SECURITIES AND EXCHANGE COMMISSION
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 December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------- to --------
Commission file number 0-21163
CBES BANCORP,INC.
---------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 43-1753244
-------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
1001 N. JESSE JAMES ROAD, EXCELSIOR SPRINGS, MO 64024
---------------------------------------------------------------
(Address of principal executive offices)
(816 630-6711)
------------------------
(Issuer's telephone number)
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 Exchange Act during the past
12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes / x / No
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the last practicable date:
Class Outstanding at February 5, 1997
--------------- -------------------------------
Common stock, .01 par value 1,024,958
<PAGE>
CBES BANCORP,INC. AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at
December 31, 1996 and June 30, 1996.....................1
Consolidated Statements of Earnings for the three
months and six months ended December 31, 1996 and 1995..2
Consolidated Statements of Stockholders' Equity for
the six months ended December 31, 1996..................3
Consolidated Statements of Cash Flows for the six
months ended December 31, 1996 and 1995.................4
Notes to Consolidated Financial Statements...............5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................7
PART II - OTHER INFORMATION................................13
SIGNATURES.................................................14
</TABLE>
<PAGE>
1
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 1996 and June 30, 1996
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
Assets (unaudited)
- ------- ------------ ---------
<S> <C> <C>
Cash $ 761,357 683,769
Interest-bearing deposits in other financial
institutions 2,210,382 2,775,590
Investment securities available-for-sale
(amortized cost of $1,001,500 and
$2,002,250 respectively) 996,000 1,974,500
Investment securities held-to-maturity 100,000 100,000
Mortgage-backed securities held-to-maturity
(estimated fair value of $354,663 and
$392,162 respectively) 357,648 400,394
Loans held-for-sale, net 198,975 366,000
Loans receivable, net 82,682,532 79,043,759
Accrued interest receivable:
Loans receivable 604,502 597,484
Investment securities 19,703 25,178
Mortgage-backed securities 3,157 3,175
Real Estate Owned 18,110 -
Stock in Federal Home Loan Bank (FHLB), at cost 810,700 810,700
Office property and equipment, net 1,257,198 1,272,907
Deferred income tax benefit - 23,000
Cash surrender value of life insurance and other
assets 1,651,325 1,753,504
---------- ---------
Total assets 91,671,589 89,829,960
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits 64,784,052 68,169,560
FHLB advances and other borrowings 8,500,000 12,000,000
Accrued expenses and other liabilities 369,129 525,177
Accrued interest payable on deposits 90,319 111,227
Advance payments by borrowers for property
taxes and insurance 252,295 691,797
Current income taxes payable 348,656 266,309
Deferred income taxes 10,561 -
---------- ----------
Total liabilities 74,355,012 81,764,070
---------- ----------
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par, 500,000 shares
authorized, none issued or outstanding - -
Common stock, $.01 par; 3,500,000 shares
authorized, 1,024,958 shares issued
and outstanding 10,250 -
Additional paid-in capital 9,736,440 -
Retained earnings, substantially restricted 8,365,847 8,082,540
Unrealized losses on available-for-sale
securities, net of tax (2,400) (16,650)
Unearned employee benefits (793,560) -
---------- ----------
Total stockholders' equity 17,316,577 8,065,890
---------- ----------
Total liabilities and stockholders'
equity 91,671,589 89,829,960
---------- ----------
---------- ----------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
2
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
----------------------- ---------------------
1996 1995 1996 1995
----------------------- ---------------------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 1,773,371 1,625,324 3,520,745 3,196,795
Mortgage-backed securities 5,688 44,548 11,633 112,451
Investment securities 15,696 22,360 42,462 62,396
Loans held-for-sale 9,754 19,675 23,435 50,315
Other 15,938 22,788 36,339 44,012
----------- --------- --------- ---------
Total interest income 1,820,447 1,734,695 3,634,614 3,465,969
----------- --------- --------- ---------
Interest expense:
Deposits 729,842 833,169 1,490,897 1,682,998
FHLB advances 91,264 207,841 270,698 460,897
----------- --------- --------- ---------
Total interest expense 821,106 1,041,010 1,761,595 2,143,895
----------- --------- --------- ---------
Net interest income 999,341 693,656 1,873,019 1,322,074
Provision for loan losses 13,934 54,707 32,273 115,577
----------- --------- --------- ---------
Net interest income after
provision for loan losses 985,407 638,978 1,840,746 1,206,497
----------- --------- --------- ---------
Noninterest income:
Gain on sale of loans, net 38,992 50,958 87,370 112,083
Customer service charges 55,305 49,684 107,166 99,628
Loan servicing fees 20,684 19,910 41,477 48,502
Net realized gain on sale of
investment and mortgage-backed
securities available-for-sale - 49,629 - 54,205
Other 28,679 25,715 60,898 54,699
----------- --------- --------- ---------
Total noninterest income 143,660 195,896 296,911 369,117
----------- --------- --------- ---------
Noninterest expense:
Compensation and benefits 351,130 292,172 658,197 579,033
Office property and equipment 76,287 67,715 147,432 136,077
Data processing 38,768 40,905 84,269 82,657
Federal insurance premiums 18,874 39,635 511,143 78,226
Advertising 24,460 19,084 34,072 31,429
Real estate owned and
repossessed assets 2,441 2,349 9,319 5,649
Other 126,850 105,938 239,689 211,476
----------- --------- --------- ---------
Total noninterest expense 638,810 567,798 1,684,121 1,124,547
----------- --------- --------- ---------
Earnings before income
taxes 490,257 267,076 453,536 451,067
Income tax expense 189,149 112,608 170,229 153,000
----------- --------- --------- ---------
Net earnings $ 301,108 154,468 283,307 298,067
----------- --------- --------- ---------
----------- --------- --------- ---------
Pro forma earnings per share $ .32 - .30 -
----------- --------- --------- ---------
----------- --------- --------- ---------
Average common and common equivalent
shares outstanding 944,282 - 943,622 -
----------- --------- --------- ---------
----------- --------- --------- ---------
See accompanying notes to unaudited consolidated financial
statements.
</TABLE>
PAGE
<PAGE>
3
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the six months ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Unearned
Net employee
Additional unrealized stock Total
Outstanding Common paid-in Retained gain (loss) ownership stockholders'
shares stock capital earnings on securities shares equity
----------- ------ --------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996 - - - 8,082,540 (16,650) - 8,065,890
Sale of stock 1,024,958 10,250 9,726,830 - - (819,960) 8,917,120
Net earnings - - - 283,307 - - 283,307
Change in unrealized loss
on securities available-
for-sale, net of tax - - - - 14,250 - 14,250
Allocation of ESOP shares - - 9,610 26,400 36,010
-------- ------ --------- --------- -------- --------- ----------
Balance at
December 31, 1996 1,024,958 10,250 9,736,440 8,356,847 (2,400) (793,560) 17,316,577
-------- ------ --------- --------- -------- --------- ----------
-------- ------ --------- --------- -------- --------- ----------
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
PAGE
<PAGE>
4
CBES BANCORP,INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 283,307 298,067
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 32,273 115,577
Depreciation 71,859 63,542
Allocation of ESOP shares 36,010 -
Net realized gain on sale of securities
available-for-sale - (54,205)
Proceeds from sale of loans held for sale 6,423,880 8,057,083
Originations of loans held for sale (6,169,485) (6,618,592)
Gain on sale of loans, net (87,370) (112,083)
Premium amortization and accretion of discounts
and deferred loan fees (160,540) (144,364)
Deferred income taxes 24,061 -
Changes in assets and liabilities:
Accrued interest receivable (1,525) (17,003)
Other assets 102,179 20,705
Accrued expenses and other liabilities (156,048) (56,828)
Accrued interest payable on deposits (20,908) 9,181
Current income taxes payable 82,347 171,605
------------ ------------
Net cash provided by operating activities 460,040 1,732,685
------------ ------------
Cash flows from investing activities:
Net (increase) decrease in loans receivable (3,526,800) 1,302,260
Purchase FHLB Stock - (16,000)
Proceeds from sales of securities available-for-sale - 4,046,846
Mortgage-backed securities principal repayments 43,180 312,559
Maturing securities 1,000,000 -
Purchase of office property equipment (56,150) (39,531)
------------ ------------
Net cash (used in) provided by investing
activities $(2,539,770) 5,606,134
------------ ------------
Cash flows from financing activities:
Decrease in deposits $(3,385,508) (264,628)
Proceeds from FHLB advances 16,500,000 12,400,000
Repayments of FHLB advances (20,000,000) (19,276,915)
Increase in advance payments by borrowers for
property taxes and insurance (439,502) (476,366)
Issuance of common stock, net of issuance costs
of $512,500 8,917,120 -
------------ ------------
Net cash provided by (used in) financing
activities 1,592,110 (7,617,909)
------------ ------------
Net decrease in cash and cash equivalents (487,620) (279,090)
Cash and cash equivalents at the beginning of
the period 3,459,359 3,073,710
------------ ------------
Cash and cash equivalents at the end of the period $ 2,971,739 2,794,620
------------ ------------
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 63,821 -
------------ ------------
------------ ------------
Cash paid during the period for interest $ 1,782,503 2,138,769
------------ ------------
------------ ------------
See accompanying notes to unaudited consolidated financial
statements.
</TABLE>
<PAGE>
5
CBES BANCORP,INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1996
(1) CBES Bancorp,Inc. and Subsidiaries
----------------------------------
CBES Bancorp, Inc. (the Company) was incorporated under the laws
of the state of Delaware for the purpose of becoming the savings
and loan holding company of Community Bank of Excelsior Springs,
a Savings Bank (the Bank) in connection with the Bank's
conversion from a federally chartered mutual savings bank to a
federally chartered stock savings bank, pursuant to its Plan of
Conversion. On August 12, 1996, the Company commenced a
Subscription and Community Offering of its shares in connection
with the conversion of the Bank (the Offering). The Offering was
consummated and the Company acquired the Bank on September 27,
1996. The Company had no assets prior to the conversion and
acquisition on September 27, 1996.
The accompanying consolidated financial statements as of and for
the three months and six months ended December 31, 1996 include
the accounts of the Company and the Bank. The accompanying
consolidated statements of financial condition as of June 30,
1996, and the statement of earnings and cash flows for the three
months and the six months ended December 31, 1995, are of the
Bank.
(2) Basis of Preparation
--------------------
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB. To
the extent that information and footnotes required by generally
accepted accounting principles for complete financial statements
are contained in or consistent with the audited financial
statements incorporated by reference in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1996, such
information and footnotes have not been duplicated herein. In
the opinion of management, all adjustments, consisting only of
normal recurring accruals, which are necessary for the fair
presentation of the interim financial statements have been
included. The statement of earnings for the three month and
six month periods ended December 31, 1996 are not necessarily
indicative of the results which may be expected for the entire
year. The June 30, 1996 consolidated balance sheet has been
derived from the audited consolidated financial statements as of
that date.
(3) Pro Forma Earnings Per Share
----------------------------
On September 27, 1996, 1,024,958 shares of the Company's stock
were issued, including 81,996 shares issued to the ESOP.
Pro forma earnings per share amounts for the three month and six
month period ended December 31, 1996 are based upon the shares
outstanding at December 31, 1996, as though those shares were
outstanding for the entire period, exclusive of the shares
unallocated by the ESOP. The computation does not reflect the
pro forma effects of the investment income that would have been
earned had the net proceeds from the conversion been received at
the beginning of the three or six month period.
<PAGE>
6
(4) Stockholders' Equity and Stock Conversion
-----------------------------------------
The Bank converted from a federally chartered mutual savings bank
to a federally chartered stock savings bank pursuant to its Plan
of Conversion which was approved by the Bank's members on
September 19, 1996. The conversion was effective on September
27, 1996 and resulted in the issuance of 1,024,958 shares of
common stock (par value $0.01) at $10.00 per share for a gross
sales price of $10,249,580. Costs related to conversion
(primarily underwriters' commissions, printing, and professional
fees) aggregated $513,000 and were deducted to arrive at the net
proceeds of $9,737,000. The Company established an employee
stock ownership trust which purchased 81,996 shares of common
stock of the Company at the issuance price of $10.00 per share
with funds borrowed from the holding company.
(5) Employee Stock Ownership Plan
-----------------------------
All employees meeting age and service requirements are eligible
to participate in an ESOP established on September 27, 1996.
Contributions made by the Bank to the ESOP are allocated to
participants by a formula based on compensation. Participant
benefits become 100% vested after five years. The ESOP purchased
81,996 shares in the Bank's conversion. The ESOP expense for the
three months ended December 31, 1996 was $36,010.
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of CBES
Bancorp,Inc. and its wholly-owned subsidiary, Community Bank of
Excelsior Springs, a Savings Bank, (collectively the Bank) at
December 31, 1996 to the financial condition at June 30, 1996,
its fiscal year-end, and the results of operations for the three
months and six months ended December 31, 1996, with the same
periods in 1995. This discussion should be read in conjunction
with the interim financial statements and notes which are
included herein.
General
- -------
CBES Bancorp,Inc. was organized as a Delaware corporation in June
1996 to acquire all of the capital stock issued by Community Bank
of Excelsior Springs, a Savings Bank upon its conversion from the
mutual to stock form of ownership. Community Bank of Excelsior
Springs, a Savings Bank was founded in 1931 as a Missouri
chartered savings and loan association located in Excelsior
Springs, Missouri. In 1995, its members voted to convert to a
federal charter. The business of the holding company consists
primarily of the business of the Bank.
The Bank conducts its business through its main office in
Excelsior Springs, Clay County, Missouri and its full service
branch office located in Kearney, Clay County, Missouri. The
Bank has been, and intends to continue to be, a community
oriented financial institution offering selected financial
services to meet the needs of the community it serves. The Bank
attracts deposits from the general public and historically has
used such deposits, together with other funds, primarily to
originate one-to-four family residential mortgage loans,
construction and land loans for single-family residential
properties, and consumer loans consisting primarily of loans
secured by automobiles. While the Bank's primary business has
been that of a traditional thrift institution, originating loans
in its primary market area for retention in its portfolio, the
Bank also has been an active participant in the secondary market,
originating residential mortgage loans for sale.
The most significant outside factors influencing the operations
of the Bank and other financial institutions include general
economic conditions, competition in the local market place and
the related monetary and fiscal policies of agencies that
regulate financial institutions. More specifically, the cost of
funds primarily consisting of insured deposits is influenced by
interest rates on competing investments and general market rates
of interest, while lending activities are influenced by the
demand for real estate financing and other types of loans, which
in turn is affected by the interest rates at which such loans may
be offered and other factors affecting loan demand and funds
availability.
The deposits of the Bank are presently insured by the Savings
Association Insurance Fund ("SAIF"), which together with the Bank
Insurance Fund ("BIF") are the two insurance funds administered
by the FDIC. In the third calendar quarter of 1995, the FDIC
lowered the premium schedule for BIF-insured institutions in
anticipation of the
<PAGE>
8
BIF achieving its statutory reserve ratio. The reduced premium
created a significant disparity in deposit insurance expense
causing a competitive advantage for BIF members. Legislation
enacted on September 30, 1996 provided for a one-time special
assessment of .657% of the Bank's SAIF insured deposits at March
31, 1995. The purpose of the assessment is to bring the SAIF to
its statutory reserve ratio. Based on the above formula, the
Bank charged $441,000 against earnings for the quarter ended
September 30, 1996. Although the special one-time assessment
significantly increased noninterest expense for the quarter, the
anticipated reduction in the premium schedule will reduce the
Bank's federal insurance premiums for the future periods.
Congress may consider legislation requiring all federal thrift
institutions, such as the Bank, to either convert to a national
bank or a state depository institution by January 1, 1998. In
addition, the Company might no longer be regulated as a thrift
holding company, but rather as a bank holding company. The
Office of Thrift Supervision (OTS) also might be abolished and
its functions transferred among the federal banking regulators.
Certain aspects of the legislation remain to be resolved and,
therefore, no assurance can be given as to whether or in what
form the legislation will be enacted or its effect on the Company
and the Bank.
Financial Condition
- -------------------
Total assets increased $1.8 million, or 2.0%, to $91.6 at
December 31, 1996 from $89.8 million at June 30, 1996. This was
primarily due to the proceeds from the sale of CBES Bancorp, Inc.
common stock, which generated net proceeds of $8,917,000, reduced
by $3.5 million, to pay down FHLB advances, and a reduction in
deposits of $3.4 million.
Loans receivable, net increased by $3.6 million, or 4.6%, to
$82.7 million at December 31, 1996 from $79.0 million at June 30,
1996 due to increases in one-to-four family portfolio loans of
$1.4 million and an increase in construction loans of $2.2
million.
Deposits decreased $3.4 million, or 5.0%, to $64.8 million at
December 31, 1996 from $68.2 million at June 30, 1996. The
decrease in deposits is principally attributable to $1.8 million
of Bank depositors' investment in common stock of CBES Bancorp,
Inc. and $1.1 million in maturing certificates of deposit being
withdrawn by depositors.
FHLB advances decreased $3.5 million, or 29.2%, to $8.5 million
at December 31, 1996 from $12.0 million at June 30, 1996. The
decrease is primarily due to $4.0 million of the net proceeds
from the sale of CBES Bancorp, Inc. common stock being used to
pay down FHLB advances.
Total equity increased $9.2 million, or 114.7%, to $17.3 million
at December 31, 1996 primarily due to the sale of 1,024,958
common shares at an initial offering price of $10 per share less
the establishment of the Company's $820,000 ESOP plan and
conversion-related costs of
$513,000.
<PAGE>
9
Comparison of Operating Results for the Three Months Ended
December 31, 1996 and 1995
Performance Summary. In the quarter ended December 31, 1996, the
Company had net earnings of $301,000 compared to net earnings of
$154,000 for the quarter ended December 31, 1995. The increase
in earnings was primarily due to an increase in interest income
of $86,000, a decrease in interest expense of $220,000, offset by
an increase in compensation of $59,000, and decrease in gain on
sale of mortgage-backed securities of $50,000.
Net Interest Income. For the three months ended December 31,
1996, net interest income increased by $306,000, or 44.1%, to
$999,000 from $694,000 for the three months ended December 31,
1995. The increase reflected an increase of $86,000 in interest
income and a decrease of $220,000 in interest expense to $821,000
from $1,041,000. The increase in interest income reflected
increased average balances of loans receivable, primarily fixed
rate mortgage loans and construction lending on single-family
residences, and an increase in adjustable rate mortgage loans
rates. Interest expense decreased by $220,000, or 21.1%, as a
result of decreased balances of certificate of deposit accounts,
and a decrease in balances and rates of FHLB Advances.
Provision for Loan Losses. During the three months ended
December 31, 1996, the Bank charged $14,000 against earnings as a
provision for loan losses compared to a provision of $55,000 for
the three months ended December 31, 1995. The decrease in
provision for loan losses is a result of stabilizing levels of
construction lending compared to significant increases in
construction lending during 1995. This charge resulted in an
allowance for loan losses of $408,000 or .49% of loans
receivable, net at December 31, 1996 compared to $400,000, or
.49% of loans receivable, net at September 30, 1996. The
allowance for loan losses is based on a detailed review of
nonperforming and other problem loans, prevailing economic
conditions, actual loss experience and other factors which, in
management's view, recognizes the changing composition of the
Bank's loan portfolio and the inherent risk associated with
different types of loans.
Management will continue to monitor its allowance for loan losses
and make future additions to the allowance through the provision
for loan losses as economic conditions dictate. Although the
Bank maintains its allowance for loan losses at a level which it
considers to be adequate to provide for potential losses, there
can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be
required in future periods.
Non-Interest Income. For the three months ended December 31,
1996, noninterest income decreased $52,000 to $144,000 from
$196,000 for the prior year period primarily due to a decrease in
the net realized gain on sale of investment and mortgage-backed
securities available-for-sale of $50,000 during the three months
ended December 31, 1995. There were no sales during the three
months ended December 31, 1996.
Non-Interest Expense. Noninterest expense increased by $71,000
to $639,000 for the three months ended December 31, 1996 from
$568,000 for the three months ended December 31, 1995. Of this
increase, $59,000 was
<PAGE>
10
attributable to compensation, principally expense associated with
the ESOP plan.
Comparison of Operating Results for the Six Months Ended December
31, 1996 and 1995
Performance Summary. In the six months ended December 31, 1996,
the Company had net income of $283,000 compared to net earnings
of $298,000 for the six months ended December 31, 1995. The
decrease in earnings was primarily due to the payment of a one-
time special assessment in the amount of $441,000 to recapitalize
SAIF, and a $79,000 increase in compensation expense, offset by
an increase in net interest income of $551,000, a decrease in the
provision for loan loss of $83,000, and a decrease in income
taxes of $17,000.
Net Interest Income. For the six months ended December 31, 1996,
net interest income increased by $551,000, or 41.7%, to
$1,873,000 from $1,322,000 for the six months ended December 31,
1995. The increase reflected an increase of $169,000 in interest
income and a decrease of $382,000 in interest expense. The
increase in interest income reflected increased average balances
of loans receivable, primarily fixed rate mortgage loans and
construction lending on single-family residences, and an increase
in adjustable rate mortgage loans rates, offset by a decrease in
interest income due to the sales of mortgage-backed securities.
Interest expense decreased by $382,000, or 17.84%, as a result of
decreased balances in certificate of deposit accounts, and a
decrease in balances and rates of FHLB Advances.
Provision for Loan Losses. During the six months ended December
31, 1996, the Bank charged $32,000 against earnings as a
provision for loan losses compared to a provision of $116,000 for
the six months ended December 31, 1995. The decrease in
provision for loan losses is a result of stabilizing levels of
construction lending compared to significant increases in
construction lending during 1995. This charge resulted in an
allowance for loan losses of $408,000 or .49% of loans
receivable, net at December 31, 1996 compared to $388,000, or
.49% of loans receivable, net at June 30, 1996. The allowance
for loan losses is based on a detailed review of nonperforming
and other problem loans, prevailing economic conditions, actual
loss experience and other factors which, in management's view,
recognizes the changing composition of the Bank's loan portfolio
and the inherent risk associated with different types of loans.
Noninterest Income. For the six months ended December 31, 1996,
noninterest income decreased $72,000 to $297,000 from $369,000
for the prior year period primarily due to a decrease in the net
realized gain on sale of investment and mortgage-backed
securities available-for-sale of $55,000 during the six months
ended December 31, 1995. There were no sales during the six
months ended December 31, 1996.
Noninterest Expense. Noninterest expense increased by $560,000 to
$1,684,000 for the six months ended December 31, 1996 from
$1,125,000 for the six months ended December 31, 1995. Of this
increase $441,000 was attributable to the one-time special SAIF
assessment, and $79,000 was attributable to compensation, due to
general wage increases and adoption of the ESOP plan.
<PAGE>
11
Nonperforming Assets
- -------------------
On December 31, 1996, nonperforming assets were $628,000 compared
to $655,000 on June 30, 1996. The balance of the Bank's
allowance for loan losses was $408,000 or 65.0% of nonperforming
assets. Loans are considered nonperforming when the collection
of principal and/or interest is not probable, or in the event
payments are more than ninety days delinquent.
Capital Resources
- -----------------
The Bank is subject to three capital to asset requirements in
accordance with Office of Thrift Supervision regulations. The
following table is a summary of the Bank's regulatory capital
requirements versus actual capital as of December 31, 1996:
<TABLE>
<CAPTION>
Actual Required Excess
amount/percent amount/percent amount/percent
--------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible $12,423 13.54% $1,376 1.50% $11,047 12.04%
Core leverage capital 12,423 13.54% 2,752 3.00% 9,671 10.54%
Risk-based capital 12,659 17.70% 5,720 8.00% 6,939 9.70%
</TABLE>
Liquidity
- ---------
The Bank's principal sources of funds are deposits, principal and
interest payments on loans, deposits in other insured
institutions and investment securities classified as available-
for-sale. While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general
economic conditions and competition. Additional sources of funds
may be obtained from the Federal Home Loan Bank of Des Moines by
utilizing numerous available products to meet funding needs.
The Bank is required to maintain levels of liquid assets as
defined by regulations. The required percentage is currently 5%
of net withdrawable savings deposits and borrowings payable on
demand or in one year or less. The eligible liquidity ratios at
December 31, 1996 and June 30, 1996 were 5.50% and 7.50%,
respectively.
In light of the competition for deposits, the Bank may utilize
the funding sources of the Federal Home Loan Bank to meet demand
in accordance with the Bank's growth plans. The wholesale
funding sources may allow the Bank to obtain a lower cost of
funding and create a more efficient liability match to the
respective assets being funded.
During the six months ended December 31, 1996, the Bank used
proceeds from the stock offering to repay obligations of the
Federal Home Loan Bank. Given the current strong loan demand,
it may be necessary for the Bank to continue to use advances.
For purposes of the cash flow statements, all short-term
investments with a maturity of three months or less at date of
purchase are considered cash equivalents. Cash and cash
equivalents at December 31, 1996 and 1995 were $2,971,739 and
$2,794,620 respectively.
<PAGE>
12
Cash flows from operating activities. Net cash provided by
operating activities decreased to $460,000 for the six months
ended December 31, 1996 from $1,733,000 for the six months ended
December 31, 1995. The decrease was mainly due to a decrease in
proceeds from the sale of loans to $6.4 million for the six
months ended December 31, 1996 from $8.1 million for the six
months ended December 31, 1995, offset by a decrease in
originations of loans held for sale to $6.2 million for the six
months ended December 31, 1996 from $6.6 million for the six
months ended December 31, 1995.
Cash flows from investing activities. Net cash used in investing
activities was $2.5 million during the six months ended December
31, 1996 compared to $5.6 million provided by investing
activities during the same period in 1995. The change was mainly
due to an increase in loans receivable of $3.5 million during the
six months ended 1996 from a $1.3 million decrease during the
1995 period and due to the proceeds from sale of securities
available for sale of $4.0 million during 1995, offset by
maturing securities of $1.0 million during the six months ended
December 31, 1996.
Cash flows from financing activities. Net cash provided by
financing activities was $1.6 million for the six months ended
December 31, 1996 compared to a use of $7.6 million during the
same period in 1995. The increase in financing activities is
primarily due to the issuance of common stock of $8.9 million and
reduction in the repayment of FHLB advances during the comparable
periods of $3.4 million, offset by a reduction in deposits of
$3.4 million during the six months ended December 31, 1996
compared to a $265,000 reduction during the same period in 1995.
<PAGE>
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The holding company and the Bank are not involved
in any pending legal proceedings incident to the
business of the holding company and the Bank, which
involve amounts in the aggregate which management
believes are material to the financial condition
and results of operation.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-------------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
27-Financial Data Schedule
<PAGE>
14
SIGNATURES
Pursuant to the requirement 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. and Subsidiaries
--------------------------------------------
(Registrant)
Date: February 10, 1997
------------------------------------
By: /s/ Larry E. Hermreck
------------------------------------
Larry E. Hermreck, Chief Executive
Officer and Secretary
(Duly Authorized Officer)
Date: February 10, 1997
------------------------------------
By: /s/ Dennis D. Hartman
------------------------------------
Dennis D. Hartman, Controller and
Chief Financial Officer
(Principal Financial Officer)
PAGE
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUNE-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 761357
<INT-BEARING-DEPOSITS> 2210382
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 996000
<INVESTMENTS-CARRYING> 457648
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<LOANS> 82881507
<ALLOWANCE> 408000
<TOTAL-ASSETS> 91671589
<DEPOSITS> 64784052
<SHORT-TERM> 8500000
<LIABILITIES-OTHER> 369129
<LONG-TERM> 0
<COMMON> 10250
0
0
<OTHER-SE> 17306327
<TOTAL-LIABILITIES-AND-EQUITY> 91671589
<INTEREST-LOAN> 3544180
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<INTEREST-TOTAL> 3634614
<INTEREST-DEPOSIT> 1490897
<INTEREST-EXPENSE> 1761595
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<LOAN-LOSSES> 32273
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 239689
<INCOME-PRETAX> 453536
<INCOME-PRE-EXTRAORDINARY> 283307
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 283307
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 8.32
<LOANS-NON> 604000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 26299
<ALLOWANCE-OPEN> 388000
<CHARGE-OFFS> 23612
<RECOVERIES> 11546
<ALLOWANCE-CLOSE> 408000
<ALLOWANCE-DOMESTIC> 408000
<ALLOWANCE-FOREIGN> 0
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</TABLE>
