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 March 31, 1997
[ ] 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.
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(Exact name of small business issuer as specified in its charter)
Delaware 43-1753244
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(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
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(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 May 9, 1997
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Common stock, .01 par value 1,024,958
CBES BANCORP,INC. AND SUBSIDIARIES
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at
March 31, 1997 (unaudited) and June 30,1996 1
Consolidated Statements of Earnings for the three
months and nine months ended March 31, 1997 and
1996 (unaudited) 2
Consolidated Statements of Stockholders' Equity for
the nine months ended March 31, 1997 (unaudited) 3
Consolidated Statements of Cash Flows for the nine
months ended March 31, 1997 and 1996 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION 13
SIGNATURES 14
1
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
March 31, 1997 and June 30, 1996
March 31, June 30,
Assets 1997 1996
(unaudited)
Cash $ 635,549 683,769
Interest-bearing deposits in other financial institutions 3,396,271 2,775,590
Investment securities available-for-sale (amortized cost of
$1,001,125 and $2,002,250 respectively) 994,180 1,974,500
Investment securities held-to-maturity 100,000 100,000
Mortgage-backed securities held-to-maturity (estimated fair value
of $206,008 and $392,162 respectively) 206,300 400,394
Loans held-for-sale, net 299,600 366,000
Loans receivable, net 85,193,320 79,043,759
Accrued interest receivable:
Loans receivable 673,857 597,484
Investment securities 6,496 25,178
Mortgage-backed securities 2,024 3,175
Real Estate Owned 19,671 -
Stock in Federal Home Loan Bank (FHLB), at cost 810,700 810,700
Office property and equipment, net 1,241,927 1,272,907
Deferred income tax benefit - 23,000
Cash surrender value of life insurance and other assets 1,639,385 1,753,504
Total assets $ 95,219,280 89,829,960
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 70,989,366 68,169,560
FHLB advances and other borrowings 5,000,000 12,000,000
Accrued expenses and other liabilities 632,219 525,177
Accrued interest payable on deposits 116,384 111,227
Advance payments by borrowers for property taxes and insurance 461,164 691,797
Current income taxes payable 497,782 266,309
Deferred income taxes 12,739 -
Total liabilities 77,709,654 81,764,070
Stockholders' equity:
Preferred stock, $.01 par, 500,000 shares authorized, none
issued or outstanding - -
Common stock, $.01 par; 3,500,000 shares authorized, 1,024,958
shares issued and outstanding 10,250 -
Additional paid-in capital 9,751,523 -
Retained earnings, substantially restricted 8,520,080 8,082,540
Unrealized losses on available-for-sale securities, net of tax (4,167) (16,650)
Unearned employee benefits (768,060) -
Total stockholders' equity 17,509,626 8,065,890
Total liabilities and stockholders' equity $ 95,219,280 89,829,960
See accompanying notes to unaudited consolidated financial statements.
2
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
Interest income:
Loans receivable $ 1,855,820 1,614,261 5,376,565 4,811,056
Mortgage-backed securities 3,955 16,810 15,588 129,261
Investment securities 12,331 16,011 54,793 78,407
Loans held-for-sale (44,581) 1,316 (21,146) 51,631
Other 29,972 16,493 66,311 60,505
Total interest income 1,857,497 1,664,891 5,492,111 5,130,860
Interest expense:
Deposits 760,454 801,981 2,251,351 2,484,979
FHLB advances 98,914 143,344 369,612 604,241
Total interest expense 859,368 945,325 2,620,963 3,089,220
Net interest income 998,129 719,566 2,871,148 2,041,640
Provision for loan losses 18,627 72,764 50,900 188,341
Net interest income after
provision for loan losses 979,502 646,802 2,820,248 1,853,299
Noninterest income:
Gain on sale of loans, net 38,223 27,194 125,593 139,277
Customer service charges 49,364 47,418 156,530 147,046
Loan servicing fees 39,316 23,043 80,793 71,545
Net realized gain on sale of investment
and mortgage-backed securities
available-for-sale - - - 54,205
Other 34,681 38,323 95,579 93,022
Total noninterest income 161,584 135,978 458,495 505,095
Noninterest expense:
Compensation and benefits 396,373 335,824 1,054,570 914,857
Office property and equipment 72,342 65,248 219,774 201,325
Data processing 40,445 45,589 124,714 128,246
Federal insurance premiums 10,904 39,832 522,047 118,058
Advertising 17,472 19,213 51,544 50,642
Real estate owned and repossessed
assets 3,888 5,755 13,207 11,404
Other 164,422 125,252 404,111 336,733
Total noninterest expense 705,846 636,713 2,389,967 1,761,265
Earnings before income
taxes 435,240 146,067 888,776 597,129
Income tax expense 178,511 54,098 348,740 207,098
Net earnings $ 256,729 91,969 540,036 390,031
Pro forma earnings per share $ .27 - .57 -
Average common and common equivalent
shares outstanding 946,877 - 944,707 -
See accompanying notes to unaudited consolidated financial statements.
3
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the nine months ended March 31, 1997
(Unaudited)
Unearned
Net employee
Additional unrealized stock Total
Outstanding Common paid-in Retained gain (loss) ownership stockholders'
shares stock capital earnings on securities shares equity
Balance at June 30, 1996 - $ - - 8,082,540 (16,650) - 8,065,890
Sale of stock 1,024,958 10,250 9,726,830 - - (819,960) 8,917,120
Net earnings - - - 540,036 - - 540,036
Dividends declared - - - (102,496) - - (102,496)
($.10 per share payable
April 10, 1997)
Change in unrealized loss
on securities available-
for-sale, net of tax - - - - 12,483 - 12,483
Allocation of ESOP shares - - 24,693 51,900 76,593
Balance at
March 31, 1997 1,024,958 $ 10,250 9,751,523 8,520,080 (4,167) (768,060) 17,509,626
See accompanying notes to unaudited consolidated financial statements.
4
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Cash flows from operating activities:
Net earnings $ 540,036 390,031
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 50,900 188,341
Depreciation 109,545 95,862
Allocation of ESOP shares 76,593 -
Net realized gain on sale of securities available-for-sale - (54,205)
Proceeds from sale of loans held for sale 8,915,671 12,700,276
Originations of loans held for sale (8,723,678) (12,021,352)
Gain on sale of loans, net (125,593) (139,277)
Premium amortization and accretion of discounts and
deferred loan fees (245,616) (191,488)
Deferred income taxes (benefit) 27,417 (4,850)
FHLB Stock dividends - (16,000)
Changes in assets and liabilities:
Accrued interest receivable (56,540) (8,041)
Other assets 114,119 (21,663)
Accrued expenses and other liabilities 4,546 39,839
Accrued interest payable on deposits 5,157 33,130
Current income taxes payable 231,473 227,002
Net cash provided by operating activities 924,030 1,217,605
Cash flows from investing activities:
Net (increase) decrease in loans receivable (5,971,792) 1,072,414
Proceeds from sales of securities available-for-sale - 4,046,846
Mortgage-backed securities principal repayments 192,495 405,676
Maturing securities 1,000,000 -
Purchase of office property equipment (78,565) (93,955)
Net cash (used in) provided by investing activities $ (4,857,862) 5,430,981
Cash flows from financing activities:
Increase (decrease) in deposits $ 2,819,806 (357,990)
Proceeds from FHLB advances 20,000,000 16,650,000
Repayments of FHLB advances (27,000,000) (23,526,915)
Increase in advance payments by borrowers for property taxes
and insurance (230,633) (402,784)
Issuance of common stock, net of issuance costs of $512,500 8,917,120 -
Net cash provided by (used in) financing activities 4,506,293 (7,637,689)
Net increase (decrease) in cash and cash equivalents 572,461 (989,103)
Cash and cash equivalents at the beginning of the period 3,459,359 3,073,710
Cash and cash equivalents at the end of the period $ 4,031,820 2,084,607
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 89,850 (15,054)
Cash paid during the period for interest $ 2,615,806 3,056,090
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $ 19,671 -
Dividends declared and payable April 10, 1997 $ 102,496 -
See accompanying notes to unaudited consolidated financial statements.
5
CBES BANCORP,INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
(1) CBES Bancorp,Inc. and Subsidiaries
CBES Bancorp, Inc. (the Company) was incorporated under the laws
of the state of Delaware for the purpose of becoming the savings
and loan holding company of Community Bank of Excelsior Springs,
a Savings Bank (the Bank) in connection with the Bank's
conversion from a federally chartered mutual savings bank to a
federally chartered stock savings bank, pursuant to its Plan of
Conversion. On August 12, 1996, the Company commenced a
Subscription and Community Offering of its shares in connection
with the conversion of the Bank (the Offering). The Offering was
consummated and the Company acquired the Bank on September 27,
1996. The Company had no assets prior to the conversion and
acquisition on September 27, 1996.
The accompanying consolidated financial statements as of and for
the three months and nine months ended March 31, 1997 include the
accounts of the Company and the Bank. The accompanying
consolidated statements of financial condition as of June 30,
1996, and the statement of earnings and cash flows for the three
months and the nine months ended March 31, 1996, are of the
Bank.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB. To
the extent that information and footnotes required by generally
accepted accounting principles for complete financial statements
are contained in or consistent with the audited financial
statements incorporated by reference in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1996, such
information and footnotes have not been duplicated herein. In
the opinion of management, all adjustments, consisting only of
normal recurring accruals, which are necessary for the fair
presentation of the interim financial statements have been
included. The statement of earnings for the three month and
nine month periods ended March 31, 1997 are not necessarily
indicative of the results which may be expected for the entire
year. The June 30, 1996 consolidated balance sheet has been
derived from the audited consolidated financial statements as of
that date.
(3) Pro Forma Earnings Per Share
On September 27, 1996, 1,024,958 shares of the Company's stock
were issued, including 81,996 shares issued to the ESOP.
Pro forma earnings per share amounts for the three month and
nine month periods ended March 31, 1997 are based upon the shares
issued September 27, 1996, exclusive of the shares unallocated by
the ESOP, as though those shares were outstanding for the entire
period. The computation does not reflect the pro forma effects
of the investment income that would have been earned had the net
proceeds from the conversion been received at the beginning of
the three or nine month period.
(Continued)
6
(4) Stockholders' Equity and Stock Conversion
The Bank converted from a federally chartered mutual savings bank
to a federally chartered stock savings bank pursuant to its Plan
of Conversion which was approved by the Bank's members on
September 19, 1996. The conversion was effective on September
27, 1996 and resulted in the issuance of 1,024,958 shares of
common stock (par value $0.01) at $10.00 per share for a gross
sales price of $10,249,580. Costs related to conversion
(primarily underwriters' commissions, printing, and professional
fees) aggregated $513,000 and were deducted to arrive at the net
proceeds of $9,737,000. The Company established an employee
stock ownership trust which purchased 81,996 shares of common
stock of the Company at the issuance price of $10.00 per share
with funds borrowed from the holding company.
(5) Employee Stock Ownership Plan
All employees meeting age and service requirements are eligible
to participate in an ESOP established on September 27, 1996.
Contributions made by the Bank to the ESOP are allocated to
participants by a formula based on compensation. Participant
benefits become 100% vested after five years. The ESOP purchased
81,996 shares in the Bank's conversion. The ESOP expense for the
three months ended December 31, 1996 was $36,010, and for the
three months ended March 31, 1997 was $40,583.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of CBES
Bancorp,Inc. and its wholly-owned subsidiary, Community Bank of
Excelsior Springs, a Savings Bank, (collectively the Bank) at
March 31, 1997 to the financial condition at June 30, 1996, its
fiscal year-end, and the results of operations for the three
months and nine months ended March 31, 1997, with the same
periods in 1996. This discussion should be read in conjunction
with the interim financial statements and notes which are
included herein.
General
CBES Bancorp,Inc. was organized as a Delaware corporation in June
1996 to acquire all of the capital stock issued by Community Bank
of Excelsior Springs, a Savings Bank upon its conversion from the
mutual to stock form of ownership. Community Bank of Excelsior
Springs, a Savings Bank was founded in 1931 as a Missouri
chartered savings and loan association located in Excelsior
Springs, Missouri. In 1995, its members voted to convert to a
federal charter. The business of the holding company consists
primarily of the business of the Bank.
The Bank conducts its business through its main office in
Excelsior Springs, Clay County, Missouri and its full service
branch office located in Kearney, Clay County, Missouri. The
Bank has been, and intends to continue to be, a community
oriented financial institution offering selected financial
services to meet the needs of the community it serves. The Bank
attracts deposits from the general public and historically has
used such deposits, together with other funds, primarily to
originate one-to-four family residential mortgage loans,
construction and land loans for single-family residential
properties, and consumer loans consisting primarily of loans
secured by automobiles. While the Bank's primary business has
been that of a traditional thrift institution, originating loans
in its primary market area for retention in its portfolio, the
Bank also has been an active participant in the secondary market,
originating residential mortgage loans for sale.
The most significant outside factors influencing the operations
of the Bank and other financial institutions include general
economic conditions, competition in the local market place and
the related monetary and fiscal policies of agencies that
regulate financial institutions. More specifically, the cost of
funds primarily consisting of insured deposits is influenced by
interest rates on competing investments and general market rates
of interest, while lending activities are influenced by the
demand for real estate financing and other types of loans, which
in turn is affected by the interest rates at which such loans may
be offered and other factors affecting loan demand and funds
availability.
The deposits of the Bank are presently insured by the Savings
Association Insurance Fund ("SAIF"), which together with the Bank
Insurance Fund ("BIF") are the two insurance funds administered
by the FDIC. In the third calendar quarter of 1995, the FDIC
lowered the premium schedule for BIF-insured institutions in
anticipation of the BIF achieving its statutory reserve ratio.
The reduced premium created a significant
8
disparity in deposit insurance expense causing a competitive
advantage for BIF members. Legislation enacted on September 30,
1996 provided for a one-time special assessment of .657% of the
Bank's SAIF insured deposits at March 31, 1995. The purpose of
the assessment is to bring the SAIF to its statutory reserve
ratio. Based on the above formula, the Bank charged $441,000
against earnings for the quarter ended September 30, 1996.
Although the special one-time assessment significantly increased
noninterest expense for the quarter, the anticipated reduction in
the premium schedule will reduce the Bank's federal insurance
premiums for the future periods.
Congress may consider legislation requiring all federal thrift
institutions, such as the Bank, to either convert to a national
bank or a state depository institution by January 1, 1999. In
addition, the Company might no longer be regulated as a thrift
holding company, but rather as a bank holding company. The
Office of Thrift Supervision (OTS) also might be abolished and
its functions transferred among the federal banking regulators.
Certain aspects of the legislation remain to be resolved and,
therefore, no assurance can be given as to whether or in what
form the legislation will be enacted or its effect on the Company
and the Bank.
Financial Condition
Total assets increased $5.4 million, or 6.0%, to $95.2 at March
31, 1997 from $89.8 million at June 30, 1996. This was primarily
due to the proceeds from the sale of CBES Bancorp, Inc. common
stock, which generated net proceeds of $8,917,000, reduced by
$7.0 million, to pay down FHLB advances, and an increase in
deposits of $2.8 million.
Loans receivable, net increased by $6.1 million, or 7.8%, to
$85.2 million at March 31, 1997 from $79.0 million at June 30,
1996 primarily due to increases in one-to-four family portfolio
loans of $1.8 million and an increase in construction loans of
$3.0 million.
Deposits increased $2.8 million, or 4.1%, to $71.0 million at
March 31, 1997 from $68.2 million at June 30, 1996. The increase
in deposits is due to $4.6 million in new certificates of
deposit, offset by $1.8 million of Bank depositors' investment in
common stock of CBES Bancorp, Inc.
FHLB advances decreased $7.0 million, or 58.3%, to $5.0 million
at March 31, 1997 from $12.0 million at June 30, 1996. The
decrease is primarily due to $4.0 million of the net proceeds
from the sale of CBES Bancorp, Inc. common stock, and $4.6
million in new certificates of deposit being used to pay down
FHLB advances.
Total equity increased $9.4 million, or 117.1%, to $17.5 million
at March 31, 1997 primarily due to the sale of 1,024,958 common
shares at an initial offering price of $10 per share less the
establishment of the Company's $820,000 ESOP plan and conversion-
related costs of $513,000.
Accrued expenses and other liabilities increased $107,000, or
20.39%, to $632,000 at March 31, 1997 primarily due to dividends
declared March 27, 1997, payable April 10, 1997, of $102,000.
9
Comparison of Operating Results for the Three Months Ended March
31, 1997 and 1996
Performance Summary. In the quarter ended March 31, 1997, the
Company had net earnings of $257,000 compared to net earnings of
$92,000 for the quarter ended March 31, 1996. The increase in
earnings was primarily due to an increase in interest income of
$193,000, a decrease in interest expense of $86,000, a decrease
in provision for loan losses of $54,000, offset by an increase in
compensation of $61,000, and an increase in income taxes of
$124,000.
Net Interest Income. For the three months ended March 31, 1997,
net interest income increased by $279,000, or 38.7%, to $998,000
from $720,000 for the three months ended March 31, 1996. The
increase reflected an increase of $193,000 in interest income, to
$1.9 million from $1.7 million, and a decrease of $86,000 in
interest expense to $859,000 from $945,000. The increase in
interest income reflected increased average balances of loans
receivable, primarily fixed rate mortgage loans and construction
lending on single-family residences, and an increase in
adjustable rate mortgage loan rates. Interest expense decreased
by $86,000, or 9.1%, as a result of decreased rates on
certificate of deposit accounts, and a decrease in balances and
rates of FHLB Advances.
Provision for Loan Losses. During the three months ended March
31, 1997, the Bank charged $19,000 against earnings as a
provision for loan losses compared to a provision of $73,000 for
the three months ended March 31, 1996. The decrease in provision
for loan losses is a result of stabilizing levels of construction
lending compared to significant increases in construction lending
during 1996. This charge resulted in an allowance for loan
losses of $420,000 or .49% of loans receivable, net at March 31,
1997 compared to $408,000, or .49% of loans receivable, net at
December 31, 1996. The allowance for loan losses is based on a
detailed review of nonperforming and other problem loans,
prevailing economic conditions, actual loss experience and other
factors which, in management's view, recognize the changing
composition of the Bank's loan portfolio and the inherent risk
associated with different types of loans.
Management will continue to monitor its allowance for loan losses
and make future additions to the allowance through the provision
for loan losses as economic conditions dictate. Although the
Bank maintains its allowance for loan losses at a level which it
considers to be adequate to provide for potential losses, there
can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be
required in future periods.
Non-Interest Income. For the three months ended March 31, 1997,
noninterest income increased $26,000 to $162,000 from $136,000
for the prior year period primarily due to an increase in the
gain on sale of loans, net,of $11,000, and and increase in loan
servicing fees of $16,000 during the three months ended March 31,
1997.
Non-Interest Expense. Noninterest expense increased by $69,000
to $706,000 for the three months ended March 31, 1997 from
$637,000 for the three months ended March 31, 1996. Of this
increase, $61,000 was attributable to
10
compensation, principally expense associated with the ESOP plan,
and $39,000 was due to an increase of other non-interest expense,
the majority of which was a result of additional expenses
incurred as a publicly-owned stock institution such as
professional fees, franchise taxes, annual meeting and proxy
expenses, partially offset by a decrease in federal insurance
premiums of $29,000.
Comparison of Operating Results for the Nine Months Ended March
31, 1997 and 1996
Performance Summary. In the nine months ended March 31, 1997,
the Company had net earnings of $540,000 compared to net earnings
of $390,000 for the nine months ended March 31, 1996. The
increase in earnings was primarily due to an increase in net
interest income of $830,000, a decrease in the provision for loan
loss of $137,000, offset by the payment of a one-time special
assessment in the amount of $441,000 to recapitalize SAIF, a
$140,000 increase in compensation expense, and an increase in
income taxes of $142,000.
Net Interest Income. For the nine months ended March 31, 1997,
net interest income increased by $830,000, or 40.6%, to
$2,871,000 from $2,042,000 for the nine months ended March 31,
1996. The increase reflected an increase of $361,000 in interest
income and a decrease of $468,000 in interest expense. The
increase in interest income reflected increased average balances
of loans receivable, primarily fixed rate mortgage loans and
construction lending on single-family residences, and an increase
in adjustable rate mortgage loans rates, offset by a decrease in
interest income due to the sales of mortgage-backed securities.
Interest expense decreased by $468,000, or 15.2%, as a result of
decreased rates in certificate of deposit accounts, and a
decrease in balances and rates of FHLB Advances.
Provision for Loan Losses. During the nine months ended March
31, 1997, the Bank charged $51,000 against earnings as a
provision for loan losses compared to a provision of $188,000 for
the nine months ended March 31, 1996. The decrease in provision
for loan losses is a result of stabilizing levels of construction
lending compared to significant increases in construction lending
during 1995 and 1996. This charge resulted in an allowance for
loan losses of $420,000 or .49% of loans receivable, net at March
31, 1997 compared to $388,000, or .49% of loans receivable, net
at June 30, 1996. The allowance for loan losses is based on a
detailed review of nonperforming and other problem loans,
prevailing economic conditions, actual loss experience and other
factors which, in management's view, recognizes the changing
composition of the Bank's loan portfolio and the inherent risk
associated with different types of loans.
Noninterest Income. For the nine months ended March 31, 1997,
noninterest income decreased $47,000 to $458,000 from $505,000
for the prior year period primarily due to a decrease in the net
realized gain on sale of investment and mortgage-backed
securities available-for-sale of $54,000 during the nine months
ended March 31, 1996. There were no sales during the nine months
ended March 31, 1997.
Noninterest Expense. Noninterest expense increased by $629,000 to
$2,390,000
11
for the nine months ended March 31, 1997 from $1,761,000 for
the nine months ended March 31, 1996. Of this increase $441,000
was attributable to the one-time special SAIF assessment,
$140,000 was attributable to compensation, due to general wage
increases and adoption of the ESOP plan, and $67,000 was due to
an increase in non-interest expense, primarily due to expenses
incurred as a publicly-owned stock institution.
Nonperfoming Assets
On March 31, 1997, nonperforming assets were $709,000 compared to
$655,000 on June 30, 1996. The balance of the Bank's allowance
for loan losses was $420,000 or 59.0% of nonperforming assets.
Loans are considered nonperforming when the collection of
principal and/or interest is not probable, or in the event
payments are more than ninety days delinquent.
Capital Resources
The Bank is subject to three capital to asset requirements in
accordance with Office of Thrift Supervision regulations. The
following table is a summary of the Bank's regulatory capital
requirements versus actual capital as of March 31, 1997:
Actual Required Excess
amount/percent amount/percent amount/percent
(Dollars in thousands)
Tangible $12,423 13.54% $1,376 1.50% $11,047 12.04%
Core leverage capital 12,423 13.54% 2,752 3.00% 9,671 10.54%
Risk-based capital 12,659 17.70% 5,720 8.00% 6,939 9.70%
Liquidity
The Bank's principal sources of funds are deposits, principal and
interest payments on loans, deposits in other insured
institutions and investment securities classified as available-
for-sale. While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general
economic conditions and competition. Additional sources of funds
may be obtained from the Federal Home Loan Bank of Des Moines by
utilizing numerous available products to meet funding needs.
The Bank is required to maintain levels of liquid assets as
defined by regulations. The required percentage is currently 5%
of net withdrawable savings deposits and borrowings payable on
demand or in one year or less. The eligible liquidity ratios at
March 31, 1997 and June 30, 1996 were 6.50% and 7.50%,
respectively.
In light of the competition for deposits, the Bank may utilize
the funding sources of the Federal Home Loan Bank to meet demand
in accordance with the Bank's growth plans. The wholesale
funding sources may allow the Bank to obtain a lower cost of
funding and create a more efficient liability match to the
respective assets being funded.
During the nine months ended March 31, 1997, the Bank used
proceeds from the stock offering to repay obligations of the
Federal Home Loan Bank. Given the current strong loan demand, it
may be necessary for the Bank
12
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 March 31, 1997 and 1996 were $4.0 million and $2.1
million respectively.
Cash flows from operating activities. Net cash provided by
operating activities decreased to $924,000 for the nine months
ended March 31, 1997 from $1.2 million for the nine months ended
March 31, 1996. The decrease was mainly due to a decrease in
proceeds from the sale of loans to $8.9 million for the nine
months ended March 31, 1997 from $12.7 million for the nine
months ended March 31, 1996, offset by a decrease in originations
of loans held for sale to $8.7 million for the nine months ended
March 31, 1997 from $12.0 million for the nine months ended March
31, 1996.
Cash flows from investing activities. Net cash used in investing
activities was $4.9 million during the nine months ended March
31, 1997 compared to $5.4 million provided by investing
activities during the same period in 1996. The change was mainly
due to an increase in loans receivable of $6.0 million during the
nine months ended March 31, 1997 from a $1.1 million decrease
during the same period in 1996, and due to the proceeds from sale
of securities available for sale of $4.0 million during the nine
month period ended March 31, 1996, offset by maturing securities
of $1.0 million during the nine months ended March 31, 1997.
Cash flows from financing activities. Net cash provided by
financing activities was $4.5 million for the nine months ended
March 31, 1997 compared to cash used of $7.6 million during the
same period in 1996. The increase in cash flows from financing
activities is primarily due to the issuance of common stock of
$8.9 million , and an increase in deposits of $2.8 million during
the nine months ended March 31, 1997, compared to a $358,000
reduction during the same period in 1996.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" which revises the
calculation and presentation provisions of Accounting Principles
Board Opinion 15 and related interpretations. Statement No. 128
is effective for the Company's fiscal year ending June 30, 1998.
Retroactive application will be required. The Company believes
the adoption of Statement No. 128 will not have a significant
effect on its reported earnings per share.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The holding company and the Bank are not involved
in any pending legal proceedings incident to the business of
the holding company and the Bank, which involve amounts in the
aggregate which management believes are material to the
financial condition and results of operation.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27-Financial Data Schedule
14
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CBES Bancorp, Inc. and Subsidiaries
-----------------------------------
(Registrant)
Date: May 13, 1997
By: /s/ Larry E. Hermreck
------------------------------
Larry E. Hermreck, Chief
Executive Officer and
Secretary (Duly Authorized
Officer)
Date: May 13, 1997
By: /s/ Dennis D. Hartman
------------------------------
Dennis D. Hartman, Controller
and Chief Financial Officer
(Principal Financial Officer)