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, 1997
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 Identification No.)
incorporation or organization)
427 Monroe Street, Jefferson City, Missouri 65101
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, 1997
Common Stock, par value $.01 per share 1,653,125 Shares
CNS BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PAGE NO.
PART I - Financial Information
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
(Unaudited)
ASSETS June 30,1997 December 31,1996
Cash and due from depository
institutions (including
interest-bearing accounts
totaling $4,204,131 in 1996
and $4,269,563 in 1997) $5,208,428 $4,572,026
Securities available-for-sale $23,670,576 $27,574,516
Stock in Federal Home Loan Bank $939,300 $939,300
Loans held-for-sale, net $0 $570,986
Loans receivable, net $64,930,478 $60,980,826
Receivable from Briar Pointe LLC $844,460 $0
Accrued interest receivable $659,320 $619,454
Premises and equipment, net $1,593,741 $1,657,421
Income tax receivable $407,151 $486,321
Other assets $97,075 $80,341
Total assets $98,350,529 $97,481,191
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $73,274,383 $72,880,431
Accrued interest on deposits $121,640 $92,381
Advances from borrowers for taxes
and insurance $182,930 $57,299
Accrued expenses and other
liabilities $240,285 $251,802
Total liabilities $73,819,238 $73,281,913
Common stock, $.01 par value:
Authorized, 6,000,000 shares;
1,653,125 shares issued $16,531 $16,531
Additional paid-in-capital $16,031,483 $16,003,502
Retained earnings, substantially
restricted $10,336,213 $10,044,280
Deferred compensation - ESOP ($1,202,394) ($1,249,411)
Investments held in trust for
Exec. Def. Comp. Plan ($140,588) ($127,428)
Unrealized loss on securities net
of deferred taxes ($509,954) ($488,196)
Total stockholders' equity $24,531,291 $24,199,278
Total liabilities and
stockholders' equity $98,350,529 $97,481,191
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1997 1996 1997 1996
INTEREST INCOME
Mortgage loans $1,244,579 $1,058,830 $2,436,444 $2,083,099
Consumer and other loans $56,277 $21,280 $115,886 $44,381
Investment securities $174,251 $91,027 $370,993 $163,695
Mortgage-backed securities $177,053 $203,900 $356,911 $418,277
Other interest-earning assets $121,621 $257,254 $235,531 $413,597
Total interest income $1,773,781 $1,632,291 $3,515,765 $3,123,049
INTEREST EXPENSE
Deposits $907,450 $982,573 $1,799,331 $1,928,671
Borrowed money $890 $0 $890 $0
Total interest expense $908,340 $982,573 $1,800,221 $1,928,671
Net interest income $865,441 $649,718 $1,715,544 $1,194,378
PROVISION FOR LOAN LOSSES $22,273 $7,245 ($4,636) $1,894
Net interest income after
provision for loan losses $843,204 $642,473 $1,720,180 $1,192,484
NONINTEREST INCOME
Loan servicing fees $12,263 $14,037 $24,994 $27,946
Income from real estate owned $1,650 $144,104 $3,050 $184,720
Net gain on sale of assets $0 $43,111 $6,156 $51,652
Other $28,307 $35,191 $59,663 $42,950
Total noninterest income $42,220 $236,443 $93,863 $307,268
NONINTEREST EXPENSE
Compensation and benefits $276,694 $254,438 $551,492 $481,376
Occupancy and equipment $60,412 $58,884 $123,970 $116,730
Deposit insurance premiums $11,931 $44,886 $26,862 $89,772
Other $177,657 $118,811 $371,628 $222,454
Total noninterest expense $526,694 $477,019 $1,070,952 $910,332
Net income before income taxes $358,730 $401,897 $743,091 $589,420
PROVISION FOR INCOME TAXES $143,474 $79,150 $297,222 $132,750
Net income $215,256 $322,747 $445,869 $456,670
Net income per share $0.14 $0.20 $0.29 $0.28
Weighted average shares outstanding $1,528,184 $1,653,125 1,528,184 1,653,125
Dividends paid per share $0.05 N/A $0.05 N/A
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
June 30, 1997 June 30, 1996
Cash flows from operating activities: ______________________________
Net Income $445,868 $456,669
Adjustments to reconcile net income to
net cash flows provided by (used for)
operating activities:
Depreciation $66,893 $62,410
Benefit for loan losses ($4,636) $1,894
(Gain)on sale of real estate owned $0 ($182,701)
Amortization of premiums on
securities available-for-sale $16,723 $28,871
Proceeds from the sale of loans
held-for-sale $607,641 $4,081,012
Origination of loans held-for-sale $0 ($5,197,411)
(Gain) on sales of loans held-for-sale $0 ($13,332)
Compensation expense - ESOP $74,998 $21,828
Decrease (increase) in:
Accrued interest receivable ($39,866) ($161,722)
Other assets ($16,734) $52,337
Income tax receivable $92,501 $26,992
Increase (decrease) in:
Accrued expenses and other liabilities $17,742 ($82,814)
Net cash provided by operating
activities $1,261,130 ($905,967)
Cash flows from investing activities:
Loans:
Loan (originations) and principal
payments - net ($2,806,671) $342,758
Purchases of:
Loans receivable ($1,175,000) ($966,450)
Securities available-for-sale ($1,047,445) ($13,392,150)
Proceeds from maturity or repayment of:
Securities available-for-sale $4,899,573 $2,345,532
Investment in joint venture ($844,460)
Proceeds from sales of real estate owned $0 $344,688
Cash outflows for premises and equipment ($3,213) ($23,081)
Net cash provided by investing
activities ($977,216) ($11,348,703)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits $393,952 ($2,143,939)
Advances from borrowers for taxes
and insurance $125,631 $119,289
Proceeds from sale of common stock $0 $14,708,750
Executive deferred compensation trust (13,160)
Dividends paid to shareholders ($153,936) --------
Net cash provided by financing
activities $352,486 $12,684,100
Net increase (decrease) in cash
and cash equivalent $636,401 $429,430
Cash and cash equivalents at
beginning of period $4,572,026 $2,855,944
Cash and cash equivalents at
end of period $5,208,428 $3,285,374
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits $388,331 $352,338
Income taxes $121,750 $45,341
Non-cash transactions during the period:
Exchange of common stock for ESOP shares $1,322,500
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 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, 1997 are not
necessarily indicative of results that may be expected for the
entire fiscal year ending December 31, 1997.
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, Parity
Insurance Agency, Inc., and its wholly-owned subsidiary, City
National Real Estate, Inc., for the three months and six
months ended June 30, 1997. 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 $531,424 were $15,999,826
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 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 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
Earnings per share for the three months and six months ended
June 30, 1997 have been calculated to be $.15 and $.29
respectively based upon the weighted average number of shares
outstanding.
(4) Subsequent Event(s):
The Company repurchased stock for the MRDP trust in the
following amounts:
Date of Purchase Shares Purchased Price per Share
July 31, 1997 5,000 $16.375
August 1,1997 15,000 $16.625
August 5,1997 7,000 $16.750
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.
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 Bank'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 17.14% at June 30,
1997.
Commitments to originate adjustable-rate mortgage loans at June 30,
1997 were approximately $159,000. Commitments to originate fixed-
rate mortgage loans at June 30, 1997 were approximately $363,000.
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. From the early 1980's up until 1996, the Savings
Bank has originated primarily adjustable-rate mortgage loans for
it's loan portfolio. In early 1996 the Savings Bank began keeping
some of the fixed rate loans it originates. As of June 30, 1997
the Savings Bank held adjustable-rate mortgage loans of $46.3
million or 73.49% of the total mortgage loans.
The Savings Bank is required to meet certain tangible, core and
risk-based capital requirements. The following table presents the
Savings Bank's capital position relative to its regulatory capital
requirements at June 30, 1997:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $18,432 19.70%
Tangible capital requirement $1,404 1.50%
Excess $17,028 18.20%
Core capital $18,432 19.70%
Core capital requirement $2,807 3.00%
Excess $15,625 16.70%
Risk-based capital $18,795 41.27%
Risk-based capital requirement $3,603 8.00%
Excess $15,192 33.27%
Financial Condition
Assets increased from $97.5 million at December 31, 1996 to $98.4
million at June 30, 1997. Cash and due from depository
institutions increased from $4.6 million at December 31, 1996 to
$5.2 million at June 30, 1997 due to the reinvestment of funds from
government securities into shorter term FHLB time certificates and
the investment in Briar Pointe, LLC, a single family home
development. Securities available-for-sale decreased from $27.6
million at December 31, 1996 to $23.7 million at June 30, 1997.
Loans held-for-sale and loans receivable, net increased from $61.6
million at December 31, 1996 to $64.9 million due primarily to the
favorable interest rate environment during the period.
Receivable from Briar Pointe, LLC is the result of an investment in
June 1997 by CNS Bancorp, Inc. in a real estate joint venture in
Waynesville, Mo. known as Briar Pointe Development Co., LLC. Briar
Pointe, LLC will develop and sell 125 building lots for single
family homes in a new subdivision known as Briar Pointe located in
the city of Waynesville, Missouri. The project is expected to be
completed within the next three years. CNS Bancorp, Inc. has a 55%
interest and two individuals have a 45% interest. CNS Bancorp,
Inc. will provide the financing and the individuals will provide
the management for the project. CNS Bancorp, Inc. will receive
interest on its investment at an interest rate of 8.5% and the
manager will receive a management fee of $75,000. When all lots
have been sold any profit will be shared with CNS Bancorp, Inc. to
receive 55% and other investors to receive 45%.
Accrued interest receivable decreased slightly during the six
months of 1997. Deposits increased from $72.9 million at December
31, 1996 to $73.3 million at June 30, 1997. Accrued interest on
deposits and advances from borrowers for taxes and insurance
increased during the first six months of 1997.
It is the policy of the Savings Bank to cease accruing interest on
loans 90 days or more past due. Nonaccrual loans decreased from
$310,000 at December 31, 1996 to $145,000 at June 30, 1997 as a
result of the loans being paid current.
Results of Operations
Net earnings decreased from $323,000 for the three months ended
June 30, 1996 to $215,000 for the three months ended June 30, 1997.
Net earnings decreased from $457,000 for the six months ended June
30, 1996 to $446,000 for the six months ended June 30, 1997. The
primary reasons for the decrease in net earnings were the two
nonrecurring gains received in 1996 from the sale of Texas REO and
the cooperative ownership of a data center.
Net Interest Income
Net interest income increased from $650,000 for the three months
ended June 30, 1996 to $843,000 for the three months ended June 30,
1997 and from $1.2 million for the six months ended June 30, 1996
to $1.8 million for the six months ended June 30, 1997. Total
interest income increased from $1.6 million for the three months
ended June 30, 1996 to $1.7 million for the three months ended June
30, 1997 and from $3.1 million for the six months ended June 30,
1996 to $3.5 million for the six months ended June 30, 1997. The
increase in total interest income is due primarily to increases in
interest income from mortgage loans, consumer and other loans and
investment securities which was partially offset by decreases in
interest income from mortgage-backed securities and other interest
earnings assets. The increases in interest income from loans and
securities is a result of higher average balances, which reflects
the investment of the proceeds of the Company's public offering,
and higher average yields in those assets in 1997 compared to the
same time periods in 1996. Total interest expense decreased from
$983,000 for the three months ended June 30, 1996 to $908,000 for
the three months ended June 30, 1997 and from $1.9 million for the
six months ended June 30, 1996 to $1.8 million for the six months
ended June 30, 1997. The decrease in interest expense is primarily
due to a decrease in the average deposit balance outstanding during
the first six months of 1997 compared to the first six months of
1996 when the stock conversion was completed.
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 their 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
increased from $7,000 for the three months ended June 30, 1996 to
$22,000 for the three months ended June 30, 1997. The increase is
due primarily to lending volume this quarter as it compares to the
same quarter last year. Provision for loan losses decreased from
$2,000 for the six months ended June 30, 1996 to a $5,000 recapture
of loan losses for the six months ended June 30, 1997. The $5,000
recapture of loan losses is primarily due to the large recapture of
loan losses during the first quarter of 1997 when a large
commercial real estate loan which was classified at the end of 1996
was paid current.
Noninterest Income
Noninterest income decreased from $236,000 for the three months
ended June 30, 1996 to $42,000 for the three months ended June 30,
1997 and from $307,000 for the six months ended June 30, 1996 to
$94,000 for the six months ended June 30, 1997. The primary
reasons that noninterest income decreased in 1997 were the decrease
in income from real estate owned and the gain in 1996 on the sale
of other assets. The Savings Bank recognized a gain of $182,000 on
the sale of Texas real estate owned and a gain of $38,000 from the
sale of a cooperative ownership of a data center during the six
months of 1996 and there was no such activity during 1997.
Noninterest Expense
Noninterest expense increased from $477,000 for the three months
ended June 30, 1996 to $527,000 for the three months ended June 30,
1997 and from $910,000 for the six months ended June 30, 1996 to
$1.1 million for the six months ended June 30, 1997. The increase
in noninterest expense during 1997 is due to increases in
compensation and benefits and other noninterest expense and is
partially offset by a decrease in deposit insurance. The increase
in compensation and benefits is due primarily to the recognition of
ESOP compensation during the first six months of 1997 and only for
the month of June in 1996. Other noninterest expenses increased
primarily due to first time expenses resulting from operating as a
public company. The decrease in deposit insurance premiums is a
result of lower insurance premiums this year compared to the same
time period last year.
Income Taxes
Income taxes increased from $79,000 for the three months ended June
30, 1996 to $144,000 for the three months ended June 30, 1997 and
from $589,000 for the six months ended June 30, 1996 to $743,000
for the six months ended June 30, 1997. The effective income tax
rates used to calculate the provision for income taxes in 1997 is
40%. A lower rate was applicable last year due primarily to non-
taxable income which included gains on sale of real estate owned.
CNS BANCORP, INC. AND SUBSIDIARIES
PART II - Other Information
Item 1 - Legal Proceeding
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
The Annual meeting of Stockholders of the Company ("Meeting")
was held on April 22, 1997. The results of the vote on the matters
presented at the Meeting is as follows:
1. The following individuals were elected as directors, each
for a three year term:
Vote for Vote Withheld
James F. McHenry 1,418,021 24,594
James E. Whaley 1,418,021 24,594
Ronald D. Roberson 1,418,021 24,594
The terms of Directors Richard Caplinger, Robert E.
Chiles, John C. Kolb, and Michael A. Dallmeyer continued
after the meeting.
2. The CNS Bancorp, Inc. 1997 Stock Option Plan was approved
by stockholders by the following vote:
For 974,162; Against 138,277; Abstain 21,038
3. The CNS Bancorp, Inc. 1997 Management Recognition and
Development Plan was approved by stockholders by the
following vote:
For 962,833; Against 143,852; Abstain 28,864
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule
(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, 1997 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