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, 1999
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
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(Address of principal executive offices)
(307) 684-5591
-----------------
(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 February 7, 2000: 820,608
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Condensed Statements of Financial Condition at December 31,
1999 (unaudited) and September 30, 1999 (unaudited) 1
Consolidated Condensed Statements of Income for the three months ended
December 31, 1999 and 1998 (unaudited) 2
Consolidated Condensed Statements of Stockholders' Equity and
Comprehensive Income for the three months ended December 31, 1999 and 3
1998 (unaudited)
Consolidated Condensed Statements of Cash Flows for the three months
ended December 31, 1999 and 1998 (unaudited) 4
Notes to Consolidated Condensed Financial Statements 5
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 and use of proceeds 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
</TABLE>
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------------ -------------------
(In thousands, except share and per
Assets share data)
- ------
<S> <C> <C>
Cash and cash equivalents $ 1,287 $ 2,189
Investment and mortgage-backed securities available-for-sale 29,900 29,479
Stock in Federal Home Loan Bank of Seattle, at cost 1,006 988
Loans receivable, net 29,697 29,727
Accrued interest receivable 513 522
Premises and equipment, net 541 544
Real estate owned -- 73
Deferred income taxes 122 62
Other assets 41 77
------------------ -------------------
Total assets $63,107 $63,661
================== ===================
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits $34,392 $34,257
Advances from Federal Home Loan Bank 14,950 15,600
Advances from borrowers for taxes and insurance 19 69
Income taxes payable 70 7
Dividends payable 104 104
Accrued expenses and other liabilities 255 268
------------------ -------------------
Total liabilities 49,790 50,305
------------------ -------------------
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 10,096 10,096
Unearned ESOP/MSBP shares (553) (577)
Retained earnings, substantially restricted 7,150 7,080
Accumulated other comprehensive income (loss) (474) (341)
Treasury stock at cost, 173,466 shares at December 31, 1999
and September 30, 1999 (3,008) (3,008)
------------------ -------------------
Total stockholders' equity 13,317 13,356
------------------ -------------------
Total liabilities and stockholders' equity $63,107 $63,661
================== ===================
</TABLE>
See notes to consolidated condensed financial statements.
Page 1
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------------------------------
1999 1998
-------------------- --------------------
(Dollars in thousands except per share data)
<S> <C> <C>
Interest Income:
Loans receivable $572 $613
Mortgage-backed securities 182 138
Investment securities 301 311
Other 32 27
-------------------- --------------------
Total interest income 1,087 1,089
Interest expense:
Deposits 427 403
Advances from Federal Home Loan Bank 206 202
--------------------
--------------------
Total interest expense 633 605
-------------------- --------------------
Net interest income 454 484
Provision for loan losses -- 6
--------------------
--------------------
Net interest income after provision for loan losses 454 478
-------------------- --------------------
Non-interest income:
Customer service charges 15 10
Other operating income 9 16
-------------------- --------------------
Total non-interest income 24 26
-------------------- --------------------
Non-interest expense:
Compensation and benefits 128 128
Occupancy and equipment 18 21
FDIC/SAIF deposit insurance premiums 4 4
Advertising 13 9
Data processing services 27 27
Professional fees 13 15
Other 38 38
--------------------
--------------------
Total non-interest expense 241 242
-------------------- --------------------
Income before income taxes 237 262
Income tax expense 70 80
-------------------- --------------------
Net income $167 $182
==================== ====================
Dividends declared per common share $ 0.12 $ 0.10
==================== ====================
Basic earnings per common share $ 0.20 $ 0.21
==================== ====================
Diluted earnings per common share $ 0.20 $ 0.21
==================== ====================
</TABLE>
See notes to consolidated condensed financial statements.
Page 2
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED
AND SUBSIDIARY Consolidated Condensed Statements of
Stockholders' Equity and Comprehensive Income
Three months ended December 31, 1999 and 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Unearned Accumulated
Additional ESOP/ other Total
Common paid-in MSBP Retained Treasury comprehensive stockholders'
stock capital shares earnings stock income (loss) equity
---------- ----------- ------------------------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1998 $106 $10,083 $ (671) $6,737 $(2,427) $ 208 $14,036
Comprehensive income:
Net income -- -- -- 182 -- -- 182
Unrealized gains on securities
available-for-sale, net of
reclassification adjustment -- -- -- -- -- 64 64
-------------
Total comprehensive income 246
ESOP shares committed to be released -- 4 12 -- -- -- 16
MSBP shares vested -- -- 12 -- -- -- 12
Cash dividends declared ($.10 per share) -- -- -- (85) -- -- (85)
---------- ----------- ------------------------- ---------- -------------- -------------
Balances at December 31, 1998 $106 $10,087 $ (647) $6,834 (2,427) $ 272 $14,225
========== =========== ========================= ========== ============== =============
Balances at September 30, 1999 $106 $10,096 $ (577) $7,080 (3,008) $ (341) $13,356
Comprehensive income:
Net income -- -- -- 167 -- 167
Unrealized losses on securities
available-for-sale, net -- -- -- -- -- (133) (133)
-------------
Total comprehensive income 34
Tax benefit from stock related compensation -- (2) -- -- -- -- (2)
ESOP shares committed to be released -- 2 12 -- -- -- 14
MSBP shares vested -- -- 12 -- -- -- 12
Cash dividends declared ($.12 per share) -- -- -- (97) -- -- (97)
---------- ----------- ------------------------- ---------- -------------- -------------
Balances at December 31, 1999 $106 $10,096 $(553) $7,150 $(3,008) $ (474) $13,317
========== =========== ========================= ========== ============== =============
</TABLE>
See notes to consolidated condensed financial statements.
Page 3
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended
December 31,
---------------------
1999 1998
---------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 167 $ 182
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses -- 6
Amortization of premiums and discounts on
securities available-for-sale 3 5
Federal Home Loan Bank stock dividends (18) (18)
Depreciation 9 8
Dividends reinvested (25) (26)
Deferred loan origination fees, net (2) 13
Loss on sale of other real estate owned 2 --
ESOP shares committed to be released 14 16
MSBP deferred compensation 12 12
Change in:
Accrued interest receivable 9 38
Income taxes 61 81
Other assets 36 23
Deferred income taxes 8 --
Accrued expenses and other liabilities (13) 33
------- -------
Net cash provided by operating activities 263 372
------- -------
Cash flows from investing activities:
Purchases of securities available-for-sale (1,190) (6,545)
Maturities and calls of securities available-for-sale 590 6,075
Origination of loans receivable (1,856) (3,349)
Repayment of principal on loans receivable 1,961 2,834
Purchase of premises and equipment (6) --
Proceeds from sale of other real estate owned (2) --
------- -------
Net cash used in investing activities (503) (985)
------- -------
Cash flows from financing activities:
Net change in deposits 135 (153)
Advances from Federal Home Loan Bank 4,600 4,250
Repayment of advances from Federal Home Loan Bank (5,250) (3,800)
Net change in advances from borrowers for taxes and insurance (50) (47)
Dividends paid to stockholders (97) (85)
------- -------
Net cash provided by (used in) financing activities (662) 165
------- -------
Net change in cash and cash equivalents (902) (448)
Cash and cash equivalents at beginning of period 2,189 1,562
------- -------
Cash and cash equivalents at end of period $ 1,287 $ 1,114
======= =======
Cash paid during period for:
Interest $ 593 $ 595
Income taxes -- --
======= =======
</TABLE>
See notes to consolidated condensed financial statements
Page 4
<PAGE>
Notes to Consolidated Condensed Financial Statements
December 31, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
For further information, the reader should refer to the Annual Report of Crazy
Woman Creek Bancorp Incorporated (the "Company") for the year ended September
30, 1999.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. The
results of operations for the three months ended December 31, 1999 and 1998 are
not necessarily indicative of the results which may be expected for an entire
year or any other period.
The accompanying consolidated financial statements include the accounts of the
Company and Buffalo Federal Savings Bank (the "Bank"), a wholly owned subsidiary
of the Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 2: FINANCIAL SERVICES MODERNIZATION BILL
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act (the "Act") which will, effective March 11, 2000, permit qualifying bank
holding companies to become financial holding companies and thereby affiliate
with securities firms and insurance companies and engage in other activities
that are financial in nature. The Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the Federal Reserve Board has determined to be
closely related to banking. A qualifying national bank also may engage, subject
to limitations on investment, in activities that are financial in nature, other
than insurance underwriting, insurance company portfolio investment, real estate
development, and real estate investment, through a financial subsidiary of the
bank.
The Act also prohibits new unitary thrift holding companies from engaging in
nonfinancial activities or from affiliating with an nonfinancial entity. As a
grandfathered unitary thrift holding company, the Company will retain its
authority to engage in nonfinancial activities.
NOTE 3: COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income (SFAS 130). SFAS 130 requires companies to report
comprehensive income, which includes net income, as well as other changes in
stockholders' equity that result from transactions and economic events other
than those with stockholders. The Company's only significant element of
comprehensive income is unrealized gains and losses on available-for-sale
securities. Because of interest rate volatility, the Company's accumulated
comprehensive income and stockholder's equity could materially fluctuate for
each interim period and year-end period. The majority of the unrealized loss
resulted from the Company's investment in U.S. Agency bonds. The following
schedule reflects the unrealized holding gains:
Page 5
<PAGE>
Notes to Consolidated Condensed Financial Statements
December 31, 1999
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------------------------
1999 1998
-------------------- --------------------
(In thousands)
<S> <C> <C>
Unrealized and realized holding gains (losses) arising
during the period, net of income tax expense (benefit) (133) 9
of $ (68) and $ 5 for the three months ended December
31, 1999 and 1998, respectively
Effect of adoption of SFAS No. 133, net of income tax -- 55
expense of $ 28
-------------------- --------------------
Net change in unrealized gain (loss) on
available-for-sale investment securities (133) 64
==================== ====================
</TABLE>
NOTE 4: EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding during the period less
unvested management stock bonus plan (MSBP) and unallocated and not yet
committed to be released Employee Stock Ownership Plan (ESOP) shares. Diluted
EPS is calculated by dividing net income by the weighted-average number of
common shares used to compute basic EPS plus the incremental amount of potential
common stock determined by the treasury stock method.
<TABLE>
<CAPTION>
For the three months ended December 31, 1999
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $ 167,000 829,990 $ 0.20
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- 301
Incremental shares related to MSBP -- --
----------------- -----------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 167,000 830,291 $ 0.20
========== === ======= ====
</TABLE>
<TABLE>
<CAPTION>
For the three months ended December 31, 1998
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $182,000 870,297 $ 0.21
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- 7,316
Incremental shares related to MSBP -- 786
----------------- -----------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 182,000 878,399 $ 0.21
================= ================= ====
</TABLE>
Page 6
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
- --------------------------
The Company may from time to time make written or oral "forward-looking
statements", including statements contained in the Company's filings with the
Securities and Exchange Commission (including this Quarterly Report on Form
10-QSB and the exhibits thereto), in its reports to stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to changes based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economy in which the Company conducts operations;
the effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the board of governors of the federal
reserve system, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute competitors' products and
services for the Company's products and services; the success of the Company in
gaining regulatory approval of its products and services, when required; the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological changes;
acquisitions; changes in consumer spending and saving habits; and the success of
the Company at managing the risks resulting from these factors.
The Company cautions that the listed factors are not exclusive. The Company does
not undertake to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the Company.
GENERAL
- -------
The Company is a unitary savings and loan holding company of the Bank. The
Company's assets are comprised of its investment in the Bank, loans to the ESOP
and to 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, consumer loans
and loans secured by savings accounts. The Bank invests in mortgage-backed
securities (including Real Estate Mortgage Investment Conduits ("REMICs")),
municipal bonds, short-term and medium-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 income is 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 rates 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 income also is affected by the level
of non-interest income, which primarily consists
Page 7
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
of service charges and other operating income. In addition, net income is
affected by the level of non-interest (general and administrative) expenses.
FINANCIAL CONDITION
- -------------------
At December 31, 1999, assets totaled $63.11 million compared to total assets of
$63.66 million at September 30, 1999. Cash and cash equivalents decreased by
$902,000 due to the payoff of FHLB advances. Investments securities
available-for-sale increased $421,000. Other real estate owned decreased $73,000
from the sale of repossessed properties. Deposits increased by $135,000 from
$34.26 million at September 30, 1999 to $34.39 million at December 31, 1999
primarily as a result of new jumbo certificates of $586,000 and a decrease in
other certificates and retirement accounts. Advances from the FHLB decreased by
$650,000 to $14.95 million at December 31, 1999.
At December 31, 1999, stockholders' equity totaled $13.32 million or 21.10% of
total assets compared to $13.36 million or 20.98% of total assets at September
30, 1999. The decrease in stockholders' equity was primarily cash dividends
declared of $97,000 and a decrease of $133,000 in the market value of investment
securities available-for-sale, which more than offset current period earnings of
$167,000.
On January 20, 2000, the Company announced the adoption of a stock repurchase
program. Any shares repurchased will decrease stockholders' equity. See also
"Part II Other Information - Item 5 Other Information."
ASSET QUALITY
- -------------
Non-performing assets totaled $58,000 at December 31, 1999, or 0.09% of total
assets. This compares to $141,000 at September 30, 1999 or 0.22% of total
assets. Non-performing loans at December 31, 1999 were comprised of four
consumer loans and one mortgage loan.
RESULTS OF OPERATIONS
- ---------------------
Comparison of Three Months Ended December 31, 1999 and 1998.
- ------------------------------------------------------------
Net Income. Net income for the three months ended December 31, 1999 totaled
- ----------
$167,000 compared to $182,000 for the three months ended December 31, 1998. Net
income was lower in 1999 than in 1998 primarily due to a $30,000 decrease in net
interest income and a $6,000 decrease in the provision for loan losses. Federal
tax expense was $10,000 lower in 1999 than in 1998 primarily due to reduced
earnings.
Interest Income. For the three months ended December 31, 1999, interest income
- ---------------
totaled $1.087 million compared to $1.089 million for the three months ended
December 31, 1998. An increase in the volume of average earning assets from
$60.85 million for the three months ended December 31, 1998 to $61.97 million
for the same period in 1999 caused interest income to increase by $12,000. A
decrease was experienced in the yield on average earning assets from 7.16% for
the three months ended December 31, 1998 to 7.02% for the three months ended
December 31, 1999, which attributed to a $14,000 decrease in interest income.
Interest Expense. Total interest expense increased by $28,000 from $605,000 for
- ----------------
the three months ended December 31, 1998 to $633,000 for the same period in
1999. This was primarily a result of an increase in the volume of average
interest-bearing liabilities.
Page 8
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
The cost of average interest-bearing deposits increased slightly from 4.98% for
the three months ended December 31, 1998 to 4.99% for the three months ended
December 31, 1999, which caused interest expense for deposits to increase by
$1,000. An increase in the volume of average interest-bearing deposits from
$32.35 million for the three months ended December 31, 1998 to $34.25 million
for the three months ended December 31, 1999, resulted in a $23,000 increase in
interest expense for deposits.
The cost of average interest-bearing advances from the FHLB decreased from 5.69%
for the three months ended December 31, 1998 to 5.35% for the same period in
1999. This decrease in the cost of average interest-bearing advances caused a
$12,000 decrease in interest expense. Average interest-bearing advances
increased from $14.20 million for the three month period ended December 31, 1998
to $15.41 million for the three month period ended December 31, 1999, resulting
in a $17,000 increase in interest expense for advances.
Net Interest Income. Net interest income decreased by $30,000 from $484,000 for
- -------------------
the three months ended December 31, 1998 to $454,000 for the three months ended
December 31, 1999. The decrease in net interest income was primarily caused by
the increase in the volume of interest-bearing liabilities. The increase in
average interest-bearing liabilities was $1.99 million greater than the $1.12
million of growth in average interest-earning assets as evidenced by the slight
decrease of the ratio of average interest-earning assets to average
interest-bearing liabilities from 130.72% in 1998 to 124.79% in 1999. The
increase in interest-bearing liabilities was the major factor for the decrease
in net interest income.
Net interest margin declined from 3.18% for the three months ended December 31,
1998 to 2.93% for the three months ended December 31, 1999. The decrease in net
interest margin was primarily caused by the disproportionate increase in
interest-bearing liabilities over interest-earning assets. Continued increases
in market rates of interest could have a negative impact on the Company's net
interest margin
Provisions for Loan Losses. The Company recorded a $6,000 provision for loan
- ---------------------------
losses for the three months ended December 31, 1998; no provision was recorded
during the three months ended December 31, 1999. There were no loan charge-offs
for the three months ended December 31, 1999, while recoveries totaled $28,000.
In 1998, there was $5,000 of loan charge-offs while recoveries totaled $3,000.
Total Non-interest Income. Total non-interest income decreased by $2,000 from
- --------------------------
$26,000 for the three months ended December 31, 1998 to $24,000 for the three
months ended December 31, 1999 primarily due to a decrease in other operating
income offset by an increase in fees generated from service charges.
Total Non-interest Expense. Total non-interest expense decreased by $1,000 from
- --------------------------
$242,000 for the three months ended December 31, 1998 to $241,000 for the three
months ended December 31, 1999. There were slight decreases in occupancy and
equipment and professional fees, while there was a slight increase in
advertising. There were no significant changes in the other components of
non-interest expense.
Provision for Income Taxes. The effective tax rate for the three months ended
- ----------------------------
December 31, 1999 and 1998 was 29.54% and 30.53%, respectively. The effective
tax rate decreased slightly due to decreased net interest income offset with
non-taxable income remaining the same for the periods reported.
Page 9
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
YEAR 2000
- ---------
Like many financial institutions, we rely on computers to conduct our business
and information systems processing. Industry experts were concerned that on
January 1, 2000, some computers might not be able to interpret the new year
properly, causing computer malfunctions. Some banking industry experts remain
concerned that some computers may not be able to interpret additional dates in
the year 2000 properly. We have operated and evaluated our computer operating
systems following January 1, 2000 and have not identified any errors or
experienced any computer system malfunctions. We will continue to monitor our
information systems to assess whether our systems are at risk of misinterpreting
any future dates and will develop appropriate contingency plans to prevent any
potential system malfunction or correct any system failures. The Company has not
been informed of any such problem experienced by its vendors or its customers,
nor by any of the municipal agencies that provide services to the Company.
Nevertheless, it is too soon to conclude that there will not by any problems
arising from the Year 2000 problem, particularly at some of the Company's
vendors. The Company will continue to monitor its significant vendors with
respect to Year 2000 problems they may encounter as those issues may effect the
Company's ability to continue operations, or might adversely affect the
Company's financial position, results of operations and cash flows. The Company
does not believe at this time that these potential problems will materially
impact the ability of the Company to continue its operations, however, no
assurance can be given that this will be the case.
The expectations of the Company contained in this section of Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause actual results to differ materially from those indicated by the
forward looking statements. All forward looking statements in the section are
based on information available to the Company on the date of this document, and
the Company assumes no obligation to update such forward looking statements.
CAPITAL COMPLIANCE AND LIQUIDITY
- --------------------------------
Capital Compliance. The following table presents the Bank's compliance with its
- ------------------
regulatory capital requirements:
<TABLE>
<CAPTION>
At December 31, 1999
----------------------------
Percentage
Amount of Assets
---------- --------------
(Dollars in thousands)
<S> <C> <C>
GAAP Capital................................. $ 11,374
Tangible capital............................. $ 12,206 19.40%
Tangible capital requirement................. 941 1.50%
-------- ----
Excess....................................... $ 11,265 17.90%
======== =====
Core capital................................. $ 12,206 19.40%
Core capital requirements.................... 1,885 3.00%
----- ----
Excess....................................... $ 10,321 16.40%
======== =====
Total risk-based capital (1)................. $ 12,483 50.60%
Total risk-based capital requirement (1)..... 1,973 8.00%
-------- -----
Excess (1)................................... $ 10,510 42.60%
======== =====
</TABLE>
1) Based on risk-weighted assets of $24,671
Page 10
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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.
The Bank, before and after any proposed capital distributions must meet or
exceed all capital requirements, may make capital distributions with prior
notice to the Office of Thrift Supervision during any calendar year up to a
total of current year net income and the preceding two years net income less
dividends paid during the previous two years. The Bank currently exceeds all
capital requirements and has been assessed as "well-capitalized" under the
regulatory guidelines.
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 December 31, 1999 such borrowed
funds totaled $14.95 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 64.62% and 61.17% at December 31, 1999 and 1998,
respectively.
The amount of certificate accounts which are scheduled to mature during the
twelve months ending December 31, 2000 is approximately $15.81 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. No assurances,
however, can be made that deposits can be maintained in the future without
further increasing the cost of funds if interest rates continue to increase.
At December 31, 1999, the Bank had loan commitments outstanding of $634,000.
Funds required to fill these commitments are derived primarily from current
excess liquidity, deposit inflows or loan and investment and mortgage-backed
security repayments. The Company's primary source of liquidity on a stand alone
basis is dividends from the Bank. As indicated above under Capital Compliance,
dividends paid by the Bank are subject to regulatory restrictions.
IMPACT OF INFLATION AND CHANGING PRICES
- ---------------------------------------
The consolidated financial statements of the Company 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
Page 11
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Company's operations. Unlike most industrial companies, nearly all the assets
and liabilities of the Company are financial. As a result, interest rates have a
greater impact on the Company'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.
KEY OPERATING RATIOS
- --------------------
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------------------------
1999 (1) 1998(1)
-------------------- --------------------
(Dollars in thousands, except per share
data) (Unaudited)
<S> <C> <C>
Return on average assets 1.04% 1.10%
Return on average equity 4.97% 4.95%
Interest rate spread 1.91% 1.96%
Net interest margin 2.93% 3.18%
Non-interest expense to average assets 1.51% 1.56%
Net charge-offs (recoveries) to average outstanding loans
0.09% 0.01%
</TABLE>
<TABLE>
<CAPTION>
At December 31, At September 30,
1999 1999
-------------------- --------------------
<S> <C> <C>
Nonaccrual and 90 days past due loans $ 58 $ 68
Repossessed real estate, held under judgment -- 73
-------------------- --------------------
Total nonperforming assets 58 141
==================== ====================
Allowance for loan losses to nonperforming assets 474.35% 128.32%
Nonperforming loans to total loans 0.93% 0.84%
Nonperforming assets to total assets 0.09% 0.22%
Book value per share (2) $15.42 $15.46
</TABLE>
- ----------------
(1) The ratios for the three-month periods are annualized.
(2) The number of shares outstanding as of December 31, 1999 and September 30,
1999 were 863,798. These include shares purchased by the ESOP and MSBP.
Page 12
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
Neither the Company nor the Bank was engaged in any legal
proceeding of a material nature at December 31, 1999. From
time to time, the Company 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 and Use of Proceeds
-----------------------------------------
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
-----------------
The Company announced that the board of directors has authorized the
repurchase up to 43,190 shares (5%) of the Corporation's common stock.
The Company has repurchased 194,202 shares of its common stock since
Buffalo Federal's mutual-to-stock conversion in March 1996.
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.
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.
Page 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, 7, 2000 By: /s/ Deane D. Bjerke
--------------------------------------------
Deane D. Bjerke
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 7, 2000 By: /s/ John B. Snyder
--------------------------------------------
John B. Snyder
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 746
<INT-BEARING-DEPOSITS> 541
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 29,900
<INVESTMENTS-MARKET> 0
<LOANS> 29,997
<ALLOWANCE> 277
<TOTAL-ASSETS> 63,107
<DEPOSITS> 34,392
<SHORT-TERM> 10,450
<LIABILITIES-OTHER> 448
<LONG-TERM> 4,500
0
0
<COMMON> 106
<OTHER-SE> 13,211
<TOTAL-LIABILITIES-AND-EQUITY> 63,107
<INTEREST-LOAN> 572
<INTEREST-INVEST> 483
<INTEREST-OTHER> 32
<INTEREST-TOTAL> 1,087
<INTEREST-DEPOSIT> 427
<INTEREST-EXPENSE> 633
<INTEREST-INCOME-NET> 454
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 241
<INCOME-PRETAX> 237
<INCOME-PRE-EXTRAORDINARY> 237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
<YIELD-ACTUAL> 2.92
<LOANS-NON> 58
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 249
<CHARGE-OFFS> 0
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 277
<ALLOWANCE-DOMESTIC> 277
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
