<PAGE>
EXHIBIT 13
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
President's Message 1
General Information 2
Selected Consolidated Financial and Other Data 3
Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
Independent Auditors' Report 16
Consolidated Balance Sheets 17
Consolidated Statements of Earnings 18
Consolidated Statements of Stockholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 22
Stockholder Information 42
Corporate Information 43
</TABLE>
<PAGE>
September 28, 2000
Dear Fellow Shareholder:
The Board of Directors, Officers, and Staff of CBES Bancorp, Inc. and its wholly
owned subsidiary, Community Bank of Excelsior Springs, a Savings Bank, are
pleased to provide you with our fourth annual report.
Fiscal 2000 was our fourth year as a stock company after serving area
communities for more than sixty-five years as a mutual savings institution. The
Bank's net loss for the fiscal year was $217,000, compared to net earnings of
$1,110,000 for fiscal year 1999. The decrease was primarily due to an increase
in the provision for loan losses of $1.8 million, a decrease in gain on sale of
loans of $589,000, and an increase in non-interest expense of $250,000, offset
by an increase in net interest income of $409,000, and an increase in customer
service charges of $94,000.
Loans receivable, net, increased to$163,799,000 at June 30, 2000 from
$134,459,000 at June 30, 1999, an increase of $29,340,000, due to increases in
one-to-four family loans held for sale of $14,470,000, commercial loans of
$1,891,000, construction loans of $10,504,000, and consumer loans of $4,136,000.
Assets increased $30,434,000 to $180,840,000 and stockholders' equity decreased
$1,194,000. The decrease in stockholder's equity was the result of the Company's
net loss and the Company's stock repurchase program under which the Company
purchased 46,056 shares of its stock during fiscal 2000.
Fiscal 2000 was a disappointing year for the Company, but we look forward to
returning to our long record of achievement in fiscal 2001. We reaffirm our
commitment to creating enhanced shareholder value while fulfilling our mission
as a community-oriented financial institution committed to our customers and the
communities we serve.
Our goals for 2001 include compliance with and the lifting of the supervisory
agreement with the Office of Thrift Supervision, the workout of our problem
loans, a reduction in assets, primarily in higher risk loans, and a reduction in
non-interest expenses. The Bank plans on hiring an individual to be Chief
Operating Officer and Chief Lending Officer to replace the Chief Lending Officer
that left the Bank, and additional loan officers, as needed, to replace the loan
officers that are no longer with the Bank.
Our goals for 2001 include compliance with and the lifting of the supervisory
agreement with the Office of Thrift Supervision and the work out of our
classified assets. As a result of the supervisory agreement and the Bank's
recent increases in classified assets, management of the Bank expects in the
near future the Bank's commercial real estate, multi-family, and land
acquisition and development lending will be reduced or eliminated, and the
Bank's construction lending activities will be curtailed. It is anticipated that
these curtailed lending activities will result in some decreases in the Bank's
loan portfolio balance, with offsetting decreases in borrowings. In addition,
management expects the reduction in lending activities, along with more emphasis
on non-interest expense, to result in a reduction in the Bank's non-interest
expense.
Thank you for your support in our Company, and we look forward to a prosperous
future.
Sincerely,
/s/ Dennis Hartman
Dennis Hartman
Chief Executive Officer
<PAGE>
GENERAL INFORMATION
CBES Bancorp, Inc. (the "Company"), a Delaware corporation, is the holding
company for Community Bank of Excelsior Springs, a Savings Bank (the "Bank").
The Company was organized by the Bank for the purpose of acquiring all of the
capital stock of the Bank in connection with the conversion of the Bank from
mutual to stock form, which was completed on September 27, 1996 (the
"Conversion"). The only significant assets of the Company are the capital stock
of the Bank, the Company's loan to the Company's Employee Stock Ownership Plan
(the "ESOP"), and the Company's loan to the Bank. The business of the Company
consists of the business of the Bank.
The Bank was originally chartered as a Missouri savings and loan association in
1931 under the name Excelsior Springs Savings and Loan Association. In 1991, the
Bank changed its name to its current form and in 1995, the Bank amended its
charter to become a federal mutual savings bank. Its deposits are insured up to
the maximum allowable amount by the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation ("FDIC"). Through its main office
in Excelsior Springs and its branch offices in Kearney and Liberty, Missouri,
the Bank primarily serves communities located in Clay and Ray Counties and to a
lesser extent in surrounding counties in the State of Missouri. At June 30,
2000, the Company had total assets of $180.8 million, deposits of $135.6
million, and total stockholders' equity of $15.8 million.
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
communities 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.
2
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
Set forth below are selected consolidated financial and other data of the
Company. The financial data is derived in part from, and should be read in
conjunction with, the consolidated financial statements and notes thereto
presented elsewhere in this annual report.
<TABLE>
<CAPTION>
At or for the years ended June 30,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- -------
(Dollars in thousands, except for share data)
<S> <C> <C> <C> <C> <C>
Selected financial condition data:
Total assets $180,840 150,406 123,856 101,076 89,830
Loans receivable, net 163,799 134,459 114,822 91,017 79,410
Mortgage-backed securities 39 57 81 154 400
Investment securities 187 93 98 1,096 2,074
FHLB stock 2,323 2,173 1,025 811 811
Other interest-bearing assets 6,089 6,673 2,424 3,544 2,776
Deposits 135,631 101,424 85,777 70,693 68,170
FHLB advances 26,750 29,450 19,500 10,750 12,000
Total equity 15,753 16,947 16,857 17,774 8,066
======== ======== ======== ======== =======
Selected operations data:
Total interest income $ 13,448 11,918 9,266 7,474 6,824
Total interest expense 7,606 6,485 4,520 3,534 4,006
-------- -------- -------- -------- -------
Net interest income 5,842 5,433 4,746 3,940 2,818
Provision for loan losses 2,152 298 266 60 236
-------- -------- -------- -------- -------
Net interest income after
provision for loan losses 3,690 5,135 4,480 3,880 2,582
-------- -------- -------- -------- -------
Loan fees and service charges 379 237 279 312 290
Gain on sale of loans, investments,
and mortgage-backed securities 590 1,178 460 157 239
Other noninterest income 180 158 128 127 127
-------- -------- -------- -------- -------
Total noninterest income 1,149 1,573 867 596 656
-------- -------- -------- -------- -------
Total noninterest expense 5,198 4,948 3,749 3,106 2,338
-------- -------- -------- -------- -------
Earnings (loss) before income taxes (359) 1,760 1,598 1,370 900
Income tax expense (benefit) (142) 650 544 485 323
-------- -------- -------- -------- -------
Net earnings (loss) $ (217) 1,110 1,054 885 577
======== ======== ======== ======== =======
Earnings per share:
Basic $ (0.26) 1.26 1.12 0.94 --
======== ======== ======== ======== =======
Diluted $ (0.26) 1.26 1.11 0.94 --
======== ======== ======== ======== =======
Average common shares outstanding 851,060 883,976 940,742 945,907 --
======== ======== ======== ======== =======
</TABLE>
3
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<TABLE>
<CAPTION>
At or for the years ended June 30,
---------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Selected financial ratios and other data:
Performance ratios:
Return on assets (ratio of net
earnings to average total assets) (0.13) % 0.74 0.95 0.94 0.65
Return on equity (ratio of net
earnings to average equity) (1.30) 6.60 6.04 5.79 7.42
Interest rate spread:
Average during period 3.28 3.38 3.80 3.66 2.90
End of period 2.74 2.92 3.04 3.17 4.12
Net interest margin 3.65 3.85 4.46 4.39 3.31
Ratio of noninterest expense to
average total assets 3.10 3.34 3.37 3.30 (1) 2.61
Ratio of average interest earning
assets to average interest-
bearing liabilities 107.75 110.31 115.56 118.71 108.57
Quality ratios:
Nonperforming assets to total
assets at end of period 4.86 0.47 0.59 1.14 0.73
Allowance for loan losses to
nonperforming loans 33.30 129.83 91.39 37.68 60.34
Allowance for loan losses to
loans receivable, net 1.79 0.69 0.58 0.48 0.49
Capital ratios:
Equity to total assets at end of year 8.71 11.27 13.61 17.59 8.99
Average equity to average assets 9.94 11.38 15.66 16.24 8.69
Number of full service offices 3 3 3 2 2
======= ======= ======= ======= =======
</TABLE>
(1) The ratio of noninterest expense to average total assets would have been
2.79% for the year ended June 30, 1997 if the $441,000 SAIF assessment had
not been incurred.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's results of operations depend primarily on its level of net
interest income, which is the difference between interest earned on interest-
earning assets, consisting primarily of mortgage and consumer loans and other
investments, and the interest paid on interest-bearing liabilities, consisting
of deposits and Federal Home Loan Bank of Des Moines ("FHLB") advances. Net
interest income is a function of the Company's "interest rate spread," which is
the difference between the average yield earned on interest-earning assets and
the average rate paid on interest-bearing liabilities, as well as a function of
the average balance of interest-earning assets as compared to interest-bearing
liabilities. The interest rate spread is affected by regulatory, economic, and
competitive factors that influence interest rates, loan demand, and deposit
flows. The Company, like other financial institutions, is subject to interest
rate risk to the degree that its interest-earning assets mature or reprice at
different times, or on different bases, than its interest-bearing liabilities.
Net interest income is reduced by all loans with principal or interest that is
currently delinquent ninety days or more, plus loans previously delinquent
ninety days or more which have not been brought current. The Company's operating
results are also affected by the amount of its noninterest income, including
gain on the sales of loans, service charges, loan servicing income, and other
income. Noninterest expense consists principally of employee compensation and
benefits, occupancy expense, data processing, federal insurance premiums,
advertising, real estate owned operations, and other operating expenses. The
Company's operating results are significantly affected by general economic and
competitive conditions, in particular, the changes in market interest rates,
government policies, and actions by regulatory authorities.
Financial Condition
Total Assets. Total assets increased $30.4 million, or 20.2%, to $180.8 million
at June 30, 2000 from $150.4 million at June 30, 1999. This was primarily due to
an increase in loans receivable, net funded by deposits and FHLB advances.
Loans Receivable, Net. Loans receivable, net (including loans held for sale),
increased by $29.3 million, or 21.8%, to $163.8 million at June 30, 2000 from
$134.4 million at June 30, 1999. The increase is primarily due to increases in
one-to-four family loans held for sale of $14.5 million, commercial loans of
$1.9 million, land loans of $0.7 million, construction loans of $10.5 million,
and consumer loans of $4.1 million.
Mortgage-backed Securities. Mortgage-backed securities decreased by $18,000, or
31.6%, to $39,000 at June 30, 2000 from $57,000 at June 30, 1999. The decrease
was due to prepayments on loans which secure the Bank's mortgage-backed
securities.
Investment Securities. Investment securities increased $94,000, or 101.1%, to
$187,000 at June 30, 2000 from $93,000 at June 30, 1999. The increase was due to
the purchase of a $100,000 Treasury Bill.
Deposits. Deposits increased $34.2 million, or 33.7%, to $135.6 million at June
30, 2000 from $101.4 million at June 30, 1999. The increase in deposits is
primarily due to $33.8 million in new certificates of deposit, of which $12.8
million are broker deposits. Due to a large demand for construction and other
loans, we offered a very competitive interest rate on selected term certificates
to fund that lending. Those certificates will begin repricing in mid-2001.
Federal Home Loan Bank Advances. FHLB advances decreased $2.7 million from $29.5
million at June 30, 1999 to $26.8 million at June 30, 2000.
Equity. Total stockholders' equity decreased by $1.1 million to $15.8 million at
June 30, 2000 from $16.9 million at June 30, 1999, primarily due to the
Company's net loss, along with the costs of the Company's stock repurchase
program.
5
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Net Interest Income Analysis
The schedule below presents, for the periods indicated, the total dollar amount
of interest income from average interest-earnings assets and the resultant
yields, as well as the total dollar amount of interest expense on average
interest-bearing liabilities and resultant rates. All average balances are
monthly average balances. Management does not believe that the use of monthly
balances instead of daily balances has caused a material difference in the
information presented. Nonaccruing loans have been included as loans carrying a
zero yield.
<TABLE>
<CAPTION>
------------------------------------
2000
-----------------------------------
At June 30, 2000 Average Interest
------------------------
Outstanding Yield/ outstanding earned/ Yield/
balance rate balance paid rate
----------- ------- ----------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 163,799 8.53% $ 149,912 12,894 8.60%
Mortgage-backed securities 39 8.06 48 4 8.33
Investment securities 187 6.19 166 10 6.02
FHLB stock 2,323 6.29 2,255 148 6.56
Other interest-bearing deposits 6,089 3.04 7,516 393 5.23
--------- --------- -------
Total interest-earning assets (1) $ 172,437 8.30% $ 159,897 13,449 8.41%
========= ===== ========= ======= =====
Interest-bearing liabilities:
Passbook accounts $ 3,928 2.25% $ 3,652 90 2.46%
Demand and NOW deposits 19,235 2.22 17,299 339 1.96
Certificate accounts 112,468 6.11 94,118 5,254 5.58
FHLB advances 26,750 6.16 33,288 1,923 5.78
--------- --------- ------
Total interest-bearing liabilities $ 162,381 5.56% $ 148,357 7,606 5.13%
========= ===== ========= ====== =====
Net interest income 5,843
======
Net interest rate spread (2) 2.74% 3.28%
===== =====
Net interest-earnings assets $ 10,056 $ 11,540
========= =========
Net interest margin (3) 3.65%
======
Average interest-earning assets to
average interest-bearing liabilities 107.75%
======
<CAPTION>
Year ended June 30,
-------------------------------------------------------------------
1999 1998
------------------------------- -------------------------------
Average Interest Average Interest
outstanding earned/ Yield/ outstanding earned/ Yield/
balance paid rate balance paid rate
----------- -------- ------ ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable $ 133,856 11,560 8.64% $ 100,867 9,047 8.97%
Mortgage-backed securities 69 6 8.70 100 7 7.00
Investment securities 95 6 6.32 560 20 3.57
FHLB stock 1,805 116 6.43 821 56 6.82
Other interest-bearing deposits 5,495 236 4.29 4,036 136 3.37
--------- ------- ---------- -------
Total interest-earning assets (1) $ 141,320 11,924 8.44% $ 106,384 9,266 8.71%
========= ======= ===== ========== ======= =====
Interest-bearing liabilities:
Passbook accounts $ 3,782 87 2.30% $ 3,736 84 2.25%
Demand and NOW deposits 14,508 316 2.18 14,001 311 2.22
Certificate accounts 76,653 4,196 5.47 61,650 3,419 5.55
FHLB advances 33,165 1,885 5.68 12,672 706 5.57
--------- ------- ---------- -------
Total interest-bearing liabilities $ 128,108 6,484 5.06% $ 92,059 4,520 4.91%
========= ======= ===== ========== ======= =====
Net interest income $ 5,440 $ 4,746
======= =======
Net interest rate spread (2) 3.38% 3.80%
===== ====
Net interest-earnings assets $ 13,212 $ 14,325
========= ==========
Net interest margin (3) 3.85% 4.46%
======= =======
Average interest-earning assets to
average interest-bearing liabilities 110.31% 115.56%
======= =======
</TABLE>
(1) Calculated net of deferred loan fees and discounts, loans in process, and
loss reserves.
(2) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on interest-bearing
liabilities.
(3) Net interest margin represents net interest income divided by average
interest-earning assets.
6
<PAGE>
Rate/Volume Analysis
The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and interest-
bearing liabilities. It distinguishes between the changes due to changes in
outstanding balances and those due to changes in interest rates. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by prior interest rate), and (ii) changes in rates
(i.e., changes in rate multiplied by prior volume). For purposes of this table,
changes attributable to both rate and volume, which cannot be segregated, have
been allocated proportionately to the changes due to volume and the changes due
to rate.
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------------------------------------------------
2000 vs 1999 1999 vs 1998
--------------------------------------- -------------------------------------
Increase Increase
(decrease) Total (decrease) Total
due to increase due to increase
---------------------- --------------------
Volume Rate (decrease) Volume Rate (decrease)
-------- ------ ----------- -------- ------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earnings assets:
Loans receivable $ 1,388 (54) 1,334 2,650 (138) 2,512
Mortgage-backed securities (2) -- (2) (2) 1 (1)
Investment securities 4 -- 4 (14) (12) (26)
FHLB stock 30 2 32 63 (3) 60
Other interest-earning assets 103 61 164 56 51 107
------- ----- ------ ------ ------ -------
Total interest-earning assets 1,523 9 1,532 2,753 (101) 2,652
------- ----- ------ ------ ------ -------
Interest-bearing liabilities:
Savings deposits (3) 6 3 3 -- 3
Demand and NOW 48 (25) 23 11 (6) 5
Certificate accounts 912 146 1,058 819 (42) 777
Borrowings 7 31 38 1,180 -- 1,180
------- ----- ------ ------ ------ -------
Total interest-bearing liabilities 964 158 1,122 2,013 (48) 1,965
------- ----- ------ ------ ------ -------
Net interest income $ 559 (149) 410 740 (53) 687
======= ===== ====== ====== ====== =======
</TABLE>
Comparison of Operating Results for the Years Ended June 30, 2000 and June 30,
1999
Performance Summary. Net earnings for the year ended June 30, 2000 decreased by
$1,327,000, or 119.6%, to a loss of $217,000 from $1,110,000 for the year ended
June 30, 1999. The results were impacted by an increase of $409,000 in net
interest income, offset by a $425,000 decrease in noninterest income, a
$1,800,000 increase in provision for loan loss, and a $250,000 increase in
noninterest expense.
For the years ended June 30, 2000 and 1999, the returns on average assets were
(.09)% and .74%, respectively, while the returns on average equity were (.88)%
and 6.60%, respectively.
Net Interest Income. Net interest income increased from $5.4 million for the
fiscal year ended June 30, 1999 to $5.8 million for the current fiscal year, an
increase of $0.4 million. This reflects an increase of $1.5 million in interest
income to $13.4 million from $11.9 million, and an increase in interest expense
of $1.1 million to $7.6 million from $6.5 million. The net increase was
primarily due to an increase in net loans receivable of $29.3 million to $163.8
million at June 30, 2000 from $134.5 million at June 30, 1999.
7
<PAGE>
For the year ended June 30, 2000, the average yield on interest-earning assets
was 8.41% compared to 8.44% for fiscal 1999. The average cost of interest-
bearing liabilities was 5.13% for the year ended June 30, 2000, an increase from
5.06% for fiscal 1999. The average balance of interest-earning assets increased
$18.6 million to $159.9 million for the year ended June 30, 2000, compared to
$141.3 million for fiscal 1999. During the same period, the average balance of
interest-bearing liabilities increased by $20.2 million to $148.4 million for
the year ended June 30, 2000 from $128.1 million in fiscal 1999.
The average interest rate spread was 3.28% for the year ended June 30, 2000,
compared to 3.38% for fiscal 1999. The average net interest margin decreased to
3.65% for the year ended June 30, 2000, compared to 3.85% for the year ended
June 30, 1999. This was primarily due to a decrease in the yield of interest-
earning assets to 8.41% for the period ended June 30, 2000 from 8.44% at June
30, 1999, and an increase in the cost of interest-bearing liabilities to 5.13%
at June 30, 2000 from 5.06% at June 30, 1999.
Provision for Loan Losses. During the year ended June 30, 2000, the Company
recorded a $2.2 million provision for loan losses in accordance with its
classification of assets policy. The increase in the provision for loan losses
was primarily attributable to a significant increase in the Bank's classified
assets of $13.3 million from $0.9 million at June 30, 1999 to $14.2 million at
June 30, 2000, together with the implementation of a more conservative
methodology in establishing its allowance for loan loss adopted in the third
quarter. The increase in classified assets during the year ended June 30, 2000
reflects comments received from OTS examiners, as well as a comprehensive review
of the loan portfolio being conducted by the Bank.
During the year ended June 30, 2000, the Bank had thirteen lending relationships
with an aggregate balance of $13 million which were classified as substandard,
and two lending relationships with an aggregate balance of $2.4 million which
were classified as special mention. The thirteen relationships classified as
substandard consisted of the following:
(1) Ten loans to a builder consisting of single family construction loans
with an aggregate balance of $1.2 million at June 30, 2000. In
February 2000, the builder filed for bankruptcy. Since June 30, 2000
the Bank has taken eight of these ten loans into real estate owned, of
which six are lots and basements, with an aggregate balance
of $205,000, and two are secured by roughed in single family houses
with an aggregate balance of $173,000.
(2) Fourteen loans to a builder with an aggregate balance of $2.2 million
at June 30, 2000, consisting of a land development loan, a multi-
family construction loan for a town house complex, four single family
speculative construction loans, two single family permanent loans, a
commercial real estate loan and a building lot loan. The commercial
real estate loan and the building lot loan were paid off after June
30, 2000. The current aggregate balance outstanding is $1.7 million.
(3) Six loans to a builder with an aggregate balance of $1.2 million at
June 30, 2000, consisting of a commercial real estate loan and a land
development loan, both of which paid off after June 30, 2000, building
lots loans, and single family construction loans. The current
aggregate balance is $626,000.
(4) Fourteen loans to a builder with an aggregate balance of $1.5 million
at June 30, 2000, consisting of fourteen single family construction
loans, two of which paid off after June 30, 2000. The current
aggregate balance is $1.3 million.
(5) Six loans to a builder consisting of a multi-family construction
loans, a commercial loan, and a building lot loan, with an aggregate
balance of $1.4 million at June 30, 2000.
(6) Five loans to a builder consisting of a multi-family construction
loan, single family construction loans, and single family permanent
loans, with an aggregate balance of $1.5 million at June 30, 2000.
8
<PAGE>
(7) Seventeen loans to a builder consisting of two single family
construction loans, one commercial real estate loan, eight single
family permanent loans, five commercial loans, and one consumer loan,
with an aggregate balance of $660,000 at June 30, 2000.
(8) Eight loans to a builder consisting of multi-family construction
loans, with an aggregate balance of $1.2 million at June 30, 2000.
This project is nearly complete. The builder is seeking permanent
financing upon completion of the project in early 2001.
(9) Six loans to a builder consisting of single family construction loans
with an aggregate balance of$1.0 million at June 30, 2000.
(10) Three loans to a builder consisting of single family construction
loans with an aggregate balance of $629,000 at June 30, 2000. All of
these loans paid off after June 30, 2000.
(11) Five loans to a builder consisting of a single family model home and
consumer loans, with an aggregate balance of $231,000 at June 30,
2000.
(12) One loan to a builder consisting of a single family construction loan
with a balance of $153,000 at June 30, 2000.
(13) Two loans to a builder consisting of single family construction loans
with an aggregate balance of $248,000 at June 30, 2000.
The two lending relationships classified as special mention consisted of the
following:
(1) A construction loan on commercial real estate with an outstanding
balance at June 30, 2000 of $1,840,000. The borrower is seeking
permanent financing upon completion of the project in the fourth
quarter of 2000.
(2) A permanent commercial real estate loan with an outstanding balance at
June 30, 2000 of $570,000.
During the year, the Bank also increased its general allowance. The Bank's
methodology for determining the general allowance for loan losses focuses
primarily on the application of specific reserve percentages to the various
categories of loans. Those percentages are based upon management's estimate of
the exposure to loss in the various categories. The reserve factors are subject
to change from time to time based on management's assessment of the relative
credit risk within the portfolio. During the fiscal year ended June 30, 2000,
management determined to increase certain of the factors based upon a more
conservative analysis of the risks inherent in the portfolio. Percentages
generally range from 0.05% for single family residential loans to 2.00% for some
consumer loans; higher percentages may be applied to problem loans. As noted
above, management continues to review specifically identified problem or
potential problem loans. On a case by case basis, where considered necessary,
reserves are increased. For this purpose, problem loans include non-accruing
loans and accruing loans delinquent more than ninety days and classified assets.
In addition, pursuant to the Bank's methodology, the reserve is replenished for
net charge-offs, which are charged against the reserve. Pursuant to the
supervisory agreement, the Bank may not reduce the allowance for loan losses
without prior notice of no objection from the Office of Thrift Supervision.
As a result of the provision for loan losses during the fiscal year ended June
30, 2000, the Bank had a total allowance for loan losses of $2.9 million, or
1.79% of loans receivable, net at June 30, 2000, compared to $927,000 or 0.69%
of loans receivable, net at June 30, 1999. The allowance for loan losses as a
percentage of non-performing assets was 33.3% at June 30, 2000 compared to
129.8% at June 30, 1999.
Management will continue to monitor its allowance for loan losses and make
additions to the allowance through the provision for loan losses as economic
conditions dictate. Although the Company maintains its allowance for loan losses
at a level considered to be adequate, 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 the future.
9
<PAGE>
The Supervisory Agreement between the Bank and the OTS provides that the Bank
shall not reduce the balance of the allowance for loan losses without prior
notice of no objection from the OTS.
Noninterest Income.For the year ended June 30, 2000, noninterest income
decreased by $425,000, or 27.0%, compared to the year ended June 30, 1999 due
primarily to a decrease in the gain on sale of mortgage loans of $588,000. The
gain on sale of loans decreased during the year as a result of a decrease in
loan sales from $41.6 million during the year ended June 30, 1999 to $31.3
million during the year ended June 30, 2000, as a part of the Company's strategy
to manage asset size and maintain capital levels.
Noninterest Expense. Noninterest expense increased $250,000 to $5.2 million for
the year ended June 30, 2000 from $4.9 million for the year ended June 30, 1999.
Of this increase, $180,000 was attributable to compensation due to an increase
in the number of employees and general wage increases, offset by a decrease in
the ESOP plan expense of $25,000. An increase of $51,000 was due to office
property and equipment expense; and $27,000 was due to an increase in other
noninterest expense, primarily consisting of mortgage loan expense, insurance
expense, and computer conversion expense. The increase in noninterest expense is
primarily due to the Company pursuing its plan of controlled growth, part of
that being the opening of the branch office in Liberty, Missouri.
Income Taxes. Income taxes decreased $792,000 to a $142,000 benefit for the year
ended June 30, 2000 from $650,000 of expense for the year ended June 30, 1999.
The increase is due to the decrease in pretax income. The Company's effective
tax rate was 39% for fiscal year 2000 and 37% for fiscal 1999.
Comparison of Operating Results for the Years Ended June 30, 1999 and June 30,
1998
Performance Summary. Net earnings for the year ended June 30, 1999 increased by
$56,000, or 5.3%, to $1,110,000 from $1,054,000 for the year ended June 30,
1998. The results were impacted by an increase of $687,000 in net interest
income and a $706,000 increase in noninterest income, offset by a $32,000
increase in provision for loan loss, a $1,199,000 increase in noninterest
expense, and a $107,000 increase in income taxes.
For the years ended June 30, 1999 and 1998, the returns on average assets were
.75% and .95%, respectively, while the returns on average equity were 6.60% and
6.04%, respectively.
Net Interest Income. Net interest income increased from $4.7 million for the
fiscal year ended June 30, 1998 to $5.4 million for the year ended June 30,
1999, an increase of $0.7 million. This reflects an increase of $2.7 million in
interest income to $11.9 million from $9.3 million, and an increase in interest
expense of $2.0 million to $6.5 million from $4.5 million. The net increase was
primarily due to an increase in net loans receivable of $19.6 million to $134.4
million in 1999 from $114.8 million in fiscal 1998.
For the year ended June 30, 1999, the average yield on interest-earning assets
was 8.44% compared to 8.71% for fiscal 1998. The average cost of interest-
bearing liabilities was 5.06% for the year ended June 30, 1999, an increase from
4.91% for fiscal 1998. The average balance of interest-earning assets increased
$34.9 million to $141.3 million for the year ended June 30, 1999, compared to
$106.4 million for fiscal 1998. During the same period, the average balance of
interest-bearing liabilities increased by $36.0 million to $128.1 million for
the year ended June 30, 1999 from $92.1 million in fiscal 1998.
The average interest rate spread was 3.37% for the year ended June 30, 1999,
compared to 3.80% for fiscal 1998. The average net interest margin decreased to
3.84% for the year ended June 30, 1999, compared to 4.46% for the year ended
June 30, 1998. This was primarily due to a decrease in the yield of interest-
earning assets to 8.44% at June 30, 1999 from 8.71% at June 30, 1998, and an
increase in the cost of interest-bearing liabilities to 5.06% at June 30, 1999
from 4.91% at June 30, 1998.
10
<PAGE>
Provision for Loan Losses. During the year ended June 30, 1999, the Company
recorded a $298,000 provision for loan losses in accordance with its
classification of assets policy. The Company's loan portfolio consists primarily
of one-to-four family mortgage loans, construction loans, and consumer loans,
and has experienced charge-offs of $82,000 and $83,000 in 1999 and 1998,
respectively. The fiscal 1999 provision exceeds the fiscal 1998 provision of
$266,000 primarily because of an overall increase in loans and, in particular,
an increase in gross construction loans from $48.6 million at June 30, 1998 to
$63.3 million at June 30, 1999. The allowance for loan losses of $927,000, or
.69%, of loans receivable, net at June 30, 1999, compares to $669,000, or .58%
,of loans receivable, net at June 30, 1998. The allowance for loan losses as a
percentage of nonperforming assets was 129.83% at June 30, 1999 compared to
91.39% at June 30, 1998, due to a decrease in the Company's nonperforming assets
during fiscal 1999. Nonperforming assets aggregated $714,000 at June 30, 1999,
including nonaccruing one-to-four family residential loans of $209,000.
Noninterest Income. For the year ended June 30, 1999, noninterest income
increased by $706,000, or 81.4%, compared to the year ended June 30, 1998 due
primarily to an increase in the gain on sale of mortgage loans of $719,000. The
gain on sale of loans increased during the year as a result of an increase in
loan sales from $22.8 million during the year ended June 30, 1998 to $57.9
million during the year ended June 30, 1999, as a part of the Company's strategy
to manage asset size and maintain capital levels. Noninterest Expense.
Noninterest expense increased $1,199,000 to $4.9 million for the year ended June
30, 1999 from $3.7 million for the year ended June 30, 1998. Of this increase,
$584,000 was attributable to compensation due to an increase in the number of
employees and general wage increases, offset by a decrease in the ESOP plan
expense of $56,000 and a decrease in the Recognition and Retention plan expense
of $107,000; $423,000 was due to office property and equipment expense, of which
$269,000 was due to Year 2000 expenses, including capitalized computer equipment
of $101,000, and $283,000 was due to an increase in other noninterest expense,
primarily consisting of mortgage loan expense, professional fees, and telephone
expense. The increase in noninterest expense is primarily due to the Company
pursuing its plan of controlled growth, part of that being the opening of the
branch office in Liberty, Missouri.
Income Taxes. Income taxes increased $107,000 to $650,000 for the year ended
June 30, 1999 from $543,000 for the year ended June 30, 1998. The increase is
due to the increase in pretax income. The Company's effective tax rate was 37%
for fiscal year 1999 and 34% for fiscal 1998.
Asset Liability Management
Savings institutions such as the Company are subject to interest rate risk to
the extent their interest-bearing liabilities (consisting primarily of deposit
accounts, FHLB advances, and other borrowings) mature or reprice more rapidly,
or on a different basis, than their interest-earning assets (consisting
predominantly of intermediate and long-term real estate loans and investments
held for investment and liquidity purposes). Having interest-bearing liabilities
that mature or reprice more frequently on average than assets may be beneficial
in times of declining interest rates, although such an asset liability structure
may result in declining net interest earnings during periods of rising interest
rates. Conversely, having interest-earning assets that mature or reprice more
frequently on average than liabilities may be beneficial in times of rising
interest rates, although this asset liability structure may result in declining
net interest earnings during periods of falling interest rates.
11
<PAGE>
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 2000, which are expected to
reprice or mature in each of the future time periods shown, assuming a 22%
annual prepayment rate for fixed-rate real estate loans, a 22% annual prepayment
rate for mortgage-backed securities, an 8% annual prepayment rate for
adjustable-rate real estate loans, and an 8% annual prepayment rate for consumer
loans. Except for deposits, which are classified as repricing in the "within 1
year" category, the amounts of assets and liabilities shown which reprice or
mature during a particular period were determined in accordance with the earlier
of term to repricing or the contractual terms of the asset liability.
<TABLE>
<CAPTION>
Maturing or repricing
---------------------------------------------------------------------------------------
Within Over
1 year 1-3 years 3-5 years 5-10 years 10 years Total
--------- -------------- ----------- ------------- ------------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earnings assets:
Loans receivable, net (1) $108,838 27,594 16,815 9,445 1,107 163,799
Mortgage-backed securities 14 17 7 1 -- 39
Investment securities 99 6 6 21 55 187
Interest-bearing deposits
in other financial institutions 6,089 -- -- -- -- 6,089
FHLB stock 2,323 -- -- -- -- 2,323
-------- -------- ---------- -------- ------ ---------
Total interest-earning
assets (1) 117,363 27,617 16,828 9,467 1,162 172,437
-------- -------- ---------- -------- ------ ---------
Interest-earning liabilities:
Savings deposits 3,928 -- -- -- -- 3,928
Demand and NOW deposits 19,235 -- -- -- -- 19,235
Certificate accounts 84,167 19,083 8,817 401 -- 112,468
FHLB advances 19,600 7,150 -- -- -- 26,750
-------- -------- ---------- -------- ------ ---------
Total interest-bearing
liabilities 126,930 26,233 8,817 401 -- 162,381
-------- -------- ---------- -------- ------ ---------
Interest sensitivity gap $ (9,567) 1,384 8,011 9,066 1,162 10,056
======== ======== ========== ======== ====== =========
Cumulative interest sensitivity gap $ (9,567) (8,183) (172) 8,894 10,056 10,056
======== ======== ========== ======== ====== =========
Ratio of interest-earning assets to
interest-bearing liabilities 92.46% 105.28% 190.86% 2,360.85% --% 106.19%
======== ======== ========== ======== ====== =========
Ratio of cumulative gap to total
assets (5.29)% (4.52)% (0.10)% 4.92% 5.56% 5.56%
======== ======== ========== ======== ====== =========
</TABLE>
(1) Calculated net of deferred loans fees, loan discounts, loans in process, and
loan loss reserves.
12
<PAGE>
Net Portfolio Value
In order to encourage institutions to reduce their interest rate risk, the
Office of Thrift Supervision (OTS) adopted a rule incorporating an interest rate
risk ("IRR") component into the risk-based capital rules. The IRR component is a
dollar amount that will be deducted from total capital for the purpose of
calculating an institution's risk-based capital requirement and is measured in
terms of the sensitivity of its net portfolio value ("NPV") to changes in
interest rates. NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities, and off-balance sheet contracts. An
institution's IRR is measured as the change to its NPV as a result of a
hypothetical 200 basis point ("bp") change in market interest rates. A resulting
change in NPV of more than 2% of the estimated market value of its assets will
require the institution to deduct from its capital 50% of that excess change.
The rules provide that the OTS will calculate the IRR component quarterly for
each institution. The Bank, based on asset size and risk-based capital, has been
informed by the OTS that it is exempt from this rule. Nevertheless, the
following table presents the Bank's NPV at June 30, 2000, as calculated by the
OTS, based on information provided to the OTS by the Bank.
Interest Rate Sensitivity of Net Portfolio Value (NPV)
NPV as percent
Net portfolio Value of PV assets
-------------------------------------------------- -------------------------
Change in Dollar Dollar Percent NPV Change
rates (bp) amount change change ratio (bp)
---------- ----------- --------- --------- --------- ------------
(Dollars in thousands)
300 $ 16,501 (1,262) (7)% 9.30% (39)
200 17,247 (516) (3) 9.60 (9)
100 17,702 (61) (1) 9.74 6
-- 17,763 9.69 --
(100) 17,404 (359) (2) 9.42 (26)
(200) 16,731 (1,032) (6) 9.01 (68)
(300) 16,023 (1,740) (10) 8.57 (112)
======== ======= ======= ======= ======= =======
Certain shortcomings are inherent in the method of analysis presented in both
the computation of NPV and in the analysis presented in prior tables setting
forth the maturing and repricing of interest-earning assets and interest-bearing
liabilities. Although certain assets and liabilities may have similar maturities
or periods within which they will reprice, they may react differently to changes
in market interest rates. The interest on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Occasionally, adjustable-rate mortgages have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. The
proportion of adjustable-rate loans could be reduced in future periods if market
interest rates would decrease and remain at lower levels for a sustained period,
due to increased refinance activity. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in the table. Finally, the ability of many
borrowers to service their adjustable-rate debt may decrease in the event of a
sustained interest rate increase.
13
<PAGE>
Liquidity and Capital Resources
The Company's primary sources of funds are deposits, FHLB advances, repayments
and prepayments of loans and mortgage-backed securities, the maturity of
investment securities, and interest income. Although maturity and scheduled
amortization of loans are relatively predictable sources of funds, deposit flows
and prepayments on loans are influenced significantly by general interest rates,
economic conditions, and competition.
The primary investing activity of the Company is originating adjustable-rate
mortgages, construction loans, and consumer loans. For the fiscal years ended
June 30, 2000 and 1999, the Bank originated loans for its portfolio in the
amount of $134 million and $167 million, respectively.
The Bank is required to maintain minimum levels of liquid assets under the OTS
regulations. Savings institutions are required to maintain an average daily
balance of liquid assets (including cash, certain time deposits, and specified
U. S. government, state, or federal agency obligations) of not less than 4.0% of
its average daily balance of net withdrawable accounts plus short-term
borrowings.
It is the Bank's policy to maintain its liquidity portfolio in excess of
regulatory requirements. The Bank's eligible liquidity ratios were 6.22% and
7.69%, respectively, at June 30, 2000 and 1999.
The Company's most liquid assets are cash and cash equivalents, which include
short-term investments. At June 30, 2000 and 1999, cash and cash equivalents
were $7.2 million and $7.5 million, respectively. Liquidity management for the
Company is both an ongoing and long-term component of the Company's asset
liability management strategy. Excess funds generally are invested in overnight
deposits at the FHLB. Should the Company require funds beyond its ability to
generate them internally, additional sources of funds are available through
advances from the FHLB. The Company would pledge its FHLB stock or certain other
assets as collateral for such advances.
At June 30, 2000, the Bank had outstanding loan commitments of $245,000 and
undisbursed loans in process of $19.4 million.
Certificates of deposit which are scheduled to mature in one year or less at
June 30, 2000 were $83.8 million. Management believes that a significant portion
of such deposits will remain with the Bank, although depending upon the Bank's
needs for funds, the Bank may be less aggressive in seeking to retain brokered
deposits. The Bank had brokered deposits of $12.8 million at June 30, 2000.
At June 30, 2000, the Bank had tangible capital of $13.6 million, or 7.5% of
total adjusted assets, which is approximately $10.9 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date. The Bank
had core capital of $13.6 million, or 7.5% of adjusted total assets, which is
$6.4 million above the minimum leverage ratio requirement of 4.0% in effect on
that date. The Bank had total risk-based capital of $15.3 million and total
risk-weighted assets of $134.3 million, or total capital of 11.4% of risk-
weighted assets. This was $4.6 million above the 8.0% requirement in effect on
that date.
Supervisory Agreement
On August 4, 2000 the Bank entered into a Supervisory Agreement with the OTS. By
signing the Supervisory Agreement, the Bank has agreed to take certain actions
in response to concerns raised by the OTS. The Supervisory Agreement provides
that the Bank shall take necessary and appropriate actions to achieve compliance
with various OTS regulations related to lending standards, lending limitations,
classification of assets, appraisal standards and other matters. The Supervisory
Agreement provides that the Bank take certain corrective steps to improve its
internal asset review program. The Supervisory Agreement requires the Bank to
establish adequate allowance for loan losses and not reduce the balance of the
allowance for loan losses without prior notice of no objection from the OTS. The
Supervisory Agreement also provides that the Bank refrain from making any new
loan commitments with the new builders or subdivision developments without prior
OTS approval. The Bank is also prohibited from increasing the number of loans to
current builders or subdivision developments without prior OTS approval.
14
<PAGE>
In addition, the Supervisory Agreement provides that the Board of Directors of
the Bank must develop or revise its written policies and procedures relating to
real estate appraisals, loan underwriting and credit administration, lending
limits and related matters. The Supervisory Agreement also provides that the
Bank shall revise its internal audit procedures, shall update its contingency
disaster recovery plan, shall establish and implement certain budgetary
procedures and shall revise its bonus program. The Supervisory Agreement also
provides that the Bank shall refrain from making capital distributions without
OTS approval. The Company relies upon dividends for the Bank to satisfy its cash
needs
The Supervisory Agreement is considered a formal written agreement with the OTS.
Failure to comply with the Supervisory Agreement can lead to further enforcement
actions by the OTS. The Bank believes that it can comply with the Supervisory
Agreement and is currently taking the necessary steps to do so. Compliance with
the Supervisory Agreement is not expected to have a materially adverse impact on
the operations or the financial condition of the Bank. However, the restrictions
imposed on the Bank's construction and commercial real estate lending activities
may cause a significant decrease in the Bank's activities in these areas. The
Supervisory Agreement will remain in effect until terminated by the OTS.
Recent Accounting Developments
The FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, in June 1998. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 137 was issued in June 1999 and delayed the effective date of SFAS No.
133 until July 1, 2001. Management believes adoption of SFAS No. 133, as amended
by SFAS No. 137, will not have a material effect on the Company's financial
position or results of operations, and adoption will not require additional
capital resources.
Impact of Inflation and Changing Prices
The consolidated financial statements and notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
generally requires the measurement of financial position and operating results
in terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Nearly all the
assets and liabilities of the Company are financial, unlike most industrial
companies. As a result, the Company's performance is directly impacted by
changes in interest rates which are indirectly influenced by inflationary
expectations. The Company's ability to match the interest sensitivity of its
financial assets to the interest sensitivity of its financial liabilities in its
asset/liability management may tend to minimize the effect of change in interest
rates on the Company's performance. Changes in interest rates do not necessarily
move to the same extent as changes in the price of goods and services. In an
increasing interest rate environment, liquidity and the maturity structure of
the Company's assets and liabilities are critical to the maintenance of
acceptable performance levels.
Forward-looking Statements
In addition to historical information, this Annual Report contains forward-
looking statements. The forward-looking statements contained herein are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Important
factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled Management's Discussion and Analysis of
Financial Condition and Results of Operations. Readers should not place undue
reliance on these forward-looking statements, as they reflect management's
analysis as of the date of this report. The Company has no obligation to update
or revise these forward-looking statements to reflect events or circumstances
that occur after the date of this report. Readers should carefully review the
risk factors described in other documents the Company files from time to time
with the Securities and Exchange Commission, including Quarterly 10-Q reports
and reports filed on Form 8-K.
15
<PAGE>
[LETTERHEAD OF KPMG]
Independent Auditors' Report
The Board of Directors
CBES Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of CBES Bancorp,
Inc. and subsidiary as of June 30, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss),
and cash flows for each of the years in the three-year period ended June 30,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CBES Bancorp, Inc.
and subsidiary as of June 30, 2000 and 1999 and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 2000, in conformity with accounting principles generally accepted in the
United States of America.
KPMG LLP
August 11, 2000
16
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
Assets 2000 1999
------------ -----------
<S> <C> <C>
Cash and cash equivalents 1,152,781 1,111,855
Interest-bearing deposits in other financial institutions 6,089,264 6,350,923
------------ -----------
Total cash and cash equivalents 7,242,045 7,462,778
Investment and mortgage-backed securities - held-to-maturity (estimated fair
value of 226,000 and 150,000 in 2000 and 1999, respectively) 225,898 150,275
Loans held for sale, net 16,863,181 2,393,421
Loans receivable, net (note 3) 146,935,945 132,065,730
Accrued interest receivable:
Loans receivable 1,118,559 1,052,903
Investment and mortgage-backed securities and interest-bearing deposits 79,808 3,167
Real estate owned 237,061 152,859
Stock in Federal Home Loan Bank (FHLB), at cost 2,322,500 2,172,500
Office property and equipment, net (note 4) 2,583,130 2,598,443
Deferred income tax benefit (note 7) 834,000 133,000
Cash surrender value of life insurance and other assets 2,397,469 2,220,827
------------ -----------
Total assets $180,839,596 150,405,903
============ ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 5) $135,630,763 101,423,598
FHLB advances (note 6) 26,750,000 29,450,000
Accrued expenses and other liabilities 888,848 1,481,920
Accrued interest payable on deposits 255,971 138,404
Advance payments by borrowers for property taxes and insurance 1,444,286 916,215
Current income taxes payable 116,246 48,704
------------ -----------
Total liabilities 165,086,114 133,458,841
------------ -----------
Stockholders' equity:
Common stock, $.01 par; 3,500,000 authorized; 1,031,851 shares issued 10,319 10,319
Additional paid-in capital 10,020,540 9,989,075
Retained earnings, substantially restricted (notes 8, 9, and 11) 9,244,208 10,033,284
Treasury stock, 158,789 and 110,724 shares, at cost (3,009,175) (2,267,740)
Unearned employee benefits (note 8) (512,410) (817,876)
------------ -----------
Total stockholders' equity 15,753,482 16,947,062
Commitments (note 3)
------------ -----------
Total liabilities and stockholders' equity $180,839,596 150,405,903
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Operations
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------ ----------- ------------
<S> <C> <C> <C>
Interest income:
Loans receivable $ 12,893,702 11,559,524 9,046,683
Investment and mortgage-backed securities 13,757 5,922 27,308
Interest-bearing deposits and other 541,051 352,341 192,008
------------ ----------- ------------
Total interest income 13,448,510 11,917,787 9,265,999
------------ ----------- ------------
Interest expense:
Deposits (note 5) 5,682,722 4,598,959 3,813,986
FHLB advances 1,923,109 1,885,508 705,884
------------ ----------- ------------
Total interest expense 7,605,831 6,484,467 4,519,870
------------ ----------- ------------
Net interest income 5,842,679 5,433,320 4,746,129
Provision for loan losses (note 3) 2,151,697 298,020 266,514
------------ ----------- ------------
Net interest income after provision for loan losses 3,690,982 5,135,300 4,479,615
------------ ----------- ------------
Noninterest income:
Gain on sales of loans, net 589,528 1,178,325 459,813
Customer service charges 321,781 227,805 224,101
Loan servicing fees 56,515 8,743 54,712
Other 179,927 157,549 128,273
------------ ----------- ------------
Total noninterest income 1,147,751 1,572,422 866,899
------------ ----------- ------------
Noninterest expense:
Compensation, payroll taxes, and fringe benefits (note 8) 2,794,722 2,614,448 2,192,707
Office property and equipment 885,879 835,311 412,640
Data processing 216,052 242,137 166,401
Federal insurance premiums (note 5) 41,525 54,517 48,149
Advertising 153,411 118,751 124,414
Real estate owned and repossessed assets 57,447 60,482 65,018
Other 1,049,204 1,022,291 739,357
------------ ----------- ------------
Total noninterest expense 5,198,240 4,947,937 3,748,686
------------ ----------- ------------
Earnings (loss) before income taxes (359,507) 1,759,785 1,597,828
Income taxes (note 7) (142,469) 650,204 543,586
------------ ----------- ------------
Net earnings (loss) $ (217,038) 1,109,581 1,054,242
============ =========== ============
Earnings (loss) per share:
Basic $ (0.26) 1.26 1.12
Diluted (0.26) 1.26 1.11
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
Accumulated
Additional other Unearned
Common paid-in Retained comprehensive employee Treasury
stock capital earnings income benefits stock Total
--------- ---------- ---------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 $ 10,250 9,728,357 8,777,980 (2,658) (739,440) -- 17,774,489
Comprehensive income:
Net earnings -- -- 1,054,242 -- -- -- 1,054,242
Other comprehensive income -
unrealized holding losses on
debt and equity securities available-
for-sale, net of tax -- -- -- 2,658 -- -- 2,658
--------- ---------- ---------- --------------- ---------- ---------- ----------
Total comprehensive income -- -- 1,054,242 2,658 -- -- 1,056,900
--------- ---------- ---------- --------------- ---------- ---------- ----------
Allocation of employee stock ownership
plan (ESOP) shares -- 132,003 -- -- 120,580 -- 252,583
Purchase of 92,244 shares of treasury stock -- -- -- -- -- (2,090,907) (2,090,907)
Adoption of Recognition and Retention
Plan (RRP) (note 9) 69 52,371 -- -- (710,190) 657,750 --
Amortization of RRP -- -- -- -- 248,566 -- 248,566
Dividends declared ($.42 per share) -- -- (384,524) -- -- -- (384,524)
Balance, June 30, 1998 10,319 9,912,731 9,447,698 -- (1,080,484) (1,433,157) 16,857,107
Comprehensive income:
Net earnings -- -- 1,109,581 -- -- -- 1,109,581
Other comprehensive income -
unrealized holding losses on
debt and equity securities available-
for-sale, net of tax -- -- -- -- -- -- --
--------- ---------- ---------- --------------- ---------- ---------- ----------
Total comprehensive income -- -- 1,109,581 -- -- -- 1,109,581
--------- ---------- ---------- --------------- ---------- ---------- ----------
Allocation of ESOP shares -- 76,344 -- -- 120,570 -- 196,914
Purchase of 48,480 shares of treasury stock -- -- -- -- -- (834,583) (834,583)
Amortization of RRP -- -- -- -- 142,038 -- 142,038
Dividends declared ($.60 per share) -- -- (523,995) -- -- -- (523,995)
--------- ---------- ---------- --------------- ---------- ---------- ----------
Balance, June 30, 1999 10,319 9,989,075 10,033,284 -- (817,876) (2,267,740) 16,947,062
Comprehensive income (loss):
Net earnings (loss) -- -- (217,038) -- -- -- (217,038)
Other comprehensive income -
unrealized holding losses on
debt and equity securities available-
for-sale, net of tax -- -- -- -- -- -- --
--------- ---------- ---------- --------------- ---------- ---------- ----------
Total comprehensive income (loss) -- -- (217,038) -- -- -- (217,038)
--------- ---------- ---------- --------------- ---------- ---------- ----------
Allocation of ESOP shares -- 46,477 -- -- 125,450 -- 171,927
Purchase of 46,056 shares of treasury stock -- -- -- -- -- (707,797) (707,797)
Amortization of RRP -- -- -- -- 131,366 -- 131,366
Dividends declared ($.68 per share) -- -- (572,038) -- -- -- (572,038)
Award of RRP shares -- (15,012) -- -- (58,911) 73,923 --
Forfeiture of RRP shares -- -- -- -- 107,561 (107,561) --
--------- ---------- ---------- --------------- ---------- ---------- ----------
Balance, June 30, 2000 $ 10,319 10,020,540 9,244,208 -- (512,410) (3,009,175) 15,753,482
========= ========== ========== =============== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Cash Flows
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
-------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (217,038) 1,109,581 1,054,242
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Provision for loan losses 2,151,697 298,020 266,514
Depreciation 415,679 346,478 209,897
Amortization of RRP and allocation of ESOP shares 303,293 338,952 501,149
(Gain) loss on disposition of real estate owned, net (19,779) 48,292 (3,227)
Proceeds from sale of loans held for sale 31,315,667 41,653,136 23,217,640
Origination of loans held for sale (45,195,899) (41,288,663) (23,640,779)
Gain on sale of loans, net (589,528) (1,178,325) (459,813)
Premium amortization and accretion of discounts
and deferred loan fees, net (780,351) (558,416) (466,442)
Provision for deferred income taxes (701,000) 13,000 (140,772)
Changes in assets and liabilities:
Accrued interest receivable (142,297) (144,070) (201,867)
Other assets (176,642) (341,890) (136,379)
Accrued expenses and other liabilities (553,702) 754,507 (75,077)
Accrued interest payable on deposits 117,567 30,643 9,795
Current income taxes payable 67,542 (134,274) (111,626)
-------------- ------------ -------------
Net cash provided by (used in) operating activities (14,004,791) 946,971 23,255
-------------- ------------ -------------
Cash flows from investing activities:
Net increase in loans receivable (16,539,030) (19,815,885) (23,047,384)
Purchase of FHLB stock (150,000) (1,147,500) (214,300)
Purchase of investment securities (195,115) -- --
Maturity of investment securities available-for-sale -- -- 1,000,000
Maturity of investment securities held-to-maturity 105,000 5,000 2,000
Mortgage-backed securities principal repayments 18,182 23,791 73,108
Purchase of office property and equipment (400,366) (1,201,418) (715,577)
Proceeds from sale of real estate owned 229,356 1,100,847 448,654
-------------- ------------ -------------
Net cash used in investing activities $ (16,931,973) (21,035,165) (22,453,499)
-------------- ------------ -------------
</TABLE>
(Continued)
20
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Consolidated Statements of Cash Flows, Continued
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from financing activities:
Increase in deposits $ 34,207,165 15,646,813 15,083,885
Proceeds from FHLB advances 75,600,000 41,450,000 22,750,000
Repayments of FHLB advances (78,300,000) (31,500,000) (14,000,000)
Increase in advance payments by borrowers
for property taxes and insurance 528,071 165,016 25,681
Purchase of treasury stock (707,797) (834,583) (2,090,907)
Dividends paid (611,408) (476,372) (370,667)
-------------- -------------- --------------
Net cash provided by financing activities 30,716,031 24,450,874 21,397,992
-------------- -------------- --------------
Net increase (decrease) in cash and
cash equivalents (220,733) 4,362,680 (1,032,252)
Cash and cash equivalents at the beginning of the year 7,462,778 3,100,098 4,132,350
-------------- -------------- --------------
Cash and cash equivalents at the end of the year $ 7,242,045 7,462,778 3,100,098
============== ============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes $ 109,151 568,000 643,000
============== ============== ==============
Cash paid during the year for interest $ 7,488,264 6,453,824 4,510,075
============== ============== ==============
Supplemental schedule of noncash investing
and financing activities:
Conversion of loans to real estate owned $ 293,779 1,253,257 325,964
============== ============== ==============
Loans made to finance sales of real estate owned $ 73,750 -- 476,818
============== ============== ==============
Dividends declared and payable $ 122,550 165,803 116,353
============== ============== ==============
Allocation of RRP shares $ 58,912 -- 710,190
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(1) Conversion and Acquisition of the Association by the Company
CBES Bancorp, Inc. (the Company) was incorporated in September 1996 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 and loan to a
federally chartered stock savings and loan. Pursuant to its Plan of
Conversion, on September 19, 1996, the Company issued and sold 1,024,958
shares of its common stock in a subscription and community offering to the
Bank's depositors and borrowers, the Company's employee stock ownership plan
(ESOP), and the general public.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and the Bank and its wholly owned subsidiary, CBES
Service Corporation. Significant intercompany balances and transactions
have been eliminated in consolidation.
(b) Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, all
investments with a maturity of three months or less at date of purchase
are considered cash equivalents.
(c) Investment and Mortgage-backed Securities
The Company classifies its investment and mortgage-backed securities
portfolios as held-to-maturity, which are recorded at amortized cost, or
available-for-sale, which are recorded at fair value. The Company
classifies its investment and mortgage-backed securities as held-to-
maturity if it has the positive intent and ability to hold the
securities to maturity. Unrealized holding gains and losses, net of the
related tax effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of stockholders'
equity until realized. Transfers of securities from available-for-sale
to held-to-maturity are recorded at fair value at the date of transfer
and unrealized holding gains or losses are amortized over the remaining
life of the security.
A decline in the fair value of any security below cost that is deemed
other than temporary is charged to income, resulting in the
establishment of a new cost basis for the security.
Premiums and discounts on mortgage-backed and investment securities are
amortized using the interest method over the life of the securities.
Realized gains and losses on sales are included in income using the
specific identification method for determining cost of the securities
sold.
22 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(d) Loans
The Company determines at the time of origination whether mortgage loans
will be held for the Company's portfolio or sold in the secondary market.
Loans originated and intended for sale in the secondary market are recorded
at the lower of aggregate cost or estimated fair value. Fees received on
such loans are deferred and recognized in income as part of the gain or
loss on sale.
Interest on loans is accrued based on the principal amount outstanding. The
Company defers all loan origination, commitment and related fees, and
certain direct origination costs related to loans generated for the Bank's
portfolio. The Bank amortizes the net fees over the expected life of the
individual loans using the interest method.
(e) Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any,
are credited to the allowance.
A general valuation allowance for losses on loans is established by
management based on its estimate of the amount required to maintain an
adequate allowance for loan losses reflective of the risks in the loan
portfolio. This estimate is based on reviews of the loan portfolio,
including assessment of the estimated net realizable value of the related
underlying collateral of and consideration of past loan loss experience,
current economic conditions, and such other factors which, in the opinion
of management, deserve current recognition. Loans are also subject to
periodic examination by regulatory agencies. Such agencies may require
charge-off or additions to the allowance based upon their judgments about
information available at the time of their examination.
Additionally, it is the Company's policy to place loans delinquent over
ninety days on nonaccrual status and exclude interest on such loans from
income. Interest ultimately collected is credited to income in the period
received.
(f) Mortgage Banking Activities
The Company accounts for its mortgage servicing rights in accordance with
Statement of Financial Accounting Standards (SFAS) No. 122,Accounting for
Mortgage Servicing Rights, as amended by SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. This statement requires that the value of retained mortgage
servicing rights related to loans originated and sold after January 1, 1996
be capitalized as an asset, thereby increasing the gain on sale of the loan
by the amount of the asset. Such mortgage servicing rights are amortized in
proportion to and over the period of the estimated net servicing income.
Any remaining unamortized amount is charged to expense if the related loan
is repaid prior to maturity. Management monitors the capitalized mortgage
servicing rights for impairment based on the fair value of those rights.
Any impairment is recognized through a valuation allowance.
23 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Included in gains on sales of loans are capitalized mortgage servicing
rights aggregating $127,000, $323,000, and $87,000 in 2000, 1999, and 1998,
respectively. Amortization expense related to the capitalized servicing
rights, included as a reduction of loan servicing fees in the accompanying
consolidated statements of operations, aggregated $91,000, $41,000,
and $18,000 during 2000, 1999, and 1998, respectively.
At June 30, 2000 and 1999, the Bank was servicing loans for others
amounting to $47,643,000 and $44,070,000, respectively. Loan servicing fees
include servicing fees from investors and certain charges collected from
borrowers, such as late payment fees, which are recorded when received. The
amount of escrow balances held for borrowers at June 30, 2000 and 1999
amounted to $458,000 and $432,000, respectively.
(g) Real Estate Owned
Real estate properties acquired through foreclosure are initially recorded
at the lower of cost or the fair value, less estimated costs to sell, of
the underlying collateral at the time of foreclosure. Subsequent to
foreclosure, further declines in the fair value of such properties are
recorded as a reduction to the carrying value of those assets through the
establishment of an allowance for losses.
(h) Stock in Federal Home Loan Bank (FHLB) of Des Moines
The Bank is a member of the FHLB system. As a member, the Bank is required
to purchase and hold stock in the FHLB of Des Moines in an amount equal to
the greater of (a) 1% of unpaid residential loans, (b) 5% of outstanding
FHLB advances, or (c) .3% of total assets. FHLB stock is carried at cost in
the accompanying consolidated balance sheets.
(i) Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which range from three to thirty years. Major
replacements and betterments are capitalized while normal maintenance and
repairs are charged to expense when incurred. Gains or losses on
dispositions are reflected in current operations.
(j) Income Taxes
The Company records deferred tax assets and liabilities for the future tax
consequences attributable to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their
respective income tax bases. The effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period
that includes the enactment date.
24 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(k) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(l) Earnings (Loss) Per Share
Basic earnings (loss) per share is based upon the weighted average number
of common shares outstanding during the periods presented. Diluted earnings
(loss) per share include the effects of all dilutive potential common
shares outstanding during each period. Unallocated ESOP shares are excluded
from outstanding shares. The shares used in the calculation of basic and
diluted earnings per share are shown below:
For the
years ended June 30,
---------------------------
2000 1999 1998
------- ------- -------
Weighted average common
shares outstanding 851,060 883,976 940,742
Stock options -- -- 5,154
------- ------- -------
851,060 883,976 945,896
======= ======= =======
(m) Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board issued SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, in June 1998. SFAS No.
133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No.
137 was issued in June 1999 and delayed the effective date of SFAS No. 133
until July 1, 2001. Management believes adoption of SFAS No. 133, as
amended by SFAS No. 137, will not have a material effect on the Company's
financial position or results of operations, and adoption will not require
additional capital resources.
25 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(3) Loans Receivable
Loans receivable consisted of the following at June 30, 2000 and 1999:
2000 1999
------------ ------------
Real estate:
One-to-four family residential $ 67,782,005 68,959,479
Construction 65,999,642 63,318,769
Land 7,183,368 6,485,472
Commercial 7,387,543 5,495,877
Multifamily 2,832,288 1,950,918
Consumer loans 18,675,572 14,538,690
------------ ------------
169,860,418 160,749,205
Less:
Loans in process 19,354,401 27,152,578
Deferred loan origination fees
and discounts on loans, net 646,072 604,351
Allowance for loan losses 2,924,000 926,546
------------ ------------
$146,935,945 132,065,730
============ ============
At June 30, 2000, the Bank was committed to originate first mortgage loans
aggregating approximating$1,970,000, of which$101,000 was committed to be sold
to a third party. Fixed rate loan commitments approximated $1,451,000 at June
30, 2000, with rates ranging from 6.75% to 8.50%. There were no commitments to
buy loans at June 30, 2000.
The Company had loans to directors and officers at June 30, 2000 and 1999 which
carry terms similar to those for other loans. A summary of such loans is as
follows:
2000 1999
---------- ----------
Balance at beginning of year $2,155,000 1,046,000
New loans 576,000 1,499,000
Payments (860,000) (390,000)
---------- ----------
Balance at end of year $1,871,000 2,155,000
========== ==========
26 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
A summary of activity in the allowance for loan losses for the years ended June
30, 2000, 1999, and 1998 is as follows:
2000 1999 1998
---------- ------- -------
Balance at beginning of year $ 926,546 669,000 436,000
Provision for loan losses 2,151,697 298,020 266,514
Charge-offs (199,747) (82,411) (83,388)
Recoveries 45,504 41,937 49,874
---------- ------- -------
Balance at end of year $2,924,000 926,546 669,000
========== ======= =======
The following table shows the recorded investment in impaired loans and (1) the
amount of that recorded investment for which there is a related allowance for
credit losses and the amount of that allowance, and (2) the amount of that
recorded investment for which there is no related allowance for credit losses as
of June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---------- --------
<S> <C> <C>
Impaired loans for which an allowance has been
established $5,733,000 --
Impaired loans for which no allowance has been
established 2,463,000 554,000
---------- --------
Total recorded investment in impaired loans $8,196,000 554,000
========== ========
Allowance for loan losses allocated to impaired loans $ 854,000 --
========== ========
</TABLE>
The average balance of impaired loans for 2000 was$8,436,000 based on month-end
balances. The net amount of interest recorded on such loans during their
impairment period aggregated $572,000 in 2000.
The Bank evaluates each customer's creditworthiness on a case-by-case basis.
Residential loans with a loan-to-value ratio exceeding 80% are required to have
private mortgage insurance. The Bank's principal lending areas are the
economically diverse communities northeast of Kansas City, Missouri.
27 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(4) Premises and Equipment
Office property and equipment consist of the following at June 30, 2000 and
1999:
2000 1999
---------- ----------
Land and land improvements $ 421,130 421,130
Office buildings 2,201,763 2,144,426
Furniture and equipment 2,068,661 1,725,632
---------- ----------
4,691,554 4,291,188
Less accumulated depreciation 2,108,424 1,692,745
---------- ----------
$2,583,130 2,598,443
========== ==========
28 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(5) Deposits
Deposit balances at June 30, 2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
2000 1999
--------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Balance by interest rate:
Noninterest bearing
demand accounts - $ 4,020,956 3% $ 3,953,136 4%
NOW accounts 1.75-2.25% 9,811,073 7 8,987,936 9
Money market 2.50-2.75% 5,402,607 4 5,775,966 6
Passbook accounts 2.25-2.75% 3,928,448 3 4,078,618 4
------------- ----- ------------- -----
23,163,084 17 22,795,656 23
------------- ----- ------------- -----
Certificate accounts: 2.00-2.99% -- -- 554 --
4.00-4.99% 824,402 1 9,501,305 9
5.00-5.99% 40,828,616 30 51,453,152 51
6.00-6.99% 68,872,506 51 17,672,931 17
7.00-7.50% 1,942,155 1 -- --
------------- ----- ------------- -----
112,467,679 83 78,627,942 77
------------- ----- ------------- -----
$ 135,630,763 100% $ 101,423,598 100%
============= ===== ============= =====
Weighted average
interest rate on deposits
at period-end 4.84% 4.82%
===== =====
Contractual maturity of
certificate accounts:
Under 12 months $ 83,770,520 75% $ 56,450,884 72%
12 to 24 months 14,832,279 13 11,229,466 14
24 to 36 months 4,646,674 4 3,957,715 5
36 to 48 months 4,326,104 4 4,307,686 5
48 to 60 months 4,490,694 4 1,184,903 2
Over 60 months 401,408 -- 1,497,288 2
============= ===== ============= =====
$ 112,467,679 100% $ 78,627,942 100%
============= ===== ============= =====
</TABLE>
At June 30, 2000 and 1999, deposits of $100,000 or more totaled $26,062,000
and $6,872,000, respectively.
(Continued)
29
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
The components of interest expense on deposits for the years ended June 30,
2000, 1999, and 1998 are as follows:
2000 1999 1998
------------ ----------- -----------
NOW, passbook, Super NOW,
and money market demand $ 402,462 388,864 375,707
Certificates of deposit 5,280,260 4,210,095 3,438,279
------------ ----------- -----------
$ 5,682,722 4,598,959 3,813,986
============ =========== ===========
(6) FHLB Advances
The Company had the following debt outstanding from the FHLB of Des Moines
at June 30, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
1,000,000 advance, interest at 5.76%, due July 1999 $ -- 1,000,000
1,000,000 advance, interest at 5.80%, due July 1999 -- 1,000,000
3,000,000 advance, interest at 5.04%, due August 1999 -- 3,000,000
1,300,000 advance, interest at 5.00%, due December 1999 -- 1,300,000
3,000,000 advance, interest at 5.60%, due May 2000 -- 3,000,000
1,000,000 advance, interest at 6.10%, due July 2000 1,000,000 --
1,300,000 advance, interest at 6.71%, due July 2000 1,300,000 --
1,000,000 advance, interest at 6.69%, due July 2000 1,000,000 --
1,000,000 advance, interest at 5.88%, due August 2000 -- 1,000,000
2,000,000 advance, interest at 5.78%, due August 2000 2,000,000 2,000,000
1,000,000 advance, interest at 6.68%, due August 2000 1,000,000 --
3,000,000 advance, interest at 6.71%, due August 2000 3,000,000 --
1,000,000 advance, interest at 6.60%, due August 2000 1,000,000 --
2,000,000 advance, interest at 6.74%, due August 2000 2,000,000 --
2,000,000 advance, interest at 6.64%, due August 2000 2,000,000 --
1,000,000 advance, interest at 5.86%, due September 2000 1,000,000 --
3,000,000 advance, interest at 5.78%, due November 2000 -- 3,000,000
1,300,000 advance, interest at 6.32%, due December 2000 1,300,000 --
5,000,000 advance, interest at 5.95%, due July 2001 -- 5,000,000
1,150,000 advance, interest at 5.33%, due December 2001 1,150,000 1,150,000
1,000,000 advance, interest at 6.04%, due December 2004 1,000,000 --
1,000,000 advance, interest at 5.08%, due June 2008 -- 1,000,000
4,000,000 advance, interest at 5.01%, due August 2008 -- 4,000,000
3,000,000 advance, interest at 4.99%, due September 2008 3,000,000 3,000,000
2,000,000 advance, interest at 5.84%, due December 2009 2,000,000 --
3,000,000 advance, interest at 6.02%, due March 2010 3,000,000 --
------------ ------------
$ 26,750,000 $ 29,450,000
============ ============
</TABLE>
(Continued)
30
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
The advances with the FHLB are collateralized by first mortgage loans.
Scheduled maturities of FHLB advances at June 30, 2000 are as follows:
Year ending
June 30: Amount
------------- ------------
2001 $ 16,600,000
2002 1,150,000
2003 ---
2004 ---
2005 1,000,000
Thereafter 8,000,000
------------
$ 26,750,000
============
(7) Income Taxes
Components of income tax expense are as follows:
Federal State Total
----------- --------- ----------
Year ended June 30, 2000:
Current $ 500,667 57,864 558,531
Deferred (626,000) (75,000) (701,000)
----------- --------- ----------
$ (125,333) (17,136) (142,469)
=========== ========= ==========
Year ended June 30, 1999:
Current $ 518,642 118,562 637,204
Deferred 10,000 3,000 13,000
----------- --------- ----------
$ 528,642 121,562 650,204
=========== ========= ==========
Year ended June 30, 1998:
Current $ 600,238 84,348 684,586
Deferred (124,000) (17,000) (141,000)
----------- --------- ----------
$ 476,238 67,348 543,586
=========== ========= ==========
(Continued)
31
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Income tax expense (benefit) has been provided at effective rates of (39.6)%,
37.0%, and 34.0% (applied to earnings before taxes) for the years ended June 30,
2000, 1999, and 1998, respectively. The reasons for the differences between the
effective tax rates and the corporate federal income tax rate of 34% are as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
Federal income tax rate (34.0)% 34.0 34.0
Items affecting federal income tax rate:
ESOP 10.3 2.2 2.2
Increase in cash surrender value of life insurance
policies, net of nondeductible premiums (19.8) (4.0) (1.6)
State income tax, net of federal benefit (4.6) 2.5 2.7
Other 8.5 2.3 (3.3)
------ ------ ------
Effective income tax rate (39.6)% 37.0 34.0
====== ====== ======
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Temporary differences which give rise to
deferred tax assets and liabilities at June 30, 2000 and 1999 are as follows:
2000 1999
---------- ---------
Accrued compensation $ 170,000 187,000
Allowance for loan losses 972,000 392,000
Other 3,000 --
---------- ---------
Deferred income tax asset 1,145,000 579,000
---------- ---------
Loan origination fees (148,000) (198,000)
Fixed assets (34,000) (63,000)
Originated servicing rights (129,000) (158,000)
Other -- (27,000)
---------- ---------
Deferred income tax liability (311,000) (446,000)
---------- ---------
Net deferred income tax benefit $ 834,000 133,000
========== =========
There was no valuation allowance for deferred tax assets required at June 30,
2000 and 1999. Management believes that it is more likely than not that the
results of future operations will generate sufficient taxable income to realize
the deferred tax assets.
(Continued)
32
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Prior to 1996, savings institutions that met certain definitional tests and
other conditions prescribed by the Internal Revenue Code were allowed to
deduct, within limitations, a bad debt deduction under either of two
alternative methods: (i) a deduction based on a percentage of taxable income
(most recently 8%), or (ii) a deduction based upon actual loan loss
experience (the Experience Method). The Small Business Job Protection Act
(the Act) repealed the bad debt deduction based on a percentage of taxable
income effective for taxable years beginning after December 31, 1995. The
Company, therefore, is now limited to the use of the bad debt deduction
computed under the Experience Method. The Company's base year tax bad debt
reserve balance of approximately $1.7 million will, in future years, be
subject to recapture in whole or in part upon the occurrence of certain
events, such as a distribution to stockholders in excess of the Company's
current and accumulated earnings and profits, a redemption of shares, or
upon a partial or complete liquidation of the Company. The Company does not
intend to make distributions to stockholders that would result in recapture
of any portion of its base year bad debt reserve. Since management intends
to use the reserve only for the purpose for which it was intended, a
deferred tax liability of approximately $578,000 has not been recorded.
(8) Benefit Plans
Deferred Compensation Plan
Effective March 1995, the Bank entered into deferred compensation agreements
with members of the Board of Directors and Officers. The agreements provide
for monthly payments to the individuals or their beneficiaries for between
ten and fifteen years following retirement. The agreements are accounted for
on an individual basis with the cost accrued over the individual's period of
service. Expense under the agreements for the years ended June 30, 2000,
1999, and 1998 was approximately $40,000, $54,000, and $51,000,
respectively. The Directors/Officers and their beneficiaries are general
unsecured creditors of the Bank for all amounts due under these agreements.
Employee Stock Ownership Plan
Qualified employees of the Company and Bank participate in an ESOP. In
connection with the conversion described in note 1, the ESOP borrowed
$819,960 from the Company, the proceeds of which were used to acquire 81,996
shares of the Company's common stock. Contributions from the Company and the
Bank, along with dividends on unallocated shares of common stock, are used
by the ESOP to make payments of principal and interest on the loan. Under
the terms of the ESOP, contributions are allocated to participants using a
formula based upon compensation. Participants are fully vested after five
years. Because the Company has provided the ESOP's borrowing, the unearned
compensation is presented as a reduction of stockholders' equity in the
accompanying consolidated balance sheets. As of June 30, 2000, 1999, and
1998, 39,014, 26,840, and 14,700, shares, respectively, had been allocated
to participants. Compensation and benefits expense in 2000, 1999, and 1998,
representing the fair value of allocated shares, was $171,927, $196,914,
and $252,583, respectively. The fair value of the remaining 42,982
unallocated shares at June 30, 2000 aggregated approximately $476,000.
33 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Recognition and Retention Plan (RRP)
During 1998, the Company adopted a RRP. In 1998 and 2000, common stock
aggregating 36,893 and 3,895 shares, respectively, was awarded to certain
officers and directors of the Company and the Bank. The awards do not
require any payment by the recipients. The shares vest 20% upon adoption of
the RRP with the remaining shares vesting equally over four years. The fair
value of the shares at the date of award, aggregating $710,190 and $31,006,
respectively, was included in unearned compensation in the accompanying
consolidated balance sheets and is being amortized to expense over the
vesting period. The Company recognized RRP expense of $131,366, $142,038,
and $248,556 in 2000, 1999, and 1998, respectively.
401(k) Plan
During June 1996, the Company established a defined contribution 401(k) plan
covering substantially all employees. The plan provides for discretionary
employer contributions. Employer contributions were $5,000, $5,000, and
$4,000 in 2000, 1999, and 1998, respectively.
(9) Stock Options
During 1998, the Company adopted a stock option plan. Under the plan,
options to acquire 102,495 shares of the Company's common stock may be
granted to certain officers, directors, and employees of the Company or the
Bank. The options enable the recipient to purchase stock at an exercise
price equal to the fair value of the stock at the date of the grant. On
October 28, 1997, the Company granted options to acquire 92,247 shares
for $19.25 per share. On October 28, 1999, the Company granted options to
acquire 9,737 shares for $15.75 per share. The options vest over five years
and are exercisable for up to ten years.
SFAS No. 123, Accounting for Stock-Based Compensation, permits entities to
recognize, as expense over the vesting period, the fair value of stock-based
awards. Alternately, SFAS No. 123 allows entities to disclose pro forma net
income and income per share as if the fair value-based method defined in
SFAS No. 123 had been applied, while continuing to apply the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, under which compensation expense is recorded on the
date of grant only if the current fair value of the underlying stock exceeds
the exercise price.
The Company has elected to apply the recognition provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. If
compensation expense for the stock options had been determined based upon
the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123, the Company's net earnings and diluted earnings per
share would have been reduced by approximately $136,000, or $.16 per diluted
share in 2000, $137,000, or $.12 per diluted share in 1999, and $242,000, or
$.23 per diluted share in 1998.
34 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Following is a summary of the assumptions used to estimate the value of the
options issued:
2000 1999
-------- -------
Dividend yield 4.70% 2.06%
Volatility 28.55% 15.00%
Risk-free interest rate 6.00% 5.60%
Expected life 10 years 10 years
======== ========
(10) Financial Instruments With Off-Balance Sheet Risk and Concentrations of
Credit Risk
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet customer financing needs. These
financial instruments consist principally of commitments to extend credit.
The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. The
Bank's exposure to credit loss in the event of nonperformance by the other
party is represented by the contractual amount of those instruments. The
Bank does not generally require collateral or other security on unfunded
loan commitments until such time that loans are funded.
In addition to financial instruments with off-balance sheet risk, the Bank
is exposed to varying risks associated with concentrations of credit
relating primarily to lending activities in specific geographic areas. The
Bank's principal lending area consists of the agricultural-based rural
communities northeast of Kansas City, Missouri, and the Bank's loans are
primarily to residents of or secured by properties located in its principal
lending area. Accordingly, the ultimate collectibility of the Bank's loan
portfolio is dependent upon market conditions in that area. This geographic
concentration is considered in management's establishment of the allowance
for loan losses.
(11) Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a
direct material effect on the Bank's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weighting, and other factors.
35
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of risk-based capital, as defined in the regulations, to risk-weighted
assets, as defined, and of tangible and core capital, as defined, to total
assets, as defined. Management believes, as of June 30, 2000, that the Bank
meets all capital adequacy requirements to which it is subject. To be
categorized as well-capitalized under the regulatory framework for prompt
corrective action, the Bank must maintain minimum total risk-based, leverage
risk-based, tangible, and core capital ratios as set forth in the table.
The Bank met all regulatory capital requirements at June 30, 2000 and 1999. The
Bank's actual and required capital amounts and ratios as of June 30, 2000 and
1999 were as follows:
<TABLE>
<CAPTION>
To be well-
For capital capitalized under
adequacy prompt corrective
Actual purposes action provisions
---------------------------- ------------------------- ----------------------------
2000 Amount Ratio Amount Ratio Amount Ratio
------------------- ------------ ----------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Tangible capital
(to tangible assets) $ 13,643,000 7.54% $ 2,717,000 1.50% $ -- --%
Tier 1 leverage (core)
capital (to adjusted
tangible assets) 13,643,000 7.54 7,246,000 4.00 9,058,000 5.00
Risk-based capital
(to risk-weighted
assets) 15,336,000 11.42 10,768,000 8.00 13,461,000 10.00
Tier 1 leverage risk-
based capital (to
risk-weighted assets) 13,643,000 10.16 -- -- 8,076,000 6.00
=========== =========== ============ ========== ============== ===========
To be well-
For capital capitalized under
adequacy prompt corrective
Actual purposes action provisions
---------------------------- -------------------------- ----------------------------
1999 Amount Ratio Amount Ratio Amount Ratio
------------------- ------------ ------------ ------------- ---------- ------------- ------------
Tangible capital
(to tangible assets) $ 13,508,000 8.93% $ 2,269,000 1.50% $ -- --%
Tier 1 leverage (core)
capital (to adjusted
tangible assets) 13,508,000 8.93 6,054,000 4.00 7,567,000 5.00
Risk-based capital
(to risk-weighted
assets) 14,389,000 13.03 8,834,000 8.00 11,043,000 10.00
Tier 1 leverage risk-
based capital (to
risk-weighted assets) 13,508,000 12.23 -- -- 6,626,000 6.00
=========== ============ ============ ========== ============== ============
</TABLE>
36 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(12) Fair Value of Financial Instruments
Fair value estimates of the Company's financial instruments as of June 30, 2000
and 1999, including methods and assumptions utilized, are set forth below:
<TABLE>
<CAPTION>
2000 1999
---------------------------------------- ------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------ -------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Investment and mortgage-backed securities $ 225,898 226,000 150,275 150,000
================== ===================== ================== ================
Loans, net of loans in process $ 163,799,126 163,832,000 134,459,151 135,387,000
================== ===================== ================== ================
Noninterest bearing demand deposits $ 4,020,956 4,022,000 3,953,136 3,953,000
Money market and NOW deposits 15,213,680 15,214,000 14,763,902 14,764,000
Passbook accounts 3,928,448 3,928,000 4,078,618 4,079,000
Certificate accounts 112,467,679 111,806,000 78,627,942 78,392,000
------------------ --------------------- ------------------ ----------------
Total deposits $ 135,630,763 134,970,000 101,423,598 101,188,000
================== ===================== ================== ================
FHLB advances $ 26,750,000 25,886,000 29,450,000 29,358,000
================== ===================== ================== ================
</TABLE>
Methods and Assumptions Utilized
The carrying amount of cash and cash equivalents and accrued interest receivable
and payable are considered to be approximate fair value based on the short-term
nature of these items. The advances on the FHLB line of credit are considered to
approximate fair value based on the contractual rates approximating the rates
currently available to the Company.
The estimated fair value of mortgage-backed and investment securities, except
certain obligations of states and political subdivisions, is based on bid prices
published in financial newspapers or bid quotations received from securities
dealers. The fair value of certain obligations of states and political
subdivisions is not readily available through market sources other than dealer
quotations, so fair value estimates are based upon quoted market prices of
similar instruments, adjusted for differences between the quoted instruments and
the instruments being valued.
37 (Continued)
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
The estimated fair value of the Company's loan portfolio is based on the
segregation of loans by collateral type, interest terms, and maturities. In
estimating the fair value of each category of loans, the carrying amount of the
loan is reduced by an allocation of the allowance for loan losses. Such
allocation is based on management's loan classification system which is designed
to measure the credit risk inherent in each classification category. The
estimated fair value of performing variable rate loans is the carrying value of
such loans, reduced by an allocation of the allowance for loan losses. The
estimated fair value of performing fixed rate loans is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates that reflect the interest rate risk inherent in the loan, reduced
by an allocation of the allowance for loan losses. The estimate of maturity is
based on the Company's historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect of current
economic and lending conditions. The fair value for significant nonperforming
loans, if any, is the estimated fair value of the underlying collateral based on
recent external appraisals or other available information, which generally
approximates carrying value, reduced by an allocation of the allowance for loan
losses.
The estimated fair value of deposits with no stated maturity, such as
noninterest bearing deposits, savings, money market accounts, passbook accounts,
and NOW accounts, is equal to the amount payable on demand. The fair value of
interest-bearing time deposits is based on the discounted value of contractual
cash flows of such deposits. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
The estimated fair value of advances from the FHLB is determined by discounting
the future cash flows of existing advances using rates currently available on
advances from the FHLB with similar characteristics.
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instruments. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates. Fair value estimates are based on existing
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments.
(Continued)
38
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
(13) Parent Company Condensed Financial Statements
Presented below are condensed financial statements of the Company (parent
only) as of June 30, 2000 and 1999 and for the years ended June 30, 2000,
1999, and 1998:
Condensed Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 232,532 1,106,161
Investment in subsidiary 13,643,432 13,542,418
ESOP loan receivable 406,330 523,944
Loan receivable from subsidiary 1,680,000 2,000,000
----------- -----------
Total assets $15,962,294 17,172,523
=========== ===========
Dividends payable $ 122,550 155,903
Other liabilities 86,262 69,558
----------- -----------
Total liabilities 208,812 225,461
Stockholders' equity 15,753,482 16,947,062
----------- -----------
Total liabilities and stockholders' equity $15,962,294 17,172,523
=========== ===========
</TABLE>
Condensed Statements of Operations
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Interest income $ 148,146 170,406 238,270
Other expense, net (162,905) (206,176) (209,118)
---------- ---------- ----------
Income (loss) before equity in
undistributed earnings of Bank (14,759) (35,770) 29,152
Equity in earnings of Bank (202,279) 1,145,351 1,025,090
---------- ---------- ----------
Net income (loss) $ (217,038) 1,109,581 1,054,242
========== ========== ==========
</TABLE>
(Continued)
39
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Condensed Statements of Cash Flows
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash provided by operating activities:
Net earnings $ (217,038) 1,109,581 1,054,242
Change in other liabilities 22,722 37,158 (4,272)
Undistributed earnings of Bank 202,279 (1,145,351) (1,025,090)
----------- ----------- -----------
Cash provided by operating activities 7,963 1,388 24,880
----------- ----------- -----------
Cash provided by investing activities - net
decrease in loans receivable 437,613 1,364,923 861,608
----------- ----------- -----------
Cash provided by financing activities:
Dividends from subsidiary -- 942,401 1,066,969
Dividends paid (611,408) (476,372) (370,667)
Purchase of treasury stock (707,797) (834,583) (2,090,907)
----------- ----------- -----------
Cash used in financing activities (1,319,205) (368,554) (1,394,605)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (873,629) 997,757 (508,117)
Cash and cash equivalents at beginning of year 1,106,161 108,404 616,521
----------- ----------- -----------
Cash and cash equivalents at end of year $ 232,532 1,106,161 108,404
=========== =========== ===========
Noncash investing and financing activities -
dividend declared and payable $ 122,550 155,903 116,353
=========== =========== ===========
</TABLE>
(14) Supervisory Agreement
Subsequent to year-end, the Bank entered into a Supervisory Agreement with
the Office of Thrift Supervision (the "OTS"). The Supervisory Agreement
provides that the Bank shall take necessary and appropriate actions to
achieve compliance with various OTS regulations related to lending
standards, lending limitations, classification of assets, appraisal
standards, and other matters. Among other things, the Supervisory Agreement
requires the Bank to establish adequate allowances for loan losses,
consistent with accounting principles generally accepted in the United
States of America, and not to reduce the balance of the allowance for loan
losses without prior notice of no objection from the OTS. The Supervisory
Agreement also provides that the Bank shall cease making any commercial
real estate loans and refrain from making any new loan commitments with new
builders or subdivision developments without prior OTS approval. Finally,
the Supervisory Agreement provides that the Bank shall be subject to
certain growth restrictions and shall refrain from making capital
distributions without OTS approval.
(Continued)
40
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARY
EXCELSIOR SPRINGS, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
Failure to comply with the Supervisory Agreement can lead to further enforcement
actions by the OTS. The Bank believes that it can comply with the Supervisory
Agreement and is currently taking the necessary steps to do so. Compliance with
the Supervisory Agreement is not expected to have a materially adverse impact on
the operations or the financial condition of the Bank or the Company. However,
the restrictions imposed on the Bank's construction and commercial real estate
lending activities may cause a significant decrease in the Bank's activities in
these areas. The Supervisory Agreement will remain in effect until terminated by
the OTS.
41
<PAGE>
STOCKHOLDER INFORMATION
Annual Meeting
The Annual Meeting of Stockholders will be held at 4:00 p.m., Central Standard
time on October 26, 2000, at the Excelsior Springs Community Center located at
112 Thompson Avenue, Excelsior Springs, Missouri 64024.
Stock Listing
CBES Bancorp, Inc. common stock is traded on the National Association of
Securities Dealers, Inc. Small Cap Market under the symbol "CBES."
Price Range of Common Stock
The per share price range of the common stock and the dividends declared or paid
for each quarter during the past three fiscal years is set forth below. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down, or
commissions, and may not necessarily represent actual transactions:
Fiscal 2000 High Low Dividends
--------------- --------- -------- -----------
First Quarter $ 16.750 14.000 0.18
Second Quarter 15.750 13.000 0.18
Third Quarter 14.500 10.875 0.18
Fourth Quarter 11.750 10.813 0.14
========= ======== ============
Fiscal 1999 High Low Dividends
--------------- --------- -------- -----------
First Quarter $ 21.000 16.750 0.12
Second Quarter 17.750 14.438 0.14
Third Quarter 15.500 14.625 0.16
Fourth Quarter 16.063 13.000 0.18
========= ======== ============
Fiscal 1998 High Low Dividends
--------------- --------- -------- -----------
First Quarter $ 20.500 17.125 0.10
Second Quarter 22.250 19.125 0.10
Third Quarter 26.500 21.375 0.10
Fourth Quarter 22.875 18.625 0.12
========= ======== ============
At June 30, 2000, there were 1,031,851 shares issued and 873,062 shares
outstanding of CBES Bancorp, Inc. common stock (including unallocated ESOP
shares) and there were approximately 238 registered holders of record.
Shareholders and General Inquiries: Transfer Agent:
Dennis D. Hartman Registrar and Transfer Co.
Chief Executive Officer 10 Commerce Drive
CBES Bancorp, Inc. Cranford, New Jersey 07016
1001 N. Jesse James Road
Excelsior Springs, Missouri 64024
(816)-630-6711
Annual and Other Reports
A copy of CBES Bancorp, Inc.'s Annual Report on Form 10-KSB for the year ended
June 30, 2000, as filed with the Securities and Exchange Commission, may be
obtained without charge by contacting Dennis D. Hartman, Chief Executive
Officer, CBES Bancorp, Inc., 1001 N. Jesse James Road, Excelsior Springs,
Missouri 64024.
42
<PAGE>
CORPORATE INFORMATION
Company and Bank Address
1001 N. Jesse James Road Telephone: (816) 630-6711
Excelsior Springs, Missouri 64024 Fax: (816) 630-1663
Board of Directors
Dennis Hartman-Chairman of the Board, Chief Executive Officer, and President of
CBES Bancorp, Inc. and Community Bank of Excelsior Springs, a Savings Bank. Mr.
Hartman has served as chief executive officer for the Bank since July 1999.
Prior to that time, he served as a chief financial officer of Community Bank of
Excelsior Springs.
Rodney G. Rounkles-Vice Chairman of the Board of Community Bank of Excelsior
Springs, a Savings Bank. Mr. Rounkles was the plant manager of a molding
products plant in Excelsior Springs, Missouri until his retirement in 1995.
Robert McCrorey - Mr. McCrorey is the former Chairman of the Board and President
of CBES Bancorp, Inc and Community Bank of Excelsior Springs, a Savings Bank.
Mr. McCrorey served as a loan originator for the Bank until June 2000.
Cecil E. Lamb - Mr. Lamb is a retired postmaster.
Richard N. Cox - Mr. Cox is the owner and operator of Cox Tool Co., Inc., a
designer/builder of plastic molds, located in Excelsior Springs, Missouri.
Robert L. Lalumondier - Mr. Lalumondier is the owner of Lalumondier Insurance
Agency, located in Kearney, Missouri.
CBES Bancorp, Inc. Executive Officers
<TABLE>
<S> <C>
Dennis D. Hartman Robert F. Kirk
Chairman of the Board and President, Chief Financial Officer
and Chief Executive Officer
Community Bank of Excelsior Springs, a Savings Bank Executive Officers
Dennis D. Hartman Margaret E. Teegarden
Chairman of the Board, President, and Savings Department Manager
Chief Executive Officer
Rodney G. Rounkles James V. Alderson
Vice Chairman of the Board Consumer Loan Department Manager
Independent Accountants: Special Counsel:
KPMG LLP Luse, Lehman, Gorman,
1000 Walnut, Suite 1600 Pomerenk, and Schick
Post Office Box 13127 5335 Wisconsin Ave. N.W., Suite 400
Kansas City, Missouri 64199 Washington, DC 20015
</TABLE>
43
