========================================
Non-accrual loans $ 6,361 6,877 4,447 4,074 3,854
Troubled debt
Restructurings 3,337 3,575 8,142 4,004 6,031
Net real estate and
other assets acquired
through foreclosure 4,938 8,043 3,683 2,702 3,232
------------------------------------------
Total $ 14,636 18,495 16,272 10,780 13,117
==========================================
Percent of total assets 1.50% 1.90% 1.65% 1.31% 1.78%
==========================================
Delinquencies. The following table summarizes delinquent loan
information.
As of September 30, 2002
----------------------------------------------------------------------
Number of Percent of
Loans delinquent for Loans Amount Total Loans
----------------------------------------------------------------------
30 to 89 days 129 $ 15,874 1.6%
90 or more days 100 6,361 0.6%
----------- -----------------------------
Total 229 $ 22,235 2.2%
=========== =============================
As of September 30, 2001
----------------------------------------------------------------------
Number of Percent of
Loans delinquent for Loans Amount Total Loans
----------------------------------------------------------------------
30 to 89 days 169 $ 9,481 0.9%
90 or more days 92 6,877 0.7%
----------- ----------------------------
Total 261 $ 16,358 1.6%
=========== ============================
The effect of non-performing loans on interest income for fiscal
year 2002 is presented below. Dollar amounts are expressed in
thousands.
Principal amount of non-performing loans
as of September 30, 2002 $ 6,361
========
Gross amount of interest income that would
have been recorded during fiscal 2002 if
these loans had been performing $ 600
Actual amount included in interest income for
fiscal 2002 168
--------
Interest income not recognized on non-performing
loans $ 432
========
5
Allowance for loss. Management records a provision for estimated
loan losses in an amount sufficient to cover current net charge-offs
and probable losses based on an analysis of risks inherent in the loan
portfolio. Management continually monitors the performance of the
loan portfolio and establishes specific loss allowances when
warranted. Specifically, when it appears that a property and borrower
are no longer capable of full repayment, management establishes a
specific loss allowance to reduce the loan's book value to fair value
based on the anticipated results of collections. In addition,
management establishes ALLL through charges to the provision for loan
loss based on an assessment of the portfolio's credit risk, other than
specifically identified problem loans. Management attempts to
maintain ALLL proportionate to the level of risk in the Bank's
performing loan portfolio.
The following table sets forth the activity in the allowance for
loan losses. Dollar amounts are expressed in thousands.
September 30,
-----------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------
Balance at beginning of year $ 5,835 7,157 6,671 6,405 6,272
Total provisions 557 460 600 300 64
Recoveries (charge-offs) (527) (1,782) (114) (34) 69
-----------------------------------------
Balance at end of year $ 5,865 5,835 7,157 6,671 6,405
=========================================
REAL ESTATE ACQUIRED THROUGH FORECLOSURE
The Bank's staff attempts to contact borrowers who fail to make
scheduled payments, generally after a payment is more than 15 days
past due. In most cases, delinquencies are cured promptly. If a
delinquency exceeds 90 days, North American will implement measures to
remedy the default, such as accepting a voluntary deed for the
property in lieu of foreclosure or commencing a foreclosure action.
If a foreclosure occurs, the property is classified as real estate
owned ("REO") until the property is sold. North American sometimes
finances the sale of foreclosed real estate ("loan to facilitate").
Loans to facilitate may involve a reduced down payment, a reduced
rate, or a longer term than the Bank's typical underwriting standards.
If a loan has a specific loss reserve at the time it is
foreclosed, the specific reserve is netted against the loan balance in
recording the foreclosed loan as REO. Management records a provision
for losses on REO when, subsequent to foreclosure, the estimated net
realizable value of a repossessed asset declines below its book value.
The following table sets forth activity in the allowance for loss on
REO. Dollar amounts are expressed in thousands.
September 30,
-----------------------------------------
2002 2001 2000 1999 1998
-----------------------------------------
Beginning allowance for loss $1,200 1,229 1,289 1,336 1,680
Provisions (236) 140 -- -- (1,987)
Net recoveries (charge-offs) (318) (169) (60) (47) 1,643
-----------------------------------------
Allowance for loss at year-end $ 646 1,200 1,229 1,289 1,336
=========================================
SECURITIES AND MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
Management classifies debt securities as available for sale if
the Bank does not have the intention and ability to hold until
maturity. Assets available for sale are carried at estimated fair
value, with all fair value adjustments recorded as accumulated other
comprehensive income or loss.
MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The Bank's MBS portfolio consists primarily of securities issued
by the FHLMC and FNMA. As of September 30, 2002, the Bank had $1.2
million in fixed rate and $251,000 in balloon and adjustable rate
mortgage-backed securities ("MBS") issued by these agencies. The
Bank also had $41,000 in CMO bonds held to maturity.
6
INVESTMENT SECURITIES
As of September 30, 2002, the Bank held no investment security
from a single issuer for which the market value exceeded 10% of the
Bank's stockholders' equity.
SOURCE OF FUNDS
In addition to customer 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 customer deposit accounts. Dollar amounts are expressed in
thousands.
September 30,
----------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------ ------------ ------------ ------------ ------------
Amount Pct. Amount Pct. Amount Pct. Amount Pct. Amount Pct.
------------ ------------ ------------ ------------ ------------
Type of Account and Rate:
Demand deposit accounts $ 70,919 13 65,885 11 63,010 10 57,987 10 60,803 11
Savings accounts 100,737 18 84,918 15 77,839 13 85,758 15 78,991 14
Money market demand
accounts 9,298 2 6,782 1 6,505 1 7,004 1 8,276 2
Certificates of deposit 368,483 67 418,455 71 474,311 76 414,714 74 397,434 73
Brokered accounts -- -- 9,997 2 -- -- -- -- -- --
------------- ------------ ------------ ------------ -----------
$549,437 100 586,037 100 621,665 100 565,463 100 545,504 100
============= ============ ============ ============ ===========
Weighted average
interest rate 2.78% 4.55% 5.46% 4.83% 5.04%
The following table presents the deposit activities at the Bank.
Dollar amounts are expressed in thousands.
For the years ended September 30,
-------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------
Deposit receipts $ 873,622 908,522 884,054 741,718 582,168
Withdrawals 930,237 924,111 857,358 744,325 576,831
-------------------------------------------------
Deposit receipts
and purchases in
Excess of (less
than) withdrawals (56,615) (15,589) 26,696 (2,607) 5,337
Deposits sold -- (51,631) -- -- --
Interest credited 20,015 31,592 29,506 22,566 19,623
-------------------------------------------------
Net increase
(decrease) $ (36,600) (35,628) 56,202 19,959 24,960
=================================================
Balance at end
of year $ 549,437 586,037 621,665 565,463 545,504
=================================================
Customers who wish to withdraw certificates of deposit prior to
maturity are subject to a penalty for early withdrawal.
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 residential 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, particularly when management determines
that it can profitably invest the advances over their term. During
fiscal 2002, the Bank borrowed an additional $224.0 million in
advances, repaid $202.3 million, and as of September 30, 2002, had a
balance of $295.2 million (34% of total liabilities) of advances from
the FHLB.
7
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,
--------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------
FHLB advances $ 295,192 273,471 264,436 168,088 109,210
Other notes payable -- -- 100 150 200
--------------------------------------------------
Total $ 295,192 273,471 264,536 168,238 109,410
==================================================
Weighted average
rate 3.73% 5.47% 6.67% 5.51% 5.77%
==================================================
As of September 30, 2002, the Bank had no category of short-term
borrowings for which the average balance outstanding during the year
was more than stockholders' equity.
OTHER ACTIVITIES
SERVICE CORPORATION ACTIVITIES
The Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA") substantially limits the types of service corporation
activities permissible by the Bank. North American's service
corporation, Nor-Am, was incorporated in 1972. Nor-Am sells tax-
deferred annuities and mutual funds through the Bank's branch offices
and credit life and disability insurance to loan customers.
OTHER INFORMATION
EMPLOYEES
As of September 30, 2002, the Bank and its subsidiaries had 314
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.
REGULATION
GENERAL
Federal savings institutions are members of the FHLB System and
their deposits are insured by the SAIF, 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. SAIF 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.
8
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 DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
("FDICIA")
Key provisions of FDICIA allow the Bank Insurance Fund ("BIF")
of the FDIC to increase its borrowing from the Treasury Department.
The BIF can also borrow up to 90% of the fair market value of its
assets to provide working capital. These borrowed funds will be
repaid from assessments on the banking industry.
The FDICIA required the FDIC to formulate safety and soundness
standards, effective December 31, 1993. The standards address matters
such as underwriting and documentation standards, internal controls
and audit systems, interest rate risk, and compensation and other
employee benefits.
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, 2002, of $15.2 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
In July 2001, the OTS adopted as final a rule that removed the
regulation that required a savings association to maintain a certain
percentage of liquid assets. The OTS does, however, retain a
provision of the liquidity regulation that requires each institution
to maintain sufficient liquidity to ensure its safe and sound
operation. Management believes that the Bank's procedures for
managing liquidity are sufficient to ensure the Bank's safe and sound
operation.
INSURANCE ON CUSTOMER DEPOSIT ACCOUNTS
The SAIF insures the Bank's deposit accounts to a maximum of
$100,000 for each insured member. 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.
Annual deposit insurance premiums range from 0 to 27 basis points
of insured deposits based on where an institution fits on the RRPS.
North American is considered to be "well capitalized" and has been
placed in the most favorable capital subgroup. In addition to deposit
insurance premiums, SAIF-insured institutions are currently assessed a
premium, which is used to service the interest on the Financing
Corporation ("FICO") debt.
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.
9
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").
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, 2002, the Bank had no supervisory goodwill or
intangible assets and $284,000 of the Bank's servicing rights were
deducted from its regulatory capital. At September 30, 2002, the
Bank's core capital ratio was 10.6%.
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, 2002, North American's
regulatory tangible capital was 10.6% of tangible assets.
Risk-Based Capital Requirement. The OTS's 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, 2002, the Bank's
current risk-based regulatory capital was 12.6% 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. As of September
30, 2002, North American had no loans that exceeded its loans-to-one-
borrower limit.
10
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, 2002, the Bank did not
have any investments in or advances to subsidiaries engaged in
activities not permissible for national banks.
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, 2002, North American met
its reserve requirements.
Savings institutions have authority to borrow from the Federal
Reserve Bank's "discount window," but only after exhausting all FHLB
sources of borrowing.
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.
As a result of changes in the Federal tax code, the Bank's bad
debt deduction for the year ended September 30, 2002 and 2001, was
based on actual experience as the percentage method for additions to
the tax bad debt reserve has been eliminated. Under the new tax
rules, thrift institutions 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 will be completed
over a six-year phase-in period. The phase-in period was delayed for
two years for institutions who met certain residential lending
requirements. As of September 30, 2002, North American had
approximately $2 million established as a tax bad debt reserve in the
base-year, and zero tax bad debt reserve after the base year.
Distributing the Bank's capital in the form of purchasing treasury
stock has 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 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.
11
ITEM 2. PROPERTIES
North America's main office is located at 12498 South 71 Highway,
Grandview, Missouri. In addition to its main office, the Bank has 8
branch offices, 6 loan origination offices, and one customer service
office. Net book value of premises owned and leasehold improvement
(net of accumulated depreciation) at September 30, 2002, was
approximately $5.9 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
3011-B North Belt
St. Joseph, Missouri 1999 Leased January 2004
2002 E Mechanic
Harrisonville, Missouri 1975 Owned
11400 E 23rd St.
Independence, Missouri 2000 Owned
7012 NW Barry Road
Kansas City, Missouri 2001 Owned
12125-D Blue Ridge Extension
Grandview, Missouri 1990 Leased January 2002
949 NE Columbus
Lee's Summit, Missouri 1993 Leased November 2002
12900 Metcalf - Suite 140
Overland Park, Kansas 1996 Leased December 2004
12800 Corporate Hill Drive
St. Louis, Missouri 2000 Leased April 2005
12
1014 Country Club Road
St. Charles, Missouri 1997 Leased December 2006
One Hallbrook Place, Suite 225
Leawood, Kansas 2002 Leased April 2007
3322 South Campbell - Suite W
Springfield, Missouri 1993 Leased August 2003
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.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information appearing on page 42 of the 2002 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 3 of the 2002 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 11 in the 2002
Annual Report to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information appearing on pages 12 through 38 of the 2002
Annual Report to Stockholders is incorporated herein by reference.
See Item 15 below for a list of the financial statements and notes so
incorporated.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCE DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing on pages 3 through 10 of the Company's
Proxy Statement for the 2003 Annual Meeting is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing on pages 5 through 10 of the Company's
Proxy Statement for the 2003 Annual Meeting is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information appearing on page 2 and 3 of the Company's Proxy
Statement for the 2003 Annual Meeting is incorporated herein by
reference.
13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing on page 9 of the Company's Proxy
Statement for the 2003 Annual Meeting s incorporated herein by
reference.
ITEM 14. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. The
undersigned, principal executive officer and principal financial
officer of NASB Financial, Inc. conclude that the disclosure controls
and procedures of NASB Financial, Inc. are effective based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of this report.
Changes in Internal Controls. There have been no significant
changes in the internal controls of NASB Financial, Inc. or in other
factors that could significantly affect these controls subsequent to
the date of the evaluation of these controls by the undersigned
principal executive officer and principal financial officer of NASB
Financial, Inc.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(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 auditor's report thereon which
appear in the Company's 2002 Annual report to Stockholders ("Annual
Report") have been incorporated herein by reference to Item 8.
Consolidated Balance Sheets at September 30, 2002, and 2001
(Annual Report - Page 12).
Consolidated Statements of Income for the years ended September
30, 2002, 2001, and 2000 (Annual Report - Page 13).
Consolidated Statements of Cash Flows for the years ended
September 30, 2002, 2001, and 2000 (Annual Report - Pages 14 and 15).
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 2002, 2001, and 2000 (Annual Report - Page 16).
Notes to Consolidated Financial Statements (Annual Report - Pages
17 through 38).
Report of Independent Auditors (Annual Report - Page 39).
(2) Financial Statement Schedules.
Schedules are provided in the Consolidated Financial Statements.
14
(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).
*13) 2002 Annual Report to Stockholders.
22) Subsidiaries of the Registrant at September 30, 2002, listed on
page 1.
23) Proxy Statement of NASB Financial, Inc. for the 2003 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).
99.1) Statement under Oath of Chief Executive Officer
99.2) Statement under Oath of Chief Financial Officer
* Filed Herewith
(b) Reports of Form 8-K.
A report on Form 8-K was filed on September 17, 2002, which
announced the signing of a definitive agreement on September 5,
2002, pursuant to which Community Bancorp, Inc. ("CBES") will be
merged with and into a wholly owned subsidiary of NASB Financial ,
Inc. formed solely to facilitate the transaction. The agreement
provides that upon the effective date of the merger, each
shareholder of CBES will receive $17.50 in cash for each share of
CBES common stock owned by such shareholder.
15
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 30, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on December 28, 2002, by the
following persons on behalf of the Registrant and in the capacities
indicated.
Signature Title
/s/ David H. Hancock Chairman (Chief Executive
David H. Hancock Officer)
/s/ Rhonda Nyhus Chief Financial Officer
Rhonda Nyhus (Principal Accounting
Officer)
/s/ Keith B. Cox Director
Keith B. Cox
/s/ Frederick V. Arbanas Director
Frederick V. Arbanas
/s/ Barrett Brady Director
Barrett Brady
/s/ Linda S. Hancock Director
Linda S. Hancock
/s/ W. Russell Welsh Director
W. Russell Welsh
/s/ James A. Watson Director
James A. Watson
16
I, David Hancock, Chairman and Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of NASB Financial,
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statement were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidate subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: December 30, 2002
17
I, Rhonda Nyhus, Vice President and Treasurer, certify that:
1. I have reviewed this annual report on Form 10-K of NASB Financial,
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statement were made, not misleading
with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidate subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: December 30, 2002
18