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, 2000
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
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(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
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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 May 5, 2000: 841,344
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements (unaudited)
Consolidated Condensed Statements of Financial Condition at March 31,
2000 and September 30, 1999 1
Consolidated Condensed Statements of Income for the three and six months
ended March 31, 2000 and 1999 2
Consolidated Condensed Statements of Stockholders' Equity and
Comprehensive Income for the six months ended March 31, 2000 and 1999 3
Consolidated Condensed Statements of Cash Flows for the six months ended
March 31, 2000 and 1999 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION
------------------
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES
</TABLE>
<PAGE>
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------------- -------------
(In thousands)
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 1,508 $ 2,189
Investment and mortgage-backed securities available-for-sale 30,000 29,479
Stock in Federal Home Loan Bank of Seattle, at cost 1,022 988
Loans receivable, net 29,893 29,727
Accrued interest receivable 542 522
Premises and equipment, net 532 544
Real estate owned -- 73
Deferred income taxes 127 62
Other assets 39 77
------------------ -------------------
Total assets $63,663 $63,661
================== ===================
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits $34,234 $34,257
Advances from Federal Home Loan Bank 16,050 15,600
Advances from borrowers for taxes and insurance 36 69
Income taxes payable 83 7
Dividends payable 98 104
Accrued expenses and other liabilities 218 268
------------------ -------------------
Total liabilities 50,719 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 10,098 10,096
Unearned ESOP/MSBP shares (530) (577)
Retained earnings, substantially restricted 7,214 7,080
Accumulated other comprehensive loss (461) (341)
Treasury stock at cost, 216,656 and 173,466 shares at March 31,
2000 and September 30, 1999, respectively (3,483) (3,008)
------------------ -------------------
Total stockholders' equity 12,944 13,356
------------------ -------------------
Total liabilities and stockholders' equity $63,663 $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 Six Months Ended
March 31, March 31,
------------------------------- -------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable $580 $607 $1,157 $1,231
Mortgage-backed securities 194 148 376 286
Investment securities 277 297 578 608
Other 25 26 57 53
------------- ------------- ------------- -------------
Total interest income 1,076 1,078 2,168 2,178
Interest expense:
Deposits 390 396 817 799
Advances from Federal Home Loan Bank 216 195 422 397
------------- ------------- ------------- -------------
Total interest expense 606 591 1,239 1,196
------------- ------------- ------------- -------------
Net interest income 470 487 929 982
Provision for loan losses -- -- -- 6
------------- ------------- ------------- -------------
Net interest income after provision for loan losses 470 487 929 976
------------- ------------- ------------- -------------
Non-interest income:
Customer service charges 15 12 30 20
Other operating income 8 3 12 8
------------- ------------- ------------- -------------
Total non-interest income 23 13 42 28
------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 132 135 260 263
Occupancy and equipment 18 23 36 44
FDIC/SAIF deposit insurance premiums 2 5 6 9
Advertising 8 10 21 19
Data processing services 27 26 54 53
Professional fees 20 24 33 39
Other 60 45 98 83
------------- ------------- ------------- -------------
Total non-interest expense 267 268 508 510
------------- ------------- ------------- -------------
Income before income taxes 226 232 463 494
Income tax expense 72 70 142 150
------------- ------------- ------------- -------------
Net income $154 $162 $ 321 $ 344
============= ============= ============= =============
Dividends declared per common share $ 0.12 $ 0.10 $ 0.24 $ 0.20
============= ============= ============= =============
Basic earnings per common share $ 0.19 $ 0.19 $ 0.39 $ 0.40
============= ============= ============= =============
Diluted earnings per common share $ 0.19 $ 0.19 $ 0.39 $ 0.39
============= ============= ============= =============
</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
Six months ended March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated
Unearned other
Additional ESOP/ comprehensive Total
Common paid-in MSBP Retained income (loss) Treasury stockholders'
stock capital shares earnings stock equity
--------- --------------- ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1998 $106 $10,083 $ (671) $6,737 $ 208 $ (2,427) $14,036
Comprehensive income:
Net income -- -- -- 344 -- -- 344
Unrealized loss on securities
available-for-sale, net of
reeclassification adjustment -- -- -- -- (135) -- (135)
adjustment
Effect of change in classification
of investment securities -- -- -- -- 55 -- 55
-------------
Total comprehensive income 264
Tax benefit from stock related
compensation -- 1 -- -- -- -- 1
ESOP shares committed to be released -- 7 23 -- -- -- 30
MSBP shares vested -- -- 24 -- -- -- 24
Cash dividends declared
($.20 per share) -- -- -- (169) -- -- (169)
--------- --------------- ------------ ------------ ------------ ------------ -------------
Balances at March 31, 1999 $106 $10,091 $ (624) $6,912 $ 128 $ (2,427) $14,186
========= =============== ============ ============ ============ ============ =============
Balances at September 30, 1999 $106 $10,096 $ (577) $7,080 $ (341) $ (3,008) $13,356
Comprehensive income:
Net income -- -- -- 321 -- 321
Unrealized losses on securities
available-for-sale, net of
reclassification adjustment -- -- -- -- (120) -- (120)
-------------
Total comprehensive income 201
Repurchase of 43,190 shares
of common stock -- -- -- -- -- (475) (475)
ESOP shares committed to be released -- 2 23 -- -- -- 25
MSBP shares vested -- -- 24 -- -- -- 24
Cash dividends declared
($.24 per share) -- -- -- (187) -- -- (187)
--------- --------------- ------------ ------------ ------------ ------------ -------------
Balances at March 31, 2000 $106 $10,098 $ (530) $7,214 $ (461) $ (3,483) $12,942
========= =============== ============ ============ ============ ============ =============
</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>
Six Months Ended
March 31,
----------------------------------
2000 1999
---------------- ---------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 321 $ 344
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 (1) 12
Federal Home Loan Bank stock dividends (34) (36)
Depreciation 18 18
Loss on sale of foreclosed real estate 2 --
Dividends reinvested (28) (35)
Deferred loan origination fees, net (11) 23
ESOP shares committed to be released 25 30
MSBP deferred compensation 24 24
Change in:
Accrued interest receivable (20) (42)
Income taxes 76 20
Other assets 38 12
Deferred income taxes (3) --
Accrued expenses and other liabilities (50) 247
--------------- ---------------
Net cash provided by operating activities 357 623
--------------- ---------------
Cash flows from investing activities:
Purchases of securities available-for-sale (1,669) (10,502)
Maturities and calls of securities available-for-sale 995 8,708
Origination of loans receivable (3,728) (5,985)
Repayment of principal on loans receivable 3,646 5,215
Purchase of premises and equipment (6) (5)
Proceeds from sale of foreclosed real estate (2) --
--------------- ---------------
Net cash used in investing activities (764) (2,569)
--------------- ---------------
Cash flows from financing activities:
Net change in deposits (23) (462)
Advances from Federal Home Loan Bank 13,800 15,250
Repayment of advances from Federal Home Loan Bank (13,350) (13,400)
Net change in advances from borrowers for taxes and insurance (33) (27)
Repurchase of common stock (475) --
Dividends paid to stockholders (193) (169)
--------------- ---------------
Net cash provided by (used in) financing activities (274) 1,192
--------------- ---------------
Net decrease in cash and cash equivalents (681) (754)
Cash and cash equivalents at beginning of period 2,189 1,562
--------------- ---------------
Cash and cash equivalents at end of period $ 1,508 $ 808
=============== ===============
Cash paid during period for:
Interest $ 1,237 $ 1,213
Income taxes 69 131
=============== ===============
</TABLE>
See notes to consolidated condensed financial statements.
Page 4
<PAGE>
Notes to Consolidated Condensed Financial Statements
March 31, 2000
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated condensed 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 and six months ended March 31, 2000 and 1999
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, effective March 11, 2000, permitted 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
Comprehensive income 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 stockholders' 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 net change in the unrealized holding losses:
Page 5
<PAGE>
Notes to Consolidated Condensed Financial Statements
March 31, 2000
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------------------------------
2000 1999
-------------------- --------------------
(In thousands)
<S> <C> <C>
Unrealized and realized holding losses arising during the
period, net of income tax benefit of $ (67) and $(70) (120) (135)
for the six months ended March 31, 2000 and 1999,
respectively
Effect of adoption of SFAS No. 133, net of income tax -- 55
expense of $ 28
-------------------- --------------------
Net change in unrealized loss on available-for-sale
investment securities (120) (80)
==================== ====================
</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 March 31, 2000
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $154,000 802,532 $ 0.19
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- --
Incremental shares related to MSBP -- --
--------- -------
Diluted EPS
Income available to common stockholders plus
assumed conversions $154,000 802,532 $ 0.19
======== ======= ====
</TABLE>
<TABLE>
<CAPTION>
For the three months ended March 31, 1999
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $162,000 869,056 $ 0.19
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- 3,427
Incremental shares related to MSBP -- 99
-------- -------
Diluted EPS
Income available to common stockholders plus
assumed conversions $162,000 872,582 $ 0.19
======== ======= ====
</TABLE>
Page 6
<PAGE>
Notes to Consolidated Condensed Financial Statements
March 31, 2000
<TABLE>
<CAPTION>
For the six months ended March 31, 2000
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $ 321,000 816,339 $ 0.39
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- --
Incremental shares related to MSBP -- --
---------- --------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 321,000 816,339 $ 0.39
========= ======= ====
</TABLE>
<TABLE>
<CAPTION>
For the six months ended March 31, 1999
---------------------------------------------------------
Average Per-Share
Income Shares Amount
------------------ ------------------ -------------------
<S> <C> <C> <C>
Basic EPS
Net income available to common stockholders $344,000 867,987 $ 0.40
====
Effect of Dilutive Securities
Incremental shares under stock option plan -- 5,480
Incremental shares related to MSBP -- 424
-------- -------
Diluted EPS
Income available to common stockholders plus
assumed conversions $344,000 873,987 $ 0.39
======== ======= ====
</TABLE>
Page 7
<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 has hired a new commercial and agriculture loan officer. This loan officer
will focus on our existing commercial customers and build a relationship with
new commercial and agricultural customers with the focus of originating a larger
percentage of these types of loans in the portfolio. 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-
Page 8
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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 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 March 31, 2000, assets totaled $63.663 million compared to total assets of
$63.661 million at September 30, 1999. Cash and cash equivalents decreased by
$681,000. Investments securities available-for-sale increased $521,000. Net
loans increased by $166,000. Other real estate owned decreased $73,000 as a
result of the sale of repossessed properties. Deposits decreased by $23,000 from
$34.257 million at September 30, 1999 to $34.234 million at March 31, 2000
primarily as a result of decreases in certificates of deposits and retirement
accounts offset by a increase in new money market checking accounts. Advances
from the FHLB, used for funding loans and purchasing investment securities,
increased by $450,000 to $16.050 million at March 31, 2000.
At March 31, 2000, stockholders' equity totaled $12.944 million or 20.33% of
total assets compared to $13.356 million or 20.98% of total assets at September
30, 1999. The decrease in stockholders' equity was primarily due to cash
dividends declared of $187,000, a decrease of $120,000 in the market value of
investment securities available-for-sale and the repurchase of 43,190 shares of
common stock, which more than offset current period earnings of $321,000.
ASSET QUALITY
- -------------
Non-performing assets totaled $104,000 at March 31, 2000, or 0.16% of total
assets. This compares to $141,000 at September 30, 1999 or 0.22% of total
assets. Non-performing loans at March 31, 2000 were comprised of eight consumer
loans and two mortgage loans.
RESULTS OF OPERATIONS
- ---------------------
Comparison of Six Months Ended March 31, 2000 and 1999.
- -------------------------------------------------------
Net Income. Net income for the six months ended March 31, 2000 totaled $321,000
- ----------
compared to $344,000 for the six months ended March 31, 1999. Net income was
lower in 2000 than in 1999 primarily due to a $53,000 decrease in net interest
income. Federal tax expense was $8,000 lower in 2000 than in 1999 primarily due
to a decrease in net income before tax expense.
Interest Income. For the six months ended March 31, 2000 interest income totaled
- ---------------
$2.168 million compared to $2.178 million for the six months ended March 31,
1999 for a decrease of $10,000. An increase in the volume of average earning
assets from $61.486 million for the six months ended March 31, 1999 to $61.715
million for the same period in 2000 caused interest income to increase by
$1,000. A decrease was experienced in the yield on average earning assets from
7.08% for the six months ended March 31, 1999 to 7.03% for the six months ended
March 31, 2000, which attributed to a $11,000 decrease interest income.
Interest Expense. Total interest expense increased by $43,000 from $1.196
- -----------------
million for the six months ended March 31, 1999 to $1.239 million for the same
period in 2000. This was primarily a result of a increase in the volume and a
decrease in the cost of average interest-bearing liabilities.
Page 9
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Interest expense for deposits increased by $18,000 form $799,000 for the six
months ended March 31,1999 to $817,000 for the same period in 2000. The cost of
average interest-bearing deposits decreased from 4.85% for the six months ended
March 31, 1999 to 4.82% for the six months ended March 31, 2000, which caused
interest expense for deposits to decrease by $5,000. An increase in the volume
of average interest-bearing deposits from $32.931 million for the six months
ended March 31, 1999 to $33.924 million for the six months ended March 31, 2000,
resulted in a $23,000 increase in interest expense for deposits.
Interest expense for advances from the FHLB increased by $25,000 form $397,000
for the six months ended March 31,1999 to $422,000 for the same period in 2000.
The cost of average interest-bearing advances from the FHLB decreased from 5.51%
for the six months ended March 31, 1999 to 5.42% for the same period in 2000.
This decrease in the cost of average interest-bearing advances caused a $7,000
decrease in interest expense. Average interest-bearing advances increased from
$14.398 million for the six months ended March 31, 1999 to $15.564 million for
the six month period ended March 31, 2000, resulting in a $32,000 increase in
interest expense on FHLB advances.
Net Interest Income. Net interest income decreased by $53,000 from $982,000 for
- -------------------
the six months ended March 31, 1999 to $929,000 for the six months ended March
31, 2000. The decrease in net interest income was primarily caused by the
declining interest rates on the investment portfolio and the loan portfolio but
was somewhat offset by the declining cost of liabilities. The increase in
average interest-bearing liabilities was larger than the growth in average
interest-earning assets as evidenced by the decrease of the ratio of average
interest-earning assets to average interest-bearing liabilities from 129.91% in
1999 to 124.71% in 2000, as a result net interest income decreased.
Net interest margin declined from 3.19% for the six months ended March 31, 1999
to 3.01% for the six months ended March 31, 2000. The decrease in net interest
margin was primarily caused by the volume of average interest-bearing
liabilities increasing at a faster pace than the volume of average interest
earning assets for the periods covered.
Provisions for Loan Losses. The Company recorded a $6,000 provision for loan
- ---------------------------
losses for the six months ended March 31, 1999; no provision was recorded during
the six months ended March 31, 2000. Loan charge-offs for the six months ended
March 31, 2000 totaled $4,000 while recoveries totaled $32,000. In 1999, loan
charge-offs totaled $11,000 while recoveries totaled $16,000. 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.
Total Non-interest Income. Non-interest income increased by $14,000 from $28,000
- -------------------------
for the six months ended March 31, 1999 to $42,000 for the six months ended
March 31, 2000. Fees generated from service charges and other operating income
attributed to all the increase. There were no sales of investment securities
during the six months ended March 31, 2000 or 1999.
Total Non-interest Expense. Total non-interest expense decreased by $2,000 from
- --------------------------
$510,000 for the six months ended March 31, 1999 to $508,000 for the six months
ended March 31, 2000. The decrease was primarily attributed to small decreases
in expenses related to compensation, occupancy and equipment, FDIC insurance
premiums, and an increase in other non-interest expense.
Page 10
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Provision for Income Taxes. The effective tax rate for the six months ended
- ----------------------------
March 31, 2000 and 1999 was 30.67% and 30.36%, respectively.
Comparison of Three Months Ended March 31, 2000 and 1999.
- ---------------------------------------------------------
Net Income. Net income for the three months ended March 31, 2000 totaled
- -----------
$154,000 compared to $162,000 for the three months ended March 31, 1999. Net
income was lower in 2000 than in 1999 primarily due to a $17,000 decrease in net
interest income offset somewhat by a $10,000 increase in the non-interest
income.
Interest Income. For the three months ended March 31, 2000, interest income
- ----------------
totaled $1.076 million compared to $1.078 million for the three months ended
March 31, 1999. A decrease in the volume of average earning assets from $62.117
million for the three months ended March 31, 1999 to $61.458 million for the
same period in 2000 caused interest income to decrease by $14,000. An increase
was experienced in the yield on average earning assets from 6.94% for the three
months ended March 31, 1999 to 7.00% for the three months ended March 31, 2000,
which attributed to a $12,000 increase in interest income.
Interest Expense. Total interest expense increased by $15,000 from $591,000 for
- ----------------
the three months ended March 31, 1999 to $606,000 for the same period in 2000.
This was primarily a result of an increase in the volume of average
interest-bearing liabilities.
Interest expense for deposits decreased by $6,000 form $396,000 for the six
months ended March 31,1999 to $390,000 for the same period in 2000. The cost of
average interest-bearing deposits decreased slightly from 4.73% for the three
months ended March 31, 1999 to 4.64% for the three months ended March 31, 2000,
which caused interest expense for deposits to decrease by $7,000. An increase in
the volume of average interest-bearing deposits from $33.507 million for the
three months ended March 31, 1999 to $33.597 million for the three months ended
March 31, 2000, resulted in a $1,000 increase in interest expense for deposits.
Interest expense for advances from the FHLB increased by $21,000 form $195,000
for the six months ended March 31,1999 to $216,000 for the same period in 2000.
The cost of average interest-bearing advances from the FHLB increased from 5.35%
for the three months ended March 31, 1999 to 5.50% for the same period in 2000.
This increase in the cost of average interest-bearing advances caused a $5,000
increase in interest expense. Average interest-bearing advances increased from
$14.591 million for the three month period ended March 31, 1999 to $15.714
million for the three month period ended March 31, 2000, resulting in a $16,000
increase in interest expense for advances.
Net Interest Income. Net interest income decreased by $17,000 from $487,000 for
- -------------------
the three months ended March 31, 1999 to $470,000 for the three months ended
March 31, 2000. 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 larger than the growth in average
interest-earning assets as evidenced by the decrease of the ratio of average
interest-earning assets to average interest-bearing liabilities from 129.15% in
1999 to 124.63% in 2000. The increase in the average interest-bearing
liabilities was the major factor for the decrease in net interest income.
Net interest margin declined from 3.14% for the three months ended March 31,
1999 to 3.06% for the three months ended March 31, 2000. The decrease in net
interest margin was primarily caused by the disproportionate increase in
interest-bearing liabilities over interest-earning assets.
Page 11
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Provisions for Loan Losses. No provision was recorded during the three months
- ---------------------------
ended March 31, 2000 and 1999. Loan charge-offs for the three months ended March
31, 2000 totaled $4,000 while recoveries totaled $4,000. In 1999, loan
charge-offs totaled $6,000 while recoveries totaled $13,000.
Total Non-interest Income. Total non-interest income increased by $10,000 from
$13,000 for the three months ended March 31, 1999 to $23,000 for the three
months ended March 31, 2000 primarily due to a increase in customer service
charges and other operating income.
Total Non-interest Expense. Total non-interest expense decreased by $1,000 from
- --------------------------
$268,000 for the three months ended March 31, 1999 to $267,000 for the three
months ended March 31, 2000. There were slight decreases in compensation,
occupancy and equipment, FDIC insurance premiums, advertising and professional
fees, while there was a slight increase in data processing services and other
non-interest expense.
Provision for Income Taxes. The effective tax rate for the three months ended
- ----------------------------
March 31, 2000 and 1999 was 31.86% and 30.17%, respectively.
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.
Page 12
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
CAPITAL COMPLIANCE AND LIQUIDITY
- --------------------------------
Capital Compliance. The following table presents the Bank's compliance with its
- ------------------
regulatory capital requirements:
At March 31, 2000
--------------------------
Percentage
Amount of Assets
-------- -----
(Dollars in thousands)
GAAP Capital.................................. $ 10,936
Tangible capital.............................. $ 11,787 18.57%
Tangible capital requirement.................. 949 1.50%
-------- -----
Excess........................................ $ 10,838 17.07%
======== =====
Core capital.................................. $ 11,787 18.57%
Core capital requirements..................... 1,901 3.00%
-------- -----
Excess........................................ $ 10,129 15.57%
======== =====
Total risk-based capital (1).................. $ 12,064 47.91%
Total risk-based capital requirement (1)...... 2,014 8.00%
-------- -----
Excess (1).................................... $ 10,050 39.91%
======== =====
1) Based on risk-weighted assets of $25,182
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 March 31, 2000 such borrowed
funds totaled $16.05 million. Loan payments and maturing investments are greatly
influenced by general interest rates, economic conditions and competition.
Page 13
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
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 67.31% and 63.89% at March 31, 2000 and 1999,
respectively.
The amount of certificate accounts which are scheduled to mature during the
twelve months ending March 31, 2001 is approximately $14.78 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 March 31, 2000, the Bank had loan commitments outstanding of $412,000. 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. The Bank has paid $710,000 in
dividends to the Company for the purpose of repurchasing common stock and the
payment of cash dividends to stockholders.
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 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.
Page 14
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
KEY OPERATING RATIOS
- --------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------------- -----------------------------------
2000 (1) 1999 (1) 2000 (1) 1999 (1)
--------------- --------------- --------------- ---------------
(Dollars in thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C>
Return on average assets.......................... 0.98% 1.14 % 1.02 % 1.16%
Return on average equity.......................... 4.77% 5.05 % 4.55 % 5.10%
Interest rate spread.............................. 2.09% 2.03 % 2.02 % 2.03%
Net interest margin............................... 3.06% 3.14 % 3.01 % 3.19%
Non-interest expense to average assets............ 1.70% 1.70 % 1.62 % 1.63%
Net charge-offs to average outstanding loans...... 0.00% (0.01)% 0.09 % 0.04%
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1999 At September 31,
1999
------------------ ------------------
<S> <C> <C>
Nonaccrual and 90 days past due loans............. $ 104 $ 68
Repossessed real estate, held under judgment..... -- 73
Total nonperforming assets...................... 104 141
Allowance for loan losses to nonperforming assets.
267.31% 128.32%
Nonperforming loans to total loans................ 0.35% 0.84%
Nonperforming assets to total assets.............. 0.16% 0.22%
Book value per share (2).......................... $15.38 $15.10
</TABLE>
- ----------------
(1) The ratios for the three- and six-month periods are annualized.
(2) The number of shares outstanding as of March 31, 2000 and September 30,
1999 was 841,354 and 884,534, respectively. These include shares purchased
by the ESOP.
Page 15
<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 March 31, 2000. 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
---------------------------------------------------
On January 26 2000, the Company held its annual meeting of stockholders
and the following items were presented:
Election of Directors Deane D. Bjerke and Thomas J. Berry for terms of
three years ending 2003 and the ratification of the appointment of KPMG
LLP as the Company's auditors for the 2000 fiscal year.
Votes were as follows:
For Against Withheld
--- ------- --------
Deane D. Bjerke 616,190 -- 7,603
Thomas J. Berry 611,890 -- 11,903
Ratification of KPMG LLP 616,145 2,637 5,011
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.
Page 16
<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: May 5, 2000 By: /s/ Deane D. Bjerke
-------------------
Deane D. Bjerke
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 5, 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
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 87
<INT-BEARING-DEPOSITS> 1,421
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 29,893
<ALLOWANCE> 277
<TOTAL-ASSETS> 63,663
<DEPOSITS> 34,234
<SHORT-TERM> 9,550
<LIABILITIES-OTHER> 435
<LONG-TERM> 6,500
0
0
<COMMON> 106
<OTHER-SE> 12,838
<TOTAL-LIABILITIES-AND-EQUITY> 63,663
<INTEREST-LOAN> 1,157
<INTEREST-INVEST> 954
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 2,168
<INTEREST-DEPOSIT> 817
<INTEREST-EXPENSE> 1,239
<INTEREST-INCOME-NET> 929
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 508
<INCOME-PRETAX> 463
<INCOME-PRE-EXTRAORDINARY> 463
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 3.01
<LOANS-NON> 104
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 249
<CHARGE-OFFS> 4
<RECOVERIES> 32
<ALLOWANCE-CLOSE> 277
<ALLOWANCE-DOMESTIC> 277
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
