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 March 31, 1998
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. 028250
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 March 31, 1998
Common Stock, par value $.01 per share 1,644,598 Shares
CNS BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1998
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
Financial Condition and Results of Operations 6
PART II - Other Information 9
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
ASSETS MARCH 31, DECEMBER 31,
1998 1997
--------- --------
Cash and due from depository institutions (including
interest-bearing accounts totaling $6,086,640 in
1998 and $3,112,633 in 1997) $ 6,989,899 $ 4,490,638
Securities available-for-sale 18,912,218 21,670,913
Stock in Federal Home Loan Bank 939,300 939,300
Loans held-for-sale, net 1,598,617 446,748
Loans receivable, net 65,198,921 66,512,442
Accrued interest receivable 572,688 616,075
Real estate owned, net 660,636 652,795
Premises and equipment, net 1,614,866 1,625,137
Income tax receivable 158,230 299,784
Other assets 864,283 636,963
---------- ----------
Total assets $97,509,658 $97,890,795
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $72,255,074 $72,882,810
Borrowed funds 589,882 595,985
Advances from borrowers for taxes and insurance 96,765 28,828
Accrued interest and other liabilities 498,781 459,045
---------- ----------
Total liabilities $73,440,502 $73,966,668
----------- -----------
Common stock, $.01 par value:
Authorized, 6,000,000 shares; 1,653,125
shares issued 16,531 16,531
Additional paid-in-capital 16,081,003 16,023,150
Retained earnings, substantially restricted 10,694,104 10,544,892
Treasury Stock (153,652) 0
Deferred compensation - ESOP (1,058,408) (1,082,640)
Deferred compensation - MRDP (878,223) (929,883)
Investments held in trust for Exec Def Comp Plan (162,396) (162,396)
Unrealized loss on securities net of deferred taxes (469,803) (485,528)
---------- ----------
Total stockholders' equity $24,069,156 $23,924,126
---------- ----------
Total liabilities and stockholders' equity $97,509,658 $97,890,794
========== ==========
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31 MARCH 31
1998 1997
----------------------------
INTEREST INCOME
Mortgage loans $1,305,380 $1,191,865
Consumer and other loans 42,014 59,609
Investment securities 102,151 196,742
Mortgage-backed securities 158,791 179,858
Other interest-earning assets 133,265 113,910
--------- ---------
Total interest income $1,741,601 $1,741,984
--------- ---------
INTEREST EXPENSE
Deposits 875,127 891,881
Borrowed money 9,429 0
---------- ----------
Total interest expense $ 884,556 $ 891,881
---------- ----------
Net interest income $ 857,045 $ 850,103
PROVISION FOR LOAN LOSSES 14,268 (26,873)
---------- ----------
Net interest income after
provision for loan losses $ 842,777 $ 876,976
NON-INTEREST INCOME
Loan servicing fees 10,862 12,731
Income from real estate owned 1,650 1,400
Net gain on sale of assets 88,575 6,156
Other 43,821 31,356
---------- ---------
Total non-interest income $ 144,908 $ 51,643
NON-INTEREST EXPENSE
Compensation and benefits 356,333 274,798
Occupancy and equipment 63,322 63,558
Deposit insurance premiums 11,931 11,931
Other 142,135 193,971
---------- ---------
Total non-interest expense $ 573,721 $ 544,258
---------- ---------
Net income before income taxes $ 413,964 $ 384,361
PROVISION FOR INCOME TAXES $ 165,565 $ 153,748
---------- ---------
Net income $ 248,399 $ 230,613
========== =========
Net income per share $ 0.16 $ 0.15
Diluted net income per share $ 0.16 $ 0.14
Weighted average shares outstanding 1,539,616 1,528,184
Dividends paid per share $ 0.06 $ 0.05
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES: -------------- --------------
Net Income $ 248,399 $ 230,613
Adjustments to reconcile net income to net cash flows
provided by (used for) operating activities:
Depreciation 30,245 339,933
Provision for loan losses 14,268 (26,873)
(Gain)/loss on sale of real estate owned 0 0
Amortization of premiums and accretion of
discounts on securities available-for-sale 37,013 9,213
(Gain)/loss on sale of securities available
for sale 0 0
Proceeds from the same of loans held-for-sale 4,943,249 0
Origination of loans held-for-sale (3,479,788) 0
(Gain)/loss on sales of loans held-for-sale 0 0
Compensation expense - ESOP 82,085 37,411
Compensation expense - MRDP 51,660 0
Decrease (increase) in:
Accrued interest receivable 43,387 14,435
Other assets (277,320) (29,542)
Income tax receivable 131,369 64,045
Increase (decrease) in:
Accrued expenses and other liabilities 39,543 25,009
Accrued income taxes 0 0
-------- --------
Net cash provided by(used for) operating activities 1,914,110 358,244
Cash flows from investing activities:
Loans:
Loan (originations) and principal
payments - net 1,816,453 (478,481)
Purchases of:
Loans receivable (3,226,129) (192,960)
Securities available-for-sale (299,672) (897,445)
Proceeds from maturity or pay down of:
Securities available-for-sale 3,047,457 2,366,649
Proceeds from sale or call of:
Securities available-for-sale 0 0
Proceeds from sales of real estate owned (7,841) 0
Cash outflows for premises and equipment (19,974) (3,213)
--------- ---------
Net cash provided by Investing Activities 1,310,294 794,550
Cash flows from financing activities: Net increase (decrease) in:
Deposits (627,736) 381,430
Advances from borrowers for taxes and
insurance 67,937 65,837
Borrowed funds (6,103) 0
Proceeds from sale of common stock (153,652) 0
Executive deferred compensation trust 0 0
Dividends paid to shareholders (99,187) (71,280)
--------- ---------
Net cash provided by financing activities (818,741) 375,987
--------- ---------
Net increase (decrease) in cash &
cash equivalents 2,499,264 1,528,782
Cash and cash equivalents at beginning of period 4,490,638 4,572,016
--------- ---------
Cash and cash equivalents at end of period 6,989,899 $6,100,808
========= =========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits 206,555 202,260
Income taxes 140,000 75,750
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 (GAP)
for interim financial information and with the instructions to Form 10-QSB
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAP 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 ended March 31, 1998 are not necessarily
indicative of results that may be expected for the entire fiscal year
ending December 31, 1998.
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 "Savings 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 ended March 31, 1998. 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 ended March 31, 1998 have been
calculated to be $.16 based upon the weighted average number of shares
outstanding.
(4) Repurchase of stock:
During the three months ended March 31, 1998 the Company repurchased
18,100 shares of common stock at an average price of $17.88 per share for
the MRDP trust and 8,527 shares of common stock at an average price of
$17.97 as treasury stock.
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 4%. The Savings Bank's liquidity ratio was approximately
10.29% at March 31, 1998.
Commitments to originate mortgage loans at March 31, 1998 were approximately
$238,000.
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. However during the first quarter of 1998
all of the fixed rate loans originated were sold or held for sale. As of March
31, 1998 the Savings Bank held adjustable-rate mortgage loans of $46 million or
70.77% 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 March 31, 1998:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $18,570 19.90%
Tangible capital requirement $1,400 1.50%
------------------------
Excess $17,170 18.40%
======= ======
Core capital $18,570 19.90%
Core capital requirement $2,800 3.00%
------------------------
Excess $15,770 16.90%
======= ======
Risk-based capital $18,954 40.31%
Risk-based capital requirement $3,762 8.00%
------------------------
Excess $15,192 32.31%
======= ======
Financial Condition
Assets decreased from $97.8 million at December 31, 1997 to $97.5 million at
March 31, 1998. Cash and due from depository institutions increased from $4.5
million at December 31, 1997 to $7.0 million at March 31, 1998 due to the sale
of $4.9 million of fixed rate loans, a large number of which were refinanced
loans which the Company held in portfolio. Securities available-for-sale
decreased from $21.7 million at December 31, 1997 to $18.9 million at March 31,
1998. Loans held-for-sale and loans receivable, net decreased from $67.0 million
at December 31, 1997 to $66.8 million at March 31, 1998 due primarily to the
refinancing and loan sales during the period.
Real estate owned, net increased from $653,000 at December 31, 1997 to $661,000
at March 31, 1998 due to the payment of a $25,000 management fee to the other
Briar Pointe, LLC joint venture party and the sale of one lot.
Deposits decreased from $72.9 million at December 31, 1997 to $72.3 million at
March 31, 1998.
It is the policy of the Savings Bank to cease accruing interest on loans 90 days
or more past due. Nonaccrual loans decreased from $132,000 at December 31, 1997
to $94,000 at March 31, 1998 as a result of the loans being paid current.
Results of Operations
Net earnings increased $18,000, or 7.71%, from $231,000 for the three months
ended March 31, 1997 to $248,000 for the three months ended March 31, 1998. The
primary reasons for the increase in net earnings were the increases in net
interest income and non-interest income which was partially offset by an
increase in provision for loan losses and an increase in non-interest expense.
Net Interest Income
Net interest income was essentially unchanged for the quarter ended March 31,
1998 compared to the quarter ended March 31, 1997.
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 ($27,000) for the three months
ended March 31, 1997 to $14,000 for the three months ended March 31, 1998. The
recovery in provision for loan losses during the first quarter of 1997 was
primarily due to a reduction in classified assets during that quarter when a
large commercial real estate loan which was classified at the end of 1996 was
paid current.
Non-interest Income
Non-interest income increased $93,000, or 180.60%, from $52,000 for the three
months ended March 31, 1997 to $145,000 for the three months ended March 31,
1998. The primary reason that NON-INTEREST income increased in 1998 was the
increased gain on sale of loans with servicing released. The Company sold $4.9
million in loans during the first quarter of 1998 and sold no loans during the
first quarter of 1997.
Non-interest Expense
Non-interest expense increased $30,000, or 5.41%, from $544,000 for the three
months ended March 31, 1997 to $574,000 for the three months ended March 31,
1998. The increase in non-interest expense during 1998 is due primarily to an
increase in compensation and benefits. The increase in compensation and benefits
is due primarily to the recognition of more ESOP and MRDP compensation during
the first three months of 1998 than in the first three months of 1997. Other
non-interest expenses decreased primarily due to the recognition of first time
expenses in 1997 resulting from operating as a public company.
Income Taxes
Income taxes increased from $154,000 for the three months ended March 31, 1997
to $166,000 for the three months ended March 31, 1998.
Year 2000 Considerations
Fiserv, the primary data processor for the Company, is planning to complete the
conversion of their system to a Year 2000 compliant system by the third quarter
of 1998. The Company has begun the process of replacing its hardware with Y2K
compliant equipment and plans to complete that process by June 30, 1998. The
estimated cost of that hardware and software upgrade is $70,000. Y2K is not the
only reason for the equipment purchase. The Company would have been replacing
the equipment in its general upgrading program this year.
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 of or 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) 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: May 15, 1998 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