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 December 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Fort Street, Buffalo, Wyoming 82834
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(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 January 30, 1998: 954,845
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED
INDEX TO FORM 10-QSB
Page
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PART I FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition at December
31, 1997 (unaudited) and September 30, 1997 (audited)........... 1
Consolidated Statements of Income for the three months
ended December 31, 1997 and 1996 (unaudited).................... 2
Consolidated Statements of Cash Flows for the three months
ended December 31, 1997 and 1996 (unaudited).................... 3
Notes to Unaudited Interim Consolidated Financial
Statements...................................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 7
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings............................................... 13
Item 2. Changes in Securities........................................... 13
Item 3. Defaults upon Senior Securities................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............. 13
Item 5. Other Information............................................... 13
Item 6. Exhibits and Reports on Form 8-K................................ 13
SIGNATURES
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(unaudited) (audited)
(In Thousands)
<S> <C> <C>
Assets
Cash and cash equivalents ........................................................ $ 715 $ 1,194
Interest bearing time deposits ................................................... 99 99
Investment and mortgage-backed securities available-for-sale ..................... 22,019 19,155
Investment and mortgage-backed securities held-to-maturity
(estimated market value of $7,402 in December 1997 and $9,067 in September 1997) 7,339 9,009
Stock in Federal Home Loan Bank of Seattle, at cost .............................. 867 801
Loans receivable, net ............................................................ 28,739 28,636
Accrued interest receivable ...................................................... 534 559
Premises and equipment, net ...................................................... 432 443
Other assets ..................................................................... 30 56
-------- --------
Total assets ................................................................. $ 60,774 $ 59,952
======== ========
Liabilities and Stockholders' Equity
Liabilities
Deposits ....................................................................... 30,508 29,507
Advances from Federal Home Loan Bank ........................................... 15,450 15,700
Advances from borrowers for taxes and insurance ................................ 10 54
Federal income tax payable ..................................................... 117 155
Deferred income taxes .......................................................... 106 116
Dividends payable .............................................................. 95 95
Accrued expenses and other liabilities ......................................... 123 115
-------- --------
Total liabilities ............................................................ 46,409 45,742
-------- --------
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;
1,058,000 issued ............................................................. 106 106
Additional paid-in surplus ..................................................... 10,061 10,041
Unearned ESOP/MSBP shares ...................................................... (783) (809)
Retained earnings, substantially restricted .................................... 6,478 6,377
Unrealized gain(loss) on securities available-for-sale ......................... 85 77
Treasury stock, shares at cost ................................................. (1,582) (1,582)
-------- --------
Total stockholders' equity ................................................... 14,365 14,210
-------- --------
Total liabilities and stockholders' equity ................................... $ 60,774 $ 59,952
======== ========
</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
December 31,
------------------------
1997 1996
--------- --------
(Unaudited)
Interest Income: (Dollars in Thousands except
earnings per share and
dividends declared)
<S> <C> <C>
Loans receivable............................................ $599 $552
Mortgage-backed securities.................................. 179 161
Investment securities....................................... 326 236
Interest-bearing time deposits.............................. 1 1
Other....................................................... 25 12
---- ----
Total interest income.................................... 1,130 962
-----
Interest expense:
Deposits.................................................... 382 355
Advances from FHLB of Seattle............................... 230 102
---- ----
Total interest expense................................... 612 457
----
Net interest income...................................... 518 505
Provision for loan losses (loan loss benefit)................. - -
----- -------
Net interest income after provision for loan losses...... 518 505
Non-interest income:
Customer service charges.................................... 12 9
Other operating income...................................... 10 7
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Total non-interest income................................ 22 16
Non-interest expense:
Compensation and benefits................................... 138 125
Occupancy and equipment..................................... 21 32
FDIC/SAIF deposit insurance premiums........................ 5 16
Advertising................................................. 9 11
Data processing services.................................... 24 25
Loss on sale of premises and equipments..................... 3 -
Other....................................................... 57 68
---- ----
Total non-interest expense............................... 257 277
---- ----
Income before income taxes............................... 283 244
Income tax expense............................................ 93 83
---- ----
Net income............................................... $ 190 $ 161
==== ====
Dividends declared per common share........................... $0.10 $0.10
==== ====
Earnings per common share..................................... $0.21 $0.21
==== ====
Earnings per common share - assuming dilution................. $0.21 $0.16
==== ====
</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>
Three Months Ended
December 31,
--------------------------
1997 1996
-------- --------
(In Thousands)
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Net income............................................................................. $ 190 $ 161
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of:
Premiums and discounts on securities available-for-sale............................ 1 -
Federal Home Loan Bank stock dividend................................................ (17) (8)
Depreciation......................................................................... 11 23
Dividends reinvested................................................................. (22) -
Loss on sale of premises and equipment............................................... 3 -
ESOP shares committed to be released................................................. 17 13
MSBP deferred compensation........................................................... 28 -
Change in:
Accrued interest receivable...................................................... 25 78
Other assets..................................................................... 26 13
Federal income taxes payable..................................................... (38) 30
Deferred tax liability........................................................... (13) -
Accrued expenses and other liabilities........................................... 8 (160)
----- -----
Net cash provided by operating activities..................................... 219 150
Cash flows from investing activities:
Purchases of securities available-for-sale............................................. (6,997) (2,205)
Maturities and calls of securities available-for-sale.................................. 4,166 1,979
Maturities and calls of securities held-to-maturity.................................... 1,670 472
Purchase of FHLB stock................................................................. (49) -
Origination of loans receivable........................................................ (1,865) (2,552)
Repayment of principal on loans receivable............................................. 1,762 1,774
Purchase of premises and equipment..................................................... (3) (5)
------ ------
Net cash used in investing activities................................................ (1,316) (537)
Cash flows from financing activities:
Net change in deposits................................................................. 1,001 (302)
Net changes in advances from Federal Home Loan Bank.................................... (250) 1,372
Net change in advances from borrowers for taxes and insurance.......................... (44) (43)
Dividends paid to stockholders......................................................... (89) (99)
------ ------
Net cash provided in financing activities............................................ 618 928
------ ------
Net increase (decrease) in cash and cash equivalents..................................... (479) 541
Cash and cash equivalents at beginning of year........................................... 1,194 451
----- ------
Cash and cash equivalents at end of period............................................... $ 715 $ 992
====== ======
</TABLE>
See notes to unaudited interim consolidated financial statements.
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<PAGE>
Notes to Unaudited Interim Consolidated Financial Statements
December 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 on Form 10-KSB 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 December 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 interests as of the Eligibility Record Date
(November 15, 1994) and Supplemental Eligibility Record Date (December 31,
1995).
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<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 prepayment, 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 adoption did not have a material effect on the financial position or
operations of the Corporation.
NOTE 4: EARNINGS PER SHARE
SFAS No. 128 "Earnings Per Share" was issued by the FASB in February 1997 and
became effective for the Corporation for all reporting periods beginning with
the interim reporting period ended December 31, 1997, SFAS No. 128 replaces
presentation of primary earnings per share ("EPS") with the presentation of
basic and fully-diluted EPS on the face of the income statement for all entities
with complex capital structures. SFAS No. 128 also requires a reconciliation of
the numerator and the denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
during the period. Additionally, unallocated ESOP shares which are unallocated
and not yet committed to be released (unallocated) and unvested MSBP shares are
excluded from the weighted-average common shares outstanding calculation. At
December 31, 1997, there were 8,001 allocated ESOP shares and 5,628 vested MSBP
shares. The weighted-average common shares outstanding for the three month
period ended December 31, 1997 was computed at 861,773 which is net of
weighted-average unallocated ESOP shares (56,380) and weighted-average unvested
MSBP shares (18,494). The weighted-average common shares outstanding for the
three month period ended December 31, 1996 was calculated at 955,532 shares.
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<PAGE>
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or resulted in the
issuance of common stock that would share in the earnings of the entity.
Dilutive potential common shares are added to the weighted-average shares used
to compute basic EPS. The following shows the reconciliation of the numerators
and denominators of the basic and diluted EPS computations:
For the period ended December 31, 997
----------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net Income $190,000
--------
Basic EPS
Net income available to
common stockholders 190,000 861,773 $0.22
=====
Effect of Dilutive Securities
ESOP shares - -
Stock Options - granted - 16,997
Unvested MSBP shares - 3,470
------- -----
Diluted EPS
Income available to common
stockholders plus assumed conversions $190,000 882,240 $0.22
======== ======= =====
The weighted-average number of common shares outstanding was the same for both
basic and diluted EPS for the three months ended December 31, 1997 given that
the assumed conversion of potential common shares would have been anti-dilutive.
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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. The
Corporation's assets are comprised of its investment in the Bank, loans to the
Bank's Employee Stock Ownership Plan ("ESOP") and the Bank, and shares in three
mutual funds. 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 loans, consumer loans and loans secured by savings accounts. The Bank
also invests in mortgage-backed securities and short-term U.S. Agency
securities. To a lesser extent, the Bank originates commercial real estate loans
and business loans. The Bank also utilizes funds obtained from the Federal Home
Loan Bank of Seattle ("FHLB") to purchase investment securities and to originate
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
- -------------------
The Corporation's assets increased by $822,000 from $9.95 million at September
30, 1997 to $60.77 million at December 31, 1997. Asset growth was attributed to
a $2.86 million increase in investment securities available-for-sale. This
increase was somewhat offset by a $1.67 million decrease in investment
securities held-to-maturity as well as a $479,000 decrease in cash and cash
equivalents. The decline in investment securities held-to-maturity was primarily
caused by maturities and the Corporation's decision to invest in
available-for-sale securities.
From September 30, 1997 to December 31, 1997, the Corporation experienced a
$1.00 million increase in deposits. This increase in deposits was primarily used
to fund the purchase of investment securities available-for-sale and to repay
advances from the FHLB. At December 31, 1997, FHLB advances totaled $15.45
million compared to $15.70 million at September 30, 1997.
At December 31, 1997, stockholders' equity totaled $14.37 million or 23.64% of
total assets compared to $14.21 million or 23.70% of total assets at September
30, 1997. Stockholders'
- 7 -
<PAGE>
equity continues to grow as a result of earnings and a slight increase in the
market value of investment securities available-for sale. The increase in
stockholders' equity was offset by a $.10 per share cash dividend that was
declared in December 1997.
ASSET QUALITY
- -------------
Non-performing loans totaled $112,000 at December 31, 1997 or 0.18% of total
assets. This compares to $225,000 at September 30, 1997, or 0.38% of total
assets. Non-performing loans were comprised of two residential loans, a
commercial loan secured by a restaurant/convenience store and nine consumer
loans.
RESULTS OF OPERATIONS
- ---------------------
Comparison of Three Months Ended December 31, 1997 and 1996.
------------------------------------------------------------
Net Income. The Corporation posted net income of $190,000 for the three months
ended December 31, 1997, as compared to $161,000 for the three months ended
December 31, 1996. The increase in net income was attributed, in part, to a
greater increase in average earning assets relative to the increase in
interest-bearing liabilities for the periods covered. This difference helped
cause a $13,000 increase in net interest income from 1996 to 1997. Also
contributing to the increase in net income was a $6,000 increase in non-interest
income and a $20,000 decline in non-interest expense. These increases in net
income were partially offset by a $10,000 increase in federal income tax
provisions from 1996 to 1997.
Interest Income. Total interest income increased by $168,000 or 17.46 % from
$962,000 for the three months ended December 31, 1996 to $1.13 million for the
three months ended December 31, 1997. An increase in the volume of average
earning assets from $51.35 million for the three month period ended December 31,
1996 to $59.31 million for the same period in 1997 was the primarily reason for
the increase in interest income. This increase in average earning assets caused
interest income to increase by $145,000. An increase in the yield on average
earning assets from 7.49% for the three month period ended December 31, 1996 to
7.62% for the three month period ended December 31, 1997 also helped augment
interest income.
Interest Expense. Total interest expense increased by $155,000 during the
covered periods primarily as a result of an increase in the average volume of
advances from the FHLB. Such average advances increased from $7.23 million for
the three month period ended December 31, 1996 to $15.43 million for the three
month period ended December 31, 1997. This increase in average advances caused
interest expense to increase by $116,000. The balance of the increase in
interest expense for the periods covered was primarily caused by the increase in
the cost of average interest-bearing liabilities from 5.08% for the three month
period ended December 31, 1996 to 5.41% for the same period in 1997.
Provisions for Credit Losses. There were no provisions for loan losses for
either the three months ended December 31, 1997 or 1996. For the three month
period ended December 31, 1997, the Corporation recorded loan charge-offs
totaling $39,000 while experiencing loan loss recoveries of $3,000. The majority
of the loan charge-offs, $37,000, were attributed to the
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<PAGE>
default of one commercial borrower. There were no credit losses during the three
month period ended December 31, 1996. In determining the provisions 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 reserve for loan
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 $13,000 from $505,000 for
the three months ended December 31, 1996 to $518,000 for the three months ended
December 31, 1997. The increase in net interest income was primarily attributed
to the fact that growth in average earning assets out paced the growth in
interest-bearing liabilities. Despite the disparity in growth rates, the ratio
of average interest-earning assets to average interest-bearing liabilities
declined from 142.65% to 130.96% for the periods covered due to the replacement
of interest-free capital with interest-bearing liabilities. In January and April
1997, the Corporation repurchased $1.88 million of its common stock. To maintain
its asset size, the Corporation replaced the funds lost through stock
repurchases with advances from the FHLB.
Net interest margin declined from 3.93% for the three month period ended
December 31, 1996 to 3.49% for the three month period ended December 31, 1997.
The decrease in net interest margin was primarily caused by a disproportionate
increase in the yield on average earning assets compared to the increase in the
cost of average interest-bearing liabilities; the increase in the cost of
average interest-bearing liabilities out paced the increase in the yield on
average earning assets for the periods covered.
Total Non-interest Income. Total non-interest income improved by $6,000 from
$16,000 for the three months ended December 31, 1996 to $22,000 for the three
months ended December 31, 1997 primarily as a result of additional fees
generated through customer service charges and loan originations.
Total Non-interest Expense. Total non-interest expense decreased by $20,000 from
$277,000 for the three months ended December 31, 1996 to $257,000 for the three
months ended December 31, 1997. The decrease in non-interest expense was
primarily the result of lower deposit insurance premiums and a reduction in
advertising costs, equipment expenses and other operating expenses. Compensation
expense increased by $13,000 from $125,000 for the three months ended December
31, 1996 to $138,000 for the three months ended December 31, 1997 due to costs
associated with the Bank's Management Stock Bonus Plan ("MSBP"). These costs
were not present in the three months ended December 31, 1996.
Other operating expenses decreased by $11,000 from $68,000 for the three months
ended December 31, 1996 to $57,000 for the same period in 1997 primarily due to
a decease in legal fees. Legal fees totaled $6,000 for the three months ended
December 31, 1997 compared to $19,000 for the same period in 1996. In 1996,
legal fees included work done on the Bank's ESOP and MSBP and on the special
stockholders' meeting held on October 21, 1996.
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<PAGE>
Occupancy and equipment costs were $9,000 lower in 1997 than in 1996 primarily
due to a decease in depreciation expense. Non-interest expense for the three
months ended December 31, 1997 included a $3,000 loss from the abandonment of
obsolete equipment.
Non-interest expense for the three months ended December 31, 1997 does not
contain any costs associated with the Corporation's efforts to upgrade its data
processing systems to address the change to the year 2000. Because all of the
Corporation's data processing and computer software is provided by outside,
third parties, the Corporation cannot, at this time, accurately quantify all of
the costs that might be recognized directly or indirectly by the Corporation.
The Corporation does not believe that these costs will have a material effect on
its financial position or results of operation.
Provision for Income Taxes. The effective tax rate for the three months ended
December 31, 1997 and 1996 was 32.86% and 34.02%, respectively.
CAPITAL COMPLIANCE AND LIQUIDITY
- --------------------------------
Capital Compliance. The following table presents the Bank's compliance with its
regulatory capital requirements of December 31, 1997.
<TABLE>
<CAPTION>
At December 31, 1997
-------------------------------
Percentage
Amount of Assets
------ ---------
(Dollars in Thousands)
<S> <C> <C>
GAAP Capital...................................... $11,060 19.74%
Tangible capital.................................. $11,008 18.41%
Tangible capital requirement...................... 896 1.50%
------- ------
Excess............................................ $10,112 16.91%
====== =====
Core capital...................................... $11,008 18.41%
Core capital requirements......................... 1,792 3.00%
------ -----
Excess............................................ $ 9,216 15.41%
====== =====
Total risk-based capital (1)...................... $11,274 46.36%
Total risk-based capital requirement (1).......... 1,945 8.00%
------ ----
Excess (1)........................................ $ 9,329 38.36%
====== =====
</TABLE>
- ------------
(1) Based on risk-weighted assets of $24,316.
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<PAGE>
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.
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 most of its operations internally but supplements with
borrowed funds from the FHLB of Seattle. As of December 31, 1997, such borrowed
funds totaled $15.45 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 4% of its net withdrawable accounts
plus short-term borrowings. 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 11.17% and 21.84% at December 31, 1997 and 1996,
respectively.
The amount of certificate accounts which are scheduled to mature during the
twelve months ending December 31, 1997 is approximately $12.31 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 December 31, 1997, the Bank had loan commitments outstanding of $474,000.
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.
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<PAGE>
KEY OPERATING RATIOS
- --------------------
Three Months Ended
December 31,
-------------------------------
1997 (1) 1996 (1)
-------- --------
(Dollars in Thousands,
except per share data)
(Unaudited)
Return on average assets........................ 1.26% 1.23%
Return on average equity........................ 5.31% 4.12%
Interest rate spread............................ 2.22% 2.42%
Net interest margin............................. 3.49% 3.93%
Noninterest expense to average assets........... 1.70% 2.11%
Net charge-offs to average outstanding loans.... (0.13)% 0.04%
<TABLE>
<CAPTION>
At At
December 31, September 30,
1997 1996
------------ -------------
<S> <C> <C>
Nonaccrual and 90 days past due loans................ 112 225
Repossessed real estate.............................. 0 0
Total nonperforming assets......................... 112 225
Allowance for credit losses to nonperforming assets.. 237.50% 134.22%
Nonperforming loans to total loans................... 0.18% 0.38%
Nonperforming assets to total assets................. 0.39% 0.79%
Book value per share (2)............................. $15.04 $14.88
</TABLE>
- ----------------
(1) The ratios for the three-month periods are annualized.
(2) The number of shares outstanding as of December 31, 1997 was 954,875.
This includes shares purchased by the ESOP.
- 12 -
<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 December 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
---------------------------------------------------
None.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 27 - Financial Disclosure Schedule
(in electronic form only).
(b) Reports on Form 8-K
None.
- 13 -
<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: February 3, 1998 By: /s/Deane D. Bjerke
-------------------------------------------------
Deane D. Bjerke
President and
Chief Executive Officer
(Principal Executive Officer)
Date: February 3, 1998 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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE QUARTERLY
REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 41
<INT-BEARING-DEPOSITS> 773
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,019
<INVESTMENTS-CARRYING> 21,891
<INVESTMENTS-MARKET> 7,402
<LOANS> 28,739
<ALLOWANCE> 266
<TOTAL-ASSETS> 60,774
<DEPOSITS> 30,508
<SHORT-TERM> 15,450
<LIABILITIES-OTHER> 451
<LONG-TERM> 2,300
0
0
<COMMON> 106
<OTHER-SE> 14,259
<TOTAL-LIABILITIES-AND-EQUITY> 60,774
<INTEREST-LOAN> 599
<INTEREST-INVEST> 505
<INTEREST-OTHER> 26
<INTEREST-TOTAL> 1,130
<INTEREST-DEPOSIT> 382
<INTEREST-EXPENSE> 612
<INTEREST-INCOME-NET> 518
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 257
<INCOME-PRETAX> 283
<INCOME-PRE-EXTRAORDINARY> 283
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190
<EPS-PRIMARY> 0.22 <F1>
<EPS-DILUTED> 0.22
<YIELD-ACTUAL> 3.49
<LOANS-NON> 112
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 302
<CHARGE-OFFS> 39
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 266
<ALLOWANCE-DOMESTIC> 266
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
BASIC EPS
</FN>
</TABLE>
