<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission file number 0-21163
---------
CBES BANCORP, INC.
------------------
(Exact name of small business issuer as specified in its charter)
Delaware 43-1753244
--------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
1001 N. JESSE JAMES ROAD, EXCELSIOR SPRINGS, MO 64024
-----------------------------------------------------
(Address of principal executive offices)
(816 630-6711)
--------------
(Issuer's telephone number)
Not Applicable
------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
Class Outstanding at May 11, 2000
------------------- ---------------------------
Common stock, .01 par value 875,358
<PAGE>
CBES BANCORP, INC. AND SUBSIDIARIES
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition at March 31,
2000 (unaudited) and June 30, 1999 ................................ 1
Consolidated Statements of Earnings for the three months and nine
months ended March 31, 2000 and 1999 (unaudited) .................. 2
Consolidated Statements of Stockholders' Equity for the nine
months ended March 31, 2000 (unaudited) ........................... 3
Consolidated Statements of Cash Flows for the nine months ended
March 31, 2000 and 1999 (unaudited) ............................... 4
Notes to Consolidated Financial Statements ......................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 6
PART II - OTHER INFORMATION .............................................. 10
SIGNATURES ............................................................... 11
<PAGE>
1
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Conditions
March 31, 2000 and June 30, 1999
March 31, June 30,
Assets 2000 1999
------ (unaudited)
Cash $ 1,248,394 1,111,855
Interest-bearing deposits in other financial
institutions 10,723,060 6,350,923
Investment securities held-to-maturity 185,336 93,000
Mortgage-backed securities held-to-maturity
(estimated fair value of $48,000 and $59,000
respectively) 43,389 57,275
Loans held for sale, net 12,194,996 2,393,421
Loans receivable, net 142,965,108 132,065,730
Accrued interest receivable:
Loans receivable 1,060,751 1,052,903
Investment securities 75,187 2,015
Mortgage-backed securities 873 1,152
Real Estate Owned 328,672 152,859
Stock in Federal Home Loan Bank (FHLB), at cost 2,322,500 2,172,500
Office property and equipment, net 2,622,237 2,598,443
Current income taxes receivable 130,318 -
Deferred income tax benefit 349,483 133,000
Cash surrender value of life insurance & other assets 2,349,175 2,220,827
------------ -----------
Total Assets 176,599,479 150,405,903
============ ===========
Liabilities & Stockholders' Equity
Liabilities:
Deposits $130,796,369 101,423,598
FHLB advances 27,450,000 29,450,000
Accrued expenses and other liabilities 959,960 1,481,920
Accrued interest payable on deposits 215, 917 138,404
Advance payments by borrowers for property taxes
and insurance 1,072,792 916,215
Current income taxes payable - 48,704
------------ -----------
Total Liabilities: 160,495,038 133,458,841
============ ===========
Stockholders' Equity:
Preferred stock, $.01 par, 500,000 shares
authorized, none issued or outstanding - -
Common Stock, $.01 par; 3,500,000 shares
authorized and 1,031,851 shares issued 10,319 10,319
Additional paid-in capital 10,033,106 9,989,075
Retained earnings, substantially restricted 9,650,949 10,033,284
Treasury stock, 156,780 and 110,724 shares at
cost, respectively (2,975,536) (2,267,740)
Unearned employee benefits (614,397) (817,876)
------------ -----------
Total stockholders' equity 16,104,441 16,947,062
------------ -----------
Total liabilities and stockholders'
equity $176,599,479 150,405,903
============ ===========
See accompanying notes to unaudited consolidated financial statements
<PAGE>
2
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 3,078,973 3,060,394 9,353,527 8,605,117
Mortgage-backed securities 846 1,276 2,789 4,139
Investment securities 30 57 70 184
Other 223,788 79,934 394,730 248,696
----------- ----------- ----------- -----------
Total interest income 3,303,637 3,141,661 9,751,116 8,858,136
----------- ----------- ----------- -----------
Interest expense:
Deposits 1,569,768 1,165,342 3,910,782 3,424,267
FHLB Advances 502,731 497,125 1,539,866 1,383,759
----------- ----------- ----------- -----------
Total interest expense 2,072,499 1,662,467 5,450,648 4,808,026
----------- ----------- ----------- -----------
Net interest income 1,231,138 1,479,194 4,300,468 4,050,110
Provision for loan losses 1,082,233 45,995 1,148,537 297,760
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 148,905 1,433,199 3,151,931 3,752,350
----------- ----------- ----------- -----------
Non-interest income:
Gain on sale of loans, net 234,258 161,181 505,531 606,716
Customer service charges 83,678 53,362 236,647 167,703
Loan servicing fees 2,182 (15,540) 48,363 8,673
Other 38,425 52,405 118,298 117,901
----------- ----------- ----------- -----------
Total non-interest income 358,543 250,408 908,839 900,993
----------- ----------- ----------- -----------
Non-interest expense:
Compensation and benefits 756,847 639,592 2,206,480 1,914,818
Office property and equipment 212,039 206,576 640,349 634,488
Data processing 63,146 80,636 171,626 189,779
Federal insurance premiums 5,520 13,990 35,889 39,524
Advertising 38,407 31,320 128,487 85,446
Real estate owned and repossessed
assets 15,675 32,129 40,603 (9,181)
Other 235,105 246,569 751,682 727,741
----------- ----------- ----------- -----------
Total non-interest expense 1,326,739 1, 250,812 3,975,116 3,582,615
----------- ----------- ----------- -----------
Earnings before income taxes (loss) (819,291) 432,795 85,654 1,070,728
Income tax expense (322,161) 158,747 12,484 391,705
----------- ----------- ----------- -----------
Net earnings (loss) (497,130) 274,048 73,170 679,023
=========== =========== =========== ===========
Earnings per share- basic (loss) $ (0.60) $ 0.32 $ 0.08 $ 0.75
=========== =========== =========== ===========
Earnings per share-diluted (loss) $ (0.60) $ 0.32 $ 0.08 $ 0.75
=========== =========== =========== ===========
Basic weighted average shares 834,272 876,635 872,786 904,416
Common stock equivalents-stock options -- -- -- --
----------- ----------- ----------- -----------
Diluted weighted average shares 834,272 876,635 872,786 904,416
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
3
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the six months ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Unearned Total
Issued Common paid-in Retained Treasury employee stockholders'
shares stock capital earnings stock benefits equity
--------- -------- ---------- ----------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999 1,031,851 $ 10,319 9,989,075 10,033,284 (2,267,740) (817,876) 16,947,062
Net earnings - - - 73,170 - - 73,170
Dividends - - - (455,505) - - (455,505)
($.18 per s hare payable
April 25, 2000)
Purchase of 46,056 shares of
treasury stock - - - - (707,796) - (707,796)
Amortization of RRP - - - - - 106,529 106,529
Allocation of ESOP shares - - 44,031 - - 96,950 140,981
--------- -------- ---------- ---------- ---------- -------- ----------
Balance at
March 31, 2000 1,031,851 $ 10,319 10,033,106 9,650,949 (2,975,536) (614,397) 16,104,441
========= ======== ========== ========== ========== ======== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
4
CBES BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
------------ ------------
Cash flows from operating
activities:
Net earnings $ 73,170 679,023
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Provision for loan losses 1,148,537 297,760
Depreciation 303,636 253,860
Amortization of RRP 106,529 106,529
Allocation of ESOP shares 140,981 157,691
Proceeds from sale of loans 27,402,018 30,525,152
held for sale
Origination of loans held (36,698,062) (30,831,475)
for sale
Gain on sale of loans, net (505,531) (606,716)
Premium amortization and accretion of discounts and
deferred loan fees, net (535,811) (482,508)
Deferred income taxes (216,483) 161,517
Changes in assets and liabilities:
Accrued interest receivable (80,741) (194,107)
Other assets (128,348) (178,701
Accrued expenses and other (671,788) (23,019)
liabilities
Accrued interest payable on 77,513 9,789
deposits
Current income taxes payable (179,022) (281,289)
------------ ------------
Net cash (used in) (9,763,402) (406,494)
operating activities ------------ ------------
Cash flows from investing
activities:
Net increase in loans receivable (11,690,138) (28,573,697)
Purchase FHLB Stock (150,000) (1,097,500)
Mortgage-backed securities 13,886 17,684
principal repayments
Maturing securities 105,000 5,000
Purchase of office property (327,430) (1,182,338)
equipment
Purchase of securities (195,115) --
------------ ------------
Net cash used in investing $(12,243,797) (30,830,851)
activities ------------ ------------
Cash flows from financing
activities:
Increase in deposits $ 29,372,771 13,168,593
Proceeds from FHLB advances 62,300,000 37,450,000
Repayments of FHLB advances (64,300,000) (14,500,000)
Increase in advance payments by
borrowers for property taxes
and insurance 156,577 (115,678)
Dividends paid (305,677) (368,093)
Treasury stock purchased (707,796) (834,583)
------------ ------------
Net cash provided by 26,515,875 34,800,239
financing activities ------------ ------------
Net increase in cash and cash 4,508,676 3,562,894
equivalents
Cash and cash equivalents at the 7,462,778 3,100,098
beginning of the period -- --
Cash and cash equivalents at the $ 11,971,454 6,662,992
end of the period ============= ===========
Supplemental disclosure of cash
flow information:
Cash paid during the period for $ 343,000 431,000
income taxes ============= ===========
Cash paid during the period for $ 5,373,135 4,798,237
interest ============= ===========
Supplemental schedule of noncash activities:
Conversion of loans to real estate $ 272,992 1,075,058
owned ============= ===========
Conversion of real estate owned to $ 97,179 596,154
loans ============= ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
5
CBES BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000
(1) CBES Bancorp, Inc. and Subsidiaries
-----------------------------------
This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technical factors affecting the
Company's operations, pricing, products and services.
(2) Basis of Preparation
--------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB. To the extent that information
and footnotes required by generally accepted accounting principles for complete
financial statements are contained in or consistent with the audited
financial statements incorporated by reference in the Company's Annual Report
on Form 10-KSB for the year ended June 30, 1999, such information and
footnotes have not been duplicated herein. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, which are necessary
for the fair presentation of the interim financial statements have been
included. The statement of earnings for the three month and nine month periods
ended March 31, 2000 are not necessarily indicative of the results which may
be expected for the entire year. The balance sheet information as of June 30,
1999 has been derived from the audited balance sheet as of that date.
(3) Capital Stock Transactions
--------------------------
On October 13, 1999 the Company announced a stock repurchase plan in which 5% or
46,056 of the Company's outstanding shares would be repurchased over the next
twelve months. Pursuant to the repurchase plan the Company bought 46,056 shares
for the treasury during the three months ended December 31, 1999.
<PAGE>
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the financial condition of CBES Bancorp, Inc.
(the "Company") and its wholly-owned subsidiary, Community Bank of Excelsior
Springs, a Savings Bank, (the "Bank") at March 31, 2000 to the financial
condition at June 30, 1999, its fiscal year-end, and the results of operations
for the three months and nine months ended March 31, 2000, with the same periods
in 1999. This discussion should be read in conjunction with the interim
financial statements and notes which are included herein. This Quarterly Report
on Form 10-QSB may contain certain forward-looking statements consisting of
estimates with respect to the financial condition, results of operations and
business of the Company that are subject to various factors which could cause
actual results to differ materially from these estimates. These factors
include, but are not limited to, general economic conditions, changes in
interest rates, deposit flows, loan demand, real estate values, and competition;
changes in accounting principles, policies, or guidelines; changes in
legislation or regulation; and other economic, competitive, governmental,
regulatory, and technological factors affecting the Company's operations,
pricing, products and services.
General
- -------
The Company was organized as a Delaware corporation in June 1996 to acquire all
of the capital stock issued by the Bank upon its conversion from the mutual to
stock form of ownership. The Bank was founded in 1931 as a Missouri chartered
savings and loan association located in Excelsior Springs, Missouri. In 1995,
its members voted to convert to a federal charter. The business of the holding
company consists primarily of the business of the Bank. The deposits of the
Bank are presently insured by the Savings Association Insurance Fund ("SAIF"),
which together with the Bank Insurance Fund ("BIF") are the two insurance funds
administered by the FDIC.
The Bank conducts its business through its main office in Excelsior Springs,
Clay County, Missouri and its full service branch offices located in Kearney and
Liberty, both in Clay County, Missouri. The Bank has been, and intends to
continue to be, a community oriented financial institution offering selected
financial services to meet the needs of the 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.
The most significant outside factors influencing the operations of the Bank and
other financial institutions include general economic conditions, competition in
the local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
primarily consisting of insured deposits is influenced by interest rates on
competing investments and general market rates of interest, while lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.
Congress may consider legislation requiring all federal thrift institutions,
such as the Bank, to either convert to a national bank or a state depository
institution. In addition, the Company might no longer be regulated as a thrift
holding company, but rather as a bank holding company. The Office of Thrift
Supervision ("OTS") also might be abolished and its functions transferred among
the federal banking regulators. There can be no assurance as to whether or in
what form such legislation will be enacted or, if enacted, its effect on the
Company and the Bank.
Financial Condition
- -------------------
Total assets increased $26.2 million, or 17.4%, to $176.6 at March 31, 2000 from
$150.4 million at June 30, 1999. This was primarily due to an increase in net
loans receivable and loans held for sale of $20.7 million, which were funded
primarily with deposit accounts.
Net loans receivable and loans held for sale increased by $20.7 million, or
15.4%, to $155.2 million at March 31, 2000 from $134.5 million at June 30, 1999
primarily due to increases in one-to-four family loans held for sale of $9.8
million, construction loans of $9.5 million, non-residential loans of $1.8
million, and consumer loans of $3.1 million. Fixed rate loans held for sale of
$1.4 million are loans contracted to be sold in the secondary market but have
not been funded. Adjustable rate loans held for sale of $10.8 million are loans
originated but not yet contracted to be sold in the secondary market.
Deposits increased $29.4 million, or 29.0%, to $130.8 million at March 31, 2000
from $101.4 million at June 30, 1999. The increase in deposits is primarily due
to $27.8 million in new certificates of deposit, of which $13.1million were
brokered deposits, and $1.8 million in new checking accounts.
FHLB advances decreased $2.0 million, or 6.8%, to $27.5 million at March 31,
2000 from $29.5 million at June 30, 1999. These advances ranged in term from
one to ten years, and approximately one-third were callable advances. The FHLB
advances were primarily used to fund loans.
<PAGE>
7
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
- -----------------------------------------------------------------------------
1999
- ----
Performance Summary. For the three months ended March 31, 2000, the Company had
a net loss of $497,000 compared to net earnings of $274,000 for the three months
ended March 31, 1999. The most significant items causing the decrease in
earnings were an increase in provision for loan loss of $1.1 million and a
decrease in net interest income of $248,000, and an increase in non-interest
expense of $76,000, offset by an increase in non-interest income of $108,000.
Net Interest Income. For the three months ended March 31, 2000, net interest
income decreased $249,000, or 16.8%, to $1.2 million from $1.5 million for the
three months ended March 31, 1999. The decrease reflected an increase of
$410,000 in interest expense, to $2.1 million from $1.7 million, partially
offset by an increase of $162,000 in interest income to $3.3 million from $3.1
million. Loans on non-accrual status significantly effected the interest income
recorded in the three months ended March 31, 2000 and March 31, 1999. In the
three months ended March 31, 1999 loans which had been on non-accrual at the
beginning of the quarter either paid the delinquent and unrecorded interest or
were paid off. As a result additional interest was recognized in that quarter
of $76,000. In the three months ended March 31, 2000 their was a substantial
increase in loans on non-accrual status. As a result interest which would have
otherwise been recorded, aggregating approximately $158,000, was not recognized
in the quarter. The increase in interest income was primarily due to an
increase in FHLB daily time and time certificates of deposit. The increase in
interest expense was primarily due to an increase in the average balances of
certificates of deposit and an increase in interest rates.
Provision for Loan Losses. During the three months ended March 31, 2000, the
Bank charged $1.1 million against earnings as a provision for loan losses
compared to a provision of $45,000 for the three months ended March 31, 1999.
The increase in the provision for loan losses for the three months ended March
31, 2000 was attributable to several factors, including a significant increase
in the Bank's classified assets as well as a decision by the Bank to adopt a
more conservative methodology in establishing its loan loss allowance. The
Bank's decision to classify certain assets, and to increase the provision for
loan losses relating to those assets, reflects comments received from OTS
examiners. During the three months ended March 31, 2000, the Bank had three
lending relationships with an aggregate balance of $5.0 million which were
classified as substandard, and two additional lending relationships with an
aggregate balance of $3.8 million which were classified as special mention. The
three relationships classified as substandard consisted of the following:
(i) loans to a builder consisting of single-family construction loans with
an aggregate balance of $1.2 million at March 31, 2000. In February
2000, the builder filed for bankruptcy and the Bank is currently
exploring workout arrangements with the builder.
(ii) loans to a builder consisting of a land development loan, a multi-
family construction loan for a townhouse complex, single family
speculative construction loans, single family permanent loans, a
commercial real estate loan, and a building lot loan. These loans had
an aggregate outstanding balance of $2.2 million at March 31, 2000.
(iii) loans to a builder consisting of a commercial real estate loan, a land
development loan, building lot loans, and single-family construction
loans, with an aggregate outstanding balance of $1.6 million.
The two lending relationships classified as special mention consisted of the
following:
(i) loans to a builder consisting of construction loans, with an
aggregate outstanding balance of $2.0 million at March 31, 2000. Two
of the construction loans have paid off since March 31, 2000 totaling
$182,000, and four construction loans currently have contracts on
them.
(ii) a construction loan on commercial real estate with an outstanding
balance at March 31, 2000 of $1.8 million.
During the quarter, the Bank also increased its general allowances. The Bank's
methodology for determining 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 quarter ended March 31, 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. In addition 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 90 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.
As a result of the provision for loan losses during the quarter, at March 31,
2000, the Bank had a total allowance for loan losses of $2.0 million,
representing 28.9% of total non-performing loans and 1.4% of the Bank's loans
receivable, net. The amount of net loans charged off was $105,000 during the
three months ended March 31, 2000 compared to $37,000 for the three months ended
March 31, 1999.
<PAGE>
8
Management will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Bank maintains its allowance for loan
losses at a level which it considers to be adequate to provide for potential
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods
Non-Interest Income. For the three months ended March 31, 2000, non-interest
income increased $108,000 to $359,000 from $250,000 for the prior year period
primarily due to an increase in gain on the sale of loans of $73,000, an
increase in customer service charges of $31,000, and an increase in loan
servicing fees of $18,000, offset by a decrease in other non-interest income of
$14,000.
Non-Interest Expense. Non-interest expense increased by $76,000 to $1.3 million
for the three months ended March 31, 2000 from $1.3 million for the three months
ended March 31, 1999. Of this increase, $117,000 was due to compensation
expense, due to an increase in the number of employees and general wage
increases, $7,000 was due to advertising, and $5,000 was due to office property
and equipment expense, offset by a decrease in data processing expense of
$17,000, a decrease in federal insurance premiums of $8,000, a decrease in real
estate owned expense of $16,000 and a decrease in other non-interest expense of
$11,000, consisting of mortgage loan expenses, insurance and bond premium
expense and telephone expense. The increase in non-interest expense is
primarily due to increased compensation expense and the opening of the branch
office in Liberty, Missouri and the purchase of the new office building in
Kearney, Missouri.
Comparison of Operating Results for the Nine Months Ended March 31, 2000 and
- ----------------------------------------------------------------------------
1999
- ----
Performance Summary. For the nine months ended March 31, 2000, the Company had
net earnings of $73,000 compared to net earnings of $679,000 for the nine months
ended March 31, 1999. The most significant items causing the decrease in
earnings were an increase in provision for loan loss of $851,000 and an increase
in non-interest expense of $393,000, offset by an increase in net interest
income of $250,000 and an increase in non-interest income of $8,000.
Net Interest Income. For the nine months ended March 31, 2000, net interest
income increased by $250,000, or 6.2%, to $4.3 million from $4.1 million for the
nine months ended March 31, 1999. The increase reflected an increase of
$893,000 in interest income, to $9.8 million from $8.9 million, offset by an
increase of $643,000 in interest expense to $5.5 million from $4.8 million. The
increase in interest income was primarily due to an increase in average balances
of loans receivable, net, primarily one-to-four family loans held for sale and
construction loans, offset by a decrease in the yields on interest-earning
assets to 8.32% for the nine month period ending March 31, 2000, from 8.53% for
the comparable period in 1999. The increase in interest expense was primarily
due to an increase in the average balances of certificates of deposit and an
increase in interest rates.
Provision for Loan Losses. During the nine months ended March 31, 2000, the
Company recorded a $1.1 million provision for loan loss against earnings
compared to a provision of $298,000 for the nine months ended March 31, 1999.
For an explanation of the $1.1 million provision for loss charged against
earnings at March 31, 2000, refer to the paragraph above for the three month
period ended March 31, 2000.
Non-Interest Income. For the nine months ended March 31, 2000, non-interest
income increased $8,000 to $909,000 from $901,000 for the prior year period,
primarily due to a increase in customer service charges of $69,000, and an
increase in loan servicing fees of $40,000, offset by a decrease in gain on sale
of mortgage loans of $101,000.
Non-Interest Expense. Non-interest expense increased by $393,000 to $4.0
million for the nine months ended March 31, 2000 from $3.6 million for the nine
months ended March 31, 1999. Of this increase, $292,000 was attributable to
increased compensation expense, due to an increase in the number of employees
and general wage increases, offset by a decrease in the ESOP plan expense of
$17,000 and a decrease in data processing expense of $18,000. An increase of
$43,000 was due to advertising, $50,000 was due to real estate owned expense,
and $24,000 was due to other non-interest expense, consisting of mortgage loan
expenses, checking account expense and conversion training.
Non-performing Assets
- ---------------------
On March 31, 2000, nonperforming assets were $7.1 million compared to $714,000
on June 30, 1999. The balance of the Bank's allowance for loan losses was $2.0
million at March 31, 2000 or 27.92% of nonperforming assets compared to $927,000
at June 30, 1999 or 129.8% of nonperforming assets. Loans are considered
nonperforming when the collection of principal and/or interest is not probable,
or in the event payments are more than ninety days delinquent.
The $6.4 million increase in nonperforming assets, from June 30, 1999 to March
31, 2000, was primarily due to a increase in one-to-four family non-accruing
construction loans of $4.9 million, and an increase in one-to-four family non-
accruing loans of $1.1million, an increase in non-accruing land loans of
$246,000, an increase in non-accruing consumer loans of $95,000 and an increase
in foreclosed assets of $78,000.
Capital Resources
- -----------------
The Bank is subject to capital to asset requirements in accordance with Office
of Thrift Supervision regulations. The following table is a summary of the
Bank's regulatory capital requirements versus actual capital as of March 31,
2000:
<PAGE>
<TABLE>
<CAPTION>
Actual Required Excess
amount/percent amount/percent amount/percent
-------------- -------------- --------------
(Dollars in thousands)
FIRREA REQUIREMENTS
-------------------
<S> <C> <C> <C> <C> <C> <C>
Tangible capital $13,862 7.85% 2,649 1.50% 11,213 6.35%
Core leverage capital $13,862 7.85% 7,064 4.00% 6,798 3.85%
Risk-based capital $15,479 12.00% 10,323 8.00% 5,156 4.00%
</TABLE>
Liquidity
- ---------
The Bank's principal sources of funds are deposits, principal and interest
payments on loans, and deposits in other insured institutions . While scheduled
loan repayments and maturing investments are relatively predictable, deposit
flows and early loan prepayments are more influenced by interest rates, general
economic conditions and competition. Additional sources of funds may be
obtained from the Federal Home Loan Bank of Des Moines by utilizing numerous
available products to meet funding needs.
The Bank is required to maintain levels of liquid assets as defined by
regulations. The required percentage is currently 4% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less. The
eligible liquidity ratios at March 31, 2000 and June 30, 1999 were 8.79% and
7.69%, respectively.
In light of the competition for deposits, the Bank may utilize the funding
sources of the Federal Home Loan Bank to meet demand in accordance with the
Bank's growth plans. The wholesale funding sources may allow the Bank to obtain
a lower cost of funding and create a more efficient liability match to the
respective assets being funded. Given the current strong loan demand, it may be
necessary for the Bank to continue to use advances.
For purposes of the cash flow statements, all short-term investments with a
maturity of three months or less at date of purchase are considered cash
equivalents. Cash and cash equivalents at March 31, 2000 and 1999 were $12.1
million and $6.7 million respectively.
Cash flows from operating activities. Net cash used in operating activities was
$9.8 million during the nine months ended March 31, 2000 compared to $406,000
during the same period in 1999. The change was primarily due to an increase in
the origination of loans held for sale of $5.9 million, and a decrease in the
proceeds from the sale of loans of $3.1 million, offset by an increase in the
provision for loan loss of $851,000.
Cash flows from investing activities. Net cash of $12.2 million was used in
investing activities for the nine months ended March 31, 2000 versus $30.8
million for the nine months ended March 31, 1999. The decrease was primarily
due to an increase in loans receivable of $11.7 million during the nine months
ended March 31, 2000 versus a $28.6 million increase during the same period in
1999.
Cash flows from financing activities. Net cash provided by financing activities
was $26.5 million for the nine months ended March 31, 2000 compared to $34.8
million during the same period in 1999. The decrease in cash flows from
financing activities is primarily due to an increase in repayments of FHLB
advances of $64.3 million for the nine months ended March 31, 2000 versus an
increase of $14.5 million for the same period in 1999, offset by an increase in
deposits of $29.4 million for the nine months ended March 31, 2000 versus an
increase of $13.2 million for the same period in 1999, and an increase in the
proceeds from FHLB advances of $62.3 million for the nine months ended March 31,
2000 versus an increase of $37.5 million for the same period in 1999.
Impact of Recently Issued Accounting Standards
The Financial Accounting Standards Board ("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 June 15, 2000.
Management believes adoption of SFAS No. 133 will not have a material effect on
the Company's financial position or results of operations, nor will adoption
require additional capital resources.
Year 2000 Issue
The Bank entered the new year without encountering any year 2000 related
problems to date, and will continue to monitor the year 2000 situation.
<PAGE>
10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The holding company and the Bank are not involved in any pending legal
proceedings incident to the business of the holding company and the
Bank, which involve amounts in the aggregate which management believes
are material to the financial condition and results of operation.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
27-Financial Data Schedule
<PAGE>
11
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
CBES Bancorp, Inc. and Subsidiaries
----------------------------------------
(Registrant)
Date: May 11, 2000
----------------------------------------
By: /s/ Dennis D. Hartman
----------------------------------------
Dennis D. Hartman, Chief Executive Officer
and Secretary (Duly Authorized Officer)
Date: May 11, 2000
----------------------------------------
By: /s/ Robert F. Kirk
----------------------------------------
Robert F. Kirk, Controller and Chief
Financial Officer (Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,248,394
<INT-BEARING-DEPOSITS> 10,723,060
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 228,725
<INVESTMENTS-MARKET> 228,836
<LOANS> 155,160,104
<ALLOWANCE> 1,976,000
<TOTAL-ASSETS> 176,599,479
<DEPOSITS> 130,796,369
<SHORT-TERM> 18,450,000
<LIABILITIES-OTHER> 959,960
<LONG-TERM> 0
10,319
0
<COMMON> 0
<OTHER-SE> 16,104,441
<TOTAL-LIABILITIES-AND-EQUITY> 176,559,479
<INTEREST-LOAN> 9,353,527
<INTEREST-INVEST> 2,859
<INTEREST-OTHER> 394,700
<INTEREST-TOTAL> 9,751,116
<INTEREST-DEPOSIT> 3,910,782
<INTEREST-EXPENSE> 5,450,648
<INTEREST-INCOME-NET> 4,300,468
<LOAN-LOSSES> 1,148,537
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 751,682
<INCOME-PRETAX> 85,654
<INCOME-PRE-EXTRAORDINARY> 73,170
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,170
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
<YIELD-ACTUAL> 8.32
<LOANS-NON> 6,833,746
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 956,000
<CHARGE-OFFS> 128,428
<RECOVERIES> 23,891
<ALLOWANCE-CLOSE> 1,976,000
<ALLOWANCE-DOMESTIC> 1,976,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
