SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1997
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-21491
BIG FOOT FINANCIAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 36-4108480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
1190 RFD, Long Grove, IL 60047-7304
(Address of principal executive offices)
(Zip Code)
(847) 634-2100
(Registrant's telephone number including area code)
NA
(Former name, former address and former fiscal year,
if changed from last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
OUTSTANDING AT
CLASS APRIL 30, 1997
----- --------------
Common Stock, Par Value $.01 2,512,750
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS OF BIG FOOT FINANCIAL CORP.
Consolidated Statements of Financial Condition (Unaudited) - April 30, 1997
and July 31, 1996 ............................................................................ Page 3
Consolidated Statements of Earnings (Unaudited) - Three months and nine
months ended April 30, 1997 and 1996 ......................................................... Page 4
Consolidated Statements of Cash Flows (Unaudited) - Nine months ended
April 30, 1997 and 1996 ...................................................................... Page 5
Notes to Unaudited Consolidated Financial Statements ......................................... Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ........................................................................ Page 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ................................... Page 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ............................................................................ Page 14
ITEM 2. CHANGES IN SECURITIES ........................................................................ Page 14
ITEM 3 DEFAULTS UPON SENIOR SECURITIES .............................................................. Page 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................................... Page 14
ITEM 5. OTHER INFORMATION ............................................................................ Page 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................................. Page 14
SIGNATURES
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<TABLE>
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(In thousands)
<CAPTION>
April 30, July 31,
ASSETS 1997 1996
-------- --------
<S> <C> <C>
Cash and due from banks .......................................................... $ 3,004 $ 2,569
Interest-earning deposits ........................................................ 2,167 2,040
Mortgage-backed securities held-to-maturity, at amortized cost ................... 49,306 44,133
Mortgage-backed securities available-for-sale, at fair value ..................... 61,341 58,278
Investment securities available-for-sale, at fair value .......................... 1,004 --
Loans receivable, net ............................................................ 86,805 79,143
Accrued interest receivable ...................................................... 1,049 964
Stock in Federal Home Loan Bank of Chicago, at cost .............................. 2,330 2,045
Investment in real estate held for sale and development .......................... 262 262
Real estate owned ................................................................ -- --
Office properties and equipment, net ............................................. 4,775 4,801
Prepaid expenses and other assets ................................................ 202 389
-------- --------
Total assets ..................................................................... $212,245 $194,624
======== ========
LIABILITIES
Savings deposits ................................................................. 125,158 137,177
Borrowed money .................................................................. 46,600 39,900
Advance payments by borrowers for taxes and insurance ............................ 1,530 1,800
Accrued interest payable and other liabilities ................................... 2,910 2,168
-------- --------
Total liabilities ................................................................ $176,198 $181,045
-------- --------
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value, 2,000,000 shares authorized; none issued ........ -- --
Common Stock, $.01 par value, 8,000,000 shares authorized; 2,512,750
shares issued at April 30, 1997 and none issued at July 31, 1996 ............ 25 --
Excess Common Stock, $.01 par value, 7,200,000 shares authorized; none issued .... -- --
Additional paid-in capital ....................................................... 23,977 --
Retained earnings-substantially restricted ....................................... 14,757 14,649
Unrealized loss on securities available-for-sale, net of tax ..................... (702) (1,070)
Common stock acquired by ESOP .................................................... (2,010) --
-------- --------
Total stockholders' equity ....................................................... 36,047 13,579
-------- --------
Total liabilities and stockholders' equity ....................................... $212,245 $194,624
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<TABLE>
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)
<CAPTION>
For the Three Months ended For the Nine Months ended
April 30, April 30,
-------------------------- -------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Mortgage-backed securities held-to-maturity ....................... $ 748 $ 662 $ 1,973 $ 2,101
Mortgage-backed securities available -for-sale .................... 1,048 1,060 2,934 3,115
Investment securities available-for-sale .......................... 7 -- 7 --
Loans receivable .................................................. 1,617 1,513 4,783 4,491
Interest-earning deposits ........................................ 32 40 298 109
FHLB of Chicago stock ............................................ 36 34 110 115
-------- -------- -------- --------
Total interest income ............................................. 3,488 3,309 10,105 9,931
-------- -------- -------- --------
INTEREST EXPENSE:
Savings deposits ................................................... 1,178 1,480 3,787 4,516
Borrowed money ..................................................... 666 627 2,050 1,876
-------- -------- -------- --------
Total Interest expense ............................................. 1,844 2,107 5,837 6,392
-------- -------- -------- --------
Net interest income before provision for loan losses ............... 1,644 1,202 4,268 3,539
Provision for loan losses .......................................... -- 4 -- 4
-------- -------- -------- --------
Net interest income after provision for loan losses ............... 1,644 1,198 4,268 3,535
-------- -------- -------- --------
NONINTEREST INCOME:
Gain on sale of real estate owned .................................. -- -- -- 36
Gain on sale of equity securities .................................. -- -- 46 --
Service fees ....................................................... 46 48 155 159
Other .............................................................. 28 10 42 50
-------- -------- -------- --------
Total noninterest income ........................................... 74 58 243 245
-------- -------- -------- --------
NONINTEREST EXPENSE:
Compensation and benefits .......................................... 611 568 1,812 1,695
Office occupancy .................................................. 255 243 742 767
Federal deposit insurance premiums ................................. 10 85 1,083 255
Real estate held for development ................................... 10 33 49 106
Professional services ............................................. 41 68 146 207
Other .............................................................. 230 148 569 477
-------- -------- -------- --------
Total noninterest expense .......................................... 1,157 1,145 4,401 3,507
-------- -------- -------- --------
Income before income taxes ........................................ 561 111 110 273
Income tax expense ................................................. 190 37 37 93
-------- -------- -------- --------
NET INCOME: $ 371 $ 74 $ 73 $ 180
======== ======== ======== ========
====================================================================================================================================
Earnings per share:
Primary ......................................................... $ 0.16 n/a $ 0.03 n/a
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<TABLE>
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
For the Nine Months Ended
April 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................................................ $ 73 $ 180
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation .......................................................................... 288 313
Gain on sale of real estate owned ..................................................... -- (36)
Net amortization of deferred loan fees ................................................ (51) (94)
Net amortization of discounts and premiums ............................................ 176 162
Provision for loan losses ............................................................ -- 4
(Increase) Decrease in prepaid expenses and other assets ............................. 187 (53)
(Increase) Decrease in accrued interest receivable .................................... (85) (19)
Market adjustment for committed ESOP shares ........................................... 35 --
Increase (Decrease) in accrued interest payable and other liabilities, net ............ 742 400
---------- ----------
Net cash provided (Used) by operating activities ..................................... 1,365 857
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of loans receivable ....................................................... (14,532) (14,065)
Principal repayment of loans receivable ............................................... 6,921 9,198
Purchases of mortgage-backed securities held-to-maturity .............................. (10,207) --
Purchases of mortgage-backed securities available-for-sale ............................ (9,156) (10,081)
Principal repayments on mortgage-backed securities held-to-maturity ................... 4,978 8,294
Principal repayments on mortgage-backed securities available-for-sale ................. 6,340 4,088
Purchases of investment securities available-for-sale ................................. (1,004) --
Proceeds from sale of real estate owned ............................................... -- 203
(Purchase) sale of stock in Federal Home Loan Bank of Chicago ......................... (285) 319
Purchase of office properties and equipment ........................................... (262) (151)
---------- ----------
Net cash provided by (used in) investing activities ................................... (17,207) (2,195)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in savings deposits ...................................................... (12,019) (7,346)
Net increase in borrowed money ........................................................ 6,700 6,600
Net proceeds from Stock Offering ...................................................... 21,993 --
Decrease in advance payments by borrowers for taxes and insurance ..................... (270) (810)
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ................................... 16,404 (1,556)
- -----------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in cash and cash equivalents .................................. 562 (2,894)
Cash and cash equivalents at beginning of period ...................................... 4,609 9,044
-------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD .................................. $ 5,171 $ 6,150
- -----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .................................................................. 5,780 6,316
Income taxes .............................................................. 71 90
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Big Foot Financial Corp. (the "Company") and its wholly-owned
subsidiary, Fairfield Savings Bank, F.S.B. (the "Bank") as of April 30, 1997 and
July 31, 1996 and for the three and nine month periods ended April 30, 1997 and
1996, respectively. The consolidated financial statements for periods prior to
December 19, 1996 include only the accounts of the Bank. Material intercompany
accounts and transactions have been eliminated in consolidation. The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management the unaudited consolidated financial statements include
all necessary adjustments, consisting of normal recurring accruals, necessary
for a fair presentation for the periods presented. These consolidated financial
statements should be read in conjunction with the audited financial statements
for the year ended July 31, 1996, and the notes thereto.
The Company believes that the disclosures are adequate to make the
information presented not misleading, however, the results for the periods
presented are not necessarily indicative of results to be expected for the
entire fiscal year.
(2) CONVERSION TO STOCK FORM OF OWNERSHIP
On May 21, 1996, the Board of Directors of the Bank adopted a Plan of
Conversion ("Plan") (which was amended on September 17, 1996) whereby the Bank
converted from a federally chartered mutual savings bank to a federally
chartered stock savings bank. The Plan was approved by the Office of Thrift
Supervision (the "OTS") and by the Bank's members at a special meeting. The
stock of the Bank was issued to the Company, which was formed in connection with
the conversion. On December 19, 1996, shares of capital stock of the Company
were fully subscribed by eligible members of the Bank and the Company's Employee
Stock Ownership Plan.
The capital stock was offered and sold at $10 per share. A total of
2,512,750 shares were sold. After giving effect to offering expenses of
approximately $1,125,000 and the cost of
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201,020 shares issued to the Company's tax qualified Employee Stock Ownership
Plan, net proceeds from the conversion were $22.0 million.
Capital distribution regulations limit the Bank's ability to make capital
distributions which include dividends, stock redemptions or repurchases,
cash-out mergers, interest payments on certain convertible debt and other
transactions charged to the capital account based on the Bank's capital level
and supervisory condition. Federal regulations also preclude any repurchase of
the stock of the Bank or its holding company for three years after conversion
except for repurchases pursuant to an offer made on a pro rata basis to all
stockholders and with prior approval of the OTS; or pursuant to an open-market
stock repurchase program that complies with certain regulatory criteria.
(3) EARNINGS PER SHARE
Earnings per share of common stock for the three and nine months ended
April 30, 1997 has been determined by dividing net income for the three and nine
months by 2,311,730, the weighted average number of primary shares of common
stock. ESOP shares are only considered outstanding for earnings per share
calculations when they are committed to be released.
The initial public offering was completed December 19, 1996. Accordingly,
net income per share calculations for the prior year periods are not meaningful
and are therefore not presented.
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ITEM 2 . MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Big Foot Financial Corp., (the "Company") an Illinois corporation, is the
holding company for Fairfield Savings Bank, F.S.B. (the "Bank"), a federally
chartered stock savings bank. On December 19, 1996, the Bank completed its
conversion (the "Conversion") from a federally chartered mutual savings bank to
a federally chartered stock savings bank, and all of the capital stock of the
Bank was acquired by the Company. The Company issued and sold 2,512,750 shares
of its common stock, $.01 par value, at a price of $10.00 per share in a
subscription offering (the "Offering") to eligible members of the Bank and to
the Company's Employee Stock Ownership Plan ("ESOP"). Net proceeds from the
Offering amounted to $22.0 million.
The Company's principal business is its investment in the Bank, which is a
community-oriented financial institution providing a variety of financial
services to the communities which it serves. The Bank's principal business
consists of gathering savings deposits from the general public within its market
area and investing those funds primarily in mortgage loans secured by one- to
four-family owner occupied properties, mortgage-backed securities and
obligations of the U.S. Government. To a lesser extent, the Bank makes
multifamily residential loans, commercial real estate loans, land, construction
and development loans, consumer loans and commercial lines of credit. The Bank's
revenues are derived principally from interest on mortgage loans and interest
and dividends on investments, mortgage-backed securities and, to a much lesser
extent, short-term investments. The Bank also derives income from fees and
service charges. The Bank's primary sources of funds are savings deposits and,
to a lesser extent, advances from the Federal Home Loan Bank of Chicago (the
"FHLB"). The Bank does not have any subsidiaries.
COMPARISON OF FINANCIAL CONDITION AT APRIL 30, 1997 AND JULY 31, 1996
Total assets increased $17.6 million or 9.1% from $194.6 million at July
31, 1996 to $212.2 million at April 30, 1997. This increase was due primarily to
the funds received in the Company's initial public offering. The components of
the Company's asset base also changed from July 31, 1996 to April 30, 1997.
Mortgage-backed securities ("MBS") (including both held-to-maturity and
available-for-sale portfolios) increased $8.2 million to $110.6 million at April
30, 1997. This increase is primarily due to the purchase of MBS in an amount
that exceeded principal repayments as well as the reduction of the loss in the
market value adjustment for the available for sale portfolio during the nine
month period. An increase of $7.7 million in loans receivable was the result of
loan originations of $14.5 million which exceeded loan repayments. Stock in the
FHLB increased because the Bank borrowed from the FHLB during the period to fund
new loan originations. Borrowers are required to hold FHLB Stock based upon
outstanding advances from the FHLB, and stock purchases were made to meet the
requirement.
The allowance for loan losses at April 30, 1997 and July 31, 1996 was
$300,000. Management believes that the provision for loan losses and the
allowance for loan losses are
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reasonable and adequate to cover any known losses, and any losses reasonably
expected in the loan portfolio. While management estimates loan losses using the
best available information no assurance can be made that future additions to the
allowance will not be necessary. The ratio of the allowance for loan losses to
total loans was 0.34% and 0.38% at April 30, 1997 and July 31, 1996,
respectively. At April 30, 1997 and July 31, 1996, the ratio of the allowance
for loan losses to non-performing loans was 150.7% and 254.2%, respectively.
Non-performing loans increased to a balance of approximately $198,000 at April
30, 1997, from $118,000 at July 31, 1996, causing this ratio to decline.
Savings deposits declined $12.0 million from July 31, 1996 to April 30,
1997; during this time, borrowed funds increased by $6.7 million. The decrease
in savings deposits was attributable to savings certificates withdrawals of
$10.5 million for the nine months ended April 30, 1997. Most of this decline is
attributable to the Bank attracting 19 month certificates of deposits by
offering above market rates of interest in 1995. Upon maturity, the Bank sought
to retain these funds by offering a market rate of interest, and while a portion
of such funds were retained, the Bank experienced some outflow of funds.
Stockholders' equity increased $22.5 million for the nine months ended
April 30, 1997. The increase was due primarily to the infusion of the net
proceeds from the initial public offering, completed December 19, 1996, of $22.0
million, a decrease in the net unrealized loss on the available-for-sale
portfolio of $368,000, and an increase of $108,000 in retained earnings.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND
1996
GENERAL. For the three months ended April 30, 1997, net income was
$371,000 or $.16 per share, compared to net income of $74,000 for the three
months ended April 30, 1996.
INTEREST INCOME. Interest income increased $179,000 to $3.5 million for the
three months ended April 30, 1997, compared to $3.3 million for the third
quarter, 1996. The average balance of interest-earning assets increased $9.6
million from $192.0 million for the three months ended April 30, 1996 to $201.6
million for the three months ended April 30, 1997. The majority of this increase
was due to the net proceeds of the Conversion. The average yield on the Bank's
interest-earning assets increased 3 basis points from 6.89% for the three months
ended April 30, 1996 to 6.92% for the three months ended April 30, 1997.
INTEREST EXPENSE. Interest expense decreased $263,000 or 12.5% from $2.1
million for the three months ended April 30, 1996 to $1.8 million for the
comparable period in 1997. This decrease was due to a decrease in the cost of
average interest-bearing liabilities resulting primarily from new certificates
of deposit issued at lower rates than maturing certificates of deposit and lower
average balances of interest-bearing liabilities. The average rate paid on
interest-bearing liabilities decreased 32 basis points from 4.87% for the three
months ended April 30, 1996 to 4.55% for the three months ended April 30, 1997.
The average balance of interest-bearing liabilities decreased $11.2 million to
$166.2 million for the three months ended April 30, 1997 from $177.4 million for
the three months ended April 30, 1996. The decrease in average interest-bearing
liabilities was due to the outflow of $13.3 million in certificates of deposit,
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competitive market conditions and the Bank's decision not to offer above-market
interest rates on its savings deposits.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest income
before provision for loan losses was $1,644,000 for the three months ended April
30, 1997 and $1,202,000 for the comparable period in 1996. The average interest
rate spread increased 35 basis points from 2.02% for the three months ended
April 30, 1996 to 2.37% for the comparable period in 1997.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for the
three months ended April 30, 1997 and a $4,000 provision for the comparable
period in 1996.
NONINTEREST INCOME. Noninterest income was $74,000 for the three months
ended April 30, 1997 compared to $58,000 for the three months ended April 30,
1996.
NONINTEREST EXPENSE. Noninterest expense increased $12,000 for the three
months ended April 30, 1997 over the three months ended April 30, 1996. The FDIC
deposit insurance premium was $75,000 less than a year ago at $10,000 for the
quarter ended April 30, 1997 compared to $85,000 for the same period last year.
This was due to the reduction of deposit insurance premium subsequent to the
recapitalization of SAIF. Professional Services expense and Real Estate
Development expenses combined declined $50,000 from a year ago. Compensation and
Benefits increased $43,000 from a year ago due to the added expense of the new
ESOP. Other Noninterest expense increased $82,000 in the quarter due primarily
to a fraud loss of $50,000 suffered by the Bank. The majority of the remaining
increases in other noninterest expense were due to insurance premium increases
and loan origination expenses.
INCOME TAX EXPENSE. Income tax expense increased $153,000 from $37,000
for the three months ended April 30, 1996 to $190,000 for the three months ended
April 30, 1997. This increase was due to the increase of $450,000 in pre-tax
income. The effective tax rate was 34.0% for the three month periods ended April
30, 1997 and 1996.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED APRIL 30, 1997
AND 1996
GENERAL. For the nine months ended April 30, 1997, net income was $73,000
or $.03 per share compared to net income of $180,000 for the nine months ended
April 30, 1996. To address and resolve the SAIF/BIF assessment disparity, the
Deposit Insurance Funds Act of 1996 ( the "1996 Act") was enacted into law on
September 30, 1996. The 1996 Act authorized the FDIC to impose a special
assessment on all institutions with SAIF-assessable deposits in an amount
necessary to recapitalize the SAIF. The Bank recorded an expense for the special
SAIF assessment of $936,000. The impact on operations, net of related tax
effects, reduced reported earnings by $617,000 for the nine months ended April
30, 1997. Net income for the nine months ended April 30, 1997, excluding the
SAIF assessment, would have been $690,000 or $.30 per share.
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INTEREST INCOME. Interest income was $10.1 million for the nine months
ended April 30, 1996 and $9.9 million for the comparable period in 1997. The
average balance of interest-earning assets increased $1.9 million from $191.7
million for the nine months ended April 30, 1996 to $193.6 million for the nine
months ended April 30, 1997. The average yield on the Bank's interest-earning
assets increased 5 basis points from 6.91% for the nine months ended April 30,
1996 to 6.96% for the nine months ended April 30, 1997.
INTEREST EXPENSE. Interest expense decreased $555,000 or 8.7% from $6.4
million for the nine months ended April 30, 1996 to $5.8 million for the
comparable period in 1997. This decrease was due primarily to a decrease in the
cost of average interest-bearing liabilities on new certificates of deposit
issued at lower rates than maturing certificates of deposit, lower average
balances of interest-bearing liabilities and a lower cost of borrowed funds. The
average rate paid on interest-bearing liabilities decreased 19 basis points from
4.81% for the nine months ended April 30, 1996 to 4.62% for the nine months
ended April 30, 1997. The average balance of interest-bearing liabilities
decreased $8.6 million to $168.5 million for the nine months ended April 30,
1997 from $177.1 million for the nine months ended April 30, 1996. The decrease
in average balance of interest-bearing liabilities was due to the outflow of
$11.1 million in certificates of deposit, competitive market conditions and the
Bank's decision not to offer above-market interest rates on its savings
deposits.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest income
before provision for loan losses was $4.3 million for the nine months ended
April 30, 1997 and $3.5 million for the comparable period in 1996. The average
interest rate spread increased 24 basis points from 2.10% for the nine months
ended April 30, 1996 to 2.34% for the comparable period in 1997.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for the
nine months ended April 30, 1997 and a $4,000 provision for the comparable
period in 1996.
NONINTEREST INCOME. Noninterest income was $243,000 for the nine months
ended April 30, 1997 compared to $245,000 for the nine months ended April 30,
1996. These amounts include a non-recurring gain on sale of real estate owned
for $36,000 in 1996 and a non-recurring gain on sale of equity securities of
$46,000 in 1997.
NONINTEREST EXPENSE. Noninterest expense increased $894,000 from $3.5
million for the nine months ended April 30, 1996 to $4.4 million for the nine
months ended April 30, 1997. This increase was due primarily to the special SAIF
assessment of $936,000.
INCOME TAX EXPENSE . Income tax expense decreased $56,000 from $93,000
for the nine months ended April 30, 1996 to $37,000 for the nine months ended
April 30, 1997. This was due to the decrease in income before taxes of $163,000
for the nine months ended April 30, 1997, which related primarily to the SAIF
assessment. The effective tax rate was 34.0% for the nine month periods ended
April 30, 1997 and 1996.
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LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of funds are savings deposits, principal and
interest payments on loans and mortgage-backed securities, and borrowings from
the FHLB. While maturities and scheduled amortization of loans and
mortgage-backed securities provide an indication of the timing of the receipt of
funds, changes in interest rates, economic conditions and competition strongly
influence mortgage prepayment rates and savings deposit flows, reducing the
predictability of the timing of sources of funds.
The Bank is required to maintain an average daily balance of liquid assets
and short-term liquid assets as a percentage of net withdrawable savings deposit
accounts plus short-term borrowings as defined by the regulations of the OTS.
The minimum required liquidity and short-term liquidity ratios are currently
5.0% and 1.0%, respectively. At April 30, 1997, the Bank's liquidity ratio was
41.8% and its short-term liquidity ratio was 3.0%. The Bank's liquidity ratio is
high due to the amount of mortgage-backed-securities in the portfolio with a
stated maturity of less than five years. The levels of the Bank's short-term
liquid assets are dependent on the Bank's operating, financing and investing
activities during any given period.
The primary investing activities of the Bank during the first nine months
of fiscal year 1997 were the origination of mortgage loans, other loans and
purchases of mortgage-backed-securities.
See the "Consolidated Statements of Cash Flows" in the Unaudited
Consolidated Financial Statements included in this Form 10-Q for the sources and
uses of cash flows for operating activities and financing activities for the
nine months ended April 30, 1997.
At April 30, 1997, the Bank had outstanding loan origination commitments of
$4.0 million and unused lines of consumer credit of $440,000. The Bank
anticipates that it will have sufficient funds available to meet its current
origination and other lending commitments. Certificates of deposit scheduled to
mature in one year or less from April 30, 1997 totaled $45.4 million. Based upon
the Bank's most recent pricing strategy, management believes that a significant
portion of such deposits will remain with the Bank. Management believes it will
have adequate resources to fund all commitments on a short term and long term
basis in accordance with its business strategy.
At April 30, 1997, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $24.9 million, or 12.27% of total
adjusted assets, which is above the required level of $3.0 million or 1.5%; core
capital of $24.9 million, or 12.27% of total adjusted assets, which is above the
required level of $6.1 million or 3.0%; and total risk-based capital of $25.2
million, or 35.4% of risk-weighted assets, which is above the required level of
$5.7 million, or 8.0%.
IMPACT OF NEW ACCOUNTING STANDARDS
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" ("Statement 128"). Statement 128
supersedes APB Opinion No. 15,
-12-
<PAGE>
Earnings Per Share and specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or potential common stock. Statement 128 was issued to simplify the
computation of EPS and make the U.S. standard more compatible with the EPS
standards of other countries and that of the International Accounting Standards
Committee. It replaces the presentation of primary EPS with a presentation of
basic EPS and replaces fully diluted EPS with diluted EPS. It also requires dual
presentation of basic and diluated EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluated EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were excercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted (although pro forma EPS disclosure in the footnotes for periods prior
to required adoption is permitted). After adoption, all prior-period EPS data
presented shall be restated to conform with Statement 128. The Company does not
expect adoption of Statement 128 to have a significant impact on the Company's
financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None .
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule*
(b) Reports on Form 8-K
None
*Submitted only with filing in electronic format.
-14-
<PAGE>
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.
BIG FOOT FINANCIAL CORP.
(Registrant)
By: /s/ Timothy L. McCue
------------------------
Timothy L. McCue
Vice President and Chief
Financial Officer
June 13, 1997
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and the statements of income of Big Foot Financial
Corp. and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> APR-30-1997
<CASH> 3,003,677
<INT-BEARING-DEPOSITS> 2,166,670
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 62,345,277
<INVESTMENTS-CARRYING> 49,306,387
<INVESTMENTS-MARKET> 47,625,774
<LOANS> 87,105,205
<ALLOWANCE> 300,000
<TOTAL-ASSETS> 212,245,478
<DEPOSITS> 125,157,512
<SHORT-TERM> 37,600,000
<LIABILITIES-OTHER> 4,440,913
<LONG-TERM> 9,000,000
0
0
<COMMON> 25,128
<OTHER-SE> 36,021,925
<TOTAL-LIABILITIES-AND-EQUITY> 212,245,478
<INTEREST-LOAN> 1,617,338
<INTEREST-INVEST> 1,870,689
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,488,028
<INTEREST-DEPOSIT> 1,177,262
<INTEREST-EXPENSE> 1,843,594
<INTEREST-INCOME-NET> 1,644,434
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,157,683
<INCOME-PRETAX> 561,097
<INCOME-PRE-EXTRAORDINARY> 370,797
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,797
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0<F1>
<YIELD-ACTUAL> 6.92
<LOANS-NON> 199,286
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 300,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 300,000
<ALLOWANCE-DOMESTIC> 300,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Value not presented. See note 3 to the unaudited consolidated financial
statements.
</FN>
</TABLE>
