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, 1997
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. 0-28250
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 65051
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. YesX
No .
Indicate the number of shares outstanding of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding March 31, 1997
Common Stock, par value $.01 per share 1,653,125 Shares
CNS BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PAGE NO.
PART I - Financial Information
Consolidated Balance Sheets 1
Consolidated Statements of Earnings 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of 5
Financial Condition and Results of Operations
PART II - Other Information 9
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS March 31,1997 December 31,1996
Cash and due from depository
institutions (including
interest-bearing accounts
totaling $4,204,131 in 1996
and $5,439,388 in 1997) $6,100,807 $4,572,026
Securities available-for-sale $26,019,205 $27,574,516
Stock in Federal Home Loan Bank $939,300 $939,300
Loans held-for-sale, net $570,986 $570,986
Loans receivable, net $61,679,140 $60,980,826
Accrued interest receivable $605,018 $619,454
Premises and equipment, net $1,626,701 $1,657,421
Income tax receivable $453,011 $486,321
Other assets $109,883 $80,341
Total assets $98,104,051 $97,481,191
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $73,261,861 $72,880,431
Accrued interest on deposits $129,224 $92,381
Advances from borrowers for taxes $123,136 $57,299
and insurance
Accrued expenses and other $245,901 $251,802
liabilities
Total liabilities $73,760,122 $73,281,913
Common stock, $.01 par value:
Authorized, 6,000,000 shares;
1,653,125 shares issued $16,531 $16,531
Additional paid-in-capital $16,017,646 $16,003,502
Retained earnings, substantially $10,203,614 $10,044,280
restricted
Deferred compensation - ESOP ($1,226,144) ($1,249,411)
Investments held in trust for ($133,413) ($127,428)
Exec. Def. Comp. Plan
Unrealized loss on securities net ($534,305) ($488,196)
of deferred taxes
Total stockholders' equity $24,343,929 $24,199,278
Total liabilities and $98,104,051 $97,481,191
stockholders' equity
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31, 1997 March 31, 1996
INTEREST INCOME
Mortgage loans $1,191,865 $1,024,269
Consumer and other loans $59,609 $23,101
Investment securities $196,742 $72,668
Mortgage-backed securities $179,858 $214,377
Other interest-earning assets $113,910 $156,343
Total interest income $1,741,984 $1,490,759
INTEREST EXPENSE
Deposits $891,881 $946,098
Borrowed money $0 $0
Total interest expense $891,881 $946,098
Net interest income $850,103 $544,661
BENEFIT FOR LOAN LOSSES ($26,873) ($5,351)
Net interest income after benefit
for loan losses $876,976 $550,012
NONINTEREST INCOME
Loan servicing fees $12,731 $13,909
Income from real estate owned $1,400 $40,616
Net gain on sale of assets $6,156 $8,541
Other $31,356 $7,759
Total noninterest income $51,643 $70,825
NONINTEREST EXPENSE
Compensation and benefits $274,798 $226,939
Occupancy and equipment $63,558 $57,846
Deposit insurance premiums $11,931 $44,886
Other $193,971 $103,643
Total noninterest expense $544,258 $433,314
Net income before income taxes $384,361 $187,523
PROVISION FOR INCOME TAXES $153,748 $53,600
Net income $230,613 $133,923
Earnings per share $0.15 N/A
Weighted average shares outstanding 1,528,184 N/A
Dividends paid per share $0.05 N/A
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
March 31, 1997 March 31, 1996
Cash flows from operating activities: __________________________________
Net Income $230,613 $133,923
Adjustments to reconcile net income to
net cash flows provided by (used for)
operating activities:
Depreciation $33,933 $30,769
Benefit for loan losses ($26,873) ($5,351)
(Gain)on sale of real estate owned $0 ($54,700)
Amortization of premiums on
securities available-for-sale $9,213 $13,595
Proceeds from the sale of loans
held-for-sale $0 $2,569,206
Origination of loans held-for-sale $0 ($2,078,006)
(Gain) on sales of loans held-for-sale $0 ($8,541)
Compensation expense - ESOP $37,411 $0
Decrease (increase) in:
Accrued interest receivable $14,435 ($7,426)
Other assets ($29,542) ($72,137)
Income tax receivable $64,045 $38,038
Increase (decrease) in:
Accrued expenses and other liabilities $25,009 $47,399
Net cash provided by operating
activities $358,245 $606,769
Cash flows from investing activities:
Loans:
Loan (originations) and principal
payments - net ($478,481) $606,742
Purchases of:
Loans receivable ($192,960) ($537,466)
Securities available-for-sale ($897,445) ($605,836)
Proceeds from maturity or repayment of:
Securities available-for-sale $2,366,649 $938,492
Proceeds from sales of real estate owned $0 $71,256
+Cash outflows for premises and equipment ($3,213) ($220)
Net cash provided by investing
activities $794,550 $472,968
Cash flows from financing activities:
Net increase (decrease) in:
Deposits $381,430 $1,307,638
Advances from borrowers for taxes
and insurance $65,837 $67,945
Dividends paid to shareholders ($71,280) ---
Net cash provided by financing
activities $375,987 $1,375,583
Net increase (decrease) in cash
and cash equivalent $1,528,782 $2,455,320
Cash and cash equivalents at
beginning of period $4,572,026 $2,855,944
Cash and cash equivalents at
end of period $6,100,808 $5,311,264
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits $813,260 $939,384
Income taxes $75,750 $0
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-Q 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, 1997 are not necessarily
indicative of results that may be expected for the entire
fiscal year ending December 31, 1997.
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 "Saving
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, 1997. Material intercompany accounts and transactions
have been eliminated in consolidation.
(2) Conversion to Stock Ownership
On December 19, 1995 the Board of Directors of the Savings
Bank unanimously adopted a Plan of Conversion pursuant to
which the Savings Bank converted from a federally chartered
mutual savings bank to a federally chartered stock savings
bank, with the concurrent formation of the Company. The
Company, on June 11, 1996, sold 1,653,125 shares of common
stock at $10.00 per share to depositors, borrowers and
employees of the Savings Bank in a subscription offering. The
proceeds from the conversion, after recognizing conversion
expenses and underwriting costs of $531,424 were $15,999,826
and are recorded as common stock and additional paid in
capital on the accompanying unaudited consolidated statement
of financial condition. The Company utilized 50% of the net
proceeds to purchase all of the capital stock of the Savings
Bank.
The Savings Bank has established for eligible employees an
Employee Stock Ownership Plan ("ESOP") in connection with the
conversion. The ESOP borrowed $1,322,500 from the Company and
purchased 132,250 common shares issued in the conversion. The
Savings Bank is expected to make scheduled discretionary cash
contributions to the ESOP sufficient to service the amount
borrowed. The $1,322,500 in stock issued by the Company is
reflected in the accompanying consolidated financial
statements as a charge to unearned compensation and a credit
to common stock and paid-in capital. The unamortized balance
of unearned compensation is shown as a deduction of
stockholders' equity. The unpaid balance of the ESOP loan is
eliminated in consolidation.
(3) Earnings Per Share
Earnings per share for the three months ended March 31, 1997
have been calculated to be $.15 based upon the weighted
average number of shares outstanding during the quarter.
(4) Subsequent Event(s):
On April 8, 1997 the Company announced a stock repurchase
program under which it will acquire up to 5%, or approximately
82,656 shares, of the corporation's outstanding common
stock.
At the annual meeting, April 22, 1997, the shareholders
approved and adopted the CNS Bancorp, Inc. 1997 Stock Option
Plan and the CNS Bancorp, Inc. Management Recognition and
Development Plan.
Management Discussion and Analysis of
Financial Condition and Results of Operation
General
On June 11, 1996, City National Savings Bank, FSB (Savings Bank)
converted from mutual to stock form and became a wholly-owned
subsidiary of a newly formed Delaware holding company, CNS Bancorp,
Inc. (Company). The Company sold 1,653,125 shares of common stock
at $10 per share in conjunction with a subscription offering to the
Savings Bank's Employee Stock Ownership Plan (ESOP) and eligible
account holders.
The Company's principal business is the business of the Savings
Bank. Therefore, the discussion in the Managements's Discussion
and Analysis of Financial Condition and Results of Operation
relates to the Savings Bank and its operations.
Liquidity and Capital Resources
The Savings Banks's principal sources of funds are cash receipts
from deposits, loan repayments by borrowers and net earnings. The
Savings Bank has an agreement with the Federal Home Loan Bank of
Des Moines to provide cash advances, should the need for additional
funds be required.
For regulatory purposes, liquidity is measured as a ratio of cash
and certain investments to withdrawable deposits. The minimum
level of liquidity required by regulation is presently 5%. The
Savings Bank's liquidity ratio was approximately 19.67% at March
31, 1997.
Commitments to originate adjustable-rate mortgage loans at March
31, 1997 were approximately $684,000. Commitments to originate
fixed-rate mortgage loans at March 31, 1997 were approximately
$195,000.
The thrift industry historically has accepted interest rate risk as
a part of its operating philosophy. Long-term, fixed-rate loans
were funded with deposits which adjust to market interest rates
more frequently. From the early 1980's up until 1996, the Savings
Bank has originated primarily adjustable-rate mortgage loans for
it's loan portfolio. In early 1996 the Savings Bank began keeping
some of the fixed rate loans it originates. As of March 31, 1997
the Savings Bank held adjustable-rate mortgage loans of $46.2
million or 74.91% of the total mortgage loans.
The Savings Bank is required to meet certain tangible, core and
risk-based capital requirements.
The following table presents the Savings Bank's capital position
relative to its regulatory capital requirements at March 31, 1997:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $18,236 19.54%
Tangible capital requirement $1,400 1.50%
Excess $16,836 18.04%
Core capital $18,236 19.54%
Core capital requirement $2,800 3.00%
Excess $15,436 16.54%
Risk-based capital $18,576 41.96%
Risk-based capital requirement $3,542 8.00%
Excess $15,034 33.96%
Financial Condition
Assets increased from $97.5 million at December 31, 1996 to $98.1
million at March 31, 1997. Cash and due from depository
institutions increased from $4.6 million at December 31, 1996 to
$6.1 million at March 31, 1997 due to the reinvestment of funds
from government securities into shorter term FHLB time
certificates. Securities available-for-sale decreased from $27.6
million at December 31, 1996 to $26 million at March 31, 1997.
Loans held-for-sale and loans receivable, net increased from $61.6
million at December 31, 1996 to $62.3 million due primarily to the
favorable interest rate environment during the period. Accrued
interest receivable decreased slightly during the quarter.
Deposits increased from $72.9 million at December 31, 1996 to $73.3
million at March 31, 1997. Accrued interest on deposits and
advances from borrowers for taxes and insurance increased during
the first quarter of 1997.
It is the policy of the Savings Bank to cease accruing interest on
loans 90 days or more past due. Nonaccrual loans decreased from
$310,000 at December 31, 1996 to $94,000 at March 31, 1997 as a
result of the loans being paid current.
Results of Operations
Net earnings increased from $134,000 for the three months ended
March 31, 1996 to $231,000 for the three months ended March 31,
1997. The primary reason for the increase in net earnings during
the current quarter was an increase in net interest income.
Net Interest Income
Net interest income increased from $545,000 for the three months
ended March 31, 1996 to $850,000 for the three months ended March
31, 1997. Total interest income increased from $1.5 million in the
first quarter of 1996 to $1.7 million in the first quarter of 1997.
The increase in total interest income is due primarily to increases
in interest income from mortgage loans, consumer and other loans
and investment securities which was partially offset by decreases
in interest income from mortgage-backed securities and other
interest earnings assets. The increases in interest income from
loans and securities is a result of higher average balances, which
reflects the investment of stock proceeds, and higher average
yields in those assets during the first quarter of 1997 compared to
the same time period last year. Total interest expense decreased
from $946,000 for the three months ended March 31, 1996 to $892,000
for the same time period in 1997. The decrease in interest expense
is primarily due to a decrease in the average deposit balance
outstanding during the first quarter of 1997 compared to the same
time period 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 the loans. Management also reviews individual loans for
which full collectibility may not be reasonably assured and
considers, among other matters, the risks inherent in the Savings
Bank's portfolio and the estimated fair value of the underlying
collateral. This evaluation is ongoing and results in variations
in the Savings Bank's provision for loan losses. As a result of
this evaluation, the Savings Bank's provision for loan losses
decreased from a ($5,000) recapture of loan losses for the three
months ended March 31, 1996 to a ($27,000) recapture of loan losses
for the three months ended March 31, 1997.
Noninterest Income
Noninterest income decreased from $71,000 for the three months
ended March 31, 1996 to $52,000 for the three months ended March
31, 1997. The primary reason that noninterest income decreased
during the first quarter of 1997 was the decrease in income from
real estate owned. The Savings Bank sold real estate owned during
the three months ended March 31, 1996 and there was no such
activity during 1997.
Noninterest Expense
Noninterest expense increased from $433,000 for the three months
ended March 31, 1996 to $544,000 for the three months ended March
31, 1997. The increase in noninterest expense during the first
quarter of 1997 is due to increases in compensation and benefits
and other noninterest expense and is partially offset by a decrease
in deposit insurance. The increase in compensation and benefits is
due primarily to the recognition of ESOP compensation during the
first quarter of 1997 when there was no ESOP compensation for the
first quarter of 1996. Other noninterest expenses increased
primarily due to first time expenses resulting from operating as a
public company. The decrease in deposit insurance premiums is a
result of lower insurance premiums this year compared to the same
time period last year.
Income Taxes
Income taxes increased from $54,000 for the three months ended
March 31, 1996 to $154,000 for the same time period in 1997. The
effective income tax rates used to calculate the provision for
income taxes is 40%. A lower rate was applicable last year due
primarily to non-taxable income which included gains on sale of
real estate owned.
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 or of 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) Exhibits: none
(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: BY:
Robert E. Chiles, President and
Duly Authorized Officer
BY:
David L. Jobe, Treasurer and
Chief Financial Officer