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 March 31, 2005
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-24033
NASB Financial, Inc.
(Exact name of registrant as specified in its charter)
Missouri 43-1805201
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12498 South 71 Highway, Grandview, Missouri 64030
(Address of principal executive offices) (Zip Code)
(816) 765-2200
(Registrant's telephone number, including area code)
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 is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes X No
The number of shares of Common Stock of the Registrant outstanding as of
May 11, 2005, was 8,444,942.
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In thousands)
March 31, September 30,
2005 2004
(Unaudited)
---------- -----------
ASSETS
Cash and cash equivalents $ 19,299 18,263
Securities available for sale 240 244
Stock in Federal Home Loan Bank, at cost 21,579 17,808
Mortgage-backed securities:
Available for sale, at market value 149,811 170,933
Held to maturity (fair value of $540
and $645 at March 31, 2005, and
September 30, 2004, respectively) 519 614
Loans receivable:
Held for sale 293,142 246,468
Held for investment, net 945,650 876,322
Allowance for loan losses (7,432) (8,221)
Accrued interest receivable 6,228 5,887
Foreclosed asset held for sale, net 6,654 4,014
Premises and equipment, net 10,102 8,481
Investment in LLC 8,468 7,982
Mortgage servicing rights, net 870 839
Deferred income tax asset 3,253 3,915
Other assets 8,250 8,339
---------- ----------
$ 1,466,633 1,361,888
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Customer deposit accounts $ 657,146 653,700
Brokered deposit accounts 89,895 30,040
Advances from Federal Home Loan Bank 428,076 367,341
Securities sold under agreements to
repurchase 138,500 159,100
Escrows 6,135 8,437
Income taxes payable 1,566 1,072
Accrued expenses and other liabilities 4,753 3,207
---------- ----------
Total liabilities 1,326,071 1,222,897
---------- ----------
Stockholders' equity:
Common stock of $0.15 par value:
20,000,000 authorized; 9,857,112 issued
at March 31, 2005 and September 30, 2004 1,479 1,479
Serial preferred stock of $1.00 par
value: 7,500,000 shares authorized;
none issued or outstanding -- --
Additional paid-in capital 16,256 16,256
Retained earnings 142.291 139,663
Treasury stock, at cost; 1,401,670 shares
at March 31, 2005 and September 30, 2004 (17,257) (17,257)
Accumulated other comprehensive income (2,207) (1,150)
---------- ----------
Total stockholders' equity 140,562 138,991
---------- ----------
$ 1,466,633 1,361,888
========== ==========
See accompanying notes to consolidated financial statements.
1
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Income (Unaudited)
(In thousands, except share data)
Three months ended Six months ended
March 31, March 31,
---------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Interest on loans $ 18,298 16,490 35,981 32,999
Interest on mortgage-backed securities 1,508 1,605 3,083 2,371
Interest and dividends on securities 127 106 261 296
Other interest income 67 20 113 47
--------- --------- --------- ---------
Total interest income 20,000 18,221 39,438 35,713
--------- --------- --------- ---------
Interest on customer deposit accounts 3,787 3,097 7,117 6,365
Interest on advances from FHLB 2,687 1,293 4,832 2,440
Interest on securities sold under
agreements to repurchase 937 427 1,668 622
--------- --------- --------- ---------
Total interest expense 7,411 4,817 13,617 9,427
--------- --------- --------- ---------
Net interest income 12,589 13,404 25,821 26,286
Provision for loan losses 250 -- 417 --
--------- --------- --------- ---------
Net interest income after provision
for loan losses 12,339 13,404 25,404 26,286
--------- --------- --------- ---------
Other income (expense):
Loan servicing fees, net 72 (154) 84 39
Impairment (loss) recovery on mortgage
servicing rights (30) 73 (11) 42
Customer service fees and charges 1,659 1,641 3,280 2,970
Recovery on real estate owned 218 -- 899 --
Gain on sale of securities available for sale -- 726 -- 726
Gain on sale of loans held for sale 3,782 3,215 7,436 4,549
Other 323 1,001 840 1,745
--------- --------- --------- ---------
Total other income 6,024 6,502 12,528 10,071
--------- --------- --------- ---------
General and administrative expenses:
Compensation and fringe benefits 3,977 4.002 8,170 7,808
Commission-based mortgage banking compensation 1,988 1,651 3,517 2,615
Premises and equipment 755 731 1,548 1,440
Advertising and business promotion 824 648 1,669 1,019
Federal deposit insurance premiums 25 25 51 51
Other 1,314 1,676 2,601 3,024
--------- --------- --------- ---------
Total general and administrative expenses 8,883 8,733 17,556 15,957
--------- --------- --------- ---------
Income before income tax expense 9,480 11,173 20,376 20,400
Income tax expense 3,413 4,078 7,390 7,561
--------- --------- --------- ---------
Net income $ 6,067 7,095 12,986 12,839
========= ========= ========= =========
Basic earnings per share $ 0.72 0.84 1.54 1.52
========= ========= ========= =========
Diluted earnings per share $ 0.71 0.84 1.53 1.52
========= ========= ========= =========
Basic weighted average shares outstanding 8,455,442 8,455,469 8,455,442 8,453,882
See accompanying notes to consolidated financial statements.
2
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Unaudited)
(In thousands, except share data)
Accumulated
Additional other Total
Common paid-in Retained Treasury comprehensive stockholders'
stock capital earnings stock income (loss) equity
-----------------------------------------------------------------------
(Dollars in thousands)
Balance at October 1, 2004 $ 1,479 16,256 139,663 (17,257) (1,150) 138,991
Comprehensive income:
Net income -- -- 12,986 -- -- 12,986
Other comprehensive income (loss),
net of tax:
Unrealized loss on securities -- -- -- -- (1,057) (1,057)
available for sale ---------
Total comprehensive income -- -- -- -- -- 11,929
Cash dividends paid -- -- (10,358) -- -- (10,358)
----------------------------------------------------------------------
Balance at March 31, 2005 $ 1,479 16,256 142,291 (17,257) (2,207) 140,562
======================================================================
See accompanying notes to consolidated financial statements.
3
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
(In thousands, except share data)
Six months ended
March 31,
----------------------
2005 2004
----------------------
Cash flows from operating activities:
Net income $ 12,986 12,839
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 523 463
Amortization and accretion, net (2,340) 209
Impairment loss (recovery) on mortgage servicing rights 11 (42)
Net fair value of loan related commitments (216) (702)
Gain on sale of loans receivable held for sale (7,436) (4,549)
Gain on sale of securities available for sale -- (726)
Provision for loan losses 417 --
Recovery on real estate owned (899) --
Origination and purchase of loans held for sale (533,505) (326,079)
Sale of loans receivable held for sale 494,243 321,133
Changes in:
Accrued interest receivable (341) (549)
Accrued expenses and other liabilities and
income taxes payable 3,579 2,059
----------------------
Net cash provided by (used in) operating activities (32,978) 4,056
Cash flows from investing activities:
Principal repayments of mortgage-backed securities:
Held to maturity 95 228
Available for sale 19,211 3,566
Principal repayments of mortgage loans receivable 188,275 190,620
Principal repayments of other loans receivable 5,919 9,530
Maturity of investment securities available for sale 4 3
Loan origination - mortgage loans held for investment (261,213) (216,770)
Loan origination - other loans receivable (7,146) (3,669)
Purchase of mortgage loans receivable held for
investment (1,207) (1,056)
Purchase of mortgage-backed securities
available for sale -- (193,043)
Purchase of FHLB stock (3,770) (1,857)
Proceeds from sale of securities available for sale -- 5,369
Proceeds for sale of real estate owned 5,517 4,163
Purchases of premises and equipment, net of sales (2,144) (855)
Investment in LLC (486) (4,049)
Other (39) (3,585)
----------------------
Net cash used in investing activities (56,984) (211,405)
4
NASB FINANCIAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (continued)
(In thousands, except share data)
Six months ended
March 31,
----------------------
2005 2004
----------------------
Cash flows from financing activities:
Net increase (decrease) in customer and brokered
deposit accounts 63,409 (4,726)
Proceeds from advances from FHLB 2,259,500 228,000
Repayment on advances from FHLB (2,198,651) (175,152)
Proceeds from sale of securities under agreements to
repurchase 267,400 189,500
Repayment of securities sold under agreements to
repurchase (288,000) (17,000)
Cash dividends paid (10,358) (8,878)
Stock options exercised -- 120
Change in escrows (2,302) (2,133)
----------------------
Net cash provided by financing activities 90,998 209,731
----------------------
Net increase in cash and cash equivalents 1,036 2,382
Cash and cash equivalents at beginning of the period 18,263 24,321
----------------------
Cash and cash equivalents at end of period $ 19,299 26,703
======================
Supplemental disclosure of cash flow information:
Cash paid for income taxes (net of refunds) $ 5,572 7,355
Cash paid for interest 13,007 9,099
Supplemental schedule of non-cash investing and financing
activities:
Conversion of loans receivable to real estate owned $ 6,878 2,217
Capitalization of mortgage servicing rights 103 2
See accompanying notes to consolidated financial statements.
5
(1) BASIS OF PRESENTATION
The accompanying unaudited 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 to the Securities and Exchange Commission. Operating results
for the six months ended March 31, 2005, are not necessarily indicative
of the results that may be expected for the fiscal year ended September
30, 2005. The consolidated balance sheet of the Company as of September
30, 2004, 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, real estate owned,
and valuation of mortgage servicing rights. Management believes that
these allowances are adequate, future additions to the allowances may be
necessary based on changes in economic conditions.
The Company's critical accounting policies involving the more
significant judgements and assumptions used in the preparation of the
consolidated financial statements as of March 31, 2005, have remained
unchanged from September 30, 2004. These policies relate to provision
for loan losses and mortgage servicing rights. Disclosure of these
critical accounting policies is incorporated by reference under Item 8
"Financial Statements and Supplementary Data" in the Company's Annual
Report on Form 10-K for the Company's year ended September 30, 2004.
Certain quarterly amounts for previous periods have been
reclassified to conform to the current quarter's presentation.
(2) 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 Six months ended
---------------------- ----------------------
3/31/05 3/31/04 3/31/05 3/31/04
---------------------- ----------------------
Net income (in thousands) $ 6,067 7,095 12,986 12,839
Average common shares outstanding 8,455,442 8,455,469 8,455,442 8,453,882
Average common share stock options
outstanding 12,434 1,128 12,167 1,474
---------------------- ----------------------
Average diluted common shares 8,467,876 8,456,597 8,467,609 8,455,356
Earnings per share:
Basic $ 0.72 0.84 1.54 1.52
Diluted 0.71 0.84 1.53 1.52
The dilutive securities included for each period presented above
consist entirely of stock options granted to employees as incentive
stock options under Section 442A of the Internal Revenue Code as
amended.
6
(3) SECURITIES AVAILABLE FOR SALE
The following table presents a summary of securities available for
sale. Dollar amounts are expressed in thousands.
March 31, 2005
-------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
Debt securities $ 180 -- -- 180
Municipal securities 60 -- -- 60
-------------------------------------------
Total $ 240 -- -- 240
===========================================
(4) MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
The following table presents a summary of mortgage-backed securities
available for sale. Dollar amounts are expressed in thousands.
March 31, 2005
-------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
Pass-through certificates
guaranteed by GNMA
- fixed rate $ 440 -- 5 435
Pass-through certificates
guaranteed by FNMA
- adjustable rate 23,366 -- 566 22,800
FHLMC participation
certificates
- fixed rate 1,875 -- 93 1,782
- adjustable rate 127,719 -- 2,925 124,794
-------------------------------------------
Total $ 153,400 -- 3,589 149,811
===========================================
(5) MORTGAGE-BACKED SECURITIES HELD TO MATURITY
The following table presents a summary of mortgage-backed
securities held to maturity. Dollar amounts are expressed in thousands.
March 31, 2005
-------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
FHLMC participation
certificates:
Balloon maturity and
adjustable rate $ 249 17 -- 266
FNMA pass-through
certificates:
Fixed rate 80 -- -- 80
Balloon maturity and
adjustable rate 111 -- -- 111
Pass-through certificates
guaranteed by GNMA
- fixed rate 59 4 -- 63
Collateralized mortgage
obligation bonds 20 -- -- 20
-------------------------------------------
Total $ 519 21 -- 540
===========================================
7
(6) LOANS RECEIVABLE
Loans receivable are as follows:
March 31,
2005
---------------------
(Dollars in thousands)
LOANS HELD FOR INVESTMENT:
Mortgage loans:
Permanent loans on:
Residential properties $ 172,406
Business properties 405,639
Partially guaranteed by VA or
insured by FHA 4,592
Construction and development 486,197
----------
Total mortgage loans 1,068,834
Commercial loans 39,220
Installment loans to individuals 23,428
----------
Total loans held for investment 1,131,482
Less:
Undisbursed loan funds (182,263)
Unearned discounts and fees and costs
on loans, net (3,569)
----------
Net loans held for investment $ 945,650
==========
March 31,
2005
---------------------
(Dollars in thousands)
LOANS HELD FOR SALE:
Mortgage loans:
Permanent loans on:
Residential properties $ 315,712
Less:
Undisbursed loan funds (22,783)
Unearned discounts and fees and costs
on loans, net 213
----------
Net loans held for sale $ 293,142
==========
Included in the loans receivable balances at March 31, 2005, are
participating interests in mortgage loans and wholly owned mortgage
loans serviced by other institutions in the amount of $171,000. Loans
and participations serviced for others amounted to approximately $106.0
million at March 31, 2005.
(7) FORECLOSED ASSETS HELD FOR SALE
Real estate owned and other repossessed property consisted of the
following:
March 31,
2005
---------------------
(Dollars in thousands)
Real estate acquired through (or deed
in lieu of) foreclosure $ 6,780
Less: allowance for losses (126)
----------
Total $ 6,654
==========
8
Foreclosed assets held for sale are initially recorded at fair
value as of the date of foreclosure minus 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
(8) MORTGAGE SERVICING RIGHTS
The following provides information about the Bank's mortgage
servicing rights for the period ended March 31, 2005. Dollar amounts
are expressed in thousands.
Balance at October 1, 2004 $ 839
Additions:
Originated mortgage servicing rights 103
Reductions:
Amortization (61)
Impairment loss (11)
--------
Balance at March 31, 2005 $ 870
========
(9) REPURCHASE AGREEMENTS
During the six-month period ended March 31, 2005, the Bank sold
various adjustable-rate mortgage-backed securities under agreements to
repurchase. The outstanding balance of such repurchase agreements was
$138.5 million at March 31, 2005. These agreements have a weighted
average rate of 2.87% and a weighted average maturity of 185 days.
(10) SEGMENT INFORMATION
In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company has identified three
principal operating segments for purposes of financial reporting:
Banking, Local Mortgage Banking, and National 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 National Mortgage Banking segment originates mortgage loans via
the internet primarily for sale to investors. The Local 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.
Local National
Three months ended Mortgage Mortgage Other and
March 31, 2005 Banking Banking Banking Eliminations Consolidated
---------------------------------------------------------------------------------------
Net interest income $ 12,561 -- -- 28 12,589
Provision for loan losses 250 -- -- -- 250
Other income 1,733 2,870 2,200 (779) 6,024
General and administrative
expenses 3,621 2,873 2,531 (142) 8,883
Income tax expense (benefit) 3,752 (1) (119) (219) 3,413
-----------------------------------------------------------
Net income $ 6,671 (2) (212) (390) 6,067
===========================================================
9
Local National
Three months ended Mortgage Mortgage Other and
March 31, 2004 Banking Banking Banking Eliminations Consolidated
---------------------------------------------------------------------------------------
Net interest income $ 13,404 -- -- -- 13,404
Provision for loan losses -- -- -- -- --
Other income 3,026 2,830 1,999 (1,353) 6,502
General and administrative
expenses 3,756 3,321 2,046 (390) 8,733
Income tax expense (benefit) 4,626 (179) (17) (352) 4,078
-----------------------------------------------------------
Net income $ 8,048 (312) (30) (611) 7,095
===========================================================
Local National
Six months ended Mortgage Mortgage Other and
March 31, 2005 Banking Banking Banking Eliminations Consolidated
------------------------------------------------------------------------------------
Net interest income $25,775 -- -- 46 25,821
Provision for loan losses 417 -- -- -- 417
Other income 4,000 5,943 4,271 (1,686) 12,528
General and administrative
expenses 7,272 5,893 4,782 (391) 17,556
Income tax expense 7,951 18 (184) (395) 7,390
--------------------------------------------------------
Net income $14,135 32 (327) (854) 12,986
========================================================
Local National
Six months ended Mortgage Mortgage Other and
March 31, 2004 Banking Banking Banking Eliminations Consolidated
------------------------------------------------------------------------------------
Net interest income $26,286 -- -- -- 26,286
Provision for loan losses -- -- -- -- --
Other income 5,025 5,367 2,667 (2,988) 10,071
General and administrative
expenses 7,298 6,332 3,203 (876) 15,957
Income tax expense 8,765 (352) (196) (656) 7,561
--------------------------------------------------------
Net income $15,248 (613) (340) (1,456) 12,839
========================================================
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
The principal business of the Company is to provide banking
services through the Bank. Specifically, the Bank obtains savings and
checking deposits from the public, then uses those funds to originate
and purchase real estate loans and other loans. The Bank also purchases
mortgage-backed securities ("MBS") and other investment securities from
time to time as conditions warrant. In addition to customer deposits,
the Bank obtains funds from the sale of loans held-for-sale, the sale of
securities available-for-sale, repayments of existing mortgage assets,
advances from the Federal Home Loan Bank ("FHLB"), and the purchase of
brokered deposit accounts. The Bank's primary sources of income are
interest on loans, MBS, and investment securities plus customer service
fees and income from mortgage banking activities. Expenses consist
primarily of interest payments on customer deposits and other borrowings
and general and administrative costs.
The Bank is regulated by the Office of Thrift Supervision ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC"), and is subject
to periodic examination by both entities. The Bank is also subject to
the regulations of the Board of Governors of the Federal Reserve System
("FRB"), which establishes rules regarding reserves that must be
maintained against customer deposits.
FINANCIAL CONDITION
ASSETS
The Company's total assets as of March 31, 2005, were $1,466.6
million, an increase of $104.7 million from September 30, 2004, the
prior fiscal year end.
10
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 six months ended March 31, 2005, the Bank
originated and purchased $533.5 million in mortgage loans held for sale,
$262.4 million in mortgage loans held for investment, and $7.1 million
in other loans. This total of $803.1 million in loans originated
compares to $547.6 million in loans originated during the six months
ended March 31, 2004.
Included in the $293.1 million in loans held for sale as of March
31, 2005, are $97.3 million in mortgage loans held for sale with
servicing released. All loans held for sale are carried at the lower of
cost or fair value.
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 such little value that a specific loss allowance is warranted.
The following table summarizes the Bank's classified assets as
reported to the OTS, plus any classified assets of the holding company.
Dollar amounts are expressed in thousands.
3/31/05 9/30/04 3/31/04
-------------------------------------
Asset Classification:
Substandard $ 15,110 17,462 13,917
Doubtful -- -- --
Loss 495 1,861 1,800
-------------------------------------
15,605 19,323 15,717
Allowance for losses (7,558) (9,315) (9,174)
-------------------------------------
$ 8,047 10,008 6,543
=====================================
The following table summarizes non-performing assets, troubled debt
restructurings, and real estate acquired through foreclosure or in-
substance foreclosure. Dollar amounts are expressed in thousands.
3/31/05 9/30/04 3/31/04
----------------------------------------
Total Assets $ 1,466,633 1,361,888 1,332,566
========================================
Non-accrual loans $ 10,387 15,748 9,310
Troubled debt
restructurings 74 2,844 3,152
Net real estate and
other assets acquired
through foreclosure 8,468 4,014 3,360
----------------------------------------
Total $ 18,929 22,606 15,822
========================================
Percent of total assets 1.29% 1.66% 1.19%
========================================
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
("ALLL") recognizes the inherent risks associated with lending
activities but, unlike specific allowances, have not been allocated to
particular problem assets but to a homogenous pool of loans. Management
believes that the specific loss allowances and ALLL are adequate. While
management uses available information to determine these allowances,
future allowances may be necessary because of changes in economic
conditions. Also, regulatory agencies (OTS and FDIC) 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.
11
The following table sets forth the activity in the allowance for
loan losses for the six months ending March 31, 2005, and 2004. Dollar
amounts are expressed in thousands.
2005 2004
-------------------------
Balance at beginning of year $ 8,221 7,986
Provision for loan losses 417 --
Recoveries 34 40
Charge-offs (1,240) (23)
-------------------------
Balance at March 31 $ 7,432 8,003
=========================
LIABILITIES AND EQUITY
Customer deposit accounts increased $3.4 million, and brokered
deposit accounts increased $59.9 million during the six months ended
March 31, 2005. The weighted average rate on customer and brokered
deposits as of March 31, 2005, was 2.05%, an increase from 1.94% as of
March 31, 2004.
Advances from the FHLB were $428.1 million as of March 31, 2005, an
increase of $60.7 million from September 30, 2004. During the six-month
period, the Bank borrowed $2,259.5 million of new advances and repaid
$2,198.7 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.
Securities sold under agreements to repurchase were $138.5 million
as of March 31, 2005, a decrease of $20.6 million from September 30,
2004. During the six-month period, the Bank sold a total of $267.4
million of mortgage-backed securities under agreements to repurchase,
and repurchase agreements of $288.0 million were repaid.
Escrows were $6.1 million as of March 31, 2005, a decrease of $2.3
million from September 30, 2004. This decrease is due to amounts paid
for borrowers' taxes during the fourth calendar quarter of 2004.
Total stockholders' equity as of March 31, 2005, was $140.6 million
(9.6% of total assets). This compares to $139.0 million (10.2% of total
assets) at September 30, 2004. On a per share basis, stockholders'
equity was $16.62 on March 31, 2005, compared to $16.44 on September 30,
2004.
The Company paid cash dividends on its common stock of $1.00 on
November 26, 2004, and $0.225 on February 25, 2005. Subsequent to the
quarter ended March 31, 2005, the Company announced a cash dividend of
$0.225 per share to be paid on May 27, 2005, to stockholders of record
as of May 6, 2005.
Total stockholders' equity as of March 31, 2005, includes an
unrealized loss of $2.2 million, net of deferred income taxes, on
available for sale securities. 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).
Six months ended
------------------------
3/31/05 3/31/04
------------------------
Return on assets 1.84% 2.10%
Return on equity 18.58% 19.80%
Equity-to-assets ratio 9.58% 9.90%
Dividend payout ratio 79.76% 69.15%
12
RESULTS OF OPERATIONS - Comparison of three months and six months ended
March 31, 2005 and 2004.
For the three months ended March 31, 2005, the Company had net
income of $6,067,000 or $0.72 per share. This compares to net income of
$7,095,000 or $0.84 per share for the quarter ended March 31, 2004.
For the six months ended March 31, 2005, the Company had net income
of $12,986,000 or $1.54 per share. This compares to net income of
$12,839,000 or $1.52 per share for the six months ended March 31, 2004.
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 deposits 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 six months ended March
31, 2005 and 2004. Average yields reflect reductions due to non-accrual
loans. Once a loan becomes 90 days delinquent, any interest that has
accrued up to that time is reserved 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.
Six months ended 3/31/05 As of
--------------------------- 3/31/05
Average Yield/ Yield/
Balance Interest Rate Rate
-------------------------------------
Interest-earning assets
Loans $1,160,060 35,981 6.20% 6.18%
Mortgage-backed securities 161,808 3,083 3.81% 4.24%
Securities 20,825 261 2.51% 3.28%
Bank deposits 11,228 113 2.01% 2.13%
--------------------------------------
Total earning assets 1,353,921 39,438 5.83% 5.89%
---------------------------
Non-earning assets 45,824
----------
Total $1,399,745
==========
Interest-costing liabilities
Customer checking and savings
deposit accounts $ 202,938 713 0.70% 0.71%
Customer and brokered
certificates of deposit 491,166 6,404 2.61% 3.07%
FHLB Advances 413,709 4,832 2.34% 2.68%
Repurchase agreements 143,914 1,668 2.32% 2.87%
--------------------------------------
Total costing liabilities 1,251,727 13,617 2.18% 2.57%%
---------------------------
Non-costing liabilities 9,005
Stockholders' equity 139,013
----------
Total $1,399,745
==========
Net earning balance $ 102,194
==========
Earning yield less costing rate 3.65% 3.32%
================
Average interest-earning assets,
net interest, and net yield
spread on average interest-
earning assets $1,353,921 25,821 3.81%
============================
Six months ended 3/31/04 As of
--------------------------- 3/31/04
Average Yield/ Yield/
Balance Interest Rate Rate
-------------------------------------
Interest-earning assets
Loans $1,026,054 32,999 6.43% 5.91%
Mortgage-backed securities 122,945 2,371 3.86% 3.85%
Securities 20,015 296 2.96% 1.76%
Bank deposits 17,070 47 0.55% 0.57%
--------------------------------------
Total earning assets 1,186,084 35,713 6.02% 5.49%
---------------------------
Non-earning assets 44,514
----------
Total $1,230,598
==========
Interest-costing liabilities
Customer checking and savings
deposit accounts $ 209,429 754 0.72% 0.68%
Customer certificates of
deposit 447,891 5,611 2.51% 2.64%
FHLB Advances 331,527 2,440 1.47% 1.53%
Repurchase agreements 106,500 622 1.17% 1.27%
--------------------------------------
Total costing liabilities 1,095,347 9,427 1.72% 1.76%%
---------------------------
Non-costing liabilities 7,187
Stockholders' equity 128,064
----------
Total $1,230,598
==========
Net earning balance $ 90,737
==========
Earning yield less costing rate 4.30% 3.73%
================
Average interest-earning assets,
net interest, and net yield
spread on average interest-
earning assets $1,186,084 26,286 4.43%
============================
13
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.
Six months ended March 31, 2005, compared to
six months ended March 31, 2004
-----------------------------------------------
Yield/
Yield Volume Volume Total
-----------------------------------------------
Components of interest income:
Loans $ (1,180) 4,308 (146) 2,982
Mortgage-backed securities (31) 750 (7) 712
Securities (45) 12 (2) (35)
Bank deposits 125 (16) (43) 66
-----------------------------------------------
Net change in interest income (1,131) 5,054 (198) 3,725
-----------------------------------------------
Components of interest expense:
Customer and brokered deposit accounts 362 357 33 752
FHLB Advances 1,442 604 346 2,392
Repurchase agreements 612 219 215 1,046
-----------------------------------------------
Net change in interest expense 2,416 1,180 594 4,190
-----------------------------------------------
Increase in net interest
margin $ (3,547) 3,874 (792) (465)
===============================================
Net interest margin before loan loss provision for the three months
ended March 31, 2005, decreased $815,000 from the same period in the
prior year. Specifically, interest income increased $1.8 million due
primarily to an increase in the average balance of interest-earning
assets. The increase in interest income was offset by a $2.6 million
increase in interest expense, which resulted from both an increase in
the average balance of interest-costing liabilities and an increase in
the average rate paid on such liabilities.
Net interest margin before loan loss provision for the six months
ended March 31, 2005, decreased $465,000 from the same period in the
prior year. Specifically, interest income increased $3.7 million. This
increase was the result of a $167.8 million increase in the average
balance of interest-earning assets, which was partially offset by a 19
basis point decrease in the average rate earned on such assets. The
increase in interest income was offset by a $4.2 million increase in
interest expense, which resulted from a $156.4 million increase in the
average balance of interest-costing liabilities, and a 46 basis point
increase in the average rate paid on such liabilities.
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses of $250,000 during
the quarter ended March 31, 2005, and $417,000 for the six months ended
March 31, 2005. Management performs an ongoing analysis of individual
loans and of homogenous pools of loans to assess for any impairment. An
increase in commercial and residential real estate loans classified as
"substandard" during the six months ended March 31, 2005, resulted in
the increase in provision for loan losses. On a consolidated basis,
loan loss reserve was 48.4% of total classified assets at March 31,
2005, 48.2% at September 30, 2004, and 58.4% at March 31, 2004.
As stated above, management believes that the provisions for loan
losses is adequate. The provision can fluctuate based on changes in
economic conditions or changes in the 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 amounts based on information available at the
time of their examination.
14
OTHER INCOME
Other income for the three months ended March 31, 2005, decreased
$478,000 from the same period in the prior year. Gain on sale of
securities available for sale decreased $726,000 due to the sale of
corporate debt and asset-backed securities in the prior year. Other
income decreased $678,000 due primarily to the effect of recording the
net fair value of certain loan-related commitments in accordance with
FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and a decrease in loan prepayment penalties. These
decreases were offset by a $567,000 increase in gain on sale of loans
held for sale due to an increase in mortgage banking volume. In
addition, provision for recovery on real estate owned increased $218,000
due to recoveries realized on the sale of foreclosed assets held for
sale, and loan servicing fees increased $226,000 due to a decrease in
the amortization of capitalized servicing.
Other income for the six months ended March 31, 2005, increased
$2.5 million from the same period in the prior year. Gain on sale of
loans held for sale increased $2.9 million due to an increase in
mortgage banking volume. Provision for recovery on real estate owned
increased $899,000 due to recoveries realized on the sale of foreclosed
assets held for sale. Customer service fees and charges increased
$310,000 due primarily to fee income earned by the Company's national
mortgage banking operation. These increases were offset by a $905,000
decrease in other income due primarily to the effect of recording the
net fair value of certain loan-related commitments in accordance with
FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and a decrease in loan prepayment penalties. In
addition, gain on sale of securities available for sale decreased
$726,000 due to the sale of corporate debt and asset-backed securities
in the prior year.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses for the three months
ended March 31, 2005, increased $150,000 from the same period in the
prior year. Specifically, compensation, fringe benefits, and commission-
based mortgage banking compensation increased $312,000 due primarily to
increased mortgage banking volume, and the continued growth of the
national mortgage banking operation. Additionally, advertising
increased $176,000 due to the addition of the national mortgage banking
operation. These increases were offset by a $362,000 decrease in other
expense due primarily to decreases in data processing and other costs
related to the addition of the national mortgage banking operation.
Total general and administrative expenses for the six months ended
March 31, 2005, increased $1.6 million from the same period in the prior
year. Specifically, compensation, fringe benefits, and commission-based
mortgage banking compensation increased $1.3 million due primarily to
increased mortgage banking volume, and the continued growth of the
national mortgage banking operation. Additionally, advertising
increased $650,000 due to the addition of the national mortgage banking
operation. These increases were offset by a $423,000 decrease in other
expense due primarily to decreases in data processing and other costs
related to the addition of the national mortgage banking operation.
REGULATION
The Bank is a member of the FHLB System and its customers' deposits
are insured by the Savings Association Insurance Fund ("SAIF") of the
FDIC. The Bank is subject to regulation by the OTS as its chartering
authority. Since passage of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA" or the "Act"), the FDIC
also has regulatory control over the Bank. The transactions of SAIF-
insured institutions are limited by statute and regulations that may
require prior supervisory approval in certain instances. Institutions
also must file reports with regulatory agencies regarding their
activities and their financial condition. The OTS and FDIC make
periodic examinations of the Bank to test compliance with the various
regulatory requirements. The OTS can require an institution to re-value
its assets based on appraisals and to establish specific valuation
allowances. This supervision and regulation is intended primarily for
the protection of depositors. Also, savings institutions are subject to
certain reserve requirements under Federal Reserve Board regulations.
INSURANCE OF ACCOUNTS
The SAIF insures the Bank's customer deposit accounts to a maximum
of $100,000 for each insured member. Deposit insurance premiums are
determined using a Risk-Related Premium Schedule ("RRPS"), a matrix
which places each insured institution into one of three capital groups
and one of three supervisory groups. Currently, deposit insurance
premiums range from 0 to 27 basis points of the institution's total
deposit accounts, depending on the institution's risk classification.
The Bank is currently considered "well capitalized", which is the most
favorable capital group and supervisory subgroup. SAIF-insured
institutions are also assessed a premium to service the interest on
Financing Corporation ("FICO") debt.
15
REGULATORY CAPITAL REQUIREMENTS
At March 31, 2005, the Bank exceeds all capital requirements
prescribed by the OTS. 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 March 31, 2005,
the Bank did not have any investments in or loans to subsidiaries
engaged in activities not permissible for national banks.
The following tables summarize the relationship between the Bank's
capital and regulatory requirements. Dollar amounts are expressed in
thousands.
At March 31, 2005 Amount
----------------------------------------------------------------
GAAP capital (Bank only) $ 127,370
Adjustment for regulatory capital:
Intangible assets (3,121)
Disallowed portion of servicing assets
and deferred tax assets (3,327)
Reverse the effect of SFAS No. 115 2,207
---------
Tangible capital 123,129
Qualifying intangible assets --
---------
Tier 1 capital (core capital) 123,129
Qualifying general valuation allowance 6,936
---------
Risk-based capital $ 130,065
=========
As of March 31, 2005
-------------------------------------------------------------------
Minimum required for Minimum required to be
Actual Capital Adequacy "Well Capitalized"
------------------- ---------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------------------- ---------------------- -----------------------
Total capital to risk-weighted assets $ 130,065 11.6% 89,600 >=8% 111,999 >=10%
Core capital to adjusted tangible assets 123,129 8.5% 58,050 >=4% 72,563 >=5%
Tangible capital to tangible assets 123,129 8.5% 21,769 >=1.5% -- --
Tier 1 capital to risk-weighted assets 123,129 11.0% -- -- 67,200 >=6%
LOANS TO ONE BORROWER
Institutions are prohibited from lending to any one borrower in
excess of 15% of the Bank's unimpaired capital plus unimpaired surplus,
or 25% of unimpaired capital plus unimpaired surplus if the loan is
secured by certain readily marketable collateral. Renewals that exceed
the loans-to-one-borrower limit are permitted if the original borrower
remains liable and no additional funds are disbursed. The Bank recently
enrolled with the OTS to participate in the "Lending Limits Pilot
Program." This program allows a federally chartered institution to
increase it's loans-to-one-borrower limit by an additional amount equal
to the lesser of: a) $10 million; b) 10% of its unimpaired capital and
surplus; or c) the percentage of its capital and surplus, in excess of
15%, that a state institution is permitted to lend. Participation in
this program increased North American's loans-to-one-borrower limit by
$10 million. This pilot program is set to expire on September 10, 2007.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity measures the ability to meet deposit withdrawals and
lending commitments. The Bank generates liquidity primarily from the
sale and repayment of loans, retention or newly acquired retail
deposits, and advances from FHLB of Des Moines' credit facility.
Management continues to use FHLB advances as a primary source of short-
term funding. At March 31, 2005, there was $48.8 million available to
the Bank in the form of FHLB advances. The Bank has established
relationships with various brokers, and, as a secondary source of
liquidity, the Bank purchases brokered deposit accounts. At March 31,
2005, the Bank has $89.9 million in brokered deposits, and it could
purchase up to $153.7 million in additional brokered deposits and remain
"well capitalized" as defined by the OTS.
16
Fluctuations in the level of interest rates typically impact
prepayments on mortgage loans and MBS. During periods of falling
interest rates, these prepayments increase and a greater demand exists
for new loans. The Bank's customer deposits are partially impacted by
area competition. Management believes that the Bank will retain most of
its maturing time deposits in the foreseeable future. However, any
material funding needs that may arise in the future can be reasonably
satisfied through the use of additional FHLB advances and/or brokered
deposits. Management is not aware of any other current market or
economic conditions that could materially impact the Bank's future
ability to meet obligations as they come due.
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, 2004.
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, 2004.
Item 4. Controls and Procedures
An evaluation of the Company's disclosure controls and procedures
was carried out under the supervision and with the participation of the
Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO")
within the 90-day period preceding the filing date of this quarterly
report. Based on that evaluation, the CEO and CFO have concluded that
the Company's disclosure controls and procedures are effective in
ensuring that the information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is (i)
accumulated and communicated to management in a timely manner, and (ii)
recorded, processed, summarized, and reported within the time periods
specified by the SEC. Since the date of this evaluation, there have not
been any significant changes in the Company's internal controls or in
other factors that could significantly affect those controls.
17
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 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual stockholder's meeting was held on January 21, 2005. The
following persons were elected to NASB Financial Inc.'s Board of
Directors for three year terms:
Barrett Brady
A. Ray Cecrle
Keith B. Cox
The firm of BKD, LLP was ratified for appointment as independent
auditors for the fiscal year ended September 30, 2005.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
Exhibit 99.1 - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
Exhibit 99.2 - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
(b) Reports of Form 8-K
A report on Form 8-K was filed on January 21, 2005, which announced
a quarterly cash dividend of $0.225 per share, payable on February 25,
2005 to shareholder's of record as of February 4, 2005.
A report on Form 8-K was filed on February 11, 2005, which
announced financial results for the quarter ended December 31, 2004.
18
S I G N A T U R E S
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)
May 13, 2005 By: /s/David H. Hancock
David H. Hancock
Chairman and
Chief Executive Officer
May 13, 2005 By: /s/Rhonda Nyhus
Rhonda Nyhus
Vice President and
Treasurer
19
I, David Hancock, Chairman and Chief Executive Officer, certify that:
1. I have reviewed this report on Form 10-Q of NASB Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statement were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidate subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
c) disclosed in this report any changes in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls which are reasonably likely to
adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls over financial reporting.
20
Date: May 13, 2005
I, Rhonda Nyhus, Vice President and Treasurer, certify that:
1. I have reviewed this report on Form 10-Q of NASB Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statement were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidate subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
c) disclosed in this report any changes in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls which are reasonably likely to
adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls over financial reporting.
21
Date: May 13, 2005
19