SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-31125
CBCT BANCSHARES, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 74-2957339
------------------------------ -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification or
organization) number)
312 Main Street, Smithville, Texas 78957-2035
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(Address of principal executive offices)
(512) 237-2482
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(issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 [ ] No [X]
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
State the number of Shares outstanding of each of the issuer's classes
of common equity, as of the latest date:
As of November 14, 2000, there were 281,031 shares of the Registrant's
common stock outstanding.
1
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CBCT BANCSHARES, INC.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income
for the Three and Nine Months Ended September 30,
2000 and 1999 4
Consolidated Statements of Changes in
Equity for the Nine Months Ended September 30, 5
2000 and 1999
Consolidated Statements of Cash
Flows for the Nine Months Ended September 30,
2000 and 1999 6
Notes to Unaudited Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION 13
Signature Page 14
2
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PART I: FINANCIAL INFORMATION
Item I: Consolidated Financial Statements
CBCT Bancshares, Inc.
Consolidated Balance Sheets
<TABLE>
At At
September 30, December 31,
ASSETS 2000 1999
------ --------
(Unaudited)
(dollars in thousands)
<S> <C> <C>
Cash and non-interest due from banks $ 209 $ 561
Interest bearing due from banks 3,995 1,692
------- ------
Total cash and cash equivalents 4,204 2,253
Investment securities to be held to maturity 5,904 -
Investment securities available for sale 4,444 16,277
Federal Home Loan Bank stock 513 497
Loans held for sale - 363
Loans - net of allowance for loan losses 22,268 21,693
Bank premises and equipment - net 1,271 1,355
Accrued interest receivable 509 253
Prepaid expenses and other assets 34 142
------- -------
$39,147 $42,833
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 549 $ 377
Interest bearing 26,964 31,977
------- -------
Total deposits 27,513 32,354
Advances from borrowers for taxes and insurance 369 47
Advances from Federal Home Loan Bank 5,681 7,392
Accrued interest payable and other liabilities 405 41
------- -------
Total liabilites 33,968 39,834
------- -------
Stockholders' Equity:
Preferred Stock, par value $0.01 per share;
1,000,000 shares authorized; none issued
and outstanding - -
Common Stock, par value $0.01 per share;
4,000,000 shares authorized; 281,031
shares issued and outstanding 3 -
Surplus 2,381 -
Retained earnings 2,840 3,214
Unallocated ESOP shares (225) -
Accumulated other comprehensive income (loss) 180 (215)
------- -------
Total equity 5,179 2,999
------- -------
$39,147 $42,833
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
3
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CBCT Bancshares, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans $ 509 $ 464 $1,500 $1,351
Debt securities 172 294 533 739
Deposits in banks 38 17 162 121
Dividends 9 8 34 22
-------- -------- ------ ------
Total interest and dividend income 728 783 2,229 2,233
-------- -------- ------ ------
Interest expense:
Deposits 320 389 984 1,166
Federal Home Loan Bank advances 75 97 254 258
-------- -------- ------ ------
Total interest expense 395 486 1,238 1,424
-------- -------- ------ ------
Net interest income 333 297 991 809
Provision for loan losses 9 - 25 -
-------- -------- ------ ------
Net interest income after loan losses 324 297 966 809
-------- -------- ------ ------
Other operating income (losses):
Service charges and fees 58 34 113 83
Net securities gains (losses) (2) 126 (865) 102
Net gains on sales of loans 9 10 17 40
Gain on sale of other real estate owned - - - -
-------- -------- ------ ------
Total other operating income (losses) 65 170 (735) 225
-------- -------- ------ ------
Operating expenses:
Compensation and benefits 140 133 406 353
Occupancy and equipment expense 29 37 124 121
Other operating expenses 106 125 329 360
-------- -------- ------ ------
Total other operating expenses 275 295 859 834
-------- -------- ------ ------
Income before income taxes 114 172 (628) 200
Income tax expense (benefit) 36 49 (254) 58
-------- -------- ------ ------
Net income (loss) $ 78 $ 123 $ (374) $ 142
======== ======== ====== ======
Basic earnings (loss) per share $ 0.30 N/A $(1.45) N/A
========
Weighted average shares outstanding (1) 258,549 N/A 258,549 N/A
</TABLE>
(1) CBCT Bancshares' initial public offering closed on September 25, 2000. For
purposes of earnings per share calculations, shares issued on September 25, 2000
have been assumed to be outstanding as of January 1, 2000.
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
CBCT Bancshares, Inc.
Consolidated Statements of Changes in Equity
(Unaudited)
<TABLE>
Unallocated Accumulated
Common Retained ESOP Other Comp.
Stock Surplus Earnings Shares Income(Loss) Total
------ ------- -------- ----------- ------------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 2000
Balance, beginning of period (January 1, 2000) $ - $ - $3,214 $ - $(215) $2,999
Sale of stock, net of expenses 3 2,381 - (225) - 2,159
Comprehensive income:
Net income (loss) - - (374) - - (374)
Change in net unrealized loss on securities
available for sale, net of reclassification
adjustment and tax effect - - - - 395 395
------
Total comprehensive income (loss) - - - - - 21
---- ------ ------ ------ ----- ------
Balance, end of period (September 30, 2000) $ 3 $2,381 $2,840 $(225) $ 180 $5,179
==== ====== ====== ===== ===== ======
Nine Months Ended September 30, 1999
Balance, beginning of period (January 1, 1999) $ - $ - $3,046 $ - $ 297 $ 3,343
Comprehensive income:
Net income - - 142 - - 142
Change in net unrealized gain on securities
available for sale, net of reclassification
adjustment and tax effect - - - - (505) (505)
------
Total comprehensive income (loss) - - - - - (363)
---- ------ ------ ----- ----- ------
Balance, end of period (September 30, 1999) $ - $ - $3,188 $ - $(208) $2,980
==== ====== ====== ===== ===== ======
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
CBCT Bancshares, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
Nine months ended
September 30,
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (374) $ 142
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71 85
Net securites losses (gains) 865 (102)
Provision for loan losses 25 -
Deferred income taxes (143) 9
Stock dividend income (16) (19)
Net change in:
Loans held for sale 363 123
Accrued interest receivable and other assets (5) (86)
Accrued interest payable and other liabilities 483 (260)
------- ------
Net cash provided by operating activities 1,269 (108)
------- ------
Cash Flows From Investing Activities
Activity in available-for-sale securities:
Sales 15,211 329
Maturities and prepayments 372 1,942
Purchases (4,017) (4,227)
Activity in held-to-maturity securities:
Maturities and prepayments 273 1,445
Purchases (6,177) (4,854)
Loan originations and collections - net (600) (1,111)
Sales of fixed assets 32 -
Capital expenditures (19) (42)
------- ------
Net cash provided by (used in) investing activities 5,075 (6,518)
------- ------
Cash Flows From Financing Activities
Net change in deposits (4,842) 1,292
Issuance of common stock 2,585 -
Expenses of stock offering (425) -
Proceeds of Federal Home Loan Bank advances - 4,000
Repayment of Federal Home Loan Bank advances (1,711) (377)
------- ------
Net cash provided by (used in) financing activities (4,393) 4,915
------- ------
Net increase in cash and cash equivalents 1,951 (1,711)
Cash and cash equivalents - beginning of period 2,253 2,950
------ ------
Cash and cash equivalents - end of period $4,204 $1,239
====== ======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
6
<PAGE>
CBCT BANCSHARES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. General
CBCT Bancshares, Inc. (the Company) was organized in March 2000 at the direction
of Community Bank of Central Texas, Inc. (the Bank) to acquire all of the
capital stock that the Bank would issue upon its conversion from the mutual to
stock form of ownership. The conversion was completed on September 25, 2000
through the sale and issuance of 281,031 shares of common stock by the Company
at a price of $10.00 per share. Information set forth in this report relating to
periods prior to the Conversion, including consolidated financial statements and
related data, relates to Community Bank of Central Texas, Inc. and its
wholly-owned (inactive) subsidiary, Central State Service Corporation.
The accompanying consolidated financial statements of the Company have been
prepared in accordance with instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the nine months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000. The consolidated financial statements and notes thereto
should be read in conjunction with the Bank's audited financial statements and
notes thereto for the year ended December 31, 1999.
2. Earnings Per Share
Earnings per share has been computed for the nine months ended September 30,
2000 based upon weighted average common shares outstanding of 258,549. For the
purpose of computing weighted average shares outstanding for the nine months
ended September 30, 2000, shares issued in the Conversion on September 25, 2000
were assumed to have been outstanding since January 1, 2000. Earnings per share
for the nine months ended September 30, 1999 is not presented as there was no
common stock issued or outstanding.
3. Investment Securities
The amortized cost and approximate fair values of investment securities to be
held to maturity and available for sale at September 30, 2000 and December 31,
1999 are as follows (dollars in thousands):
7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
Investment securities to be held to maturity:
September 30,2000
Amortized Unrealized Approximate
Cost Gain (Loss) Fair Value
---------- ------------ ------------
<S> <C> <C> <C>
Debt securities:
U.S. Treasury securities $ -- $ -- $ --
Government agencies 2,987 1 2,988
State and municipal -- -- --
Collateralized mortgage obligations 2,917 (6) 2,911
Marketable equity securities -- -- --
------ --- ------
$5,904 $(5) $5,899
====== === ======
</TABLE>
There were no investment securities to be held to maturity at December 31, 1999.
<TABLE>
Investment securities available for sale:
September 30, 2000
Amortized Unrealized Approximate
Cost Gain (Loss) Fair Value
---------- ------------- -----------
<S> <C> <C> <C>
Debt securities:
U.S. Treasury securities $ -- $ -- $ --
Government agencies 2,989 9 2,998
State and municipal 110 3 113
Mortgage-backed 1,064 3 1,067
Marketable equity securities 5 261 266
------ ---- ------
$4,168 $276 $4,444
====== ==== ======
</TABLE>
<TABLE>
December 31, 1999
Amortized Unrealized Approximate
Cost Gain (Loss) Fair Value
--------- ----------- ----------
<S> <C> <C> <C>
Debt securities:
U.S. Treasury securities $ -- $ -- $ --
Government agencies -- -- --
State and municipal 145 3 148
Mortgage-backed 16,452 (554) 15,898
Marketable equity securities 5 226 231
------- ----- -------
$16,602 $(325) $16,277
======= ===== =======
</TABLE>
4. Other Cash Flow Information
Other cash flow information for the nine months ended September 30, 2000 and
1999 is as follows (dollars in thousands):
<TABLE>
2000 1999
------ ------
<S> <C> <C>
Interest paid in cash $1,242 $1,428
====== ======
Income taxes paid in cash $ - $ 98
====== ======
</TABLE>
8
<PAGE>
PART I: FINANCIAL INFORMATION
CBCT BANCSHARES, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following discussion is intended to assist in understanding the financial
condition and results of operations of CBCT Bancshares, Inc. The information
contained in this section should be read in conjunction with the consolidated
financial statements and the accompanying notes to consolidated financial
statements contained in this Form 10-QSB.
CBCT Bancshares, Inc.'s results of operations depend primarily on its net
interest income, which is the difference between interest income on
interest-earning assets, which principally consist of loans and mortgage-backed
and investment securities, and interest expense on interest bearing liabilities,
which principally consist of deposits and borrowings. CBCT Bancshares, Inc.'s
results of operations also are affected by the level of its non-interest income
and expenses and income tax expense.
Forward-Looking Statements
When used in this Form 10-QSB and in future filings by us with the Securities
and Exchange Commission in our press releases or other public or shareholder
communications, and in oral statements made with the approval of an authorized
executive officer, the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar words are intended to identify forward-looking
statements. Our ability to predict results or the actual effect of future plans
or strategies is uncertain. Factors which could have a material adverse effect
on our operations include, but are not limited to, changes in interest rates,
general economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in our market areas and accounting principles and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and you should not rely too much on these statements.
Changes in Financial Condition from December 31, 1999, to September 30, 2000
General
Total assets decreased by approximately $3.7 million to $39.1 million at
September 30, 2000 from $42.8 million at December 31, 1999. The decrease in
total assets resulted primarily from the liquidation of low yielding securities
in the first quarter of 2000 to take advantage of a restructuring opportunity in
the investment portfolio. The restructuring was an asset/liability management
decision to improve future interest rate risk exposure. A portion of the
proceeds from this restructuring was used to fund deposit outlfows resulting
from management's decision to reduce the interest rates paid on certain time
deposits. As a result, time deposits were decreased by $4.4 million during the
period. The increase in loans, to $22.3 million from $21.7 million, was
attributed to the continued growth of loan demand in the Bank's market area.
9
<PAGE>
The allowance for loan losses at September 30, 2000 increased to $223,000 or
.99% of total loans, from the December 31, 1999 amount of $199,000, or .91% of
total loans. The increase was due to loan loss provisions exceeding loan
charge-offs during the period. Loan loss provisions have been increased due to
the increasing volume of loans along with a slight change in the mix of the loan
portfolio to one with a higher volume of commercial loans. Non-performing loans
were $26,000 at September 30, 2000 compared to $68,000 at December 31, 1999.
Total deposits decreased by approximately $4.9 million, to $27.5 million at
September 30, 2000 from $32.4 million at December 31, 1999. The decrease was
attributed to a reduction in the interest rate paid on deposits during the
period ended September 30, 2000, resulting in an outflow of higher interest
bearing deposits. Federal Home Loan Bank advances decreased by $1.7 million as a
result of repayments on the advances.
Total equity increased by approximately $2.2 million to $5.2 million at
September 30, 2000, from $3.0 million at December 31, 1999. The increase in
equity was primarily attributed to the infusion of net proceeds from the
Company's stock offering in connection with the conversion of Community Bank of
Central Texas, ssb. to stock form, partially offset by the losses resulting from
the sale of the securities portfolio.
Comparison of Results of Operations for the Three Months and Nine Months Ended
September 30, 1999 and 2000
Net Interest Income
Net interest income for the quarter ended September 30, 2000 was $333,000,
compared to $297,000 for the quarter ended September 30, 1999, an increase of
$36,000. Net interest income for the nine months ended September 30, 2000 was
$991,000, compared to $809,000 for the nine months ended September 30, 1999, an
increase of $182,000. The increase was attributed to higher yields and volumes
of loans as well as the decrease in total interest expense resulted primarily
from the decrease in time deposits of $4.4 million.
Other Operating Income
Other operating income for the quarter ended September 30, 2000 was $65,000,
compared to $170,000 for the quarter ended September 30, 1999. The decrease in
2000 was primarily attributed to a one time realized gain on the sale of
securities in the amount of $126,000 in the quarter ended September 30, 1999
with no similar transaction occurring in the 2000 period. Other operating income
for the nine months ended September 30, 2000 was $(735,000) compared to $225,000
for the nine months ended December 31, 1999. The decrease in other operating
income for the nine months ended September 30, 2000 was primarily due to the
$865,000 in realized losses on sales of investment securities occurring during
that period.
10
<PAGE>
Other Operating Expenses
Other operating expenses for the quarter ended September 30, 2000 were $275,000,
compared to $295,000 for the quarter ended September 30, 1999. For the nine
months ended September 30, 2000, other operating expenses were $859,000 compared
to $834,000 for the same nine months ended September 30, 1999. The increase is
primarily attributed to compensation expense, which increased due to increased
personnel.
Liquidity and Capital Resources
We are required to maintain minimum levels of investments that qualify as liquid
assets under government regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. Historically, we have maintained liquid
assets at levels above the minimum requirements and above levels believed to be
adequate to meet the requirements of normal operations, including potential
deposit outflows. Cash flow projections are regularly reviewed and updated to
assure that adequate liquidity is maintained. At September 30, 2000, our
regulatory liquidity ratio, which is our liquid assets as a percentage of
deposits and current borrowings, was 48.29%. It is anticipated that our
liquidity ratio will decrease in future periods as we deploy proceeds from the
stock offering into loan originations, as they become available.
Consistent with our goal to operate a sound and profitable financial
organization, we actively seek to maintain a "well capitalized" institution in
accordance with regulatory standards. Total equity was $5.2 million at September
30, 2000 or 13.30% of total assets on that date. As of September 30, 2000, we
exceeded all capital requirements of the FDIC and the Texas Savings and Loan
Department. Our consolidated regulatory capital ratios at September 30, 2000
were as follows: core capital 12.77%; Tier I risk-based capital, 23.67%; and
total risk-based capital, 25.27%. The regulatory capital requirements to be
considered well capitalized are 5.0%, 6.0%, and 10.0%, respectively.
Quantitative and Qualitative Disclosures About Market Risk
The rates of interest we earn on assets and pay on liabilities generally are
established contractually for a period of time. Market interest rates change
over time. Our loans generally have longer maturities than our deposits.
Accordingly, our results of operations, like those of other financial
institutions, are impacted by changes in interest rates and the interest rate
sensitivity of our assets and liabilities. The risk associated with changes in
interest rates and our ability to adapt to these changes is known as interest
rate risk and is our most significant market risk. As of September 30, 2000, our
one-year cumulative interest rate sensitivity gap as a percentage of total
assets was a negative 34.54%, which generally means if interest rates rise, our
net interest income could be reduced because interest paid on interest-bearing
liabilities, including deposits and borrowings, could increase more quickly than
interest received on interest-earning assets, including loans and
mortgage-backed and investment securities. In addition, rising interest rates
may hurt our income because they may reduce the demand for loans and the value
of our mortgage-related and investment securities. In the alternative, if
interest rates decrease, our net interest income would increase.
11
<PAGE>
How We Measure Our Risk of Interest Rate Change
During the three months ended March 31, 2000, in order to improve our interest
rate risk position, we sold most of our existing investment securities
portfolio. This resulted in a significant improvement in our one-year cumulative
interest rate sensitivity gap, from a negative 46.03% at December 31, 1999 to a
negative 34.54% at September 30, 2000. It also increased our flexibility to
invest in other assets, including investment securities and loans, at current
yields and shorter terms to maturity.
12
<PAGE>
PART II. OTHER INFORMATION
CBCT BANCSHARES, INC.
Item 1 - Legal Proceedings
Not applicable.
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
(a) Exhibits - Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - None.
13
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBCT BANCSHARES, INC.
Registrant
Date: November 14, 2000 /s/ Brad M. Hurta
----------------- ---------------------------------------
Brad M. Hurta
President and Chief Executive Officer
Date: November 14, 2000 /s/ Lynn Frerich
----------------- ---------------------------------------
Lynn Frerich
Vice President, Chief Operating Officer
and Secretary
14
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