UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
SPECIAL FINANCIAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
-------------------- --------------------
Commission file number 0-21163
CBES Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1753244
- --------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1001 North Jesse James Road, Excelsior Springs, Missouri 64024
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 630-6711
----------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Pursuant to Rule 15d-2 of the Act, this annual report contains only financial
statements for the fiscal year ended June 30, 1996.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-----------------------------------------------------------------
(a) (1) Financial Statements:
- -----------------------------
Pursuant to Rule 15d-2 of the Act, this annual report contains only financial
statements for the fiscal year ended June 30, 1996 as the certified financial
reports for the year ended June 30, 1996 were not yet available when the
Registration Statement on Form SB-2 (File 333-6649) was filed on June 21, 1996.
2
COMMUNITY BANK OF EXCELSIOR
SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
KPMG Peat Marwick LLP
1000 Walnut, Suite 1600
P.O. Box 13127
Kansas City, MO 64199
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Community Bank of Excelsior Springs,
a Savings Bank:
We have audited the accompanying consolidated balance sheets of Community Bank
of Excelsior Springs, a Savings Bank, and subsidiary as of June 30, 1996 and
1995 and the related consolidated statements of earnings, equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of Community Bank's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Bank of
Excelsior Springs, a Savings Bank, and subsidiary as of June 30, 1996 and 1995
and the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
August 9, 1996
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
CONSOLIDATED BALANCE SHEETS
June 30,
----------------------
Assets 1996 1995
------ ---- ----
Cash $ 683,769 604,665
Interest-bearing deposits in other financial institutions 2,775,590 2,469,045
Investment securities available-for-sale (note 2):
U.S. government and agency obligations (amortized cost of
$2,002,250 and $2,003,750 in 1996 and 1995, respectively) 1,974,500 1,962,320
Mutual fund (amortized cost of $0 and $1,078,676 in 1996
and 1995, respectively) - 1,078,676
Investment securities held-to-maturity 100,000 -
Mortgage-backed securities held-to-maturity (estimated fair value of
$392,162 and $3,911,886 in 1996 and 1995, respectively)(note 3) 400,394 3,869,572
Loans held-for-sale, net 366,000 1,518,908
Loans receivables, net (note 4) 79,043,759 77,361,061
Accrued interest receivable:
Loans receivable 597,484 504,442
Investment securities 25,178 34,386
Mortgage-backed securities 3,175 33,223
Stock in Federal Home Loan Bank (FHLB), at cost 810,700 794,700
Office property and equipment, net (note 5) 1,272,907 1,288,352
Current income taxes receivable - 5,560
Deferred income tax benefit 23,000 -
Cash surrender value of life insurance and other assets 1,753,504 1,581,076
-------------- ----------
Total assets $ 89,829,960 93,105,986
============== ==========
Liabilities and Equity
----------------------
Liabilities:
Deposits (note 6) $ 68,169,560 68,274,476
FHLB advances (note 7) 12,000,000 15,876,915
Accrued expenses and other liabilities 525,177 477,188
Accrued interest payable on deposits 111,227 104,769
Advance payments by borrowers for property taxes and insurance 691,797 864,780
Current income taxes payable 266,309 -
Deferred income taxes (note 8) - 27,000
-------------- ----------
Total liabilities 81,764,070 85,625,128
Equity:
Retained earnings, substantially restricted (notes 10, 11 and 12) 8,082,540 7,505,716
Unrealized losses on available-for-sale securities, net of tax (16,650) (24,858)
-------------- ----------
Total equity 8,065,890 7,480,858
Commitments (note 4) -------------- ----------
Total liabilities and equity $ 89,829,960 93,105,986
============== ==========
See accompanying notes to consolidated financial statements.
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended June 30,
----------------------
1996 1995
---- ----
Interest income:
Loans receivable $ 6,457,691 5,249,045
Mortgage-backed securities 135,461 304,343
Investment securities 100,448 173,022
Loans held-for-sale 57,315 25,820
Other 72,957 65,633
--------- ---------
Total interest income 6,823,872 5,817,863
--------- ---------
Interest expense:
Deposits (note 6) 3,251,677 2,577,149
FHLB advances 753,745 568,783
--------- ---------
Total interest expense 4,005,422 3,145,932
--------- ---------
Net interest income 2,818,450 2,671,931
Provision for loan losses (note 4) 235,828 171,277
--------- ---------
Net interest income after provision for loan losses 2,582,622 2,500,654
--------- ---------
Noninterest income:
Gain on sales of loans, net 184,899 42,106
Customer service charges 197,577 193,017
Loan servicing fees 92,247 73,774
Net realized gain on sale of investment and mortgage-backed
securities available-for-sale 54,205 -
Writedown of investment in mutual fund (note 2) - (314,148)
Other 127,161 101,940
---------- ---------
Total noninterest income 656,089 96,689
---------- ---------
Noninterest expense:
Compensation, payroll taxes and fringe benefits (note 9) 1,203,276 1,080,572
Office property and equipment 274,213 245,411
Data processing 171,257 162,722
Federal insurance premiums 157,259 139,020
Advertising 60,253 55,875
Real estate owned and repossessed assets 14,351 23,243
Other 457,902 425,704
---------- ----------
Total noninterest expense 2,338,511 2,132,547
---------- ----------
Earnings before income taxes 900,200 464,796
Income taxes (note 8) 323,376 301,238
---------- ----------
Net earnings $ 576,824 163,558
========== ==========
See accompanying notes to consolidated financial statements.
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Equity
Unrealized
Retained Losses on
earnings, available-for-sale
substantially securities
restricted net of tax Total
---------- ---------- -----
Balance at June 30, 1994 $ 7,342,158 (361,222) 6,980,936
Net earnings 163,558 - 163,558
Writedown of investment in mutual fund - 314,148 314,148
Decrease in unrealized loss on available-for-sale
securities, net of tax - 22,216 22,216
------------ --------- -----------
Balance at June 30, 1995 7,505,716 (24,858) 7,480,858
Net earnings 576,824 - 576,824
Decrease in unrealized loss on available-for-sale
securities, net of tax - 8,208 8,208
------------ --------- ===========
Balance at June 30, 1996 $ 8,082,540 (16,650) 8,065,890
============ ========= ===========
See accompanying notes to consolidated financial statements.
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
----------------------
1996 1995
---- ----
Cash flows from operating activities:
Net earnings $ 576,824 163,558
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 235,828 171,277
Depreciation 132,335 118,250
Net realized gain on sale of securities available-for-sale (54,205) -
Writedown of investment in mutual fund - 314,148
Gain on disposition of real estate owned, net - (5,822)
Proceeds from sale of loans held for sale 16,276,153 4,763,106
Origination of loans held for sale (14,938,346) (6,134,640)
Gain on sale of loans, net (184,899) (42,106)
Premium amortization and accretion of discounts and deferred
loan fees (282,871) (301,901)
Deferred income (benefit) taxes (55,472) 21,464
FHLB stock dividends (16,000) -
Changes in assets and liabilities:
Accrued interest receivable (53,786) (183,758)
Other assets (172,428) (28,821)
Accrued expenses and other liabilities 47,989 180,940
Accrued interest payable on deposits 6,458 42,933
Current income taxes payable 271,869 (56,737)
------------- ------------
Net cash provided by (used in) operating activities 1,789,449 (978,109)
------------- ------------
Cash flows from investing activities:
Net increase in loans receivable (1,632,432) (23,956,731)
Purchase of investment securities held-to-maturity (100,000) -
Purchase of FHLB stock - (273,500)
Proceeds from sales of securities available-for-sale 4,046,846 -
Mortgage-backed securities principal repayments 553,490 964,384
Change in FHLB time deposits - 1,600,000
Purchase of office property and equipment (116,890) (213,041)
Proceeds from sale of real estate owned - 29,772
Purchase of life insurance policies - (1,420,000)
------------- ------------
Net cash provided by (used in) investing activities $ 2,751,014 (23,269,116)
------------- ------------
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVING BANK
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Years ended June 30,
------------------------
1996 1995
---- ----
Cash flows from financing activities:
(Decrease) increase in deposits $ (104,916) 8,094,031
Proceeds from FHLB advances 23,650,000 32,000,000
Repayments of FHLB advances (27,526,915) (16,123,085)
Increase in advance payments by borrowers for property taxes and
insurance (172,983) 62,911
----------- -----------
Net cash (used in) provided by financing activities (4,154,814) 24,033,857
----------- -----------
Net increase (decrease) in cash and cash equivalents 385,649 (213,368)
Cash and cash equivalents at the beginning of the period 3,073,710 3,287,078
----------- -----------
Cash and cash equivalents at the end of the period $ 3,459,359 3,073,710
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 122,000 336,510
=========== ===========
Cash paid during the period for interest $ 3,998,964 3,102,999
=========== ===========
Supplemental schedule of noncash investing and financing activities:
Conversion of loans to real estate owned $ - 10,897
=========== ===========
Loans made to finance sales of real estate owned $ - 68,000
=========== ===========
See accompanying notes to consolidated financial statements.
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) Organization
------------
The consolidated financial statements include the accounts of Community
Bank of Excelsior Springs, a Savings Bank, and its wholly-owned
subsidiary, CBES Service Corporation, collectively referred to as
Community Bank. Community Bank of Excelsior Springs is chartered as a
federal mutual savings bank. CBES Service Corporation was formed in
March 1993 to provide insurance services. All significant intercompany
balances and transactions have been eliminated in consolidation.
(b) Cash and Cash Equivalents
-------------------------
For purposes of the cash flows, all investments with a maturity of three
months or less at date of purchase are considered cash equivalents.
(c) Mortgage-backed and Investment Securities
-----------------------------------------
Community Bank classifies securities as either available-for-sale or held-
to-maturity. Held-to-maturity securities are those which Community
Bank has the positive intent and ability to hold to maturity. All
other securities are classified as available-for-sale.
Securities classified as held-to-maturity are recorded at amortized cost.
Securities classified as available-for-sale are recorded at fair value
with unrealized net holding gains and losses, net of the related tax
effect, excluded from earnings and reported as a separate component of
equity until realized. A decline in the market value of any security
below cost that is deemed other than temporary is charged to income,
resulting in the establishment of a new cost basis for the security.
Pursuant to Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
and implementation guidance issued in November 1995 by the Financial
Accounting Standards Board, Community Bank reclassified certain held-
to-maturity mortgage-backed securities with aggregate cost and fair
value of $2,913,965 and $2,963,159, respectively, to available-for-
sale on December 5, 1995. These securities were sold on December 11,
1995.
Premiums and discounts on mortgage-backed and investment securities are
amortized using the interest method over the life of the securities.
Realized gains or losses on sales are recognized using the specific
identification method.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) Loans Held-for-Sale
-------------------
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value. Fees received
on such loans are deferred and recognized in income as part of the
gain or loss on sale. At June 30, 1996 and 1995, all loans held for
sale were committed to be sold to a third party. There was no
valuation allowance at June 30, 1996 or 1995.
(e) Deferred Loan Fees and Costs
----------------------------
Loan fees and certain direct loan origination costs are deferred, and the
net fee or cost is recognized as interest income using the interest
method over the contractual life of the loan for loans generated for
Community Bank's portfolio.
(f) Allowance for Losses
--------------------
The allowance for loan losses is established through provision for loan
losses charged against income. Loans deemed to be impaired are charged
against the allowance for loan losses, and subsequent recoveries, if
any, are credited to the allowance.
A valuation allowance for losses on loans is established by management
based on its estimate of the amount required to maintain an adequate
allowance for loan losses reflective of the risks in the loan
portfolio. This estimate is based on reviews of the loan portfolio,
including assessment of the estimated net realizable value of the
related underlying collateral of and consideration of past loan loss
experience, current economic conditions and such other factors which,
in the opinion of management, deserve current recognition. Loans are
also subject to periodic examination by regulatory agencies. Such
agencies may require charge-off or additions to the allowance based
upon their judgments about information available at the time of their
examination.
Additionally, it is Community Bank's policy to place loans delinquent, as
to principal, over ninety days on nonaccrual status and exclude
interest on such loans from income. Interest ultimately collected is
credited to income in the period received.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Community Bank adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," on July 1,
1995. SFAS No. 114, as amended by SFAS No. 118, defines the
recognition criteria for loan impairment and the measurement methods
for certain impaired loans and loans for which terms have been
modified in troubled-debt restructurings (a restructured loan).
Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all amounts due - both principal
and interest - according to the contractual terms of the loan
agreement. When measuring impairment, the expected future cash flows
of an impaired loan are required to be discounted at the loan's
effective interest rate. Alternatively, impairment can be measured by
reference to an observable market price, if one exists, or the fair
value of the collateral for a collateral-dependent loan. Regardless of
the historical measurement method used, SFAS No. 114 requires a
creditor to measure impairment based on the fair value of the
collateral when the creditor determines foreclosure is probable.
Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement.
Community Bank applies the recognition criteria of SFAS No. 114 to
multifamily real estate loans, commercial real estate loans and
restructured loans. Smaller balance, homogeneous loans, including one-
to-four-family residential and construction loans and consumer loans,
are collectively evaluated for impairment. SFAS No. 118 amends SFAS
No. 114 to allow a creditor to use existing methods for recognizing
interest income on impaired loans. Community Bank has elected to
continue to use its existing nonaccrual methods for recognizing
interest on impaired loans. The adoption of SFAS No. 114 and No. 118
resulted in no prospective adjustment to the allowance for loan losses
and did not affect Community Bank's policies regarding charge-offs or
recoveries. The impact of these statements on the consolidated
financial statements of Community Bank was immaterial.
(g) Real Estate Owned
-----------------
Real estate properties acquired through foreclosure are initially recorded
at the lower of cost or the fair value, less estimated costs to sell,
of the underlying collateral at the time of foreclosure. Subsequent to
foreclosure, further declines in the fair value of such properties are
recorded as a reduction to the carrying value of those assets through
the establishment of an allowance for losses.
(h) Stock in Federal Home Loan Bank (FHLB)
--------------------------------------
Community Bank is a member of the FHLB system. As a member, it is required
to purchase and hold stock in the FHLB of Des Moines in an amount
equal to the greater of (a) 1% of unpaid residential loans at the
beginning of each year, (b) 5% of FHLB advances, or (c) .3% of total
assets. Community Bank's investment in such stock is recorded at cost.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(i) Office Property and Equipment
-----------------------------
Office property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line method
over the estimated useful lives (three to thirty years) of the
respective assets.
Maintenance and repairs are charged to expense and betterments are
capitalized. Gains and losses on disposition are reflected in current
operations.
(j) Income Taxes
------------
Community Bank accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective income tax bases. The effect on
deferred tax assets and liabilities for a change in tax rate is
recognized in income in the period that includes the enactment dates.
(k) Use of Estimates
----------------
Management of Community Bank has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(l) Effect of New Financial Accounting Standards
--------------------------------------------
SFAS No. 122, "Accounting for Mortgage Servicing Rights," will be effective
for Community Bank for the year beginning July 1, 1996 and generally
requires entities that sell or securitize loans and retain the
mortgage servicing rights to allocate total cost of the mortgage loans
to the mortgage servicing right and the loan based on their relative
fair value. Costs allocated to mortgage servicing rights should be
recognized as a separate asset and amortized over the period of
estimated net servicing income and evaluated for impairment based on
fair value. The adoption of this statement is not expected to have a
material effect on the consolidated financial statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," supersedes SFAS No. 122 and will
be effective for all transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. This
statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach
that focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the financial-components approach, after a transfer of financial
assets, an entity recognizes all financial and servicing assets it
controls and liabilities it has incurred and derecognizes financial
assets it no longer controls and liabilities that have been
extinguished. The financial-components approach focuses on the assets
and liabilities that exist after the transfer. Many of these assets
and liabilities are components of financial assets that existed prior
to the transfer. If a transfer does not meet the criteria for a sale,
the transfer is accounted for as a secured borrowing with pledge of
collateral. The adoption of this statement is not expected to have a
material effect on the consolidated financial statements.
(2) INVESTMENT SECURITIES
---------------------
A summary of investment securities available-for-sale at June 30, 1996 and
1995 is as follows:
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
------------ ---------- ----------- ---------
June 30, 1996:
U.S. government and
agency obligations
maturing within one
year $1,000,000 - (8,400) 991,600
U.S. government and
agency obligations
maturing after one
year but within five
years 1,002,250 - (19,350) 982,900
---------- ---------- ------- ---------
$2,002,250 - (27,750) 1,974,500
========== ========== ======= =========
June 30, 1995:
U.S. government and
agency obligations
maturing after one year
but within five years $2,003,750 - (41,430) 1,962,320
Mutual fund 1,078,676 - - 1,078,676
---------- ---------- ------- ---------
$3,082,426 - (41,430) 3,040,996
========== ========== ======= =========
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended June 30, 1996, Community Bank recognized gross gains
of $5,011 and no gross losses on proceeds of $1,083,687 from the sale
of its investment in a mutual fund. No investment securities were sold
during the year ended June 30, 1995.
During the year ended June 30, 1995, management determined that the decline
in market value of its mutual fund investment below cost was not
temporary and, accordingly, adjusted the cost basis of the investment
downward by $314,148 through a charge to earnings.
(3) MORTGAGE-BACKED SECURITIES
--------------------------
Mortgage-backed securities held-to-maturity consisted of the following at
June 30, 1996 and 1995:
Amortized Unrealized Unrealized Estimated
cost gains losses fair value
---- ----- ------ ----------
June 30, 1996:
Federal Home Loan
Mortgage Corporation
(FHLMC) participation
certificates $ 397,558 1,425 (9,664) 389,319
Pass-through certificate
guaranteed by Government
National Mortgage
Association (GNMA) 2,836 7 - 2,843
---------- ------ ------- ---------
$ 400,394 1,432 (9,664) 392,162
========== ====== ======= =========
June 30, 1995:
FHLMC participation
certificates $ 3,507,847 21,606 (15,923) 3,513,530
Pass-through certificate
guaranteed by GNMA 361,725 36,631 - 398,356
---------- ------ ------- ---------
$ 3,869,572 58,237 (15,923) 3,911,886
========== ====== ======= =========
During the year ended June 30, 1996, Community Bank recognized gross gains
of $52,722 and gross losses of $3,528 on proceeds of $2,963,159 from
the sale of mortgage-backed securities available-for-sale. See note
1(c). No mortgage-backed securities were sold during the year ended
June 30, 1995.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) LOANS RECEIVABLE
----------------
Loans receivable consisted of the following:
June 30,
------------------
1996 1995
---- ----
Real estate:
One-to-four family residential $ 52,294,663 53,737,889
Construction 22,460,608 16,221,145
Land 4,005,713 1,991,631
Commercial 1,082,598 818,371
Multifamily 315,304 134,412
Consumer loans 10,572,028 11,296,068
----------- ----------
90,730,914 84,199,516
Less:
Loans in process 11,015,102 6,390,936
Deferred loan origination fees
and discounts on loans, net 284,053 221,519
Allowance for loan losses 388,000 226,000
----------- ----------
$ 79,043,759 77,361,061
=========== ==========
At June 30, 1996, Community Bank was committed to make first mortgage loans
approximating $1,982,000, of which $190,000 was committed to be sold
to a third party. Fixed rate loan commitments approximated $1,691,000
at June 30, 1996, with rates ranging from 7.75% to 9.00%. Community
Bank services mortgage loans for others amounting to approximately
$31,080,000 and $25,743,000 at June 30, 1996 and 1995, respectively.
At June 30, 1996 and 1995, Community Bank had loans of approximately
$1,357,000 and $972,000 to directors, officers and management
employees. During the years ended June 30, 1996 and 1995,
approximately $633,000 and $328,000 of new loans were made and
repayments totaled approximately $248,000 and $143,000, respectively.
Such loans were made in accordance with Community Bank's normal
lending practices.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of activity in the allowance for loan losses for the years ended
June 30, 1996 and 1995 is as follows:
1996 1995
----------- ---------
Balance at beginning of year $ 226,000 163,000
Provision for loan losses 235,828 171,277
Charge-offs (107,408) (171,386)
Recoveries 33,580 63,109
--------- --------
Balance at end of year $ 388,000 226,000
========= ========
At June 30, 1996 and 1995, Community Bank had approximately $412,000 and
$133,000, respectively, of nonaccruing loans. For the years ended
June 30, 1996 and 1995, gross interest income which would have been
recorded had the nonaccruing loans been in accordance with their
original terms amounted to $34,000 and $11,000, respectively. The
amount that was included in income on such loans was $28,000 and
$7,000 for the years ended June 30, 1996 and 1995, respectively.
Community Bank evaluates each customer's creditworthiness on a case-by-case
basis. Residential loans with a loan-to-value ratio exceeding 80% are
required to have private mortgage insurance. Community Bank's
principal lending areas are the economically diverse communities
northeast of Kansas City, Missouri.
(5) OFFICE PROPERTY AND EQUIPMENT
-----------------------------
Office property and equipment consist of the following:
June 30,
--------------------------------
1996 1995
----------- ---------
Land and land improvements $ 171,130 171,130
Office buildings 1,321,053 1,281,997
Furniture and equipment 769,455 691,621
---------- ---------
2,261,638 2,144,748
Less accumulated depreciation 988,731 856,396
---------- ---------
$1,272,907 1,288,352
========== =========
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) DEPOSITS
--------
Deposit balances are summarized as follows:
June 30,
------------------------------------------------
1996 1995
--------------------- ----------------------
Balance by interest rate:
Noninterest bearing
demand accounts - $ 1,378,795 2% $ 1,319,904 2%
NOW accounts 2.25 - 2.00 7,967,617 12 7,601,014 11
Money market 2.50 - 2.75 6,235,135 9 5,874,186 9
Passbook accounts 2.25 - 2.75 3,977,740 6 3,740,235 5
----------- ----- ----------- ---------
19,559,287 29 18,535,339 27
----------- ----- ----------- ---------
Certificate accounts: 2.00 - 2.99 13,462 - 22,732 -
3.00 - 3.99 - - 853,408 1
4.00 - 4.99 1,658,854 2 7,548,143 11
5.00 - 5.99 43,045,110 63 11,569,757 17
6.00 - 6.99 3,445,487 5 22,091,710 33
7.00 - 7.99 160,037 - 7,022,435 10
8.00 - 8.99 287,323 1 628,466 1
9.00 - 9.99 - - 2,486 -
----------- ----- ----------- ---------
48,610,273 71 49,739,137 73
----------- ----- ----------- ---------
$68,169,560 100% $68,274,476 100%
=========== ===== =========== =========
Weighted average interest
rate on savings deposits
at period end 4.47% 4.84%
==== ====
Contractual maturity of
certificate accounts:
Under 12 months $38,189,808 79% $39,609,558 80%
12 to 24 months 4,968,501 10 5,573,835 10
24 to 36 months 1,522,494 3 2,363,905 5
36 to 48 months 866,610 2 474,964 1
48 to 60 months 631,194 1 435,806 1
Over 60 months 2,431,666 5 1,281,069 3
----------- ----- ----------- ---------
$48,610,273 100% $49,739,137 100%
=========== ===== =========== =========
Deposits of $100,000 or more totaled $4,074,000 and $3,132,000 at June 30,
1996 and 1995, respectively.
The components of interest expense on savings deposits for the years ended
June 30, 1996 and 1995 are as follows:
1996 1995
---- ----
NOW, passbook and money market $ 372,422 397,213
Certificate accounts 2,879,255 2,179,936
--------- ---------
$ 3,251,677 2,577,149
========= =========
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) FHLB ADVANCES
-------------
Community Bank had the following debt outstanding from the Federal Home
Loan Bank of Des Moines at June 30, 1996 and 1995:
June 30,
-------------------------
1996 1995
------------- ----------
$3,000,000 advances, interest at 6.14%
due September 2000 $ 3,000,000 -
$3,000,000 advance, interest at 8.00%
due September 2009 - 2,919,860
$2,500,000 advance, interest at 8.03%
due December 2009 - 2,457,055
$2,000,000 advance, interest at 6.78%
due November 1995 - 2,000,000
$1,000,000 advance, interest at 6.65%
due October 1995 - 1,000,000
$2,000,000 advance, interest at 5.81%
due October 1996 2,000,000 -
$1,000,000 advance, interest at 5.78%
due June 1996 - 2,000,000
$1,000,000 advance, interest at 5.77%
due June 1997 1,000,000 1,000,000
$1,000,000 advance, interest at 5.86%
due June 1998 1,000,000 1,000,000
$10,000,000 line of credit, interest at
approximately 50 basis points above the
U.S. Treasury Bill rate (5.57% and
6.46% at June 30, 1996 and 1995)
maturing May 1997 5,000,000 3,500,000
----------- ----------
$12,000,000 15,876,915
=========== ==========
The advances and lines of credit to the FHLB are collateralized by first
mortgage loans.
Scheduled maturities of FHLB advances are as follows:
Year ending June 30,
--------------------
1997 $ 8,000,000
1998 1,000,000
2001 3,000,000
-----------
$12,000,000
===========
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) INCOME TAXES
------------
Components of income tax expense are as follows:
Federal State Total
----------- ------ --------
Year ended June 30, 1996:
Current $354,775 24,073 378,848
Deferred (64,983) 9,511 (55,472)
-------- ------ -------
$289,792 33,584 323,376
======== ====== =======
Year ended June 30, 1995:
Current $257,355 34,334 291,689
Deferred 8,883 666 9,549
-------- ------ -------
$266,238 35,000 301,238
======== ====== =======
Income tax expense has been provided at effective rates of 35.9% and 64.8%
(applied to earnings before taxes) for the years ended June 30, 1996
and 1995, respectively. The reasons for the differences between the
effective tax rates and the corporate federal income tax rate of 34%
are as follows:
Years ended
June 30,
---------------
1996 1995
------ ----
Federal income tax rate 34.0% 34.0
Items affecting federal income tax rate:
Writedown of investment in mutual - 23.0
fund
Increase in cash surrender value of
life insurance policies, net of
nondeductible premiums (1.6) -
State income tax net of federal 3.3 5.0
benefit
Other .2 2.8
---- ----
Effective income tax rate 35.9% 64.8
==== ====
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and
such amounts as measured by tax laws. Temporary differences which give
rise to deferred tax assets and liabilities at June 30, 1996 and 1995
are as follows:
Years ended
June 30,
---------------------
1996 1995
---------- ---------
Accrued compensation $ 33,000 -
Allowance for loan losses 127,000 56,000
Unrealized losses on assets 11,000 17,000
available-for-sale
Writedown of investment in mutual fund - 129,000
Other 1,000 17,000
--------- --------
Deferred income tax asset before
valuation allowance 172,000 219,000
Valuation allowance - 107,000
--------- --------
Deferred income tax asset 172,000 112,000
--------- --------
Loan origination fees (68,000) (49,000)
Fixed assets (65,000) (51,000)
Other (16,000) (39,000)
--------- --------
Deferred income tax liability (149,000) (139,000)
--------- --------
Net deferred income tax benefit $ 23,000 (27,000)
(liability) ========= ========
The valuation allowance that was outstanding at the beginning of the fiscal year
was eliminated due to reversal of the corresponding deductible
temporary difference.
(9) COMPENSATION AGREEMENTS
-----------------------
Effective March 1995, Community Bank entered into deferred compensation
agreements with members of the Board of Directors and Officers. The
agreements provide for monthly payments to the individuals or their
beneficiary for between ten and fifteen years following retirement.
The agreements are accounted for on an individual basis with the cost
accrued over the individual's period of service. Expense under the
agreements for the years ended June 30, 1996 and 1995 was
approximately $39,000 and $14,000, respectively.
The Directors/Officers and their beneficiaries are general unsecured creditors
of Community Bank for all amounts due under these agreements.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) RETAINED EARNINGS
-----------------
Retained earnings at June 30, 1996 and 1995 include approximately $1,700,000 for
which no provision for federal income tax has been made. This amount
represents an allocation of income to bad debt deductions for income
tax purposes only. Reduction of amounts allocated for purposes other
than income tax bad debt losses will create income for tax purposes
only, which will be subject to the then current corporate income tax
rate.
(11) REGULATORY CAPITAL REQUIREMENTS
-------------------------------
Community Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken,
could have a direct material effect on Community Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Community Bank must meet
specific capital guidelines that involve quantitative measures of
Community Bank' assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Community
Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Community Bank to maintain minimum amounts and ratios (set
forth in the table below) of risk-based capital, as defined in the
regulations, to risk-weighted assets, as defined, and of tangible and
core capital, as defined, to total assets, as defined. Management
believes, as of June 30, 1996, that Community Bank meets all capital
adequacy requirements to which it is subject.
As of June 30, 1996, the most recent notification from the Office of Thrift
Supervision (OTS) categorized Community Bank as adequately capitalized
under the regulatory framework for prompt corrective action. To be
categorized as adequately capitalized, Community Bank must maintain
minimum total risk-based, tangible and core capital ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
Tangible Core Risk-based
------------- --------- ----------
Regulatory capital: $8,083,000 8,083,000 8,101,000
Minimum capital requirement: 1,348,000 2,696,000 5,528,000
---------- --------- ---------
Regulatory capital in
excess of minimum
capital requirement $6,735,000 5,387,000 2,573,000
========== ========= =========
Minimum capital requirement 1.5% 3.0 8.0
========== ========= =========
Community Bank regulatory capital 9.0% 9.0 11.7
========== ========= =========
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) PLAN OF CONVERSION
------------------
On May 14, 1996, Community Bank's Board of Directors approved a plan (Plan) to
convert from a federally chartered mutual savings bank to a federally
chartered stock savings bank, subject to approval by Community Bank's
members. The Plan, which includes formation of a holding company to
own all of the outstanding stock of Community Bank, is subject to
approval by the OTS and includes the filing of a registration
statement with the Securities and Exchange Commission. As of June 30,
1996, Community Bank had incurred approximately $154,000 of costs
related to this conversion which is included in other assets. If the
conversion is ultimately successful, actual conversion costs will be
accounted for as a reduction in gross proceeds. If the conversion is
unsuccessful, the conversion costs will be expensed.
The Plan calls for the common stock of the holding company to be offered to
various parties in a subscription offering at a price based on an
independent appraisal of Community Bank. It is anticipated that any
shares not purchased in the subscription offering will be offered in a
community offering.
Community Bank may not declare or pay a cash dividend if the effect thereof
would cause its net worth to be reduced below either the amount
required for the liquidation account discussed below or the regulatory
capital requirements imposed by the OTS.
At the time of conversion, Community Bank will establish a liquidation account
in an amount equal to its retained earnings as reflected in the latest
statement of financial condition used in the final conversion
prospectus. The liquidation account will be maintained for the
benefit of eligible account holders who continue to maintain their
deposit accounts in Community Bank after conversion. In the event of
a complete liquidation of Community Bank, and only in such an event,
eligible depositors who continue to maintain accounts shall be
entitled to receive a distribution from the liquidation account before
any liquidation may be made with respect to common stock.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," and SFAS
No. 119, "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments," require disclosure of estimated fair
values of financial instruments, both assets and liabilities
recognized and not recognized in the consolidated financial
statements. Fair value estimates have been made as of June 30, 1996
based on then current economic conditions, risk characteristics of the
various financial instruments and other subjective factors.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to
estimate that value:
Cash and Cash Equivalents
-------------------------
The carrying amounts approximate fair value because of the short
maturity of these instruments.
Investment Securities and Mortgage-backed Securities
----------------------------------------------------
The fair values of investment securities and mortgage-backed
securities are estimated based on published bid prices or bid
quotations received from securities dealers.
Loans Receivable
----------------
The fair values of loans receivable are estimated using the option-
based approach. Cash flows consist of scheduled principal, interest
and prepaid principal. Loans with similar characteristics were
aggregated for purposes of these calculations.
Accrued Interest
----------------
The carrying amount of accrued interest is assumed to be its carrying
value because of the short-term nature of these items.
Stock in the FHLB
-----------------
The carrying amount of such stock is estimated to approximate fair
value.
Deposits
--------
The fair values of deposits with no stated maturity are deemed to be
equivalent to amounts payable on demand. The fair values of
certificates of deposit are estimated based on the static discounted
cash flow approach using rates currently offered for deposits of
similar remaining maturities.
FHLB Advances
-------------
The fair values of FHLB advances are estimated based on discounted
values of contractual cash flows using the rates currently available
to Community Bank for advances of similar remaining maturities. The
carrying amount of the advances under the line of credit approximates
fair value due to the short maturity.
(Continued)
COMMUNITY BANK OF EXCELSIOR SPRINGS, A SAVINGS BANK,
AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair value estimates of Community Bank's financial instruments as of June 30,
1996 are set forth below:
Carrying Estimated
amount fair value
------ ----------
Cash and cash equivalents $ 3,459,359 3,459,000
=========== ==========
Investment securities $ 2,074,500 2,075,000
=========== ==========
Mortgage-backed securities $ 400,394 392,000
=========== ==========
Loans receivable, net of loans in $79,715,812 80,823,000
process =========== ==========
Accrued interest receivable $ 625,837 626,000
=========== ==========
Stock in the FHLB $ 810,700 811,000
=========== ==========
Deposits:
Noninterest bearing demand deposit $ 1,378,795 1,379,000
Money market and NOW deposits 14,202,752 14,203,000
Passbook accounts 3,977,740 3,978,000
Certificate accounts 48,610,273 48,423,000
----------- ----------
Total deposits $68,169,560 67,983,000
=========== ==========
FHLB Advances $12,000,000 11,922,000
=========== ==========
Accrued interest payable $ 111,227 111,000
=========== ==========
Limitations
- -----------
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments.
These estimates do not reflect any premium or discount that could
result from offering for sale at one time Community Bank's entire
holdings of a particular financial instrument. Because no market
exists for a significant portion of Community Bank's financial
instruments, fair value estimates are based on judgments regarding
future loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates. Fair value estimates are based on existing balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: November 6, 1996 By: /s/ Larry E. Hermreck
---------------- ---------------------------
Larry E. Hermreck
Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Larry E. Hermreck /s/ Robert L. Lalumondier
- ---------------------------------- ----------------------------------
Larry E. Hermreck Robert L. Lalumondier
Chief Executive Officer Director
Date: November 6, 1996 Date: November 6, 1996
---------------- ----------------
/s/ Dennis D. Hartman /s/ Robert E. McCrorey
- ---------------------------------- ----------------------------------
Dennis D. Hartman Robert E. McCrorey
Controller and Chief Financial Officer Chairman of the Board
Date: November 6, 1996 Date: November 6, 1996
---------------- ----------------
/s/ Richard N. Cox /s/ Edgar L. Radley
- ---------------------------------- ----------------------------------
Richard N. Cox Edgar L. Radley
Director Vice Chairman of the Board
Date: November 6, 1996 Date: November 6, 1996
---------------- ----------------
/s/ Rodney G. Rounkles /s/ Cecil E. Lamb
- ---------------------------------- ----------------------------------
Rodney G. Rounkles Cecil E. Lamb
Director Director
Date: November 6, 1996 Date: November 6, 1996
---------------- ----------------