<PAGE>
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, 1997
[ ] 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, 1998
--------------------------- -------------------------------
Common stock, .01 par value 1,012,851
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at December 31,
1997 and June 30, 1997.......................................... 1
Consolidated Statements of Earnings for the three months and six
months ended December 31, 1997 and 1996......................... 2
Consolidated Statements of Stockholders' Equity for the six
months ended December 31, 1997.................................. 3
Consolidated Statements of Cash Flows for the six months ended
December 31, 1997 and 1996...................................... 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...............................................11
SIGNATURES................................................................12
<PAGE>
1
CBES BANCORP,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND JUNE 30, 1997
<TABLE>
<CAPTION>
December 31, June 30,
Assets 1997 1997
------ ------------ ------------
(unaudited)
<S> <C> <C>
Cash $ 821,830 588,056
Interest-bearing deposits in other financial institutions 5,360,526 3,544,294
Investment securities available-for-sale (amortized cost of
$1,000,750 at June 30, 1997) - 996,320
Investment securities held-to-maturity 100,000 100,000
Mortgage-backed securities held-to-maturity (estimated fair value
of $98,702 and $156,176 respectively) 97,011 154,352
Loans held-for-sale, net 1,089,502 696,617
Loans receivable, net 98,591,969 90,320,430
Accrued interest receivable:
Loans receivable 791,844 688,408
Investment securities 2,167 20,028
Mortgage-backed securities 1,295 1,697
Real Estate Owned 242,418 168,204
Stock in Federal Home Loan Bank (FHLB), at cost 810,700 810,700
Office property and equipment, net 1,405,098 1,237,823
Deferred income tax benefit - 7,000
Cash surrender value of life insurance and other assets 1,812,982 1,742,557
------------ -----------
Total assets $111,127,342 101,076,486
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits $ 80,094,860 70,692,900
FHLB advances and other borrowings 12,250,000 10,750,000
Accrued expenses and other liabilities 768,575 741,009
Accrued interest payable on deposits 94,645 97,966
Advance payments by borrowers for property taxes and insurance 213,372 725,518
Current income taxes payable 152,579 294,604
Deferred income taxes 15,517 -
------------ -----------
Total liabilities 93,589,548 83,301,997
------------ -----------
Stockholders' equity:
Preferred stock, $.01 par, 500,000 shares authorized, none issued
or outstanding - -
Common stock, $.01 par; 3,500,000 shares authorized, 1,031,851
and 1,024,958 shares issued, respectively 10,319 10,250
Additional paid-in capital 9,845,579 9,728,357
Retained earnings, substantially restricted 9,105,499 8,777,980
Unrealized losses on available-for-sale securities, net of tax - (2,658)
Treasury stock, 10,000 shares at cost (218,000) -
Unearned recognition and retention plan shares (532,643) -
Unearned employee ESOP shares (672,960) (739,440)
------------ -----------
Total stockholders' equity 17,537,794 17,774,489
------------ -----------
Total liabilities and stockholders' equity $111,127,342 101,076,486
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
2
CBES BANCORP,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 2,208,037 1,773,371 4,308,848 3,520,745
Mortgage-backed securities 1,961 5,688 3,899 11,633
Investment securities 8,178 15,696 19,576 42,462
Loans held-for-sale 26,710 9,754 42,654 23,435
Other 46,373 15,938 84,248 36,339
------------ ------------ ------------ ------------
Total interest income 2,291,259 1,820,447 4,459,225 3,634,614
------------ ------------ ------------ ------------
Interest expense:
Deposits 945,511 729,842 1,828,401 1,490,897
FHLB advances 156,318 91,264 291,813 270,698
------------ ------------ ------------ ------------
Total interest expense 1,101,829 821,106 2,120,214 1,761,595
------------ ------------ ------------ ------------
Net interest income 1,189,430 999,341 2,339,011 1,873,019
Provision for loan losses 41,588 13,934 121,566 32,273
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 1,147,842 985,407 2,217,445 1,840,746
------------ ------------ ------------ ------------
Noninterest income:
Gain on sale of loans, net 91,109 38,992 147,844 87,370
Customer service charges 54,461 55,305 116,277 107,166
Loan servicing fees 17,224 20,684 35,003 41,477
Other 29,478 28,679 64,026 60,898
------------ ------------ ------------ ------------
Total noninterest income 192,272 143,660 363,150 296,911
------------ ------------ ------------ ------------
Noninterest expense:
Compensation and benefits 675,872 351,130 1,093,879 658,197
Office property and equipment 86,912 76,287 166,405 147,432
Data processing 43,138 38,768 81,811 84,269
Federal insurance premiums 11,585 18,874 22,998 511,143
Advertising 18,194 24,460 29,161 34,072
Real estate owned and repossessed assets 249 2,441 28,181 9,319
Other 171,632 126,850 329,510 239,689
------------ ------------ ------------ ------------
Total noninterest expense 1,007,582 638,810 1,751,945 1,684,121
------------ ------------ ------------ ------------
Earnings before income taxes 332,532 490,257 828,650 453,536
Income tax expense 121,066 189,149 312,322 170,229
------------ ------------ ------------ ------------
Net earnings $ 211,466 301,108 516,328 283,307
============ ============ ============ ============
Earnings per share-basic and diluted $ .22 .32 .54 .30
============ ============ ============ ============
Basic weighted average shares 975,533 944,282 964,215 943,622
Common stock equivalents-stock options 5,630 - 401 -
------------ ------------ ------------ ------------
Diluted weighted average shares 981,163 944,282 964,616 943,622
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
3
CBES BANCORP,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Issued Common paid-in Retained Treasury
shares stock capital earnings stock
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997 1,024,958 $ 10,250 9,728,357 8,777,980 -
Net earnings - - - 516,328 -
Dividends declared - - - (188,809) -
($.10 per share payable
January 22, 1998)
Change in unrealized loss
on securities available-
for-sale, net of tax - - - - -
Purchase of 40,000 shares
of Treasury Stock - - - - (875,750)
Adoption of recogntion
and retention plan (RRP) 6,893 69 52,371 - 657,750
Amortization of RRP - - - - -
Allocation of ESOP shares - - 64,851 - -
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1997 1,031,851 $ 10,319 9,845,579 9,105,499 (218,000)
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Unearned Unearned
Net employee recognition
unrealized stock & retention Total
gain (loss) ownership plan stockholders'
on securities shares shares equity
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1997 (2,658) (739,440) - 17,774,489
Net earnings - - - 516,328
Dividends declared - - - (188,809)
($.10 per share payable
January 22, 1998)
Change in unrealized loss
on securities available-
for-sale, net of tax 2,658 - - 2,658
Purchase of 40,000 shares
of Treasury Stock - - - (875,750)
Adoption of recogntion
and retention plan (RRP) - - (710,190) -
Amortization of RRP - - 177,547 177,547
Allocation of ESOP shares - 66,480 - 131,331
------------- ------------- ------------- -------------
Balance at December 31, 1997 - (672,960) (532,643) 17,537,794
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
4
CBES BANCORP,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 516,328 283,307
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 121,566 32,273
Depreciation 86,386 71,859
Amortization of RRP 177,547 -
Allocation of ESOP shares 131,331 36,010
Proceeds from sale of loans held for sale 8,322,405 6,423,880
Originations of loans held for sale (8,567,446) (6,169,485)
Gain on sale of loans, net (147,844) (87,370)
Premium amortization and accretion of discounts and
deferred loan fees (235,855) (160,540)
Deferred income taxes 20,745 24,061
Changes in assets and liabilities:
Accrued interest receivable (85,173) (1,525)
Other assets (70,425) 102,179
Accrued expenses and other liabilities 27,566 (156,048)
Accrued interest payable on deposits (3,321) (20,908)
Current income taxes payable (142,025) 82,347
----------- -----------
Net cash provided by operating activities 151,785 460,040
----------- -----------
Cash flows from investing activities:
Net increase in loans receivable (8,230,714) (3,526,800)
Mortgage-backed securities principal repayments 57,341 43,180
Maturing securities 1,000,000 1,000,000
Purchase of office property equipment (253,661) (56,150)
----------- -----------
Net cash used in investing activities $(7,427,034) (2,539,770)
----------- -----------
Cash flows from financing activities:
Decrease in deposits $ 9,401,960 (3,385,508)
Proceeds from FHLB advances 6,000,000 16,500,000
Repayments of FHLB advances (4,500,000) (20,000,000)
Decrease in advance payments by borrowers for property taxes
and insurance (512,146) (439,502)
Issuance of common stock, net of issuance costs of $512,500 - 8,917,120
Dividends paid (188,809) -
Treasury stock purchased (875,750) -
----------- -----------
Net cash provided by financing activities 9,325,255 1,592,110
----------- -----------
Net increase (decrease) in cash and cash equivalents 2,050,006 (487,620)
Cash and cash equivalents at the beginning of the period 4,132,350 3,459,359
----------- -----------
Cash and cash equivalents at the end of the period $ 6,182,356 2,971,739
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 433,602 63,821
=========== ===========
Cash paid during the period for interest $ 2,123,535 1,782,503
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
5
CBES BANCORP,INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1997
(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.
(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, 1997, 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, 1997 are not necessarily indicative of the results which may be expected for
the entire year. The June 30, 1997 consolidated balance sheet has been derived
from the audited consolidated financial statements as of that date.
(3) EARNINGS PER SHARE
------------------
Effective for the quarter ending December 31, 1997, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128. Under this
statement basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the 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
and six months ended December 31, 1997 was $77,911 and $131,331 respectively.
(6) CAPITAL STOCK TRANSACTIONS
--------------------------
In December 1997, the Company completed the purchase of 40,000 shares for
$875,750. This purchase was the first purchase in the Company's plan to acquire
92,244 shares in a buyback program to be completed by December 1, 1998.
<PAGE>
6
(7) STOCK OPTION AND RECOGNITION AND RETENTION PLAN
-----------------------------------------------
Stock Option and Recognition and Retention Plan
The shareholders approved the adoption of a stock option plan and a recognition
and retention plan (RRP) in October 1997.
Under the RRP, common stock aggregating 40,998 shares may be awarded to certain
officers and directors of the Company. In October 1997, the Company awarded
36,893 shares with a market value of $710,190. These shares have been reflected
as unearned employee benefits in the accompanying consolidated balance sheet.
Under the provisions of the RRP, the participants immediately vested in twenty
percent of the shares and vest in the remaining shares in twenty percent
increments over the next four years. As the awards vest, they are reflected as
compensation expense. The amortization of the RRP awards during the quarter
ended December 31, 1997 was $177,547. The unamortized cost of the RRP awards at
December 31, 1997 was $532,643.
Under the stock option plan, options to acquire 102,495 shares of the Company's
common stock may be granted to certain officers and directors of the Company. In
October 1997, the Company awarded options to acquire 92,247 shares of stock. The
options enable the recipients to purchase stock at an excercise price equal to
the fair market value of the stock at the date of grant ($19.25). Under
provisions of the stock option plan, the participants immediately vested in
twenty percent of the options and vest in the remaining shares in twenty percent
increments over the next four years. No stock options have been excercised by
the recipients during the quarter ended December 31, 1997.
SFAS No. 123, "Accounting for Stock-Based Compensation" requires pro forma
disclosures for companies that do not adopt its fair value method for stock-
based employee compensation. Accordingly, the following pro forma information
presents net income and earnings per share had the Standard's fair value method
been used to measure compensation cost for stock options granted during the six
months ended December 31, 1997. No compensation cost was actually recognized for
stock options for the six months ended December 31, 1997.
Net income as reported $516,328
Pro forma net income $474,138
Basic earnings per share as reported $ 0.54
Basic pro forma earnings per share $ 0.49
The fair value of options granted of $92,247 was estimated using the following
weighted-average information: risk-free interest rate of 5.51%, expected life of
8 years, expected volatility of stock price of 5.07%, and expected dividends of
2.24% per year.
<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.
(the Company) and its wholly-owned subsidiary, Community Bank of Excelsior
Springs, a Savings Bank, (the Bank) at December 31, 1997 to the financial
condition at June 30, 1997, its fiscal year-end, and the results of operations
for the three months and six months ended December 31, 1997, with the same
periods in 1996. 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 plans to open a full service branch in Liberty,
Missouri in early 1998. 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. 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
was 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 that quarter, the reduction in the premium
schedule is reducing 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, 1999. 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.
<PAGE>
8
FINANCIAL CONDITION
- -------------------
Total assets increased $10.1 million, or 9.9%, to $111.1 at December 31, 1997
from $101.1 million at June 30, 1997. This was primarily due to an increase in
loans receivable, net of $8.7 million, which were funded primarily with
deposits.
Loans receivable, net increased by $8.7 million, or 9.6%, to $99.7 million at
December 31, 1997 from $91.0 million at June 30, 1997 due to increases in one-
to-four family portfolio loans of $2.0 million and an increase in one-to-four
family construction loans of $6.7 million.
Deposits increased $9.4 million, or 13.3%, to $80.1 million at December 31, 1997
from $70.7 million at June 30, 1997. The increase in deposits is primarily due
to $8.7 million in new certificates of deposit.
FHLB advances increased $1.5 million, or 13.9%, to $12.3 million at December 31,
1997 from $10.8 million at June 30, 1997. The increase in FHLB advances was
primarily used to increase liquidity.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND
- --------------------------------------------------------------------------------
1996
- ----
Performance Summary. In the quarter ended December 31, 1997, the Company had
net earnings of $211,000 compared to net earnings of $301,000 for the quarter
ended December 31, 1996. The decrease in earnings was primarily due to an
increase in interest income of $471,000, an increase in gain on the sale of
loans of $52,000, a decrease in income taxes of $68,000, offset by an increase
in interest expense of $281,000, an increase in provision for loan loss of
$28,000, an increase in compensation of $325,000, and an increase in other non-
interest expense of $45,000.
Net Interest Income. For the three months ended December 31, 1997, net interest
income increased by $190,000, or 19.0%, to $1,189,000 from $999,000 for the
three months ended December 31, 1996. The increase reflected an increase of
$471,000 in interest income, to $2,291,000 from $1,820,000 and an increase of
$281,000 in interest expense to $1,102,000 from $821,000.
Provision for Loan Losses. During the three months ended December 31, 1997, the
Bank charged $42,000 against earnings as a provision for loan losses compared to
a provision of $14,000 for the three months ended December 31, 1996. The
increase in provision for loan losses is a result of an overall increase in the
loan portfolio, and in particular one-to-four family construction loans, and
one-to-four family portfolio loans. This provision resulted in an allowance for
loan losses of $544,000 or .55% of loans receivable, net at December 31, 1997
compared to $436,000, or .48% of loans receivable, net at June 30, 1997. 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, 1997, noninterest
income increased $48,000 to $192,000 from $144,000 for the prior year period
primarily due to an increase in gain on the sale of loans of $52,000, offset by
a decrease in loan servicing fees of $3,000.
<PAGE>
9
Non-Interest Expense. Noninterest expense increased by $369,000 to $1,008,000
for the three months ended December 31, 1997 from $639,000 for the three months
ended December 31, 1996. Of this increase, $325,000 was attributable to
compensation, of which $43,000 was due to the ESOP plan, $183,000 was due to the
adoption of the Recognition and Retention plan, of which $146,000 was due to the
immediate vesting and $37,000 was an accrual for vesting for the upcoming year,
and $98,000 was due to an increase in the number of employees and general wage
increases. The increase in employees is due to staffing associated with opening
the new branch in Liberty, Missouri in early 1998.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND
- ------------------------------------------------------------------------------
1996
- ----
Performance Summary. In the six months ended December 31, 1997, the Company had
net income of $516,000 compared to net earnings of $283,000 for the six months
ended December 31, 1996. The increase in earnings was primarily due to an
increase in interest income of $825,000, an increase in gain on the sale of
loans of $60,000, a decrease in Federal Insurance premiums of $488,000,
primarily due to the one-time special assessment of $441,000 to recapitalize
SAIF charged in September of 1996, offset by an increase in interest expense of
$359,000, an increase in the provision for loan loss of $89,000, an increase in
compensation of $436,000, an increase in office property and equipment of
$19,000, an increase in other non-interest expense of $90,000, and an increase
in income taxes of $142,000.
Net Interest Income. For the six months ended December 31, 1997, net interest
income increased by $466,000, or 24.9%, to $2,339,000 from $1,873,000 for the
six months ended December 31, 1996. The increase reflected an increase of
$825,000 in interest income, to $4,459,000 from $3,635,000, offset by an
increase of $359,000 in interest expense to $2,120,000 from $1,761,000.
Provision for Loan Losses. During the six months ended December 31, 1997, the
Bank charged $122,000 against earnings as a provision for loan losses compared
to a provision of $32,000 for the six months ended December 31, 1996. The
increase in provision for loan losses is a result of an overall increase in the
loan portfolio, and in particular one-to-four family construction loans, and
one-to-four family portfolio loans. This provision resulted in an allowance
for loan losses of $544,000 or .55% of loans receivable, net at December 31,
1997 compared to $436,000, or .48% of loans receivable, net at June 30, 1997.
Noninterest Income. For the six months ended December 31, 1997, noninterest
income increased $66,000 to $363,000 from $297,000 for the prior year period
primarily due to an increase in gain on the sale of loans of $60,000.
Noninterest Expense. Noninterest expense increased by $68,000 to $1,752,000 for
the six months ended December 31, 1997 from $1,684,000 for the six months ended
December 31, 1996. Of this increase, $436,000 was attributable to compensation,
of which $98,000 was due to the ESOP plan, $183,000 was due to the adoption of
the Recognition and Retention plan, and $151,000 was due to an increase in the
number of employees and general wage increases. The increase in employees is due
to staffing associated with opening the new branch in Liberty, Missouri in early
1998.
NONPERFOMING ASSETS
- -------------------
On December 31, 1997, nonperforming assets were $600,000 compared to $1,157,000
on June 30, 1997. The balance of the Bank's allowance for loan losses was
$544,000 or 90.6% 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.
<PAGE>
10
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, 1997:
<TABLE>
<CAPTION>
Actual Required Excess
amount/percent amount/percent amount/percent
--------------- -------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tangible capital $13,347 12.01% $1.667 1.50% $11,680 10.51%
Core leverage capital 13,347 12.01% 3,333 3.00% 10,014 9.01%
Risk-based capital 13,730 14.89% 7,376 8.00% 6,354 6.89%
</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 4% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less. The
eligible liquidity ratios at December 31, 1997 and June 30, 1997 were 6.68% and
6.37%, 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.
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, 1997 and 1996 were
$6,182,356 and $2,971,739 respectively.
Cash flows from operating activities. Net cash provided by operating activities
decreased to $152,000 for the six months ended December 31, 1997 from $460,000
for the six months ended December 31, 1996. The decrease was primarily due to
an increase in net earnings of $233,000, an increase in the proceeds from the
sale of loans held for sale of $1,899,000, amortization of the recognition and
retention plan of $178,000 adopted October 28, 1998, and an increase in the
change of accrued expenses and other liabilities of $184,000, offset by an
increase in the originations of loans held for sale of $2,398,000, a decrease in
the change in other assets of $173,000, and a decrease in the change in current
income taxes payable of $224,000.
Cash flows from investing activities. Net cash of $7.4 million was used in
investing activities for the six months ended December 31, 1997 versus $2.5
million for the six months ended December 31, 1996. The decrease was primarily
due to an increase in loans receivable of $8.2 million during the six months
ended December 31, 1997 versus a $3.5 million increase during the same period
in 1996.
Cash flows from financing activities. Net cash provided by financing activities
was $9.3 million for the six months ended December 31, 1997 compared to $1.6
million during the same period in 1996. The increase in cash flows from
financing activities is primarily due to an increase in deposits of $9.4 million
for the six months ended December 31, 1997 versus a decrease of $3.4 million for
the same period in 1996.
<PAGE>
11
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
---------------------------------------------------
On October 28, 1997 the Company held its annual meeting of stockholders
to consider the election of two directors of the Company, to ratify the
adoption of the 1997 Stock Option and Incentive Plan, to ratify the
adoption of the Recognition and Retention Plan, and to ratify the
appointment of KPMG Peat Marwick LLP as the auditors of the Company for
the fiscal year ending June 30, 1998. The results of the meeting were as
follows:
Edgar L. Radley was elected to serve as a director of the Company with
870,219 votes for and 11,100 votes withheld.
Rodney G. Rounkles was elected to serve as a director of the Company with
870,294 votes for and 11,025 votes withheld.
The CBES Bancorp, Inc. 1997 Stock Option and Incentive Plan was approved
with 563,356 votes for, 36,538 votes against, 1,000 votes abstaining, and
280,425 broker non-votes.
The CBES Bancorp, Inc. Recognition and Retention Plan was approved with
555,855 votes for, 45,413 votes against, 1,025 votes abstaining, and
279,826 broker non-votes.
The appointment of KPMG Peat Marwick LLP to act as the Company's auditors
for the fiscal year ending June 30, 1998 was ratified with 858,619 votes
for and 22,500 votes against.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
27-Financial Data Schedule
<PAGE>
12
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 11, 1998
----------------------------------------------------
By: /s/ Larry E. Hermreck
----------------------------------------------------
Larry E. Hermreck, Chief Executive Officer
and Secretary (Duly Authorized Officer)
Date: February 11, 1998
----------------------------------------------------
By: /s/ Dennis D. Hartman
----------------------------------------------------
Dennis D. Hartman, Controller and Chief
Financial Officer (Principal Finacial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 821,830
<INT-BEARING-DEPOSITS> 5,360,526
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 197,011
<INVESTMENTS-MARKET> 198,702
<LOANS> 99,681,471
<ALLOWANCE> 544,000
<TOTAL-ASSETS> 111,127,342
<DEPOSITS> 80,094,860
<SHORT-TERM> 12,250,000
<LIABILITIES-OTHER> 768,575
<LONG-TERM> 0
0
0
<COMMON> 10,319
<OTHER-SE> 17,527,475
<TOTAL-LIABILITIES-AND-EQUITY> 111,127,342
<INTEREST-LOAN> 4,351,502
<INTEREST-INVEST> 23,475
<INTEREST-OTHER> 84,248
<INTEREST-TOTAL> 4,459,225
<INTEREST-DEPOSIT> 1,828,401
<INTEREST-EXPENSE> 2,120,214
<INTEREST-INCOME-NET> 2,339,011
<LOAN-LOSSES> 121,566
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 329,510
<INCOME-PRETAX> 828,650
<INCOME-PRE-EXTRAORDINARY> 516,328
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,328
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
<YIELD-ACTUAL> 8.75
<LOANS-NON> 600,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 436,000
<CHARGE-OFFS> 33,024
<RECOVERIES> 19,458
<ALLOWANCE-CLOSE> 544,000
<ALLOWANCE-DOMESTIC> 544,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
