SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to __________
Commission File No. 0-27714
Crazy Woman Creek Bancorp Incorporated
--------------------------------------
(Exact name of registrant as specified in its charter)
Wyoming 83-0315410
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Fort Street, Buffalo, Wyoming 82834
--------------------------------- -----
(Address of principal executive offices)
(307) 684-5591
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $.10 per share
Outstanding at April 17, 1997: 1,005,100
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED
INDEX TO FORM 10-QSB
Page
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 31,
1997 (unaudited) and September 30, 1996 (audited).......... 1
Consolidated Statements of Income for the three and six
months ended March 31, 1997 and 1996 (unaudited)........... 2
Consolidated Statements of Cash Flows for the six months
ended March 31, 1997 and 1996 (unaudited).................. 3
Notes to Unaudited Interim Consolidated Financial
Statements................................................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 6
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings.......................................... 15
Item 2. Changes in Securities...................................... 15
Item 3. Defaults upon Senior Securities............................ 15
Item 4. Submission of Matters to a Vote of Security Holders........ 15
Item 5. Other Information.......................................... 15
Item 6. Exhibits and Reports on Form 8-K........................... 15
SIGNATURES
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
---- ----
(unaudited) (audited)
(In Thousands)
Assets
- ------
<S> <C> <C>
Cash and cash equivalents....................................... $ 1,760 $ 451
Interest bearing time deposits.................................. 99 99
Investment and mortgage-backed securities available-for-sale.... 12,121 13,365
Investment and mortgage-backed securities held-to-maturity
(estimated market value of $8,843 in 1997 and $10,181 in 1996) 9,039 10,303
Stock in Federal Home Loan Bank of Seattle, at cost............. 459 400
Loans receivable, net........................................... 27,582 25,859
Accrued interest receivable..................................... 472 496
Premises and equipment, net..................................... 475 502
Other assets.................................................... 35 42
-------- -------
Total assets................................................ $ 52,042 $ 51,517
======= ========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities
Deposits...................................................... 28,131 29,371
Advances from Federal Home Loan Bank.......................... 9,007 6,113
Advances from borrowers for taxes and insurance............... 28 53
Federal income tax payable ................................... 100 15
Deferred income taxes......................................... 77 81
Dividends payable............................................. 101 106
Accrued expenses and other liabilities........................ 108 270
--------- -------
Total liabilities........................................... 37,552 36,009
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Stockholders' equity
Preferred stock, par value $.10 per share, 2,000,000 shares
authorized; none issued and outstanding..................... $ - $ -
Common stock, par value $.10 per share, 5,000,000 shares authorized;
1,005,100 issued and outstanding at March 31, 1997
1,058,000 issued and outstanding at September 30, 1996...... 106 106
Additional paid-in surplus.................................... 10,033 10,027
Retained earnings, substantially restricted................... 6,194 6,058
Unearned compensation relating to Employee Stock Ownership Plan
and Management Stock Bonus Plan, at cost.................... (1,089) (617)
Unrealized gain(loss) on securities available-for-sale........ (73) (66)
Treasury stock - 52,900 shares (1997), at cost................ (681) -
------- -------
Total stockholders' equity.................................. 14,490 15,508
------ -------
Total liabilities and stockholders' equity.................. $52,042 $51,517
====== ======
</TABLE>
See notes to unaudited interim consolidated financial statements.
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<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
------- ------ ------ -----
(Unaudited) (Unaudited)
Interest Income: (Dollars in thousands except earnings per share and dividends
declared per share)
<S> <C> <C> <C> <C>
Loans receivable........................ $560 $485 $1,112 $ 995
Mortgage-backed securities.............. 137 83 298 167
Investment securities................... 227 106 464 219
Interest bearing time deposits.......... 2 9 3 18
Other................................... 16 33 27 48
---- ---- ------ ------
Total interest income................ 942 716 1,904 1,447
---
Interest expense:
Deposits................................ 339 375 694 737
Advances from FHLB of Seattle........... 118 52 220 96
---- ---- ------- --------
Total interest expense............... 457 427 914 833
---
Net interest income.................. 485 289 990 614
Provision for loan losses................. - - -
----- ------- ------- ---------
Net interest income after provision
for loan losses.................... 485 289 990 614
Non-interest income:
Customer service charges................ 10 10 19 21
Other operating income.................. 9 6 16 16
Gain on sale of investment and mortgage-
backed securities..................... 1 10 2 21
Gain on sale of other real estate owned. - - - 13
----- ---- ------ ------
Total non-interest income............ 20 26 37 71
Non-interest expense:
Compensation and benefits............... 140 111 265 211
Occupancy and equipment................. 26 24 58 45
FDIC/SAIF deposit insurance premiums.... 1 16 17 32
Advertising............................. 8 9 19 18
Data processing services................ 23 35 48 56
Other................................... 50 32 118 69
---- ---- ------- -------
Total non-interest expense........... 248 227 525 431
---- ---- ------ ------
Income before income taxes........... 257 88 502 254
Income tax expense........................ 89 24 172 81
---- ---- ------- -----
Net income........................... $ 168 $ 64 $ 330 $ 173
===== === ===== =====
Dividends declared per common share....... $0.10 $0.00 $0.20 $0.00
==== ==== ==== ====
Earnings per common share................. $0.17 $0.06 $ 0.34 $0.17
==== ==== ===== ====
</TABLE>
See notes to unaudited interim consolidated financial statements.
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<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months Ended
March 31,
1997 1996
---- ----
(In Thousands)
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Net income................................................. $ 330 $ 173
Adjustments to reconcile net income to net cash provided
by operating activities
Amortization of premiums and discounts on investment
securities available-for- sale, net.................... 8 -
Amortization of premiums and discounts on investment
securities held-to-maturity, net....................... 2 (44)
Federal Home Loan Bank stock dividend.................... (15) (14)
Depreciation............................................. 37 29
Gain on sale of securities............................... (2) (21)
Gain on sale of other real estate owned.................. - (13)
ESOP shares committed to be released..................... 28 -
MSBP deferred compensation............................... 27 -
Change in:
Accrued interest receivable.......................... 24 28
Other assets......................................... 7 (11)
Federal income taxes payable......................... 85 48
Dividends payable.................................... (5) -
Accrued expenses and other liabilities............... (162) (3)
----- ---
Net cash provided by operating activities......... 364 172
Cash flows from investing activities:
Net change in interest bearing deposits.................... - 198
Purchases of investment and mortgage-backed securities
available-for-sale....................................... (4,649) -
Maturities of investment and mortgage-backed securities
available-for-sale....................................... 3,338 16
Proceeds from the sale of investment and mortgage-backed
securities available-for-sale............................ 2,539 -
Purchases of investment and mortgage-backed securities
held-to-maturity......................................... - (6,683)
Maturities of investment and mortgage-backed securities
held-to-maturity......................................... 611 5,376
Proceeds from the sale of investment and mortgage-backed
securities held-to-maturity.............................. 650 688
Purchase of FHLB of Seattle stock.......................... (43) -
Net change in loans receivable............................. (1,723) (1,456)
Purchases of premises and equipment........................ (10) (44)
Proceeds from sale of other real estate owned.............. - 68
----- -----
Net cash used in investing activities.................... 713 (1,837)
</TABLE>
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<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
Six months Ended
March 31,
1997 1996
---- ----
(In Thousands)
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net change in deposits..................................... (1,240) (433)
Net changes in advances from Federal Home Loan Bank........ 2,894 687
Net change in advances from borrowers for taxes and
insurance................................................ (25) (16)
Dividends paid to stockholders............................. (194) -
Acquisition of common stock for MSBP, at cost.............. (522) -
Acquisition of treasury stock, at cost..................... (681) -
Sale of common stock, net of offering costs................ - 9,492
------ ------
Net cash provided in financing activities................ 232 9,730
------ --------
Net increase (decrease) in cash and cash equivalents......... 1,309 8,065
Cash and cash equivalents at beginning of year............... 451 268
------ -----
Cash and cash equivalents at end of period................... $ 1,760 $ 8,333
====== =======
</TABLE>
See notes to unaudited interim consolidated financial statements.
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<PAGE>
Notes to Unaudited Interim Consolidated Financial Statements
March 31, 1997
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. For further information, the reader should refer to the
annual report of Crazy Woman Creek Bancorp Incorporated (the "Corporation").
The accompanying consolidated financial statements include the accounts of the
Corporation and Buffalo Federal Savings Bank (the "Bank"), a wholly owned
subsidiary of the Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentations have been included. The
results of operations for the interim periods ended March 31, 1997 and 1996 are
not necessarily indicative of the results which may be expected for an entire
year or any other period.
NOTE 2: CONVERSION FROM MUTUAL SAVINGS BANK TO STOCK SAVINGS
BANK AND FORMATION OF SAVINGS AND LOAN HOLDING COMPANY
On March 29, 1996, the Bank consummated its conversion from a
federally-chartered mutual savings and loan association to a stock savings bank
pursuant to a Plan of Conversion (the "Conversion") via the issuance of common
stock. In connection with the Conversion, the Corporation sold 1,058,000 shares
of common stock which, after giving effect to offering expenses of $410,000
resulting in net proceeds of $10.13 million ($9.49 million net of ESOP
purchases). Pursuant to the Conversion, the Bank transferred all of its
outstanding shares to its newly organized holding company, the Corporation, in
exchange for 50% of the net proceeds.
Upon consummation of the Conversion, the preexisting liquidation rights of the
depositors of the Bank were unchanged. Specifically, such rights were retained
and will be accounted for by the Bank for the benefit of such depositors in
proportion to their liquidation interest as of the Eligibility Record Date
(November 15, 1994) and Supplemental Eligibility Record Date December 31, 1995).
- 5 -
<PAGE>
NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the FASB issued Statement 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." Statement No.
125 provides guidance on accounting for transfers and servicing of financial
assets, recognition and measurement of servicing assets and liabilities,
financial assets subject to repayment, secured borrowings and collateral, and
extinguishment of liabilities.
Statement No. 125 generally requires the Corporation to recognize as separate
assets the rights to service mortgage loans for others, whether the servicing
rights are acquired through purchases or loan originations. Servicing rights are
initially recorded at fair value based upon the present value of estimated
future cash flows. Subsequently, the servicing rights are assessed for
impairment, which is recognized in the statement of earnings in the period the
impairment occurs. For purposes of performing the impairment evaluation, the
related portfolio must be stratified on the basis of certain risk
characteristics including loan type and note rate. Statement No. 125 also
specifies that financial assets subject to prepayment, including loans that can
be contractually prepaid or otherwise settled in such a way that the holder
would not recover substantially all of its recorded investment be measured like
debt securities available for sale or trading securities under Statement No.
115. The Corporation adopted the provisions of Statement No. 125 on January 1,
1997, and such adoption did not have a material effect on the financial position
or operations of the Corporation.
NOTE 5: EARNINGS PER SHARE
Earnings per common share is calculated by dividing net income by the weighted
average number of common shares and common stock equivalents outstanding during
the period. Shares sold in the Conversion are assumed to have been outstanding
for all of fiscal year 1996, for purposes of computing weighted average shares
outstanding. Additionally, unallocated ESOP shares are excluded from the
weighted average common shares outstanding calculation, while allocated shares
are considered to be outstanding. At March 31, 1997, there were 4,571 allocated
ESOP shares. At March 31, 1996, no ESOP shares had been allocated. The weighted
average shares outstanding for the six month period ended March 31, 19977 was
computed at 997,133 net of weighted average unallocated ESOP shares (60,381).
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
- -------
The Corporation is a unitary savings and loan holding company of the Bank. At
the present time, the Corporation's only assets are its investment in the Bank,
loans to the Bank's Employee Stock Ownership Plan ("ESOP") and the Bank. The
Bank operates as a traditional savings association, attracting deposit accounts
from the general public and using those deposits, together with other funds,
primarily to originate and invest in fixed-rate conventional loans secured by
single-family residential real estate. The Bank also originates home equity,
consumer loans and loans secured by savings accounts. The Bank also invests in
mortgage-backed (including Real Estate Mortgage Investment Conduits ("REMICs"),
and short-term U.S. Agency securities. To a lesser extent, the Bank originates
commercial real estate loans and business loans.
The Bank's net earnings are dependent primarily on its net interest income,
which is the difference between interest income earned on its interest-earning
assets and interest expense paid on interest-bearing liabilities. Net interest
income is determined by (i) the difference between yields earned on
interest-earning assets and rate paid on interest-bearing liabilities (interest
rate spread) and (ii) the relative amounts of interest-earning assets and
interest-bearing liabilities. The Bank's interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. To a lesser extent, the Bank's net earnings also are
affected by the level of non-interest income, which primarily consists of
service charges and other operating income. In addition, net earnings are
affected by the level of non-interest (general and administrative) expenses.
FINANCIAL CONDITION
- -------------------
At March 31, 1997, assets totaled $52.04 million compared to total assets of
$51.52 million at September 30, 1996. Asset growth was attributed to a $1.72
million increase in net loans receivable due to the demand for housing related
loans and a $1.31 million increase in cash and cash equivalents. These increases
were somewhat offset by a combined $2.51 million decline in investment and
mortgage-backed securities available for sale and those securities held to
maturity.
Total deposits declined by $1.24 million or 4.2% from $29.37 million at
September 30, 1996 to $28.13 million at March 31, 1997. Loan growth and deposit
outflows were primarily funded by additional advances from the Federal Home Loan
Bank of Seattle ("FHLB"). FHLB advances increased by $2.90 million from $6.11
million at September 30, 1996 to $9.01 million at March 31, 1997.
- 7 -
<PAGE>
Total stockholders' equity declined by $1.02 million from $15.51 million to
$14.49 million primarily as a result of stock repurchases. In January 1997,
after obtaining regulatory approval, the Corporation purchased 52,900 share of
its common stock for approximately $681,000. In addition to this purchase, the
Corporation purchased an additional 42,320 shares of its common stock for the
Bank's restricted stock plan. The stock plan was approved by stockholders at a
special meeting held on October 2, 1996. Stockholders' equity was further
reduced by a $.10 per share cash dividend that was declared in March 1997.
ASSET QUALITY
- -------------
Non-performing assets totaled $119,000 at March 31, 1997, or 0.2% of total
assets. This compares to $32,000 at September 30, 1996 or 0.1% of total assets.
The increase in non-performing assets was primarily due to the delinquency of
two home loans; both borrowers are behind on loan payments due to reductions in
their respective incomes. See also "Key Operating Ratios."
RESULTS OF OPERATIONS
- ---------------------
Comparison of Six Months Ended March 31, 1997 and 1996.
-------------------------------------------------------
Net Income. Net income for the six months ended March 31, 1997 totaled $330,000
compared to $173,000 for the six months ended March 31, 1996. Net income was
higher in 1997 than in 1996 primarily because of a 31.3% increase in average
earning assets. Average earning assets increased from $38.81 million for the six
month period ended March 31, 1996 to $50.97 million for the same period in 1996
primarily as a result of net proceeds received from the Corporation's initial
stock offering. Although the stock proceeds were received at the end of the
period in 1996, the proceeds were not fully invested in higher yielding assets
until the later part of April 1996. Net proceeds from the sale of stock totaled
$9.49 million. Net income for 1996 included a $21,000 gain from the sale of
mortgage-backed securities and a $13,000 gain from the sale of a repossessed
home. In 1997, a $2,000 gain was recognized from the sale of certain
mortgage-backed and investment securities available for sale.
Interest Income. Interest income totaled $1.90 million for the six months ended
March 31, 1997 compared to $1.45 million for the six months ended March 31,
1996. The increase was primarily due to an significant increase in average
earning assets. The yield on average earning assets was up slightly from 7.46%
for the six months ended March 31, 1996 to 7.47% for the six months ended March
31, 1997.
Interest Expense. Interest expense increased from $833,000 for the six months
ended March 31, 1996 to $914,000 for the six months ended March 31, 1997. The
increase was primarily attributed to an increase the average volume of FHLB
advances. Average FHLB advances increased by $4.41 million from $3.54 million
for the six month period ended March 31, 1996 to $7.95 million for the six month
period ended March 31, 1997. This increase in interest expense was somewhat
offset by a decline in the cost of average interest-bearing liabilities. From
the six month period ended March 31, 1996 to the six month period ended March
31, 1997 the cost of interest-bearing liabilities declined from 5.25% to 5.04%.
A decline in the cost of interest-bearing deposits from 5.23% for the six months
ended March 31, 1996 to 4.90% for
- 8 -
<PAGE>
the six months ended March 31, 1997 caused interest expense to decline by
approximately $46,000.
Provisions for Credit Losses. There was no provision for loan losses for either
of the six months ended March 31, 1997 or 1996. Loan charge-offs for the six
months ended March 31, 1997 totaled $5,000 while recoveries also total $5,000
thus causing no change in loan loss reserves. There were no credit losses for
the six months ended March 31, 1996. In determining the provision for loan
losses, management analyzes, among other things, the composition of the Bank's
loan portfolio, market conditions and the Bank's market area. Management has
determined that the reserve for loan losses was adequate to cover any
anticipated credit losses. There can be no assurance that the allowance for
losses will be adequate to cover losses which may in fact be realized in the
future and that additional provisions will not be required.
Net Interest Income. Net interest income increased by $376,000 from $614,000 for
the six months ended March 31, 1996 to $990,000 for the six months ended March
31, 1997 primarily as a result of an increase in average earnings assets. For
the periods covered, the ratio of average earning assets to average
interest-bearing liabilities increased from 122.38% to 140.60%, respectively.
Total Non-interest Income. Non-interest income declined by $34,000 from $71,000
for the six months ended March 31, 1996 to $37,000 for the six months ended
March 31, 1997. The decrease was primarily attributed to a reduction in the
amount of gain from the sale of investment and mortgage-backed securities from
$21,000 for the six months ended March 31, 1996 to $2,000 for the six months
ended March 31, 1997. In 1996, a gain of $13,000 was recorded on the sale of a
repossessed home; no such gains were recognized in 1997. No significant change
occurred in the other components of non-interest income for the periods covered.
See also "--Comparison of Three Months Ended March 31, 1997 and 1996 -- Total
Non-interest Income."
Total Non-interest Expense. Non-interest expense increased by $94,000 or 21.8%
from $431,000 for the six months ended March 31, 1996 to $525,000 for the six
months ended March 31, 1997. Non-interest expense was higher in 1997 than in
1996 due to an increase in compensation expense and due to costs associated with
being a public company. Compensation expense increased by $54,000 from $211,000
for the six months ended March 31, 1996 to $265,000 for the six months ended
March 31, 1996 primarily as a result of costs associated with the Bank's ESOP
and Management Stock Bonus Plan "MSBP"; the MSBP was approved by a majority of
stockholders at a special meeting held on October 2, 1996. The increase in
compensation expense was also caused by general employee pay increases and the
hiring of an additional employee in April 1996.
Other operating expenses increased by $49,000 from $69,000 for the six months
ended March 31, 1996 to $118,000 for the six months ended March 31, 1997. Part
of the increase in other operating expenses was due, in part, to an increase in
legal fees of $25,000 for the periods covered. Legal fees included work done on
the ESOP and MSBP, Securities and Exchange Commission reporting documents, the
special stockholders' meeting conducted on October 2, 1996 and other related
items. These costs are expected to decline in the future. The balance
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<PAGE>
of other operating expenses were comprised of corporate state taxes, proxy
solicitation fees and other costs associated with being a public company
(including printing and mailing costs).
Occupancy and equipment expenses increased by $13,000 from $45,000 for the six
months ended March 31, 1996 to $58,000 for the six months ended March 31, 1997
as a result of an increase in depreciation expense and costs associated with the
maintenance of the Bank's office building. Insurance premiums paid to the
Federal Deposit Insurance Corporation ("FDIC") for deposit insurance coverage
declined by $15,000 from $32,000 for the six months ended March 31, 1996 to
$17,000 for the six months ended March 31, 1997. There were no significant
changes in the other components of non-interest expenses for the periods
covered.
Provision for Income Taxes. The effective tax rate for the six months ended
March 31, 1997 and 1996 was 34.26% and 31.89%, respectively.
Comparison of Three Months Ended March 31, 1997 and 1996
--------------------------------------------------------
General. For the three months ended March 31, 1997, the Corporation posted a net
profit of $168,000 as compared with net profit of $64,000 for the three months
ended March 31, 1996. The increase in net income was primarily attributed to a
significant increase in average earnings assets. Average earnings assets
increased by $9.83 million from $40.75 million for the three month period ended
March 31, 1996 to $50.58 million for the three month period ended March 31, 1997
primarily as a result of the receipt of $9.49 million in net proceeds received
from the Corporation's initial stock offering.
Interest Income. Total interest income increased by $226,000 from $716,000 for
the three months ended March 31, 1996 to $942,000 for the three months ended
March 31, 1997. The increase in interest income was due, in part, to an increase
in average earning assets. From March 31, 1996 to March 31, 1997 average earning
assets increased from $40.75 million to $50.76 million, respectively. The
increase in average earnings assets caused interest income to increase by
$186,000. The balance of the increase in interest income was caused by an
increase in the yield on earning assets from 7.03% for the three month period
ended March 31, 1996 to 7.45% for the three month period ended March 31, 1997.
As previously indicated, the increase in average earning assets was primarily
funded by the net proceeds received through the stock offering.
Interest Expense. Total interest expense increased by $30,000 from $427,000 for
the three months ended March 31, 1996 to $457,000 for the three months ended
March 31, 1997 as a result of an increase in average FHLB advances. Average FHLB
advances increased from $4.09 million for the three month period ended March 31,
1996, to $8.67 million for the three month period ended March 31, 1997. A
decline in the cost of interest-bearing liabilities somewhat offset the increase
in interest expense caused by additional advances from the FHLB. The cost of
interest-bearing liabilities for the periods covered declined from 5.32% to
5.01%, respectively. See also "--Comparison of Six Months Ended March 31, 1997
and 1996 -- Total Interest Expense."
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<PAGE>
Provision for Credit Losses. There was no loan loss provision made for the three
months ended March 31, 1997. See also "--Comparison of Six Months Ended March
31, 1997 and 1996 -- Provision for Credit Losses."
Net Interest Income. Net interest income increased by $196,000 from $289,000 for
the three months ended March 31, 1996 to $485,000 for the three months ended
March 31, 1997. The net interest margin increased by a 100 basis points from
2.76% to 3.76% for the periods covered. The reason for the increase in net
interest income and net interest margin was primarily attributed to the influx
of funds from the stock offering. These funds were used to purchase
interest-bearing assets. During the periods covered, average earning assets
increased from $40.75 million to $50.58 million, respectively. As a result of
this increase in earning assets, the ratio of earning assets to interest-bearing
liabilities increased from 127.02% for the three month period ended March 31,
1996 to 138.59% for the three month period ended March 31, 1997. See also --
"Comparison of Six Months Ended March 31, 1997 and 1996 -- Net Interest Income."
Total Non-Interest Income. Non-interest income declined by $6,000 from $26,000
for the three months ended March 31, 1996 to $20,000 for the three months ended
March 31, 1997. The decline was attributed to a reduction in gains from the sale
of investment and mortgage-backed securities from $10,000 in 1996 to $1,000 in
1997. Other operating income increased by $3,000 for the periods covered. See
also "-- Comparison of Six Months Ended March 31 1997, and 1996 -- Total
Non-Interest Expenses."
Total Non-Interest Expense. Non-interest expense increased by $21,000 from
$227,000 for the three months ended March 31, 1996 to $248,000 for the three
months ended March 31, 1997 as a result of an increase in compensation expenses,
legal fees and other operating expenses. These increases were somewhat offset by
a $15,000 decline in FDIC deposit insurance premiums.
Compensation expenses increased by $29,000 from $111,000 for the three months
ended March 31, 1996 to $140,000 for the three months ended March 31, 1997
primarily as a result of costs associated with the Bank's stock benefit plans
and to general employee pay increases. The hiring of an additional employee in
April 1996 also caused compensation expense to increase.
Other operating expenses increased from $32,000 for the three months ended March
31, 1996 to $50,000 for the three months ended March 31, 1997. An increase in
legal fees from $300 for the three months ended March 31, 1996 to $9,000 for the
three months ended March 31, 1997 was the major contributing factor of the
increase. The balance of the increase in other operating expenses was attributed
to costs associated with being a public company. See also "-- Comparison of Six
Months Ended March 31, 1997 and 1996 - Total Non-Interest Expense."
Provision for Income Taxes. The effective tax rate for the three months ended
March 31, 1997 and 1996 was 34.63% and 27.27%, respectively.
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<PAGE>
CAPITAL COMPLIANCE AND LIQUIDITY
- --------------------------------
Capital Compliance. The following table presents the Bank's compliance with its
regulatory capital requirements of March 31, 1997.
<TABLE>
<CAPTION>
At March 31, 1997
----------------------
Percentage
Amount of Assets
------ ----------
(Dollars in Thousands)
<S> <C> <C>
GAAP Capital.......................................... $10,340 19.87%
Tangible capital...................................... $10,413 19.97%
Tangible capital requirement......................... 782 1.50%
------- ------
Excess............................................... $ 9,631 18.47%
====== =====
Core capital.......................................... $10,413 19.97%
Core capital requirements........................... 1,565 3.00%
------ -----
Excess.............................................. $ 8,848 16.97%
====== =====
Total risk-based capital (1).......................... $10,688 48.63%
Total risk-based capital requirement (1)............ 1,758 8.00%
------ ----
Excess (1).......................................... $ 8,930 40.63%
====== =====
</TABLE>
- ------------
(1) Based on risk-weighted assets of $21,979.
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and, as a result, the ability of the Bank to meet its future minimum
capital requirements. Increased borrowings were necessary to meet the increased
loan demand.
- 12 -
<PAGE>
Liquidity. The Bank's liquidity is a measure of its ability to fund loans, pay
withdrawals of deposits, and other cash outflows in an efficient, cost effective
manner. The Bank's primary source of funds are deposits and scheduled
amortization and prepayment of loans. During the past several years, the Bank
has used such funds primarily to fund maturing time deposits, pay savings
withdrawals, fund lending commitments, purchase new investments, and increase
liquidity. The Bank funds its operations internally but supplements with
borrowed funds from the FHLB of Seattle. As of March 31, 1997 such borrowed
funds totaled $9.01 million. Loan payments and maturing investments are greatly
influenced by general interest rates, economic conditions and competition.
The Bank is required under federal regulations to maintain certain specified
levels of "liquid investments," which include certain United States government
obligations and other approved investments. Current regulations require the Bank
to maintain liquid assets of not less than 5% of its net withdrawable accounts
plus short-term borrowings. Short-term liquid assets must consist of not less
than 1% of such accounts and borrowings, which amount is also included within
the 5% requirement. Those levels may be changed from time to time by the
regulators to reflect current economic conditions. The Bank has generally
maintained liquidity far in excess of regulatory requirements. The Bank's
regulatory liquidity was 20.52% and 30.77% at March 31, 1997 and 1996,
respectively, and its short term liquidity was 4.40% and 21.79.%, at such dates,
respectively.
The amount of certificate accounts which are scheduled to mature during the
twelve months ending March 31, 1997 is approximately $13.29 million. To the
extent that these deposits do not remain at the Bank upon maturity, the Bank
believes that it can replace these funds with deposits, excess liquidity, FHLB
advances or outside borrowings. It has been the Bank's experience that a
substantial portion of such maturing deposits remain at the Bank.
At March 31, 1997, the Bank had loan commitments outstanding of $581,000 and a
$700,000 commitment to purchase a short-term REMIC. Funds required to fill these
commitments are derived primarily from current excess liquidity, deposit inflows
or loan and investment and mortgage-backed security repayments.
IMPACT OF INFLATION AND CHANGING PRICES
- ---------------------------------------
The consolidated financial statements of the Corporation and notes thereto,
presented elsewhere herein, have been prepared in accordance with GAAP, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Corporation's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Corporation are
financial. As a result, interest rates have a greater impact on the
Corporation's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.
- 13 -
<PAGE>
RECENT ANNOUNCEMENTS
- --------------------
The Corporation, in a press release dated April 10, 1997, announced that it had
received regulatory authorization to repurchase up to 5% (or 50,255) shares of
the Corporation's common stock. This repurchase program follows the repurchase
of 52,900 shares of common stock during the first year following the Bank's
mutual-to-stock conversion.
The repurchase will be made in open-market transactions over a one-year period
subject to the availability of stock and pursuant to the terms of the
Corporation's repurchase plan. Repurchased shares will become authorized but
unissued shares and will be utilized for general corporate and other purposes,
including the issuance of shares in connection with the exercise of stock
options.
KEY OPERATING RATIOS
- --------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1997 (1) 1996 (1) 1997 (1) 1996 (1)
-------- -------- -------- --------
(Dollars in Thousands, (Dollars in Thousands,
except per share data) except per share data)
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Return on average assets...................... 1.30% 0.61% 1.27% 0.87%
Return on average equity...................... 4.63% 2.78% 4.38% 4.57%
Interest rate spread.......................... 2.44% 1.70% 2.43% 2.20%
Net interest margin........................... 3.76% 2.76% 3.81% 3.08%
Noninterest expense to average assets......... 1.92% 2.16% 2.02% 2.16%
Net charge-offs to average outstanding loans.. 0.00% 0.00% 0.00% 0.00%
</TABLE>
At March 31, At September 30,
1997 1996
------------ ----------------
Nonaccrual and 90 days past due loans......... 119 32
Repossessed real estate....................... 0 0
Total nonperforming assets.................. 119 32
Allowance for credit losses to nonperforming
assets...................................... 240.34% 862.50%
Nonperforming loans to total loans............ 0.34% 0.12%
Nonperforming assets to total assets.......... 0.17% 0.06%
Book value per share (2)...................... $14.42 $14.66
- ----------------
(1) The ratios for the three- and three- month periods are annualized.
(2) The number of shares outstanding as of March 31, 1997 and September 30,
1996 were 1,005,100 and 1,058,000, respectively. These include shares
purchased by the ESOP.
- 14 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
Neither the Corporation nor the Bank was engaged in any legal
proceeding of a material nature at March 31, 1997. From time to
time, the Corporation is a party to legal proceedings in the
ordinary course of business wherein it enforces its security
interest in loans.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27 - Financial Disclosure Schedule (in electronic
filing only).
(b) Reports on Form 8-K
None.
- 15 -
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRAZY WOMAN CREEK BANCORP INCORPORATED
Date: April 18, 1997 By: /s/ Deane D. Bjerke
Deane D. Bjerke
President and
Chief Executive Officer
(Principal Executive Officer)
Date: April 18, 1997 By: /s/ Dalen C. Slater
Dalen C. Slater
Senior Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 13
<INT-BEARING-DEPOSITS> 1,800
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,121
<INVESTMENTS-CARRYING> 9,039
<INVESTMENTS-MARKET> 8,843
<LOANS> 27,582
<ALLOWANCE> 286
<TOTAL-ASSETS> 52,042
<DEPOSITS> 28,131
<SHORT-TERM> 7,307
<LIABILITIES-OTHER> 414
<LONG-TERM> 1,700
0
0
<COMMON> 106
<OTHER-SE> 14,384
<TOTAL-LIABILITIES-AND-EQUITY> 52,042
<INTEREST-LOAN> 560
<INTEREST-INVEST> 364
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 942
<INTEREST-DEPOSIT> 339
<INTEREST-EXPENSE> 457
<INTEREST-INCOME-NET> 485
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 248
<INCOME-PRETAX> 257
<INCOME-PRE-EXTRAORDINARY> 168
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
<YIELD-ACTUAL> 3.84
<LOANS-NON> 114
<LOANS-PAST> 114
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 286
<CHARGE-OFFS> 5
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 286
<ALLOWANCE-DOMESTIC> 286
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
