-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bo1aSWx2wxDH1rZNno3UsVbtKBtx54x9fdGjZxD76GPuFxl8er9bDwVOMGVh+rG9 GB70GwuT0G0FIidW42tJwg== 0000943374-97-000016.txt : 19970222 0000943374-97-000016.hdr.sgml : 19970222 ACCESSION NUMBER: 0000943374-97-000016 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBES BANCORP INC CENTRAL INDEX KEY: 0001017308 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 431753244 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21163 FILM NUMBER: 97529712 BUSINESS ADDRESS: STREET 1: 1001 N JESSE JAMES RD CITY: EXCELSIOR SPRINGS STATE: MI ZIP: 64024 BUSINESS PHONE: 8166306711 MAIL ADDRESS: STREET 1: 1011 N JESSE JAMES RD STREET 2: 1011 N JESSE JAMES RD CITY: EXCELSIOR SPRINGS STATE: MI ZIP: 64024 10QSB 1 10-QSB FOR CBES BANCORP INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1996 [ ] 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 0-21163 CBES BANCORP,INC. --------------------------- (Exact name of small business issuer as specified in its charter) Delaware 43-1753244 ------------------------------------------------- (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 1001 N. JESSE JAMES ROAD, EXCELSIOR SPRINGS, MO 64024 --------------------------------------------------------------- (Address of principal executive offices) (816 630-6711) ------------------------ (Issuer's telephone number) Not Applicable ---------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date: Class Outstanding at February 5, 1997 --------------- ------------------------------- Common stock, .01 par value 1,024,958 CBES BANCORP,INC. AND SUBSIDIARIES Table of Contents
PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statements of Financial Condition at December 31, 1996 and June 30, 1996.....................1 Consolidated Statements of Earnings for the three months and six months ended December 31, 1996 and 1995..2 Consolidated Statements of Stockholders' Equity for the six months ended December 31, 1996..................3 Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1995.................4 Notes to Consolidated Financial Statements...............5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................7 PART II - OTHER INFORMATION................................13 SIGNATURES.................................................14
1 CBES BANCORP,INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition December 31, 1996 and June 30, 1996
December 31, June 30, 1996 1996 Assets (unaudited) - ------- ------------ --------- Cash $ 761,357 683,769 Interest-bearing deposits in other financial institutions 2,210,382 2,775,590 Investment securities available-for-sale (amortized cost of $1,001,500 and $2,002,250 respectively) 996,000 1,974,500 Investment securities held-to-maturity 100,000 100,000 Mortgage-backed securities held-to-maturity (estimated fair value of $354,663 and $392,162 respectively) 357,648 400,394 Loans held-for-sale, net 198,975 366,000 Loans receivable, net 82,682,532 79,043,759 Accrued interest receivable: Loans receivable 604,502 597,484 Investment securities 19,703 25,178 Mortgage-backed securities 3,157 3,175 Real Estate Owned 18,110 - Stock in Federal Home Loan Bank (FHLB), at cost 810,700 810,700 Office property and equipment, net 1,257,198 1,272,907 Deferred income tax benefit - 23,000 Cash surrender value of life insurance and other assets 1,651,325 1,753,504 ---------- --------- Total assets 91,671,589 89,829,960 ---------- ---------- ---------- ---------- Liabilities and Stockholders' Equity - ------------------------------------ Liabilities: Deposits 64,784,052 68,169,560 FHLB advances and other borrowings 8,500,000 12,000,000 Accrued expenses and other liabilities 369,129 525,177 Accrued interest payable on deposits 90,319 111,227 Advance payments by borrowers for property taxes and insurance 252,295 691,797 Current income taxes payable 348,656 266,309 Deferred income taxes 10,561 - ---------- ---------- Total liabilities 74,355,012 81,764,070 ---------- ---------- ---------- ---------- Stockholders' equity: Preferred stock, $.01 par, 500,000 shares authorized, none issued or outstanding - - Common stock, $.01 par; 3,500,000 shares authorized, 1,024,958 shares issued and outstanding 10,250 - Additional paid-in capital 9,736,440 - Retained earnings, substantially restricted 8,365,847 8,082,540 Unrealized losses on available-for-sale securities, net of tax (2,400) (16,650) Unearned employee benefits (793,560) - ---------- ---------- Total stockholders' equity 17,316,577 8,065,890 ---------- ---------- Total liabilities and stockholders' equity 91,671,589 89,829,960 ---------- ---------- ---------- ---------- See accompanying notes to unaudited consolidated financial statements.
2 CBES BANCORP,INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited)
Three Months Ended Six Months Ended December 31 December 31 ----------------------- --------------------- 1996 1995 1996 1995 ----------------------- --------------------- Interest income: Loans receivable $ 1,773,371 1,625,324 3,520,745 3,196,795 Mortgage-backed securities 5,688 44,548 11,633 112,451 Investment securities 15,696 22,360 42,462 62,396 Loans held-for-sale 9,754 19,675 23,435 50,315 Other 15,938 22,788 36,339 44,012 ----------- --------- --------- --------- Total interest income 1,820,447 1,734,695 3,634,614 3,465,969 ----------- --------- --------- --------- Interest expense: Deposits 729,842 833,169 1,490,897 1,682,998 FHLB advances 91,264 207,841 270,698 460,897 ----------- --------- --------- --------- Total interest expense 821,106 1,041,010 1,761,595 2,143,895 ----------- --------- --------- --------- Net interest income 999,341 693,656 1,873,019 1,322,074 Provision for loan losses 13,934 54,707 32,273 115,577 ----------- --------- --------- --------- Net interest income after provision for loan losses 985,407 638,978 1,840,746 1,206,497 ----------- --------- --------- --------- Noninterest income: Gain on sale of loans, net 38,992 50,958 87,370 112,083 Customer service charges 55,305 49,684 107,166 99,628 Loan servicing fees 20,684 19,910 41,477 48,502 Net realized gain on sale of investment and mortgage-backed securities available-for-sale - 49,629 - 54,205 Other 28,679 25,715 60,898 54,699 ----------- --------- --------- --------- Total noninterest income 143,660 195,896 296,911 369,117 ----------- --------- --------- --------- Noninterest expense: Compensation and benefits 351,130 292,172 658,197 579,033 Office property and equipment 76,287 67,715 147,432 136,077 Data processing 38,768 40,905 84,269 82,657 Federal insurance premiums 18,874 39,635 511,143 78,226 Advertising 24,460 19,084 34,072 31,429 Real estate owned and repossessed assets 2,441 2,349 9,319 5,649 Other 126,850 105,938 239,689 211,476 ----------- --------- --------- --------- Total noninterest expense 638,810 567,798 1,684,121 1,124,547 ----------- --------- --------- --------- Earnings before income taxes 490,257 267,076 453,536 451,067 Income tax expense 189,149 112,608 170,229 153,000 ----------- --------- --------- --------- Net earnings $ 301,108 154,468 283,307 298,067 ----------- --------- --------- --------- ----------- --------- --------- --------- Pro forma earnings per share $ .32 - .30 - ----------- --------- --------- --------- ----------- --------- --------- --------- Average common and common equivalent shares outstanding 944,282 - 943,622 - ----------- --------- --------- --------- ----------- --------- --------- --------- See accompanying notes to unaudited consolidated financial statements.
PAGE 3 CBES BANCORP,INC. AND SUBSIDIARIES Consolidated Statement of Stockholders' Equity For the six months ended December 31, 1996 (Unaudited)
Unearned Net employee Additional unrealized stock Total Outstanding Common paid-in Retained gain (loss) ownership stockholders' shares stock capital earnings on securities shares equity ----------- ------ --------- -------- ----------- ---------- ---------- Balance at June 30, 1996 - - - 8,082,540 (16,650) - 8,065,890 Sale of stock 1,024,958 10,250 9,726,830 - - (819,960) 8,917,120 Net earnings - - - 283,307 - - 283,307 Change in unrealized loss on securities available- for-sale, net of tax - - - - 14,250 - 14,250 Allocation of ESOP shares - - 9,610 26,400 36,010 -------- ------ --------- --------- -------- --------- ---------- Balance at December 31, 1996 1,024,958 10,250 9,736,440 8,356,847 (2,400) (793,560) 17,316,577 -------- ------ --------- --------- -------- --------- ---------- -------- ------ --------- --------- -------- --------- ---------- See accompanying notes to unaudited consolidated financial statements.
PAGE 4 CBES BANCORP,INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the six months ended December 31, 1996 and 1995 (Unaudited)
1996 1995 ----------- ------- Cash flows from operating activities: Net earnings $ 283,307 298,067 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses 32,273 115,577 Depreciation 71,859 63,542 Allocation of ESOP shares 36,010 - Net realized gain on sale of securities available-for-sale - (54,205) Proceeds from sale of loans held for sale 6,423,880 8,057,083 Originations of loans held for sale (6,169,485) (6,618,592) Gain on sale of loans, net (87,370) (112,083) Premium amortization and accretion of discounts and deferred loan fees (160,540) (144,364) Deferred income taxes 24,061 - Changes in assets and liabilities: Accrued interest receivable (1,525) (17,003) Other assets 102,179 20,705 Accrued expenses and other liabilities (156,048) (56,828) Accrued interest payable on deposits (20,908) 9,181 Current income taxes payable 82,347 171,605 ------------ ------------ Net cash provided by operating activities 460,040 1,732,685 ------------ ------------ Cash flows from investing activities: Net (increase) decrease in loans receivable (3,526,800) 1,302,260 Purchase FHLB Stock - (16,000) Proceeds from sales of securities available-for-sale - 4,046,846 Mortgage-backed securities principal repayments 43,180 312,559 Maturing securities 1,000,000 - Purchase of office property equipment (56,150) (39,531) ------------ ------------ Net cash (used in) provided by investing activities $(2,539,770) 5,606,134 ------------ ------------ Cash flows from financing activities: Decrease in deposits $(3,385,508) (264,628) Proceeds from FHLB advances 16,500,000 12,400,000 Repayments of FHLB advances (20,000,000) (19,276,915) Increase in advance payments by borrowers for property taxes and insurance (439,502) (476,366) Issuance of common stock, net of issuance costs of $512,500 8,917,120 - ------------ ------------ Net cash provided by (used in) financing activities 1,592,110 (7,617,909) ------------ ------------ Net decrease in cash and cash equivalents (487,620) (279,090) Cash and cash equivalents at the beginning of the period 3,459,359 3,073,710 ------------ ------------ Cash and cash equivalents at the end of the period $ 2,971,739 2,794,620 ------------ ------------ ------------ ------------ Supplemental disclosure of cash flow information: Cash paid during the period for income taxes $ 63,821 - ------------ ------------ ------------ ------------ Cash paid during the period for interest $ 1,782,503 2,138,769 ------------ ------------ ------------ ------------ See accompanying notes to unaudited consolidated financial statements.
5 CBES BANCORP,INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) December 31, 1996 (1) CBES Bancorp,Inc. and Subsidiaries ---------------------------------- CBES Bancorp, Inc. (the Company) was incorporated under the laws of the state of Delaware for the purpose of becoming the savings and loan holding company of Community Bank of Excelsior Springs, a Savings Bank (the Bank) in connection with the Bank's conversion from a federally chartered mutual savings bank to a federally chartered stock savings bank, pursuant to its Plan of Conversion. On August 12, 1996, the Company commenced a Subscription and Community Offering of its shares in connection with the conversion of the Bank (the Offering). The Offering was consummated and the Company acquired the Bank on September 27, 1996. The Company had no assets prior to the conversion and acquisition on September 27, 1996. The accompanying consolidated financial statements as of and for the three months and six months ended December 31, 1996 include the accounts of the Company and the Bank. The accompanying consolidated statements of financial condition as of June 30, 1996, and the statement of earnings and cash flows for the three months and the six months ended December 31, 1995, are of the Bank. (2) Basis of Preparation -------------------- The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-QSB. To the extent that information and footnotes required by generally accepted accounting principles for complete financial statements are contained in or consistent with the audited financial statements incorporated by reference in the Company's Annual Report on Form 10-KSB for the year ended June 30, 1996, such information and footnotes have not been duplicated herein. In the opinion of management, all adjustments, consisting only of normal recurring accruals, which are necessary for the fair presentation of the interim financial statements have been included. The statement of earnings for the three month and six month periods ended December 31, 1996 are not necessarily indicative of the results which may be expected for the entire year. The June 30, 1996 consolidated balance sheet has been derived from the audited consolidated financial statements as of that date. (3) Pro Forma Earnings Per Share ---------------------------- On September 27, 1996, 1,024,958 shares of the Company's stock were issued, including 81,996 shares issued to the ESOP. Pro forma earnings per share amounts for the three month and six month period ended December 31, 1996 are based upon the shares outstanding at December 31, 1996, as though those shares were outstanding for the entire period, exclusive of the shares unallocated by the ESOP. The computation does not reflect the pro forma effects of the investment income that would have been earned had the net proceeds from the conversion been received at the beginning of the three or six month period. 6 (4) Stockholders' Equity and Stock Conversion ----------------------------------------- The Bank converted from a federally chartered mutual savings bank to a federally chartered stock savings bank pursuant to its Plan of Conversion which was approved by the Bank's members on September 19, 1996. The conversion was effective on September 27, 1996 and resulted in the issuance of 1,024,958 shares of common stock (par value $0.01) at $10.00 per share for a gross sales price of $10,249,580. Costs related to conversion (primarily underwriters' commissions, printing, and professional fees) aggregated $513,000 and were deducted to arrive at the net proceeds of $9,737,000. The Company established an employee stock ownership trust which purchased 81,996 shares of common stock of the Company at the issuance price of $10.00 per share with funds borrowed from the holding company. (5) Employee Stock Ownership Plan ----------------------------- All employees meeting age and service requirements are eligible to participate in an ESOP established on September 27, 1996. Contributions made by the Bank to the ESOP are allocated to participants by a formula based on compensation. Participant benefits become 100% vested after five years. The ESOP purchased 81,996 shares in the Bank's conversion. The ESOP expense for the three months ended December 31, 1996 was $36,010. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion compares the financial condition of CBES Bancorp,Inc. and its wholly-owned subsidiary, Community Bank of Excelsior Springs, a Savings Bank, (collectively the Bank) at December 31, 1996 to the financial condition at June 30, 1996, its fiscal year-end, and the results of operations for the three months and six months ended December 31, 1996, with the same periods in 1995. This discussion should be read in conjunction with the interim financial statements and notes which are included herein. General - ------- CBES Bancorp,Inc. was organized as a Delaware corporation in June 1996 to acquire all of the capital stock issued by Community Bank of Excelsior Springs, a Savings Bank upon its conversion from the mutual to stock form of ownership. Community Bank of Excelsior Springs, a Savings Bank was founded in 1931 as a Missouri chartered savings and loan association located in Excelsior Springs, Missouri. In 1995, its members voted to convert to a federal charter. The business of the holding company consists primarily of the business of the Bank. The Bank conducts its business through its main office in Excelsior Springs, Clay County, Missouri and its full service branch office located in Kearney, Clay County, Missouri. The Bank has been, and intends to continue to be, a community oriented financial institution offering selected financial services to meet the needs of the community it serves. The Bank attracts deposits from the general public and historically has used such deposits, together with other funds, primarily to originate one-to-four family residential mortgage loans, construction and land loans for single-family residential properties, and consumer loans consisting primarily of loans secured by automobiles. While the Bank's primary business has been that of a traditional thrift institution, originating loans in its primary market area for retention in its portfolio, the Bank also has been an active participant in the secondary market, originating residential mortgage loans for sale. The most significant outside factors influencing the operations of the Bank and other financial institutions include general economic conditions, competition in the local market place and the related monetary and fiscal policies of agencies that regulate financial institutions. More specifically, the cost of funds primarily consisting of insured deposits is influenced by interest rates on competing investments and general market rates of interest, while lending activities are influenced by the demand for real estate financing and other types of loans, which in turn is affected by the interest rates at which such loans may be offered and other factors affecting loan demand and funds availability. The deposits of the Bank are presently insured by the Savings Association Insurance Fund ("SAIF"), which together with the Bank Insurance Fund ("BIF") are the two insurance funds administered by the FDIC. In the third calendar quarter of 1995, the FDIC lowered the premium schedule for BIF-insured institutions in anticipation of the 8 BIF achieving its statutory reserve ratio. The reduced premium created a significant disparity in deposit insurance expense causing a competitive advantage for BIF members. Legislation enacted on September 30, 1996 provided for a one-time special assessment of .657% of the Bank's SAIF insured deposits at March 31, 1995. The purpose of the assessment is to bring the SAIF to its statutory reserve ratio. Based on the above formula, the Bank charged $441,000 against earnings for the quarter ended September 30, 1996. Although the special one-time assessment significantly increased noninterest expense for the quarter, the anticipated reduction in the premium schedule will reduce the Bank's federal insurance premiums for the future periods. Congress may consider legislation requiring all federal thrift institutions, such as the Bank, to either convert to a national bank or a state depository institution by January 1, 1998. In addition, the Company might no longer be regulated as a thrift holding company, but rather as a bank holding company. The Office of Thrift Supervision (OTS) also might be abolished and its functions transferred among the federal banking regulators. Certain aspects of the legislation remain to be resolved and, therefore, no assurance can be given as to whether or in what form the legislation will be enacted or its effect on the Company and the Bank. Financial Condition - ------------------- Total assets increased $1.8 million, or 2.0%, to $91.6 at December 31, 1996 from $89.8 million at June 30, 1996. This was primarily due to the proceeds from the sale of CBES Bancorp, Inc. common stock, which generated net proceeds of $8,917,000, reduced by $3.5 million, to pay down FHLB advances, and a reduction in deposits of $3.4 million. Loans receivable, net increased by $3.6 million, or 4.6%, to $82.7 million at December 31, 1996 from $79.0 million at June 30, 1996 due to increases in one-to-four family portfolio loans of $1.4 million and an increase in construction loans of $2.2 million. Deposits decreased $3.4 million, or 5.0%, to $64.8 million at December 31, 1996 from $68.2 million at June 30, 1996. The decrease in deposits is principally attributable to $1.8 million of Bank depositors' investment in common stock of CBES Bancorp, Inc. and $1.1 million in maturing certificates of deposit being withdrawn by depositors. FHLB advances decreased $3.5 million, or 29.2%, to $8.5 million at December 31, 1996 from $12.0 million at June 30, 1996. The decrease is primarily due to $4.0 million of the net proceeds from the sale of CBES Bancorp, Inc. common stock being used to pay down FHLB advances. Total equity increased $9.2 million, or 114.7%, to $17.3 million at December 31, 1996 primarily due to the sale of 1,024,958 common shares at an initial offering price of $10 per share less the establishment of the Company's $820,000 ESOP plan and conversion-related costs of $513,000. 9 Comparison of Operating Results for the Three Months Ended December 31, 1996 and 1995 Performance Summary. In the quarter ended December 31, 1996, the Company had net earnings of $301,000 compared to net earnings of $154,000 for the quarter ended December 31, 1995. The increase in earnings was primarily due to an increase in interest income of $86,000, a decrease in interest expense of $220,000, offset by an increase in compensation of $59,000, and decrease in gain on sale of mortgage-backed securities of $50,000. Net Interest Income. For the three months ended December 31, 1996, net interest income increased by $306,000, or 44.1%, to $999,000 from $694,000 for the three months ended December 31, 1995. The increase reflected an increase of $86,000 in interest income and a decrease of $220,000 in interest expense to $821,000 from $1,041,000. The increase in interest income reflected increased average balances of loans receivable, primarily fixed rate mortgage loans and construction lending on single-family residences, and an increase in adjustable rate mortgage loans rates. Interest expense decreased by $220,000, or 21.1%, as a result of decreased balances of certificate of deposit accounts, and a decrease in balances and rates of FHLB Advances. Provision for Loan Losses. During the three months ended December 31, 1996, the Bank charged $14,000 against earnings as a provision for loan losses compared to a provision of $55,000 for the three months ended December 31, 1995. The decrease in provision for loan losses is a result of stabilizing levels of construction lending compared to significant increases in construction lending during 1995. This charge resulted in an allowance for loan losses of $408,000 or .49% of loans receivable, net at December 31, 1996 compared to $400,000, or .49% of loans receivable, net at September 30, 1996. The allowance for loan losses is based on a detailed review of nonperforming and other problem loans, prevailing economic conditions, actual loss experience and other factors which, in management's view, recognizes the changing composition of the Bank's loan portfolio and the inherent risk associated with different types of loans. Management will continue to monitor its allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic conditions dictate. Although the Bank maintains its allowance for loan losses at a level which it considers to be adequate to provide for potential losses, there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods. Non-Interest Income. For the three months ended December 31, 1996, noninterest income decreased $52,000 to $144,000 from $196,000 for the prior year period primarily due to a decrease in the net realized gain on sale of investment and mortgage-backed securities available-for-sale of $50,000 during the three months ended December 31, 1995. There were no sales during the three months ended December 31, 1996. Non-Interest Expense. Noninterest expense increased by $71,000 to $639,000 for the three months ended December 31, 1996 from $568,000 for the three months ended December 31, 1995. Of this increase, $59,000 was 10 attributable to compensation, principally expense associated with the ESOP plan. Comparison of Operating Results for the Six Months Ended December 31, 1996 and 1995 Performance Summary. In the six months ended December 31, 1996, the Company had net income of $283,000 compared to net earnings of $298,000 for the six months ended December 31, 1995. The decrease in earnings was primarily due to the payment of a one- time special assessment in the amount of $441,000 to recapitalize SAIF, and a $79,000 increase in compensation expense, offset by an increase in net interest income of $551,000, a decrease in the provision for loan loss of $83,000, and a decrease in income taxes of $17,000. Net Interest Income. For the six months ended December 31, 1996, net interest income increased by $551,000, or 41.7%, to $1,873,000 from $1,322,000 for the six months ended December 31, 1995. The increase reflected an increase of $169,000 in interest income and a decrease of $382,000 in interest expense. The increase in interest income reflected increased average balances of loans receivable, primarily fixed rate mortgage loans and construction lending on single-family residences, and an increase in adjustable rate mortgage loans rates, offset by a decrease in interest income due to the sales of mortgage-backed securities. Interest expense decreased by $382,000, or 17.84%, as a result of decreased balances in certificate of deposit accounts, and a decrease in balances and rates of FHLB Advances. Provision for Loan Losses. During the six months ended December 31, 1996, the Bank charged $32,000 against earnings as a provision for loan losses compared to a provision of $116,000 for the six months ended December 31, 1995. The decrease in provision for loan losses is a result of stabilizing levels of construction lending compared to significant increases in construction lending during 1995. This charge resulted in an allowance for loan losses of $408,000 or .49% of loans receivable, net at December 31, 1996 compared to $388,000, or .49% of loans receivable, net at June 30, 1996. The allowance for loan losses is based on a detailed review of nonperforming and other problem loans, prevailing economic conditions, actual loss experience and other factors which, in management's view, recognizes the changing composition of the Bank's loan portfolio and the inherent risk associated with different types of loans. Noninterest Income. For the six months ended December 31, 1996, noninterest income decreased $72,000 to $297,000 from $369,000 for the prior year period primarily due to a decrease in the net realized gain on sale of investment and mortgage-backed securities available-for-sale of $55,000 during the six months ended December 31, 1995. There were no sales during the six months ended December 31, 1996. Noninterest Expense. Noninterest expense increased by $560,000 to $1,684,000 for the six months ended December 31, 1996 from $1,125,000 for the six months ended December 31, 1995. Of this increase $441,000 was attributable to the one-time special SAIF assessment, and $79,000 was attributable to compensation, due to general wage increases and adoption of the ESOP plan. 11 Nonperforming Assets - ------------------- On December 31, 1996, nonperforming assets were $628,000 compared to $655,000 on June 30, 1996. The balance of the Bank's allowance for loan losses was $408,000 or 65.0% of nonperforming assets. Loans are considered nonperforming when the collection of principal and/or interest is not probable, or in the event payments are more than ninety days delinquent. Capital Resources - ----------------- The Bank is subject to three capital to asset requirements in accordance with Office of Thrift Supervision regulations. The following table is a summary of the Bank's regulatory capital requirements versus actual capital as of December 31, 1996:
Actual Required Excess amount/percent amount/percent amount/percent --------------- -------------- -------------- (Dollars in thousands) Tangible $12,423 13.54% $1,376 1.50% $11,047 12.04% Core leverage capital 12,423 13.54% 2,752 3.00% 9,671 10.54% Risk-based capital 12,659 17.70% 5,720 8.00% 6,939 9.70%
Liquidity - --------- The Bank's principal sources of funds are deposits, principal and interest payments on loans, deposits in other insured institutions and investment securities classified as available- for-sale. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan prepayments are more influenced by interest rates, general economic conditions and competition. Additional sources of funds may be obtained from the Federal Home Loan Bank of Des Moines by utilizing numerous available products to meet funding needs. The Bank is required to maintain levels of liquid assets as defined by regulations. The required percentage is currently 5% of net withdrawable savings deposits and borrowings payable on demand or in one year or less. The eligible liquidity ratios at December 31, 1996 and June 30, 1996 were 5.50% and 7.50%, respectively. In light of the competition for deposits, the Bank may utilize the funding sources of the Federal Home Loan Bank to meet demand in accordance with the Bank's growth plans. The wholesale funding sources may allow the Bank to obtain a lower cost of funding and create a more efficient liability match to the respective assets being funded. During the six months ended December 31, 1996, the Bank used proceeds from the stock offering to repay obligations of the Federal Home Loan Bank. Given the current strong loan demand, it may be necessary for the Bank to continue to use advances. For purposes of the cash flow statements, all short-term investments with a maturity of three months or less at date of purchase are considered cash equivalents. Cash and cash equivalents at December 31, 1996 and 1995 were $2,971,739 and $2,794,620 respectively. 12 Cash flows from operating activities. Net cash provided by operating activities decreased to $460,000 for the six months ended December 31, 1996 from $1,733,000 for the six months ended December 31, 1995. The decrease was mainly due to a decrease in proceeds from the sale of loans to $6.4 million for the six months ended December 31, 1996 from $8.1 million for the six months ended December 31, 1995, offset by a decrease in originations of loans held for sale to $6.2 million for the six months ended December 31, 1996 from $6.6 million for the six months ended December 31, 1995. Cash flows from investing activities. Net cash used in investing activities was $2.5 million during the six months ended December 31, 1996 compared to $5.6 million provided by investing activities during the same period in 1995. The change was mainly due to an increase in loans receivable of $3.5 million during the six months ended 1996 from a $1.3 million decrease during the 1995 period and due to the proceeds from sale of securities available for sale of $4.0 million during 1995, offset by maturing securities of $1.0 million during the six months ended December 31, 1996. Cash flows from financing activities. Net cash provided by financing activities was $1.6 million for the six months ended December 31, 1996 compared to a use of $7.6 million during the same period in 1995. The increase in financing activities is primarily due to the issuance of common stock of $8.9 million and reduction in the repayment of FHLB advances during the comparable periods of $3.4 million, offset by a reduction in deposits of $3.4 million during the six months ended December 31, 1996 compared to a $265,000 reduction during the same period in 1995. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- The holding company and the Bank are not involved in any pending legal proceedings incident to the business of the holding company and the Bank, which involve amounts in the aggregate which management believes are material to the financial condition and results of operation. Item 2. Changes in Securities --------------------- Not applicable. Item 3. Defaults Upon Senior Securities ------------------------------- Not applicable. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Not applicable. Item 5. Other Information ------------------- None. Item 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibits 27-Financial Data Schedule 14 SIGNATURES Pursuant to the requirement 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. CBES Bancorp, Inc. and Subsidiaries -------------------------------------------- (Registrant) Date: February 10, 1997 ------------------------------------ By: /s/ Larry E. Hermreck ------------------------------------ Larry E. Hermreck, Chief Executive Officer and Secretary (Duly Authorized Officer) Date: February 10, 1997 ------------------------------------ By: /s/ Dennis D. Hartman ------------------------------------ Dennis D. Hartman, Controller and Chief Financial Officer (Principal Financial Officer) PAGE EX-27 2 FDS FOR CBES BANCORP, INC. WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
9 1
6-MOS JUNE-30-1997 DEC-31-1996 761357 2210382 0 0 996000 457648 454663 82881507 408000 91671589 64784052 8500000 369129 0 10250 0 0 17306327 91671589 3544180 54095 36339 3634614 1490897 1761595 1873019 32273 0 239689 453536 283307 0 0 283307 .30 .30 8.32 604000 0 0 26299 388000 23612 11546 408000 408000 0 0
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