UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from___to___.Commission File No. 028250
CNS BANCORP, INC.
Delaware
43-1738315
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization)
427 Monroe Street, Jefferson City, Missouri 65101
Registrant's telephone number, including area code (573) 634-3336
Not applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding May 01,
2000
Common Stock, par value $.01 per share 1,418,286 Shares
CNS BANCORP, INC. AND
SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PAGE NO.
PART I - Financial Information
Consolidated Statements of Financial Condition 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - Other Information 9
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS March 31, 2000 December 31,1999
Cash and due from depository institutions $ 8,898,557 $10,720,442
Securities available-for-sale $10,834,163 $12,386,970
Stock in Federal Home Loan Bank $ 662,500 $ 662,500
Loans receivable, net $66,198,739 $64,263,384
Accrued interest receivable $ 670,693 $ 574,883
Real estate owned, net $ 621,591 $ 621,591
Premises and equipment, net $ 1,488,450 $ 1,521,752
Income tax receivable $ 523,448 $ 545,257
Other assets $ 454,355 $ 469,039
Total assets $90,352,496 $91,765,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $67,589,730 $68,906,887
Borrowed funds $ 537,420 $ 794,346
Advances from borrowers for
taxes and insurance $ 99,027 $ 40,731
Accrued expenses and other liabilities $ 411,581 $ 437,446
Total liabilities $68,637,758 $70,179,410
Common stock $ 16,531 $ 16,531
Additional paid-in-capital $ 16,160,025 $16,142,402
Retained earnings, substantially restricted $ 10,657,760 $10,628,692
Deferred compensation-ESOP ($ 787,265) ($820,084)
Deferred compensation -MRDP ($436,004) ($487,665)
Investments held in trust for
Exec Def Comp Plan ($128,481) ($130,587)
Treasury stock ($3,585,067) ($3,585,067)
Accumulated other comprehensive income ($182,761) ($177,814)
Total stockholders' equity $ 21,714,738 $21,586,408
Total liabilities and stockholders' equity $90,352,496 $91,765,818
The notes to consolidated financial statements are an integral part of these
statements.
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31 March 31
2000 1999
INTEREST INCOME
Mortgage loans $1,161,355 $1,165,145
Consumer and other loans $ 114,894 $ 77,741
Investment securities $ 75,286 $ 64,359
Mortgage-backed securities $ 97,650 $ 115,632
Other interest-earning assets $ 127,308 $ 199,600
Total interest income $1,576,493 $1,622,477
INTEREST EXPENSE
Deposits $ 774,540 $ 831,159
Borrowed money $ 10,117 $ 9,030
Total interest expense $ 784,657 $ 840,189
Net interest income $ 791,836 $ 782,288
PROVISION (BENEFIT) FOR
LOAN LOSSES $ 0 ($24,703)
Net interest income after
provision for loan losses $ 791,836 $ 806,991
NONINTEREST INCOME
Loan servicing fees $ 22,123 $ 21,339
Income from real estate owned $ 750 $ 1,650
Net gain on sale of assets $ 0 $ 69,991
Other $ 27,664 $ 32,264
Total non-interest income $ 50,537 $ 125,244
NONINTEREST EXPENSE
Compensation and benefits $ 349,970 $ 348,739
Occupancy and equipment $ 63,252 $ 64,083
Deposit insurance premiums $ 3,663 $ 11,130
Other $ 176,072 $ 158,629
Total non-interest expense $ 592,957 $ 582,581
Net income before income taxes $ 249,416 $ 349,654
PROVISION FOR INCOME TAXES $ 99,785 $ 139,875
Net income $ 149,631 $ 209,779
OTHER COMPREHENSIVE (LOSS), NET OF
INCOME TAXES
Unrealized (losses) on securities $ (4,947) $ (11,059)
Comprehensive income $ 144,684 $ 209,779
Earnings per share $ 0.11 $ 0.16
Diluted earnings per share $ 0.11 $ 0.15
Weighted average shares outstanding 1,336,562 1,356,241
Dividends per share $ 0.090 $ 0.075
The notes to consolidated financial statements are an integral part of these
statements.
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
March 31, 2000 March 31, 1999
Cash flows from operating activities:
Net Income $ 149,631 $ 209,779
Adjustments to reconcile net income to net cash flows
provided by (used for) operating activities:
Depreciation $ 33,301 $ 30,812
Provision (Benefit) for loan losses $ 0 ($ 24,703)
Amortization of premiums and accretion
of discounts on securities available-for-sale $ 15,576 $ 14,538
Proceeds from the sale of loans held-for-sale $ 0 $ 4,918,695
Origination of loans held-for-sale $ 0 ($ 3,432,594)
(Gain)/loss on sales of loans held-for-sale $ 0 ($ 23,385)
ESOP expenses $ 57,527 $ 44,992
MRDP expenses $ 51,661 $ 51,660
Decrease (increase) in:
Accrued interest receivable ($ 95,808) ($ 2,828)
Other assets $ 14,684 ($ 73,051)
Income tax receivable $ 21,809 $ 22,150
Increase (decrease) in:
Accrued expenses and other liabilities ($ 23,758) $ 39,722
Net cash provided by operating activities $ 224,623 $ 1,775,787
Cash flows from investing activities:
Loans:
Loan (originations) and principal payments - net ($1,935,355) $ 3,879,353
Purchases of:
Loans receivable $ 0 ($ 1,971,080)
Securities available-for-sale ($ 293,953) $ 0
Proceeds from maturity or pay down of:
Securities available-for-sale $1,826,237 $ 953,459
Proceeds from sales of real estate owned $ 0 ($ 50,669)
Cash outflows for premises and equipment $ 0 ($ 440)
Net cash provided by (used for) Investing Activities ($ 403,071) $ 2,810,623
Cash flows from financing activities:
Net increase (decrease) in:
Deposits ($ 1,317,157) ($ 961,006)
Advances from borrowers for taxes and insurance $ 58,296 $ 55,850
Borrowed funds ($ 256,926) ($ 6,502)
Treasury stock purchased $ 0 ($ 367,313)
Dividends paid to share holders ($ 127,646) ($ 113,735)
Net cash used for financing activities ($ 1,643,433) ($ 1,392,706)
Net increase (decrease) in cash and cash equivalents ($1,821,883)($ 3,193,704)
Cash and Cash equivalents at beginning of period $10,720,442 $ 9,813,816
Cash and cash equivalents at end of period $ 8,898,557 $13,007,520
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits $ 136,328 $ 139,988
Income taxes $ 0 $ 71,742
The notes to consolidated financial statements are an integral part of these
statements.
CNS BANCORP, INC. AND
SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with Generally Accepted
Accounting Principles (GAAP) for interim financial information
and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments
necessary for a fair presentation have been included. The results of
operations and other data for the three months ended March 31,
2000 are not necessarily indicative of results that may be expected
for the entire fiscal year ending December 31, 2000.
The unaudited consolidated financial statements include the
amounts of CNS Bancorp, Inc. (the "Company") and its wholly-
owned subsidiary, City National Savings Bank, FSB (the "Savings
Bank") and the Savings Bank's wholly-owned subsidiary, Parity
Insurance Agency, Inc., and its wholly-owned subsidiary, City
National Real Estate, Inc., for the three months ended March 31,
2000. Material intercompany accounts and transactions have been
eliminated in consolidation.
(2) Employee Stock Ownership Plan "ESOP"
The Savings Bank has established for eligible employees an
Employee Stock Ownership Plan in connection with the
conversion. The ESOP borrowed $1,322,500 from the Company
and purchased 132,250 common shares issued in the conversion.
The Savings Bank is expected to make scheduled discretionary cash
contributions to the ESOP sufficient to service the amount
borrowed. The $1,322,500 in stock issued by the Company is
reflected in the accompanying consolidated financial statements as
a charge to unearned compensation and a credit to common stock
and paid-in capital. The unamortized balance of unearned
compensation is shown as a deduction of stockholders' equity. The
unpaid balance of the ESOP loan is eliminated in consolidation.
(3) Earnings Per Share "EPS"
Earnings per share for the quarter ended March 31, 2000 and 1999
were calculated as follows:
2000
1999 Weighted
Weighted
Average Average
Shares Per-share Shares Per-share
(denominator) amount (denominator) amount
Basic EPS 1,336,562 $0.11 1,356,241 $0.16
Effect of dilutive shares
Unallocated ESOP Shares 78,727 91,853
Stock options 0 0
Diluted EPS 1,415,289 $0.11 1,448,094 $0.15
Management Discussion and Analysis of
Financial Condition and Results of Operation
General
The principal business of CNS Bancorp, Inc. consists of directing the
business of City National Savings Bank, FSB. Therefore, the discussion in
the Managements's Discussion and Analysis of Financial Condition and
Results of Operation relates to the Savings Bank and its operations.
Merger with Exchange National Bancshares, Inc
Pursuant to an Agreement and Plan of Merger dated as of October 27, 1999,
by and between the Company and Exchange National Bancshares, Inc.
("Exchange"), the Company has agreed to merge with a subsidiary of
Exchange with the subsidiary being the surviving corporation. Immediately
after this merger, the Savings Bank will merge with Exchange National
Bank of Jefferson City ("Exchange National Bank"), with Exchange
National Bank being the surviving institution. As a result of this
transaction, the Company and the Savings Bank will cease to exist.
Exchange intends to operate the Savings Bank's Tipton, St. Robert and
California, Missouri offices as branches of Exchange National Bank and to
consolidate the Bank's two Jefferson City offices with Exchange National
Bank's existing offices in Jefferson City. Under the merger agreement,
each outstanding share of the Company's common stock will automatically
become exchangeable for $8.80 in cash and 0.15 of a share of Exchange
common stock. The merger consideration is subject to downward
adjustment if the Company's adjusted net worth falls below $20.95 million.
The merger is subject to approval of the holders of a majority of the
outstanding stock of the Company and to regulatory approval. The
transaction will be submitted to a vote of the Company's shareholders on
June 6, 2000.
Liquidity and Capital Resources
The Savings Bank's principal sources of funds are cash receipts from
deposits, loan repayments by borrowers and net earnings. The Savings
Bank had $537,000 borrowed from the Federal Home Loan Bank of Des
Moines (FHLB) at March 31, 2000 and an agreement with the FHLB to
provide additional cash advances should the need arise.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits. The minimum level of liquidity
required by regulation is presently 4%. The Savings Bank's liquidity ratio
was approximately 22.03% at March 31, 2000.
Commitments to originate mortgage loans and unfunded loans in process
were approximately $852,000 and $1.9 million respectively at March 31,
2000.
The thrift industry historically has accepted interest rate risk as a part of
its operating philosophy. Long-term, fixed-rate loans were funded with
deposits which adjust to market interest rates more frequently. From the
early 1980's up until 1996, the Savings Bank has originated primarily
adjustable-rate mortgage loans for its loan portfolio. In early 1996 the
Savings Bank began keeping some of the fixed rate loans it originates. As
of March 31, 2000 the Savings Bank held adjustable-rate mortgage loans of
$44million or 66.67% of total mortgage loans.
The Savings Bank is required to meet certain tangible, core and risk-based
capital requirements. The following table presents the Savings Bank's
capital position relative to its minimum regulatory capital requirements at
March 31, 2000.
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $18,149
20.65%
Tangible capital requirement $1,318
1.50%
Excess $16,831
19.15%
Core capital $18,191
20.65%
Core capital requirement $3,515
4.00%
Excess $14,634
16.65%
Risk-based capital $18,557
35.94%
Risk-based capital requirement $4,130 8.00%
Excess $14,427
27.94%
Financial Condition
Assets decreased from $91.8 million at December 31, 1999 to $90.4 million
at March 31, 2000. Cash and due from depository institutions decreased
from $10.7 million at December 31, 1999 to $8.9 million at March 31,
2000. Securities available-for-sale decreased from $12.4 million at
December 31, 1999 to $10.8 million at March 31, 2000. The decrease in
cash and due from depository institutions and securities available-for -sale
is primarily due to loan originations and deposit outflow. Loans receivable,
net increased from $64.3 million at December 31, 1999 to $66.2 million at
March 31, 2000.
Deposits decreased from $68.9 million at December 31, 1999 to $67.6
million at March 31, 2000.
Results of Operations
Net income decreased $60,000, or 28.67%, from $210,000 for the three
months ended March 31, 1999 to $150,000 for the three months ended
March 31, 2000. The primary reasons for the decrease in net earnings were
a decrease in non-interest income, an increase in non-interest expense and
an increase in provision for loan losses which was partially offset by an
increase in net interest income and a decrease in provision for income taxes.
Net Interest Income
Net interest income increased $10,000, or 1.22%, from $782,000 for the
three months ended March 31, 1999 to $792,000 for the three months ended
March 31, 2000. The primary reasons for the increase in net interest
income were increases in interest income from consumer loans and
investment securities and a decrease in interest expense on deposits which
was partially offset by a decrease in interest income from mortgage loans,
mortgage-backed securities and other interest-earning assets. Interest
income from mortgage loans decreased $4,000, or .33%, for the three
months ended March 31, 2000 compared to the same period in 1999. The
primary reason for the decrease in interest income from mortgage loans is a
decrease in the average yield from 7.97% to 7.86%in 1999 and 2000
respectively. The average balance for mortgage loans increased in the first
quarter of 2000 compared to 1999. Interest income from consumer and
other loans increased $37,000 from $78,000 for the three months ended
March 31, 1999 to $115,000 for the three months ended March 31, 2000.
The primary reason for the increase is an increase in the average balance of
commercial loans during the first quarter of 2000 compared to the first
quarter of 1999. Interest income from mortgage-backed securities
decreased due to the continued reduction in balance due to principal
repayment. Interest income from other interest-earning assets decreased
$73,000 from $200,000 for the three months ended March 31, 1999 to
$127,000 for the three months ended March 31, 2000. The primary reason
for the decrease is a decrease in the average balance deposited at the FHLB
from $11.4 million during the first quarter of 1999 to $8.5 million during
the first quarter of 2000. The decrease in deposit balance is the result of
the aforementioned loan originations and deposit outflow. Interest expense on
deposits decreased $56,000 from $831,000 for the three months ended
March 31, 1999 to $775,000 for the three months ended March 31, 2000.
The primary reason for the decrease in interest expense on deposits is a
decrease in the average balance from $72 million during the first quarter of
1999 to $68 million during the first quarter of 2000. The average rate paid
on savings remained relatively unchanged from last year.
Provision for Loan Losses
Provision for loan losses is based upon management's consideration of
economic conditions which may affect the ability of borrowers to repay their
loans. Management also reviews individual loans for which full
collectibility may not be reasonably assured and considers, among other
matters, the risks inherent in the Bank's portfolio and the estimated fair
value of the underlying collateral. This evaluation is ongoing and results in
variations in the Bank's provision for loan losses. As a result of this
evaluation, the Bank's provision for loan losses increased from a ($25,000)
benefit for the three months ended March 31, 1999 to zero for the three
months ended March 31, 2000. The recovery in provision for loan losses
during the first quarter of 1999 was primarily due to a reduction in
classified assets during that quarter when a large commercial real estate
loan which was classified at the end of 1998 was paid current.
Non-interest Income
Non-interest income decreased $74,000, or 59.65%, from $125,000 for the
three months ended March 31, 1999 to $51,000 for the three months ended
March 31, 2000. The primary reason for the decrease in non-interest
income in 2000 as compared to 1999 was the decrease in gain on sale of
loans which is a direct result of lower loan sales during the first quarter of
2000. .
Non-interest Expense
Non-interest expense increased $10,000, or 1.78%, from $583,000 for the
three months ended March 31, 1999 to $593,000 for the three months ended
March 31, 2000. The increase in non-interest expense in 2000 is due
primarily to an increase in other non-interest expense which was partially
offset by a decrease in deposit insurance premiums. The increase in other
non-interest expense was primarily due to the miscellaneous expenses
pertaining to the pending merger.
Provision for Income Taxes
Provision for income taxes decreased from $140,000 for the three months
ended March 31, 1999 to $100,000 for the three months ended March 31,
2000 as a result of the decrease in net income before income taxes.
Year 2000 Considerations
The Company has not experienced any operation or financial problems
related to the Year 2000 date change. Management believes that the Year
2000 issue will not pose any future operational problems.
CNS BANCORP, INC. AND SUBSIDIARIES
PART II - Other Information
Item 1 - Legal Proceeding
There are no material legal proceedings to which the Company or
the Savings Bank is a party of or which any of their property is
subject. From time to time, the Savings Bank is a party to various
legal proceedings incident to its business.
Item 2 - Changes in Securities None.
Item 3 - Defaults upon Senior Securities Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders None.
Item 5 - Other Information None.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K: No reports on Form 8-K have been
filed during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNS BANCORP,
INC.
(Registrant)
DATE: May 12, 2000 BY:
Robert E. Chiles,
President and
Duly Authorized
Officer
BY:
David L. Jobe, Treasurer and
Chief Financial
Officer