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 December 31, 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 DECEMBER 31, 1997
----- -----------------
Common Stock, Par Value $.01 2,512,750
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS OF BIG FOOT FINANCIAL CORP.
Consolidated Statements of Financial Condition (Unaudited)
December 31, 1997 and June 30, 1997...................................................Page 3
Consolidated Statements of Earnings (Loss) (Unaudited) - Three
and six months ended December 31, 1997 and 1996.......................................Page 4
Consolidated Statements of Cash Flows (Unaudited) - Six months ended
December 31, 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 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS......................................................................Page 15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..............................................Page 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .......................................................Page 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................................Page 15
ITEM 5. OTHER INFORMATION......................................................................Page 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................................................Page 16
</TABLE>
SIGNATURES
<PAGE>
ITEM 1
FINANCIAL STATEMENTS OF BIG FOOT FINANCIAL CORP
BIG FOOT FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1997 1997
---- ----
<S> <C> <C>
Cash and due from banks ...................................... $ 3,165 $ 2,191
Interest-earning deposits .................................... 14,963 1,701
Mortgage-backed securities held-to-maturity, at amortized cost 42,913 47,376
Mortgage-backed securities available-for-sale, at fair value . 44,322 60,219
Investment in mutual funds, at fair value .................... 1,919 1,087
Loans receivable, net ........................................ 100,292 93,624
Accrued interest receivable .................................. 978 1,051
Stock in Federal Home Loan Bank of Chicago, at cost .......... 2,580 2,480
Investment in real estate held for sale and development ...... 262 262
Real estate owned ............................................ -- --
Office properties and equipment, net ......................... 4,634 4,737
Prepaid expenses and other assets ............................ 232 168
======== ========
Total assets ................................................. $216,260 $214,896
======== ========
LIABILITIES
Noninterest-bearing NOW accounts ............................. $ 5,106 $ 4,582
Interest-bearing NOW accounts ................................ 6,865 7,178
Money market demand accounts ................................. 12,008 12,281
Passbook accounts ............................................ 38,775 39,607
Certificates of deposit ...................................... 60,018 59,333
-------- --------
Total savings deposits ....................................... 122,772 122,981
Borrowed money .............................................. 50,700 49,600
Advance payments by borrowers for taxes and insurance ........ 1,626 1,610
Accrued interest payable and other liabilities ............... 3,233 3,728
-------- --------
Total liabilities ............................................ $178,331 $177,919
======== ========
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 and outstanding .................. 25 25
Additional paid-in capital ................................... 24,150 24,039
Retained earnings-substantially restricted ................... 15,554 14,869
Unrealized gain (loss) on securities available-for-sale,
net of tax ............................................... 110 (46)
Common stock acquired by the ESOP ........................... (1,910) (1,910)
-------- --------
Total stockholders' equity ................................... 37,929 36,977
-------- --------
Total liabilities and stockholders' equity ................... $216,260 $214,896
======== ========
</TABLE>
(See accompanying notes to unaudited consolidated financial statements)
<PAGE>
BIG FOOT FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- ------------- ------------- --------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Mortgage-backed securities held-to-maturity ........ $ 648 $ 595 $ 1,331 $ 1,211
Mortgage-backed securities available-for-sale ...... 869 928 1,833 1,911
Mutual funds ....................................... 139 -- 139 --
Loans receivable ................................... 1,896 1,594 3,749 3,135
Interest-earning deposits ......................... 89 164 114 192
FHLB of Chicago stock ............................. 46 38 89 73
------- ------- ------- -------
Total interest income .............................. 3,687 3,319 7,255 6,522
------- ------- ------- -------
INTEREST EXPENSE:
Savings deposits ................................... 1,215 1,281 2,406 2,667
Borrowed money ..................................... 791 721 1,567 1,371
------- ------- ------- -------
Total interest expense ............................. 2,006 2,002 3,973 4,038
------- ------- ------- -------
Net interest income before provision for loan losses 1,681 1,317 3,282 2,484
Provision for loan losses .......................... -- -- -- --
------- ------- ------- -------
Net interest income after provision for loan losses 1,681 1,317 3,282 2,484
------- ------- ------- -------
NONINTEREST INCOME:
Service fees ....................................... 58 57 116 112
Gain on sale of mortgage-backed
securities available-for sale ................... 229 -- 229 --
Other .............................................. 10 7 20 59
------- ------- ------- -------
Total noninterest income ........................... 297 64 365 171
------- ------- ------- -------
NONINTEREST EXPENSE:
Compensation and benefits .......................... 733 611 1,402 1,176
Office occupancy .................................. 262 242 538 520
Federal deposit insurance premiums ................. 20 81 40 1,101
Real estate held for development ................... 10 25 21 44
Professional services ............................. 69 50 169 104
Other .............................................. 231 194 469 287
------- ------- ------- -------
Total noninterest expense .......................... 1,325 1,203 2,639 3,232
------- ------- ------- -------
Income(loss) before income taxes ................... 653 178 1,008 (577)
Income tax expense (benefit) ....................... 200 61 323 (196)
======= ======= ======= =======
NET INCOME(LOSS): ........... $ 453 $ 117 $ 685 $ (381)
======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic .............................................. $ 0.20 n/a $ 0.30 n/a
Diluted ............................................ 0.19 n/a 0.29 n/a
</TABLE>
(See accompanying notes to unaudited consolidated financial statements)
<PAGE>
BIG FOOT FINANCIAL CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
DECEMBER 31,
---------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ............................................................... $ 685 $ (381)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation .................................................................... 201 189
Gain on sale of mortgage-backed securities available-for-sale ................... (229) --
Net amortization of deferred loan fees .......................................... (37) (34)
Net amortization of discounts and premiums ...................................... 123 121
(Increase) decrease in prepaid expenses and other assets ........................ (64) 198
(Increase) decrease in accrued interest receivable .............................. 73 30
Market adjustment for committed ESOP shares ..................................... 111 --
Increase (decrease) in accrued interest payable and other liabilities, net ...... (495) 7,241
-------- --------
Net cash provided by (used in) operating activities ............................. 368 7,364
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of loans receivable ................................................. (13,953) (7,946)
Principal repayment of loans receivable ......................................... 7,322 4,912
Principal repayments on mortgage-backed securities held-to-maturity ............. 4,345 3,612
Principal repayments on mortgage-backed securities available-for-sale ........... 6,766 4,447
Proceeds from sale of mortgage-backed securities available-for-sale ............. 9,511 --
Purchase of investment securities available-for-sale ............................ (832) --
Purchase of stock in Federal Home Loan Bank of Chicago .......................... (100) (185)
Purchase of office properties and equipment ..................................... (98) (188)
-------- --------
Net cash provided by investing activities ....................................... 12,961 4,652
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in savings deposits ................................................ (209) (10,761)
Net increase (decrease) in borrowed money ....................................... 1,100 3,700
Net proceeds from stock offering ................................................ -- 21,992
Increase (decrease) in advance payments by borrowers for taxes and insurance .... 16 (94)
-------- --------
Net cash provided by (used in) financing activities ............................. 907 14,837
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents ............................ 14,236 26,853
Cash and cash equivalents at beginning of period ................................ 3,892 5,200
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD ............................ $ 18,128 $ 32,053
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period
for:
Interest ............................................................. 3,936 4,096
Income taxes.......................................................... 318 71
</TABLE>
(See accompanying notes to unaudited consolidated financial statements)
<PAGE>
BIG FOOT FINANCIAL CORP. 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 December 31, 1997
and June 30, 1997 and for the three and six month periods ended December 31,
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 June 30, 1997, and the notes thereto included in the
Company's Form 10-K.
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.
During the 1997 fiscal year, the Bank changed its fiscal year end to June
30. The Company's and the Bank's 1997 fiscal year ended June 30, 1997. The
Company believes it is appropriate to compare this year's fiscal quarter and six
month period to the corresponding periods in the prior 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 common stock of the Company were
fully subscribed by eligible members of the Bank and the Company's Employee
Stock Ownership Plan.
The common 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 201,020 shares
<PAGE>
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. The OTS
approved the Company's stock repurchase program ("Repurchase Program") that was
adopted by the Board of Directors of the Company on August 19, 1997. The
Repurchase Program authorizes the Company to repurchase up to 125,637 shares, or
five percent, of its 2,512,750 outstanding common shares. The repurchases, if
any, will be made from time to time at the discretion of management. At December
31, 1997, the Company had not repurchased any shares of its common stock
pursuant to the Repurchase Program. On December 4, 1997, the OTS provided its
non-objection to the Company's notification that it would repurchase up to an
additional 4% of its shares of common stock, or 100,510 shares, for the
Company's 1997 Recognition and Retention Plan ("RRP"). At December 31, 1997, no
shares of common stock have been repurchased for the RRP.
(3) EARNINGS PER SHARE
In February 1997, the FASB issued Statement 128, "Earnings Per Share."
Statement 128 supersedes APB Opinion No. 15, "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. It replaces the presentations of primary EPS with the presentation of
basic EPS, and replaces fully diluted EPS with diluted EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures, and requires a reconciliation
of the neumerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Statement 128 is effective for
financial statements for both interim and annual periods ending after December
15, 1997.
Earnings per share of common stock for the three and six months ended
December 31, 1997 has been calculated according to the guidelines of Statement
128.
Basic earnings per share of common stock for the three and six months ended
December 31, 1997 has been determined by dividing net income for the period by
2,321,781, the weighted average number of shares of common stock outstanding.
Diluted earnings per share of common stock for the three and six months ended
December 31, 1997 has been determined by dividing net income for the period by
2,368,435 and 2,342,262, respectively, the weighted number of shares of common
stock and common stock equivalents outstanding. 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,
earnings per share calculations for the prior year period is not meaningful and
is therefore not presented.
<PAGE>
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 meet the needs of the communities 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.
During the 1997 fiscal year, the Bank changed its fiscal year end to
June 30. The Company's and the Bank's 1997 fiscal year ended June 30, 1997. The
Company believes it is appropriate to compare this year's fiscal quarter and six
month period with the corresponding periods in the prior year.
The OTS approved the Company's stock repurchase program ("Repurchase
Program") that was adopted by the Board of Directors of the Company on August
19, 1997. The Repurchase Program authorizes the Company to repurchase up to
125,637 shares, or five percent, of its 2,512,750 outstanding common shares. The
repurchases, if any, will be made from time to time at the discretion of
management. At December 31, 1997, the Company had not repurchased any shares of
its common stock pursuant to the Repurchase Program. On December 4, 1997, the
OTS provided its non-objection to the Company's notification that it would
repurchase up to an additional 4% of its shares of common stock, or 100,510
shares, for the Company's 1997 Recognition and Retention Plan ("RRP"). At
December 31, 1997, no shares of common stock have been repurchased for the RRP.
<PAGE>
The selected financial ratios and other data of the Company set forth
in the table on the next page are derived in part from, and should be read in
conjunction with, the Unaudited Consolidated Financial Statements of the Company
presented elsewhere in this report.
<PAGE>
FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
----------- -----------
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C>
Total assets $216,260 $214,896
Loans receivable (net) 100,292 93,624
Allowance for loan losses 300 300
Mortgage-backed securities 87,235 107,595
Savings deposits 122,722 122,981
Borrowed money 50,700 49,600
Stockholders' equity 37,929 36,977
</TABLE>
<TABLE>
<CAPTION>
At or for the At or for the
Three Months ended Six Months ended
December 31, December 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
SELECTED OPERATING DATA:
<S> <C> <C> <C> <C>
Net interest income after provision
for loan losses $ 1,681 $ 1,317 $ 3,282 $ 2,484
Net income (loss) 453 117 685 (381)
Net income excluding
special SAIF assessment, net of tax 453 117 685 236
SELECTED FINANCIAL RATIOS:
Bank Capital ratios:
Tangible 12.38% 11.56% 12.38% 11.56%
Core 12.38 11.56 12.38 11.56
Risk-based 34.07 34.49 34.07 34.49
Return on average assets (1)(2) 0.84 0.23 0.64 0.24
Return on average stockholders' equity (1)(2) 4.80 2.53 3.66 2.53
Consolidated equity to assets at end of period 17.54 17.21 17.54 17.21
Noninterest expense to average assets (1)(3) 2.46 2.40 2.45 2.34
Non-performing assets as a percent of total assets 0.09 0.18 0.09 0.18
Allowance for loan losses as a percent of total loans 0.30 0.37 0.30 0.37
Allowance for loan losses as a percent of
non-performing loans 150.75 78.95 150.75 78.95
PER SHARE DATA:
Basic earnings per share $ 0.20 n/a $ 0.30 n/a
Diluted earnings per share 0.19 n/a 0.29 n/a
Book value per share 15.09 n/a 15.09 n/a
STOCK QUOTES:
High (4) $ 21.500 $ 13.000 $ 21.500 $13.000
Low (4) 17.750 12.313 16.000 12.313
At end of period (4) 21.000 13.000 21.000 13.000
</TABLE>
- ----------------------------------------------------------
(1) Results have been annualized
(2) Six month 1996 results exclude special SAIF assessment of $617,000, net
of tax
(3) Six month 1996 results exclude special SAIF assessment of
$936,000
(4) Quotes for 1996 include the period December 19 to December
31, 1996
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND JUNE 30, 1997
Total assets increased $1.4 million from $214.9 million at June 30,
1997 to $216.3 million at December 31, 1997. The components of the Company's
asset base also changed from June 30, 1997 to December 31, 1997. Mortgage-backed
securities ("MBS") (including both held-to-maturity and available-for-sale
portfolios) decreased $20.4 million from $107.6 million at June 30, 1997 to
$87.2 million at December 31, 1997. This decrease is due to principal repayment
and the sale of $9.0 million of MBS in the available-for-sale portfolio during
the period, which were offset in part by an increase in the market value of the
available-for-sale portfolio. An increase of $6.7 million in loans receivable
was the result of loan originations of $14.0 million which exceeded loan
repayments. Stock in the FHLB increased by $100,000 because the Bank had
additional advances from the FHLB during the period in order to fund short term
liquidity needs. 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 December 31, 1997 and June 30, 1997 was
$300,000. There was no provision for loan loss for the period ended December 31,
1997. Management believes that the provision for loan losses and the allowance
for loan losses are 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 0.30% and 0.37% at December 31,
1997 and June 30, 1997, respectively. At December 31, 1997 and June 30, 1997,
the ratio of the allowance for loan losses to non-performing loans remained
constant at 150.8%. The Bank had one non-performing loan amounting to
approximately $199,000 at December 31, 1997 and June 30, 1997.
Savings deposits declined $209,000 from June 30, 1997 to December 31,
1997; during this time, borrowed funds increased by $1.1 million. The decrease
in saving deposits was attributable to a decline of $273,000 in Money Market
Demand accounts and $832,000 in Passbook accounts. This decline was offset by
increases of $685,000 and $211,000 in Certificates of Deposits and NOW accounts,
respectively.
Stockholders' equity increased $952,000 for the six months ended
December 31, 1997. The increase was due primarily to net income of $685,000
during the six month period, and an increase in the unrealized gain on the
available-for-sale portfolio of $156,000.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1996
GENERAL. For the three months ended December 31, 1997, net income was
$453,000 or $.20 basic earnings per share, compared to net income of $117,000
for the three months ended December 31, 1996.
INTEREST INCOME. Interest income increased $368,000 to $3.7 million for
the three months ended December 31, 1997, compared to $3.3 million for the three
months ended December 31, 1996. The average balance of interest-earning assets
increased $17.0 million from $190.1 million for the three months ended December
31, 1996 to $207.1 million for the three months ended December 31, 1997. The
majority of this increase was due to the receipt of the net proceeds of the
Conversion. The average yield on the Bank's interest-earning assets increased 14
basis point from 6.98% for the three months ended December 31, 1996 to 7.12% for
the three months ended December 31, 1997.
<PAGE>
INTEREST EXPENSE. Interest expense remained constant at $2.0 million
for the three months ended December 31, 1997, as compared to the same period in
1996. The average rate paid on interest-bearing liabilities increased one basis
point from 4.70% for the three months ended December 31, 1996 to 4.71% for the
three months ended December 31, 1997. The average balance of interest-bearing
liabilities decreased $93,000 to $169.0 million for the three months ended
December 31, 1997.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses was $1.7 million for the three months
ended December 31, 1997 and $1.3 million for the comparable period in 1996. The
average interest rate spread increased 13 basis points from 2.28% for the three
months ended December 31, 1996 to 2.41% for the comparable period in 1997.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for
the three months ended December 31, 1997 and for the comparable period in 1996.
NONINTEREST INCOME. Noninterest income was $297,000 for the three
months ended December 31, 1997 compared to $64,000 for the three months ended
December 31, 1996. The difference is due to a gain of $229,000 that was realized
from a sale of $9.0 million of MBS classified as available-for-sale.
NONINTEREST EXPENSE. Noninterest expense increased $122,000 to $1.3
million for the three months ended December 31, 1997 as compared to $1.2 million
for the three months ended December 31, 1996.
Compensation, professional services, and other expenses increased
$122,000, $19,000, and $37,000, respectively, for the three month period ending
December 31, 1997 compared to the comparable period last year. Compensation
expenses primarily incresaed due to the ESOP and other employee benefits.
Professional service expense and other expense primarily increased due to costs
incurred in connection with the incorporation of the Company and its operation
as a public company; there were no similar costs in the comparable periods of
1996.
The Bank was assessed and paid to the FDIC a one-time special Savings
Association Insurance Fund (the "SAIF") assessment of $936,000 in September
1996. After this special assessment, regular deposit insurance premiums were
reduced. Thus, deposit insurance declined $61,000 to $20,000 for the three
months ended December 31, 1997, as compared to the comparable period in 1996.
INCOME TAX EXPENSE. Income tax expense increased $139,000 from $61,000
for the three months ended December 31, 1996 to $200,000 for the three months
ended December 31, 1997. This increase was due to the increase of $475,000 in
pre-tax income. The effective tax rate was 30.6% and 34.3% for the three month
periods ended December 31, 1997 and 1996, respectively.
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1996
GENERAL. For the six months ended December 31, 1997, net income was
$685,000 or $.30 basic earnings per share, compared to a net loss of $381,000
for the six months ended December 31, 1996. The net loss for the six months
ended December 31, 1996 included the one time after tax charge of $617,000 due
to the special SAIF assessment. Net income for the six months ended December 31,
1996 excluding the SAIF assessment would have been $236,000.
INTEREST INCOME. Interest income increased $733,000 to $7.3 million for
the six months ended December 31, 1997, compared to $6.5 million for the six
months ended December 31, 1996. The average balance of interest-earning assets
increased $18.6 million from $188.4 million for the six months ended December
31, 1996 to $207.0 million for the six months ended December 31, 1997. The
majority of this increase was due to the receipt of the net proceeds from the
Conversion. The average yield on the Bank's interest-earning assets increased
nine basis point from 6.92% for the six months ended December 31, 1996 to 7.01%
for the six months ended December 31, 1997.
INTEREST EXPENSE. Interest expense remained constant at $4.0 million
for the six months ended December 31, 1997, as compared to the same period in
1996. The average rate paid on interest-bearing liabilities decreased two basis
points from 4.73% for the six months ended December 31, 1996 to 4.71% for the
six months ended December 31, 1997. The average balance of interest-bearing
liabilities decreased $1.9 million to $168.7 million for the six months ended
December 31, 1997 from $170.6 million for the six months ended December 31,
1996.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses was $3.3 million for the six months
ended December 31, 1997 and $2.5 million for the comparable period in 1996. The
average interest rate spread increased eleven basis points from 2.19% for the
six months ended December 31, 1996 to 2.30% for the comparable period in 1997.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for
the six months ended December 31, 1997 and for the comparable period in 1996.
NONINTEREST INCOME. Noninterest income was $365,000 for the six months
ended December 31, 1997 compared to $171,000 for the six months ended December
31, 1996. The difference is due to a gain of $229,000 that was realized from a
sale of $9.0 million of MBS classified as available-for-sale. Other noninterest
income declined $39,000 to $20,000 for the six months ending December 31, 1997,
as compared to the comparable period in 1996.
NONINTEREST EXPENSE. Noninterest expense decreased $593,000 for the six
months ended December 31, 1997 as compared to the six months ended December 31,
1996. The Bank was assessed and paid to the FDIC a one-time special SAIF
assessment of $936,000 in September 1996. After this special assessment, regular
deposit insurance premiums were reduced.
Compensation, professional services, and other expenses increased
$226,000, $65,000, and $182,000, respectively, for the six month period ending
December 31, 1997 compared to the similar period in 1996. Compensation expenses
primarily incresaed due to the ESOP and other employee benefits. Professional
service expense and other expense primarily increased due to costs incurred in
<PAGE>
connection with the incorporation of the Company and its operation as a public
company; there were no similar costs in the comparable period of 1996.
INCOME TAX EXPENSE. Income tax expense increased $519,000 from a tax
benefit of $196,000 for the six months ended December 31, 1996 to $323,000 for
the six months ended December 31, 1997. This increase was due to the increase of
$1.6 million in pre-tax income. The effective tax rate was 32.0% and 34.0% for
the six month periods ended December 31, 1997 and 1996, respectively.
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
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 ratio is currently 4.0%. At December 31, 1997, the Bank's liquidity
ratio was 47.5%. 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 six months
ended December 31, 1997 were the origination of mortgage loans, and other loans.
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 six
months ended December 31, 1997 and 1996.
At December 31, 1997, the Bank had outstanding loan origination
commitments of $2.0 million and unused lines of consumer credit of $506,000. 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 December 31, 1997 totaled $41.5
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 December 31, 1997, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $25.4 million, or 12.38% of total
adjusted assets, which is above the required level of $3.1 million or 1.5%; core
capital of $25.4 million, or 12.38% of total adjusted assets, which is above the
required level of $6.2 million or 3.0%; and total risk-based capital of $25.7
million, or 34.07% of risk-weighted assets, which is above the required level of
$6.0 million, or 8.0%.
<PAGE>
YEAR 2000
A committee, of senior officers of the Company, has been formed to evaluate
the effects that the upcoming year 2000 could have on computer programs utilized
by the Bank. The majority of software used by the Company is provided by third
party vendors. All of the Company's vendors are aware of the year 2000
situation, and each has assurred the Company that it is currently working to
have its software year 2000 compliant by March 31, 1999.
At this time it is expected that the cost to become year 2000 compliant will not
have a material impact on the Company's results of operations, liquidity, or
capital resources.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There has been no material change in market risk since June 30, 1997.
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders ("Meeting") on
December 22, 1997. All of the proposals submitted to the shareholders at the
Meeting were approved. The proposals submitted to shareholders and the
tabulation of votes for each proposal is as follows:
1. Election of three candidates to the Board of Directors, each to
serve for a term of three years.
The number of votes cast with respect to this matter was as follows:
NOMINEE FOR WITHHELD BROKER NON-VOTES
------- --- -------- ----------------
George M. Briody 1,947,491 22,014 0
F. Gregory Opelka 1,947,491 22,014 0
Joseph J. Nimrod 1,947,491 22,014 0
<PAGE>
2. Ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for fiscal year ending June 30, 1998.
The number of votes cast with respect to this matter were as follows:
FOR AGAINST WITHHELD BROKER NON-VOTES
1,948,295 11,850 9,360 0
3. Approval of the Big Foot Financial Corp. 1997 Recognition and
Retention Plan.
The number of votes cast with respect to this matter were as follows:
FOR AGAINST WITHHELD BROKER NON-VOTES
1,166,815 231,026 30,618 541,052
4. Approval of Article X of the Big Foot Financial Corp. 1997 Stock
Option Plan.
The number of votes cast with respect to this matter were as follows:
FOR AGAINST WITHHELD BROKER NON-VOTES
1,278,675 135,464 32,517 522,849
ITEM 5. Other Information
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.
<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
February 12, 1998
<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-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,164,627
<INT-BEARING-DEPOSITS> 14,962,580
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,321,867
<INVESTMENTS-CARRYING> 42,912,868
<INVESTMENTS-MARKET> 42,507,137
<LOANS> 100,591,775
<ALLOWANCE> 300,000
<TOTAL-ASSETS> 216,260,159
<DEPOSITS> 122,772,240
<SHORT-TERM> 23,700,000
<LIABILITIES-OTHER> 3,233,163
<LONG-TERM> 27,000,000
0
0
<COMMON> 25,128
<OTHER-SE> 37,903,780
<TOTAL-LIABILITIES-AND-EQUITY> 216,260,159
<INTEREST-LOAN> 1,896,590
<INTEREST-INVEST> 1,790,770
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,687,360
<INTEREST-DEPOSIT> 1,214,967
<INTEREST-EXPENSE> 2,005,885
<INTEREST-INCOME-NET> 1,681,475
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,325,427
<INCOME-PRETAX> 652,745
<INCOME-PRE-EXTRAORDINARY> 652,742
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 453,445
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0<F1>
<YIELD-ACTUAL> 7.12
<LOANS-NON> 199,132
<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>Not applicable.
</FN>
</TABLE>
