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 December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-21163
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CBES BANCORP, INC.
------------------
(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
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(Address of principal executive offices)
(816 630-6711)
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(Issuer's telephone number)
Not Applicable
---------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 February 10, 2000
--------------------------- --------------------------------
Common stock, .01 par value 875,358
CBES BANCORP, INC. AND SUBSIDIARIES
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at December 31,
1999 (unaudited) and June 30, 1999 ................................... 1
Consolidated Statements of Earnings for the three months and six
months ended December 31, 1999 and 1998 (unaudited) .................. 2
Consolidated Statements of Stockholders' Equity for the six
months ended December 31, 1999 (unaudited) ........................... 3
Consolidated Statements of Cash Flows for the six months ended
December 31, 1999 and 1998 (unaudited) ............................... 4
Notes to Consolidated Financial Statements ............................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................. 6
PART II - OTHER INFORMATION ....................................................... 10
SIGNATURES ........................................................................ 11
1
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 1999 and June 30, 1999
December 31, June 30,
Assets 1999 1999
------ ---- ----
(unaudited)
Cash $ 2,033,514 1,111,855
Interest-bearing deposits in other financial institutions 8,547,474 6,350,923
Investment securities held-to-maturity (estimated fair value of
$190,000 and $93,000 respectively) 190,010 93,000
Mortgage-backed securities held-to-maturity (estimated fair value
of $48,000 and $59,000 respectively) 47,589 57,275
Loans held for sale, net 14,731,465 2,393,421
Loans receivable, net 135,551,812 132,065,730
Accrued interest receivable:
Loans receivable 1,207,558 1,052,903
Investment securities 84,639 2,015
Mortgage-backed securities 958 1,152
Real Estate Owned 257,556 152,859
Stock in Federal Home Loan Bank (FHLB), at cost 2,322,500 2,172,500
Office property and equipment, net 2,653,677 2,598,443
Deferred income tax benefit 349,483 133,000
Cash surrender value of life insurance & other assets 2,388,769 2,220,827
------------- -------------
Total Assets $ 170,367,002 150,405,903
============= =============
Liabilities & Stockholders' Equity
----------------------------------
Liabilities:
Deposits $ 105,954,553 101,423,598
FHLB advances 45,450,000 29,450,000
Accrued expenses and other liabilities 1,355,367 1,481,920
Accrued interest payable on deposits 125,968 138,404
Advance payments by borrowers for property taxes and insurance 369,716 916,215
Current income taxes payable 449,832 48,704
------------- -------------
Total Liabilities $ 153,705,437 133,458,841
============= =============
Stockholders' Equity:
Preferred stock, $.01 par, 500,000 shares authorized, none issued
or outstanding - -
Common Stock, $.01 par; 3,500,000 shares authorized and 1,031,851
shares issued $ 10,319 10,319
Additional paid-in capital 10,018,309 9,989,075
Retained earnings, substantially restricted 10,300,071 10,033,284
Treasury stock, 156,780 and 110,724 shares at cost, respectively (2,975,536) (2,267,740)
Unearned employee benefits (691,597) (817,876)
------------- -------------
Total stockholders' equity 16,661,565 16,947,062
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Total liabilities and stockholders' equity $ 170,367,002 150,405,903
============= =============
See accompanying notes to unaudited consolidated financial statements.
2
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
---------------------------- ---------------------------
1999 1998 1999 1998
---------- --------- --------- ---------
Interest income:
Loans receivable $3,245,687 2,824,860 6,274,554 5,544,723
Mortgage-backed securities 928 1,404 1,943 2,863
Investment securities 32 105 40 127
Other 90,756 96,615 170,942 168,762
---------- --------- --------- ---------
Total interest income 3,337,403 2,922,984 6,447,479 5,716,475
---------- --------- --------- ---------
Interest expense:
Deposits 1,172,509 1,179,132 2,341,014 2,258,925
FHLB Advances 592,741 524,444 1,037,134 886,634
---------- --------- --------- ---------
Total interest expense 1,765,251 1,703,576 3,378,149 3,145,559
---------- --------- --------- ---------
Net interest income 1,572,152 1,219,408 3,069,330 2,570,916
Provision for loan losses 28,014 176,615 66,304 251,765
---------- --------- --------- ---------
Net interest income after
provision for loan losses 1,544,138 1,042,793 3,003,026 2,319,151
---------- --------- --------- ---------
Non-interest income:
Gain on sale of loans, net 133,931 305,094 271,273 445,535
Customer service charges 81,470 57,456 152,969 115,341
Loan servicing fees 63,973 12,113 46,181 24,213
Other 50,388 33,023 79,873 65,496
---------- --------- --------- ---------
Total non-interest income 329,792 407,686 550,296 650,585
---------- --------- --------- ---------
Non-interest expense:
Compensation and benefits 742,715 614,205 1,449,633 1,275,226
Office property and equipment 211,445 285,576 428,310 427,912
Data processing 47,095 53,923 108,480 109,143
Federal insurance premiums 15,579 12,666 30,369 25,534
Advertising 56,456 35,111 90,080 54,126
Real estate owned and repossessed assets 22,350 4,954 24,928 (41,310)
Other 266,086 248,920 516,578 481,172
---------- --------- --------- ---------
Total non-interest expense 1,361,726 1, 255,355 2,648,378 2,331,803
---------- --------- --------- ---------
Earnings before income taxes 512,175 195,124 904,945 637,933
Income tax expense 190,307 68,919 334,645 232,958
---------- --------- --------- ---------
Net earnings $ 321,868 126,205 570,300 404,975
========== ========= ========= =========
Earnings per share-basic $ 0.37 $ 0.14 $ 0.65 $ 0.45
========== ========= ========= =========
Earnings per share-diluted $ 0.37 $ 0.14 $ 0.65 $ 0.45
========== ========= ========= =========
Basic weighted average shares 871,196 906,689 870,954 906,689
Common stock equivalents-stock options -- 287 -- 287
---------- --------- --------- ---------
Diluted weighted average shares 871,196 906,976 870,954 906,976
========== ========= ========= =========
See accompanying notes to unaudited consolidated financial statements.
3
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the six months ended December 31, 1999
(Unaudited)
Additional Unearned Total
Issued Common paid-in Retained Treasury employee stockholders'
shares stock capital earnings stock benefits equity
------ ----- ------- -------- ----- -------- ------
Balance at June 30, 1999 1,031,851 $ 10,319 9,989,075 10,033,284 (2,267,740) (817,876) 16,947,062
Net earnings -- -- -- 570,300 -- -- 570,300
Dividends declared -- -- -- (303,513) -- -- (303,513)
($.18 per share payable
January 25, 2000)
Purchase of 46,056 shares of
treasury stock -- -- -- -- (707,796) -- (707,796)
Amortization of RRP -- -- -- -- -- 71,019 71,019
Allocation of ESOP shares -- -- 29,234 -- -- 55,259 84,493
--------- ----------- ---------- ---------- ---------- -------- ----------
Balance at
December 31, 1999 1,031,851 $ 10,319 10,018,309 10,300,071 (2,975,536) (691,597) 16,661,565
========= =========== ========== ========== ========== ======== ==========
See accompanying notes to unaudited consolidated financial statements.
4
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended December 31, 1999 and 1998
(Unaudited)
1999 1998
------ ------
Cash flows from operating activities:
Net earnings $ 570,300 404,975
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 66,304 251,765
Depreciation 198,808 162,201
Amortization of RRP 71,019 71,019
Allocation of ESOP shares 84,494 118,820
Proceeds from sale of loans held for sale 13,529,455 20,837,028
Origination of loans held for sale (25,596,226) (21,564,775)
Gain on sale of loans, net (271,273) (445,535)
Premium amortization and accretion of discounts and
deferred loan fees, net (363,759) (312,871)
Deferred income taxes (216,483) 161,517
Changes in assets and liabilities:
Accrued interest receivable (237,085) (83,655)
Other assets 167,940 (94,140)
Accrued expenses and other liabilities (126,553) 101,049
Accrued interest payable on deposits (12,436) 17,493
Current income taxes payable 410,128 (354,558)
---------------- ---------------
Net cash (used in) operating activities (12,070,247) (729,667)
---------------- ---------------
Cash flows from investing activities:
Net increase in loans receivable (3,294,555) (19,443,528)
Purchase FHLB Stock (150,000) (750,000)
Mortgage-backed securities principal repayments 9,686 11,609
Maturing securities 2,000 2,000
Purchase of office property equipment (254,042) (1,144,865)
Purchase of securities (97,779) -
---------------- ---------------
Net cash used in investing activities $ (3,784,690) (21,324,784)
---------------- ---------------
Cash flows from financing activities:
Increase in deposits $ 4,530,955 11,804,778
Proceeds from FHLB advances 50,300,000 24,950,000
Repayments of FHLB advances (34,300,000) (10,500,000)
Increase in advance payments by borrowers for property taxes
and insurance (546,499) (369,192)
Dividends paid (303,513) (229,513)
Treasury stock purchased (707,796) (834,583)
---------------- ---------------
Net cash provided by financing activities 18,973,147 24,821,490
---------------- ---------------
Net increase in cash and cash equivalents 3,118,210 2,767,039
Cash and cash equivalents at the beginning of the period 7,462,778 3,100,098
---------------- ---------------
Cash and cash equivalents at the end of the period $ 10,580,988 5,867,137
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 150,000 426,000
================ ===============
Cash paid during the period for interest $ 3,390,585 3,128,066
================ ===============
Supplemental schedule of noncash activities:
Conversion of loans to real estate owned $ 201,876 940,527
================ ===============
Conversion of real estate owned to loans $ 97,179 $ 408,308
================ ===============
See accompanying notes to unaudited consolidated financial statements.
5
CBES BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1999
(1) CBES Bancorp, Inc. and Subsidiaries
-----------------------------------
This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technical factors affecting the
Company's operations, pricing, products and services.
(2) Basis of Preparation
--------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB. To the extent that information and
footnotes required by generally accepted accounting principles for complete
financial statements are contained in or consistent with the audited financial
statements incorporated by reference in the Company's Annual Report on Form
10-KSB for the year ended June 30, 1999, such information and footnotes have not
been duplicated herein. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, which are necessary for the fair
presentation of the interim financial statements have been included. The
statement of earnings for the three month and six month periods ended December
31, 1999 are not necessarily indicative of the results which may be expected for
the entire year. The balance sheet information as of June 30, 1999 has been
derived from the audited balance sheet as of that date.
(3) Capital Stock Transactions
--------------------------
On October 13, 1999 the Company announced a stock repurchase plan in which 5% or
46,056 of the Company's outstanding shares would be repurchased over the next
twelve months. Pursuant to the repurchase plan the Company bought 46,056 shares
for the treasury during the three months ended December 31, 1999.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of CBES Bancorp, Inc.
(the "Company") and its wholly-owned subsidiary, Community Bank of Excelsior
Springs, a Savings Bank, (the "Bank") at December 31, 1999 to the financial
condition at June 30, 1999, its fiscal year-end, and the results of operations
for the three months and six months ended December 31, 1999, with the same
periods in 1998. This discussion should be read in conjunction with the interim
financial statements and notes which are included herein. This Quarterly Report
on Form 10-QSB may contain certain forward-looking statements consisting of
estimates with respect to the financial condition, results of operations and
business of the Company that are subject to various factors which could cause
actual results to differ materially from these estimates. These factors include,
but are not limited to, general economic conditions, changes in interest rates,
deposit flows, loan demand, real estate values, and competition; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, pricing, products and
services.
General
- -------
The Company was organized as a Delaware corporation in June 1996 to acquire all
of the capital stock issued by the Bank upon its conversion from the mutual to
stock form of ownership. The Bank was founded in 1931 as a Missouri chartered
savings and loan association located in Excelsior Springs, Missouri. In 1995,
its members voted to convert to a federal charter. The business of the holding
company consists primarily of the business of the Bank. The deposits of the Bank
are presently insured by the Savings Association Insurance Fund ("SAIF"), which
together with the Bank Insurance Fund ("BIF") are the two insurance funds
administered by the FDIC.
The Bank conducts its business through its main office in Excelsior Springs,
Clay County, Missouri and its full service branch offices located in Kearney and
Liberty, both in Clay County, Missouri. The Bank has been, and intends to
continue to be, a community oriented financial institution offering selected
financial services to meet the needs of the communities it serves. The Bank
attracts deposits from the general public and historically has used such
deposits, together with other funds, primarily to originate one-to-four family
residential mortgage loans, construction and land loans for single-family
residential properties, and consumer loans consisting primarily of loans secured
by automobiles. While the Bank's primary business has been that of a traditional
thrift institution, originating loans in its primary market area for retention
in its portfolio, the Bank also has been an active participant in the secondary
market, originating residential mortgage loans for sale.
The most significant outside factors influencing the operations of the Bank and
other financial institutions include general economic conditions, competition in
the local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
primarily consisting of insured deposits is influenced by interest rates on
competing investments and general market rates of interest, while lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.
Congress may consider legislation requiring all federal thrift institutions,
such as the Bank, to either convert to a national bank or a state depository
institution. In addition, the Company might no longer be regulated as a thrift
holding company, but rather as a bank holding company. The Office of Thrift
Supervision ("OTS") also might be abolished and its functions transferred among
the federal banking regulators. There can be no assurance as to whether or in
what form such legislation will be enacted or, if enacted, its effect on the
Company and the Bank.
Financial Condition
- -------------------
Total assets increased $20.0 million, or 13.3%, to $170.4 at December 31, 1999
from $150.4 million at June 30, 1999. This was primarily due to an increase in
net loans receivable and loans held for sale of $15.8 million, which were funded
primarily with FHLB advances and deposit accounts.
Net loans receivable and loans held for sale increased by $15.8 million, or
11.8%, to $150.3 million at December 31, 1999 from $134.5 million at June 30,
1999 primarily due to increases in one-to-four family loans held for sale of
$12.3 million, construction loans of $1.5 million, non-residential loans of $1.8
million, and consumer loans of $1.4 million. Fixed rate loans held for sale of
$1.3 million are loans contracted to be sold in the secondary market but have
not been funded. Adjustable rate loans held for sale of $13.4 million are loans
originated but not yet contracted to be sold in the secondary market.
Deposits increased $4.5 million, or 4.5%, to $106.0 million at December 31, 1999
from $101.4 million at June 30, 1999. The increase in deposits is primarily due
to $4.9 million in new certificates of deposit.
FHLB advances increased $16.0 million, or 54.3%, to $45.5 million at December
31, 1999 from $29.5 million at June 30, 1999. These advances ranged in term from
one to three years, and approximately one-fourth were callable advances. The
FHLB advances were primarily used to fund loans.
7
Comparison of Operating Results for the Three Months Ended December 31, 1999 and
- --------------------------------------------------------------------------------
1998
- ----
Performance Summary. For the three months ended December 31, 1999, the Company
had net earnings of $322,000 compared to net earnings of $126,000 for the three
months ended December 31, 1998. The most significant items causing the increase
in earnings were an increase in net interest income of $353,000 and a decrease
in the provision for loan losses of $149,000, offset by a decrease in
non-interest income of $78,000, and an increase in non-interest expense of
$106,000.
Net Interest Income. For the three months ended December 31, 1999, net interest
income increased $353,000, or 28.9%, to $1,572,000 from $1,219,000 for the three
months ended December 31, 1998. The increase reflected an increase of $414,000
in interest income, to $3,337,000 from $2,923,000, offset by an increase of
$62,000 in interest expense to $1,765,000 from $1,704,000. The increase in
interest income was primarily due to an increase in average balances of loans
receivable, net, primarily one-to-four family loans held for sale. The increase
in interest expense was primarily due to an increase in the average balances of
certificates and FHLB advances and an increase in interest rates.
Provision for Loan Losses. During the three months ended December 31, 1999, the
Bank charged $28,000 against earnings as a provision for loan losses compared to
a provision of $177,000 for the three months ended December 31, 1998. This
provision resulted in an allowance for loan losses of $956,000 or .64% of loans
receivable, net at December 31, 1999 compared to $927,000, or .58% of loans
receivable, net at June 30, 1999. The allowance for loan losses is based on a
detailed review of nonperforming and other problem loans, prevailing economic
conditions, actual loss experience and other factors which, in management's
view, recognizes the changing composition of the Bank's loan portfolio and the
inherent risk associated with different types of loans.
The Bank's methodology for determining allowance for loan losses focuses
primarily on the application of specific reserve percentages to the various
categories of loans. Those percentages are based upon management's estimate of
the exposure to loss in the various categories. Percentages generally range from
0.05% for single family residential loans to 2.00% for some consumer loans;
higher percentages may be applied to problem loans. In addition, management
continues to review specifically identified problem, or potential problem loans.
On a case by case basis, where considered necessary, reserves are increased. For
this purpose, problem loans include non-accruing loans and accruing loans
delinquent more than 90 days. In addition, pursuant to the Bank's methodology,
the reserve is replenished for net charge-offs, which are charged against the
reserve.
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 December 31, 1999, non-interest
income decreased $78,000 to $330,000 from $408,000 for the prior year period
primarily due to a decrease in gain on the sale of loans of $171,000, offset by
an increase in customer service charges of $24,000, an increase in loan
servicing fees of $52,000, which includes a write-up of mortgage servicing
rights of $59,000, and an increase in other non-interest income of $17,000.
Non-Interest Expense. Non-interest expense increased by $106,000 to $1,362,000
for the three months ended December 31, 1999 from $1,255,000 for the three
months ended December 31, 1998. Of this increase, $129,000 was due to
compensation expense, due to an increase in the number of employees and general
wage increases, $21,000 was due to advertising, $17,000 was due to real estate
owned expense and $17,000 was due to other non-interest expense, consisting of
mortgage loan expenses, insurance and bond premium expense and conversion
training, offset by a decrease in office property and equipment expense of
$74,000 and a decrease in data processing expense of $7,000. The increase in
non-interest expense is primarily due to increased compensation expense and the
Company pursuing its plan of controlled growth, part of that being the opening
of the branch office in Liberty, Missouri and the purchase of the new office
building in Kearney, Missouri.
Comparison of Operating Results for the Six Months Ended December 31, 1999 and
- ------------------------------------------------------------------------------
1998
- ----
Performance Summary. For the six months ended December 31, 1999, the Company had
net earnings of $570,000 compared to net earnings of $405,000 for the six months
ended December 31, 1998. The most significant items causing the increase in
earnings were an increase in net interest income of $498,000 and a decrease in
the provision for loan loss of $185,000, offset by a decrease in non-interest
income of $100,000 and an increase in non-interest expense of $317,000.
Net Interest Income. For the six months ended December 31, 1999, net interest
income increased by $498,000, or 19.4%, to $3,069,000 from $2,571,000 for the
six months ended December 31, 1998. The increase reflected an increase of
$731,000 in interest income, to $6,477,000 from $5,716,000, offset by an
increase of $233,000 in interest expense to $3,378,000 from $3,146,000. The
increase in interest income was primarily due to an increase in average balances
of loans receivable, net, primarily one-to-four family loans held for sale and
an increase in the yields on interest-earning assets to 8.53% for the six month
period ending December 31, 1999, from 8.13% for the comparable period in 1998.
The increase in interest expense was primarily due to an increase in the average
balances of certificates and FHLB advances and an increase in interest rates.
8
Provision for Loan Losses. During the six months ended December 31, 1999, the
Bank charged $66,000 against earnings as a provision for loan losses compared to
a provision of $252,000 for the six months ended December 31, 1998. The decrease
in the provision for loan loss for the six months ended December 31, 1999
compared to the same period in 1998, was primarily due to a decrease in
nonperforming loans to $461,000 at December 31, 1999 from $2,554,000 at December
31, 1998.
Non-Interest Income. For the six months ended December 31, 1999, non-interest
income decreased $100,000 to $550,000 from $651,000 for the prior year period,
primarily due to a decrease in gain on the sale of loans of $174,000, offset by
an increase in customer service charges of $38,000, an increase in loan
servicing fees of $22,000 and an increase in other non-interest income of
$14,000.
Non-Interest Expense. Non-interest expense increased by $317,000 to $2,648,000
for the six months ended December 31, 1999 from $2,332,000 for the six months
ended December 31, 1998. Of this increase, $174,000 was attributable to
increased compensation expense, due to an increase in the number of employees
and general wage increases, offset by a decrease in the ESOP plan expense of
$34,000. An increase of $36,000 was due to advertising, $66,000 was due to real
estate owned expense, and $35,000 was due to other non-interest expense,
consisting of mortgage loan expenses, insurance and bond premium and conversion
training.
Non-performing Assets
- ---------------------
On December 31, 1999, nonperforming assets were $712,000 compared to $714,000 on
June 30, 1999. The balance of the Bank's allowance for loan losses was $956,000
at December 31, 1999, or 134.2% of nonperforming assets compared to $927,000 at
June 30, 1999 or129.8% of nonperforming assets. Loans are considered
nonperforming when the collection of principal and/or interest is not probable,
or in the event payments are more than ninety days delinquent.
The $2,000 increase in nonperforming assets, from June 30, 1999 to December 31,
1999, was primarily due to a decrease in one-to-four family non-accruing
construction loans of $336,000, offset by an increase in one-to-four family
non-accruing loans of $56,000, an increase in non-accruing consumer loans of
$165,000 and an increase in foreclosed assets of $113,000.
Capital Resources
- -----------------
The Bank is subject to capital to asset requirements in accordance with Office
of Thrift Supervision regulations. The following table is a summary of the
Bank's regulatory capital requirements versus actual capital as of December 31,
1999:
Actual Required Excess
amount/percent amount/percent amount/percent
-------------- -------------- --------------
(Dollars in thousands)
FIRREA REQUIREMENTS
- -------------------
Tangible capital $14,270 8.38% 2,555 1.50% 11,715 6.88%
Core leverage capital $14,270 8.38% 6,813 4.00% 7,457 4.38%
Risk-based capital $15,221 12.60% 9,668 8.00% 5,553 4.60%
Liquidity
- ---------
The Bank's principal sources of funds are deposits, principal and interest
payments on loans, and deposits in other insured institutions . While scheduled
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan prepayments are more influenced by interest rates, general
economic conditions and competition. Additional sources of funds may be obtained
from the Federal Home Loan Bank of Des Moines by utilizing numerous available
products to meet funding needs.
The Bank is required to maintain levels of liquid assets as defined by
regulations. The required percentage is currently 4% of net withdrawable savings
deposits and borrowings payable on demand or in one year or less. The eligible
liquidity ratios at December 31, 1999 and June 30, 1999 were 5.21% and 7.69%,
respectively.
In light of the competition for deposits, the Bank may utilize the funding
sources of the Federal Home Loan Bank to
meet demand in accordance with the Bank's growth plans. The wholesale funding
sources may allow the Bank to obtain a lower cost of funding and create a more
efficient liability match to the respective assets being funded. Given the
current strong loan demand, it may be necessary for the Bank to continue to use
advances.
For purposes of the cash flow statements, all short-term investments with a
maturity of three months or less at date of purchase are considered cash
equivalents. Cash and cash equivalents at December 31, 1999 and 1998 were
$10,580,988 and $5,867,137 respectively.
Cash flows from operating activities. Net cash used in operating activities was
$12,070,000 during the six months
9
ended December 31, 1999 compared to $730,000 during the same period in 1998. The
change was primarily due to a decrease in the proceeds from the sale of loans
held for sale of $7,308,000, and a decrease in the gain on sale of loans, net of
$174,000, offset by an increase in the originations of loans held for sale of
$4,032,000.
Cash flows from investing activities. Net cash of $3.8 million was used in
investing activities for the six months ended December 31, 1999 versus $21.3
million for the six months ended December 31, 1998. The decrease was primarily
due to an increase in loans receivable of $3.3 million during the six months
ended December 31, 1999 versus a $19.4 million increase during the same period
in 1998.
Cash flows from financing activities. Net cash provided by financing activities
was $19.0 million for the six months ended December 31, 1999 compared to $24.8
million during the same period in 1998. The decrease in cash flows from
financing activities is primarily due to an increase in FHLB advances of $16.0
million for the six months ended December 31, 1999 versus an increase of $14.4
million for the same period in 1998, and an increase in deposits of $4.5 million
for the six months ended December 31, 1999 versus an increase of $11.8 million
for the same period in 1998.
Impact of Recently Issued Accounting Standards
The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in June 1998.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 137 was issued in
June 1999 and delayed the effective date of SFAS No. 133 until June 15, 2000.
Management believes adoption of SFAS No. 133 will not have a material effect on
the Company's financial position or results of operations, nor will adoption
require additional capital resources.
Year 2000 Issue
The Bank entered the new year without encountering any year 2000 related
problems to date, and will continue to monitor the year 2000 situation.
10
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
---------------------------------------------------
On October 28, 1999 the Company held its annual meeting of
stockholders to consider the election of two directors of the Company
and to ratify the appointment of KPMG LLP as the auditors of the
Company for the fiscal year ending June 30, 2000. The results of the
meeting were as follows:
Robert E. McCrorey was elected to serve as a director of the Company
with 567,836 votes for and 43,857 votes withheld.
Richard N. Cox was elected to serve as a director of the Company with
568,036 votes for and 43,657 votes withheld.
The appointment of KPMG LLP to act as the Company's auditors for the
fiscal year ending June 30, 2000 was ratified with 584,173 votes for,
24,320 votes against, and 3,200 votes withheld.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
27-Financial Data Schedule
11
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
CBES Bancorp, Inc. and Subsidiaries
-----------------------------------
(Registrant)
Date: February 10, 2000
-----------------------------------
By: /s/ Dennis D. Hartman
-----------------------------------
Dennis D. Hartman, Chief Executive Officer
and Secretary (Duly Authorized Officer)
Date: February 10, 2000
-----------------------------------
By: /s/ Robert F. Kirk
-----------------------------------
Robert F. Kirk, Controller and Chief
Financial Officer
(Principal Financial Officer)