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 September 30, 2000
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 36-410848-0
(State or other jurisdiction of (IRS 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 NOVEMBER 9, 2000
----- ----------------
Common Stock, Par Value $.01 1,719,668
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS OF BIG FOOT FINANCIAL CORP.
<S> <C>
Consolidated Statements of Financial Condition (Unaudited)
September 30, 2000 and June 30, 2000................................. Page 3
Consolidated Statements of Earnings (Unaudited) - Three months
ended September 30, 2000 and 1999.................................... Page 4
Consolidated Statements of Cash Flows (Unaudited) - Three months
ended September 30, 2000 and 1999.................................... 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 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................... Page 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................ 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 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... Page 15
SIGNATURES
</TABLE>
<PAGE>
Big Foot Financial Corp. and Subsidiary
Consolidated Statements of Financial Condition
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks......................................................... $ 3,685 $ 2,905
Interest-earning deposits....................................................... 3,582 3,429
Mortgage-backed securities held-to-maturity, at amortized cost
(fair value of $11,097 at September 30, 2000 and $17,227 at June 30, 2000).... 11,330 17,894
Mortgage-backed securities available-for-sale, at fair value.................... 18,711 19,469
Investment in mutual funds and preferred stock, at fair value................... 7,887 7,511
Loans receivable, net........................................................... 159,372 155,187
Accrued interest receivable..................................................... 974 954
Stock in Federal Home Loan Bank of Chicago, at cost............................. 3,500 3,300
Foreclosed real estate owned.................................................... - 78
Office properties and equipment, net............................................ 4,449 4,512
Prepaid expenses and other assets............................................... 375 435
-------- --------
Total assets.................................................................... $213,865 $215,674
======== ========
LIABILITIES
Noninterest-bearing NOW accounts................................................ $ 5,941 $ 6,592
Interest-bearing NOW accounts................................................... 8,731 8,944
Money market demand accounts.................................................... 9,361 10,752
Passbook accounts............................................................... 36,222 37,447
Certificates of deposits........................................................ 50,757 51,759
-------- --------
Total savings deposits.......................................................... 111,012 115,494
Borrowed money.................................................................. 70,000 66,000
Advance payments by borrowers for taxes and insurance........................... 1,017 2,054
Accrued interest payable and other liabilities.................................. 2,737 3,514
-------- --------
Total liabilities............................................................... 184,766 187,062
-------- --------
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........................................................................ 25 25
Treasury stock, at cost (781,082 shares at September 30, 2000 and 767,082
shares at June 30, 2000)...................................................... (9,726) (9,567)
Additional paid-in capital...................................................... 24,462 24,455
Retained earnings-substantially restricted...................................... 17,024 16,948
Common stock acquired by the Employee Stock Ownership Plan...................... (1,306) (1,306)
Common stock acquired by Recognition and Retention Plan......................... (945) (1,040)
Accumulated other comprehensive loss............................................ (435) (903)
-------- --------
Total stockholders' equity...................................................... 29,099 28,612
-------- --------
Total liabilities and stockholders' equity...................................... $213,865 $215,674
======== ========
</TABLE>
(See accompanying notes to unaudited consolidated financial statements)
<PAGE>
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
-------------------
2000 1999
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INTEREST INCOME
<S> <C> <C>
Mortgage-backed securities held-to-maturity..................................... $ 190 $ 364
Mortgage-backed securities available-for-sale................................... 304 380
Investment in mutual funds and preferred stock.................................. 136 54
Loans receivable................................................................ 2,810 2,464
Interest-earning deposits....................................................... 39 74
Federal Home Loan Bank of Chicago stock......................................... 65 42
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Total interest income........................................................... 3,544 3,378
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INTEREST EXPENSE
Savings deposits................................................................ 1,026 1,083
Borrowed money.................................................................. 1,035 729
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Total interest expense.......................................................... 2,061 1,812
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Net interest income before provision for loan losses............................ 1,483 1,566
Provision for loan losses....................................................... - -
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Net interest income after provision for loan losses............................. 1,483 1,566
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NONINTEREST INCOME
Service fees.................................................................... 65 70
Other........................................................................... 23 10
------ ------
Total noninterest income........................................................ 88 80
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NONINTEREST EXPENSE
Compensation and benefits....................................................... 769 747
Office occupancy................................................................ 258 289
Federal deposit insurance premiums.............................................. 6 18
Real estate held for sale and development....................................... - 8
Professional services........................................................... 178 119
Other........................................................................... 166 178
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Total noninterest expense....................................................... 1,377 1,359
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Income before income taxes...................................................... 194 287
Income tax expense.............................................................. 37 106
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NET INCOME $ 157 $ 181
====== ======
================================================================================================== ======
Earnings per share:
Basic........................................................................ $ 0.10 $ 0.09
Diluted...................................................................... 0.10 0.09
</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
THREE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 157 $ 181
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................... 108 119
Market adjustment for committed ESOP shares..................................... 7 20
Amortization of award of RRP shares............................................. 95 95
Net amortization of deferred loan fees.......................................... (8) (15)
Net amortization of discounts and premiums...................................... 59 90
(Increase) decrease in accrued interest receivable.............................. (20) 17
Decrease in prepaid expenses and other assets................................... 60 12
Increase (decrease) in accrued interest payable and other liabilities, net...... (1,018) 48
------- --------
Net cash provided by (used in) operating activities............................. (560) 567
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of loans receivable................................................. (7,554) (11,333)
Principal repayment of loans receivable......................................... 3,377 5,459
Principal repayments on mortgage-backed securities held-to-maturity............. 6,526 3,260
Principal repayments on mortgage-backed securities available-for-sale........... 1,069 2,033
Purchase of stock in Federal Home Loan Bank of Chicago.......................... (200) -
Proceeds from sale of real estate held for development.......................... - 154
Proceeds from sale of foreclosed real estate.................................... 78 -
Purchase of office properties and equipment, net................................ (45) (64)
------- --------
Net cash provided by (used in) investing activities............................. 3,251 (491)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in savings deposits................................................ (4,482) (4,966)
Net increase (decrease) in borrowed money....................................... 4,000 (1,000)
Increase (decrease) in advance payments by borrowers for taxes and insurance.... (1,037) 302
Payment of cash dividend........................................................ (80) (112)
Purchase of treasury stock...................................................... (159) (610)
------- --------
Net cash used in financing activities........................................... (1,758) (6,386)
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents............................ 933 (6,310)
Cash and cash equivalents at the beginning of the period........................ 6,334 10,627
------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD.............................. $ 7,267 $ 4,317
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................................... 2,063 1,837
Income taxes............................................................... - 20
</TABLE>
(SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS)
<PAGE>
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 September 30, 2000
and June 30, 2000 and for the three month periods ended September 30, 2000 and
1999. 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, 2000, and the notes thereto included in the
Company's 2000 Annual Report on 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.
(2) EARNINGS PER SHARE
Earnings per share of common stock are calculated according to the
guidelines of the Financial Accounting Standards Board's ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share" ("Statement
128"). ESOP shares are only considered outstanding for earnings per share
calculations when they are released or committed to be released. Presented below
are the calculations for basic and diluted earnings per share:
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
2000 1999
--------------- ----------
BASIC:
<S> <C> <C>
Net income.................................................... $ 157,000 $ 181,000
Weighted average shares outstanding........................... 1,607,794 2,112,517
Basic earnings per share...................................... $ 0.10 $ 0.09
DILUTED:
Net income.................................................... $ 157,000 $ 181,000
Weighted average shares outstanding........................... 1,607,794 2,112,519
Effect of dilutive stock options outstanding.................. - 809
Diluted weighted average shares outstanding................... 1,607,794 2,113,326
Diluted earnings per share.................................... $ 0.10 $ 0.09
</TABLE>
(3) COMPREHENSIVE INCOME
The Company's comprehensive income (loss) for the three month periods
ended September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------------- ---------
<S> <C> <C>
Net income.............................................................. $157,000 $ 181,000
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during the period.......... 468,000 (236,000)
--------------- ----------
Comprehensive income (loss)............................................. $625,000 $ (55,000)
=============== ==========
</TABLE>
(4) DIVIDEND DECLARATION
On August 15, 2000, the Board of Directors declared a quarterly
dividend of $.05 per share, which was paid on September 15, 2000 to stockholders
of record on August 31, 2000.
(5) STOCK REPURCHASE PROGRAMS
The Repurchase Programs adopted by the Company authorized the
repurchase of 866,099 shares, or over 34 percent of the 2,512,750 shares of
common stock issued in the Company's initial public offering. At September 30,
2000, 781,082 shares have been repurchased at an average cost of $12.45 per
share. Management has current Board authorization to repurchase 85,017 shares as
opportunities may arise. Additional authorizations to repurchase stock may be
made from time to time at the discretion of the Board of Directors. Management
continues to believe that stock repurchase programs are an effective capital
management tool and provide enhanced value to both the Company and its
stockholders.
<PAGE>
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
--------------------------
This Quarterly Report on Form 10-Q contains certain forward looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include: changes in general, economic and market
conditions; the development of an adverse interest rate environment that
adversely affects the interest rate spread or other income anticipated from the
Company's operations and investments; depositor and borrower preferences; and
unexpected increases in non-interest and other operational expenses. The Company
disclaims any obligation to publicly announce future events or developments
which may affect the forward-looking statements contained herein.
GENERAL
-------
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
advances from the Federal Home Loan Bank of Chicago (the "FHLB"). The Bank does
not have any subsidiaries.
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>
SEPTEMBER 30, JUNE 30,
2000 2000
---- ----
<S> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets............................................................... $ 213,865 $215,674
Loans receivable (net)..................................................... 159,372 155,187
Allowance for loan losses.................................................. 300 300
Mortgage-backed securities................................................. 30,041 37,363
Savings deposits........................................................... 111,012 115,494
Borrowed funds............................................................. 70,000 66,000
Stockholders' equity....................................................... 29,099 28,612
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 1999
---- ----
<S> <C> <C>
SELECTED OPERATING DATA:
Net interest income before provision for loan losses....................... $ 1,483 $ 1,566
Net income................................................................. 157 181
SELECTED FINANCIAL RATIOS:
Bank Capital ratios (1):
Tangible.............................................................. 10.43% 13.25%
Core.................................................................. 10.43 13.25
Risk-based............................................................ 22.87 30.52
Return on average assets (2).............................................. 0.29 0.34
Return on average stockholders' equity (2)................................ 2.18 2.09
Consolidated equity to assets at end of period............................ 13.61 16.29
Noninterest expense to average assets (2)................................. 2.57 2.55
Non-performing assets as a percent of total assets........................ 0.06 0.12
Allowance for loan losses as a percent of total loans..................... 0.19 0.21
Allowance for loan losses as a percent of non-performing loans............ 222.22 121.95
PER SHARE DATA:
Basic earnings per share.................................................. $ 0.10 $ 0.09
Diluted earnings per share................................................ 0.10 0.09
Book value per share...................................................... 16.80 15.30
Cash dividends per share.................................................. 0.05 0.05
STOCK QUOTES:
High...................................................................... $ 12.563 $ 15.063
Low....................................................................... 11.750 13.125
At September 30........................................................... 12.250 13.625
</TABLE>
---------------------------------------------------------------
(1) Fairfield Savings Bank, FSB only.
(2) Three month results have been annualized.
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND JUNE 30, 2000
Total assets decreased $1.8 million from $215.7 million at June 30,
2000 to $213.9 million at September 30, 2000. The components of the Company's
asset base also changed from June 30, 2000 to September 30, 2000.
Mortgage-backed securities ("MBS") (including both held-to-maturity and
available-for-sale portfolios) decreased $7.3 million from $37.4 million at June
30, 2000 to $30.1 million at September 30, 2000. This decrease is primarily due
to the receipt of $7.6 million principal repayments during the three month
period. An increase of $4.2 million in loans receivable was the result of loan
originations of $7.6 million which exceeded the $3.4 million of loan repayments.
Interest earning deposits increased $153,000 from $3.4 million at June 30, 2000
to $3.6 million at September 30, 2000.
Investments in mutual funds and preferred stock are recorded on the
balance sheet at fair value and were $7.9 million and $7.5 million at September
30, 2000 and June 30, 2000, respectively.
The allowance for loan losses at September 30, 2000 and June 30, 2000
was $300,000. Management believes that the allowance for loan losses is adequate
to cover any probable losses 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 0.19% and 0.21% at September 30,
2000 and 1999, respectively. At September 30, 2000 and 1999, the ratio of the
allowance for loan losses to non-performing loans was 222.22% and 121.95%,
respectively. The Bank had one non-performing loan totaling approximately
$135,000 at September 30, 2000 and three non-performing loans totaling
approximately $193,000 at June 30, 2000. The Bank had one property held in
foreclosed real estate at June 30, 2000, which totaled $78,000. This foreclosed
real estate had mortgage insurance and was sold during the quarter ended
September 30, 2000 for a gain of approximately $8,000. There were no loan
chargeoffs during the three month periods ended September 30, 2000 and 1999.
Savings deposits decreased $4.5 million from June 30, 2000 to September
30, 2000; during this time, borrowed funds increased by $4.0 million. Interest
and noninterest-bearing NOW accounts declined $900,000 primarily due to a
$500,000 decrease in government entities deposits, whose balances fluctuate
during the year. Passbook savings were $36.2 million at September 30, 2000
compared to $37.4 million at June 30, 2000. Certificates of deposit accounts
declined $1.0 million to $50.8 million at September 30, 2000 from June 30, 2000.
Stockholders' equity at September 30, 2000 was $29.1 million, an
increase of $487,000 from June 30, 2000. The increase includes the first
quarter's net income of $157,000 and a reduction in the unrealized loss in the
available-for-sale investment portfolio of $468,000 (net of taxes) which was
offset by dividends declared and treasury stock purchases. The Company's book
value was $16.80 per share at September 30, 2000 compared to $15.30 per share at
September 30, 1999, an increase of $1.50 or approximately 9.8%.
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
GENERAL. For the three months ended September 30, 2000, net income was
$157,000 or $0.10 per basic and diluted share, compared to net income of
$181,000 or $0.09 per basic and diluted share for the three months ended
September 30, 1999.
INTEREST INCOME. Interest income was $3.5 million and $3.4 million for
the three months ended September 30, 2000 and 1999, respectively. The average
balance of interest-earning assets increased $900,000 from $204.4 million for
the three months ended September 30, 1999 to $205.3 million for the three months
ended September 30, 2000. The average yield on the Bank's interest-earning
assets increased 29 basis points from 6.61% for the three months ended September
30, 1999 to 6.90% for the three months ended September 30, 2000.
INTEREST EXPENSE. Interest expense increased $249,000 to $2.1 million
for the three months ended September 30, 2000, as compared to the same period in
1999. The average rate paid on interest-bearing liabilities increased 42 basis
points from 4.29% for the three months ended September 30, 1999 to 4.71% for the
three months ended September 30, 2000. The average balance of interest-bearing
liabilities increased $6.3 million to $174.1 million for the three months ended
September 30, 2000 from $167.8 million for the three months ended September 30,
1999. The increase in the cost of average interest-bearing liabilities resulted
primarily from the renewal of maturing certificates of deposit and borrowed
funds at higher rates.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses was $1.5 million for the three months
ended September 30, 2000 and 1999. The average interest rate spread decreased 13
basis points from 2.32% for the three months ended September 30, 1999 to 2.19%
for the comparable period in 2000. Net interest margin declined one basis point
and was 2.91% for the three months ended September 30, 2000.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for
the three months ended September 30, 2000 or for the comparable period in 1999.
NONINTEREST INCOME. Noninterest income was $88,000 for the three months
ended September 30, 2000, compared to $80,000 for the three months ended
September 30, 1999. Service fee income from savings operations declined $5,000.
Other fee income increased $13,000, including a gain on sale of foreclosed real
estate of approximately $8,000.
NONINTEREST EXPENSE. Noninterest expense increased $18,000 and was $1.4
million for the three months ended September 30, 2000. Compensation expense
increased $22,000 over the similar period last year primarily due to normal
salary increases. Office occupancy expense was $258,000 for the three months
ended September 30, 2000, compared to $289,000 for the same period in 1999. This
decrease was primarily due to large office maintenance expenditures made in the
first quarter 1999 while no similar expenditures occurred in the current
quarter. Professional services expense was $178,000 for the first quarter of
2000, an increase of $59,000, primarily due to legal fees in a suit to recover
damages in a real estate development known as The Trails of
<PAGE>
Olympia Fields. A new trial date has been set for May 2001. Other noninterest
expense was $166,000 for the three months ended September 30, 2000, compared to
$178,000 for the comparable period in 1999. The decrease was due to expenses
incurred in fiscal year 1999 for Year 2000 preparations.
INCOME TAX EXPENSE. Income tax expense decreased $69,000 from $106,000
for the three months ended September 30, 1999 to $37,000 for the three months
ended September 30, 2000. This decrease was partially due to the decrease of
$93,000 in pre-tax income. The effective tax rate was 19.1% and 36.9% for the
three month periods ended September 30, 2000 and 1999, respectively. The
decrease in the effective tax rate was primarily due to an increase in the
dividend received deduction recorded in fiscal year 2000 for dividends received
on the Company's investments in mutual funds and preferred stock.
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. Net cash used in operating
activities amounted to $560,000 during the quarter ended September 30, 2000
compared to net cash provided of $567,000 during the quarter ended September 30,
1999.
The Bank is required by the OTS to maintain an average daily balance of
liquid assets (cash, certain time deposits, bankers' acceptances, specified
United States Government, state or federal agency obligations, shares of certain
mutual funds and certain corporate debt securities and commercial paper) equal
to a monthly average of not less than a specified percentage of its net
withdrawable deposits accounts plus short-term borrowings. This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10% depending upon economic conditions and the savings flows of
member institutions, and is currently 4%. At September 30, 2000, the Bank's
liquidity ratio was 26.34%. The Bank's liquidity ratio is high due to the amount
of mortgage-backed-securities held in the Bank's investment 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 three months
ended September 30, 2000 were the origination of mortgage 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
three months ended September 30, 2000 and 1999.
At September 30, 2000, the Bank had outstanding loan origination
commitments of $3.3 million and unused lines of consumer credit of $670,000. The
Bank anticipates that it will have
<PAGE>
sufficient funds available to meet its current origination and other lending
commitments. Certificates of deposit scheduled to mature in one year or less
from September 30, 2000 totaled $35.1 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 September 30, 2000, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $21.7 million, or 10.43% of total
adjusted assets, which is above the required level of $3.1 million or 1.5%; core
capital of $21.7 million, or 10.43% of total adjusted assets, which is above the
required level of $6.2 million or 3.0%; and total risk-based capital of $22.0
million, or 22.87% of risk-weighted assets, which is above the required level of
$7.7 million, or 8.00%.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (Statement 133). Statement 133
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts. Under the standard, entities
are required to carry all derivative instruments in the balance sheet at fair
value. The accounting for the changes in fair value of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and, if so, on the reason for holding it. The gain or loss due to
changes in fair value is recognized in earnings or as other comprehensive income
in the statement of stockholders' equity, depending on the type of instrument
and whether or not it is considered a hedge. In June 1999, the FASB issued
Statement 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the effective date of Statement No. 133." This statement defers the
adoption of Statement 133 to fiscal quarters of fiscal years beginning after
June 15, 2000. The FASB issued Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities -- an amendment of FASB
Statement No. 133" in June 2000, which addresses various implementation issues
relating to Statement 133. Adoption of the above Statements by the Company,
effective July 1, 2000, did not have a material impact on the Company's
financial condition or its results of operations.
The FASB issued SFAS No. 140 "ACCOUNTING FOR TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES" (Statement 140) in
September 2000. Statement 140 supercedes and replaces FASB Statement 125,
"ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES". Accordingly, Statement 140 is now the authoritative accounting
literature for transfers and servicing of financial assets and extinguishments
of liabilities. Statement 140 also includes several additional disclosure
requirements in the area of securitized financial assets and collateral
arrangements. The provisions of Statement 140 related to transfers of financial
assets are to be applied to all transfers of financial assets occurring after
March 31, 2001. The collateral recognition and disclosure provisions in
Statement 140 are effective for fiscal years ending after December 15, 2000. The
Company
<PAGE>
anticipates that the adoption of Statement 140 will not have a material impact
on the Company's results of operations.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There has been no material change in market risk since that disclosed in
Item 7A of the Company's Form 10-K for the year ended June 30, 2000.
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
October 24, 2000. On August 31, 2000, the record date, there were
1,736,668 shares of common stock issued and outstanding. The
proposals submitted to the shareholders and the tabulation of
votes for each proposal are as follows:
1. Election of three candidates to the Board of Directors, to
serve for a term of three years.
The number of votes cast with respect to this matter was as
follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD BROKER NON-VOTES
------- --- -------- ----------------
<S> <C> <C> <C>
George M. Briody 1,389,843 209,667 -
Joseph J. Nimrod 1,389,843 209,667 -
F. Gregory Opelka 1,386,143 213,367 -
</TABLE>
2. Ratification of the appointment of KPMG LLP as independent
public accountants for the fiscal year ending June 30, 2001.
<PAGE>
The number of votes cast with respect to this matter was as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
1,542,602 56,024 884 -
</TABLE>
3. Shareholder's proposal set forth in Company's Proxy
Statement dated September 13, 2000.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
394,198 779,496 71,554 354,262
</TABLE>
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.
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
Senior Vice President and Chief
Financial Officer
November 13, 2000
