Edgar Filing: NASB FINANCIAL INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

Small reporting Company

Form 10-Q

Securities and Exchange Commission

Washington, DC 20549

FORM 10-Q

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended June 30, 2013

¨	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

incorporation or organization)

(IRS Employer

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)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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. Yes x 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 x No ¨

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 “accelerated filer”, “large accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of Common Stock of the Registrant outstanding as of August 5, 2013, was 7,867,614.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Balance Sheets


	June 30,			September 30,
	2013			2012
	(Unaudited)
	(Dollars in thousands)
ASSETS
Cash and cash equivalents	$	28,071			8,716
Securities:
Available for sale, at fair value		239,716			214,190
Stock in Federal Home Loan Bank, at cost		5,929			7,073
Mortgage-backed securities:
Available for sale, at fair value		475			554
Held to maturity, at cost		10,398			25,921
Loans receivable:
Held for sale, at fair value		104,658			163,834
Held for investment, net		695,582			766,601
Allowance for loan losses		(20,650	)		(31,829	)

Total loans receivable, net		779,590			898,606

Accrued interest receivable		4,011			4,402
Foreclosed assets held for sale, net		13,007			17,040
Premises and equipment, net		11,920			11,637
Investment in LLCs		16,667			17,222
Deferred income tax asset, net		14,157			17,199
Income taxes receivable		1,187			—
Other assets		17,277			18,266

	$	1,142,405			1,240,826

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Customer deposit accounts	$	801,348			870,946
Brokered deposit accounts		—			21,367
Advances from Federal Home Loan Bank		100,000			127,000
Subordinated debentures		25,774			25,774
Escrows		6,468			8,760
Income taxes payable		—			3,490
Accrued expenses and other liabilities		18,240			11,986

Total liabilities		951,830			1,069,323

Stockholders’ equity:
Common stock of $0.15 par value: 20,000,000 shares authorized; 9,857,112 shares issued		1,479			1,479
Additional paid-in capital		16,613			16,657
Retained earnings		210,626			189,516
Treasury stock, at cost; 1,989,498 shares		(38,418	)		(38,418	)
Accumulated other comprehensive income		275			2,269

Total stockholders’ equity		190,575			171,503

	$	1,142,405			1,240,826

See accompanying notes to condensed consolidated financial statements.

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Statements of Operations (Unaudited)


	Three months ended						Nine months ended
	June 30,						June 30,
	2013			2012			2013			2012
	(Dollars in thousands, except per share data)
Interest on loans receivable	$	10,880			13,654			34,954			43,817
Interest on mortgage-backed securities		103			415			484			1,377
Interest and dividends on securities		1,107			676			3,155			2,142
Other interest income		1			5			4			11

Total interest income		12,091			14,750			38,597			47,347

Interest on customer and brokered deposit accounts		1,179			2,241			4,288			7,155
Interest on advances from Federal Home Loan Bank		510			658			1,573			1,859
Interest on subordinated debentures		124			135			378			401
Other interest expense		5			—			13			—

Total interest expense		1,818			3,034			6,252			9,415

Net interest income		10,273			11,716			32,345			37,932
Provision for loan losses		—			3,000			(9,600	)		10,500

Net interest income after provision for loan losses		10,273			8,716			41,945			27,432

Other income (expense):
Loan servicing fees, net		27			39			79			104
Customer service fees and charges		1,279			1,424			4,110			4,036
Provision for loss on real estate owned		(139	)		(361	)		(956	)		(3,784	)
Loss on sale of securities available for sale		—			—			—			(343	)
Gain (loss) on sale of securities held to maturity		—			(32	)		257			(32	)
Gain from loans receivable held for sale		11,232			12,949			46,619			32,785
Impairment loss on investment in LLCs		—			—			—			(200	)
Other income (expense)		(1,402	)		1,542			(3,650	)		1,833

Total other income		10,997			15,561			46,459			34,399

General and administrative expenses:
Compensation and fringe benefits		6,954			5,633			19,812			16,454
Commission-based mortgage banking compensation		4,544			4,421			15,481			11,730
Premises and equipment		1,452			1,184			3,996			3,669
Advertising and business promotion		1,930			1,614			4,489			3,995
Federal deposit insurance premiums		589			361			1,839			1,148
Other		2,915			2,850			8,462			7,975

Total general and administrative expenses		18,384			16,063			54,079			44,971

Income before income tax expense		2,886			8,214			34,325			16,860
Income tax expense		1,111			3,159			13,215			6,491

Net income	$	1,775			5,055			21,110			10,369

Basic earnings per share	$	0.23			0.64			2.68			1.32

Diluted earnings per share	$	0.23			0.64			2.68			1.32

Basic weighted average shares outstanding		7,867,614			7,867,614			7,867,614			7,867,614

See accompanying notes to condensed consolidated financial statements.

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three months ended June 30,
	2013			2012
	(Dollars in thousands)
Net income	$	1,775			5,055

Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities, net of income tax benefit of $950 and $235 at June 30, 2013 and 2012, respectively		(1,518	)		(375	)
Reclassification adjustment for (gain) loss included in net income		—			—

Change in unrealized gain (loss) on available for sale securities, net of income tax benefit of $950 and $235 at June 30, 2013 and 2012, respectively		(1,518	)		(375	)

Comprehensive income	$	257			4,680


	Nine months ended June 30,
	2013			2012
	(Dollars in thousands)
Net income	$	21,110			10,369

Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities, net of income tax expense (benefit) of $(1,248) and $155 at June 30, 2013 and 2012, respectively		(1,994	)		247
Reclassification adjustment for loss included in net income, net of income tax benefit of $132 at June 30, 2012		—			211

Change in unrealized gain (loss) on available for sale securities, net of income tax expense (benefit) of $(1,248) and $287 at June 30, 2013 and 2012, respectively		(1,994	)		458

Comprehensive income	$	19,116			10,827

See accompanying notes to condensed consolidated financial statements.

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)


	Common stock		Additional paid-in capital			Retained earnings		Treasury stock			Accumulated other comprehensive Income (loss)			Total stockholders’ equity
	(Dollars in thousands)
Balance at October 1, 2012	$	1,479		16,657			189,516		(38,418	)		2,269			171,503
Comprehensive income:
Net income		—		—			21,110		—			—			21,110
Other comprehensive income, net of tax:
Unrealized loss on securities available for sale		—		—			—		—			(1,994	)		(1,994	)

Total comprehensive income															19,116
Stock based compensation		—		(44	)		—		—			—			(44	)

Balance at June 30, 2013	$	1,479		16,613			210,626		(38,418	)		275			190,575

See accompanying notes to condensed consolidated financial statements.

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine months ended June 30,
	2013			2012
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	21,110			10,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,720			1,461
Amortization and accretion, net		621			(832	)
Loss on sale of securities available for sale		—			343
(Gain) loss on sale of securities held to maturity		(257	)		32
Loss from investment in LLCs		563			116
Impairment loss on investment in LLCs		—			200
Gain from loans receivable held for sale		(46,619	)		(32,785	)
Provision for loan losses		(9,600	)		10,500
Provision for loss on real estate owned		956			3,784
Origination of loans receivable held for sale		(1,494,860	)		(1,294,296	)
Sale of loans receivable held for sale		1,600,655			1,318,653
Stock based compensation – stock options		(44	)		4
Changes in:
Net fair value of loan-related commitments		3,299			(1,364	)
Accrued interest receivable		391			456
Prepaid and accrued expenses, other liabilities, and income taxes payable		2,103			3,816

Net cash provided by operating activities		80,038			20,457
Cash flows from investing activities:
Principal repayments of mortgage-backed securities:
Held to maturity		4,851			9,654
Available for sale		68			118
Principal repayments of mortgage loans receivable held for investment		169,266			185,273
Principal repayments of other loans receivable		2,686			3,122
Principal repayments of investment securities available for sale		42,468			25,109
Loan origination - mortgage loans receivable held for investment		(108,088	)		(62,045	)
Loan origination - other loans receivable		(1,712	)		(2,509	)
Purchase of mortgage loans receivable held for investment		(647	)		(709	)
Proceeds from sale of Federal Home Loan Bank stock		1,145			5,454
Purchase of investment securities available for sale		(72,525	)		(163,147	)
Proceeds from sale of investment securities available for sale		—			19,678
Proceeds from sale of mortgage-backed securities held to maturity		10,800			859
Proceeds from sale of real estate owned		11,905			8,155
Purchases of premises and equipment, net		(957	)		(2,203	)
Investment in LLCs		(7	)		(4	)
Other		(91	)		640

Net cash provided by investing activities		59,162			27,445

NASB Financial, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine months ended June 30,
	2013			2012
	(Dollars in thousands)
Cash flows from financing activities:
Net increase (decrease) in customer and brokered deposit accounts		(90,975	)		55,794
Proceeds from advances from Federal Home Loan Bank		25,000			25,000
Repayment on advances from Federal Home Loan Bank		(52,000	)		(122,000	)
Change in escrows		(2,292	)		(3,173	)
Proceeds from other borrowings		422			—

Net cash used in financing activities		(119,845	)		(44,379	)

Net increase in cash and cash equivalents		19,355			3,523
Cash and cash equivalents at beginning of the period		8,716			5,030

Cash and cash equivalents at end of period	$	28,071			8,553

Supplemental disclosure of cash flow information:
Cash paid for income taxes (net of refunds)	$	13,602			4,642
Cash paid for interest		5,981			9,461
Supplemental schedule of non-cash investing and financing activities:
Conversion of loans receivable to real estate owned, net of specific reserves	$	9,335			15,974
Conversion of real estate owned to loans receivable		224			3,907

See accompanying notes to condensed consolidated financial statements.

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of NASB Financial, Inc. (the “Company”), its wholly-owned subsidiary, North American Savings Bank, F.S.B. (“North American” or the “Bank”), and the Bank’s wholly-owned subsidiary, Nor-Am Service Corporation. All significant inter-company transactions have been eliminated in consolidation. The consolidated financial statements do not include the accounts of our wholly-owned statutory trust, NASB Preferred Trust I (the “Trust”). The Trust qualifies as a special purpose entity that is not required to be consolidated in the financial statements of NASB Financial, Inc. The Trust Preferred Securities issued by the Trust are included in Tier I capital for regulatory capital purposes. See Footnote 9, Subordinated Debentures.

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. All adjustments are of a normal and recurring nature, and, in the opinion of management, the statements include all adjustments considered necessary for fair presentation. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012, filed with the Securities and Exchange Commission on December 14, 2012. Operating results for the nine month period ended June 30, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2013. The condensed consolidated balance sheet of the Company as of September 30, 2012, has been derived from the audited balance sheet of the Company as of that date.

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowances for losses on loans, valuation of foreclosed assets held for sale, accruals for loan recourse provisions, and fair values of financial instruments, among other items. Management believes that these estimates are adequate; however, future additions to the allowance or changes in the estimates may be necessary based on changes in economic conditions.

The Company’s critical accounting policies involving the more significant judgments and assumptions used in the preparation of the condensed consolidated financial statements as of June 30, 2013, have remained unchanged from September 30, 2012. These policies relate to the allowance for loan losses, the valuation of foreclosed assets held for sale, the valuation of derivative instruments, and the valuation of equity method investments.

Certain quarterly amounts for previous periods have been reclassified to conform to the current quarter’s presentation.

(2) RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassification out of accumulated other comprehensive income. The new standard is effective for fiscal years beginning after December 15, 2012, including interim periods within those years. The amendments should be prospectively applied. The amendments do not change the current requirement for reporting net income or other comprehensive income. The amendments require an organization to present on the face of the financial statements, or in the footnotes, the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required to provide additional detail about those amounts. Management does not believe that the adoption of this standard will have a material impact on the Company’s consolidated financial statements.

(3) RECONCILIATION OF BASIC EARNINGS PER SHARE TO DILUTED EARNINGS PER SHARE

The following table presents a reconciliation of basic earnings per share to diluted earnings per share for the periods indicated.


	Three months ended				Nine months ended
	6/30/13		6/30/12		6/30/13		6/30/12
Net income (in thousands)	$	1,775		5,055		21,110		10,369
Average common shares outstanding		7,867,614		7,867,614		7,867,614		7,867,614
Average common share stock options outstanding		—		—		—		—

Average diluted common shares		7,867,614		7,867,614		7,867,614		7,867,614
Earnings per share:
Basic	$	0.23		0.64		2.68		1.32
Diluted	$	0.23		0.64		2.68		1.32

At June 30, 2013 and 2012, options to purchase 41,138 and 47,538 shares, respectively, of the Company’s stock were outstanding. These options were not included in the calculation of diluted earnings per share because the option exercise price was greater than the average market price of the common shares for the period, thus making the options anti-dilutive.

(4) SECURITIES AVAILABLE FOR SALE

The following table presents a summary of securities available for sale at June 30, 2013. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Corporate debt securities	$	67,471		2,117		—		69,588
U.S. government sponsored agency securities		171,398		222		1,914		169,706
Municipal securities		422		—		—		422

Total	$	239,291		2,339		1,914		239,716

The following table presents a summary of securities available for sale at September 30, 2012. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Corporate debt securities	$	57,983		3,035		—		61,018
U.S. government sponsored agency securities		152,546		624		4		153,166
Municipal securities		6		—		—		6

Total	$	210,535		3,659		4		214,190

There were no sales of securities available for sale during the nine month period ended June 30, 2013. During the nine month period ended June 30, 2012, the Company realized gross gains of $227,000 and gross losses of $570,000 on the sale of securities available for sale.

The following table presents a summary of the fair value and gross unrealized losses of those securities available for sale which had unrealized losses at June 30, 2013. Dollar amounts are expressed in thousands.


	Less than 12 months				12 months or longer
	Estimated		Gross		Estimated		Gross
	fair		unrealized		fair		unrealized
	value		losses		value		losses
U.S. government sponsored agency securities	$	88,566		1,914	$	—		—

Total	$	88,566		1,914	$	—		—

The scheduled maturities of securities available for sale at June 30, 2013 are presented in the following table. Dollar amounts are expressed in thousands.


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Due in less than one year	$	10,197		18		—		10,215
Due from one to five years		158,175		2,321		4		160,492
Due from five to ten years		10,420		—		18		10,402
Due after ten years		60,499		—		1,892		58,607

Total	$	239,291		2,339		1,914		239,716

(5) MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE

The following table presents a summary of mortgage-backed securities available for sale at June 30, 2013. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Pass-through certificates guaranteed by GNMA – fixed rate	$	71		2		—		73
Pass-through certificates guaranteed by FNMA – adjustable rate		130		7		—		137
FHLMC participation certificates:
Fixed rate		138		7		—		145
Adjustable rate		114		6		—		120

Total	$	453		22		—		475

The following table presents a summary of mortgage-backed securities available for sale at September 30, 2012. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
Pass-through certificates guaranteed by GNMA – fixed rate	$	78		3		—		81
Pass-through certificates guaranteed by FNMA – adjustable rate		143		9		—		152
FHLMC participation certificates:
Fixed rate		176		14		—		190
Adjustable rate		123		8		—		131

Total	$	520		34		—		554

There were no sales of mortgage-backed securities available for sale during the nine month periods ended June 30, 2013 and 2012.

The scheduled maturities of mortgage-backed securities available for sale at June 30, 2013 are presented in the following table. Dollar amounts are expressed in thousands.


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Due from one to five years	$	138		7		—		145
Due after ten years		315		15		—		330

Total	$	453		22		—		475

Actual maturities and pay-downs of mortgage-backed securities available for sale will differ from scheduled maturities depending on the repayment characteristics and experience of the underlying financial instruments, on which borrowers have the right to prepay certain obligations.

(6) MORTGAGE-BACKED SECURITIES HELD TO MATURITY

The following table presents a summary of mortgage-backed securities held to maturity at June 30, 2013. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
FHLMC participation certificates:
Fixed rate	$	31		3		—		34
FNMA pass-through certificates:
Fixed rate		2		—		—		2
Balloon maturity and adjustable rate		14		—		—		14
Collateralized mortgage obligations		10,351		186		29		10,508

Total	$	10,398		189		29		10,558

The following table presents a summary of mortgage-backed securities held to maturity at September 30, 2012. Dollar amounts are expressed in thousands.


			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair
	cost		gains		losses		value
FHLMC participation certificates:
Fixed rate	$	37		3		—		40
FNMA pass-through certificates:
Fixed rate		3		—		—		3
Balloon maturity and adjustable rate		24		1		—		25
Collateralized mortgage obligations		25,857		390		198		26,049

Total	$	25,921		394		198		26,117

During the nine month period ended June 30, 2013, the Bank recognized a gain of $295,000 and a loss of $38,000 on the sale of two mortgage backed securities which were classified as held to maturity. The securities had a combined amortized cost of $10.5 million at the time of sale. During the nine month period ended June 30, 2012, the Bank recognized a loss of $32,000 on the sale of a mortgage backed security which was classified as held to maturity. The security had an amortized cost of $891,000 at the time of sale. The decision was made to sell the securities after it was determined that there was a significant deterioration in the issuer’s creditworthiness.

The following table presents a summary of the fair value and gross unrealized losses of those mortgage-backed securities held to maturity which had unrealized losses at June 30, 2013. Dollar amounts are expressed in thousands.


	Less than 12 months				12 months or longer
	Estimated		Gross		Estimated		Gross
	fair		unrealized		Fair		unrealized
	value		losses		Value		losses
Collateralized mortgage obligations	$	—		—	$	3,744		29

Total	$	—		—	$	3,744		29

Management monitors the securities portfolio for impairment on an ongoing basis by evaluating market conditions and other relevant information, including external credit ratings, to determine whether or not a decline in value is other-than-temporary. When the fair value of a security is less than its amortized cost, an other-than-temporary impairment is considered to have occurred if the present value of expected cash flows is not sufficient to recover the entire amortized cost, or if the Company intends to, or will be required to, sell the security prior to the recovery of its amortized cost. The unrealized losses at June 30, 2013, are primarily the result of changes in market yields from the time of purchase. Management generally views changes in fair value caused by changes in interest rates as temporary. In addition, all scheduled payments for securities with unrealized losses at June 30, 2013, have been made, and it is anticipated that the Company will hold such securities to maturity and that the entire principal balance will be collected.

The scheduled maturities of mortgage-backed securities held to maturity at June 30, 2013, are presented in the following table. Dollar amounts are expressed in thousands.


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Due from one to five years	$	831		2		21		812
Due from five to ten years		24		1		—		25
Due after ten years		9,543		186		8		9,721

Total	$	10,398		189		29		10,558

Actual maturities and pay-downs of mortgage-backed securities held to maturity will differ from scheduled maturities depending on the repayment characteristics and experience of the underlying financial instruments, on which borrowers have the right to prepay certain obligations.

(7) LOANS RECEIVABLE

The Bank has traditionally concentrated its lending activities on mortgage loans secured by residential and business property and, to a lesser extent, development lending. Residential mortgage loans have either long-term fixed or 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. Dollar amounts are expressed in thousands.


	6/30/13			9/30/12
HELD FOR INVESTMENT
Mortgage loans:
Permanent loans on:
Residential properties	$	340,731			331,310
Business properties		269,141			321,559
Partially guaranteed by VA or insured by FHA		5,749			3,950
Construction and development		89,506			110,718

Total mortgage loans		705,127			767,537
Commercial loans		12,313			17,570
Installment loans and lease financing to individuals		6,322			7,753

Total loans receivable held for investment		723,762			792,860
Less:
Undisbursed loan funds		(23,624	)		(21,014	)
Unearned discounts and fees on loans, net of deferred costs		(4,556	)		(5,245	)

Net loans receivable held for investment	$	695,582			766,601

HELD FOR SALE
Mortgage loans:
Permanent loans on:
Residential properties	$	104,658			163,834

Included in the loans receivable balances at June 30, 2013, are participating interests in mortgage loans and wholly-owned mortgage loans serviced by other institutions in the amount of $1.1 million. Loans and participations serviced for others amounted to approximately $24.4 million at June 30, 2013. Loans serviced for others are not included in the accompanying condensed consolidated balance sheets.

Lending Practices and Underwriting Standards

Residential real estate loans - The Bank offers a range of residential loan programs, including programs offering loans guaranteed by the Veterans Administration (“VA”) and loans insured by the Federal Housing Administration (“FHA”). 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 Board Chairman, CEO or EVP/Residential Lending. 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 approved outside licensed appraiser, is required for substantially 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.

At the time a potential borrower applies for a 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.

Construction and development loans - Construction and land development loans are made primarily to builders/developers, who construct properties for resale. 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 require two approvals, from either the Board Chairman, CEO, or SVP/Construction Lending. Prior approval is required from the Bank’s Board of Directors for newly originated construction and development loans with a proposed balance of $1.0 million or greater. 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 approved outside licensed appraiser is required on all loans in excess of $250,000. Generally, the Bank will commit to an initial term of 12 to 18 months on construction loans, and an initial term of 24 to 48 months on land acquisition and development loans, with six month renewals thereafter. 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 help ensure adequate progress is achieved before making scheduled loan disbursements.

When construction and development loans mature, the Bank typically considers extensions for short, six-month term periods. This allows the Bank to more frequently evaluate the loan, including creditworthiness and current market conditions and, if management believes it’s in the best interest of the Company, to modify the terms accordingly. This portfolio consists primarily of assets with rates tied to the prime rate and, in most cases, the conditions for loan renewal include an interest rate “floor” in accordance with the market conditions that exist at the time of renewal.

During the nine month period ended June 30, 2013, the Bank renewed fifty-seven loans within its construction and land development portfolio due to slower home and lot sales in the current economic environment. Such extensions were accounted for as Troubled Debt Restructurings (“TDRs”) if the restructuring was related to the borrower’s financial difficulty, and if the Bank made concessions that it would not otherwise consider. In order to determine whether or not a 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 renewal).

Commercial real estate loans - The Bank purchases and originates several different types of commercial real estate loans. 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 require two approvals, from either the Board Chairman, CEO, or SVP/Commercial Lending. Prior approval is required from the Bank’s Board of Directors for newly originated commercial loans with a proposed balance of $1.0 million or greater. 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 rationale for exceeding this limit is clearly documented. An appraisal report performed in conformity with the Uniform Standards of Professional Appraisers Practice by an approved 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 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.

At least once during each calendar year, a review is prepared for each borrower relationship in excess of $5 million and for each individual loan over $1 million. Collateral inspections are obtained on an annual basis for each loan over $1 million, and on a triennial basis for each loan between $500,000 and $1 million. Financial information, such as tax returns, is requested annually for all commercial real estate loans over $500,000, which is consistent with industry practice, and the Bank believes it 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.

Installment Loans - 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.

Allowance for Loan 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, within their regulatory filings, 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 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. Prior to the quarter ended March 31, 2012, the Bank recorded a specific allowance equal to the amount of measured impairment.

In July 2011, the Office of Thrift Supervision (“OTS”) merged with and into the Office of the Comptroller of the Currency (“OCC”), and the OCC became the Bank’s primary regulator. Beginning with the quarter ended March 31, 2012, the Bank was required to file a Consolidated Report of Condition and Income (“Call Report”) instead of the previously required Thrift Financial Report (“TFR”). With the adoption of the Call Report, the Bank was required to discontinue using specific valuation allowances on loans deemed impaired. The TFR had allowed any measured impairments to be carried as

specific valuation allowances, whereas the Call Report required any measured impairments that are deemed “confirmed losses” to be charged-off and netted from their respective loan balances. For impaired loans that are collateral dependent, a “confirmed loss” is generally the amount by which the loan’s recorded investment exceeds the fair value of its collateral. If a loan is considered uncollectible, the entire balance is deemed a “confirmed loss” and is fully charged-off. During the quarter ended March 31, 2012, the Bank charged-off against ALLL the aggregate “confirmed losses” of $23.3 million that were carried as specific valuation allowances in prior periods, and netted them against their respective loan balances for reporting purposes. This change had no impact on net loans receivable as presented in the consolidated balance sheet. In addition, this change did not materially impact the analysis of ALLL, which is described in more detail in the following paragraph, as specific valuation allowances were previously considered in the determination of historical loss ratios.

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 within the various loan portfolios. These loans are categorized into pools based upon certain characteristics such as loan type, collateral type and repayment source. 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. For purposes of calculating historical loss ratios, specific valuation allowances established prior to March 31, 2012, are considered charge-offs during the periods in which they are established.

The Bank does not routinely obtain updated appraisals for their collateral dependent loans that are not adversely classified. 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 presents the balance in the allowance for loan losses for the three and nine months ended June 30, 2013 and 2012. Dollar amounts are expressed in thousands.


				Residential			Commercial
				Held For			Real			Construction &
	Residential			Sale			Estate			Development			Commercial			Installment			Total
Allowance for loan losses:
Balance at April 1, 2013	$	7,380			—			7,253			5,627			60			406			20,726
Provision for loan losses		886			—			(315	)		(476	)		—			(95	)		—
Losses charged off		(203	)		—			(420	)		—			—			—			(623	)
Recoveries		307			—			174			21			—			45			547

Balance at June 30, 2013	$	8,370			—			6,692			5,172			60			356			20,650

Balance at April 1, 2012	$	6,941			3			13,881			15,169			651			152			36,797
Provision for loan losses		6,970			(3	)		(5,165	)		1,302			(89	)		(15	)		3,000
Losses charged off		(1,982	)		—			(1,973	)		(3,317	)		—			—			(7,272	)
Recoveries		20			2			1,662			588			—			19			2,291

Balance at June 30, 2012	$	11,949			2			8,405			13,742			562			156			34,816

Balance at October 1, 2012	$	6,941			—			7,086			16,590			513			699			31,829
Provision for loan losses		2,232			—			177			(11,129	)		(453	)		(427	)		(9,600	)
Losses charged off		(1,359	)		—			(994	)		(669	)		—			(87	)		(3,109	)
Recoveries		556			—			423			380			—			171			1,530

Balance at June 30, 2013	$	8,370			—			6,692			5,172			60			356			20,650

Balance at October 1, 2011	$	6,663			12			13,201			41,863			7,682			845			70,266
Provision for loan losses		9,684			(12	)		6,748			(1,359	)		(4,551	)		(10	)		10,500
Losses charged off		(4,524	)		—			(13,206	)		(27,350	)		(2,569	)		(698	)		(48,347	)
Recoveries		126			2			1,663			588			—			19			2,397

Balance at June 30, 2012	$	11,949			2			8,405			13,742			562			156			34,816

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method at June 30, 2013. Dollar amounts are expressed in thousands.


			Residential		Commercial
			Held For		Real		Construction &
	Residential		Sale		Estate		Development		Commercial		Installment		Total
Allowance for loan losses:
Ending balance of allowance for loan losses related to loans at June 30, 2013:
Individually evaluated for impairment	$	712		—		137		4		25		—		878

Collectively evaluated for impairment	$	7,658		—		6,555		5,168		35		356		19,772

Acquired with deteriorated credit quality *	$	21		—		—		—		—		—		21

Loans:
Balance at June 30, 2013	$	344,333		104,658		267,312		65,302		12,313		6,322		800,240

Ending balance:
Loans individually evaluated for impairment	$	21,579		—		10,251		28,822		11,250		4		71,906

Loans collectively evaluated for impairment	$	322,754		104,658		257,061		36,480		1,063		6,318		728,334

Loans acquired with deteriorated credit quality	$	3,674		—		—		—		—		—		3,674

*	Included in ending balance of allowance for loan losses related to loans individually evaluated for impairment at June 30, 2013.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method at September 30, 2012. Dollar amounts are expressed in thousands.


			Residential		Commercial
			Held For		Real		Construction &
	Residential		Sale		Estate		Development		Commercial		Installment		Total
Allowance for loan losses:
Ending balance of allowance for loan losses related to loans at September 30, 2012:
Individually evaluated for impairment	$	975		—		7		42		—		—		1,024

Collectively evaluated for impairment	$	5,966		—		7,079		16,548		513		699		30,805

Acquired with deteriorated credit quality	$	—		—		—		—		—		—		—

Loans:
Balance at September 30, 2012	$	332,320		163,834		319,272		89,689		17,567		7,753		930,435

Ending balance:
Loans individually evaluated for impairment	$	18,440		—		24,895		42,267		—		69		85,671

Loans collectively evaluated for impairment	$	310,635		163,834		294,377		47,422		17,567		7,684		841,519

Loans acquired with deteriorated credit quality	$	3,245		—		—		—		—		—		3,245

Classified Assets, Delinquencies, and Non-accrual Loans

Classified assets - In accordance with the Bank’s asset classification system, problem assets are classified with risk ratings of 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 little value. Prior to the quarter ended March 31, 2012, the Bank established a specific valuation allowance for such assets. In conjunction with the adoption of the Call Report during the quarter ended March 31, 2012, such assets are charged-off against the ALLL at the time they are deemed to be a “confirmed loss.”

In addition to the risk rating categories for problem assets noted above, loans may be assigned a risk rating of “pass,” “pass-watch,” or “special mention.” The pass category includes loans with borrowers and/or collateral that is of average quality or better. Loans in this category are considered average risk and satisfactory repayment is expected. Assets classified as pass-watch are those in which the borrower has the capacity to perform according to the terms and repayment is expected. However, one or more elements of uncertainty exist. Assets classified as special mention have a potential weakness that deserves management’s close attention. If left undetected, the potential weakness may result in deterioration of repayment prospects.

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 presents the credit risk profile of the Company’s loan portfolio based on risk rating category as of June 30, 2013. Dollar amounts are expressed in thousands.


			Residential		Commercial
			Held For		Real		Construction &
	Residential		Sale		Estate		Development		Commercial		Installment		Total
Rating:
Pass	$	291,695		104,658		196,528		13,855		—		6,293		613,029
Pass – Watch		24,953		—		57,209		25,280		1,063		—		108,505
Special Mention		227		—		356		—		—		—		583
Substandard		26,940		—		13,082		26,167		11,250		29		77,468
Doubtful		518		—		137		—		—		—		655
Loss		—		—		—		—		—		—		—

Total	$	344,333		104,658		267,312		65,302		12,313		6,322		800,240

The following table presents the credit risk profile of the Company’s loan portfolio based on risk rating category as of September 30, 2012. Dollar amounts are expressed in thousands.


			Residential		Commercial
			Held For		Real		Construction &
	Residential		Sale		Estate		Development		Commercial		Installment		Total
Rating:
Pass	$	283,771		163,834		256,158		14,370		1,318		7,621		727,072
Pass – Watch		11,076		—		28,439		19,054		—		—		58,569
Special Mention		4,689		—		323		—		—		—		5,012
Substandard		32,011		—		34,352		56,261		16,249		132		139,005
Doubtful		773		—		—		4		—		—		777
Loss		—		—		—		—		—		—		—

Total	$	332,320		163,834		319,272		89,689		17,567		7,753		930,435

The following table presents the Company’s loan portfolio aging analysis as of June 30, 2013. Dollar amounts are expressed in thousands.


	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
Residential	$	4,665		603		6,514		11,782		332,551		344,333		—
Residential held for sale		—		—		—		—		104,658		104,658		—
Commercial real estate		1,930		—		515		2,445		264,867		267,312		—
Construction & development		806		—		2,271		3,077		62,225		65,302		—
Commercial		—		—		—		—		12,313		12,313		—
Installment		58		—		25		83		6,239		6,322		—

Total	$	7,459		603		9,325		17,387		782,853		800,240		—

The following table presents the Company’s loan portfolio aging analysis as of September 30, 2012. Dollar amounts are expressed in thousands.


	30-59 Days Past Due		60-90 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
Residential	$	1,727		1,439		16,430		19,596		312,724		332,320		5,183
Residential held for sale		—		—		—		—		163,834		163,834		—
Commercial real estate		217		714		6,082		7,013		312,259		319,272		—
Construction & development		567		633		5,487		6,687		83,002		89,689		1,931
Commercial		—		—		—		—		17,567		17,567		—
Installment		181		67		64		312		7,441		7,753		—

Total	$	2,692		2,853		28,063		33,608		896,827		930,435		7,114

When a loan becomes 90 days past due, or when full payment of interest and principal is not expected, the Bank stops accruing interest and establishes a reserve for the unpaid interest accrued-to-date. In some instances, a loan may become 90 days past due if it has exceeded its maturity date but the Bank and borrower are still negotiating the terms of an extension agreement. In those instances, the Bank typically continues to accrue interest, provided the borrower has continued making interest payments after the maturity date and full payment of interest and principal is expected.

The following table presents the Company’s loans meeting the regulatory definition of nonaccrual, which includes certain loans that are current and paying as agreed. This table does not include purchased impaired loans or troubled debt restructurings that are performing. Dollar amounts are expressed in thousands.


	6/30/13		9/30/12
Residential	$	19,734		23,147
Residential held for sale		—		—
Commercial real estate		8,609		20,952
Construction & development		8,361		30,606
Commercial		—		—
Installment		24		62

Total	$	36,728		74,767

As of June 30, 2013, $25.4 million (69.2%) of the loans classified as nonaccrual were current and paying as agreed.

During the quarter ended March 31, 2012, the Company’s nonaccrual loans increased $41.4 million. This increase resulted from management’s decision to move certain impaired collateral dependent loans secured by land development, commercial real estate, and residential rental properties to nonaccrual, even though the majority of such loans were current and paying in accordance with their contractual terms. Due to the continued deterioration in the real estate markets, management determined that the full collection of principal and interest was uncertain. In accordance with GAAP, these loans were charged-down to the fair value of their underlying collateral, and therefore, the recorded investment in the loan is deemed fully collectable at June 30, 2013. Interest income is recognized on a cash-basis as payments are received. The majority of these loans currently remain in non-accrual status; however, loans with a carrying value of $7.8 million at June 30, 2013, were returned to a performing status during the current quarter, based upon improvement in the real estate markets and the borrower’s financial condition.

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. A restructuring of debt is considered a TDR if, because of a debtor’s financial difficulty, a creditor grants concessions that it would not otherwise consider. Loans modified in troubled debt restructurings are also considered impaired. Concessions granted in a TDR could include a reduction in interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. 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. Unless the loan is performing prior to the restructure, TDRs are placed in non-accrual status at the time of restructuring and may only be returned to performing status after the borrower demonstrates sustained repayment performance for a reasonable period, generally six months.

The following table presents the recorded balance of troubled debt restructurings. Dollar amounts are expressed in thousands.


	6/30/13		9/30/12
Troubled debt restructurings:
Residential	$	9,773		6,156
Residential held for sale		—		—
Commercial real estate		5,110		17,384
Construction & development		27,892		39,844
Commercial		11,250		—
Installment		4		—

Total	$	54,029		63,384

Performing troubled debt restructurings:
Residential	$	1,742		593
Residential held for sale		—		—
Commercial real estate		—		3,812
Construction & development		20,317		11,521
Commercial		11,250		—
Installment		4		—

Total	$	33,313		15,926

At June 30, 2013, the Bank had outstanding commitments of $1,000 to be advanced in connection with TDRs.

The following table presents the number of loans and the Company’s recorded investment in TDRs modified during the three month period ended June 30, 2013. Dollar amounts are expressed in thousands.


			Recorded		Recorded
			Investment		Investment		Increase in
	Number		Prior to		After		ALLL or
	of Loans		Modification		Modification		Charge-offs
Residential		6	$	2,964	$	2,964	$	—
Residential held for sale		—		—		—		—
Commercial real estate		1		724		591		133
Construction & development		7		5,156		5,156		—
Commercial		—		—		—		—
Installment		2		5		5		—

Total		16	$	8,849	$	8,716	$	133

The following table presents the number of loans and the Company’s recorded investment in TDRs modified during the three month period ended June 30, 2012. Dollar amounts are expressed in thousands.


			Recorded		Recorded
			Investment		Investment		Increase in
	Number		Prior to		After		ALLL or
	of Loans		Modification		Modification		Charge-offs
Residential		1	$	399	$	429	$	—
Residential held for sale		—		—		—		—
Commercial real estate		2		4,921		5,119		—
Construction & development		11		6,407		6,407		—
Commercial		—		—		—		—
Installment		—		—		—		—

Total		14	$	11,727	$	11,955	$	—

The following table presents the number of loans and the Company’s recorded investment in TDRs modified during the nine month period ended June 30, 2013. Dollar amounts are expressed in thousands.


			Recorded		Recorded
			Investment		Investment		Increase in
	Number		Prior to		After		ALLL or
	of Loans		Modification		Modification		Charge-offs
Residential		18	$	7,526	$	7,468	$	19
Residential held for sale		—		—		—		—
Commercial real estate		3		1,471		1,338		133
Construction & development		21		23,484		23,484		—
Commercial		1		16,251		13,751		25
Installment		2		5		5		—

Total		45	$	48,737	$	46,046	$	177

The following table presents the number of loans and the Company’s recorded investment in TDRs modified during the nine month period ended June 30, 2012. Dollar amounts are expressed in thousands.


			Recorded		Recorded
			Investment		Investment		Increase in
	Number		Prior to		After		ALLL or
	of Loans		Modification		Modification		Charge-offs
Residential		3	$	554	$	583	$	—
Residential held for sale		—		—		—		—
Commercial real estate		2		4,921		5,119		—
Construction & development		26		27,485		27,066		418
Commercial		1		3,000		1,500		—
Installment		—		—		—		—

Total		32	$	35,960	$	34,268	$	418

The following table presents TDRs restructured during the three month period ended June 30, 2013 by type of modification. Dollar amounts are expressed in thousands.


							Total
							Recorded
	Extension				Combination		Investment
	Of		Interest Only		of Terms		Prior to
	Maturity		Period		Modified		Modification
Residential	$	2,622		—		342		2,964
Residential held for sale		—		—		—		—
Commercial real estate		—		—		724		724
Construction & development		5,156		—		—		5,156
Commercial		—		—		—		—
Installment		—		—		5		5

Total	$	7,778		—		1,071		8,849

The following table presents TDRs restructured during the three month period ended June 30, 2012 by type of modification. Dollar amounts are expressed in thousands.


							Total
							Recorded
	Extension				Combination		Investment
	of		Interest Only		of Terms		Prior to
	Maturity		Period		Modified		Modification
Residential	$	—		—		399		399
Residential held for sale		—		—		—		—
Commercial real estate		—		2,578		2,343		4,921
Construction & development		6,407		—		—		6,407
Commercial		—		—		—		—
Installment		—		—		—		—

Total	$	6,407		2,578		2,742		11,727

The following table presents TDRs restructured during the nine month period ended June 30, 2013 by type of modification. Dollar amounts are expressed in thousands.


							Total
							Recorded
	Extension				Combination		Investment
	Of		Interest Only		of Terms		Prior to
	Maturity		Period		Modified		Modification
Residential	$	6,529		—		997		7,526
Residential held for sale		—		—		—		—
Commercial real estate		—		—		1,471		1,471
Construction & development		23,484		—		—		23,484
Commercial		—		—		16,251		16,251
Installment		—		—		5		5

Total	$	30,013		—		18,724		48,737

The following table presents TDRs restructured during the nine month period ended June 30, 2012 by type of modification. Dollar amounts are expressed in thousands.


							Total
							Recorded
	Extension				Combination		Investment
	of		Interest Only		of Terms		Prior to
	Maturity		Period		Modified		Modification
Residential	$	155		—		399		554
Residential held for sale		—		—		—		—
Commercial real estate		—		2,578		2,343		4,921
Construction & development		27,485		—		—		27,485
Commercial		—		—		3,000		3,000
Installment		—		—		—		—

Total	$	27,640		2,578		5,742		35,960

The following table presents the Company’s recorded investment and number of loans considered TDRs at June 30, 2013 and 2012, that defaulted during the nine month period. Dollar amounts are expressed in thousands.


	June 30, 2013				June 30, 2012
	Number		Recorded		Number		Recorded
	of Loans		Investment		of Loans		Investment
Residential		22	$	5,023		17	$	3,589
Residential held for sale		—		—		—		—
Commercial real estate		3		322		4		5,906
Construction & development		2		1,485		5		3,479
Commercial		—		—		—		—
Installment		2		4		—		—

Total		29	$	6,834		26	$	12,974

The following table presents impaired loans, including troubled debt restructurings, as of June 30, 2013. Dollar amounts are expressed in thousands.


			Unpaid				YTD Average		Interest
	Recorded		Principal		Specific		Investment in		Income
	Balance		Balance		Allowance		Impaired Loans		Recognized
Loans without a specific valuation allowance:
Residential	$	16,662		18,072		—		17,014		606
Residential held for sale		—		—		—		—		—
Commercial real estate		10,114		18,032		—		10,627		810
Construction & development		27,043		31,064		—		31,231		1,483
Commercial		—		—		—		—		—
Installment		4		437		—		41		36
Loans with a specific valuation allowance:
Residential	$	4,917		6,131		712		5,526		255
Residential held for sale		—		—		—		—		—
Commercial real estate		137		167		137		138		6
Construction & development		1,779		1,779		4		1,779		91
Commercial		11,250		11,250		25		13,195		702
Installment		—		—		—		—		—
Total:
Residential	$	21,579		24,203		712		22,540		861
Residential held for sale		—		—		—		—		—
Commercial real estate		10,251		18,199		137		10,765		816
Construction & development		28,822		32,843		4		33,010		1,574
Commercial		11,250		11,250		25		13,195		702
Installment		4		437		—		41		36

The following table presents impaired loans, including troubled debt restructurings, as of September 30, 2012. Dollar amounts are expressed in thousands.


			Unpaid				YTD Average		Interest
	Recorded		Principal		Specific		Investment in		Income
	Balance		Balance		Allowance		Impaired Loans		Recognized
Loans without a specific valuation allowance:
Residential	$	16,849		19,394		—		18,252		776
Residential held for sale		—		—		—		—		—
Commercial real estate		21,574		30,652		—		24,961		1,796
Construction & development		40,633		45,873		—		46,820		2,658
Commercial		—		—		—		—		—
Installment		68		570		—		69		17
Loans with a specific valuation allowance:
Residential	$	4,836		4,910		974		4,836		260
Residential held for sale		—		—		—		—		—
Commercial real estate		3,322		3,955		7		3,949		215
Construction & development		1,634		1,668		42		1,698		100
Commercial		—		—		—		—		—
Installment		—		—		—		—		—
Total:
Residential	$	21,685		24,304		974		23,088		1,036
Residential held for sale		—		—		—		—		—
Commercial real estate		24,896		34,607		7		28,910		2,011
Construction & development		42,267		47,541		42		48,518		2,758
Commercial		—		—		—		—		—
Installment		68		570		—		69		17

(8) FORECLOSED ASSETS HELD FOR SALE

The carrying value of real estate owned and other repossessed property was $13.0 million and $17.0 million at June 30, 2013, and September 30, 2012, respectively

Foreclosed assets held for sale are initially recorded at fair value as of the date of foreclosure less any estimated selling costs (the “new basis”) and are subsequently carried at the lower of the new basis or fair value less selling costs on the current measurement date. When foreclosed assets are acquired, any excess of the loan balance over the new basis of the foreclosed asset is charged to the allowance for loan losses. Subsequent adjustments for estimated losses are charged to operations when the fair value declines to an amount less than the carrying value. Costs and expenses related to major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. Applicable gains and losses on the sale of real estate owned are realized when the asset is disposed of, depending on the adequacy of the down payment and other requirements.

With the adoption of the Call Report during the quarter ended March 31, 2012, the Bank was required to begin following regulatory guidance related to the Call Report requirements. One such requirement resulted in a change in the treatment of specific loss reserves for foreclosed assets held for sale. Previous Thrift Financial Report guidance allowed banks to reduce an asset’s carrying value through a specific allowance when the fair value declined to an amount less than its carrying value. Call Report guidance requires that the carrying value of foreclosed assets held for sale be written down to fair value through a charge to earnings. During the quarter ended March 31, 2012, the Bank charged-off the previously established specific allowances on such assets of $9.4 million. This change had no impact on net foreclosed assets held for sale as presented in the consolidated balance sheet.

(9) SUBORDINATED DEBENTURES

On December 13, 2006, the Company, through its wholly-owned statutory trust, NASB Preferred Trust I (the “Trust”), issued $25 million of pooled Trust Preferred Securities. The Trust used the proceeds from the offering to purchase a like amount of the Company’s subordinated debentures. The debentures, which have a variable rate of 1.65% over the 3-month LIBOR and a 30-year term, are the sole assets of the Trust. In exchange for the capital contributions made to the Trust by the Company upon formation, the Company owns all the common securities of the Trust.

In accordance with Financial Accounting Standards Board ASC 810-10, the Trust qualifies as a special purpose entity that is not required to be consolidated in the financial statements of the Company. The $25.0 million Trust Preferred Securities issued by the Trust will remain on the records of the Trust. The Trust Preferred Securities are included in Tier I capital for regulatory capital purposes.

The Trust Preferred Securities have a variable interest rate of 1.65% over the 3-month LIBOR, and are mandatorily redeemable upon the 30-year term of the debentures, or upon earlier redemption as provided in the Indenture. The debentures are callable, in whole or in part, after five years of the issuance date. The Company did not incur a placement or annual trustee fee related to the issuance. The securities are subordinate to all other debt of the Company and interest may be deferred up to five years.

On July 11, 2012, the Company notified security holders that it was exercising its right to defer the payment of interest on its Trust Preferred Securities for a period of up to five years.

(10) INCOME TAXES

The Company’s federal and state income tax returns for fiscal years 2010 through 2012 remain subject to examination by the Internal Revenue Service and various state jurisdictions, based on the statute of limitations.

(11) SEGMENT INFORMATION

The Company has identified two principal operating segments for purposes of financial reporting: Banking and Mortgage Banking. These segments were determined based on the Company’s internal financial accounting and reporting processes and are consistent with the information that is used to make operating decisions and to assess the Company’s performance by the Company’s key decision makers.

The Mortgage Banking segment originates mortgage loans for sale to investors and for the portfolio of the Banking segment. The Banking segment provides a full range of banking services through the Bank’s branch network, exclusive of mortgage loan originations. A portion of the income presented in the Mortgage Banking segment is derived from sales of loans to the Banking segment based on a transfer pricing methodology that is designed to approximate economic reality. The Other and Eliminations segment includes financial information from the parent company plus inter-segment eliminations.

The following table presents financial information from the Company’s operating segments for the periods indicated. Dollar amounts are expressed in thousands.


				Mortgage		Other and
Three months ended June 30, 2013	Banking			Banking		Eliminations			Consolidated
Net interest income	$	10,398			—		(125	)		10,273
Provision for loan losses		—			—		—			—
Other income		830			11,408		(1,241	)		10,997
General and administrative expenses		7,448			11,268		(332	)		18,384
Income tax expense		1,455			54		(398	)		1,111

Net income	$	2,325			86		(636	)		1,775


				Mortgage		Other and
Three months ended June 30, 2012	Banking			Banking		Eliminations			Consolidated
Net interest income	$	11,852			—		(136	)		11,716
Provision for loan losses		3,000			—		—			3,000
Other income		835			15,233		(507	)		15,561
General and administrative expenses		6,526			9,733		(196	)		16,063
Income tax expense		1,217			2,117		(175	)		3,159

Net income	$	1,944			3,383		(272	)		5,055


				Mortgage		Other and
Nine months ended June 30, 2013	Banking			Banking		Eliminations			Consolidated
Net interest income	$	32,722			—		(377	)		32,345
Provision for loan losses		(9,600	)		—		—			(9,600	)
Other income		1,615			47,210		(2,366	)		46,459
General and administrative expenses		20,666			34,100		(687	)		54,079
Income tax expense		8,959			5,047		(791	)		13,215

Net income	$	14,312			8,063		(1,265	)		21,110


				Mortgage		Other and
Nine months ended June 30, 2012	Banking			Banking		Eliminations			Consolidated
Net interest income	$	38,334			—		(402	)		37,932
Provision for loan losses		10,500			—		—			10,500
Other income		(1,496	)		37,315		(1,420	)		34,399
General and administrative expenses		19,100			26,408		(537	)		44,971
Income tax expense		2,787			4,199		(495	)		6,491

Net income	$	4,451			6,708		(790	)		10,369

(12) DERIVATIVE INSTRUMENTS

The Company has commitments outstanding to extend credit that have not closed prior to the end of the period. As the Company enters into commitments to originate loans, it also enters into commitments to sell the loans in the secondary market. Such commitments to originate loans held for sale are considered derivative instruments in accordance with GAAP, which requires the Company to recognize all derivative instruments in the balance sheet and to measure those instruments at fair value. As a result of marking to market commitments to originate loans, the Company recorded a decrease in other assets of $909,000, an increase in other liabilities of $4.4 million, and a decrease in other income of $5.3 million for the quarter ended June 30, 2013. The Company recorded a decrease in other assets of $2.5 million, an increase in other liabilities of $4.4 million, and a decrease in other income of $6.9 million for the nine month period ended June 30, 2013. As a result of marking to market commitments to originate loans, the Company recorded an increase in other assets of $1.6 million, a decrease in other liabilities of $360,000, and an increase in other income of $2.0 million for the quarter ended June 30, 2012. The Company recorded an increase in other assets of $945,000, a decrease in other liabilities of $333,000, and an increase in other income of $1.3 million for the nine month period ended June 30, 2012.

Additionally, the Company has commitments to sell loans that have closed prior to the end of the period. Due to the mark to market adjustment on commitments to sell loans held for sale, the Company recorded an increase in other assets of $3.8 million, a decrease in other liabilities of $37,000, and an increase in other income of $3.9 million during the quarter ended June 30, 2013. The Company recorded an increase in other assets of $3.5 million, a decrease in other liabilities of $133,000, and an increase in other income of $3.6 million during the nine month period ended June 30, 2013. Due to the mark to market adjustment on commitments to sell loans held for sale, the Company recorded a decrease in other assets of $747,000, an increase in other liabilities of $89,000, and a decrease in other income of $836,000 during the quarter ended June 30, 2012. The Company recorded a decrease in other assets of $13,000, a decrease in other liabilities of $98,000, and an increase in other income of $85,000 during the nine month period ended June 30, 2012.

The balance of derivative instruments related to commitments to originate and sell loans at June 30, 2013, and September 30, 2012, is disclosed in Footnote 13, Fair Value Measurements.

(13) FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would likely be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. GAAP identifies three primary measurement techniques: the market approach, the income approach, and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuations or techniques to convert future amounts, such as cash flows or earnings, to a single present amount. The cost approach is based on the amount that currently would be required to replace the service capability of an asset.

GAAP establishes a fair value hierarchy and prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The maximization of observable inputs and the minimization of the use of unobservable inputs are required. Classification within the fair value hierarchy is based upon the objectivity of the inputs that are significant to the valuation of an asset or liability as of the measurement date. The three levels within the fair value hierarchy are characterized as follows:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 – Inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.

•

Level 3 – Unobservable inputs for the asset or liability for which there is little, if any, market activity for the asset or liability at the measurement date. Unobservable inputs reflect the Company’s own assumptions about what market participants would use to price the asset or liability. These inputs may include internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

The Company measures certain financial assets and liabilities at fair value in accordance with GAAP. These measurements involve various valuation techniques and assume that the transactions would occur between market participants in the most advantageous market for the Company.

The following is a summary of valuation techniques utilized by the Company for its significant financial assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy:

Available for sale securities

Securities available for sale consist of corporate debt, trust preferred, U. S. government sponsored agency, and municipal securities. Such securities are valued using market prices in an active market, if available. This measurement is classified as Level 1 within the hierarchy. Less frequently traded securities are valued using industry standard models which utilize various assumptions such as historical prices of the same or similar securities, and observation of market prices of securities of the same issuer, market prices of same-sector issuers, and fixed income indexes. Substantially all of these assumptions are observable in the marketplace or can be derived from observable data. These measurements are classified as Level 2 within the hierarchy.

At June 30, 2012, mortgage-backed securities available for sale, which consist of agency pass-through and participation certificates issued by GNMA, FNMA, and FHLMC, were valued by using broker-dealer quotes for similar assets in markets that are not active. Although the Company did not validate these quotes, they were reviewed by management for reasonableness in relation to current market conditions. Additionally, they were obtained from experienced brokers who had an established relationship with the Bank and deal regularly with these types of securities. The Company did not make any adjustment to the quotes received from broker-dealers. These measurements are classified as Level 2. At June 30, 2013, mortgage-backed securities available for sale were valued by using industry standard models which utilize various inputs and assumptions such as historical prices of benchmark securities, prepayment estimates, loan type, and year of origination. Substantially all of these assumptions are observable in the marketplace or can be derived from observable data. These measurements are classified as Level 2 within the hierarchy.

Loans held for sale

Loans held for sale are valued using quoted market prices for loans with similar characteristics. This measurement is classified as Level 2 within the hierarchy.

Commitments to Originate Loans and Forward Sales Commitments

Commitments to originate loans and forward sales commitments are valued using a valuation model which considers differences between current market interest rates and committed rates. The model also includes assumptions, which estimate fall-out percentages, for commitments to originate loans, and average lives. Fall-out percentages, which range from ten to forty percent, are estimated based upon the difference between current market rates and committed rates. Average lives are based upon estimates for similar types of loans. These measurements use significant unobservable inputs and are classified as Level 3 within the hierarchy.

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall at June 30, 2013 (in thousands):


			Quoted Prices in		Significant		Significant
			Active Markets for		Other		Unobservable
	Fair		Identical Assets		Observable		Inputs
	Value		(Level 1)		Inputs (Level 2)		(Level 3)
Assets:
Securities, available for sale
U.S. government sponsored agency securities	$	169,706		110,541		59,165		—
Corporate debt securities		69,588		—		69,588		—
Municipal securities		422		—		422		—
Mortgage-backed securities, available for sale				—				—
Pass through certificates guaranteed by GNMA – fixed rate		73		—		73		—
Pass through certificates guaranteed by FNMA – adjustable rate		137		—		137		—
FHLMC participation certificates:				—				—
Fixed rate		145		—		145		—
Adjustable rate		120		—		120		—
Loans held for sale		104,658		—		104,658		—
Commitments to originate loans		73		—		—		73
Forward sales commitments		5,674		—		—		5,674

Total assets	$	350,596		110,541		234,308		5,747

Liabilities:
Commitments to originate loans	$	4,938		—		—		4,938
Forward sales commitments		—		—		—		—

Total liabilities	$	4,938		—		—		4,938


			Quoted Prices in		Significant		Significant
			Active Markets for		Other		Unobservable
	Fair		Identical Assets		Observable		Inputs
	Value		(Level 1)		Inputs (Level 2)		(Level 3)
Assets:
Securities, available for sale
U.S. government sponsored agency securities	$	153,166		142,359		10,807		—
Corporate debt securities		61,018		—		61,018		—
Municipal securities		6		—		6		—
Mortgage-backed securities, available for sale				—				—
Pass through certificates guaranteed by GNMA – fixed rate		81		—		81		—
Pass through certificates guaranteed by FNMA – adjustable rate		152		—		152		—
FHLMC participation certificates:				—				—
Fixed rate		190		—		190		—
Adjustable rate		131		—		131		—
Loans held for sale		163,834		—		163,834		—
Commitments to originate loans		2,559		—		—		2,559
Forward sales commitments		2,194		—		—		2,194

Total assets	$	383,331		142,359		236,219		4,753

Liabilities:
Commitments to originate loans	$	512		—		—		512
Forward sales commitments		133		—		—		133

Total liabilities	$	645		—		—		645

The following tables present a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs for the nine month periods ended June 30, 2013 and 2012 (in thousands):


	Commitments
	to Originate			Forward Sales
	Loans			Commitments
Balance at October 1, 2012	$	2,047			2,061
Total realized and unrealized gain (losses):
Included in net income		(6,912	)		3,613

Balance at June 30, 2013	$	(4,865	)		5,674


	Commitments
	to Originate			Forward Sales
	Loans			Commitments
Balance at October 1, 2011		360			1,328
Total realized and unrealized gains:
Included in net income		1,279			85

Balance at June 30, 2012		1,639			1,413

Realized and unrealized gains and losses noted in the table above and included in net income for the nine month period ended June 30, 2013, are reported in the condensed consolidated statements of income as follows (in thousands):


	Other
	Income
Total losses	$	(3,299	)

Changes in unrealized losses relating to assets still held at the balance sheet date	$	—

Realized and unrealized gains and losses noted in the table above and included in net income for the nine month period ended June 30, 2012, are reported in the condensed consolidated statements of income as follows (in thousands):


	Other
	Income
Total gains	$	1,364

Changes in unrealized losses relating to assets still held at the balance sheet date	$	—

The following is a summary of valuation techniques utilized by the Company for its significant financial assets and liabilities measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy:

Impaired loans

Loans for which it is probable that the Company will not collect principal and interest due according to contractual terms are measured for impairment. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and other internal assessments of value. Appraisals are obtained when an impaired loan is deemed to be collateral dependent and at least annually thereafter. Fair value is generally the appraised value less estimated selling costs and may be discounted further if management believes any other factors or events have affected the fair value. Impaired loans are classified within Level 3 of the fair value hierarchy.

The carrying value of impaired loans that were re-measured during the nine month period ended June 30, 2013, was $26.1 million. The carrying value of impaired loans that were re-measured during the nine month period ended June 30, 2012, was $66.0 million.

Foreclosed Assets Held For Sale

The carrying value of foreclosed assets held for sale was $13.0 million at June 30, 2013. Charge-offs related to foreclosed assets held for sale that were re-measured during the nine month period ended June 30, 2013, totaled $478,000. Charge-offs and increases in specific reserves related to foreclosed assets held for sale that were re-measured during the nine month period ended June 30, 2012, totaled $3.2 million.

Investment in LLCs

Investments in LLCs are accounted for using the equity method of accounting. On a quarterly basis, these investments are analyzed for impairment in accordance with ASC 323-10-35-32, which states that an other than temporary decline in value of an equity method investment should be recognized. The Company utilizes a multi-faceted approach to measure the potential impairment. The internal model utilizes the following valuation methods: 1) liquidation or appraised values determined by an independent third party appraisal; 2) an on-going business, or discounted cash flows method wherein the cash flows are derived from the sale of fully-developed lots, the development and sale of partially-developed lots, the operation of the homeowner’s association, and the value of raw land obtained from an independent third party appraiser; and 3) an on-going business method, which utilizes the same inputs as method 2, but presumes that cash flows will first be generated from the sale of raw ground and then from the sale of fully-developed and partially-developed lots and the operation of the homeowner’s association. 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 of 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 ($1.2 million, net of tax) during the year ended September 30, 2010. During the quarter ended March 31, 2012, list prices of fully-developed lots in Central Platte’s residential development were reduced. The Company incorporated these lower prices into its internal valuation model, which resulted in an additional impairment charge of $200,000 ($123,000, net of tax) during the quarter ended March 31, 2012. No other events have occurred that would indicate any additional impairment of the Company’s investment in Central Platte. Investment in LLCs is classified within Level 3 of the fair value hierarchy.

The carrying value of the Company’s investment in LLCs was $16.7 million at June 30, 2013, and $17.2 million at September 30, 2012.

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value:

Cash and cash equivalents

The carrying amount reported in the condensed consolidated balance sheets is a reasonable estimate of fair value.

Securities and mortgage-backed securities held to maturity

Securities that trade in an active market are valued using market prices, if available. Securities that do not trade in an active market were valued by using industry standard models which utilize various inputs and assumptions such as historical prices of similar securities, estimated delinquencies, defaults, and loss severity.

Stock in Federal Home Loan Bank (“FHLB”)

The carrying value of stock in Federal Home Loan Bank approximates its fair value.

Loans receivable held for investment

Fair values are computed for each loan category using market spreads to treasury securities for similar existing loans in the portfolio and management’s estimates of prepayments.

Customer and brokered deposit accounts

The estimated fair values of demand deposits and savings accounts are equal to the amount payable on demand at the reporting date. Fair values of certificates of deposit are computed at fixed spreads to treasury securities with similar maturities.

Advances from FHLB

The estimated fair values of advances from FHLB are determined by discounting the future cash flows of existing advances using rates currently available for new advances with similar terms and remaining maturities.

Subordinated debentures

Fair values are based on quotes from broker-dealers that reflect estimated offer prices.

Commitments to originate, purchase and sell loans

The estimated fair value of commitments to originate, purchase, or sell loans is based on the difference between current levels of interest rates and the committed rates.

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 (in thousands):


			Fair Value Measurements Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other		Unobservable
	Carrying		Identical Assets		Observable		Inputs
	Value		(Level 1)		Inputs (Level 2)		(Level 3)
Financial Assets:
Cash and cash equivalents	$	28,071		28,071		—		—
Stock in Federal Home Loan Bank		5,929		—		5,929		—
Mortgage-backed securities held to maturity		10,398		—		10,558		—
Loans receivable held for investment		674,932		—		—		705,523
Financial Liabilities:
Customer deposit accounts		801,348		—		—		802,800
Advances from FHLB		100,000		—		—		101,558
Subordinated debentures		25,774		—		—		11,598


			Fair Value Measurements Using
			Quoted Prices in		Significant		Significant
			Active Markets for		Other		Unobservable
	Carrying		Identical Assets		Observable		Inputs
	Value		(Level 1)		Inputs (Level 2)		(Level 3)
Financial Assets:
Cash and cash equivalents	$	8,716		8,716		—		—
Stock in Federal Home Loan Bank		7,073		—		7,073		—
Mortgage-backed securities held to maturity		25,921		—		26,117		—
Loans receivable held for investment		734,772		—		—		763,017
Financial Liabilities:
Customer deposit accounts		870,946		—		—		872,160
Brokered deposit accounts		21,367		—		—		21,365
Advances from FHLB		127,000		—		—		130,393
Subordinated debentures		25,774		—		—		9,021

The following tables present the carrying values and fair values of the Company’s unrecognized financial instruments. Dollar amounts are expressed in thousands.


	June 30, 2013					September 30, 2012
	Contract or		Estimated			Contract or		Estimated
	notional		unrealized			notional		unrealized
	amount		gain (loss)			amount		gain
Unrecognized financial instruments:
Lending commitments – fixed rate, net	$	20,739		(712	)	$	2,446		11
Lending commitments – floating rate		5,166		(21	)		926		9
Commitments to sell loans		—		—			—		—

The fair value estimates presented are based on pertinent information available to management as of June 30, 2013, and September 30, 2012. Although management is not aware of any factors that would significantly affect the estimated fair values, such amounts have not been comprehensively revalued for purposes of these condensed consolidated financial statements since that date. Therefore, current estimates of fair value may differ significantly from the amounts presented above.

(14) INVESTMENT IN LLCs

The Company is a partner in two limited liability companies, Central Platte Holdings LLC (“Central Platte”) and NBH, LLC (“NBH”), which were formed for the purpose of purchasing and developing vacant land in Platte County, Missouri. These investments are accounted for using the equity method of accounting.

The Company’s investment in Central Platte consists of a 50% ownership interest in an entity that develops land for residential real estate sales. Sales of lots have not met previous expectations and, as a result, the Company evaluated its investment for impairment, in accordance with ASC 323-10-35-32, which provides guidance related to a loss in value of an equity method investment. The Company utilizes a multi-faceted approach to measure the potential impairment. The internal model utilizes the following valuation methods: 1) liquidation or appraised values determined by an independent third party appraisal; 2) an on-going business, or discounted cash flows method wherein the cash flows are derived from the sale of fully-developed lots, the development and sale of partially-developed lots, the operation of the homeowner’s association, and the value of raw land obtained from an independent third party appraiser; and 3) another on-going business method, which utilizes the same inputs as method 2, but presumes that cash flows will first be generated from the sale of raw ground and then from the sale of fully-developed and partially-developed lots and the operation of the homeowner’s association. The internal model also includes method 4, an on-going business method wherein the cash flows are derived from the sale of fully-developed lots, the development and sale of partially-developed lots, the operation of the homeowner’s association, and the development and sale of lots from the property that is currently raw land. However, management does not feel the results from this method provide a reliable indication of value because the time to “build-out” the development exceeds 18 years. Because of this unreliability, the results from method 4 are given a zero weighting in the final impairment analysis. 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 of the assumptions and the differences in valuation techniques that are utilized within each approach (e.g., order of distribution of assets upon potential liquidation). It is management’s opinion that no one valuation method within the model is preferable to the other and that no one method is more likely to occur than the other. Therefore, the final estimate of value is determined by assigning an equal weight to the values derived from each of the first three methods described above.

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 ($1.2 million, net of tax) during the year ended September 30, 2010. During the quarter ended March 31, 2012, list prices of fully-developed lots in Central Platte’s residential development were reduced. The Company incorporated these lower prices into its internal valuation model, which resulted in an additional impairment charge of $200,000 ($123,000, net of tax) during the quarter ended March 31, 2012. No other events have occurred that would indicate any additional impairment of the Company’s investment in Central Platte.

The following table displays the results derived from the Company’s internal valuation model at June 30, 2013, and the carrying value of its investment in Central Platte at June 30, 2013. Dollar amounts are expressed in thousands.


Method 1	$	15,106
Method 2		16,300
Method 3		18,415
Average of methods 1, 2, and 3	$	16,607

Carrying value of investment in Central Platte Holdings, LLC	$	15,300

The Company’s investment in NBH consists of a 50% ownership interest in an entity that holds raw land, which is currently zoned as agricultural. The general managers intend to rezone this property for commercial and/or residential development. The raw land was purchased in 2002. The Company accounts for its investment in NBH under the equity method. Due to the overall economic conditions surrounding real estate, the Company evaluated its investment for impairment in accordance with ASC 323-10-35-32, which provides guidance related to a loss in value of an equity method investment. Potential impairment was measured based on liquidation or appraised values determined by an independent third party appraisal. As a result of this analysis, the Company determined that its investment in NBH was materially impaired and recorded an impairment charge of $1.1 million ($693,000, net of tax) during the year ended September 30, 2010. The results of this analysis as of September 30, 2012, did not indicate any additional impairment of the Company’s investment in NBH. No events have occurred during the nine month period ended June 30, 2013, that would indicate any additional impairment of the Company’s investment. The carrying value of the Company’s investment in NBH was $1.4 million at June 30, 2013.

(15) REGULATORY AGREEMENTS

On April 30, 2010, the Board of Directors of North American Savings Bank, F.S.B. (the “Bank”), a wholly-owned subsidiary of the Company, entered into a Supervisory Agreement with the Office of Thrift Supervision (“OTS”), the Bank’s primary regulator at that time. The agreement required, among other things, that the Bank revise its policies regarding internal asset review, obtain an independent assessment of its allowance for loan and lease losses methodology and conduct an independent third-party review of a portion of its commercial and construction loan portfolios. The agreement also directed the Bank to provide a plan to reduce its classified assets and its reliance on brokered deposits, and restricted the payment of dividends or other capital distributions by the Bank during the period of the agreement. The agreement did not direct the Bank to raise capital, make management or board changes, revise any loan policies or restrict lending growth.

On April 30, 2010, the Company’s Board of Directors entered into an agreement with the OTS, the Company’s primary regulator at that time. The agreement restricted the payment of dividends or other capital distributions by the Company and restricted the Company’s ability to incur, issue or renew any debt during the period of the agreement.

The Bank’s Supervisory Agreement and the Company’s agreement with the OTS were assigned to their new primary regulators, the Office of the Comptroller of the Currency (“OCC”) and Board of Governors of the Federal Reserve System (“Federal Reserve Board” or “FRB”), respectively, on July 21, 2011.

On May 22, 2012, the Board of Directors of the Bank agreed to a Consent Order with the OCC. This Consent Order replaces and terminates the previous Supervisory Agreement. The Consent Order requires that the Bank establish various plans and programs to improve its asset quality and to ensure the adequacy of allowances for loan and lease losses. It requires the Bank to obtain an independent third-party review of its non-homogenous loan portfolios and to enhance its credit administration systems. Among other items, it also requires a written capital maintenance plan to ensure that the Bank’s Tier 1 leverage capital and total risk-based capital ratios remain equal to or greater than 10% and 13%, respectively. As of June 30, 2013, the Bank’s actual Tier 1 leverage capital and total risk-based capital ratios were 17.2% and 22.6%, respectively. The Consent Order does not direct the Bank to raise capital, make management or board changes, or restrict lending.

On November 29, 2012 the Company’s Board of Directors entered into a formal written agreement with the Federal Reserve Bank of Kansas City, which replaces and terminates the Company’s previous agreement with the OTS. The agreement with FRB restricts the payment of dividends or other capital distributions by the Company, restricts the Company’s ability to incur, increase, or guarantee any debt, and restricts the Company’s ability to purchase or redeem any of its stock. In addition, the agreement restricts the Company and its wholly-owned statutory trust, NASB Preferred Trust I, from making distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities.

On February 1, 2013, the Board of Directors of the Bank signed an additional Consent Order with the OCC, effective as of that date. This Consent Order requires the Bank to take corrective action to enhance its program for compliance with the Bank Secrecy Act (“BSA”) and other anti-money laundering requirements. The Consent Order requires, among other things, that the Bank improve its processes to better identify and monitor accounts and transactions that pose a greater than normal risk for compliance with the BSA. The Consent Order also requires the Bank to maintain an effective risk assessment process, monitoring mechanisms, training programs and appropriate systems to review the activities of customer accounts.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

We may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”). These forward-looking statements may be included in this quarterly report and in other communications by the Company, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” and similar expressions are intended to identify forward-looking statements. The following factors, as well as those discussed under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2012, filed with the Securities and Exchange Commission, among others, could cause our financial performance to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

•

the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

•

the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

•

the effects of, and changes in, foreign and military policy of the United States Government; inflation, interest rate, market and monetary fluctuations;

•

the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services;

•

the willingness of users to substitute competitors’ products and services for our products and services;

•

our success in gaining regulatory approval of our products, services and branching locations, when required;

•

the impact of changes in financial services’ laws and regulations, including laws concerning taxes, banking, securities and insurance;

•

technological changes;

•

acquisitions and dispositions;

•

changes in consumer spending and saving habits;

•

our success at managing the risks involved in our business; and

•

changes in the fair value or economic value of, impairments of, and risks associated with the Bank’s investments in real estate owned, mortgage backed securities and other assets.

This list of important factors is not all-inclusive. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank. For further discussion of these factors, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2012, filed with the Securities and Exchange Commission, and in our Quarterly Reports, if applicable.

GENERAL

NASB Financial, Inc. was formed in 1998 as a unitary thrift holding company of North American Savings Bank, F.S.B. 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 Kansas City, Lee’s Summit and Springfield in Missouri. 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, interest on investment securities, customer service fees, and mortgage banking fees. Its primary expenses are interest payments on customer deposit accounts and borrowings and normal operating costs.

FINANCIAL CONDITION

Assets

The Company’s total assets as of June 30, 2013 were $1,142.4 million, a decrease of $98.4 million from September 30, 2012, the prior fiscal year end.

Loans receivable held for investment were $695.6 million as of June 30, 2013, a decrease of $71.0 million during the nine month period. This decrease consisted almost entirely of repayments within the Bank’s commercial real estate and construction and land development portfolios. The weighted average rate on such loans as of June 30, 2013, was 5.42%, a decrease from 5.86% as of June 30, 2012.

Loans receivable held for sale as of June 30, 2013, were $104.7 million, a decrease of $59.2 million from September 30, 2012, due primarily to decreases in origination volume during the current quarter. This portfolio consists of residential mortgage loans originated by the Bank’s mortgage banking division that will be sold with servicing released. The Company has elected to carry loans held for sale at fair value, as permitted under GAAP.

As the Bank originates mortgage loans each month, management evaluates the existing market conditions to determine which loans will be held in the Bank’s portfolio and which loans will be sold in the secondary market. Loans sold in the secondary market can be sold with servicing released or converted into MBS and sold with the loan servicing retained by the Bank. At the time of each loan commitment, a decision is made to either hold the loan for investment, hold it for sale with servicing retained, or hold it for sale with servicing released. Management monitors market conditions to decide whether loans should be held in portfolio or sold and if sold, which method of sale is appropriate. During the nine months ended June 30, 2013, the Bank originated and purchased $1,494.9 million in mortgage loans held for sale, $108.7 million in mortgage loans held for investment, and $1.7 million in other loans. This total of $1,605.3 million in loans compares to $1,359.6 million in loans originated and purchased during the nine months ended June 30, 2012.

The Bank classifies problem assets as “substandard,” “doubtful” or “loss.” Substandard assets have one or more defined weaknesses, and it is possible that the Bank will sustain some loss unless the deficiencies are corrected. Doubtful assets have the same defects as substandard assets plus other weaknesses that make collection or full liquidation improbable. Assets classified as loss are considered uncollectible and of little value.

The following table summarizes the Bank’s classified assets, including foreclosed assets held for sale, as reported to their primary regulator, plus any classified assets of the holding company. Dollar amounts are expressed in thousands.


	6/30/13			9/30/12			6/30/12
Asset Classification:
Substandard	$	90,475			156,117			153,463
Doubtful		655			777			948
Loss		—			—			—

		91,130			156,894			154,411
Allowance for loan losses		(20,650	)		(31,829	)		(34,816	)

	$	70,480			125,065			119,595

The following table summarizes non-performing assets, troubled debt restructurings, and real estate acquired through foreclosure, net of specific loss allowances. Dollar amounts are expressed in thousands.


	6/30/13			9/30/12			6/30/12
Total Assets	$	1,142,405			1,240,826			1,220,569

Non-accrual loans		36,728			74,767			63,360
Performing troubled debt restructurings		33,313			15,926			18,501
Net real estate and other assets acquired through foreclosure		13,007			17,040			17,488

Total		83,048			107,733			99,349

Percent of total assets	$	7.27	%		8.68	%		8.14	%

Management records a provision for loan losses in amounts sufficient to cover current net charge-offs and an estimate of probable losses based on an analysis of risks that management believes to be inherent in the loan portfolio. The Allowance for Loan and Lease Losses recognizes the inherent risks associated with lending activities for individually identified problem assets as well as the entire homogenous and non-homogenous loan portfolios. Management believes that the specific loss allowances and ALLL are adequate. While management uses available information to determine these allowances, future provisions may be necessary because of changes in economic conditions or changes in the information available to management. Also, regulatory agencies review the Bank’s allowance for losses as part of their examinations, and they may require the Bank to recognize additional loss provisions based on the information available at the time of their examinations.

With the exception of certain residential loans, which are not deemed impaired until they reach 180 days past due, loans in non-accrual status are considered impaired. (At June 30, 2013, residential loans of $1.7 million in non-accrual status were not deemed impaired.) 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. Any measured impairment that is deemed a “confirmed loss” is charged off and netted from the respective loan balance. For collateral dependent loans, which make up the majority of the Bank’s impaired loans, a “confirmed loss” is generally the amount by which the loan’s recorded investment exceeds the fair value of its collateral. Therefore, risks associated with non-accrual loans have been addressed within Bank’s quarterly analysis of the adequacy of its ALLL, as essentially all were individually analyzed for impairment.

If loans classified as substandard are also impaired, they are individually analyzed for impairment, as noted above. At June 30, 2013, $63.4 million of loans classified as substandard have also been deemed impaired. In addition, the Bank utilizes a qualitative adjustment related to changes and trends in past due, non-accrual, and adversely classified loans. This adjustment is applied to the various pools of unimpaired loans when determining adequacy of the Bank’s ALLL.

Investment securities were $239.7 million as of June 30, 2013, an increase of $25.5 million from September 30, 2012. During the nine month period, the Bank purchased $72.5 million of securities available for sale and received principal repayments related to such securities of $42.5 million. There were no sales of investment securities during the nine month period ended June 30, 2013.

Mortgage-backed securities were $10.9 million as of June 30, 2013, a decrease of $15.6 million from the prior year end. During the nine month period ended June 30, 2013 and 2012, the Bank sold $10.8 million and $859,000 of mortgage-backed securities held to maturity, respectively, following significant deterioration in the issuer’s creditworthiness. The average yield on the mortgage-backed securities portfolio was 3.68% at June 30, 2013, a decrease from 4.85% at June 30, 2012.

The Company’s investment in LLCs, which is accounted for using the equity method, was $16.7 million at June 30, 2013, a decrease of $555,000 from September 30, 2012. During the year ended September 30, 2012, the Company recorded a $200,000 impairment charge related to its investment in LLCs. There have been no events subsequent to September 30, 2012, that would indicate an additional impairment in value of the Company’s investment in LLCs at June 30, 2013.

Liabilities and Equity

Customer and brokered deposit accounts decreased $91.0 million during the nine months ended June 30, 2013. This decrease was due to a $143.3 million decrease in certificates of deposits during the period, which was partially offset by increases in savings, money market, and checking accounts. The decrease in customer and brokered deposit accounts is commensurate with decreases in loans receivable held for sale and loans receivable held for investment during the nine month period. The weighted average rate on customer and brokered deposits as of June 30, 2013, was 0.56%, a decrease from 0.98% as of June 30, 2012.

Advances from the FHLB were $100.0 million as of June 30, 2013, a decrease of $27.0 million from September 30, 2012. During the nine month period, the Bank borrowed $25.0 million of new advances and repaid $52.0 million. Management regularly uses FHLB advances as an alternate funding source to provide operating liquidity and to fund the origination and purchase of mortgage loans.

Subordinated debentures were $25.8 million as of June 30, 2013. Such debentures resulted from the issuance of Trust Preferred Securities through the Company’s wholly-owned statutory trust, NASB Preferred Trust I. The Trust used the proceeds from the offering to purchase a like amount of the Company’s subordinated debentures. The debentures, which have a variable rate of 1.65% over the 3-month LIBOR and a 30-year term, are the sole assets of the Trust.

Escrows were $6.5 million as of June 30, 2013, a decrease of $2.3 million from September 30, 2012. This decrease is due to amounts paid for borrowers’ taxes during the fourth calendar quarter of 2012.

Total stockholders’ equity as of June 30, 2013, was $190.6 million (16.7% of total assets). This compares to $171.5 million (13.8% of total assets) at September 30, 2012. On a per share basis, stockholders’ equity was $24.22 on June 30, 2013, compared to $21.80 on September 30, 2012.

The Company did not pay any cash dividends to its stockholders during the nine month period ended June 30, 2013. In accordance with the agreement, which is described more fully in Footnote 14, Regulatory Agreements, the Company is restricted from the payment of dividends or other capital distributions during the period of the agreement without prior written consent from its primary regulator.

Total stockholders’ equity as of June 30, 2013, includes an unrealized gain, net of deferred income taxes, on available for sale securities of $275,000. This amount is reflected in the line item “Accumulated other comprehensive income.”

Ratios

The following table illustrates the Company’s return on assets (annualized net income divided by average total assets); return on equity (annualized net income divided by average total equity); equity-to-assets ratio (ending total equity divided by ending total assets); and dividend payout ratio (dividends paid divided by net income).


	Nine months ended
	6/30/13			6/30/12
Return on assets		2.36	%		1.12	%
Return on equity		15.55	%		8.87	%
Equity-to-assets ratio		16.68	%		13.21	%
Dividend payout ratio		—	%		—	%

RESULTS OF OPERATIONS - Comparison of three and nine months ended June 30, 2013 and 2012.

For the three months ended June 30, 2013, the Company had net income of $1.8 million or $0.23 per share. This compares to a net income of $5.1 million or $0.64 per share for the three month period ended June 30, 2012.

For the nine months ended June 30, 2013, the Company had net income of $21.1 million or $2.68 per share. This compares to a net income of $10.4 million or $1.32 per share for the nine month period ended June 30, 2012.

Net Interest Margin

The Company’s net interest margin is comprised of the difference (“spread”) between interest income on loans, MBS and investments and the interest cost of customer and brokered deposits and other borrowings. Management monitors net interest spreads and, although constrained by certain market, economic, and competition factors, it establishes loan rates and customer deposit rates that maximize net interest margin.

The following table presents the total dollar amounts of interest income and expense on the indicated amounts of average interest-earning assets or interest-costing liabilities for the nine months ended June 30, 2013 and 2012. Average yields reflect reductions due to non-accrual loans. Once a loan becomes 90 days delinquent, or when full payment of interest and principal is not expected, any interest that has accrued up to that time is reversed and no further interest income is recognized unless the loan is paid current. Average balances and weighted average yields for the periods include all accrual and non-accrual loans. The table also presents the interest-earning assets and yields for each respective period. Dollar amounts are expressed in thousands.


								As of 6/30/13										As of 6/30/12
	Nine months ended 6/30/13							As of 6/30/13			Nine months ended 6/30/12							As of 6/30/12
	Average				Yield/			Yield/			Average				Yield/			Yield/
	Balance		Interest		Rate			Rate			Balance		Interest		Rate			Rate
Interest-earning assets
Loans	$	826,849		34,954		5.64	%		5.16	%	$	971,111		43,817		6.02	%		5.57	%
Mortgage-backed securities		21,452		484		3.01	%		3.68	%		34,616		1,377		5.30	%		4.85	%
Securities		252,700		3,155		1.66	%		1.77	%		93,102		2,142		3.07	%		1.72	%
Bank deposits		18,371		4		0.03	%		0.22	%		20,796		11		0.07	%		0.01	%

Total earning assets		1,119,372		38,597		4.60	%		4.26	%		1,119,625		47,347		5.64	%		4.87	%

Non-earning assets		74,741										95,361

Total	$	1,194,113									$	1,214,986

Interest-costing liabilities
Customer checking and savings deposit accounts	$	325,875		1,088		0.45	%		0.40	%	$	263,667		950		0.48	%		0.46	%
Customer and brokered certificates of deposit		511,226		3,200		0.83	%		0.71	%		589,367		6,205		1.40	%		1.24	%
FHLB Advances		132,305		1,573		1.59	%		1.69	%		166,007		1,859		1.49	%		1.75	%
Subordinated debentures		25,000		378		2.02	%		1.93	%		25,000		401		2.14	%		2.12	%
Other borrowings		337		13		5.14	%		5.00	%		—		—		—	%		—	%

Total costing liabilities		994,743		6,252		0.84	%		0.73	%		1,044,041		9,415		1.20	%		1.12	%

Non-costing liabilities		15,642										14,016
Stockholders’ equity		183,728										156,929

Total	$	1,194,113									$	1,214,986

Net earning balance		124,629										75,584

Earning yield less costing rate						3.76	%		3.53	%						4.44	%		3.75	%

Average interest-earning assets, net interest, and net yield spread on average interest –earning assets	$	1,119,372		32,345		3.85	%				$	1,119,625		37,932		4.52	%

The following table provides information regarding changes in interest income and interest expense. For each category of interest-earning asset and interest-costing liability, information is provided on changes attributable to (1) changes in rates (change in rate multiplied by the old volume), and (2) changes in volume (change in volume multiplied by the old rate), and (3) changes in rate and volume (change in rate multiplied by the change in volume). Average balances, yields and rates used in the preparation of this analysis come from the preceding table. Dollar amounts are expressed in thousands.


	Nine months ended June 30, 2013, compared to nine months ended June 30, 2012
							Yield/
	Yield			Volume			Volume			Total
Components of interest income:
Loans	$	(2,768	)		(6,513	)		418			(8,863	)
Mortgage-backed securities		(595	)		(523	)		225			(893	)
Securities		(985	)		3,675			(1,677	)		1,013
Bank deposits		(6	)		(1	)		—			(7	)

Net change in interest income		(4,354	)		(3,362	)		(1,034	)		(8,750	)

Components of interest expense:
Customer and brokered deposit accounts		(2,815	)		(134	)		82			(2,867	)
FHLB Advances		125			(377	)		(34	)		(286	)
Subordinated debentures		(23	)		—			—			(23	)
Other borrowings		—			—			13			13

Net change in interest expense		(2,713	)		(511	)		61			(3,163	)

Increase in net interest margin	$	(1,641	)		(2,851	)		(1,095	)		(5,587	)

Net interest margin before loan loss provision for the nine months ended June 30, 2013, decreased $5.6 million from the same period in the prior year. Specifically, interest income decreased $8.8 million, which was offset by a $3.2 million decrease in interest expense for the period. Interest on loans decreased $8.9 million as the result of a $144.3 million decrease in the average balance of loans receivable outstanding during the period and a 38 basis point decrease in the average rate earned on such loans during the period. Interest on mortgage-backed securities decreased $893,000 due to an $13.2 million decrease in the average balance of mortgage-backed securities during the period and a 229 basis point decrease in the average rate earned on such securities during the period. Interest earned on investment securities increased $1.0 million resulting from a $159.6 million increase in the average balance of such securities during the period, the effect of which was partially offset by a 141 basis point decrease in the average rate earned on such securities. Interest expense on customer and brokered deposit accounts decreased $2.9 million due primarily to a 44 basis point decrease in the average rate paid on such liabilities. Interest expense on FHLB advances decreased $286,000 as the result a $33.7 million decrease in the average balance of advances outstanding during the period, the effect of which was partially offset by a 10 basis point increase in the average rate paid of such liabilities.

Provision for Loan Losses

The Company recorded a negative provision for loan losses of $9.6 million during the nine month period. Based upon management’s analysis, the resulting allowance for loan losses of $20.7 million is adequate at June 30, 2013.

The negative provision for loan loss for the current quarter was based upon the Bank’s ALLL methodology, which contains both qualitative and quantitative factors. Specifically, activity during the quarter reflected in quantitative factors included the following:

•

The Bank’s portfolio of loans held to maturity decreased $71.0 million during the nine month period, to $695.6 million. This decrease consisted almost entirely of declines within the Bank’s commercial real estate and construction and land development portfolios, which historically have experienced higher credit losses than the Bank’s other portfolios.

•

The level of criticized loans (those classified as special mention, substandard, or doubtful) decreased $66.1 million during the nine month period. Of this decline, $51.2 million related to loans within the Bank’s commercial real estate and construction and land development portfolios.

•

The Bank’s loss experience during the period was much better than the previous 36 months. During the nine month period ended June 30, 2013, the Bank recorded net charge-offs of $1.6 million.

•

The level of nonperforming loans decreased $38.0 million during the nine month period. Similar to the decrease in gross loan balances, this decline consisted almost entirely of loans within the Bank’s commercial real estate and construction and land development portfolios.

In addition to the quantitative factors noted above, management observed the following qualitative factors when determining the appropriate level of the Bank’s ALLL at June 30, 2013:

•

The housing market in the Kansas City metropolitan area, where all of the Bank’s construction and land development lending is concentrated, has shown renewed strength during the period. In terms of new building permits, the market experienced its best fourth calendar quarter since 2008, and the supply of new housing inventory has dropped below the equilibrium level, resulting in an increase in new housing starts. New building permits issued during the first six months of 2013 remained strong and were also at their highest level since 2008.

•

During the nine-month period, an independent third party review was completed, which included approximately 80% of the loans within the Bank’s commercial real estate and construction and land development portfolios. This review resulted in no loan classification discrepancies, validating the effectiveness of the Bank’s internal asset review process.

The Company recorded a provision for loan losses of $3.0 million during the quarter ended June 30, 2012, due primarily to declines in the value of collateral securing impaired land development loans that are collateral dependent. The Company recorded a provision for loan losses of $5.0 million during the quarter ended March 31, 2012, due primarily to declines in the value of collateral securing impaired loans that are collateral dependent. This increase in the ALLL, resulting from the provision for loan loss, was offset by net charge offs of $26.2 million during the three month period, as the Bank’s elimination of the use of specific valuation allowances. Prior to the quarter ended March 31, 2012, measured impairments were recorded as specific valuation allowances and carried as contra-assets to reduce a loan’s carrying value to fair value. When the Bank adopted the Call Report, during the quarter ended March 31, 2012, the cumulative specific valuation allowance that were considered “confirmed losses” were charged-off and netted against their respective loans balances. For collateral dependent loans that are deemed impaired, a “confirmed loss” is defined as the amount by which the loan’s recorded investment exceeds the fair value of its collateral. If a loan is considered uncollectible, the entire balance is deemed a “confirmed loss” and is fully charged-off.

The Company recorded a provision for loan losses of $2.5 million during the three month period ended December 31, 2011, due primarily to increases in specific reserves related to impaired commercial real estate loans. This increase in the ALLL, resulting from the provision for loan loss, was offset by net charge offs of $14.8 million during the period, which primarily resulted from the foreclosure or sale of certain impaired collateral dependent commercial and land development loans which were being carried at the fair value of the collateral.

On a consolidated basis, the allowance for losses on loans and real estate owned was 22.7% of total classified assets at June 30, 2013, 20.3% at September 30, 2012, and 22.5% at June 30, 2012.

Management believes that the allowance for losses on loans and real estate owned is adequate. 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. Also, regulatory agencies review the Company’s allowances for losses as a part of their examination process, and they may require changes in loss provision based on information available at the time of their examination.

Other Income

Other income for the three months ended June 30, 2013, decreased $4.6 million from the same period in the prior year. Specifically, gain on sale of loans held for sale decreased $1.7 million from the same period in the prior year. Although mortgage banking volume and spreads increased from June 2012 quarter, this was offset by a $4.7 million decrease in the adjustment necessary to mark the loans held for sale portfolio to market value at the end of the period. Other income decreased $2.9 million due primarily to the effect of recording the net fair value of certain loan-related commitments in accordance with GAAP. Customer service fees and charges decreased $145,000 from the same period in the prior year due primarily decreases in return item and internet banking charges. These decreases in other income were partially offset by a $222,000 decrease in provision for loss on real estate owned due to fewer declines in the fair value of properties within the Bank’s portfolio of foreclosed assets held for sale during the period.

Other income for the nine months ended June 30, 2013, increased $12.1 million from the same period in the prior year. Specifically, gain on sale of loans held for sale increased $13.8 million from the same period in the prior year due to increased mortgage banking volume and spreads. Provision for loss on real estate owned decreased $2.8 million due to fewer declines in the fair value of properties within the Bank’s portfolio of foreclosed assets held for sale during the period. Gain on sale of securities held to maturity increased $289,000 as compared to the same period in the prior year, due primarily to the sales of two mortgage-backed securities held to maturity after it was determined that there was a significant deterioration in the issuer’s creditworthiness. Loss on sale of securities available for sale decreased $343,000 as compared to the same period in the prior year, due to the fact that there were no sales of such securities during the current period. In addition, the Company recorded a $200,000 impairment charge related to its investment in Central Platte Holdings, LLC during the nine month period ended June 30, 2012, resulting from a decrease in the sales price of fully-developed lots in Central Platte’s residential development. These increases were partially offset by a $5.5 million decrease in other income due to a $4.7 million decrease in the effect of recording the net fair value of certain loan-related commitments in accordance with GAAP and a decrease in loan prepayment penalties.

A rapid rise in interest rates could adversely impact the mortgage markets and the level of loans originated by the Bank’s mortgage banking segment, thereby reducing income derived from gains on the sale of loans held for sale.

General and Administrative Expenses

Total general and administrative expenses for the three months ended June 30, 2013, increased $2.3 million from the same period in the prior year. Specifically, compensation and fringe benefits increased $1.3 million due to the addition of personnel in the Company’s residential lending, internal asset review, information technology, and loan servicing departments. Commission-based mortgage banking compensation increased $123,000 due to an increase in residential mortgage loan origination volume from the same period in the prior year. Premises and equipment expense increased $268,000 due to the addition of office space leased for the Company’s mortgage banking and information technology staff and increased costs associates with both hardware and software related to the Bank’s various information systems. Advertising and business promotion expense increased $316,000 due to an increase in advertising costs related to the mortgage banking operation. In addition, the Bank increased its advertising on radio, television, and billboards during the period. Federal deposit insurance premiums increased $228,000, due primarily to an increase in premium rates from the same period in the prior year.

Total general and administrative expenses for the nine months ended June 30, 2013, increased $9.1 million from the same period in the prior year. Specifically, compensation and fringe benefits increased $3.4 million due to the addition of personnel in the Company’s residential lending, internal asset review, information technology, and loan servicing departments. Commission-based mortgage banking compensation increased $3.8 million due to an increase in residential mortgage loan origination volume from the same period in the prior year. Premises and equipment expense increased $327,000 due to the addition of office space leased for the Company’s mortgage banking and information technology staff and increased costs associated with both hardware and software related to the Bank’s various information systems. Advertising and business promotion expense increased $494,000 due to an increase in advertising costs related to the mortgage banking operation. In addition, the Bank increased its advertising on radio, television, and billboards during the nine month period. Federal deposit insurance premiums increased $691,000, due primarily to an increase in premium rates from the same period in the prior year. In addition, other expenses increased $487,000 primarily due to costs related to the increase in residential origination volume and costs incurred to move the Bank’s disaster recovery site during the current nine month period.

REGULATION

Regulation of the Company

NASB Financial, Inc. is a unitary savings and loan holding company of North American Savings Bank, F.S.B. On July 21, 2011, supervisory responsibility for the Company was transferred from the Office of Thrift Supervision (the “OTS”) to the Board of Governors of the Federal Reserve System (“Federal Reserve Board” or “FRB”), as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Accordingly, the Company is required to register and file reports with the Federal Reserve Board and is subject to regulation and examination by the Federal Reserve Board. In addition, the Federal Reserve Board has enforcement authority over the Company, which also permits the Federal Reserve Board to restrict or prohibit activities that are determined to present a serious risk to the Bank.

Regulation of the Bank

The Bank is a federally chartered stock savings bank, formed under the authority provided in the Home Owners’ Loan Act (as amended, “HOLA”). On July 21, 2011, supervisory responsibility for the Bank was transferred from the OTS to the Office of the Comptroller of the Currency (“OCC”), as required by the Dodd-Frank Act. Although the Bank remains subject to regulations previously promulgated by the OTS, in general, those regulations are now enforced by the OCC.

Capital Requirements

Regulations require that thrifts meet three minimum capital ratios.

Leverage Limit. The leverage limit requires that 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.

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.

Risk-Based Capital Requirement. OCC 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 OCC. Banking regulations categorize banks with risk-based capital ratios over 10% as well capitalized, 8% to 10% as adequately capitalized, and under 8% as undercapitalized.

At June 30, 2013, the Bank exceeds all capital requirements prescribed by the OCC. To calculate these requirements, a thrift must deduct any investments in and loans to subsidiaries that are engaged in activities not permissible for a national bank. As of June 30, 2013, the Bank did not have any investments in or loans to subsidiaries engaged in activities not permissible for national banks.

On May 22, 2012, the Board of Directors of the Bank agreed to a Consent Order with the OCC, which is described more fully in Footnote 14, Regulatory Agreements. Among other items, the Consent Order requires that the Bank maintain a Tier 1 leverage capital ratio equal to or greater than 10% and a risk-based capital ratio equal to or greater than 13%. As of June 30, 2013, the Bank’s actual Tier 1 leverage capital and total risk-based capital ratios were 17.2% and 22.6%, respectively. The existence of individual minimum capital requirements means that the Bank may not be deemed well capitalized.

The following tables summarize the relationship between the Bank’s capital and regulatory requirements. Dollar amounts are expressed in thousands.


At June 30, 2013	Amount
GAAP capital (Bank only)	$	195,089
Adjustment for regulatory capital:
Intangible assets		(2,296	)
Reverse the effect of SFAS No. 115		(275	)

Tangible capital		192,518
Qualifying intangible assets		—

Tier 1 capital (core capital)		192,518
Qualifying general valuation allowance		11,403

Risk-based capital	$	203,921


	As of June 30, 2013
	Actual					Minimum Required for Capital Adequacy					Minimum Required to be Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital to risk-weighted assets	$	203,921		22.6	%		72,238		>8	%		90,298		>10	%
Tier 1 capital to adjusted tangible assets		192,518		17.2	%		44,810		>4	%		56,013		>5	%
Tangible capital to tangible assets		192,518		17.2	%		16,804		>1.5	%		—		—
Tier 1 capital to risk-weighted assets		192,518		21.3	%		—		—			54,179		>6	%

Recent Legislation

On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank Act implements far-reaching changes across the financial regulatory landscape, including provisions that, among other things:

•

Centralize responsibility for consumer financial protection by creating the Consumer Financial Protection Bureau (“CFPB”), with broad rulemaking, supervision and enforcement authority for a wide range of consumer protection laws that would apply to all banks and thrifts. Smaller financial institutions, including the Bank, will be subject to the supervision and enforcement of their primary federal banking regulator with respect to the federal consumer financial protection laws.

•

Require new capital rules that apply the same leverage and risk-based capital requirements applicable to insured depository institutions to savings and loan holding companies.

•

Require the federal banking regulators to seek to make their capital requirements countercyclical, so that capital requirements increase in times of economic expansion and decrease in times of economic contraction.

•

Provide for new disclosure and other requirements relating to executive compensation and corporate governance.

•

Make permanent the $250,000 limit for federal deposit insurance for non-interest bearing demand transaction accounts at all insured depository institutions.

•

Effective July 21, 2011, repealed the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transaction and other accounts.

•

Require all depository institution holding companies to serve as a source of financial strength to their depository institution subsidiaries in the event such subsidiaries suffer from financial distress.

Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall financial impact on the Company and the financial services industry more generally. The elimination of the prohibition on the payment of interest on demand deposits could materially increase our interest expense, depending on how the marketplace responds. Provisions in the legislation that require revisions to the capital requirements of the Company and the Bank could require the Company and the Bank to seek additional sources of capital in the future.

On January 10, 2013, the CPPB issued a final rule that implements certain provision of the Dodd-Frank Act which prohibit creditors from making residential mortgage loans without regard to the borrower’s repayment ability. The rule sets forth specific verification requirements, product features, and underwriting criteria that a lender must follow for residential mortgage loans to be treated as “qualified mortgages” and, therefore, subject to certain protections from liability. The final rule is effective for residential mortgage loan applications received on or after January 10, 2014.

On July 9, 2013, the OCC approved a final rule revising regulatory capital rules applicable to national banks and federal savings associations. The new rule will implement the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. It establishes a new minimum ratio of common equity tier 1 capital to risk weighted assets of 4.5% and a common equity tier 1 capital conservation buffer or 2.5% of risk weighted assets. The new rule places limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain the capital conservation buffer. The rule also increases the minimum tier 1 capital requirement from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations. The final rule also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Most banking organizations will be required to apply the new capital rules on January 1, 2015. However, the largest internationally active banking organizations are required to apply the provisions on January 1, 2014.

LIQUIDITY AND CAPITAL RESOURCES

The Bank maintains sufficient liquidity to ensure 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 cash and cash equivalents, the sale and repayment of loans, the retention of existing or newly acquired retail deposits, and FHLB advances. Additional sources of liquidity include the sale of investment securities available for sale, reverse repurchase agreements, FRB advances, and the acquisition of deposits through a nationwide internet listing service.

Management continues to use FHLB advances as a primary source of short-term funding. FHLB advances are secured by a blanket pledge agreement covering portions of the loan and securities portfolio as collateral, supported by quarterly reporting of eligible collateral to FHLB. FHLB borrowings are limited based upon a percentage of the Bank’s assets and eligible collateral, as adjusted by collateral eligibility and maintenance levels. Management continually monitors the balance of eligible collateral relative to the amount of advances outstanding to determine the availability of additional FHLB advances. At June 30, 2013, the Bank had a total borrowing capacity at FHLB of $231.8 million, and outstanding advances of $100.0 million. As an additional source of liquidity, the Bank has $118.9 million of highly liquid short term U.S. Government sponsored agency securities in its portfolio at June 30, 2013.

In accordance with the Consent Order with the OCC, which is described more fully in Footnote 15, Regulatory Agreements, the Bank is required to meet and maintain specific capital levels. This requirement prohibits the Bank from accepting, renewing, or rolling over any brokered deposits.

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 the Bank’s primary and additional liquidity sources, described above. 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 are uncertain, management believes its sources of funding will continue to remain stable during upward and downward interest rate environments

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For a complete discussion of the Company’s asset and liability management policies, as well as the potential impact of interest rate changes upon the market value of the Company’s portfolio, see the “Asset/Liability Management” section of the Company’s Annual Report for the year ended September 30, 2012.

Management recognizes that there are certain market risk factors present in the structure of the Bank’s financial assets and liabilities. Since the Bank does not have material amounts of derivative securities, equity securities, or foreign currency positions, interest rate risk (“IRR”) is the primary market risk that is inherent in the Bank’s portfolio. On a quarterly basis, the Bank monitors the estimate of changes that would potentially occur to its net portfolio value (“NPV”) of assets, liabilities, and off-balance sheet items assuming a sudden change in market interest rates. Management presents a NPV analysis to the Board of Directors each quarter and NPV policy limits are reviewed and approved. There have been no material changes in the market risk information provided in the Annual Report for the year ended September 30, 2012.

Item 4. 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 quarterly report. There were no changes in the Company’s internal control over financial reporting during the period covered by this quarterly report on Form 10-Q that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There were no material proceedings pending other than ordinary and routine litigation incidental to the business of the Company.

Item 1A. Risk Factors

There were no material changes during the period from the risk factors previously discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit 31.1	–	Certification of Chief Executive Officer pursuant to Rules 13a-15(e) and 15d-15(e)

Exhibit 31.2	–	Certification of Chief Financial Officer pursuant to Rules 13a-15(e) and 15d-15(e)

Exhibit 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

Exhibit 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

Exhibit 101.INS	–	XBRL Instance Document

Exhibit 101.SCH	–	XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL	–	XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF	–	XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB	–	XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE	–	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NASB Financial, Inc.
		(Registrant)

August 9, 2013	By:	/s/ Paul L. Thomas
		Paul L. Thomas
		Chief Executive Officer

August 9, 2013	By:	/s/ Rhonda Nyhus
		Rhonda Nyhus
		Vice President and Treasurer