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, 1999
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 March 31,
1999
Common Stock, par value $.01 per share 1,422,646 Shares
CNS BANCORP, INC. AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1999
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 9
<PAGE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS March 31, 1999 December 31,1998
Cash and due from depository institutions $13,007,520 $ 9,813,816
Securities available-for-sale $16,774,636 $17,715,083
Stock in Federal Home Loan Bank $ 662,500 $ 662,500
Loans held-for-sale, net $ 304,359 $ 1,767,075
Loans receivable, net $59,816,342 $61,699,912
Accrued interest receivable $ 564,003 $ 561,175
Real estate owned, net $ 760,754 $ 710,085
Premises and equipment, net $ 1,581,082 $ 1,611,454
Income tax receivable $ 105,597 $ 166,356
Other assets $ 766,241 $ 693,189
Total assets $94,343,034 $95,400,645
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $71,728,159 $72,689,165
Borrowed funds $ 564,481 $ 570,983
Advances from borrowers for
taxes and insurance $ 90,137 $ 34,287
Accrued expenses and other liabilities $ 407,770 $ 365,419
Total liabilities $72,790,547 $73,659,854
Common stock $ 16,531 $ 16,531
Additional paid-in-capital $ 16,126,938 $16,121,656
Retained earnings, substantially restricted $ 11,110,168 $11,007,233
Deferred compensation-ESOP ($ 918,542) ($951,361)
Deferred compensation -MRDP ($671,582) ($723,243)
Investments held in trust for
Exec Def Comp Plan ($96,887) ($94,258)
Treasury stock ($3,549,592) ($3,182,279)
Unrealized loss on securities net of
deferred taxes (464,5 47) ($453,488)
Total stockholders' equity $ 21,552,487 $21,740,791
Total liabilities and stockholders' equity $94,343,034 $95,400,645
<PAGE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31 March 31
1999 1998
INTEREST INCOME
Mortgage loans $1,165,145 $1,305,380
Consumer and other loans $ 77,741 $ 42,014
Investment securities $ 64,359 $ 102,151
Mortgage-backed securities $ 115,632 $ 158,791
Other interest-earning assets $ 199,600 $ 133,265
Total interest income $1,622,477 $1,741,601
INTEREST EXPENSE
Deposits $ 831,159 $ 875,127
Borrowed money $ 9,030 $ 9,429
Total interest expense $ 840,189 $ 884,556
Net interest income $ 782,288 $ 857,045
PROVISION (BENEFIT) FOR
LOAN LOSSES ($24,703) ($14,268)
Net interest income after
provision for loan losses $ 806,991 $ 842,777
NONINTEREST INCOME
Loan servicing fees $ 21,339 $ 10,862
Income from real estate owned $ 1,650 $ 1,650
Net gain on sale of assets $ 69,991 $ 88,575
Other $ 32,264 $ 43,821
Total non-interest income $ 125,244 $ 144 ,908
NONINTEREST EXPENSE
Compensation and benefits $ 348,739 $ 356,333
Occupancy and equipment $ 64,083 $ 63,322
Deposit insurance premiums $ 11,130 $ 11,931
Other $ 158,629 $ 142,135
Total non-interest expense $ 582,581 $ 573,721
Net income before income taxes $ 349,654 $ 413,964
PROVISION FOR INCOME TAXES $ 139,875 $ 165,565
Net income $ 209,779 $ 248,399
Earnings per share $ 0.16 $ 0.16
Diluted earnings per share $ 0.15 $ 0.15
Weighted average shares
outstanding 1,356,241 1,539,616
Dividends per share $ 0.075 $ 0.060<PAGE>
CNS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
March 31, 1999 March 31, 1998
Cash flows from operating activities:
Net Income $ 209,779 $ 248,399
Adjustments to reconcile net income to net cash flows
provided by (used for) operating activities:
Depreciation $ 30,812 $ 30,245
Provision (Benefit) for loan losses ($ 24,703) ($ 14,268)
Amortization of premiums and accretion
of discounts on securities available-for-sale $ 14,538 $ 37,013
Proceeds from the same of loans held-for-sale $ 4,918,695 $ 4,943,249
Origination of loans held-for-sale ($ 3,432,594) ($ 3,479,788)
(Gain)/loss on sales of loans held-for-sale( $ 23,385) $ 0
ESOP expenses $ 44,992 $ 82,085
MRDP expenses $ 51,660 $ 51,660
Decrease (increase) in:
Accrued interest receivable ($ 2,828) $ 43,387
Other assets ($ 73,052) ($ 133,719)
Income tax receivable $ 22,150 $ 131,369
Increase (decrease) in:
Accrued expenses and other liabilities $ 39,722 $ 39,543
Net cash provided by (used for) operating activities $ 1,775,786 $ 2,007,711
Cash flows from investing activities:
Loans:
Loan (originations) and principal payments - net $ 3,879,353 ($ 1,816,453)
Purchases of:
Loans receivable ($ 1,971,080) ($ 3,226,129)
Securities available-for-sale $ 0 ($ 299,672)
Proceeds from maturity or pay down of:
Securities available-for-sale $ 953,459 $ 3,047,457
Proceeds from sales of real estate owned ($ 50,669) ($ 7,841)
Cash outflows for premises and equipment ($ 440) ($ 19,974)
Net cash provided by Investing Activities $ 2,810,623 $ 1,310,294
Cash flows from financing activities:
Net increase (decrease) in:
Deposits ($ 961,006) ($ 627,736)
Advances from borrowers for taxes and insurance $ 55,850 $ 67,937
Borrowed funds ($ 6,502) ($ 6,103)
Treasury stock purchased ($ 367,313) ($ 153,652)
Dividends paid to share holders ($ 113,735) ($ 99,187)
Net cash provided by financing activities ($ 1,392,706) ($ 818,741)
Net increase (decrease) in cash and cash equivalents ($3,193,703)($2,499,265)
Cash and Cash equivalents at beginning of period $ 9,813,816 $4,490,265
Cash and cash equivalents at end of period $13,007,520 $6,989,899
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest on deposits $ 139,988 $ 206,555
Income taxes $ 71,742 $ 140,000
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, 1999 are not necessarily
indicative of results that may be expected for the entire fiscal
year ending December 31, 1999.
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, 1999. 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") 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 (EPS) for the quarter ended March 31, 1998
and 1999 were calculated as follows:
1998 1999
Weighted Weighted
Average Average
Shares Per-share Shares Per-share
(denominator) amount (denominator) amount
Basic EPS 1,543,184 $0.16 1,356,241 $0.16
Effect of dilutive shares
Unallocated ESOP Shares 104,981 91,853
Stock options 12,603 0
Diluted EPS 1,660,768 $0.15 1,448,094 $0.15
Management Discussion and Analysis of
Financial Condition and Results of Operation
General
The principal business of CNS Bancorp, Inc. ("Company") consists of
directing the business of City National Savings Bank, FSB. ("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 had $565,000 borrowed from the Federal Home Loan Bank of
Des Moines (FHLB) at March 31, 1999 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 22.40% at March 31, 1999.
Commitments to originate mortgage loans and unfunded loans in
process were approximately $369,000 and $1.4 million respectively at
March 31, 1999.
The thrift industry historically has accepted interest rate risk as 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, 1999 the Savings Bank held adjustable-
rate mortgage loans of $44 million or 77.94% 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, 1999:
Percent of Adjusted
Amount Total Assets
(Unaudited)
(Dollars in Thousands)
Tangible capital $19,769 21.13%
Tangible capital requirement $1,404 1.50%
Excess $18,365 19.63%
Core capital $19,769 21.13%
Core capital requirement $3,743 4.00%
Excess $16,026 17.13%
Risk-based capital $20,143 43.50%
Risk-based capital requirement $3,705 8.00%
Excess $16,438 35.50%
Financial Condition
Assets decreased from $95.4 million at December 31, 1998 to $94.3
million at March 31, 1999. Cash and due from depository institutions
increased from $9.8 million at December 31, 1998 to $13.0 million at
March 31, 1999 due primarily to loan sales and repayments. Securities
available-for-sale decreased from $17.7 million at December 31, 1998
to $16.8 million at March 31, 1999. Loans held-for-sale and loans
receivable, net decreased from $63.5 million at December 31, 1998 to
$60.1 million at March 31, 1999 due to refinancing and loan sales
during the period.
Real estate owned, net increased from $710,000 at December 31,
1998 to $761,000 at March 31, 1999 due to the payment of $50,000
to the other Briar Pointe, LLC joint venture party to purchase full
interest in the project.
Deposits decreased from $72.7 million at December 31, 1998 to $71.7
million at March 31, 1999.
It is the policy of the Savings Bank to cease accruing interest on loans
90 days or more past due. Nonaccrual loans decreased from $156,000
at December 31, 1998 to zero at March 31, 1999 as a result of the
delinquent loans being paid current.
Results of Operations
Net income decreased $38,000, or 15.55%, from $248,000 for the
three months ended March 31, 1998 to $210,000 for the three months
ended March 31, 1999. The primary reasons for the decrease in net
earnings were decreases in net interest income and non-interest income
and in increase in noninterest expense which was partially offset by a
decrease in provision for loan losses and provision for income taxes.
Net Interest Income
Net interest income decreased $75,000, or 8.72%, from $857,000 for
the three months ended March 31, 1998 to $782,000 for the three
months ended March 31, 1999. The primary reasons for the decrease
in net interest income were decreases in interest income from
mortgage loans, investment securities and mortgage-backed securities
which was partially offset by an increase in interest income from
consumer and other loans and other interest-earning assets and a
decrease in interest expense on deposits and borrowed money.
Interest income from mortgage loans decreased $140,000, or 10.74%,
from $1.3 million for the three months ended March 31, 1998 to $1.2
million for the three months ended March 31, 1999. The primary
reason for the decrease is a decrease in the average mortgage loan
balance from $65.1 million for the first quarter of 1998 to $58.4
million for the first quarter of 1999 and a decrease in average yield
from 8.04% to 7.97%. The decrease in average balance is due to the
refinancing and sale of loans during 1998 and the first quarter of 1999.
Interest income from investment securities decreased due to a decrease
in the average investment balance and a lower yield in 1999 compared
to 1998. Interest income from mortgage-backed-securities decreased
due to the continued reduction in balance from repayments. Interest
income from consumer and other loans increased $36,000 from
$42,000 for the three months ended March 31, 1998 to $78,000 for
the three months ended March 31, 1999. The primary reason for the
increase is an increase in the average balance of commercial loans from
$412,000 during the first quarter of 1998 to $1.7 million during the
first quarter of 1999. Interest income from other interest-earning
assets increased $67,000 from $133,000 for the three months ended
March 31, 1998 to $200,000 for the three months ended March 31,
1999. The primary reason for the increase is an increase in the average
balance deposited at the FHLB from $2.1 million during the first
quarter of 1998 to $11.4 million during the first quarter of 1999. The
increase in deposit balance is the result of the afore mentioned loan
sales and repayments. Interest expense on deposits decreased $44,000
from $875,000 for the three months ended March 31, 1998 to
$831,000 for the three months ended March 31, 1999. The primary
reason for the decrease in interest expense on deposits is a decrease in
the average balance from $73 million during the first quarter of 1998
to $72 million during the first quarter of 1999 and a decrease in
average rate from 4.82% during the first quarter of 1998 to 4.60%
during the first quarter of 1999.
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 decreased from $14,000 for the three months ended March 31,
1998 to a ($25,000) benefit for the three months ended March 31,
1999. 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 $20,000, or 13.57%, from $145,000
for the three months ended March 31, 1998 to $125,000 for the three
months ended March 31, 1999. The primary reason the decrease in
noninterest income in 1999 as compared to 1998 was the decrease in
gain on sale of loans which is a direct result of lower loan sales during
the first quarter of 1999. .
Non-interest Expense
Non-interest expense increased $9,000, or 1.54%, from $574,000 for
the three months ended March 31, 1998 to $583,000 for the three
months ended March 31, 1999. The increase in non-interest expense
during 1999 is due primarily to an increase in other noninterest
expense which was partially offset by a decrease in compensation and
benefits. The increase in other noninterest expense was primarily due
to the amortization of mortgage servicing rights. The decrease in
compensation and benefits is due primarily to decrease in
compensation expense for the ESOP due to a lower average share
price during the first quarter of 1999 as compared to the first quarter
of 1998.
Provision for Income Taxes
Income taxes decreased from $166,000 for the three months ended
March 31, 1998 to $140,000 for the three months ended March 31,
1999.
Year 2000 Considerations
The Company has a Year 2000 Action Plan which management is
using to identify and correct Year 2000 compliance issues. The
Company has reviewed all services and operation components to
identify technical and non-technical issues. Having identified internal
components and external components, the Company has replaced its
computer hardware with Y2K compliant equipment. The Company
has requested third party providers to insure Y2K compliance with
software and services and has required testing of these services to
assure compliance. All third party providers have identified Year
2000 issues and are completing revisions to systems and software to
become Year 2000 compliant.
The primary service provider for the Company is Fiserv who provides
data processing. Fiserv has provided the Company with 'proxy' test
results indicating Year 2000 compliance. The Company completed the
connectivity testing with Fiserv during the first quarter of 1999.
The Company has completed the testing phase of the Year 2000
Action Plan. This required the testing of systems and software to
insure continued service to customers until and beyond the Year 2000.
All systems have passed the testing phase, all functional problems were
identified and remedied. Failure to remedy Year 2000 issues could
result in an interruption of service to customers.
The cost incurred by the Company for Year 2000 compliance to date
is approximately $74,000, most of which was capitalized for three
years. Fiserv is currently billing approximately $325 monthly as
reimbursement for their Year 2000 testing. It is expected that the
Company will have additional reimbursement costs of approximately
$3,500.
The Company is not able to estimate the potential loss of revenue due
to the Year 2000 issue, since the exact impact and longevity of any
potential problems cannot be predicted. However, because the
majority of the loan portfolio consists of residential mortgages,
management believes the Year 2000 issue will not impair these
borrowers' ability to repay their debt.
The Company is preparing for the event of different systems not being
Year 2000 capable as of June 30, 1999. Any system found to be not in
compliance will be handled manually or by another provider that is
Year 2000 compliant. There can be no assurances the Company's
Year 2000 Action Plan will effectively address the Year 2000 issue.
Partial or total system failures would have an adverse effect on the
Company's operations and could result in a material financial impact.
<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 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 14, 1999 BY:
Robert E. Chiles, President and
Duly Authorized Officer
BY:
David L. Jobe, Treasurer and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 13,007,520
<INT-BEARING-DEPOSITS> 6,435,907
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,774,636
<INVESTMENTS-CARRYING> 17,530,599
<INVESTMENTS-MARKET> 16,774,636
<LOANS> 60,120,701
<ALLOWANCE> 390,195
<TOTAL-ASSETS> 94,343,034
<DEPOSITS> 71,728,159
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,062,388
<LONG-TERM> 1,062,388
0
0
<COMMON> 16,531
<OTHER-SE> 21,535,956
<TOTAL-LIABILITIES-AND-EQUITY> 94,343,034
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<INTEREST-INVEST> 179,991
<INTEREST-OTHER> 199,600
<INTEREST-TOTAL> 1,622,477
<INTEREST-DEPOSIT> 831,139
<INTEREST-EXPENSE> 840,189
<INTEREST-INCOME-NET> 782,288
<LOAN-LOSSES> -24,703
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<INCOME-PRETAX> 349,654
<INCOME-PRE-EXTRAORDINARY> 349,654
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<NET-INCOME> 139,875
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<EPS-DILUTED> .15
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