UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
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 June 30, 1996
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 No. 0-28250
CNS BANCORP, INC.
Delaware 43-1738315
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
427 Monroe Street, Jefferson City, Missouri 65051
Registrant's telephone number, including area code (573)634-3336
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 Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such
report), and (2) has been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ] .
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding June 30, 1996
Common Stock, par value
$.01 per share 1,653,125 Shares
CNS BANCORP, INC. AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31,1995
INDEX
PAGE NO.
PART I - Financial Information (Unaudited)
Consolidated Balance Sheets 1
Consolidated Statements of Earnings 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of 5
Financial Condition and Results of
Operations
PART II - Other Information 9
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS JUNE 30, 1996 DECEMBER 31, 1995
------------- ------------
Cash and due from
depository institutions $2,850,729 $2,855,944
Securities available-for-sale $37,077,169 $25,470,739
Stock in Federal Home
Loan Bank $939,300 $939,300
Loans held-for-sale $1,269,300 $466,131
Loans receivable, net $53,235,072 $52,611,378
Accrued interest receivable $647,782 $486,060
Real estate owned, net $0 $161,987
Premises and equipment, net $1,719,810 $1,759,437
Other assets $587,124 $639,461
------------- ------------
Total assets $98,326,286 $85,390,437
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $73,786,978 $75,930,917
Accrued interest on deposits $118,558 $123,347
Advances from borrowers for
taxes and insurance $182,330 $63,041
Accrued income taxes $28,711 $1,719
Accrued expenses and
other liabilities $13,517 $91,542
------------- ------------
Total liabilities $74,130,094 $76,210,566
Common stock $16,531 $0
Additional paid-in-capital $9,697,118 $0
Retained earnings,
substantially restricted $16,474,431 $9,697,118
Deferred compensation - ESOP ($1,303,715) $0
Unrealized loss on
securities available-
for-sale net of
deferred taxes ($688,173) ($517,247)
------------- ------------
Total stockholders' equity $24,196,192 $9,179,871
------------- ------------
Total liabilities and
stockholders' equity $98,326,286 $85,390,437
1
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1996 1995 1996 1995
------- ------- ------- -------
INTEREST INCOME
Mortgage loans $1,079,529 $ 828,101 $2,118,377 $1,648,160
Consumer and other loans 21,148 21,043 44,249 39,722
Investment securities 74,680 106,474 126,683 215,465
Mortgage-backed securities 203,900 255,663 418,277 515,207
Other interest-earning assets 257,253 171,802 413,596 328,558
------- ------- ------- -------
Total interest income 1,636,510 1,383,083 3,121,182 2,747,112
INTEREST EXPENSE-DEPOSITS 982,591 916,454 1,928,708 1,732,258
------- ------- ------- -------
Net interest income 653,919 466,629 1,192,474 1,014,854
PROVISION FOR LOAN LOSSES 7,245 8,335 1,894 78,275
Net interest income after ------- ------- ------- -------
provision for loan losses 646,674 458,294 1,190,580 936,579
NONINTEREST INCOME
Loan servicing fees 14,037 14,425 27,946 28,940
Income from real estate owned 550 48,156 9,925 48,576
Net gain (loss) on sale
of assets 132,796 906 196,037 (125,794)
Other 100,923 28,821 158,380 224,864
------- ------- ------- -------
Total noninterest income 248,306 92,308 392,288 176,586
NONINTEREST EXPENSE
Compensation and benefits 259,940 219,751 496,962 446,314
Occupancy and equipment 96,784 91,241 194,766 184,248
Deposit insurance premiums 44,886 43,909 89,772 90,643
Other 88,457 87,560 211,947 384,329
------- ------- ------- -------
Total noninterest expense 490,067 442,461 993,447 1,105,534
------- ------- ------- -------
Net income before income taxes 404,913 108,141 589,421 7,631
PROVISION FOR INCOME TAXES 79,150 24,900 132,750 2,500
------- ------- ------- -------
Net income 322,747 50,755 456,671 5,131
Net earnings per share N/A N/A N/A N/A
Weighted average shares out-
standing (1) 1,653,125 N/A N/A N/A
Dividends per share N/A N/A N/A N/A
_________
(1) Shares outstanding at end of period.
2
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Cash flows from operating activities:
Net Income $456,671 $5,131
Adjustments to reconcile net income to
net cash flows provided by (used for)
operating activities:
Depreciation 62,410 60,288
Provision for loan losses 1,894 78,275
Gain on sale of real estate owned (182,701) (779)
Amortization of premiums and (discounts)
on mortgage-backed securities 26,931 18,486
Amortization of premiums and (discounts)
on investment securities 1,940 1,064
ESOP expenses 21,828 0
Proceeds from the sale of loans held-
for-sale 4,081,012 328,600
Origination of loans held-for-sale (5,197,411) (549,377)
Gain on sales of loans held-for-sale (13,332) (1,266)
Loss on sale of mortgage-backed securities 0 127,839
Decrease (increase) in:
Accrued interest receivable 161,722 (21,499)
Other assets (52,337) (8,821)
Increase (decrease) in:
Accrued interest on deposits (4,789) 90,022
Accrued expenses and other liabilities (78,025) 328,441
Accrued income taxes 26,992 28,840
------------- -------------
Net cash provided by(used for) operating
activities (906,965) 485,244
Cash flows from investing activities:
Loans:
Loan (originations) and principal
payments - net 342,756 (1,298,948)
Purchases of:
Loans receivable (966,450) (605,775)
Securities available-for-sale (13,392,150) 0
Securities held-to-maturity 0 (1,191,329)
Proceeds from maturity of:
Securities available-for-sale (1,910,887) 0
Securities held-to-maturity 0 3,000,000
Proceeds from sales of securities
available-for-sale 1,864,062
Proceeds from sales of real estate owned 344,688 0
Cash outflows for premises and equipment (23,081) (21,162)
------------- -------------
Net Cash Provided by Investing Activities (11,783,350) 1,746,848
Cash flows from financing activities:
Net increase (decrease) in:
Deposits (2,143,939) (2,174,605)
Advances from borrowers for taxes and
insurance 119,289 134,669
Proceeds from sale of common stock 14,708,750 0
------------- -------------
Net cash provided by financing activities 12,684,100 (2,039,936)
Net increase (decrease) in cash and cash
equivalents (5,215) 192,156
Cash and cash equivalents at beginning
of period 2,855,944 1,296,596
------------- -------------
Cash and cash equivalents at end of period $ 2,850,729 $ 1,488,752
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits 352,338 446,026
Income taxes 45,341 31,340
Non-cash transactions during the period:
Exchange of common stock for ESOP shares 1,322,500 0
3
PAGE
CNS BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation have been included. The
results of operations and other data for the three months and six months ended
June 30, 1996 are not necessarily indicative of results that may be expected
for the entire fiscal year ending December 31, 1996.
The unaudited consolidated financial statements include the amounts of
CNS Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, City
National Savings Bank, FSB (the "Saving Bank") and the Savings Bank's
wholly-owned subsidiary, Cinsal for the three an six months ended June 30,
1996. The consolidated financial statements for the prior periods include
only the accounts of the Savings Bank and its subsidiaries. Material
intercompany accounts and transactions have been eliminated in consolidation.
(2) Conversion to Stock Ownership
On December 19, 1995 the Board of Directors of the Savings Bank
unanimously adopted a Plan of Conversion pursuant to which the Savings Bank
converted from a federally chartered mutual savings bank to a federally
chartered stock savings bank, with the concurrent formation of the Company.
The Company, on June 11, 1996, sold 1,653,125 shares of common stock at $10.00
per share to depositors, borrowers and employees of the Savings Bank in a
subscription offering. The proceeds from the conversion, after recognizing
conversion expenses and underwriting costs of $500,000 were $16,031,250 and
are recorded as common stock and additional paid in capital on the
accompanying unaudited consolidated statement of financial condition. The
Company utilized 50% of the net proceeds to purchase all of the capital stock
of the Savings Bank.
The Savings Bank has established for eligible employees an Employee
Stock Ownership Plan ("ESOP") in connection with the conversion. The ESOP
borrowed $1,322,500 from the Holding Company and purchased 132,250 common
shares issued in the conversion. The Savings Bank is expected to make
scheduled discretionary cash contributions to the ESOP sufficient to service
the amount borrowed. The $1,322,500 in stock issued by the Holding Company is
reflected in the accompanying consolidated financial statements as a charge to
unearned compensation and a credit to common stock and paid-in capital. The
unamortized balance of unearned compensation is shown as a deduction of
stockholders' equity. The unpaid balance of the ESOP loan is eliminated in
consolidation.
(3) Earnings Per Share
The conversion to stock ownership was effected on June 11, 1996,
therefore, earnings per share for the three and six months ended June 30, 1996
have not been computed.
4
PAGE
Management Discussion and Analysis of
Financial Condition and Results of Operation
General
On June 11, 1996, City National Savings Bank, FSB (Savings Bank) converted
from mutual to stock form and became a wholly-owned subsidiary of a newly
formed Delaware holding company, CNS Bancorp, Inc. (Company). The Company
sold 1,653,125 shares of common stock at $10 per share in conjunction with a
subscription offering to the Savings Bank's Employee Stock Ownership Plan
(ESOP) and eligible account holders. Net proceeds of the sale of common stock
in the subscription offering were $16,031,250, after deducting conversion
costs of $500,000. The Company retained 50% of the net conversion proceeds
less the funds used to make the ESOP loan to the Savings Bank for purchase of
shares of common stock for the Savings Bank's ESOP and purchased short term
government securities of approximately $6.6 million. The balance of the net
proceeds were used to purchase all of the stock of the Savings Bank in the
conversion.
The Company's principal business is the business of the Savings Bank.
Therefore, the discussion in the Managements's Discussion and Analysis of
Financial Condition and Results of Operation relates to the Savings Bank and
its operations.
Liquidity and Capital Resources
The Savings Banks's principal sources of funds are cash receipts from
deposits, loan repayments by borrowers and net earnings. The Savings Bank has
an agreement with the Federal Home Loan Bank of Des Moines to provide cash
advances, should the need for additional funds be required.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits. The minimum level of liquidity required
by regulation is presently 5%. The Savings Bank's liquidity ratio was
approximately 19.24% at June 30, 1996.
Commitments to originate adjustable-rate mortgage loans at June 30, 1996 were
approximately $1,080,000. Commitments to originate fixed-rate mortgage loans
at June 30, 1996 were approximately $741,000.
The thrift industry historically has accepted interest rate risk as a part of
its operating philosophy. Long-term, fixed-rate loans were funded with
deposits which adjust to market interest rates more frequently. Since the
early 1980's, the Savings Bank has originated primarily adjustable-rate
mortgage loans for it's loan portfolio, which, when combined with its strong
capital position and emphasis on deposits with shorter maturities, has reduced
interest rate exposure.
The Savings Bank is required to meet certain tangible, core and risk-based
capital requirements.
5
PAGE
The following table presents the Savings Bank's capital position relative
to its regulatory capital requirements at June 30, 1996:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $16,855 18.25%
Tangible capital requirement $1,385 1.50%
Excess $15,470 16.75%
Core capital $16,855 18.25%
Core capital requirement $2,770 3.00%
Excess $14,085 15.25%
Risk-based capital $17,171 43.10%
Risk-based capital requirement $3,187 8.00%
Excess $13,984 35.10%
Financial Condition
Assets increased from $85.4 million at December 31, 1995 to $98.3 million at
June 30, 1996. Securities available-for-sale increased from $25.5 million at
December 31, 1995 to $37.1 million at June 30, 1996 as a result of proceeds
from the sale of common stock since the cash was used to purchase short-term
government securities. The Company expects to use the funds as they mature
for loan originations or purchases in order to increase interest income.
Loans held-for-sale and loans receivable, net increased from $53.1 million at
December 31, 1995 to $54.4 million due primarily to the favorable interest
rate environment during the period. Accrued interest receivable increased
because of the larger asset base in securities and loans. Real estate owned,
net decreased due to the sale of all of the real estate during the first six
months of 1996. Deposits decreased from $75.9 million at December 31, 1995 to
$73.8 million at June 30, 1996.
It is the policy of the Savings Bank to cease accruing interest on loans 90
days or more past due. Nonaccrual loans increased from $88,000 at December
31, 1995 to $188,000 at June 30, 1996 due to a collection oversight for one
purchased loan of $167,000 during May and June.
Results of Operations
Net earnings increased from $51,000 for the three months ended June 30, 1995
to $323,000 for the three months ended June 30, 1996. Net earnings increased
from $5,000 for the six months ended June 30, 1995 to $457,000 for the six
months ended June 30, 1996. There were three primary reasons for the
increase. In January of 1995 the Savings Bank sold CMOs at a loss of
$128,000. During March and April of 1996 the Savings Bank sold all remaining
real estate owned at a profit of $183,000. In June of 1996 the Savings Bank
received $38,000 from the sale of it's cooperative ownership of a data center.
6
PAGE
Net Interest Income
Net interest income increased from $467,000 for the three months ended June
30, 1995 to $654,000 for the three months ended June 30, 1996 and from
$1,015,000 for the six months ended June 30, 1995 to $1,192,000 for the same
period in 1996. Total interest income increased from $1,383,000 for the three
months ended June 30, 1995 to $1,637,000 for the three months ended June 30,
1996. Total interest income increased from $2,747,000 for the six months
ended June 30, 1995 to $3,121,000 for the comparable 1996 period. The
increase in interest income stemmed from an increase in average earning assets
and higher yields on those assets. The weighted-average yield on the loan
portfolio was 8.04% for the six months ended June 30, 1996. The weighted
average rate at December 31, 1995 was 7.75%. Interest income from investment
securities decreased from $106,000 for the three months ended June 30, 1995 to
$75,000 for the three months ended June 30, 1996. Interest income from
investment securities decreased from $215,000 for the six months ended June
30, 1995 to $127,000 for the same time period in 1996. This decrease is
primarily due to a reduced securities balance in 1996. Interest income from
mortgage-backed securities decreased from $255,000 for the three months ended
June 30, 1995 to $204,000 for the three months ended June 30, 1996. Interest
income from mortgage-backed securities decreased from $515,000 for the six
months ended June 30, 1995 to $418,000 for the same time period in 1996. The
decreases are due primarily to the principal repayment of the mortgage-backed
securities. Interest income from other interest-earning assets increased from
$172,000 for the three months ended June 30, 1995 to $257,000 for the three
months ended June 30, 1996. Interest income from other interest-earning
assets increased from $329,000 for the six months ended June 30, 1995 to
$414,000 for the six months ended June 30, 1996. The increase in interest
income from other interest-earning assets is primarily due to the earnings
from the larger than normal balance on deposit at the FHLB during the stock
conversion. Interest expense increased as both the weighted-average rate and
average deposit balance increased. The weighted-average rate on deposits was
5.15% for the six months ended June 30, 1996. The weighted-average rate at
December 31, 1995 was 5.02%.
Provision for Loan Losses
Provision for loan losses is based upon management's consideration of economic
conditions which may affect the ability of borrowers to repay the loans.
Management also reviews individual loans for which full collectibility may not
be reasonably assured and considers, among other matters, the risks inherent
in the Savings Bank's portfolio and the estimated fair value of the underlying
collateral. This evaluation is ongoing and results in variations in the
Savings Bank's provision for loan losses. As a result of this evaluation, the
Savings Bank's provision for loan losses was $7,000 for the three months ended
June 30, 1996 and $8,000 for the three months ended June 30, 1995. The loan
loss provision was $2,000 for the six months ended June 30, 1996 and $78,000
for the same period in 1995.
Noninterest Income
Noninterest income increased from $92,000 for the three months ended June 30,
1995 to $248,000 for the three months ended June 30, 1996. Noninterest income
increased from $177,000 for the six months ended June 30, 1995 to $392,000 for
the six months ended June 30, 1996. The primary reason for the increase was
the profit on sale of real estate owned of $183,000 and profit on the sale of
cooperative ownership of a data center of $38,000, both received during the
first six months of 1996.
7
Noninterest Expense
Noninterest expense increased from $443,000 for the three months ended June
30, 1995 to $490,000 for the three months ended June 30, 1996. Noninterest
expense decreased from $1.1 million for the six months ended June 30, 1995 to
$994,000 for the six months ended June 30, 1996. The primary reason for the
increase during the current quarter is the addition of the ESOP compensation.
The primary reason for the decrease during the six month period is the loss of
$128,000 on the sale of CMO's taken in early 1995.
Income Taxes
The effective income tax rates are less than the statutory rates due primarily
to nontaxable income, which includes gain on the sale of real estate owned.
Income taxes fluctuated due to the level of earnings before income taxes.
8
CNS BANCORP, INC. AND SUBSIDIARIES
PART II - Other Information
Item 1 - Legal Proceedings
There are no material legal proceedings to which the Company or the Savings
Bank is a party or of which any of their property is subject. From time to
time, the Savings Bank is a party to various legal proceedings incident to its
business.
Item 2 - Changes in Securities
None.
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.
(a) Exhibits: none
(b) Reports on Form 8-K: No reports on Form 8-K have been filed during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNS BANCORP, INC.
(Registrant)
DATE: August 14, 1996 BY:/s/ Robert E. Chiles
---------------------
Robert E. Chiles, President and
Duly Authorized Officer
BY:/s/ David L. Jobe
------------------
David L. Jobe, Treasurer and
Chief Financial Officer