-----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, FD0wW1uHpd+n8DvcEcADjbvZ5UDQr579F+T4ycVTluOFWJbzEDsOtlvi+DmSsetf O/n0FN3TwSnKUnCOYsayXw== 0000950109-99-004042.txt : 19991115 0000950109-99-004042.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950109-99-004042 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: SEC FILE NUMBER: 000-21163 FILM NUMBER: 99749334 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 FORM 10-Q 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 September 30, 1999 [ ] 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 November 10, 1999 --------------------------- -------------------------------- Common stock, .01 par value 910,427 CBES BANCORP, INC. AND SUBSIDIARIES Table of Contents PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Statements of Financial Condition at September 30, 1999 (unaudited) and June 30, 1999 .............................. 1 Consolidated Statements of Earnings for the three months ended September 30, 1999 and 1998 (unaudited) ................... 2 Consolidated Statements of Stockholders' Equity for the three months ended September 30, 1999 (unaudited) ............... 3 Consolidated Statements of Cash Flows for the three months ended September 30, 1999 and 1998 (unaudited) ......................... 4 Notes to Consolidated Financial Statements ........................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 6 PART II - OTHER INFORMATION ................................................. 11 SIGNATURES .................................................................. 12 1 CBES BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition September 30, 1999 and June 30, 1999
September 30, June 30, Assets 1999 1999 ------ ---- ---- (unaudited) Cash $ 617,658 $ 1,111,855 Interest-bearing deposits in other financial institutions 5,553,592 6,350,923 Investment securities held-to-maturity (estimated fair value of $93,000 and $98,000 respectively) 188,779 93,000 Mortgage-backed securities held-to-maturity (estimated fair value of $65,000 and $82,000 respectively) 52,134 57,275 Loans held for sale, net 7,304,719 2,393,421 Loans receivable, net 135,948,495 132,065,730 Accrued interest receivable: Loans receivable 1,151,909 1,052,903 Investment securities 21,013 2,015 Mortgage-backed securities 1,049 1,152 Real Estate Owned 160,666 152,859 Stock in Federal Home Loan Bank (FHLB), at cost 2,172,500 2,172,500 Office property and equipment, net 2,623,953 2,598,443 Current deferred income taxes receivable 133,000 133,000 Cash surrender value of life insurance & other assets 2,181,310 2,220,827 ------------- ------------- Total Assets $ 158,110,776 $ 150,405,903 ============= ============= Liabilities & Stockholders' Equity ---------------------------------- Liabilities: Deposits $ 100,634,785 $ 101,423,598 FHLB advances 37,450,000 29,450,000 Accrued expenses and other liabilities 1,364,395 1,481,920 Accrued interest payable on deposits 132,003 138,404 Advance payments by borrowers for property taxes and insurance 1,218,784 916,215 Current income taxes payable 193,402 48,704 ------------- ------------- Total Liabilities 140,993,009 133,458,841 ============= ============= Stockholders' Equity: Preferred stock, $.01 par, 500,000 shares authorized, none issued or outstanding Common Stock, $.01 par; 3,500,000 shares authorized and 1,031,851 shares issued 10,319 10,319 Additional paid-in capital 10,004,110 9,989,075 Retained earnings, substantially restricted 10,125,814 10,033,284 Treasury stock, 110,724 shares at cost (2,267,740) (2,267,740) Unearned employee benefits (754,736) (817,876) ------------- ------------- Total stockholders' equity 17,117,767 16,947,062 ------------- ------------- Total liabilities and stockholders' equity $ 158,110,776 $ 150,405,903 ============= =============
See accompanying notes to unaudited consolidated financial statements. 2 CBES BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited)
Three Months Ended September 30 -------------------------------- 1999 1998 -------------- -------------- Interest income: Loans receivable 3,028,867 2,719,863 Mortgage-backed securities 1,015 1,459 Investment securities 8 22 Other 80,186 72,147 -------------- -------------- Total interest income 3,110,076 2,793,491 -------------- -------------- Interest expense: Deposits 1,168,505 1,079,793 FHLB Advances 444,393 362,190 -------------- -------------- Total interest expense 1,612,898 1,441,983 -------------- -------------- Net interest income 1,497,178 1,351,508 Provision for loan losses 38,290 75,150 -------------- -------------- Net interest income after provision for loan losses 1,458,888 1,276,358 -------------- -------------- Non-interest income: Gain on sale of loans, net 137,342 140,441 Customer service charges 71,499 57,885 Loan servicing fees (17,792) 12,100 Other 29,485 32,473 -------------- -------------- Total non-interest income 220,534 242,899 -------------- -------------- Non-interest expense: Compensation and benefits 706,918 661,021 Office property and equipment 216,865 142,336 Data processing 61,385 55,220 Federal insurance premiums 14,790 12,868 Advertising 33,624 19,015 Real estate owned and repossessed assets 2,578 (46,264) Other 250,492 232,252 -------------- -------------- Total non-interest expense 1,286,682 1,076,448 -------------- -------------- Earnings before income taxes 392,770 442,809 Income tax expense 144,338 164,039 -------------- -------------- Net earnings 248,432 278,770 ============== ============== Earnings per share-basic 0.28 0.31 ============== ============== Earnings per share-diluted 0.28 0.31 ============== ============== Basic weighted average shares 873,140 906,689 Common stock equivalents-stock options -- 287 -------------- -------------- Diluted weighted average shares 873,140 906,976 ============== ==============
See accompanying notes to unaudited consolidated financial statements. 3 CBES BANCORP, INC. AND SUBSIDIARIES Consolidated Statement of Stockholders' Equity For the three months ended September 30, 1999 (Unaudited)
Additional Unearned Total Issued Common paid-in Retained Treasury employee stockholders' shares stock capital earnings stock benefits equity ------ ----- ------- -------- ----- -------- ----- Balance at June 30, 1999 $ 1,031,851 $ 10,319 9,989,075 10,033,284 (2,267,740) (817,876) 16,947,062 ----------- ----------- ---------- ---------- ---------- -------- ---------- Net earnings -- -- -- 248,432 -- -- 248,432 Dividends declared -- -- -- (155,902) -- -- (155,902) ($.18 per share payable October, 1999) Purchase treasury stock -- -- -- -- -- -- Amortization of RRP -- -- -- -- -- 35,510 35,510 Allocation of ESOP shares -- -- 15,035 -- -- 27,630 42,665 ----------- ----------- ----------- ------------ ------------- ------------- ------------- Balance at September 30, 1999 $ 1,031,851 10,319 10,004,110 10,125,814 (2,267,740) (754,736) 17,117,767 =========== =========== =========== ============ ============= ============= =============
See accompanying notes to unaudited consolidated financial statements. 4 CBES BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the three months ended September 30, 1999 and 1998 (Unaudited)
1999 1998 ------------ ------------ Cash flows from operating activities: Net earnings $ 248,432 278,770 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses 38,290 75,150 Depreciation 96,338 77,557 Amortization of RRP 35,510 35,510 Allocation of ESOP shares 42,665 58,560 Proceeds from sale of loans held for sale 7,176,483 5,205,505 Origination of loans held for sale (11,950,439) (10,629,411) Gain on sale of loans, net (137,342) (140,441) Premium amortization and accretion of discounts and deferred loan fees (173,045) (152,591) Deferred income taxes -- 161,517 Changes in assets and liabilities: Accrued interest receivable (117,901) (85,736) Other assets 531,915 10,012 Accrued expenses and other liabilities (896,333) 1,119,759 Accrued interest payable on deposits (6,401) 10,426 Current income taxes payable 144,339 (7,477) ------------ ------------ Net cash (used in) operating activities $ (4,967,489) (3,982,890) ------------ ------------ Cash flows from investing activities: Net increase in loans receivable (3,791,390) (12,274,012) Purchase FHLB Stock -- (750,000) Proceeds from Sale of securities available-for-sale -- -- Mortgage-backed securities principal repayments 5,141 7,657 Maturing securities 2,000 2,000 Purchase of office property equipment (121,847) (84,842) Purchase of securities (97,779) -- ------------ ------------ Net cash used in investing activities $ (4,003,875) (13,099,197) ------------ ------------ Cash flows from financing activities: Increase (decrease) in deposits $ (788,813) 4,920,912 Proceeds from FHLB advances 13,000,000 16,000,000 Repayments of FHLB advances (5,000,000) -- Increase in advance payments by borrowers for property -- -- and insurance 302,569 705,089 Dividends Paid (155,902) (108,277) Treasury stock purchased -- -- ------------ ------------ Net cash provided by financing activities 7,357,854 21,517,724 ------------ ------------ Net increase (decrease) in cash and cash equivalents (1,613,510) 4,435,637 Cash and cash equivalents at the beginning of the period 7,784,760 3,100,098 ------------ ------------ Cash and cash equivalents at the end of the period $ 6,171,250 7,535,735 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the period for income taxes $ -- 10,000 ============ ============ Cash paid during the period for interest $ 1,619,299 1,431,557 ============ ============ Supplemental schedule of noncash activities: Conversion of loans to real estate owned $ (35,990) (645,244) ============ ============ Conversion of real estate owned to loans $ 28,183 400,219 ============ ============ Dividends declared and payable $ 165,803 108,277 ============ ============
See accompanying notes to unaudited consolidated financial statements. 5 CBES BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) September 30, 1999 (1) CBES Bancorp, Inc. and Subsidiaries ----------------------------------- This Quarterly Report on Form 10-QSB may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technical factors affecting the Company's operations, pricing, products and services. (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, 1999, 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 period ended September 30, 1999 are not necessarily indicative of the results which may be expected for the entire year. The balance sheet information as of June 30, 1999 has been derived from the audited balance sheet as of that date. The Company adopted the provisions of Statement of Financial Accounting Standards Number 130 (Comprehensive Income), effective July 1, 1998. The Company has no components of comprehensive income other than net income. (3) Capital Stock Transactions -------------------------- On October 13, 1999 the Company announced a stock repurchase plan in which 5% or 46,056 of the Company's outstanding shares would be repurchased over the next twelve months. Pursuant to that repurchase plan the Company bought 10,700 shares for the treasury on October 25, 1999. (4) Newly Issued Accounting Pronouncements -------------------------------------- The Financial Accounting Standards Board ("FASB") issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", in June 1998. SFAS No. 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 137 was issued in June 1999 and delayed the effective date of SFAS No. 133 until June 15, 2000. Management believes adoption of SFAS No. 133 will not have a material effect in the Company's financial position or results of operation, nor will adoption require additional capital resources. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion compares the financial condition of CBES Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Community Bank of Excelsior Springs, a Savings Bank, (the "Bank") at September 30, 1999 to the financial condition at June 30, 1999, its fiscal year-end, and the results of operations for the three months ended September 30, 1999, with the same period in 1998. This discussion should be read in conjunction with the interim financial statements and notes which are included herein. This Quarterly Report on Form 10-QSB may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services. General - ------- The Company was organized as a Delaware corporation in June 1996 to acquire all of the capital stock issued by the Bank upon its conversion from the mutual to stock form of ownership. The 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 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. The Bank conducts its business through its main office in Excelsior Springs, Clay County, Missouri and its full service branch offices located in Kearney and Liberty, both in Clay County, Missouri. The Liberty office opened on March 16, 1998. On December 30, 1998 the Bank purchased a building in Kearney, Missouri from another financial institution. The Bank relocated its Kearney office from a leased facility to the new location on March 22, 1999. The purchase price of the building, together with furniture, fixtures, and equipment, was $1.0 million. 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 communities 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. 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. 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. There can be no assurance as to whether or in what form such legislation will be enacted or, if enacted, its effect on the Company and the Bank. 7 Financial Condition - ------------------- Total assets increased $6.9 million, or 4.6%, to $158.3 at September 30, 1999 from $151.4 million at June 30, 1999. This was primarily due to an increase in net loans receivable and loans held for sale of $ 8.8 million, which were funded primarily with FHLB advances. Net loans receivable and loans held for sale increased by $8.8 million, or 6.5%, to $143.2 million at September 30, 1999 from $134.8 million at June 30, 1999 primarily due to increases in one-to-four family loans held for sale of $4.9 million, and construction loans of $3.5 million. Fixed rate loans of $2.0 are loans that have contracted to be sold in the secondary market, but have not been funded. Adjustable rate loans held for sale of $5.3 million are loans that have been originated but are not yet contracted to be sold in the secondary market. Deposits decreased $0.8 million, or 0.8%, to $100.6 million at September 30, 1999 from $101.4 million at June 30, 1999. The decrease in deposits is primarily due to a decrease in checking and money market deposit account balances. FHLB advances increased $8.0 million, or 27.10%, to $37.4 million at September 30, 1999 from $29.5 million at June 30, 1999. These advances ranged in term from three months to one year. The FHLB advances were primarily used to fund loans. Comparison of Operating Results for the Three Months Ended September 30, 1999 - ----------------------------------------------------------------------------- and 1998 - -------- Performance Summary. For the three months ended September 30, 1999, the Company had net earnings of $248,000 compared to net earnings of $279,000 for the three months ended September 30, 1998. The most significant items causing the decrease in earnings were a decrease in non-interest income of $22,000, and an increase in non-interest expense of $210,000, offset by increase in net interest income of $146,000 and a decrease in provision for loan loss of $37,000. Net Interest Income. For the three months ended September 30, 1999, net interest income increased $146,000, or 10.8%, to $1,497,000 from $1,352,000 for the three months ended September 30, 1998. The increase reflected an increase of $317,000 in interest income, to $3,110,000 from $2,793,000 offset by an increase of $171,000 in interest expense to $1,613,000 from $1,442,000. The increase in interest income was primarily due to an increase in average balances of loans receivable, net, primarily one-to-four family loans and construction loans. The increase in interest expense was primarily due to an increase in the average balances of FHLB advances. Provision for Loan Losses. During the three months ended September 30, 1999, the Bank charged $38,000 against earnings as a provision for loan losses compared to a provision of $75,000 for the three months ended September 30, 1998. This provision resulted in an allowance for loan losses of $932,000 or .65% of loans receivable, net at September 30, 1999 compared to $927,000, or .69% of loans receivable, net at June 30, 1999. 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. The Bank's methodology for determining allowance for loan losses focuses primarily on the application of specific reserve percentages to the various categories of loans. Those percentages are based upon management's estimate of the exposure to loss in the various categories. Percentages generally range from 0.05% for single family residential loans to 2.00% for some consumer loans; higher percentages may be applied to problem loans. In addition, management continues to review specifically identified problem, or potential problem loans. On a case by case basis, where considered necessary, reserves are increased. For this purpose, problem loans include non-accruing loans and accruing loans delinquent more than 90 days. In addition, pursuant to the Bank's methodology, the reserve is replenished for net charge-offs, which are charged against the reserve. 8 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 September 30, 1999, non-interest income decreased $22,000 to $221,000 from $243,000 for the prior year period primarily due to a decrease in loan servicing fees of $30,000, which includes a write down of mortgage servicing rights of $23,000, and an increase in customer service charges of $14,000. Non-Interest Expense. Non-interest expense increased by $210,000 to $1,287,000 for the three months ended September 30, 1999 from $1,076,000 for the three months ended September 30, 1998. Of this increase, $46,000 was due to compensation expense, due to an increase in the number of employees and general wage increases, $75,000 was due to office property and equipment expense, of which $3,000 was attributable to Year 2000 expenses, including capitalized computer hardware of $2,000, $6,000 was due to data processing, $15,000 was due to advertising, $49,000 was due to real estate loan expense and $18,000 was due to other non-interest expense, consisting of mortgage loan expenses, insurance expense, and tuition fees.. The increase in non-interest expense is primarily due to increased office property and equipment expense and the Company pursuing its plan of controlled growth, part of that being the opening and expansion of the branch office in Liberty, Missouri and the purchase of the new office building in Kearney, Missouri. Non-performing Assets - --------------------- On September 30, 1999, nonperforming assets were $717,000 compared to $714,000 on June 30, 1999. The balance of the Bank's allowance for loan losses was $932,000 at September 30, 1999, or 130.0% of nonperforming assets compared to $927,000 at June 30, 1999 or 129.8% 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 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 September 30, 1999:
Actual Required Excess amount/percent amount/percent amount/percent --------------- -------------- -------------- (Dollars in thousands) FIRREA REQUIREMENTS ------------------- Tangible capital $13,833 8.74% $2,374 1.50% $11,459 7.24% Core leverage capital $13,833 8.74% $6,331 4.00% $ 7,502 4.74% Risk-based capital $14,759 12.63% $9,348 8.00% $ 5,411 4.63%
Liquidity - --------- The Bank's principal sources of funds are deposits, principal and interest payments on loans, and deposits in other insured institutions . 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 9 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 4% of net withdrawable savings deposits and borrowings payable on demand or in one year or less. The eligible liquidity ratios at September 30, 1999 and June 30, 1999 were 4.40% and 7.69%, 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. 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 September 30, 1999 and 1998 were $6,171,250 and $7,435,735 respectively. Cash flows from operating activities. Net cash used in operating activities was $4,967,489 during the three months ended September 30, 1999 compared to $3,983,000 during the same period in 1998. The change was primarily due to an increase in the proceeds from the sale of loans held for sale of $1,971,000, and an increase in the change in other assets of $522,000, and an decrease in the change in accrued expenses and other liabilities of $2,016,000, and an increase in the originations of loans held for sale of $1,321,000. Cash flows from investing activities. Net cash of $4.0 million was used in investing activities for the three months ended September 30, 1999 versus $13.1 million for the three months ended September 30, 1998. The decrease was primarily due to an increase in loans receivable of $3.8 million during the three months ended September 30, 1999 versus a $12.3 million increase during the same period in 1998. Cash flows from financing activities. Net cash provided by financing activities was $7.4 million for the three months ended September 30, 1999 compared to $21.5 million during the same period in 1998. The decrease in cash flows from financing activities is primarily due to an increase in FHLB advances of $13.0 million, offset by advance repayments of $5.0 million for the three months ended September 30, 1999 versus an increase of $16.05 million for the same period in 1998, and an decrease in deposits of $0.8 million for the three months ended September 30, 1999 versus an increase of $4.9 million for the same period in 1998. Impact of Recently Issued Accounting Standards The Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", in June 1998. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 137 was issued in June 1999 and delayed the effective date of SFAS No. 133 until June 15, 2000. Management believes adoption of SFAS No. 133 will not have a material effect on the Company's financial position or results of operations, nor will adoption require additional capital resources. Year 2000 Issue The Board of Directors and the Management of the Bank have established a formal process for the implementation of a plan to evaluate and correct the problems that the Year 2000 could cause to the Bank's critical automated systems. The Year 2000 problem exists because many automated systems use only two digit fields to represent the year, such as "99" representing 1999. However, with the two digit format, the Year 2000 is indistinguishable from 1900, 2001 from 1901, and so on. Should these critical systems fail in the year 2000, the Bank would have difficulty in processing transactions for loans and deposit customers, which could cause significant damage to the Bank's important customer relationships. 10 The Company's year 2000 process uses the standard framework set forth by the OTS. The process includes separate phases for awareness, assessment, renovation, validation, and implementation. Since the Company does not develop any of the software programs that are utilized, the process is focused on follow-up and testing of software provided by third-party vendors and data centers to ensure their renovation. Also, the process attended to pre-packaged computer software, personal computer and server hardware, and other electronic equipment. The Company has established and tested a contingency plan for the year 2000 which will be implemented if necessary. The data processing of the Bank's core operations is provided by a third party service bureau. Management has received assurances from the Bank's service bureau that software and data center hardware are year 2000 compliant. In the year 2000 process, the Company has also evaluated the hardware and software on its wide-area network ("WAN"). Management estimates that the year 2000 implementation process cost $269,000, which includes the cost of capitalized computer hardware for the WAN and other costs to perform testing and validation of services provided by the Company's service bureau and other third parties. The Company has previously had an on-site examination of its year 2000 process, which was performed by the OTS, its primary regulator. Management is continuing to work closely with vendors, service providers, and regulators to accomplish its goal of a smooth transition to the year 2000. 11 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 --------------------------------------------------- None Item 5. Other Information ----------------- None. Item 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibits 27-Financial Data Schedule 12 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 there unto duly authorized. CBES Bancorp, Inc. and Subsidiaries ----------------------------------------------- (Registrant) Date: November 12, 1999 ----------------------------------------------- By: /s/ Dennis D. Hartman ----------------------------------------------- Dennis D. Hartman, Chief Executive Officer and Secretary (Duly Authorized Officer) Date: November 12, 1999 ----------------------------------------------- By: /s/ Robert F. Kirk ----------------------------------------------- Robert F. Kirk, Controller and Chief Financial Officer (Principal Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE
9 1 3-MOS JUN-30-2000 SEP-30-1999 617,658 5,553,592 0 0 0 240,913 241,809 143,253,214 932,000 158,110,776 100,634,785 17,300,000 1,364,395 0 10,319 0 0 17,117,767 158,110,776 3,028,867 1,023 80,186 3,110,076 1,168,505 1,612,898 1,497,178 38,290 0 250,492 392,770 248,432 0 0 248,432 0.28 0.28 8.57 538,379 0 0 0 927,000 36,712 16,226 932,000 932,000 0 0
-----END PRIVACY-ENHANCED MESSAGE-----