Information About Shareholder Proposals
If you wish to submit proposals to be included in our proxy statement for the 2009
Annual Meeting of Shareholders, we must receive them on or before September 16, 2008, pursuant to the proxy soliciting regulations of the Securities and Exchange Commission. Securities and Exchange Commission rules contain standards as to what
shareholder proposals are required to be in the proxy statement. All shareholder proposals for inclusion in our proxy materials shall be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended,
and as with any shareholder proposal (regardless of whether it is included in our proxy materials), our Certificate of Incorporation and bylaws, and Delaware law.
By Order of the Board of Directors,
Stephen Dowd
Senior Vice President, Chief Financial Officer
and Secretary
White Plains, New
York
January 14, 2008
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To
assure that your shares are represented at the annual meeting, please complete, sign, date and promptly return the accompanying proxy card in the postage-paid envelope provided.
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21
Appendix A
CMS BANCORP, INC.
AUDIT COMMITTEE CHARTER
I.
Audit Committee
The Audit Committee of the Board of Directors (the Committee) of CMS Bancorp, Inc. (the Company) shall be composed of at a minimum three directors who are independent of management and are free of any
relationship that, in the opinion of the Board of Directors, would interfere with their exercise of independent judgment as a Committee member. Each Committee member must be able to read and understand fundamental financial statements. At least one
Committee member must be a financial expert,
i.e
., have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background. Committee
members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or outside programs. Committee members and the Committees chairperson shall be recommended by the Nominating
Committee, after consultation with the Chairman of the Board and the Chief Executive Officer, and appointed in accordance with the Companys bylaws. If the Committees chairperson is not designated or present, the members of the Committee
may designate a chairperson by majority vote of the Committee membership.
Independence.
A
director will not be considered independent if, among other things, the director is an affiliated person of the Company or any of its subsidiaries or has:
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been employed by the Company or its affiliates in the past three years;
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accepted any compensation, including consulting and advisory fees, from the Company or its affiliates during the previous fiscal year (except for board services,
retirement plan benefits, or non-discretionary compensation);
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an immediate family member who is, or has been in the past three years, employed by the Company or its affiliates as an executive officer;
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been, or has an immediate family member who has been, a partner, controlling shareholder or an executive officer of any organization to which the Company made or
from which it received, payments (other than those which arise solely from investments in the Companys securities or under non-discretionary charitable contribution matching programs) that exceed five percent of the recipients
consolidated gross revenues for that year, or $200,000, whichever is more, in any of the past three years;
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been, or has an immediate family member who has been, employed as an executive of another entity where at any time during the past three years any of the
Companys executives serve on that entitys compensation committee; or
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is, or has an immediate family member who is, a current partner of the Companys independent registered public accounting firm, or was a partner or employee of
the Companys independent registered public accounting firm who worked on the Companys audit at any time during any of the past three years.
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A-1
Authority to Engage Advisors.
The Committee shall have the authority and
funding to engage independent counsel and other advisers, as it deems necessary to carry out its duties.
II.
Statement of Policy
It is the Committees responsibility to provide oversight of the Companys accounting and
financial reporting processes, including oversight of the Companys independent registered public accounting firm and internal audit functions. In so doing, it is the responsibility of the Committee to maintain free and open means of
communications between the Board of Directors, the Companys independent registered public accounting firm, the internal auditors, and the financial management of the Company.
III.
Meetings
The Committee shall meet at least four times annually,
or more frequently as circumstances dictate. The Committee will normally meet in a separate executive session with the Companys internal auditors. At least annually, the Committee will meet with the independent registered public accounting
firm to discuss any matters that the Committee believes should be discussed privately. The internal auditor shall serve as the clerk of the Committee and keep minutes of the proceedings of each Committee meeting. A majority of the Committee shall
constitute a quorum for the conduct of business. At the discretion of the chairperson, a member may attend a meeting by telephone conference in which he can hear each person in attendance and all such persons can hear the person attending by
telephone conference.
IV.
Responsibilities
1.
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Appoint and oversee the Companys independent registered public accounting firm. The Committee is also solely responsible, and shall have the necessary funding, for
compensation of the independent registered public accounting firm.
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2.
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Review and pre-approve all audit and non-audit services to be performed by the Companys independent registered public accounting firm, including but not limited to requests
for any management consulting engagement to be performed by the Companys independent registered public accounting firm. The Committee may delegate to one or more Committee members the responsibility to approve such services, provided timely
reports are made to the full Committee. In addition, the Committee may establish pre-approval categories of services, as provided by applicable rules and regulations.
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3.
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Evaluate the independent registered public accounting firm on an at least an annual basis. Such evaluation shall include a report from the independent registered public accounting
firm which includes:
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the independent registered public accounting firms internal quality-control procedures;
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any material issues raised by the most recent internal quality-control review or peer review of the firm, or by any inquiry or investigation by governmental or
professional authorities, within the last five years, respecting independent audits carried out by the firm, and any steps taken by the firm to address such issues; and
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a formal written statement delineating all relationships between the independent registered public accounting firm and the Company as contemplated by Independence
Standards Board Standard No. 1,
Independence Discussions with Audit Committees
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A-2
4.
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Review and update this charter annually and ascertain that it is reported in the Companys proxy statement at least once every three years.
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5.
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Periodically report to the Board of Directors on significant results of the following activities.
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a)
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Appointment of the independent registered public accounting firm to audit the financial statements of the Company and subsidiaries and determination of the compensation for such
services.
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b)
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Approval of all audit and non-audit services to be provided by the independent registered public accounting firm.
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c)
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Resolution of any disagreements that may arise between the independent registered public accounting firm and management.
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d)
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Evaluation of the performance of the independent registered public accounting firm and, where appropriate, recommendation that the Board replace the independent registered public
accounting firm.
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6.
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Review the independent registered public accounting firms engagement letter setting forth the scope and approach of the proposed audit, the estimated fees for performing the
annual audit, FDICIA controls audit, and quarterly reviews of Form 10-Q. The Committee will also meet with the independent registered public accounting firm to review findings, including comments or recommendations.
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7.
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Review the effectiveness of the internal audit function of the Company including the independence and authority of its reporting obligations, the proposed audit plan for the current
internal audit cycle, and the coordination of such plans with the independent registered public accounting firm.
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8.
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Review with the independent registered public accounting firm and internal auditors the integrity of the Companys financial reporting processes and compliance with 12 U.S.C.
1831 p-1 (Federal Deposit Insurance Act).
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9.
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Inquire as to the independent registered public accounting firms judgments about the quality and appropriateness of the Companys accounting principles as applied in its
financial statements.
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10.
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Consider and approve, if appropriate, major changes to the Companys auditing and accounting principles and practices as suggested by the independent registered public
accounting firm, management or the internal auditors.
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11.
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Review and approve the required reports to be included in the Companys annual report to shareholders and proxy statement.
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12.
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Review, at the Committees discretion, quarterly financial statements and review with management and the independent registered public accounting firm any significant matters
that arise out of the Companys quarterly financial statements review, based upon the independent registered public accounting firms limited review procedures. Discuss any significant changes to the Companys accounting principles
and any items required to be communicated by the independent registered public accounting firm in accordance with SAS 61 as amended by SAS 90.
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A-3
13.
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Review and discuss with the independent registered public accounting firm annually all relationships the independent registered public accounting firm have with the Company which
might adversely affect their objectivity and independence and review a written statement from the independent registered public accounting firm as to their independence. The Committee shall take, or recommend that the full Board take, appropriate
action to oversee the independence of the independent registered public accounting firm.
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14.
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Review the scope and general extent of the independent registered public accounting firms annual audit. The Committees review should include a report from the
independent registered public accounting firm addressing the following:
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audit staffing and supervision, and scope of audit;
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critical accounting policies and practices, alternative accounting treatments, the reasons for selecting such policies, and their impact on the fairness of the
Companys financial statements;
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significant estimates made by management in the preparation of financial reports;
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the nature and content of communications between auditors and management;
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off-balance sheet transactions, joint ventures, contingent liabilities, or derivative transactions, and their impact on the fairness of financial statements;
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auditor proposed adjustments both those recorded by management and those not recorded by management;
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difficulties encountered with management during the audit;
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disagreements with management regarding accounting reporting issues;
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material legal matters that may impact the financial statements; and
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the independent registered public accounting firms opinion on the overall fairness of the financial statements.
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15.
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Discuss the results of the audit with the independent registered public accounting firm prior to releasing the year-end earnings and annual report to regulatory agencies. Discuss
those matters that are required to be communicated to audit committees in accordance with SAS 61 as amended by SAS 90.
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16.
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It is not the duty of the Committee to plan or conduct audits or to determine that the Companys financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. This is the responsibility of management and the independent registered public accounting firm.
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V.
Other Duties
1.
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Inquire of the Companys Chief Executive Officer and Chief Financial Officer as to the existence of any significant deficiencies or material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information, and as to the existence of any fraud, whether or not
material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting.
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A-4
2.
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Appoint and supervise the independent registered public accounting firm.
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3.
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Review internal and external reports concerning the loan review, compliance, and information technology functions of the Company.
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4.
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In consultation with the Board of Directors, review and follow-up on regulatory examination findings and recommendations.
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5.
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Conduct or authorize investigations into any matters within the Committees scope of responsibilities. The Committee is empowered to retain independent counsel and other
professional advisors to assist in the conduct of any investigation or as may be necessary in the fulfillment of its responsibilities.
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6.
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Establish procedures for receipt, retention and treatment of complaints regarding internal accounting controls, and auditing matters.
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7.
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Establish procedures for confidential, anonymous employee submissions of concerns regarding questionable accounting or auditing matters.
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8.
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Review internal audits adherence to its audit plan and make adjustments as necessary.
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9.
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Review and approve all related party transactions. For such purpose, related party transaction shall mean any transaction required to be disclosed pursuant to SEC
Regulation S-B, Item 404.
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A-5
Appendix B
CMS BANCORP, INC.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
Purpose
The purpose of the Nominating and
Corporate Governance Committee (the Committee) shall be to assist the Board of Directors (the Board) of CMS Bancorp, Inc. (the Company) in identifying qualified individuals to become Board members and officers of
the Company, in determining the composition of the Board and its committees, in developing and implementing a process to assess Board effectiveness and in developing and implementing the Companys corporate governance guidelines.
Membership and Appointment
The Committee
shall consist of no fewer than three members, each of whom shall meet the criteria for independence established by the rules and regulations of The Nasdaq Stock Market and who the Board has affirmatively determined does not have a material
relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Members of the Committee shall be appointed annually by the Board and shall serve at the
pleasure of the Board. Notwithstanding the foregoing, no director shall serve on the Committee in any capacity in any year during which such directors term as a director is scheduled to expire.
Meetings and Procedures
The Committee shall
have a chairperson who must, and a secretary who may but need not be, a member of the Committee. The Board shall designate the chairperson of the Committee and the Committee shall designate the secretary for the Committee. If the Board does not
designate a chairperson, or if the chairperson shall not be present at a meeting, the Committee shall select its own chairperson.
The
Committee shall establish its own rules of procedure, which shall be consistent with the bylaws of the Company and this Charter. The Committee shall meet at least two times annually at regularly scheduled times and places determined by the
Committees chairperson, and may meet more frequently, or take action by unanimous written consent, as circumstances require. A meeting may be called by the chairperson of the Committee or by majority of the members of the Committee. Notice of
any meeting shall be given by the person or persons calling the meeting given to each other member of the Committee at least 48 hours prior to the meeting. Notice may be given in the same fashion as permitted for notice of Board meetings pursuant to
the Companys bylaws and applicable law. A meeting shall be deemed properly called if each member of the Committee shall have received notice given as aforesaid or, prior to the conclusion of the meeting, shall have signed a written waiver of
notice.
A quorum shall consist of at least a majority of the voting members of the Committee. The vote of a majority of the voting members
present at any meeting at which a quorum exists, including the chairperson of the committee who shall be eligible to vote, shall constitute the action of the Committee.
The Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent
information as the Committee requests.
B-1
Following each of its meetings, the Committee shall report its actions and recommendations to the Board.
The secretary of the Committee shall keep written minutes of its meetings, which minutes shall be subject to approval by the members of the Committee and, once approved, shall be maintained with the books and records of the Company.
The Committee shall have the authority to delegate any of its responsibilities to subcommittees, as the committee may deem appropriate in its sole
discretion.
Nominations by Shareholders
Shareholders may recommend nominees for election to the Board, in a manner consistent with the Companys bylaws, this Charter and any guidelines established by the Committee.
Committee Authority and Responsibilities
The
Committee shall have the following authority and responsibilities:
Identification and Evaluation of Board of Directors Candidates
1.
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The Committee shall develop criteria, to be approved by the full Board, for the selection of directors and, when appropriate, conduct searches for individuals qualified to become
members of the Board.
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2.
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The Committee shall evaluate the validity of any shareholder nominees for election as directors in accordance with the qualifications and procedures set forth in Article II of the
Companys bylaws. The Committee shall consider, obtain information regarding, interview and evaluate any valid shareholder nominees for election as directors in accordance with the criteria developed by the Board.
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3.
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The Committee shall select, and recommend to the Board for its approval, nominees for election as directors, taking into account the criteria approved by the Board.
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Evaluation of Board of Directors Effectiveness
4.
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The Committee shall develop criteria for the evaluation of the Board and its members and shall annually assess the performance of incumbent Board members and the Board as a whole.
Such assessment shall be discussed with the full Board and, as appropriate, the Committee shall recommend changes, including, but not limited to, changes in Board size and composition and in Board policies and procedures.
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5.
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The Committee shall develop and recommend to the Board for its approval an annual self-evaluation process of the Board and its committees. The Committee shall oversee the annual
self-evaluation of the Board and its committees and report its findings to the Board.
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Corporate Governance Matters
6.
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The Committee shall develop and recommend to the Board for its approval a set of corporate governance guidelines. The Committee shall review the guidelines on an annual basis, or
more frequently if appropriate, and recommend changes as necessary.
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B-2
7.
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The Committee shall review and assess the adequacy of this charter at least annually and, as appropriate, recommend changes to the Board for its approval.
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8.
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The Committee shall periodically review and assess the Companys Charter and bylaws and, as appropriate, recommend changes to the Board for its approval.
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9.
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The Committee shall consider any other corporate governance issues that may arise from time to time, and to develop appropriate recommendations for the Board.
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In undertaking its responsibilities, the Committee may retain or terminate, in its sole discretion, any search firm to be
used to identify director candidates and to approve the search firms fees and other retention terms. The Committee shall also have authority to retain outside counsel and any other advisors as the Committee may deem appropriate in its sole
discretion.
B-3
CMS Bancorp, Inc.
2007 Annual Report
CMS Bancorp, Inc.
Dear Stockholders:
The fiscal year ended September 30, 2007 was one in which we made great strides in moving the Company toward achieving our strategic goals. On April 4, 2007, Community Mutual Savings Bank completed its
conversion from a New York State-chartered mutual savings bank to a federally-chartered stock savings bank. On that same date, in the conversion and offering, CMS Bancorp sold 1,983,750 shares of its common stock, raising $19.8 million in gross
proceeds. The successful completion of the stock offering was a critical factor in positioning the Company for growth and future profitability and we continue to focus on our three year plan for the Bank.
Over the past two years, we have invested in new management and staff, implemented new products and services for our customers, and incorporated a new
technology platform to help deliver higher quality customer service. Going forward, we believe that our investment in technology and people will help our institution to maintain its community banking focus and meet its strategic growth objectives.
In addition to remodeling our Mount Vernon branch, we have secured a new location for our Eastchester branch which will open in early
2008. This new location will provide the template for future branch expansion and relocation, including greater visibility, better customer access and parking, an ATM, a commercial night deposit drop and better branding of our commitment to personal
customer service.
The growth in our balance sheet and improvement in net interest income in 2007 reflects not only the impact of the
proceeds from the sale of stock, but our continuing efforts to improve profitability, by expanding and diversifying our loan portfolio while maintaining our conservative underwriting standards, and prudently adding to our deposit balances at
appropriate market interest rates.
All financial institutions are facing a challenging interest rate market. Over the past two years,
short-term deposit rates have risen significantly, while longer-term interest rates on loans have remained within a very narrow range, thereby mitigating increases in our interest income from loan growth. The recent flat, and at times inverted,
interest rate yield curve has negatively impacted our earnings, however, we continue to remain focused on loan growth and the diversification of the loan portfolio, along with carefully monitoring our deposit interest and other non-interest costs.
I would like to thank our customers, the Board of Directors, officers and employees for their efforts in making 2007 a year in which we
accomplished much, and you, our stockholders, for your continued support.
Sincerely,
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Thomas G. Ferrara, Chairman of the Board
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John E. Ritacco, President and CEO
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CMS Bancorp, Inc.
Selected Consolidated Financial Information and Other Data
The following information is derived from the audited consolidated financial statements of CMS Bancorp, Inc, (the Company). For additional
information about the Company and Community Mutual Savings Bank, (the Bank) a more detailed presentation is contained in Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and footnotes of the Company which are included in this Annual Report.
Selected Financial Condition
Data
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At September 30,
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(in thousands)
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2007
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2006
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Total assets
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$
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173,506
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$
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122,528
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Loans receivable, net
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146,701
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96,732
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Investment securities
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4,565
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19,298
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Cash and cash equivalents
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17,540
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3,061
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Deposits
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117,500
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108,784
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FHLB Advances
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30,000
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4,204
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Stockholders equity
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24,354
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8,307
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Selected Operating Data
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Year Ended September 30,
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(in thousands, except per share data)
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2007
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2006
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Interest income
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$
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7,505
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$
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5,720
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Interest expense
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3,011
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1,714
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Net interest income
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4,494
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4,006
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Provision for loan losses
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60
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Non-interest income
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279
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422
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Non-interest expense
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5,509
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4,336
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Income tax expense
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7
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40
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Net income (loss)
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$
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(803
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)
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$
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52
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Net (loss) per share
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$
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(0.38
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)
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N/A
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3
CMS Bancorp, Inc.
Selected Financial Ratios and Other Data
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At or for the Years
Ended September 30,
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2007
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2006
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Performance Ratios
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Return on average assets
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-0.58
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%
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0.04
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%
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Return on average equity
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-4.93
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%
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0.64
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%
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Net yield on average interest-earning assets
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5.61
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%
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5.07
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%
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Net interest rate spread
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2.78
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%
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3.31
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%
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Net interest margin
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3.36
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%
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3.55
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%
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Average interest-earning assets to average interest-bearing liabilities
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1.26
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1.16
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Capital Ratios
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Average stockholders equity to average assets
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11.79
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%
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6.95
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%
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Tier 1 core ratio
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8.99
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%
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6.95
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%
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Total risk based capital ratio
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17.34
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%
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13.02
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%
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Asset Quality Ratios
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Allowance for loan losses to gross loans
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0.18
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%
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0.22
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%
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Non-performing loans to total assets
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0.00
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%
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0.00
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%
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4
CMS Bancorp, Inc.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Annual Report
contains forward-looking statements, which may be identified by the use of such words as believe, expect, anticipate, should, planned, estimated,
potential and similar expressions that are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations
and business 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:
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changes in the real estate market or local economy;
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changes in interest rates;
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changes in laws and regulations to which we are subject; and
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competition in our primary market area.
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Any or all of our forward-looking statements in this Annual Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Consequently, no forward-looking statement can be guaranteed. We disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the
occurrence of anticipated or unanticipated events.
General
CMS Bancorps results of operations depend primarily on its net interest income, which is the difference between the interest income it earns on its loans and investments and the interest it pays on its deposits
and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on these balances. CMS Bancorps operations are
also affected by non-interest income, such as service fees and gains and losses on sales of securities, the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy costs, and other general and
administrative expenses. In general, financial institutions such as CMS Bancorp are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the
demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. CMS Bancorps operations and lending activities are principally concentrated in Westchester County, New York, and its operations and
earnings are influenced by the economics of the area in which it operates. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments, customer preferences, and levels of personal income and savings in CMS
Bancorps primary market area.
CMS Bancorps net interest income may be affected by market interest rate changes. Prior to the
September 2007 reduction in the Federal funds interest rate, increases in short-term interest rates during 2005 and 2006, without a corresponding increase in long-term interest rates, resulted in an increase in interest expense and reduction in net
interest income. The effect of a flat or inverted interest rate yield curve could decrease CMS Bancorps ability to reinvest proceeds from loan and investment repayments at higher interest rates. CMS Bancorps cost of funds has increased
faster than its yield on loans and investments, due to the longer-term nature of its interest-earning assets and the current yield curve environment.
In order to grow and diversify in the current yield curve environment, CMS Bancorp seeks to continue to grow its multi-family, non-residential, construction, home equity and commercial loans by targeting these
5
CMS Bancorp, Inc.
markets in Westchester County and surrounding areas as a means to increase the yield on and diversify its loan portfolio, build transactional deposit account
relationships and, depending on market conditions, sell a portion of the fixed-rate residential real estate loans to a third party in order to diversify its loan portfolio, increase fee income and reduce interest rate risk.
To the extent CMS Bancorp increases its investment in construction or development, consumer and commercial loans, which are considered greater risks than
one- to four-family residential loans, CMS Bancorps provision for loan losses may increase to reflect this increased risk, which could cause a reduction in CMS Bancorps income.
Overview
CMS Bancorp seeks to differentiate itself
from its competition by providing superior, highly personalized and prompt service with competitive fees and rates to its customers. Historically, CMS Bancorp has been a community-oriented retail savings bank offering residential mortgage loans and
traditional deposit products and, to a lesser extent, commercial real estate, small business and consumer loans in Westchester County, New York, and surrounding areas.
CMS Bancorp has adopted a strategic plan that focuses on growth in the traditional one- to four-family real estate lending market as well as diversification of the loan portfolio into higher yield multi-family,
non-residential, construction and commercial loan markets. CMS Bancorps strategic plan also calls for increasing deposit relationships and broadening its product lines and services. CMS Bancorp believes that this business strategy is best for
its long term success and viability, and complements its existing commitment to high quality customer service.
In connection with its
overall growth strategy, CMS Bancorp seeks to:
|
|
|
continue to grow its commercial and industrial loan and commercial real estate loan portfolio by targeting commercial businesses in Westchester County and
surrounding areas as a means to increase the yield on and diversify its loan portfolio and build transactional deposit account relationships;
|
|
|
|
focus on expanding its retail banking franchise and increasing the number of households served within its market area; and
|
|
|
|
depending on market conditions, sell a portion of the fixed rate residential real estate loans to a third party, in order to diversify its loan portfolio, increase
fee income and reduce interest rate risk.
|
Critical Accounting Policies
It is managements opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative
importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan
losses and the assessment of whether deferred taxes are more likely than not to be realized. Management believes that the allowance for loan losses represents its best estimate of losses known and inherent in the loan portfolio that are both
probable and reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in CMS
Bancorps market area. Managements assessment as to the amount of deferred taxes more likely than not to be realized is based upon future taxable income, which is subject to revision upon updated information.
These critical policies and their application have been and will continue to be reviewed periodically by the Audit Committee and the Board of Directors.
All accounting policies are important, and as such, we encourage you to review each of the policies included in Note 2 to CMS Bancorps Consolidated Financial Statements to obtain a better understanding of how its financial performance is
reported.
6
CMS Bancorp, Inc.
Average Balances, Interest and Average Yields
The following table sets forth certain information relating to CMS Bancorps average balance sheets and reflects the average yield on
interest-earning assets and average cost of interest-bearing liabilities, interest earned and interest paid for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets
or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses, but include non-accrual
loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30,
2007
|
|
|
For the Year Ended
September 30, 2007
|
|
|
For the Year Ended
September 30, 2006
|
|
|
|
Actual
Balance
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
Yield
Rate
|
|
|
Average
Balance
|
|
|
Interest
Income
Expense
|
|
Yield
Rate
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (1)
|
|
$
|
146,701
|
|
|
6.01
|
%
|
|
$
|
111,089
|
|
|
$
|
6,521
|
|
5.87
|
%
|
|
$
|
85,685
|
|
|
$
|
4,785
|
|
5.58
|
%
|
Securities available for sale
|
|
|
2,116
|
|
|
3.81
|
%
|
|
|
3,761
|
|
|
|
169
|
|
4.49
|
%
|
|
|
4,114
|
|
|
|
187
|
|
4.55
|
%
|
Securities held to maturity (2)
|
|
|
2,449
|
|
|
5.07
|
%
|
|
|
8,381
|
|
|
|
283
|
|
3.38
|
%
|
|
|
18,424
|
|
|
|
554
|
|
3.01
|
%
|
Federal funds sold
|
|
|
13,100
|
|
|
4.75
|
%
|
|
|
7,723
|
|
|
|
403
|
|
5.22
|
%
|
|
|
2,420
|
|
|
|
106
|
|
4.38
|
%
|
Other interest-earning assets (3)
|
|
|
4,826
|
|
|
5.82
|
%
|
|
|
2,733
|
|
|
|
129
|
|
4.72
|
%
|
|
|
2,229
|
|
|
|
88
|
|
3.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
169,192
|
|
|
5.87
|
%
|
|
|
133,687
|
|
|
|
7,505
|
|
5.61
|
%
|
|
|
112,872
|
|
|
|
5,720
|
|
5.07
|
%
|
Non-interest earning assets
|
|
|
4,314
|
|
|
|
|
|
|
4,480
|
|
|
|
|
|
|
|
|
|
4,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
173,506
|
|
|
|
|
|
$
|
138,167
|
|
|
|
|
|
|
|
|
$
|
116,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing-liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
$
|
8,173
|
|
|
3.92
|
%
|
|
$
|
6,433
|
|
|
$
|
238
|
|
3.70
|
%
|
|
$
|
6,519
|
|
|
$
|
101
|
|
1.55
|
%
|
Savings and club accounts
|
|
|
42,026
|
|
|
0.40
|
%
|
|
|
44,529
|
|
|
|
178
|
|
0.40
|
%
|
|
|
53,650
|
|
|
|
213
|
|
0.40
|
%
|
Certificates of deposit
|
|
|
54,814
|
|
|
4.78
|
%
|
|
|
48,736
|
|
|
|
2,268
|
|
4.65
|
%
|
|
|
36,634
|
|
|
|
1,379
|
|
3.76
|
%
|
Borrowed money (4)
|
|
|
30,366
|
|
|
5.00
|
%
|
|
|
6,577
|
|
|
|
327
|
|
4.97
|
%
|
|
|
721
|
|
|
|
21
|
|
2.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
135,379
|
|
|
3.42
|
%
|
|
|
106,275
|
|
|
|
3,011
|
|
2.83
|
%
|
|
|
97,524
|
|
|
|
1,714
|
|
1.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits
|
|
|
12,487
|
|
|
|
|
|
|
14,963
|
|
|
|
|
|
|
|
|
|
10,552
|
|
|
|
|
|
|
|
Other
|
|
|
1,286
|
|
|
|
|
|
|
638
|
|
|
|
|
|
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest bearing liabilities
|
|
|
13,773
|
|
|
|
|
|
|
15,601
|
|
|
|
|
|
|
|
|
|
11,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
149,152
|
|
|
|
|
|
|
121,876
|
|
|
|
|
|
|
|
|
|
108,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
24,580
|
|
|
|
|
|
|
16,424
|
|
|
|
|
|
|
|
|
|
8,402
|
|
|
|
|
|
|
|
Comprehensive (loss)
|
|
|
(226
|
)
|
|
|
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
(283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
24,354
|
|
|
|
|
|
|
16,291
|
|
|
|
|
|
|
|
|
|
8,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
173,506
|
|
|
|
|
|
$
|
138,167
|
|
|
|
|
|
|
|
|
$
|
116,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,494
|
|
2.78
|
%
|
|
|
|
|
|
$
|
4,006
|
|
3.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest-earning assets/net interest margin
|
|
|
|
|
|
|
|
|
$
|
27,412
|
|
|
|
|
|
3.36
|
%
|
|
$
|
15,348
|
|
|
|
|
|
3.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.26
|
|
|
|
|
|
|
|
|
|
1.16
|
|
|
|
(1)
|
Net of allowance for loan losses and net deferred costs and fees.
|
(2)
|
Amounts shown are at amortized cost.
|
(3)
|
Includes stock of Federal Home Loan Bank of New York.
|
(4)
|
Includes mortgage escrow funds.
|
7
CMS Bancorp, Inc.
Rate/Volume Analysis
The following table analyzes the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in
interest income or expense caused by either changes in outstanding balances (volume) or changes in interest rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two
periods. The effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period. Changes attributable to both rate and volume which cannot be segregated, have been allocated
proportionately to the absolute value of the change due to volume and the change due to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2007
Compared to Year Ended
September 30, 2006
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Net
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
259
|
|
|
$
|
1,477
|
|
|
$
|
1,736
|
|
Securities available for sale
|
|
|
(2
|
)
|
|
|
(16
|
)
|
|
|
(18
|
)
|
Securities held to maturity
|
|
|
61
|
|
|
|
(332
|
)
|
|
|
(271
|
)
|
Federal funds sold
|
|
|
24
|
|
|
|
273
|
|
|
|
297
|
|
Other interest-earning assets
|
|
|
19
|
|
|
|
22
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
361
|
|
|
|
1,424
|
|
|
|
1,785
|
|
|
|
|
|
Interest bearing-liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
138
|
|
|
|
(1
|
)
|
|
|
137
|
|
Savings and club accounts
|
|
|
|
|
|
|
(35
|
)
|
|
|
(35
|
)
|
Certificates of deposit
|
|
|
371
|
|
|
|
518
|
|
|
|
889
|
|
Borrowed money
|
|
|
25
|
|
|
|
281
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
534
|
|
|
|
763
|
|
|
|
1,297
|
|
|
|
|
|
Net interest income
|
|
$
|
(173
|
)
|
|
$
|
661
|
|
|
$
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of Financial Condition at September 30, 2007 to September 30, 2006
Total assets increased by $51.0 million, or 41.6%, to $173.5 million at September 30, 2007 from $122.5 million at September 30, 2006, as
proceeds of the sale of CMS Bancorps common stock, investment maturities, higher deposit balances and borrowings from the Federal Home Loan Bank (FHLB) were used to fund loan growth. During the year ended September 30, 2007,
cash and cash equivalents increased by $14.4 million to $17.5 million at September 30, 2007 from $3.1 million at September 30, 2006. The increase in cash and cash equivalents resulted from borrowings from FHLB.
In the year ended September 30, 2007, securities available for sale declined by $2.0 million to $2.1 million at September 30, 2007 from $4.1
million at September 30, 2006 and securities held to maturity declined by $12.8 million to $2.4 million at September 30, 2007 from $15.2 million at September 30, 2006 as investments in U.S. Government Agency bonds matured.
Loans receivable were $146.7 million and $96.7 million at September 30, 2007 and September 30, 2006, respectively, representing an increase
of $50.0 million or 51.7%. Strong demand, additional personnel in the loan department and an emphasis on growing the loan portfolio with conservatively underwritten loans led to higher
8
CMS Bancorp, Inc.
originations of one-to four-family mortgage loans as well as higher utilization of home equity lines of credit and originations of non-residential real
estate and construction loans. The increase in loans receivable was funded from the proceeds of the sale of CMS Bancorps common stock, maturities of securities, higher deposit balances and borrowings from the FHLB.
While the banking industry has seen increases in loan delinquencies and defaults over the past year, particularly in the subprime sector, CMS Bancorp has
not experienced losses in its loan portfolio due primarily to its conservative underwriting policies. As of September 30, 2007 and 2006, CMS Bancorp had no non-performing loans and the allowance for loan losses was 0.18% and 0.22% as of
September 30, 2007 and 2006, respectively. Loans charged off, net of recoveries were $7,000 and $22,000 in the years ended September 30, 2007 and 2006, respectively. While there has been no material shift in the loan portfolio, delinquency
levels, loss experience, economic conditions or other factors, loans grew by $50.0 million during the year ended September 30, 2007 and as a result, $60,000 was added to the allowance for loan losses.
The increase in premises and equipment from $686,000 at September 30, 2006 to $1.3 million at September 30, 2007 includes the modernization of
the Mount Vernon branch and upgrades to the technology infrastructure. The $1.2 million increase in FHLB stock to $1.6 million at September 30, 2007 from $351,000 at September 30, 2006 resulted from higher borrowings as of
September 30, 2007. Other assets decreased from $1.8 million at September 30, 2006 to $1.0 million at September 30, 2007 as a result of deferred stock offering costs associated with the initial public offering. These deferred stock
offering costs were reclassified to stockholders equity and deducted from the proceeds of the shares sold in the conversion. At September 30, 2006, deferred stock offering costs in the amount of $817,000 were incurred and included in
other assets.
Deposits increased by $8.7 million, or 8.0%, from $108.8 million as of September 30, 2006 to $117.5 million as of
September 30, 2007. The increase in deposits resulted from competitive market interest rates which attracted deposits in the certificate of deposit and money market deposit categories. This increase in deposits was partially offset by
depositors use of $1.3 million of deposits to purchase common stock of CMS Bancorp in the conversion and stock offering.
FHLB
borrowings increased to $30.0 million at September 30, 2007 from $4.2 million as of September 30, 2006 and were used to fund loans and investments in Federal funds.
Stockholders equity increased from $8.3 million at September 30, 2006 to $24.4 million at September 30, 2007 as a result of the sale of
CMS Bancorps common stock in the conversion, partially offset by the $803,000 net loss incurred during the year.
Comparison of Operating Results
for the Year Ended September 30, 2007 and 2006
General.
For the year ended September 30, 2007, CMS
Bancorp recorded a net loss of $803,000 compared to net income of $52,000 in the year ended September 30, 2006. The net loss in the 2007 period reflects a one-time increase in non-interest expense due to the contribution of $774,000 to fund the
Community Mutual Charitable Foundation (the Foundation). Gains on the sale of securities in the year ended September 30, 2006 of $110,000 did not recur in 2007. The increase in net interest income of $428,000 in the year ended
September 30, 2007 was partially offset by the costs of investing in personnel, equipment and renovating the Mount Vernon branch.
Interest Income.
Interest income increased $1.8 million, or 31.6%, to $7.5 million for the year ended September 30, 2007 from $5.7 million for the year ended September 30, 2006. The increase in interest income is due
to increases of $1.7 million in interest income from loans, $297,000 on federal funds sold and $41,000 from other interest earning assets, partially offset by a decrease in interest income from securities of $289,000.
9
CMS Bancorp, Inc.
Interest income from loans increased by $1.7 million, or 36.3%, to $6.5 million for the year ended
September 30, 2007 from $4.8 million for the year ended September 30, 2006. The increase was due to a $25.4 million, or 29.6%, increase in the average balance of loans to $111.1 million in the year ended September 30, 2007 from $85.7
million in the year ended September 30, 2006 and an increase in the average yield to 5.87% from 5.58%, as additions to the loan portfolio were made at interest rates which were higher than the interest rate on the overall portfolio. Of the
increase in average loan balances of $25.4 million, $18.9 million was in the conventional one- to four-family residential mortgage portfolio.
Interest income from securities decreased by $289,000, or 39.0%, to $452,000 for the year ended September 30, 2007 from $741,000 for the year ended September 30, 2006. The decrease in interest income from securities was due to
maturities of U.S. Government Agency bonds which caused the average balance of securities available for sale to decrease by $353,000 to $3.8 million for the year ended September 30, 2007 from $4.1 million for the year ended September 30,
2006. The average balance of securities held to maturity declined by $10.0 million due to maturities, to $8.4 million for the year ended September 30, 2007 from $18.4 million for the year ended September 30, 2006. The impact of the bond
maturities and lower average balances was partially offset by an increase in the average yield on securities from 3.29% for the year ended September 30, 2006 to 3.72% for the year ended September 30, 2007, as the result of maturities of
bonds with lower yields.
Interest income from Federal funds sold increased by $297,000 from $106,000 in the year ended September 30,
2006 to $403,000 in the year ended September 30, 2007. The average balance of Federal funds sold increased $5.3 million from $2.4 million in the year September 30, 2006 to $7.7 million in the year ended September 30, 2007. Higher
average balances resulted from investing the proceeds from the sale of CMS Bancorps common stock and the borrowings from the FHLB. The average yield also increased from 4.38% to 5.22% in years ended September 30, 2006 and 2007,
respectively as a result of increases in the Federal funds interest rates. Interest income from other interest-earning assets increased by $41,000 from $88,000 to $129,000 for the years ended September 30, 2006 and 2007, respectively, as a
result of higher average balances and higher rates.
Interest Expense.
Total interest expense increased $1.3 million, or
75.7%, to $3.0 million for the year ended September 30, 2007, from $1.7 million for the year ended September 30, 2006 reflecting higher market interest rates, a shift in deposits from lower cost savings accounts to higher cost time
deposits, existing low cost time deposits maturing and re-pricing into higher rate time deposit products, higher money market rates and higher borrowing from the FHLB. The average balance of interest-bearing liabilities increased by $8.8 million to
$106.3 million for the year ended September 30, 2007 compared to $97.5 million for the year ended September 30, 2006 and the average cost on those liabilities increased from 1.76% in 2006 to 2.83% in 2007.
Interest expense on demand accounts (money market accounts) increased by $137,000 to $238,000 in 2007 compared to $101,000 in 2006 as a result of higher
rates offered to attract money market deposits. Interest expense on savings and club accounts decreased by $35,000 as a result of a decline in the average balance of $9.1 million, from $53.6 million in the year ended September 30, 2006 to $44.5
million in 2007. The decrease in the average balance of savings and club accounts resulted from withdrawals and transfers into higher interest rate certificates of deposit. Interest expense on certificates of deposit increased $889,000 from $1.4
million for the year ended September 30, 2006 to $2.3 million for the year ended September 30, 2007 as a result of average balances increasing by $12.1 million to $48.7 million for the year ended September 30, 2007 compared to $36.6
million in 2006 and the increase in the average cost of interest on certificates of deposit from 3.76% in 2006 to 4.65% in 2007. Higher average balances and higher interest rates reflect market conditions and the need to respond to changes in local
market conditions in order to attract and retain deposits.
Interest expense on borrowed money was $327,000 in the year ended
September 30, 2007 and $21,000 in the year ended September 30, 2006. In 2006, the primary component of borrowed money was mortgage escrow
10
CMS Bancorp, Inc.
accounts which carry a lower interest rate than FHLB borrowings. In 2007, FHLB borrowings, which were used to fund loan growth, became the predominant
component of borrowed money and, as a result, the average cost of interest increased from 2.91% in 2006 to 4.97% in 2007. The average balance of borrowed money increased by $5.9 million, from $721,000 in 2006 to $6.6 million in 2007 as a result of
borrowing needed to fund loan growth.
Provision for Loan Losses.
The allowance for loan losses was $269,000, or 0.18%, of
gross loans outstanding at September 30, 2007 compared to $215,000, or 0.22%, of gross loans outstanding at September 30, 2006. The level of the allowance for loan losses is based on estimates and ultimate losses may vary from these
estimates. Management reviews the level of the allowance for loan losses on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic
conditions, and other factors related to the collectibility of the loan portfolio. Management regularly evaluates various risk factors related to the loan portfolio, such as type of loan, underlying collateral and payment status, and the
corresponding allowance allocation percentages. While there has been no material shift in the loan portfolio, delinquency levels, loss experience, economic conditions or other factors, loans grew by $50.0 million during the year ended
September 30, 2007 and as a result, $60,000 was added to the allowance for loan losses. CMS Bancorp has allocated the allowance among categories of loan types as well as classification status at each period end date.
Net Interest Income.
Net interest income after provision for loan losses increased $428,000, or 10.7%, to $4.4 million for the year
ended September 30, 2007 from $4.0 million for the year ended September 30, 2006. Increases in both average interest-earning assets and the yield on those assets in the year ended September 30, 2007 were partially offset by increases
in the cost of interest-bearing liabilities, and to a lesser degree, increases in interest-bearing deposit balances and borrowing from the FHLB and by the provision for loan losses.
The Federal funds rate increased from 3.75% at September 30, 2005 to 5.25% in September 2006 and remained at that level until it was reduced to
4.75% in September 2007. The interest rate on 10-year Treasury notes, from which CMS Bancorp generally prices conventional mortgages, was below the Federal funds rate for virtually all of both years. The positive impact of growth in the loan
portfolio and reinvesting the proceeds of maturing lower yielding securities and other interest-earning assets into higher yielding loans, as well as diversifying the loan portfolio into higher yielding multi-family, non-residential, construction,
home equity and commercial real estate loans was mitigated by the negative impact on net interest income of the flat, and at times inverted interest rate yield curve. Increases in short-term interest rates without a corresponding increase in
long-term interest rates have resulted, and may continue to result in a decrease in net interest spread.
Non-interest
Income.
Non-interest income of $279,000 in the year ended September 30, 2007 was lower than the comparable 2006 amount of $422,000 primarily due to gains on the sale of securities in 2006 of $110,000 which did not recur in 2007.
Non-interest Expenses.
Non-interest expenses were $5.5 million and $4.3 million for the years ended
September 30, 2007 and 2006, respectively, representing an increase of $1.2 million, or 27.9%. A contribution of $774,000 to fund the Foundation, made in connection with the conversion and offering of CMS Bancorps common stock resulted in
the increase in contributions in 2007. Higher salaries and benefits ($270,000), occupancy ($68,000) and equipment costs ($61,000) in the year ended September 30, 2007 resulted from investments in upgrading infrastructure, processes, technology
and personnel. These increases and a $75,000 increase in professional fees, in part resulting from costs associated with operating as a public company, were partially offset by lower advertising ($27,000), lower FDIC insurance premiums ($24,000),
lower directors fees ($37,000) and lower bank charges ($20,000).
Income Tax Expense.
The income tax expense was
$7,000 in the year ended September 30, 2007 compared to $40,000 in the comparable 2006 period. The tax provision is recorded based on reported income (loss), at the
11
CMS Bancorp, Inc.
statutory rate for federal tax purposes and the higher of the statutory rate or minimum tax rate for state purposes. Deductions for contributions are limited
to 10% of pre-tax income before the contribution and any unused charitable contribution can be carried forward for five years. The ability to realize sufficient future profits to utilize the contribution carryforward cannot be assured and, as a
result, the tax benefit of the contribution carryforward was not recognized by CMS Bancorp by providing for a valuation allowance. The effective tax rates in future periods could be reduced if earnings in those periods are sufficient to utilize any
portion of the contribution carryforward. The effective tax rate in both years was higher than the statutory rate as a result of providing for New York State minimum taxes.
Management of Market Risk
As a financial institution, CMS Bancorps primary component of market
risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a significant portion of its assets and liabilities. Fluctuations in interest rates will also affect the market
value of all interest-earning assets, other than those which possess a short-term maturity. Interest rates are highly sensitive to factors that are beyond CMS Bancorps control, including general economic conditions, inflation, changes in the
slope of the interest rate yield curve, monetary and fiscal policies of the federal government and the regulatory policies of government authorities. Due to the nature of CMS Bancorps operations, it is not subject to foreign currency exchange
or commodity price risk. Instead, CMS Bancorps real estate loan portfolio, concentrated in Westchester County, New York, is subject to the risks associated with the economic conditions prevailing in its market area.
The primary goals of CMS Bancorps interest rate management strategy are to determine the appropriate level of risk given the business strategy and
then manage that risk so as to reduce the exposure of CMS Bancorps net interest income to fluctuations in interest rates. Historically, CMS Bancorps lending activities have been dominated by one- to four-family real estate mortgage
loans. The primary source of funds has been deposits which have substantially shorter terms to maturity than the loan portfolio, and as a result, CMS Bancorp has employed certain strategies to manage the interest rate risk inherent in the
asset/liability mix, including but not limited to limiting terms of fixed rate one- to four-family mortgage loan originations, which are retained in CMS Bancorps portfolio, emphasizing investments with short- and intermediate-term maturities
of less than five years and borrowing term funds from FHLB.
In addition, the actual amount of time before mortgage loans are repaid can be
significantly impacted by changes in mortgage prepayment rates and market interest rates. Mortgage prepayment rates will vary due to a number of factors, including the regional economy in the area where the underlying mortgages were originated,
seasonal factors, demographic variables and the assumability of the underlying mortgages. However, the major factors affecting prepayment rates are prevailing interest rates, related mortgage refinancing opportunities and competition. CMS Bancorp
monitors interest rate sensitivity so that it can make adjustments to its asset and liability mix on a timely basis.
Interest Rate Risk
CMS Bancorp uses a simulation model to monitor interest rate risk. This model reports the net interest income and net economic value at risk under
different interest rate environments. Specifically, an analysis is performed of changes in net interest income assuming changes in interest rates, both up and down, from current rates over the three-year period following the current financial
statements.
The changes in interest income and interest expense due to changes in interest rates reflect the interest sensitivity of CMS
Bancorps interest earning assets and interest bearing liabilities. For example, in a rising interest rate environment, the interest income from an adjustable-rate mortgage will increase depending on its re-pricing characteristics while the
interest income from a fixed rate loan would not increase until it was repaid and loaned out at a higher interest rate.
12
CMS Bancorp, Inc.
The table below sets forth the latest available estimated changes in net interest income, as of
June 30, 2007 that would result from various basis point changes in interest rates over a twelve-month period.
|
|
|
|
|
|
|
|
|
|
|
Change in Interest Rates In Basis Points (Rate Shock)
|
|
Net Interest Income
|
|
|
Amount
|
|
Dollar
Change
|
|
|
Percent
Change
|
|
|
|
(Dollars in Thousands)
|
|
300
|
|
$
|
4,911
|
|
$
|
(211
|
)
|
|
-4.1
|
%
|
200
|
|
|
4,986
|
|
|
(136
|
)
|
|
-2.7
|
%
|
100
|
|
|
5,060
|
|
|
(62
|
)
|
|
-1.2
|
%
|
50
|
|
|
5,093
|
|
|
(29
|
)
|
|
-0.6
|
%
|
0
|
|
|
5,122
|
|
|
|
|
|
0.0
|
%
|
-50
|
|
|
5,147
|
|
|
25
|
|
|
0.4
|
%
|
-100
|
|
|
5,163
|
|
|
41
|
|
|
0.8
|
%
|
-200
|
|
|
5,198
|
|
|
76
|
|
|
1.5
|
%
|
-300
|
|
|
5,173
|
|
|
51
|
|
|
1.0
|
%
|
Liquidity and Capital Resources
CMS Bancorp is required to maintain levels of liquid assets sufficient to ensure CMS Bancorps safe and sound operation. Liquidity is the ability to
meet current and future financial obligations of a short-term nature. CMS Bancorp adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, repayment of
borrowings, when applicable, and loan funding commitments. CMS Bancorp also adjusts its liquidity level as appropriate to meet its asset/liability objectives.
CMS Bancorps primary sources of funds are deposits, brokered certificates of deposit, amortization and prepayments of loans, FHLB advances and loans, maturities of investment securities and funds provided from
operations. While scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flow and loan and mortgage-backed securities prepayments are greatly influenced by
market interest rates, economic conditions and competition. CMS Bancorps liquidity, represented by cash and cash equivalents and investment securities, is a product of its operating, investing and financing activities.
Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments,
such as Federal funds and other interest earning assets. If CMS Bancorp requires funds beyond its ability to generate them internally, borrowing agreements exist with the FHLB which provide an additional source of funds. At September 30, 2007,
CMS Bancorp had $30 million in loans from the FHLB and an available line of credit of $31.7 million.
In the year ended September 30,
2007, net cash provided from operating activities was $971,000, compared to net cash used of $1.5 million in the comparable 2006 period. In the year ended September 30, 2007, the net loss of $803,000 was offset by the non-cash portion of the
contribution to the Foundation of $714,000 and the decrease in other assets of $804,000 resulting from deferred stock offering costs associated with the initial public offering being reclassified to stockholders equity and deducted from the
proceeds of the shares sold in the conversion. In the year ended September 30, 2006 the increase in other assets used $952,000 of cash including costs relating to the issuance of common stock of $478,000 and $363,000 of receivables relating to
the timing of mortgage escrow deposits and payments. The increase in other liabilities in 2006 provided $606,000 of cash including $494,000 relating to income tax accruals.
13
CMS Bancorp, Inc.
In the year ended September 30, 2007 and 2006, investing activities used $37.3 million and $16.8
million of cash, respectively. In the 2007 period, maturities of U.S. Government bonds of $14.7 million, FHLB borrowings and higher deposits were used to fund net loan increases of $50.1 million, additions to premises and equipment of $773,000 and
FHLB stock purchases of $1.2 million. In the year ended September 30, 2006, net loan increases used $17.5 million of cash, purchases of investment securities used $4.0 million of cash and maturities of securities provided $4.3 million of cash.
Net cash provided by financing activities was $50.8 million and $9.0 million in the years ended September 30, 2007 and 2006,
respectively. In 2007, increases in deposits of $8.7 million, the net proceeds from the sale of CMS Bancorps common stock of $17.8 million and additional borrowing from the FHLB were partially offset by common stock issued to the ESOP. In the
2006 period, higher deposits and FHLB borrowing provided cash of $4.5 million and $4.2 million, respectively.
CMS Bancorp anticipates that
it will have sufficient funds available to meet its current loan and other commitments. As of September 30, 2007, CMS Bancorp had cash and cash equivalents of $17.5 million and securities of $4.6 million. At September 30, 2007, CMS Bancorp
has outstanding commitments to originate loans of $17.4 million and $9.3 million of undisbursed funds from approved lines of credit, principally under a homeowners equity line of credit lending program. Certificates of deposit scheduled to
mature in one year or less at September 30, 2007, totaled $47.1 million. Management believes that, based upon its experience and CMS Bancorps deposit flow history, a significant portion of such deposits will remain with CMS Bancorp.
CMS Bancorp had an unused overnight line of credit and an unused one month overnight repricing line of credit commitment with The Federal
Home Loan Bank of New York which total $31.7 million.
The following table sets forth Community Mutuals capital position at
September 30, 2007, compared to the minimum regulatory capital requirements:
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum
Requirement
|
|
|
To Be Well
Capitalized
Under Prompt
Corrective
Actions
Provisions
|
|
Tier 1 leverage ratio
|
|
8.99
|
%
|
|
4.00
|
%
|
|
5.00
|
%
|
Tier 1 risk-based capital ratio
|
|
17.05
|
%
|
|
N/A
|
|
|
6.00
|
%
|
Total risk-based capital ratio
|
|
17.34
|
%
|
|
8.00
|
%
|
|
10.00
|
%
|
Off-Balance Sheet Arrangements
CMS Bancorp does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on CMS Bancorps
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other
accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. CMS
Bancorp is currently evaluating the potential impact, if any, the adoption of FASB Statement No. 157 will have on our financial position, results of operations and cash flows.
14
CMS Bancorp, Inc.
On September 13, 2006, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulleting (SAB) No. 108. SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a potential current year
misstatement. Prior to SAB No. 108, companies might evaluate the materiality of financial-statement misstatements using either the income statement or balance sheet approach, with the income statement approach focusing on new misstatements
added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a companys balance sheet. Misstatements that would be material under one approach could be viewed as immaterial under
another approach, and not be corrected. SAB No. 108 now requires that companies view financial statement misstatements as material if they are material according to either the income statement or balance sheet approach. CMS Bancorp has analyzed
SAB 108 and determined that upon adoption it will have no impact on CMS Bancorps financial condition or results of operations.
In
July 2006, FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48
requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective
for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. CMS Bancorp does not believe that adopting FIN 48 will have any
material adverse impact on its consolidated financial statements.
In February 2007, FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value.
Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for CMS Bancorp as of October 1, 2007. CMS Bancorp believes
that the adoption of SFAS No. 159 will not have a material adverse impact on its financial condition and statement of operations.
In
April 2007, the FASB directed the FASB Staff to issue FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (FSP FIN 39-1). FSP FIN 39-1 modifies FIN No. 39, Offsetting of Amounts Related to Certain
Contracts, and permits companies to offset cash collateral receivables or payables with net derivative positions under certain circumstances. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early
adoption permitted. The application of this standard did not have an effect on the financial statements of CMS Bancorp.
In May 2007, the
FASB issued FASB Staff Position (FSP) FIN 48-1 Definition of Settlement in FASB Interpretation No. 48 (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The application of this standard did not have an effect on the financial statements of CMS Bancorp.
Impact of Inflation and Changing Prices
The
consolidated financial statements and related notes of CMS Bancorp have been prepared in accordance with generally accepted accounting principles (GAAP). GAAP generally requires the measurement of financial position and operating results
in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of CMS Bancorps operations. Unlike industrial
companies, CMS Bancorps assets and liabilities are primarily monetary in nature. As a result, the effect of changes in interest rates will have a more significant impact on CMS Bancorps performance than will the effect of changing prices
and inflation in general.
15
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
CMS Bancorp, Inc.
White Plains, New York
We have audited the accompanying
consolidated statements of financial condition of CMS Bancorp, Inc. and subsidiary (the Company) as of September 30, 2007 and 2006, and the related statements of operations, changes in stockholders equity and cash flows for
the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall 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 consolidated
financial position of CMS Bancorp, Inc. and subsidiary as of September 30, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Notes 2 and 14, the Company changed its method of accounting for the
Defined Benefit Pension Plan in 2007.
Beard Miller Company LLP
Pine
Brook, New Jersey
November 30, 2007
16
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and amounts due from depository institutions
|
|
$
|
1,164
|
|
|
$
|
2,709
|
|
Interest-bearing deposits
|
|
|
3,276
|
|
|
|
352
|
|
Federal funds sold
|
|
|
13,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
17,540
|
|
|
|
3,061
|
|
Securities available for sale
|
|
|
2,116
|
|
|
|
4,087
|
|
Securities held to maturity, estimated fair value of $2,463 and $15,073, respectively
|
|
|
2,449
|
|
|
|
15,211
|
|
Loans receivable, net of allowance for loan losses of $269 and $216, respectively
|
|
|
146,701
|
|
|
|
96,732
|
|
Premises and equipment
|
|
|
1,326
|
|
|
|
686
|
|
Federal Home Loan Bank of New York stock
|
|
|
1,550
|
|
|
|
351
|
|
Accrued interest receivable
|
|
|
795
|
|
|
|
638
|
|
Other assets
|
|
|
1,029
|
|
|
|
1,762
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
173,506
|
|
|
$
|
122,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
117,500
|
|
|
$
|
108,784
|
|
Advances from Federal Home Loan Bank of New York
|
|
|
30,000
|
|
|
|
4,204
|
|
Advance payments by borrowers for taxes and insurance
|
|
|
366
|
|
|
|
245
|
|
Other liabilities
|
|
|
1,286
|
|
|
|
988
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
149,152
|
|
|
|
114,221
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 1,000,000 shares authorized, None outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 14,000,000 shares authorized 2,055,165 issued and outstanding at September 30, 2007
|
|
|
21
|
|
|
|
|
|
Additional paid in capital
|
|
|
18,535
|
|
|
|
|
|
Retained earnings
|
|
|
7,641
|
|
|
|
8,444
|
|
Unearned Employee Stock Ownership Plan (ESOP) shares
|
|
|
(1,617
|
)
|
|
|
|
|
Accumulated other comprehensive (loss)
|
|
|
(226
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
24,354
|
|
|
|
8,307
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
173,506
|
|
|
$
|
122,528
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
17
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share data)
|
|
Interest income
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
6,521
|
|
|
$
|
4,785
|
|
Securities
|
|
|
452
|
|
|
|
741
|
|
Other interest-earning assets
|
|
|
532
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
7,505
|
|
|
|
5,720
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
2,684
|
|
|
|
1,693
|
|
Mortgage escrow funds
|
|
|
12
|
|
|
|
12
|
|
Borrowings
|
|
|
315
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
3,011
|
|
|
|
1,714
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
4,494
|
|
|
|
4,006
|
|
Provision for loan losses
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
4,434
|
|
|
|
4,006
|
|
|
|
|
|
|
|
|
|
|
Non-interest income
|
|
|
|
|
|
|
|
|
Fees and service charges
|
|
|
270
|
|
|
|
289
|
|
Gain on sale of securities available for sale
|
|
|
|
|
|
|
110
|
|
Other
|
|
|
9
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
|
279
|
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
Non-interest expenses
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
2,635
|
|
|
|
2,365
|
|
Net occupancy
|
|
|
623
|
|
|
|
555
|
|
Equipment
|
|
|
450
|
|
|
|
389
|
|
Professional fees
|
|
|
388
|
|
|
|
313
|
|
Advertising
|
|
|
64
|
|
|
|
92
|
|
Federal insurance premium
|
|
|
13
|
|
|
|
37
|
|
Directors fees
|
|
|
125
|
|
|
|
162
|
|
Other insurance
|
|
|
79
|
|
|
|
73
|
|
Bank charges
|
|
|
66
|
|
|
|
86
|
|
Contributions
|
|
|
795
|
|
|
|
14
|
|
Other
|
|
|
271
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
5,509
|
|
|
|
4,336
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(796
|
)
|
|
|
92
|
|
Income tax expense
|
|
|
7
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(803
|
)
|
|
$
|
52
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.38
|
)
|
|
|
N/A
|
(1)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,892,122
|
|
|
|
N/A
|
(1)
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company completed its initial public offering on April 3, 2007
|
See notes to consolidated financial statements.
18
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Years Ended September 30, 2007 and 2006
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
|
Unearned
ESOP
Shares
|
|
|
Accumulated
Other
Comprehensive
(Loss)
|
|
|
Total
|
|
Balance September 30, 2005
|
|
$
|
|
|
$
|
|
|
$
|
8,392
|
|
|
$
|
|
|
|
$
|
(275
|
)
|
|
$
|
8,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190
|
|
|
|
Balance September 30, 2006
|
|
|
|
|
|
|
|
|
8,444
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
8,307
|
|
Net loss
|
|
|
|
|
|
|
|
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
(803
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply FASB Statement No. 158, net of tax of $68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
(102
|
)
|
Issuance of common stock
|
|
|
21
|
|
|
18,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,555
|
|
Common stock issued to ESOP
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
(1,644
|
)
|
ESOP shares committed for release
|
|
|
|
|
|
1
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2007
|
|
$
|
21
|
|
$
|
18,535
|
|
$
|
7,641
|
|
|
$
|
(1,617
|
)
|
|
$
|
(226
|
)
|
|
$
|
24,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to
consolidated financial statements.
19
CMS Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(803
|
)
|
|
$
|
52
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation of premises and equipment
|
|
|
133
|
|
|
|
99
|
|
Amortization and accretion, net
|
|
|
76
|
|
|
|
58
|
|
Gain on sale of securities available for sale
|
|
|
|
|
|
|
(110
|
)
|
Provision for loan losses
|
|
|
60
|
|
|
|
|
|
Deferred income taxes
|
|
|
(13
|
)
|
|
|
65
|
|
Stock contributed to The Community Mutual Charitable Foundation
|
|
|
714
|
|
|
|
|
|
ESOP expense
|
|
|
28
|
|
|
|
|
|
(Increase) in accrued interest receivable
|
|
|
(157
|
)
|
|
|
(123
|
)
|
Decrease (increase) in other assets
|
|
|
804
|
|
|
|
(952
|
)
|
Increase (decrease) in accrued interest payable
|
|
|
383
|
|
|
|
(28
|
)
|
(Decrease) in other liabilities
|
|
|
(254
|
)
|
|
|
(606
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided from (used in) operating activities
|
|
|
971
|
|
|
|
(1,545
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of securities available for sale
|
|
|
|
|
|
|
(4,007
|
)
|
Proceeds from sales of securities available for sale
|
|
|
|
|
|
|
129
|
|
Proceeds from maturities of securities held to maturity
|
|
|
12,731
|
|
|
|
4,300
|
|
Proceeds from maturities of securities available for sale
|
|
|
2,000
|
|
|
|
|
|
Principal repayments on securities available for sale
|
|
|
10
|
|
|
|
20
|
|
Principal repayments on securities held to maturity
|
|
|
31
|
|
|
|
46
|
|
Net (increase) in loans receivable
|
|
|
(50,122
|
)
|
|
|
(17,507
|
)
|
Additions to premises and equipment
|
|
|
(773
|
)
|
|
|
(213
|
)
|
(Purchase) redemption of Federal Home Loan Bank of New York stock
|
|
|
(1,199
|
)
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(37,322
|
)
|
|
|
(16,816
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
8,716
|
|
|
|
4,538
|
|
Advances from Federal Home Loan Bank of New York
|
|
|
30,000
|
|
|
|
4,204
|
|
Repayment of advances from Federal Home Loan Bank of New York
|
|
|
(4,204
|
)
|
|
|
|
|
Net increase in payments by borrowers for taxes and insurance
|
|
|
121
|
|
|
|
244
|
|
Proceeds from issuance of common stock
|
|
|
17,841
|
|
|
|
|
|
Stock issued to ESOP
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided from financing activities
|
|
|
50,830
|
|
|
|
8,986
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
14,479
|
|
|
|
(9,375
|
)
|
Cash and cash equivalentsbeginning
|
|
|
3,061
|
|
|
|
12,436
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsending
|
|
$
|
17,540
|
|
|
$
|
3,061
|
|
|
|
|
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
|
|
|
Cash paid during the period for
|
|
|
|
|
|
|
|
|
Interest on deposits and borrowings
|
|
$
|
2,628
|
|
|
$
|
1,686
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
9
|
|
|
$
|
707
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
20
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements
Note 1Principles of Consolidation, Reorganization and Initial
Public Offering
The consolidated financial statements include the accounts of CMS Bancorp, Inc. (the Company) and its
wholly owned subsidiary, Community Mutual Savings Bank (the Bank). The Companys business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.
On April 3, 2007, the Bank reorganized from a New York State-chartered mutual savings bank to a federally-chartered mutual savings
bank and simultaneously converted from a federally-chartered mutual savings bank to a federally-chartered stock savings bank, with the concurrent formation of a stock holding company which conducted a subscription offering with depositors of the
Bank receiving first priority in the offering. After the conversion and offering, all of the Banks stock is owned by the Company. In connection with the conversion and offering, the Company issued 2,055,165 shares of common stock, consisting
of 164,413 shares to the ESOP, 71,415 shares to The Community Mutual Charitable Foundation (the Foundation) and 1,819,337 shares sold to the public at a purchase price of $10.00 per share. The net proceeds from the sale of shares to the
public amounted to $16,196,000 ($18,193,000 of proceeds, net of reorganization expenses of $1,997,000). The management and business operations of the Bank continued unchanged after the conversion and offering.
Note 2Summary of Significant Accounting Policies
Basis of
Financial Statement Presentation
The consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the
statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the assessment of whether deferred taxes are more likely than not to be
realized. Management believes that the allowance for loan losses represents its best estimate of losses known and inherent in the loan portfolio that are both probable and reasonable to estimate. While management uses available information to
recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in the Companys market area. Managements assessment as to the amount of deferred taxes more
likely than not to be realized is based upon future taxable income, which is subject to revision upon updated information.
In addition,
various regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on
their judgments about information available to them at the time of their examination.
Cash and Cash Equivalents
Cash and cash equivalents include cash and amounts due from depository institutions, interest-earning deposits and federal funds sold, all with original
maturities of three months or less.
Securities
Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought
21
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized
holding gains and losses included in earnings. Debt and equity securities not classified as trading securities or as held-to-maturity securities, are classified as available for sale securities and reported at fair value, with unrealized holding
gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income (loss), as a separate component of stockholders equity. The Company has no securities classified as trading securities.
On a quarterly basis, the Company makes an assessment to determine whether there have been any events or economic circumstances to indicate that a
security on which there is an unrealized loss is impaired on an other-than-temporary basis. The Company considers many factors including the severity and duration of the impairment; the intent and ability of the Company to hold the security for a
period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit ratings and recent downgrades. Securities on which there is an unrealized loss that is deemed to be
other-than-temporary are written down to fair value with the write-down recorded as a realized loss.
Premiums and discounts on all debt
securities are amortized or accreted to income by use of the interest method over the estimated remaining period to contractual maturity.
Gains or losses on sales of securities are recognized on the specific identification method.
Loans Receivable
Loans receivable are carried at unpaid principal balances and net deferred loan origination costs less the allowance for loan losses.
The Company defers loan origination fees and certain direct loan origination costs and accretes net amounts as an adjustment of yield over the
contractual lives of the related loans.
Recognition of interest income is discontinued and existing accrued interest receivable is
reversed on loans that are more than ninety days delinquent and where management, through its loan review process, feels such interest is uncollectible. Income is subsequently recognized only to the extent that cash payments are received until, in
managements judgment, the borrowers ability to make periodic interest and principal payments is probable, in which case the loan is returned to an accrual status.
Allowance for Loan Losses
An allowance for loan losses is maintained at a level that represents
managements best estimate of losses known and inherent in the loan portfolio that are both probable and estimable. The allowance is decreased by loan charge-offs, increased by subsequent recoveries of loans previously charged off, and then
adjusted, via either a charge or credit to operations, to an amount determined by management to be necessary. Loans or portions thereof, are charged off when, after collection efforts are exhausted, they are determined to be uncollectible.
Management of the Company, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume inherent in its loan activities, along with the general economic and real estate market
conditions. The Company utilizes a two tier approach: (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan
portfolio. The Company maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status,
size of loans, type of collateral and
22
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
financial condition of the borrowers. Specific loan loss allowances are established for identified loans based on a review of such information and/or
appraisals of the underlying collateral. General loan losses are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions and managements
judgment. Although management believes that specific and general loan losses are established in accordance with managements best estimate, actual losses are dependent upon future events and, as such, further additions to the level of loan loss
allowances may be necessary.
A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of loan impairment is measured based on the present value of expected future cash flows discounted at the
loans effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependant. All loans identified as impaired are evaluated independently. The
Company does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied first to interest receivable and then to principal.
Concentration of Risk
The Companys lending activities are concentrated in loans secured by real estate located in the
Westchester County, New York and surrounding areas.
Premises and Equipment
Premises and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost
less accumulated depreciation and amortization. Depreciation and amortization charges are computed using the straight-line method over the following estimated useful lives:
|
|
|
|
|
Years
|
Buildings and improvements
|
|
10 - 50
|
Furnishings and equipment
|
|
3 - 10
|
Leasehold improvements
|
|
The lesser of
useful life or term
of lease
|
Significant renewals and betterments are charged to the property and equipment account.
Maintenance and repairs are charged to expense in the year incurred. Rental income is netted against occupancy expenses in the consolidated statements of operations.
Advertising
Advertising expense is recognized as incurred.
Business and Interest-Rate Risk
The Company is
principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to originate loans secured by real estate and purchase investment and mortgage-backed securities.
The potential for interest-rate risk exists when interest-sensitive
23
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
liabilities reprice at different times and rates than interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets,
thereby reducing net interest income. Management regularly monitors the maturity structure of the Companys assets and liabilities in order to measure its level of interest-rate risk and plan for future volatility.
Income Taxes
The Company and the Bank file a
consolidated federal income tax return. Federal income taxes are allocated to the Company and the Bank based upon the contribution of their respective income or loss to the consolidated return. The Company and the Bank file a combined state income
tax return.
Federal and state income taxes have been provided on the basis of reported income. The amounts reflected on the income tax
returns differ from these provisions due principally to temporary differences in the treatment of certain items for financial statement and income tax reporting purposes. Deferred income taxes have been recorded to recognize such temporary
differences. The realization of deferred tax assets is assessed and a valuation allowance is provided, when necessary, for that portion of the asset which more likely than not will not be realized.
Benefit Plans
The Company has a non-contributory
defined benefit pension plan covering all eligible employees. The Company also has a 401(k) retirement plan and an Employee Stock Ownership Plan (ESOP), both of which are defined contribution plans.
The benefits for the pension plan are based on years of service and employees compensation. Prior service costs for the pension plan generally are
amortized over the estimated remaining service periods of employees. The Company uses the corridor approach in the valuation of the pension plan which defers all actuarial gains and losses resulting from differences between actual results and
economic estimates or actuarial assumptions. For the pension plan, these unrecognized gains and losses are amortized to income when net gains and losses exceed 10% of the greater of the market-value of plan assets or the projected benefit obligation
at the beginning of the plan year.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of Statement No.s 87, 88, 106 and 132R. SFAS No. 158 requires major
changes to accounting for defined benefit and other postretirement plans. SFAS No. 158, which the Company adopted as of September 30, 2007, requires recognition of the over-funded or under-funded status of the benefit plans as an asset or
liability in the consolidated statement of financial condition, with the changes in the funded status recorded through other comprehensive income in the year in which the change occurs. The impact of the adoption of SFAS No. 158 is more fully
described in Note 14 to the consolidated financial statements.
Net Income (Loss) Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding Basic net loss per
common share for the year ended September 30, 2007 is calculated by utilizing the net loss for the period April 3, 2007, the date the Company completed its public stock offering, through September 30, 2007 ($723,000) and the weighted
average number of common outstanding during the same period. The company has not granted any restricted awards or stock options and, during the year ended
24
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
September 30, 2007, had no potential dilutive common stock equivalents. Unallocated common shares held by the ESOP are not included in the weighted
average number of common shares outstanding for purposes of calculating both basic and dilutive net loss per share until they are committed to be released. Net income per share data is not presented for the year ended September 30, 2006, as the
Company had no publicly held shares outstanding prior to the Companys initial public offering on April 3, 2007.
Off-Balance Sheet
Credit-Related Financial Instruments
In the ordinary course of business, the Company enters into commitments to extend credit,
including commitment under lines of credit. Such financial instruments are recorded when they are funded.
Note 3Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
(In thousands)
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
2,042
|
|
$
|
|
|
$
|
1
|
|
$
|
2,041
|
Mortgage-backed securities
|
|
|
71
|
|
|
4
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,113
|
|
$
|
4
|
|
$
|
1
|
|
$
|
2,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
1,991
|
|
$
|
|
|
$
|
9
|
|
$
|
1,982
|
Due after one year through five years
|
|
|
2,034
|
|
|
|
|
|
13
|
|
|
2,021
|
Mortgage-backed securities
|
|
|
81
|
|
|
3
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,106
|
|
$
|
3
|
|
$
|
22
|
|
$
|
4,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The age of unrealized losses and fair value of related securities available for sale at
September 30, 2007 and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
|
(In thousands)
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
|
|
$
|
|
|
$
|
2,041
|
|
$
|
1
|
|
$
|
2,041
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
4,003
|
|
$
|
22
|
|
$
|
|
|
$
|
|
|
$
|
4,003
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2007, management concluded that the unrealized losses above (which related
to two securities) are temporary in nature since they are primarily related to market interest rates and not related to the underlying credit quality of the issuer of securities. Additionally, the Company has the intent and ability to hold these
investments for a period of time necessary to recover the amortized cost.
25
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Proceeds from sales of securities available for sale during the year ended September 30, 2006
were $129,000 and gross gains of $110,000 were realized on those sales. There were no sales of securities available for sale during the year ended September 30, 2007.
Note 4Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
|
(In thousands)
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
2,200
|
|
$
|
|
|
$
|
4
|
|
$
|
2,196
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
249
|
|
|
18
|
|
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,449
|
|
$
|
18
|
|
$
|
4
|
|
$
|
2,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
12,731
|
|
$
|
|
|
$
|
112
|
|
$
|
12,619
|
After one but within five years
|
|
|
2,200
|
|
|
|
|
|
36
|
|
|
2,164
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
280
|
|
|
10
|
|
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,211
|
|
$
|
10
|
|
$
|
148
|
|
$
|
15,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The age of unrealized losses and fair value of related securities held to maturity at
September 30, 2007 and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
|
(In thousands)
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
|
|
$
|
|
|
$
|
2,196
|
|
$
|
4
|
|
$
|
2,196
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
|
|
$
|
|
|
$
|
14,783
|
|
$
|
148
|
|
$
|
14,783
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2007, management concluded that the unrealized losses above (which relate
to 18 securities) were temporary in nature since they were primarily related to market interest rates and not related to the underlying credit quality of the issuer of the securities. Additionally, the Company has the intent and ability to hold
these investments for a period of time necessary to recover the amortized cost.
There were no sales of securities held to maturity during
the years ended September 30, 2007 and 2006.
26
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Note 5Loans Receivable
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Real estate
|
|
|
|
|
|
|
|
|
One-to four-family
|
|
$
|
131,579
|
|
|
$
|
86,774
|
|
Multi-family
|
|
|
1,509
|
|
|
|
1,757
|
|
Non-residential
|
|
|
2,879
|
|
|
|
1,145
|
|
Construction
|
|
|
954
|
|
|
|
250
|
|
Equity and second mortgages
|
|
|
7,974
|
|
|
|
5,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,895
|
|
|
|
95,572
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
500
|
|
|
|
550
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
Passbook and other
|
|
|
424
|
|
|
|
151
|
|
Student
|
|
|
20
|
|
|
|
26
|
|
Checking overdraft
|
|
|
15
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
459
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
Total Loans
|
|
|
145,854
|
|
|
|
96,317
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(269
|
)
|
|
|
(216
|
)
|
Net deferred loan origination costs, net
|
|
|
1,116
|
|
|
|
631
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
146,701
|
|
|
$
|
96,732
|
|
|
|
|
|
|
|
|
|
|
The following is an analysis of the allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Balancebeginning of year
|
|
$
|
216
|
|
|
$
|
238
|
|
Provision charged to operations
|
|
|
60
|
|
|
|
|
|
Loans charged off
|
|
|
(7
|
)
|
|
|
(24
|
)
|
Recovery of loans previously charged off
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Balanceend of year
|
|
$
|
269
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2007 and 2006, and during the years then ended, the Company had no loans
which were considered to be impaired or placed on non-accrual status.
At September 30, 2007 and 2006, loans serviced for the benefit
of others totaled $550,000 and $624,000, respectively.
27
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Note 6Premises and Equipment
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Land
|
|
$
|
179
|
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements
|
|
|
1,150
|
|
|
|
477
|
|
Accumulated depreciation
|
|
|
(433
|
)
|
|
|
(441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
717
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Construction in process
|
|
|
|
|
|
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
445
|
|
|
|
427
|
|
Accumulated amortization
|
|
|
(330
|
)
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furnishings and equipment
|
|
|
1,899
|
|
|
|
1,705
|
|
Accumulated depreciation
|
|
|
(1,584
|
)
|
|
|
(1,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
315
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,326
|
|
|
$
|
686
|
|
|
|
|
|
|
|
|
|
|
Note 7Accrued Interest Receivable
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
Loans
|
|
$
|
741
|
|
$
|
473
|
Securities
|
|
|
54
|
|
|
165
|
|
|
|
|
|
|
|
|
|
$
|
795
|
|
$
|
638
|
|
|
|
|
|
|
|
Note 8Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
Weighted
Average
Rate
|
|
|
Amount
|
|
Weighted
Average
Rate
|
|
|
|
(Dollars in thousands)
|
|
Demand deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing deposits
|
|
$
|
12,487
|
|
|
|
|
$
|
12,286
|
|
|
|
Interest bearing deposits
|
|
|
8,173
|
|
3.92
|
%
|
|
|
4,886
|
|
1.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,660
|
|
1.55
|
%
|
|
|
17,172
|
|
0.48
|
%
|
Savings and club deposits
|
|
|
42,026
|
|
0.40
|
%
|
|
|
49,714
|
|
0.40
|
%
|
Certificates of deposit
|
|
|
54,814
|
|
4.78
|
%
|
|
|
41,898
|
|
4.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
117,500
|
|
2.65
|
%
|
|
$
|
108,784
|
|
1.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
The scheduled maturities of certificates of deposit are as follows:
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
One year or less
|
|
$
|
47,141
|
|
$
|
29,475
|
After one to two years
|
|
|
2,636
|
|
|
7,204
|
After two to three years
|
|
|
1,664
|
|
|
845
|
After three years to four years
|
|
|
3,256
|
|
|
1,237
|
After four years to five years
|
|
|
117
|
|
|
3,137
|
|
|
|
|
|
|
|
|
|
$
|
54,814
|
|
$
|
41,898
|
|
|
|
|
|
|
|
The aggregate amount of certificates of deposit with balances of $100,000 or more totaled
approximately $17,392,000 and $12,181,000 at September 30, 2007 and 2006, respectively. Deposits in excess of $100,000 are generally not insured by Federal Deposit Insurance Corporation.
Interest expense on deposits consists of the following:
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
Demand deposits
|
|
$
|
238
|
|
$
|
101
|
Savings and club deposits
|
|
|
178
|
|
|
213
|
Certificates of deposit
|
|
|
2,268
|
|
|
1,379
|
|
|
|
|
|
|
|
|
|
$
|
2,684
|
|
$
|
1,693
|
|
|
|
|
|
|
|
Note 9Advances from Federal Home Loan Bank of New York (FHLB)
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
Overnight borrowings with interest at 5.45%
|
|
$
|
|
|
$
|
4,204
|
Five year advance, maturing August 15, 2012, convertible on August 15, 2010, with interest payable quarterly at
4.78%
|
|
|
10,000
|
|
|
|
Five year advance, maturing August 8, 2012, convertible on August 8, 2009, with interest payable quarterly at 4.81%
|
|
|
10,000
|
|
|
|
Seven year fixed rate advance with interest at 5.57%, payable in monthly installments of principal and interest of $57,000 with a balloon
payment of $8,925,000 on August 8, 2014
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,000
|
|
$
|
4,204
|
|
|
|
|
|
|
|
29
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
A schedule of the Companys annual principal obligations to the FHLB is as follows:
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
2007
|
|
$
|
|
|
$
|
4,204
|
2008
|
|
|
133
|
|
|
|
2009
|
|
|
140
|
|
|
|
2010
|
|
|
149
|
|
|
|
2011
|
|
|
157
|
|
|
|
2012
|
|
|
20,166
|
|
|
|
Thereafter
|
|
|
9,255
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,000
|
|
$
|
4,204
|
|
|
|
|
|
|
|
These FHLB advances are secured by stock of the FHLB in the amount of $1,550,000 and $351,000 at
September 30, 2007 and 2006, respectively, and a blanket assignment of qualifying loans.
The Company has established an overnight
line of credit and comparison (DRA) commitment, each in the amount of $15,876,600, with the FHLB, which will expire on July 31, 2008. As of September 30, 2006, there was $4,204,000 outstanding against these credit lines.
Note 10Lease Commitments and Total Rental Expense
The Company leases six locations under long-term operating leases. Future minimum lease payments by year and in the aggregate, under noncancellable operating leases with initial or remaining terms of one year or more, consisted of the
following at September 30, 2007 (in thousands):
|
|
|
|
Year ended September 30,
|
|
|
2008
|
|
$
|
441
|
2009
|
|
|
364
|
2010
|
|
|
356
|
2011
|
|
|
280
|
2012
|
|
|
277
|
Thereafter
|
|
|
1,121
|
|
|
|
|
|
|
$
|
2,839
|
|
|
|
|
The total rental expense and related charges for all leases for the years ended September 30,
2007 and 2006 was approximately $470,000 and $464,000, respectively.
Note 11Income Taxes
The Company qualifies as a thrift under the provisions of the Internal Revenue Code and, therefore, was permitted, prior to January 1, 1996, to
deduct from federal taxable income an allowance for bad debts based on 8% of taxable income before such deduction, less certain adjustments, subject to certain limitations. Beginning January 1, 1996, the Company, for federal income tax
purposes, must calculate its tax bad debt deduction using either the experience or specific charge off method. The New York State tax law permits the Company to deduct 32% of its taxable income before bad debt deduction, subject to certain
limitations.
30
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Retained earnings at September 30, 2007, include approximately $1,981,000 of such bad debt
deduction for which federal income taxes have not been provided. In addition, deferred New York State taxes have not been provided on bad debt allowance in the amount of $4,100,000. If such amount is used for purposes other than for bad debt losses,
including distributions in liquidation, it will be subject to income tax at the then current rate.
The components of income taxes
(benefit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Current income tax expense
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
5
|
|
|
$
|
(22
|
)
|
State
|
|
|
15
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit)
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(10
|
)
|
|
|
50
|
|
State
|
|
|
(3
|
)
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation between the reported income taxes and the federal
income taxes which would be computed by applying the normal federal income tax rate of 34% to income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
Percent of
Pretax
Loss
|
|
|
2006
|
|
Percent of
Pretax
Income
|
|
|
|
(Dollars in thousands)
|
|
Federal income taxes (benefit)
|
|
$
|
(271
|
)
|
|
(34.0
|
)%
|
|
$
|
31
|
|
34.0
|
%
|
Increases (decreases) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
270
|
|
|
33.6
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax effect
|
|
|
8
|
|
|
1.0
|
|
|
|
8
|
|
8.6
|
|
Other items, net
|
|
|
|
|
|
|
|
|
|
1
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Income Taxes
|
|
$
|
7
|
|
|
0.6
|
%
|
|
$
|
40
|
|
43.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
The tax effects of existing temporary differences that give rise to significant portions of net
deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
|
2006
|
|
|
(In Thousands)
|
Deferred tax assets
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
108
|
|
|
$
|
86
|
Deferred rent
|
|
|
28
|
|
|
|
25
|
Contribution carryover
|
|
|
270
|
|
|
|
|
SFAS 158 adjustment
|
|
|
152
|
|
|
|
|
Minimum pension liability
|
|
|
|
|
|
|
84
|
Unrealized loss on securities available for sale
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
Total Deferred Tax Assets
|
|
|
558
|
|
|
|
203
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
Accrued pension
|
|
|
30
|
|
|
|
9
|
Depreciation
|
|
|
41
|
|
|
|
30
|
Unrealized gain on securities available for sale
|
|
|
1
|
|
|
|
|
Other
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
Total Deferred Tax Liabilities
|
|
|
72
|
|
|
|
58
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets Included in Other Assets
|
|
$
|
216
|
|
|
$
|
145
|
|
|
|
|
|
|
|
|
Note 12Comprehensive Income (Loss)
Total comprehensive income represents the sum of net income and items of other comprehensive income or loss that are reported directly in
equity on an after tax basis, such as the net unrealized holding gain or loss on securities available for sale and minimum pension liability adjustments. The Company has reported its total comprehensive income in the statements of changes in
stockholders equity.
Other comprehensive income (loss) is summarized as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
2006
|
|
|
|
(In thousands)
|
|
Securities available for sale
|
|
|
|
|
|
|
|
Net unrealized holding gains (losses) arising during the year, net of income taxes of $9,000 and $(6,000), respectively
|
|
$
|
13
|
|
$
|
(7
|
)
|
Reclassification adjustment for net gains included in net income, net of income taxes of $(43,000)
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
(74
|
)
|
Adjustment to additional minimum pension liability, net of income taxes of $140,000
|
|
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
32
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Accumulated other comprehensive loss, which is included in stockholders equity, consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Net unrealized holding gains (losses) on securities available for sale, net of deferred income tax of $1,000 and $(8,000),
respectively
|
|
$
|
2
|
|
|
$
|
(11
|
)
|
SFAS 158 adjustment, net of related deferred taxes of ($152,000)
|
|
|
(228
|
)
|
|
|
|
|
Minimum pension liability, net of related deferred income taxes of $(84,000)
|
|
|
|
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(226
|
)
|
|
$
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
Note 13Regulatory Matters
For the purpose of granting eligible account holders a priority in the event of future liquidation, the Bank, at the time of conversion, established a
liquidation account in an amount equal to its retained earnings of $8.3 million at September 30, 2006. In the event of a future liquidation of the converted Bank (and only in such event), an eligible account holder who continues to maintain his
or her deposit account shall be entitled to receive a distribution from the special account. The total amount of the special account is decreased (but never increased) in an amount proportionally corresponding to decreases in the deposit account
balances of eligible account holders as of each subsequent year end. After conversion, no dividends may be paid to stockholders if such dividends would reduce retained earnings of the converted Bank below the amount required by the special account.
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 Company. 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 Banks assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. The
Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets
(as defined), and of Tier 1 capital to total assets (as defined).
The following tables present a reconciliation of the Banks capital
per generally accepted accounting principles (GAAP) and regulatory capital at the dates presented:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
GAAP capital
|
|
$
|
15,628
|
|
|
$
|
8,307
|
|
Disallowed deferred tax asset
|
|
|
(216
|
)
|
|
|
|
|
Pension liability, net of deferred taxes
|
|
|
228
|
|
|
|
|
|
Unrealized (gain) loss on securities available for sale
|
|
|
(2
|
)
|
|
|
11
|
|
Intangible asset
|
|
|
(64
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
Tier I and tangible capital
|
|
|
15,574
|
|
|
|
8,254
|
|
General valuation allowance
|
|
|
269
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
Total Regulatory Capital
|
|
$
|
15,843
|
|
|
$
|
8,470
|
|
|
|
|
|
|
|
|
|
|
33
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
For Capital Adequacy
Purposes
|
|
|
To be Well Capitalized
under Prompt
Corrective Action
Provisions
|
|
|
|
Amount
|
|
Ratio
|
|
|
Amount
|
|
Ratio
|
|
|
Amount
|
|
Ratio
|
|
|
|
(Dollars in Thousands)
|
|
September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets)
|
|
$
|
15,843
|
|
17.34
|
%
|
|
$
|
³
7,309
|
|
³
|
8.00
|
%
|
|
$
|
³
9,136
|
|
³
|
10.00
|
%
|
Core (Tier 1) capital (to risk-weighted assets)
|
|
|
15,574
|
|
17.05
|
|
|
|
|
|
|
|
|
|
³
|
5,482
|
|
³
|
6.00
|
|
Core (Tier 1) capital (to total assets)
|
|
|
15,574
|
|
8.99
|
|
|
³
|
6,930
|
|
³
|
4.00
|
|
|
³
|
8,662
|
|
³
|
5.00
|
|
Tangible capital (to total assets)
|
|
|
15,574
|
|
8.99
|
|
|
³
|
2,599
|
|
³
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets)
|
|
$
|
8,470
|
|
13.02
|
%
|
|
$
|
³
5,204
|
|
³
|
8.00
|
%
|
|
$
|
³
6,505
|
|
³
|
10.00
|
%
|
Core (Tier 1) capital (to risk-weighted assets)
|
|
|
8,254
|
|
12.69
|
|
|
|
|
|
|
|
|
|
³
|
3,903
|
|
³
|
6.00
|
|
Core (Tier 1) capital (to average total assets)
|
|
|
8,254
|
|
6.95
|
|
|
³
|
4,753
|
|
³
|
4.00
|
|
|
³
|
5,941
|
|
³
|
5.00
|
|
Tangible capital (to average total assets)
|
|
|
8,254
|
|
6.95
|
|
|
³
|
1,782
|
|
³
|
1.50
|
|
|
|
|
|
|
|
|
As of the most recent notification from the regulatory authorities, the Bank was categorized as
well-capitalized under the regulatory framework for prompt corrective action. There are no conditions existing or events which have occurred since notification that management believes have changed the Banks category.
Note 14Benefit Plans
Pension Plan
The Bank maintains a non-contributory defined benefit pension plan (the Plan) covering all eligible employees. The benefits are based on
employees years of service and compensation. The Banks policy is to fund the Plan annually with at least the minimum contribution deductible and/or allowable for federal income tax purposes.
34
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
The following table sets forth the Plans funded status and components of net periodic pension
cost:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars in thousands)
|
|
Change in benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligationbeginning of year
|
|
$
|
3,385
|
|
|
$
|
3,997
|
|
Service cost
|
|
|
58
|
|
|
|
103
|
|
Interest cost
|
|
|
186
|
|
|
|
180
|
|
Actuarial (gain) loss
|
|
|
23
|
|
|
|
(779
|
)
|
Benefits paid
|
|
|
(165
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligationend of year
|
|
$
|
3,487
|
|
|
$
|
3,385
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
Fair value of assetsbeginning of year
|
|
$
|
2,873
|
|
|
$
|
2,748
|
|
Actual return on plan assets
|
|
|
368
|
|
|
|
181
|
|
Benefits paid
|
|
|
(165
|
)
|
|
|
(116
|
)
|
Contributions
|
|
|
110
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Fair value of assetsend of year
|
|
$
|
3,186
|
|
|
$
|
2,873
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
3,197
|
|
|
$
|
3,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
(3,487
|
)
|
|
$
|
(3,385
|
)
|
Fair value of assets
|
|
|
3,186
|
|
|
|
2,873
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(301
|
)
|
|
|
(512
|
)
|
Unrecognized prior service cost
|
|
|
|
|
|
|
33
|
|
Unrecognized net loss
|
|
|
|
|
|
|
505
|
|
Additional minimum liability
|
|
|
|
|
|
|
(243
|
)
|
|
|
|
|
|
|
|
|
|
Accrued pension cost included in other liabilities
|
|
$
|
(301
|
)
|
|
$
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the statement of financial condition consist of:
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
(301
|
)
|
|
$
|
(217
|
)
|
Additional minimum liability
|
|
|
|
|
|
|
(243
|
)
|
Intangible asset
|
|
|
|
|
|
|
33
|
|
Accumulated other comprehensive income, pre-tax
|
|
|
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of year
|
|
$
|
(301
|
)
|
|
$
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss, pre-tax, consist of:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
(351
|
)
|
|
$
|
|
|
Prior service cost
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(380
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Valuation assumptions:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
35
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
|
|
|
|
|
|
|
|
|
|
|
Years Ended September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars in thousands)
|
|
Net periodic pension expense
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
58
|
|
|
$
|
103
|
|
Interest cost
|
|
|
186
|
|
|
|
180
|
|
Expected return on assets
|
|
|
(199
|
)
|
|
|
(190
|
)
|
Amortization of prior service cost
|
|
|
4
|
|
|
|
3
|
|
Amortization of unrecognized net loss
|
|
|
9
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
Total net periodic pension expense
|
|
$
|
58
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
Valuation assumptions:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
5.25
|
%
|
Rate of return on long-term assets
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
Salary increase rate
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
Impact of SFAS 158
The impact of the adoption, effective September 30, 2007, of SFAS No. 158, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
FAS # 158
Adjustment
|
|
|
FAS # 158
Adjustment
(In thousands)
|
|
|
After
FAS # 158
Adjustment
|
|
Other assets
|
|
$
|
1,035
|
|
|
$
|
(6
|
)
|
|
$
|
1,029
|
|
Total assets
|
|
|
173,512
|
|
|
|
(6
|
)
|
|
|
173,506
|
|
Other liabilities
|
|
|
1,190
|
|
|
|
96
|
|
|
|
1,286
|
|
Total liabilities
|
|
|
149,056
|
|
|
|
96
|
|
|
|
149,152
|
|
Accumulated other comprehensive loss
|
|
|
(124
|
)
|
|
|
(102
|
)
|
|
|
(226
|
)
|
Total liabilities and stockholders equity
|
|
|
173,512
|
|
|
|
(6
|
)
|
|
|
173,506
|
|
As of September 30, 2007, unrecognized losses of $351,000 and unrecognized prior service
costs of $29,000 were included in accumulated other comprehensive loss in accordance with FAS No. 158. As required under FAS No. 158, for fiscal year ended September 30, 2008, $4,000 in unrecognized past service costs are expected to
be recognized as a component of net periodic benefit plan costs.
The plan assets are invested as follows:
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
Equity securities
|
|
57
|
%
|
|
52
|
%
|
Guaranteed insurance funds
|
|
43
|
%
|
|
48
|
%
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
36
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
At September 30, 2007, expected benefit payments were as follows (in thousands):
|
|
|
|
Year ended September 30,
|
|
|
2008
|
|
$
|
164
|
2009
|
|
|
161
|
2010
|
|
|
159
|
2011
|
|
|
157
|
2012
|
|
|
154
|
2013 to 2017
|
|
|
880
|
|
|
|
|
|
|
$
|
1,675
|
|
|
|
|
The Bank expects to contribute $36,000 to the Plan during the year ended September 30, 2008.
The long-term rate of return on assets assumption is set based on historical returns earned by equities and fixed income securities,
adjusted to reflect expectations of future returns as applied to the Plans actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the ranges of 5.0% to 9.0% and 2.0% to 6.0%,
respectively. Additionally, the long-term inflation rate is projected to be 2.5%. When these overall return expectations are applied to the Plans largest allocation, the result is an expected return of 8.0% to 10.0%.
The Bank plans to maintain the current asset mix and seek to achieve an optimal risk/reward profile by limiting market exposure to present levels. It is
expected to have a 4.0% to 5.0% return from fixed income and a 5.0% to 9.0% rate of return from equities. The overall expected long-term rate of return on Plan assets used was 7.0% for both 2007 and 2006.
Savings and Investment Plan
The Company has
implemented a Savings and Investment Plan (the Savings Plan) pursuant to Section 401(k) of the Internal Revenue Code for all eligible employees. Under the Savings Plan, employees may elect to contribute a percentage of their
compensation, subject to limits. The Company makes matching contribution equal to 50% of employees contribution, up to 8.0% of compensation, subject to certain limitations. The Savings Plan expenses for the years ended September 30, 2007
and 2006, amounted to approximately $34,000 and $29,000, respectively.
Employees Stock Ownership Plan (ESOP)
The Company established an ESOP for all eligible employees in connection with the public offering of common stock in April 2007. The ESOP used the
proceeds of a $1.6 million, 8.0% term loan from the Company to purchase 164,413 shares of Company common stock. The term loan from the Company to the ESOP is payable in annual installments of principal and interest over 30 years commencing on
December 31, 2007. The Company intends to make discretionary contributions to the ESOP which will be equal to principal and interest payments on the term loan to the ESOP from the Company. Shares purchased with the loan proceeds are initially
pledged as collateral for the term loan and are held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from the suspense account will be allocated among the participants on the basis of
compensation, as defined by the ESOP, in the year of allocation. As of September 30, 2007, the loan had a balance of $1,644,130.
37
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
The ESOP is accounted for in accordance with Statement of Position 93-6, Accounting for
Employee Stock Ownership Plans which was issued by the American Institute of Certified Public Accountants. Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP shares in the consolidated statements of financial
condition. As shares are committed to be released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. Dividends on
unallocated ESOP shares are recorded as a reduction of debt. ESOP compensation expense was $28,000 for the year ended September 30, 2007.
The ESOP shares are summarized as follows:
|
|
|
|
|
|
September 30,
2007
|
Unearned shares
|
|
|
161,673
|
Shares committed to be released
|
|
|
2,740
|
Shares released
|
|
|
|
|
|
|
|
Total shares
|
|
|
164,413
|
|
|
|
|
|
|
Fair value of unearned shares
|
|
$
|
1,701,000
|
|
|
|
|
Note 15Commitments and Contingencies
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.
These financial instruments primarily include commitments to extend credit. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of financial
condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
The Company has the following
outstanding commitments:
|
|
|
|
|
|
|
|
|
September 30
|
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
Commitments to originate loans, expiring in three months or less
|
|
$
|
17,366
|
|
$
|
4,575
|
At September 30, 2007, of the $17,366,000 in outstanding commitments to originate loans
$7,298,000 are at fixed rates ranging from 6.15% to 7.625% and $10,068,000 are adjustable rates with initial rates ranging from 6.625% to 8.75%.
At September 30, 2006 of the $4,575,000 in outstanding commitments to originate loans, $3,435,000 are at fixed rates ranging from 6.00% to 7.00% and $1,140,000 are adjustable rates with initial rates ranging from 6.25% to 7.00%.
At September 30, 2007 and 2006, undisbursed funds from approved lines of credit under a homeowners equity lending program
totaled $9,054,000 and $8,650,000, respectively. Interest rates are either fixed (ranging
38
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
from 6.75% to 7.50% at September 30, 2007) or variable, based on the prime rate or prime minus 25 basis points adjusted on a monthly basis (ranging from
7.50% to 7.25% at September 30, 2007). At September 30, 2007 and 2006, unused overdraft protection and commercial lines of credits were $283,000 and $131,000, respectively. Unless specifically cancelled by notice from the Company, these
funds represent firm commitments available to the respective borrowers on demand.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on managements credit evaluation of the counterparty. Collateral held consists primarily of residential real estate, but may include income-producing commercial properties.
The Company also has, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on
any of these transactions.
The Company is a party to litigation which arises primarily in the ordinary course of business. In the opinion
of management, the ultimate disposition of such litigation should not have a material adverse effect on the financial position or results of operations of the Company.
The Bank has been identified as a defendant in a lawsuit brought by two former employees, filed on August 2, 2007 in the United States District Court, Southern District of New York. The plaintiffs claim the Bank
violated sections of Title VII of the Civil Rights Act of 1964, the New York State Human Rights Law, the New York Executive Law, the Age Discrimination in Employment Act of 1967 and the Fair Labor Relations Act. The plaintiffs are seeking
compensatory and punitive damages, liquidated damages, overtime compensation and fees and costs totaling $3.75 million. The plaintiffs previously filed a complaint with the Equal Employment Opportunity Commission (the EEOC) and the EEOC
returned a no-cause determination in the Banks favor on April 27, 2007. At this time, management does not believe that the resolution of this action will have a material effect on the consolidated financial statements of the
Company.
Note 16Fair Value of Financial Instruments
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties other than a forced liquidation sale. Significant estimates
were used for the purpose of this disclosure. Estimated fair values have been determined using the best available data and estimation methodology suitable for each category of financial instruments. Fair value estimates, methods and assumptions are
set forth below for the Companys financial instruments.
Cash and Cash Equivalents and Accrued Interest Receivable and Payable
The carrying amounts for cash and cash equivalents and accrued interest receivable and payable approximate fair value because they mature in three months
or less.
Securities
The fair value
for debt and equity securities, both available for sale and held to maturity, are based on quoted market prices or dealer prices, if available. If quoted market or dealer prices are not available, fair value is estimated using quoted market or
dealer prices for similar securities.
39
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Loans Receivable
The fair value of loans receivable is estimated by discounting future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining
maturities, of such loans.
Deposits
The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair value of certificates of deposit are estimated using rates currently offered for deposits of similar remaining
maturities.
Borrowings
The fair value
is estimated using interest rates currently offered by the FHLB for advances of similar remaining maturities.
Commitments to Extend Credit
The fair values of commitments to fund unused lines of credit and to originate or purchase loans are estimated using fees currently
charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate commitments, fair value also considers the difference between current levels of
interest rates and the committed interest rates. At September 30, 2007 and 2006, the fair value of commitments to extend credit were not considered material.
The carrying amounts and estimated fair values of financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2007
|
|
2006
|
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
|
(In thousands)
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,540
|
|
$
|
17,540
|
|
$
|
3,061
|
|
$
|
3,061
|
Securities available for sale
|
|
|
2,116
|
|
|
2,116
|
|
|
4,087
|
|
|
4,087
|
Securities held to maturity
|
|
|
2,449
|
|
|
2,463
|
|
|
15,211
|
|
|
15,073
|
Loans receivable
|
|
|
146,701
|
|
|
138,919
|
|
|
96,732
|
|
|
93,600
|
Accrued interest receivable
|
|
|
795
|
|
|
795
|
|
|
638
|
|
|
638
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
117,500
|
|
|
117,674
|
|
|
108,784
|
|
|
107,750
|
FHLB Advances
|
|
|
30,000
|
|
|
30,377
|
|
|
4,204
|
|
|
4,204
|
Accrued interest payable
|
|
|
412
|
|
|
412
|
|
|
29
|
|
|
29
|
|
|
|
|
|
Off balance sheet financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Limitations
The fair value estimates are made at a discrete point in time based on relevant market information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss
experience,
40
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
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. Further, the foregoing estimates may not reflect the actual amount that could be
realized if all of the financial instruments were offered for sale.
In addition, the fair value estimates are based on existing on-and-off
balance sheet financial instruments without attempting to value the anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered
financial assets and liabilities include premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in any of the estimates.
Finally, reasonable comparability between financial
institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation
methodologies introduces a greater degree of subjectivity to these estimated fair values.
Note 17Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. FASB Statement No. 157 applies to other accounting pronouncements that require or permit fair value
measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The Company is currently evaluating the potential impact, if any,
the adoption of FASB Statement No. 157 will have on our financial position, results of operations and cash flows.
On
September 13, 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulleting (SAB) No. 108. SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of
prior year misstatements should be considered in quantifying a potential current year misstatement. Prior to SAB No. 108, companies might evaluate the materiality of financial-statement misstatements using either the income statement or balance
sheet approach, with the income statement approach focusing on new misstatements added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a companys balance sheet. Misstatements
that would be material under one approach could be viewed as immaterial under another approach, and not be corrected. SAB No. 108 now requires that companies view financial statement misstatements as material if they are material according to
either the income statement or balance sheet approach. The Company has analyzed SAB 108 and determined that upon adoption it will have no impact on the Companys financial condition or results of operations.
In July 2006, FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement
No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being
sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an
adjustment to opening retained earnings. The Company does not believe that adopting FIN 48 will have any material adverse impact on its consolidated financial statements.
41
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items
for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for the Company as of October 1, 2007. The Company believes that the adoption of SFAS No. 159
will not have a material adverse impact on its financial condition and statement of operations.
In April 2007, the FASB directed the FASB
Staff to issue FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (FSP FIN 39-1). FSP FIN 39-1 modifies FIN No. 39, Offsetting of Amounts Related to Certain Contracts, and permits companies to
offset cash collateral receivables or payables with net derivative positions under certain circumstances. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The application of this
standard did not have an effect on the financial statements of the Company.
In May 2007, the FASB issued FASB Staff Position
(FSP) FIN 48-1 Definition of Settlement in FASB Interpretation No. 48 (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing
previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The application of this standard did not have an effect on the financial statements of the Company.
Note 18Parent Only Financial Information
The
following are the financial statements of the Company (Parent only) as of and for the period ended September 30, 2007. Comparative data is not provided for 2006 as the Company was formed in April 2007.
CONDENSED STATEMENT OF FINANCIAL CONDITION
September 30, 2007
(In thousands)
|
|
|
|
Assets
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,051
|
Investment in Bank
|
|
|
15,628
|
ESOP loan receivable
|
|
|
1,644
|
Other assets
|
|
|
80
|
|
|
|
|
Total assets
|
|
$
|
24,403
|
|
|
|
|
|
|
Liabilities and stockholders equity
|
|
|
|
Other liabilities
|
|
$
|
49
|
Stockholders equity
|
|
|
24,354
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
24,403
|
|
|
|
|
42
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
CONDENSED STATEMENT OF OPERATIONS
From Inception, April 3, 2007 to September 30, 2007
(In thousands)
|
|
|
|
|
Interest income
|
|
$
|
75
|
|
Equity in earnings of Bank
|
|
|
105
|
|
|
|
|
|
|
Total Income
|
|
|
180
|
|
|
|
|
|
|
|
|
Contribution to Foundation
|
|
|
774
|
|
Other non-interest expense
|
|
|
138
|
|
|
|
|
|
|
Total expense
|
|
|
912
|
|
|
|
|
|
|
|
|
(Loss) before income taxes
|
|
|
(732
|
)
|
Income tax expense
|
|
|
(9
|
)
|
|
|
|
|
|
Net (loss)
|
|
$
|
(723
|
)
|
|
|
|
|
|
CONDENSED STATEMENT OF CASH FLOWS
From Inception, April 3, 2007 to September 30, 2007
(In thousands)
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
Net (loss)
|
|
$
|
(723
|
)
|
Equity in earnings of Bank
|
|
|
(106
|
)
|
Stock contributed to Foundation
|
|
|
714
|
|
Other, net
|
|
|
(31
|
)
|
|
|
|
|
|
Net cash (used in) operating activities
|
|
|
(146
|
)
|
|
|
|
|
|
Cash (used in) investing activities
|
|
|
|
|
Capital contribution to Bank
|
|
|
(9,000
|
)
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(9,000
|
)
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
17,841
|
|
Purchase of ESOP shares
|
|
|
(1,644
|
)
|
|
|
|
|
|
Net cash provided from financing activities
|
|
|
16,197
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
7,051
|
|
Cash and cash equivalentsbeginning of period
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend of period
|
|
$
|
7,051
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activities
|
|
|
|
|
Equity of Bank at inception
|
|
$
|
8,223
|
|
|
|
|
|
|
43
CMS Bancorp, Inc.
Notes to Consolidated Financial Statements(Continued)
Note 19Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2007
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
Interest income
|
|
$
|
1,598
|
|
|
$
|
1,684
|
|
|
$
|
1,960
|
|
|
$
|
2,263
|
Interest expense
|
|
|
648
|
|
|
|
675
|
|
|
|
715
|
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
950
|
|
|
|
1,009
|
|
|
|
1,245
|
|
|
|
1,290
|
Provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
950
|
|
|
|
1,009
|
|
|
|
1,215
|
|
|
|
1,260
|
Non-interest income
|
|
|
80
|
|
|
|
68
|
|
|
|
64
|
|
|
|
67
|
Non-interest expense
|
|
|
1,046
|
|
|
|
1,176
|
|
|
|
1,985
|
|
|
|
1,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(16
|
)
|
|
|
(99
|
)
|
|
|
(706
|
)
|
|
|
25
|
Income taxes (benefit)
|
|
|
(3
|
)
|
|
|
(32
|
)
|
|
|
27
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(13
|
)
|
|
$
|
(67
|
)
|
|
$
|
(733
|
)
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share, basic
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
|
$
|
(0.39
|
)
|
|
$
|
0.01
|
(1)
|
The Company completed its initial public offering on April 3, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2006
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Interest income
|
|
$
|
1,363
|
|
|
$
|
1,397
|
|
|
$
|
1,446
|
|
|
$
|
1,514
|
|
Interest expense
|
|
|
344
|
|
|
|
397
|
|
|
|
459
|
|
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
1,019
|
|
|
|
1,000
|
|
|
|
987
|
|
|
|
1,000
|
|
Provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
1,019
|
|
|
|
1,000
|
|
|
|
987
|
|
|
|
1,000
|
|
Non-interest income
|
|
|
80
|
|
|
|
75
|
|
|
|
73
|
|
|
|
194
|
|
Non-interest expense
|
|
|
1,085
|
|
|
|
1,086
|
|
|
|
1,030
|
|
|
|
1,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
14
|
|
|
|
(11
|
)
|
|
|
30
|
|
|
|
59
|
|
Income taxes (benefit)
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
13
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
8
|
|
|
$
|
(6
|
)
|
|
$
|
17
|
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
(1)
|
The Company completed its initial public offering on April 3, 2007.
|
Note 20Subsequent Event
At a special meeting of the stockholders of the Company held on November 9, 2007, the
stockholders approved the CMS Bancorp, Inc. 2007 Stock Option Plan and the CMS Bancorp, Inc. 2007 Recognition and Retention Plan (collectively the Plans). The plans authorize the award of up to 205,516 stock options and 82,206 shares of
restricted stock. On November 28, 2007, non-employee directors received an aggregate of 40,275 stock options with an exercise price of $10.12 and 14,110 shares of restricted stock. On November 28, 2007, certain officers and employees of
the Company and the Bank received an aggregate of 111,879 stock options with an exercise price of $10.12 and 47,591 shares of restricted stock. The Company will expense , in accordance with SFAS No. 123(R), the fair value of all options at
$4.30 per option, over their vesting periods and will expense the fair value of all share-based compensation granted over the requisite service periods.
44
ANNUAL MEETING OF SHAREHOLDERS OF
CMS BANCORP, INC.
February 21, 2008
Please date, sign and mail
your proxy card in
the
envelope provided as soon
as possible.
¯
Please detach
along perforated line and mail in the envelope provided.
¯
|
|
|
n
20230000000000001000 9
|
|
022108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors unanimously recommends a vote
FOR
the nominees named in Item 1
and a vote
FOR
the proposal in Item 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
1. Election of the two Directors for a term of office to expire in 2011 or until
their successors are elected and qualified.
|
|
|
|
2. Ratify the appointment of Beard Miller Company LLP as CMS Bancorp Inc.s independent registered public accounting firm for the fiscal year
ending September 30, 2008.
|
|
¨
|
|
¨
|
|
¨
|
|
|
NOMINEES:
|
|
|
|
|
|
|
|
|
|
|
|
|
¨
FOR ALL NOMINEES
|
|
O William V. Cuddy, Jr.
O AnneMarie V. Romagnoli
|
|
|
|
|
|
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and the Proxy Statement for the Annual Meeting of Shareholders dated January
14, 2008.
|
¨
WITHHOLD AUTHORITY FOR ALL NOMINEES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¨
FOR ALL
EXCEPT
(See instructions below)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTION:
To withhold authority to vote for any individual
nominee(s), mark
FOR ALL EXCEPT
and fill in
the circle next to each nominee you wish to
withhold, as shown here:
l
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I Will Attend Annual Meeting.
|
|
|
|
¨
|
|
|
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be submitted via this method.
|
|
¨
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Shareholder
|
|
|
|
Date:
|
|
|
|
Signature of Shareholder
|
|
|
|
Date:
|
|
|
|
Note:
|
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized
person.
|
¨
n
CMS BANCORP, INC.
This Proxy is solicited on behalf of the Board of Directors of CMS Bancorp, Inc.
for the Annual Meeting of Shareholders to be held on February 21, 2008.
The undersigned shareholder of CMS Bancorp, Inc. hereby appoints Thomas G. Ferrara and John E. Ritacco, and each of them, with full powers of
substitution, to represent and to vote as proxy, as designated, all shares of common stock of CMS Bancorp, Inc. held of record by the undersigned on January 4, 2008, at the Annual Meeting of Shareholders (the Annual Meeting) to be
held on February 21, 2008 at 3:00 p.m., Eastern time, at the Crowne Plaza Hotel, located at 66 Hale Avenue, White Plains, New York 10601, or at any adjournment or postponement thereof, upon the matters described in the accompanying Notice of
the Annual Meeting of Shareholders and Proxy Statement, dated January 14, 2008, and upon such other matters as may properly come before the Annual Meeting. The undersigned hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder.
If no direction is given, this Proxy
will be voted
FOR
the election of all nominees listed in Item 1 and
FOR
the proposal listed in Item 2.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.