UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, NW
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 June 30, 1998
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 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 June 30, 1998
Common Stock, par value $.01 per share 1,644,598 Shares
CNS BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1998
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
Financial Condition and Results of Operations 5
PART II - Other Information 8
<PAGE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS June 30, 1998 December 31,1997
[C] [C]
Cash and due from depository
institutions (including
interest-bearing accounts
totaling $3,112,633 in 1997
and $9,674,588 in 1998) $10,494,840 $ 4,490,638
Securities available-for-sale $18,355,589 $21,670,913
Stock in Federal Home Loan Bank $ 662,500 $ 939,300
Loans held-for-sale, net $ 430,600 $ 446,748
Loans receivable, net $64,303,042 $66,512,442
Accrued interest receivable $ 573,606 $ 616,075
Real estate owned, net $ 709,210 $ 652,795
Premises and equipment, net $ 1,592,802 $ 1,625,137
Income tax receivable $ 259,191 $ 299,784
Other assets $ 607,042 $ 636,963
Total assets $97,988,422 $97,890,795
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits $72,543,136 $72,882,810
Borrowed funds $ 583,682 $ 595,985
Advances from borrowers for taxes and
insurance $ 147,429 $ 28,829
Accrued expenses and other liabilities $ 436,238 $ 459,045
Total liabilities $73,710,485 $73,966,669
Common stock, $.01 par value:
Authorized, 6,000,000 shares;
1,653,125 shares issued $ 16,531 $ 16,531
Additional paid-in-capital $16,098,446 $16,023,150
Retained earnings, substantially
restricted $10,798,588 $10,544,892
Treasury Stock ($ 153,652) $ 0
Deferred compensation - ESOP ($1,016,999) ($1,082,640)
Deferred compensation - MRDP ($ 826,562) ($ 929,883)
Investments held in trust for Exec.
Def. Comp. Plan ($ 147,437) ($ 162,396)
Unrealized loss on securities net of
deferred taxes ($ 490,978) ($ 485,528)
Total stockholders' equity $24,277,937 $23,924,126
Total liabilities and stockholders'
equity $97,988,422 $97,890,795
</TABLE>
<TABLE>
<PAGE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Mortgage loans $1,276,879 $1,244,579 $2,582,259 $2,436,444
Consumer and other loans $ 46,932 $ 56,277 $ 88,946 $ 115,886
Investment securities $ 112,893 $ 174,251 $ 215,044 $ 370,993
Mortgage-backed securities $ 149,102 $ 177,053 $ 307,893 $ 356,911
Other interest-earning assets $ 145,625 $ 121,621 $ 278,890 $ 235,531
Total interest income $1,731,431 $1,773,781 $3,473,032 $3,515,765
INTEREST EXPENSE
Deposits $ 908,301 $ 907,450 $1,783,428 $1,799,331
Borrowed money $ 9,436 $ 890 $ 18,865 $ 890
Total interest expense $ 917,737 $ 908,340 $1,802,293 $1,800,221
Net interest income $ 813,694 $ 865,441 $1,670,739 $1,715,544
PROVISION FOR LOAN LOSSES ($ 258) $ 22,237 $ 14,010 ($ 4,636)
Net interest income after
provision for loan losses $ 813,952 $ 843,204 $1,656,729 $1,720,180
NONINTEREST INCOME
Loan servicing fees $ 12,629 $ 12,263 $ 23,491 $ 24,994
Income from real estate owned ($ 2,053) $ 1,650 ($ 403) $ 3,050
Net gain on sale of loans $ 95,734 $ 0 $ 184,309 $ 6,156
Other $ 34,289 $ 28,307 $ 78,110 $ 59,663
Total noninterest income $ 140,599 $ 42,220 $ 285,507 $ 93,863
NONINTEREST EXPENSE
Compensation and benefits $ 351,019 $ 276,694 $ 707,352 $ 551,492
Occupancy and equipment $ 63,153 $ 60,412 $ 126,475 $ 123,970
Deposit insurance premiums $ 10,909 $ 11,931 $ 22,840 $ 23,862
Other $ 193,088 $ 177,657 $ 335,223 $ 371,628
Total noninterest expense $ 618,169 $ 526,694 $1,191,890 $1,070,952
Net income before income taxes $ 336,382 $ 358,730 $ 750,346 $ 743,091
PROVISION FOR INCOME TAXES $ 133,107 $ 143,474 $ 298,672 $ 297,222
Net income $ 203,275 $ 215,256 $ 451,674 $ 445,869
Other comprehensive income
(loss), net of income taxes:
Unrealized gains (losses)
on securities ($ 21,175) $ 24,351 ($ 5,160) ($ 21,758)
Comprehensive income $ 182,100 $ 239,607 $ 446,514 $ 424,111
Basic net income per share $ 0.13 $ 0.14 $ 0.29 $ 0.28
Diluted net income per share $ 0.12 $ 0.13 $ 0.27 $ 0.27
Weighted average shares outstanding 1,540,781 1,534,463 1,540,781 1,534,463
Dividends paid per share $ 0.06 $ 0.05 $ 0.12 $ 0.10
</TABLE>
<TABLE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
June 30, 1998 June 30, 1997
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 451,674 $ 445,869
Adjustments to reconcile net income to net cash flows
provided by (used for) operating activities:
Depreciation $ 58,549 $ 66,893
Provision for loan losses $ 14,010 ($ 4,636)
Amortization of premiums and
accretion of (discounts) on
securities available-for-sale $ 67,483 $ 16,723
Proceeds from the sale of loans held-for-sale $ 10,426,026 $ 607,641
Origination of loans held-for-sale ($ 8,778,256) $ 0
(Gain) on sales of loans held-for-sale $ 184,309 $ 0
Compensation expense - ESOP $ 140,937 $ 74,998
Compensation expense - MRDP $ 103,320 $ 0
decrease (increase) in:
Accrued interest receivable $ 42,469 ($ 39,866)
Other assets $ 29,922 ($ 16,734)
Income tax receivable $ 42,966 $ 92,501
Increase (decrease) in:
Accrued expenses and other liabilities ($ 23,000) $ 17,742
Net cash provided by operating activities $ 2,391,791 $ 1,261,131
Cash flows from investing activities:
Loans:
Loan (originations) and principal payments - net $ 6,019,767 ($ 2,806,671)
Purchases of:
Loans receivable ($ 5,271,690) ($ 1,175,000)
Securities available-for-sale ($ 749,391) ( $1,047,445)
Proceeds from maturity or repayment of:
Securities available-for-sale $ 4,266,402 $ 4,899,573
Proceeds from sales of real estate owned ($ 56,414) ($ 844,460)
Cash outflows for premises and equipment ($ 26,214) ($ 3,213)
Net cash provided by investing activities $ 4,182,460 ($ 977,216)
Cash flows from financing activities:
Net increase (decrease) in:
Deposits ($ 339,674) $ 393,952
Advances from borrowers for taxes
and insurance $ 118,600 $ 125,631
Borrowed funds ($ 12,303) $ 0
Treasury stock purchased ($ 153,652) $ 0
Executive deferred compensation trust $ 14,958 ($ 13,160)
Dividends paid to shareholders ($ 197,978) ($ 153,936)
Net cash provided by financing activities($ 570,049) $ 352,487
Net increase in cash and cash equivalents$ 6,004,202 $ 636,402
Cash and cash equivalents at beginning of period $ 4,490,638 $ 4,572,026
Cash and cash equivalents at end of period $ 10,494,840 $ 5,208,428
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits $ 1,777,556 $ 1,794,115
Income taxes $ 270,409 $ 121,750
</TABLE>
<PAGE>
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
and six months ended June 30, 1998 are not necessarily indicative of
results that may be expected for the entire fiscal year ending December
31, 1998.
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 and six months ended June 30, 1998. 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 ("ESOP"). The ESOP borrowed $1,322,500 from
the Company and purchased 132,250 common shares. 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.
<PAGE>
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 Bank'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 4%. The Savings Bank's
liquidity ratio was approximately 17.03% at June 30, 1998.
Commitments to originate mortgage loans at June 30, 1998 were
approximately $559,000.
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 June 30, 1998 the Savings Bank held adjustable-rate
mortgage loans of $45.6 million or 72.61% 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 June
30, 1998:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $18,872 20.10%
Tangible capital requirement $ 1,409 1.50%
Excess $17,463 18.60%
Core capital $18,872 20.10%
Core capital requirement $ 2,817 3.00%
Excess $16,055 17.10%
Risk-based capital $19,231 41.29%
Risk-based capital requirement $ 3,726 8.00%
Excess $15,505 33.29%
Financial Condition
Assets remained unchanged at $98.0 million at June 30, 1998. Cash and due
from depository institutions increased from $4.5 million at December 31,
1997 to $10.5 million at June 30, 1998 due to the sale of $10.2 million of
fixed rate loans, a large number of which were refinanced loans which the
Company held for sale. Securities available-for-sale decreased from $21.7
million at December 31, 1997 to $18.4 million at June 30, 1998. Loans
held-for-sale and loans receivable, net decreased from $67.0 million at
December 31, 1997 to $64.7 million due primarily to refinancing and loan
sales during the period.
Real estate owned, net increased from $653,000 at December 31, 1997 to
$709,000 at June 30, 1998 due to the payment of a $25,000 management fee to
the other Briar Pointe, LLC joint venture party and foreclosure of a
single family residence which was partially offset by the sale of one
lot in Briar Pointe during the first six months of 1998.
It is the policy of the Savings Bank to cease accruing interest on
loans 90 days or more past due. Nonaccrual loans decreased from
$132,000 at December 31, 1997 to $19,000 at June 30, 1998 as a result
of the loans being paid current.
Results of Operations
Net earnings decreased $12,000, or 5.57% from $215,000 for the three
months ended June 30, 1997 to $203,000 for the three months ended June
30, 1998. Net earnings increased $6,000, or 2.52% from $446,000 for
the six months ended June 30, 1997 to $452,000 for the six months ended
June 30, 1998.
Net Interest Income
Net interest income decreased from $865,000 for the three months ended June
30, 1997 to $814,000 for the three months ended June 30, 1998 and from
$1.72 million for the six months ended June 30, 1997 to $1.67 million for
the six months ended June 30, 1998. Total interest income decreased from
$1.8 million for the three months ended June 30, 1997 to $1.7 million for
the three months ended June 30, 1998 and from $3.52 million for the six
months ended June 30, 1997 to $3.47 million for the six months ended June
30, 1998. The decrease in total interest income is due primarily to
decreases in interest income from consumer and other loans, investment
securities and mortgage-backed securities which was partially offset by
increases in interest income from mortgage loans and other interest
earnings assets. The increases in interest income from mortgage loans is a
result of higher average balances in 1998 compared to the same time periods
in 1997. Total interest expense increased from $908,000 for the three
months ended June 30, 1997 to $918,000 for the three months ended June 30,
1998 and remained unchanged at $1.8 million for the six months ended June
30, 1997 and June 30, 1998. The increase in interest expense is
primarily due to an increase in FHLB advances the first six months of 1998
compared to the first six months of 1997 which is partially off set by a
decrease in interest on deposits.
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 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 $22,000 for the three months ended June 30,
1997 to a $258 recapture of loan losses for the three months ended June
30, 1998. The decrease is due primarily to a reduction in classified
assets this quarter as it compares to the same quarter last year.
Provision for loan losses increased from a $5,000 recapture of loan losses
for the six months ended June 30, 1997 to a $14,000 provision for loan
losses for the six months ended June 30, 1998. The $5,000 recapture of
loan losses is primarily due to the recapture of loan losses during the
first quarter of 1997 when a large commercial real estate loan which was
classified at the end of 1996 was paid current.
Non-interest Income
Non-interest income increased from $42,000 for the three months ended June
30, 1997 to $141,000 for the three months ended June 30, 1998 and from
$94,000 for the six months ended June 30, 1997 to $286,000 for the six
months ended June 30, 1998. The primary reason that non-interest income
increased in 1998 was the increased gain on sale of loans with servicing
released. The Company sold $5.3 million of loans in the second quarter and
$10.2 million in the six months ended June 30, 1998.
Non-interest Expense
Non-interest expense increased from $527,000 for the three months ended
June 30, 1997 to $618,000 for the three months ended June 30, 1998 and from
$1.1 million for the six months ended June 30, 1997 to $1.2 million for the
six months ended June 30, 1998. The increase in non-interest expense
during 1998 is primarily due to increases in compensation and benefits
and other non-interest expense and is partially offset by a decrease in
deposit insurance and other non-interest expense. The increase in
compensation and benefits is due primarily to the recognition of MRDP
compensation during the first six months of 1998 and none in 1997.
Other non-interest expenses decreased primarily due to first time
expenses in 1997 resulting from operating as a public company.
Provision for Income Taxes
Provision for income taxes decreased from $144,000 for the three months
ended June 30, 1997 to $133,000 for the three months ended June 30, 1998
and increased from $297,000 for the six months ended June 30, 1997 to
$299,000 for the six months ended June 30, 1998.
Year 2000 Considerations
Fiserv, the primary data processor for the Company, has completed the
conversion of their thrift system to be Year 2000 compliant. The Company
has replaced its hardware with Y2K compliant equipment. The total cost of
that hardware and software upgrade was about $70,000. Y2K is not the only
reason for the equipment purchase. The Company would have been replacing
the equipment in its general upgrading program this year.
Fiserv will charge the Company approximately $7,000 for its prorated share
of the Y2K expenses.<PAGE>
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
The Annual meeting of Stockholders of the Company ("Meeting") was
held on April 21, 1998. The results of the vote on the matters
presented at the Meeting is as follows:
1. The following individuals were elected as directors, each for a
three year term:
Vote for Vote Withheld
Richard E Caplinger 1,415,192 1,250
Michael A. Dallmeyer 1,415,192 1,250
The terms of Directors Robert E. Chiles, James F. McHenry,
James E. Whaley, Ronald D. Roberson, and John C. Kolb continued
after the meeting.
Item 5 - Other Information-Subsequent Events
1. In August the Company completed the previously announced stock
repurchase program. The Company has repurchased 82,656
shares of it's common stock as treasury stock at an average
price of $17.54 per share.
Item 6 - Exhibits and Reports on Form 8-K.
1. Exhibit 27 Financial Data Schedule
2. 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: August 7, 1998 BY:
Robert E. Chiles, President and
Duly Authorized Officer
BY:
David L. Jobe, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,494,840
<INT-BEARING-DEPOSITS> 9,674,588
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,355,589
<INVESTMENTS-CARRYING> 19,214,992
<INVESTMENTS-MARKET> 18,355,589
<LOANS> 64,733,642
<ALLOWANCE> 364,626
<TOTAL-ASSETS> 97,988,422
<DEPOSITS> 72,543,136
<SHORT-TERM> 0
<LIABILITIES-OTHER> 583,667
<LONG-TERM> 583,682
0
0
<COMMON> 16,531
<OTHER-SE> 24,261,406
<TOTAL-LIABILITIES-AND-EQUITY> 97,988,422
<INTEREST-LOAN> 2,671,205
<INTEREST-INVEST> 522,937
<INTEREST-OTHER> 278,890
<INTEREST-TOTAL> 3,473,032
<INTEREST-DEPOSIT> 1,783,428
<INTEREST-EXPENSE> 1,802,293
<INTEREST-INCOME-NET> 1,670,739
<LOAN-LOSSES> 14,010
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,191,890
<INCOME-PRETAX> 750,346
<INCOME-PRE-EXTRAORDINARY> 750,346
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 451,674
<EPS-PRIMARY> 029
<EPS-DILUTED> 027
<YIELD-ACTUAL> 0
<LOANS-NON> 14,699
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 397,005
<CHARGE-OFFS> 31,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 364,626
<ALLOWANCE-DOMESTIC> 364,626
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
