2000 ANNUAL REPORT
================================================================================
TO OUR STOCKHOLDERS
The Company's primary business activity consists of the ownership of
Fairfield Savings Bank, F.S.B. (the "Bank"). The Bank had a core and a tangible
capital ratio of 10.28% and 12.78% at June 30, 2000 and 1999, respectively. The
decrease in bank capital ratios from prior years is due to a dividend paid to
Big Foot Financial Corp. (the "Company"), which was primarily used to repurchase
its common stock.
The Board of Directors of Big Foot Financial Corp. declared a cash
dividend on its common stock of five cents ($0.05) per share in each quarter of
the fiscal year ended June 30, 2000. The Board will consider the payment of
additional dividends in succeeding quarterly periods, based on earnings,
financial conditions and other factors.
The Company continues to pursue a stock repurchase program. During
fiscal year 2000, the Company repurchased 525,281 shares of common stock. Total
common stock repurchased since the inception of the repurchase programs amounted
to 767,082 shares, or over 30% of the total 2,512,750 common shares issued in
the Company's initial public offering. The repurchase program has helped
increase our book value from $15.29 per share at June 30, 1999 to $16.40 per
share at June 30, 2000, an increase of $1.11, or approximately 7.3%. Additional
repurchases will be made from time to time at the discretion of management.
Total assets as of June 30, 2000 were $215.7 million, an increase of
$0.2 million from the prior year-end. There has been a continuing moderately
strong loan demand in the Bank's market area. Loan originations in the current
fiscal year were $32.5 million, compared to $44.1 million in the prior fiscal
year. At fiscal year-end, the Bank held one property classified as foreclosed
real estate, and non-performing assets were 0.15% of total assets, a ratio well
below industry averages. A detailed summary of the financial results appears in
the Management's Discussion and Analysis section of this Report.
During fiscal year 2000, the Bank began developing a fully interactive,
transactional website. The website (www.fairfieldbank.com) will allow our
customers access to their account information, as well as transfer funds between
accounts and open new savings or loan accounts. It is anticipated that this
website will be fully functional by late fall 2000.
The Proxy Statement includes a shareholder proposal, which Management
opposes. Refer to the Proxy Statement on page 20 for details.
Fairfield Savings Bank will continue to focus on meeting the financial
service and loan needs of its valued customers. And, Big Foot Financial will do
its best to meet the expectations of its owners, the Big Foot stockholders.
Sincerely,
/s/ George M. Briody
-------------------------------------
George M. Briody
President and Chief Executive Officer
Big Foot Financial Corp.
Fairfield Savings Bank, F.S.B.
<PAGE>
2000 ANNUAL REPORT
================================================================================
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 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, with net proceeds totaling $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.
The Board of Directors of the Company approved the repurchase of shares
of the Company's outstanding common stock. The shares of common stock available
for repurchase under the current repurchase program, together with shares of
common stock previously repurchased, totals approximately 34.5% of the total
shares issued by the Company in the initial public offering. Additional
repurchases will be made from time to time through privately negotiated
transactions, odd-lot purchases and open-market transactions at the discretion
of management. At June 30, 2000, 767,082 shares had been repurchased under all
of the repurchase programs at an average cost of $12.47 per share and 99,017
shares remain to be repurchased under the current authorization. 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.
The Company repurchased 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"). On February 23, 1999, the Company amended the RRP in connection with
the authorization and granting of a restricted stock award of 3,149 shares to a
new director. The Company, as of June 30, 2000, had repurchased 110,245 common
shares for the RRP.
4
<PAGE>
2000 ANNUAL REPORT
================================================================================
MANAGEMENT STRATEGY
HOME LENDING AND ASSET QUALITY. The Bank's strategy has been to
maintain its focus as a traditional consumer oriented financial intermediary
serving the markets in which its offices are located.
The Bank has emphasized, and intends to continue to emphasize, the
origination of one- to four-family residential mortgage loans in its lending
area, which is defined generally as Cook, Du Page and Lake Counties in Illinois.
At June 30, 2000, one- to four-family residential mortgage loans totaled $153.8
million or 98.8% of gross loans, of which $149.9 million or approximately 96.3%
of gross loans, are at fixed rates of interest. Approximately 1.2% of gross
loans consisted of multifamily mortgage loans, land, construction and
development loans, home equity and other loans. For the 2000 fiscal year, the
Bank originated $32.5 million of loans. The Bank also invests in mortgage-backed
securities. The Bank's holdings of mortgage-backed securities totaled $37.4
million at June 30, 2000, representing 17.3% of total assets.
The Bank pays particular attention to both the value estimates applied
to the collateral securing loans, as well as to the creditworthiness of its
prospective borrowers and employs rigorous underwriting standards to minimize
risk of loss. As a result of this strategy, historically the Bank has had
minimal loss experience in its lending operations. The Bank's ratio of
non-performing loans to total loans at year-end ranged from 0.14% to 0.29% for
the last five fiscal years and was 0.16% at June 30, 2000. The ratio of
non-performing assets to total assets ranged from 0.06% to 0.16% for the last
five fiscal years and was 0.15% at June 30, 2000. The Bank's ratio of allowance
for loan losses to non-performing loans ranged from 87.72% to 254.24% for the
last five fiscal years and was 120.48% at June 30, 2000.
SAVINGS DEPOSITS AND BORROWED MONEY. The Bank's savings deposits are
derived principally from its primary market area. The Bank's strategy has been
to maintain a high level of stable savings deposits by providing quality service
to its customers without significantly increasing its cost of funds. The Bank's
low-cost deposit base, consisting of passbook accounts, noninterest bearing
demand accounts, NOW accounts and money market demand accounts, totaled $63.7
million or 55.2% of total savings deposits and had a weighted average effective
rate of 2.30% at June 30, 2000. For the past three years, these accounts have
consistently accounted for more than 51.0% of total savings deposits and had a
weighted average effective rate of not more than 2.36% throughout this period.
At June 30, 2000, money market demand accounts totaled $10.8 million or 9.3% of
total savings deposits and had a weighted average effective rate of 3.24%. The
Bank has consistently maintained an overall cost of funds lower than the
National Median Cost of Funds Rate as determined by the OTS. At June 30, 2000,
the Bank's cost of savings deposits was 3.55% and its cost of funds (including
FHLB borrowings) was 4.48%, or 40 basis points below the National Median Cost of
Funds Rate. The Bank has not and does not intend to use brokered deposits as a
source of funds.
MANAGEMENT OF INTEREST RATE RISK. The Bank's business strategy also
seeks to reduce the Bank's vulnerability to increases in interest rates.
Pursuant to this strategy, the Bank, (i) emphasizes the origination of mortgage
loans with terms of 15-years, instead of 30-year terms, (ii) seeks to attract
and maintain passbook accounts, which are considered by management to be
5
<PAGE>
2000 ANNUAL REPORT
================================================================================
more resistant to increases in interest rates, and (iii) purchases
mortgage-backed securities primarily with maturities of five to fifteen years.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal objectives of the Bank's interest rate risk ("IRR")
management activities are to: (i) evaluate the interest rate risk included in
certain balance sheet accounts; (ii) determine the level of risk appropriate
given the Bank's business focus, operating environment, capital and liquidity
requirements and performance objectives; and (iii) manage this risk consistent
with Board approved guidelines. Through such management, the Bank seeks to
reduce vulnerability to changes in interest rates and to manage the ratio of
interest rate sensitive assets to interest rate sensitive liabilities within
specified maturities or repricing dates. The Bank monitors its interest rate
risk as such risk relates to its operating strategies. The change in levels of
interest rates is an uncertainty that could have an impact on the earnings of
the Bank. The Bank's Chief Financial Officer is charged with the responsibility
of developing and implementing an interest rate risk management and reporting
system. This system measures the Bank's exposure to interest rate risk and
provides reports quarterly to management and the Board of Directors to ensure
compliance with the limits of the policy.
To the extent consistent with its interest rate spread objectives and
market conditions, the Bank attempts to manage its interest rate risk and has
taken several steps in this regard. First, a majority of the Bank's
mortgage-backed and investment securities acquisitions since 1993 have been
securities having a balloon maturity of five or seven years. At June 30, 2000,
the Company had $37.4 million in mortgage-backed securities, approximately $21.3
million of which mature within ten years. The Bank's available-for-sale
securities portfolio is carried at fair value. Any sale of such securities may
result in a gain or loss to the Bank to the extent the market value at the time
of sale exceeds or is less than the amortized cost.
Second, a significant portion of the Bank's deposits are passbook
accounts, which are considered by management to be somewhat more resistant to
interest rate changes than most other types of accounts. At June 30, 2000, the
Bank had $37.4 million in passbook accounts. Finally, although the Bank makes
minimal adjustable rate loans due to competitive factors, the Bank's fixed rate
lending program emphasizes loans with terms of 15 years or less. At June 30,
2000, the Bank had $47.7 million or over 30.0% of total loans with remaining
terms of 16 years or less.
Despite the efforts taken by the Bank to seek to reduce its level of
interest rate risk, and the Bank's intent to continue to seek to reduce its
exposure to interest rate risk, the Bank has remained vulnerable to increases in
interest rates. There can be no assurance that the Bank will not experience
changes in net income and net interest income during periods of increasing or
decreasing interest rates.
Net Portfolio Value ("NPV") analysis provides a quantification of
interest rate risk. In essence, this approach calculates the present value of
expected cash flows from existing assets less the present value of expected cash
flows from existing liabilities plus the present value of net expected cash
inflows from existing off-balance sheet contracts.
6
<PAGE>
2000 ANNUAL REPORT
================================================================================
The OTS provides all institutions that file a schedule entitled the
Consolidated Maturity & Rate schedule ("CMR") as a part of their quarterly
Thrift Financial Report with an interest rate sensitivity report of NPV. The OTS
simulation model uses a discounted cash flow analysis and an option-based
pricing approach to measuring the interest rate sensitivity of NPV. The OTS
model estimates the economic value of each type of asset, liability, and
off-balance sheet contract under the assumption that the Treasury yield curve
shifts instantaneous and parallel up and down 100 to 300 basis points in 100
basis point increments. The OTS allows thrifts under $500 million in total
assets to use the results of their interest rate sensitivity model, which is
based on information provided by the institution, to estimate the sensitivity of
NPV.
The OTS model utilizes an option-based pricing approach to estimate the
sensitivity of mortgage loans. The most significant embedded option in these
types of assets is the prepayment option of the borrowers. The OTS model uses
various price indications and prepayment assumptions to estimate sensitivity of
mortgage loans.
In the OTS model, the value of deposit accounts appears on the asset
and liability side of the NPV analysis. In estimating the value of certificates
of deposit accounts, the liability portion of the CD is represented by the
implied value when comparing the difference between the CD face rate and
available wholesale CD rates. On the asset side of the NPV calculation, the
value of the "customer relationship" due to the rollover of retail CD deposits
represents an intangible asset in the NPV calculation.
Other deposit accounts such as NOW accounts, money market demand
accounts, passbook accounts, and non-interest-bearing accounts also are included
on the asset and liability side of the NPV calculation in the OTS model. These
accounts are valued at 100% of the respective account balances on the liability
side. On the asset side of the analysis, the value of the "customer
relationship" of the various types of deposit accounts is reflected as a deposit
intangible.
The NPV sensitivity of borrowed funds is estimated by the OTS model
based on a discounted cash flow approach. The cash flows are assumed to consist
of monthly or semi-annual interest payments with principal paid at maturity
(dependent upon the type of borrowing). The OTS model is based on only the
Bank's balance sheet, because virtually all of the Company's interest rate risk
exposure lies at the Bank level. Management believes the table below also
accurately reflects an analysis of the Company's IRR.
Presented below, as of June 30, 2000, is an analysis of the Bank's
estimated interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts in interest rates, up and down 300 basis points in 100
point increments. The NPV is prepared for the Bank by the OTS as of the end of
each calendar quarter. The regulatory focus of Asset and Liability Management
allows institutions to perform an in-house estimate of risk as the basis for
measuring risk-based capital. The Bank has demonstrated through its past pricing
action that passbook accounts function as relatively fixed rate deposits, and as
such, the passbook accounts are not rate sensitive deposits. Based upon the
Bank's historical experience of its passbook accounts, the Bank calculates the
Core Deposit Intangible value for those accounts. This
7
<PAGE>
calculation is substituted for the OTS calculations and then a new set of ratios
is computed. The Bank's asset and liability structure results in a decrease in
NPV in a rising interest rate scenario. During periods of rising interest rates,
the value of monetary assets declines more rapidly than the value of monetary
liabilities rises. Conversely, during periods of falling interest rates, the
value of monetary assets rises more rapidly than the value of monetary
liabilities declines. However, the amount of change in value of specific assets
and liabilities due to changes in interest rates is not the same in a rising
interest rate environment as in a falling interest rate environment (i.e., the
amount of value increase under a specific rate decline may not equal the amount
of value decrease under an identical upward interest rate movement).
<TABLE>
<CAPTION> NPV AS % OF ECONOMIC
CHANGE IN INTEREST NET PORTFOLIO VALUE VALUE OF ASSETS
RATE IN BASIS POINTS ------------------- -----------------------
(RATE SHOCKS) AMOUNT $ CHANGE % CHANGE NPV RATIO CHANGE
--------------------- ------- -------- -------- --------- ---------
($ in thousands)
<S> <C> <C> <C> <C> <C>
300 $12,098 $(14,339) (54.2)% 6.16 % $(623)
200 17,697 (8,740) (33.1) 8.71 (367)
100 22,126 (4,311) (16.3) 10.62 (176)
Static (1) 26,437 - - 12.38 -
(100) 29,699 3,262 12.3 13.64 126
(200) 29,787 3,350 12.7 13.61 123
(300) 29,149 2,712 10.3 13.29 91
</TABLE>
----------------------------
(1) Based on the economic value of the Bank's assets assuming no change in
interest rates.
As noted above, the market value of the Bank's net assets would be
anticipated to decline in the event of certain designated increases in interest
rates. For instance, in the event of a 200 basis point increase in interest
rates, NPV is anticipated to fall by $8.7 million or 33.1%. The level of
interest rate risk in the NPV table set forth above at June 30, 2000 is within
the Bank's current guidelines for acceptable interest rate risk.
In the event that interest rates change in the designated amounts,
there can be no assurance that the Bank's assets and liabilities would perform
as set forth above. In addition, a change in Treasury rates in the designated
amounts accompanied by a change in the shape of the Treasury yield curve would
cause changes to the NPV significantly different than indicated above.
Certain shortcomings are inherent in the methods of analysis presented
in the computation of NPV. For example, although certain assets and liabilities
may have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates while interest rates on other types of assets may lag behind
changes in market rates. Additionally, certain assets, such as adjustable rate
loans, have features that restrict changes in interest rates both in the near
term and over the life of the asset. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in the table. Finally, the ability of borrowers
to make scheduled payments on their adjustable rate loans may decrease in the
event of an interest rate increase. As a result, the actual effect of changing
interest rates may differ from that presented in the foregoing table.
8
<PAGE>
2000 ANNUAL REPORT
================================================================================
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income depends upon the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.
The following tables set forth certain information relating to the
Bank's average balance sheet and reflects the average yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balance of assets
and liabilities, respectively, for the periods presented. Average balances are
derived from month end balances. Management does not believe that the use of
month end balances instead of daily balances has caused any material difference
in the information presented. The yields and costs include fees, which are
considered adjustments to yields.
9
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2000 ANNUAL REPORT
================================================================================
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
AT JUNE 30, 2000 JUNE 30, 2000
------------------------ -------------------------------------
WEIGHTED
AVERAGE AVERAGE AVERAGE
BALANCE RATE (1) BALANCE INTEREST YIELD/COST
----------- ----------- --------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Mortgage-backed securities $ 37,363 6.66 % $ 45,526 $ 2,675 5.88 %
Loans receivable (2) 155,487 7.04 146,418 10,270 7.01
Investment securities (3) 7,511 6.92 3,833 271 7.07
Interest-earnings deposits 3,429 5.91 4,635 242 5.22
Stock in FHLB-Chicago 3,300 6.75 2,808 198 7.05
---------- ------- ---------- ---------- -------
Total interest-earning assets 207,090 6.94 % 203,220 13,656 6.72 %
---------- ------- ---------- ---------- -------
Allowance for loan losses (300) (300)
Noninterest-earning assets 8,884 9,302
---------- ----------
Total assets $ 215,674 $ 212,222
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW accounts $ 8,944 2.01 % $ 8,834 $ 177 2.00 %
Money market demand accounts 10,752 3.24 11,068 347 3.14
Passbook/statement savings accounts 37,447 2.50 37,757 944 2.50
Certificates of deposit 51,759 5.09 55,668 2,769 4.97
Borrowed money 66,000 6.10 55,846 3,207 5.74
---------- ------- ---------- ---------- -------
Total interest-bearing liabilities 174,902 4.65 169,173 7,444 4.40
---------- ------- ---------- ---------- -------
Noninterest-bearing NOW accounts 6,592 6,213
Other noninterest-bearing liabilities 5,568 4,739
---------- ----------
Total liabilities 187,062 180,125
---------- ----------
Stockholders' equity 28,612 32,097
---------- ----------
Total liabilities and stockholders'
equity $ 215,674 $ 212,222
========== ==========
Net interest income $ 6,212
==========
Average interest rate spread (4) 2.29 % 2.32 %
======= =======
Net interest margin (5) 3.06 %
=======
Net interest earning assets $ 32,188 $ 34,047
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities 118.40 % 120.13 %
========== ==========
</TABLE>
(NOTES ON FOLLOWING PAGE)
<PAGE>
2000 ANNUAL REPORT
================================================================================
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
---------------------------------- -------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Mortgage-backed securities $ 66,241 $ 3,871 5.84 % $ 91,196 $ 5,582 6.12 %
Loans receivable (2) 125,523 9,056 7.21 102,733 7,839 7.63
Investment securities (3) 3,246 272 8.38 1,786 170 9.52
Interest-earnings deposits 10,274 516 5.02 7,264 412 5.67
Stock in FHLB-Chicago 2,908 190 6.53 2,565 171 6.67
---------- -------- ------- ---------- --------- ------
Total interest-earning assets 208,192 13,905 6.68 % $ 205,544 $ 14,174 6.90 %
---------- -------- ------ ---------- --------- -------
Allowance for loan losses (300) (300)
Noninterest-earning assets 9,645 9,123
---------- ----------
Total assets $ 217,537 $ 214,367
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW accounts $ 8,322 $ 167 2.01 % $ 7,158 $ 145 2.03 %
Money market demand accounts 11,587 341 2.94 11,957 382 3.19
Passbook/statement savings accounts 38,764 969 2.50 39,046 977 2.50
Certificates of deposit 59,413 3,106 5.23 59,931 3,287 5.48
Borrowed funds 52,077 2,952 5.67 48,469 2,941 6.07
---------- -------- ------- ---------- --------- -------
Total interest-bearing liabilities $ 170,163 $ 7,535 4.43 % $ 166,561 $ 7,732 4.64 %
---------- -------- ------- ---------- --------- -------
Noninterest-bearing NOW accounts 5,837 4,962
Other noninterest-bearing liabilities 5,424 5,003
---------- ----------
Total liabilities $ 181,424 $ 176,526
---------- ----------
Stockholders' equity 36,113 37,841
---------- ----------
Total liabilities and stockholders'
equity $ 217,537 $ 214,367
========== ==========
Net interest income $ 6,370 $ 6,442
======== =========
Average interest rate spread (4) 2.25 % 2.26 %
======= ======
Net interest margin (5) 3.06 % 3.13 %
======= ======
Net interest earning assets $ 38,029 $ 38,983
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities 122.35 % 123.40 %
========== ==========
</TABLE>
----------------------------------------
(1) The weighted average rate represents the coupon associated with each
asset and liability, weighted by the principal balance associated
with each asset and liability.
(2) In computing the average balance of loans receivable, non-accrual
loans have been included.
(3) Includes investment in mutual funds and preferred stock.
(4) Average interest rate spread represents the difference between the
average rate earned on interest-earning assets and the average rate
paid on interest-bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
RATE/VOLUME ANALYSIS
Net interest income can also be analyzed in terms of the impact
changing interest rates have on interest-earning assets and interest-bearing
liabilities, and the change in the volume or amount of these assets and
liabilities. In general, increases in the volume or amount of interest-bearing
liabilities, as well as increases in the interest rates paid on interest-bearing
liabilities, and decreases in the volume or amount of interest-earning assets,
as well as decreases in the yields
11
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2000 ANNUAL REPORT
================================================================================
earned on interest-earning assets, have the effect of reducing the Bank's net
interest income. Conversely, increases in the volume or amount of the Bank's
interest-earning assets, as well as increases in the yields earned on
interest-earning assets, and decreases in the volume or amount of
interest-bearing liabilities, as well as decreases in the rates paid on
interest-bearing liabilities, have the effect of increasing the Bank's net
interest income. The following table sets forth certain information regarding
changes in interest income and interest expense for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to changes in volume (changes in
volume multiplied by old rate) and changes in rates (changes in rates multiplied
by old volume). Changes attributable to the combined impact of rate volume have
been allocated proportionately to the changes due to volume and the changes due
to rate.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
COMPARED TO YEAR ENDED COMPARED TO YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
-------------------------------- ---------------------------------
INCREASE/(DECREASE) INCREASE/(DECREASE)
DUE TO DUE TO
-------------------------------- ---------------------------------
VOLUME RATE NET VOLUME RATE NET
------- -------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Mortgage-backed securities $(1,222) $ 26 $ (1,196) $ (1,466) $ (245) $ (1,711)
Loans receivable 1,471 (257) 1,214 1,618 (401) 1,217
Investment securities (1) 45 46 (1) 119 (17) 102
Interest-earning deposits (294) 20 (274) 143 (39) 104
Stock in FHLB of Chicago (7) 15 8 23 (4) 19
------- -------- --------- -------- --------- ----------
Total $ (7) $ (242) $ (249) $ 437 $ (706) $ (269)
======= ======== ========= ======== ========= ==========
INTEREST-BEARING LIABILITIES
NOW accounts $ 11 $ (1) $ 10 $ 23 $ (1) $ 22
Money market demand accounts (16) 22 6 (12) (29) (41)
Passbook/statement savings accounts (25) - (25) (8) - (8)
Certificates of deposit (189) (148) (337) (28) (153) (181)
Borrowed money 218 37 255 96 (85) 11
------- -------- --------- -------- --------- ----------
Total $ (1) $ (90) $ (91) $ 71 $ (268) $ (197)
======= ======== ========= ======== ========= ==========
Net change in net interest income $ (6) $ (152) $ (158) $ 366 $ (438) $ (72)
======== ======== ========= ======== ========= ==========
</TABLE>
-----------------------------------
(1) Includes investment in mutual funds and preferred stock.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2000 AND JUNE 30, 1999
Total assets increased $0.2 million from $215.5 million at June 30,
1999 to $215.7 million at June 30, 2000. The components of the Company's asset
base also changed from June 30, 1999 to June 30, 2000. Mortgage-backed
securities ("MBS") (including both held-to-maturity and available-for-sale
portfolios) decreased $16.6 million from $54.0 million at June 30, 1999 to $37.4
million at June 30, 2000. This decrease is primarily due to $15.9 million in
principal repayments. An increase of $16.7 million in loans receivable from
$138.5 million at June 30, 1999 to $155.2 million at June 30, 2000, was the
result of loan originations of $32.5 million which exceeded the $16.3 million of
loan repayments. Interest earning deposits decreased $4.1 million from $7.5
million at June 30, 1999 to $3.4 million at June 30, 2000.
12
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2000 ANNUAL REPORT
================================================================================
Investments in mutual funds and preferred stock are recorded on the
balance sheet at fair value and were $7.5 million and $3.3 million at June 30,
2000 and 1999, respectively. This increase reflects the purchases of grade
corporate preferred stocks of $4.4 million during the fiscal year ended June 30,
2000. The net unrealized gain or loss in this portfolio is included as a
component of accumulated other comprehensive income (loss). See Note 2, to the
Consolidated Financial Statements, for further information.
The Company, in July 1999, sold its remaining parcel of real estate
held for development in Olympia Fields by means of an auction. The cost basis of
the property at June 30, 1999, was $262,000; the sale price, net of selling
costs, was approximately $154,000 resulting in a loss of approximately $108,000.
A loss accrual was recorded by the Company in the quarter ended June 30, 1999
for this amount.
The allowance for loan losses at June 30, 2000 and 1999 was $300,000.
Management believes that the allowance for loan losses is adequate to cover any
known losses, and losses inherent 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 0.22% at June 30,
2000 and 1999, respectively. At June 30, 2000 and 1999, the ratio of the
allowance for loan losses to non-performing loans was 120.48% and 155.44%,
respectively. The Bank had two non-performing loans totaling approximately
$249,000 at June 30, 2000 and three non-performing loans totaling approximately
$193,000 at June 30, 1999. The Bank had one property held in foreclosed real
estate at June 30, 2000, which amounted to $78,000. There were no loan
chargeoffs during the fiscal years June 30, 2000 and 1999.
Savings deposits decreased $8.4 million from June 30, 1999 to June 30,
2000; during this time, borrowed funds increased by $14.0 million.
Noninterest-bearing NOW accounts increased $643,000. The increase in
noninterest-bearing NOW accounts was partially caused by the increases in
Government Entity deposits, which balances fluctuate during the year.
Stockholders' equity at June 30, 2000 was $28.6 million or $6.1 million
less than at June 30, 1999. This decline is due to the Company's repurchase of
525,281 treasury shares at a cost of $6.3 million, and the payment of a $0.05
per share quarterly cash dividend in each quarter this fiscal year. Accumulated
other comprehensive loss was $903,000 and $480,000 at June 30, 2000 and 1999
respectively, representing the decline in the market value of the securities
held in the available-for-sale portfolio.
COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED JUNE 30, 2000 AND 1999
GENERAL. For the year ended June 30, 2000, net income was $459,000 or
$0.24 basic and diluted earnings per share, compared to $818,000 or $0.37 basic
and diluted earnings per share for the year ended June 30, 1999.
INTEREST INCOME. Interest income was $13.7 million for the year ended
June 30, 2000, compared to $13.9 million for the year ended June 30, 1999. The
average balance of interest earning assets decreased $5.0 million from $208.2
million for the year ended June 30, 1999 to
13
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2000 ANNUAL REPORT
================================================================================
$203.2 million for the year ended June 30, 2000. Generally, yields earned on new
mortgage loan originations were higher than rates earned on MBS repayments, as a
result the average yield on the Bank's interest-earning assets increased four
basis points from 6.68% for the year ended June 30, 1999 to 6.72% for the year
ended June 30, 2000.
INTEREST EXPENSE. Interest expense decreased $91,000 and was $7.4
million for the year ended June 30, 2000. This decrease was due primarily to a
lower cost of funds. The average rate paid on interest-bearing liabilities
decreased three basis points from 4.43% for the year ended June 30, 1999 to
4.40% for the year ended June 30, 2000. The average balance of interest-bearing
liabilities decreased $1.0 million to $169.2 million for the year ended June 30,
2000 from $170.2 million for the year ended June 30, 1999.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses decreased $158,000 and was $6.2 million
for the year ended June 30, 2000. The average interest rate spread was 2.32% for
the year ended June 30, 2000 and 2.25% in 1999. Net interest margin was
unchanged at 3.06% for the years ended June 30, 2000 and 1999.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for
the years ended June 30, 2000 and 1999.
NONINTEREST INCOME. Noninterest income was $303,000 for the year ended
June 30, 2000 compared to $284,000 for the year ended June 30, 1999.
NONINTEREST EXPENSE, Noninterest expense increased $519,000 from $5.4
million for the fiscal year ended June 30, 1999 to $5.9 million for the fiscal
year ended June 30, 2000. Compensation and benefits expense increased $179,000
to $3.1 million for the fiscal year ended June 30, 2000.
Approximately $75,000 of the compensation expense increase is
attributable to discontinuation of a deferred compensation program, which
resulted in an additional, one time expense of 5% of covered employees' salary.
The change was necessary to maintain fairness and equity in treating employees.
Compensation expense also increased due to normal salary increases.
Pension expense for the year ended June 30, 2000 was approximately
$90,000 greater than the preceding year, primarily because pension expense in
the preceding year was reduced due to a change in estimated pension liability.
The loss on the July 1999 sale of Olympia Fields property was provided
for by the Company in the quarter ended June 30, 1999, through the establishment
of a loss accrual of $108,000.
Professional services expense increased $578,000 to $897,000 for the
year ended June 30, 2000. The bulk of this expenditure was an expected increased
outlay made for final preparation to bring to trial a suit for damages
pertaining to a real estate development known as The Trails of Olympia Fields.
This trial, which was scheduled for May 2000, was summarily
14
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2000 ANNUAL REPORT
================================================================================
postponed by the trial judge in order to deal with the issue of punitive
damages. A new trial date has not yet been set.
At the same time, the Company's attorneys became aware of what the
Company and its counsel believe is material evidence that implicates not only
the defendants, but also one of their attorneys in alleged misconduct in the
defense of their case. As a result, additional depositions were necessitated.
Also, the Bank's co-plaintiff went through a bankruptcy without disclosing this
suit as an asset. The co-plaintiff's bankruptcy case has since been reopened,
and the Bank has incurred expenses related to filing a claim as a creditor, and
to maintain control of the direction of the suit. The Bank did not anticipate
these increased expenses. Overall, the Bank's position has been strengthened,
but not without cost, and the Company believes it will ultimately prevail on the
merits of the case.
Other noninterest expense was $687,000 for the year ended June 30, 2000
compared to $786,000 for the year ended June 30, 1999. This decrease was
primarily due to a reduction in loan origination expenses, customer related
losses and expenses relating to the Year 2000 issue.
INCOME TAX EXPENSE. Income tax expense decreased $299,000 from $472,000
for the year ended June 30, 1999 to $173,000 for the year ended June 30, 2000.
This decrease was primarily due to a decrease of $658,000 in pre-tax income and
a decrease in the effective tax rate. The effective tax rate was 27.4% and 36.6%
for the years ended June 30, 2000 and 1999, respectively. The decrease in the
effective tax rate was primarily due to an increase in dividend received
deductions recorded in fiscal year 2000 for dividends received on the Company's
investments in mutual funds and preferred stock.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999 AND JUNE 30, 1998
Total assets decreased $5.1 million from $220.6 million at June 30,
1998 to $215.5 million at June 30, 1999. The components of the Company's asset
base also changed from June 30, 1998 to June 30, 1999. Mortgage-backed
securities ("MBS") (including both held-to-maturity and available-for-sale
portfolios) decreased $25.7 million from $79.7 million at June 30, 1998 to $54.0
million at June 30, 1999. This decrease was primarily due to $35.0 million in
principal repayments which was partially offset by the purchase of $10.1 million
of MBS during the twelve month period. An increase of $23.0 million in loans
receivable from $115.5 million at June 30, 1998 to $138.5 million at June 30,
1999, was the result of loan originations of $44.4 million which exceeded the
$21.4 million of loan repayments. Interest earning deposits decreased $2.3
million from $9.8 million at June 30, 1998 to $7.5 million at June 30, 1999.
Investments in mutual funds and preferred stock are recorded on the
balance sheet at fair value and were $3.3 million and $2.6 million at June 30,
1999 and 1998, respectively. The net unrealized gain or loss in this portfolio
is included as a component of accumulated other comprehensive income (loss). See
Note 2, to the Consolidated Financial Statements, for further information.
The Company, in July 1999, sold its remaining parcel of real estate
held for development in Olympia Fields by means of an auction. The cost basis of
the property at June 30, 1999, was
15
<PAGE>
2000 ANNUAL REPORT
================================================================================
$262,000; the sale price, net of selling costs, was approximately $154,000
resulting in a loss of approximately $108,000. A loss accrual was recorded by
the Company in the quarter ended June 30, 1999 for this amount. Through the sale
of this property, the Company expects to benefit in future years from a
reduction of operating expenses related to the property of approximately $40,000
annually and from the ability to invest the proceeds of the sale in
income-earning assets.
The allowance for loan losses at June 30, 1999 and 1998 was $300,000.
The ratio of the allowance for loan losses to total loans was 0.22% and 0.26% at
June 30, 1999 and 1998, respectively. At June 30, 1999 and 1998, the ratio of
the allowance for loan losses to non-performing loans was 155.44% and 87.72%,
respectively. The Bank had three non-performing loans totaling approximately
$193,000 at June 30, 1999 and three non-performing loans totaling approximately
$342,000 at June 30, 1998. There were no loan chargeoffs during the fiscal years
June 30, 1999 and 1998.
Savings deposits increased $82,000 from June 30, 1998 to June 30, 1999;
during this time, borrowed funds decreased by $1.0 million. The savings
categories of money market demand accounts, and certificates of deposit
decreased $2.9 million, while passbook accounts increased $0.5 million, and NOW
accounts increased $2.4 million. The increase in NOW accounts was partially
caused by the increases in Government Entity deposits, whose balances fluctuate
during the year.
Stockholders' equity at June 30, 1999 was $34.7 million or $3.4 million
less than at June 30, 1998. This decline was due to the purchase of 69,269
shares of the Company's common stock for the Recognition and Retention Plan and
the repurchase of 241,801 treasury shares by the Company, at a cost of $3.3
million, pursuant to the Company's first and second Repurchase Programs.
Accumulated other comprehensive income (loss) was $(480,354) and $36,377 at June
30, 1999 and 1998 respectively, representing the decline in the market value of
the securities held in the available-for-sale portfolio.
COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED JUNE 30, 1999 AND 1998
GENERAL. For the year ended June 30, 1999, net income was $818,000 or
$0.37 basic and diluted earnings per share, compared to $1.2 million or $0.50
basic and $0.49 diluted earnings per share for the year ended June 30, 1998.
INTEREST INCOME. Interest income was $13.9 million for the year ended
June 30, 1999, compared to $14.2 million for the year ended June 30, 1998. The
average balance of interest earning assets increased $2.6 million from $205.5
million for the year ended June 30, 1998 to $208.1 million for the year ended
June 30, 1999. Generally, yields earned on new mortgage loan originations were
lower than rates earned on loan repayments, as a result the average yield on the
Bank's interest-earning assets decreased 22 basis points from 6.90% for the year
ended June 30, 1998 to 6.68% for the year ended June 30, 1999.
INTEREST EXPENSE. Interest expense decreased $0.2 million and was $7.5
million for the year ended June 30, 1999. This decrease was due primarily to a
lower cost of funds. The average rate paid on interest-bearing liabilities
decreased 21 basis points from 4.64% for the year
16
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2000 ANNUAL REPORT
================================================================================
ended June 30, 1998 to 4.43% for the year ended June 30, 1999. The average
balance of interest-bearing liabilities increased $3.6 million to $170.2 million
for the year ended June 30, 1999 from $166.6 million for the year ended June 30,
1998.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses decreased $72,000 and was $6.4 million
for the year ended June 30, 1999. The average interest rate spread was 2.25% for
the year ended June 30, 1999 and 2.26% in 1998. Net interest margin declined
seven basis points and was 3.06% for the year ended June 30, 1999.
PROVISION FOR LOAN LOSSES. There was no provision for loan losses for
the years ended June 30, 1999 and 1998.
NONINTEREST INCOME. Noninterest income was $284,000 for the year ended
June 30, 1999 compared to $724,000 for the year ended June 30, 1998. The primary
reason for the decrease was due to a $470,000 gain that was realized from a sale
in 1998 of $10.7 million of securities classified as available-for-sale.
NONINTEREST EXPENSE. Noninterest expense increased $91,000 for the year
ended June 30, 1999 as compared to the year ended June 30, 1998.
Compensation and benefits totaled $2.9 million for both years ended
June 30, 1999 and 1998; however, there were changes in some of the components.
Employee Stock Ownership Plan ("ESOP") expense declined $110,000 for the year
ended June 30, 1999. The cost of the ESOP is partially related to the Company's
average common stock price; therefore the lower average common stock price of
the Company during the fiscal year ended June 30, 1999 decreased the expense for
shares released to the ESOP compared to the prior year. Also, pension expense
decreased from the prior year due to a change in estimated pension liability.
These decreases were offset by an increase in expense of the Recognition and
Retention Plan ("RRP") of $252,000, and increases in salaries and other employee
benefits. The RRP, which was implemented in January 1998, had six months of
expense in 1998 compared to twelve months of expense in 1999.
Office occupancy expense was $1,090,000 for the year ended June 30,
1999, compared to $1,043,000 for the same period in 1998. This was primarily due
to increased furniture and fixture depreciation expense, resulting from the
purchase of new ATMs and in-house data processing equipment.
The loss on the sale of Olympia Fields property was provided for by the
Company in the quarter ended June 30, 1999, through the establishment of a loss
accrual of $108,000. Through the sale of this property, the Company expects to
benefit in future years from a reduction of operating expenses related to the
property of approximately $40,000 annually and from the ability to invest the
proceeds of the sale in income-earning assets.
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2000 ANNUAL REPORT
================================================================================
Professional services expense decreased $22,000 to $319,000 for the
year ended June 30, 1999. This decrease was primarily due to a reduction in
legal fees associated with an ongoing litigation regarding a real estate
development known as The Trails of Olympia Fields.
Other noninterest expense was $787,000 for the year ended June 30, 1999
compared to $833,000 for the year ended June 30, 1998. This decrease was
primarily due to a one time $40,000 State of Illinois franchise payment in 1998
and a reduction of advertising expense in 1999. This decrease was partially
offset by an increase of $31,000 in 1999 relating to the Year 2000 issue.
INCOME TAX EXPENSE. Income tax expense decreased $240,000 from $712,000
for the year ended June 30, 1998 to $472,000 for the year ended June 30, 1999.
This decrease was primarily due to a decrease of $602,000 in pre-tax income and
a decrease in the effective tax rate. The effective tax rate was 36.6% and 37.6%
for the years ended June 30, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The term "liquidity" as used by a savings bank refers to the ability of
the institution to produce sufficient cash to meet withdrawals, fund loan
commitments and pay operating expenses. Cash needed to fund these requirements
is generated by savings deposits, loan repayments, securities sales, FHLB
advances, and other sources of income.
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. Cash flow from operating
activities amounted to $2.6, $1.6 and $1.6 million for the 2000, 1999 and 1998
fiscal years, respectively.
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 deposit 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 June 30, 2000, 1999 and 1998 the
Bank's liquidity ratio was 33.6%, 50.1% and 60.8%, respectively. 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. The Bank's
liquidity ratio is high due to the amount of mortgage-backed securities in the
portfolio. 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 are the origination of
mortgage and other loans and the purchase and sale of mortgage-backed and other
securities. During the fiscal years
18
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2000 ANNUAL REPORT
================================================================================
ended June 30, 2000, 1999 and 1998 the Bank's disbursements for loan
originations totaled $32.5, $44.1 and $39.4 million, respectively. These
activities were funded primarily by principal repayments on loans and
securities. During the 2000 fiscal year, there was $5.9 million net cash used in
investing activities. Net cash flows provided by investing activities amounted
to $1.0 and $3.9 million for the fiscal years ended June 30, 1999 and 1998.
For the 2000 fiscal year, the Company repurchased $6.3 million of
Company common stock; also the Bank had an $8.4 million net decrease in deposits
(including the effect of interest credited). For the 1999 fiscal year, the Bank
experienced net increases in deposits (including the effect of interest
credited) of $82,000 and for fiscal year 1998, an increase of $854,000.
Management believes that the reduction in deposits resulted, in part, from the
disintermediation of funds away from savings institutions into direct
investments, such as corporate securities, mutual funds and other investment
vehicles, which direct investments, because of the absence of federal deposit
insurance premiums and reserve requirements, among other reasons, may pay higher
rates of return than savings institutions.
Net cash flows used in financing activities amounted to $1.0 million
and $5.2 for the year ended June 30, 2000 and 1999, respectively. Net cash flows
provided by financing activities amounted to $3.7 million for the 1998 fiscal
year.
The Bank's most liquid assets are cash and cash equivalents, which
consist of short-term highly liquid investments with original maturities of less
than three months that are readily convertible to known amounts of cash and
interest-earning deposits. The level of these assets is dependent on the Bank's
operating, financing and investing activities during any given period. At June
30, 2000, 1999 and 1998, cash and cash equivalents totaled $6.3, $10.6 and $13.1
million, respectively.
The Bank has other sources of liquidity if a need for additional funds
arises, including the ability to obtain additional FHLB advances. The Bank had
$66.0 and $52.0 million, outstanding in FHLB advances at June 30, 2000 and 1999,
respectively. The Bank utilizes borrowings primarily to offset outflows in
deposits at times when the Bank does not believe that it can replace such funds
with lower costing deposit products. In addition, the Bank has used borrowed
funds to fund the purchase of mortgage-backed securities at times when the
spread between the rate paid on the borrowed funds and the yield earned on such
securities was favorable.
At June 30, 2000, the Bank had outstanding mortgage loan origination
commitments of $4.1 million and unused lines of consumer credit of $710,000. 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 June 30, 2000 totaled $38.4
million. Based upon the Bank's most recent pricing strategy, management believes
that a significant portion of such deposits will remain with the Bank.
At June 30, 2000, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $21.6 million, or 10.28% of total
adjusted assets, which is above the required level of $3.1 million or 1.50%;
core capital of $21.6 million, or 10.28% of total adjusted assets, which is
above the required level of $6.3 million or 3.0%; and total risk-based capital
of
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2000 ANNUAL REPORT
================================================================================
$21.9 million, or 22.9% of risk-weighted assets, which is above the required
level of $7.6 million, or 8.0% of risk-weighted assets.
IMPACT OF INFLATION AND CHANGING PRICES
The Company's consolidated Financial Statements and Notes thereto
presented herein have been prepared in accordance with Generally Accepted
Accounting Principles, which generally require the measurement of financial
position and operating results in terms of historical dollars without
considering the changes in the relative purchasing power of money over time due
to inflation. The impact of inflation is reflected in the increased cost of the
Bank's operations. Unlike industrial companies, nearly all of the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a greater impact on the Bank's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.
20
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2000 ANNUAL REPORT
================================================================================
[Letterhead of KPMG LLP]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Big Foot Financial Corp.
Long Grove, Illinois:
We have audited the accompanying consolidated balance sheets of Big Foot
Financial Corp. and subsidiary (the Company) as of June 30, 2000 and 1999,
and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the years in the three-year period ended June
30, 2000. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Big
Foot Financial Corp. and subsidiary as of June 30, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in
the three-year period ended June 30, 2000 in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Chicago, Illinois
July 31, 2000
21
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2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 2000 and 1999
================================================================================
<TABLE>
<CAPTION>
ASSETS 2000 1999
------------- -----------
<S> <C> <C>
Cash and due from banks $ 2,904,868 3,126,148
Interest-earning deposits 3,429,400 7,501,314
Mortgage-backed securities held-to-maturity, at amortized
cost (fair value of $17,226,882 at June 30, 2000
and $28,055,319 at June 30, 1999) (note 2) 17,893,963 28,567,158
Mortgage-backed securities available-for-sale, at fair value (note 2) 19,469,763 25,447,366
Investment in mutual funds and preferred stock, at fair value (note 2) 7,510,852 3,320,333
Loans receivable, net (note 3) 155,186,805 138,516,590
Accrued interest receivable (note 4) 953,781 979,010
Investment in real estate held for sale and development, net (note 14) -- 154,259
Stock in Federal Home Loan Bank of Chicago, at cost 3,300,000 2,600,000
Office properties and equipment, net (note 5) 4,512,164 4,820,183
Foreclosed real estate 78,216 --
Prepaid expenses and other assets 434,393 460,421
----------- -----------
Total assets $ 215,674,205 215,492,782
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits (note 6):
Interest-bearing $ 108,901,280 117,968,013
Noninterest-bearing 6,592,748 5,948,780
----------- -----------
Total savings deposits 115,494,028 123,916,793
Borrowed money (note 7) 66,000,000 52,000,000
Advance payments by borrowers for taxes and insurance 2,054,142 1,866,489
Accrued interest payable and other liabilities 3,514,373 2,987,290
------------ -----------
Total liabilities 187,062,543 180,770,572
------------ -----------
Stockholders' equity (note 12):
Preferred stock, $.01 par value, 2,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $.01 par value, 8,000,000 shares
authorized; 2,512,750 issued 25,128 25,128
Treasury stock, at cost (767,082 and 241,801 shares at
June 30, 2000 and 1999, respectively) (9,566,760) (3,259,062)
Additional paid-in capital 24,455,670 24,463,104
Retained earnings - substantially restricted 16,947,611 16,866,409
Common stock acquired by Employee Stock Option Plan (1,306,630) (1,507,650)
Common stock acquired by Recognition and Retention Plan (1,040,280) (1,385,365)
Accumulated other comprehensive loss (903,077) (480,354)
------------ -----------
Total stockholders' equity 28,611,662 34,722,210
----------- -----------
Total liabilities and stockholders' equity $ 215,674,205 215,492,782
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Mortgage-backed securities held-to-maturity $ 1,271,263 2,114,813 2,518,316
Mortgage-backed securities available-for-sale 1,403,653 1,756,151 3,064,001
Investment in mutual funds and preferred stock 270,775 271,703 170,208
Loans receivable 10,270,050 9,055,558 7,838,745
Interest-earning deposits 242,365 516,309 412,083
Federal Home Loan Bank of Chicago stock 198,017 190,236 170,806
---------- ---------- ----------
Total interest income 13,656,123 13,904,770 14,174,159
---------- ---------- ----------
Interest expense:
Savings deposits (note 6) 4,236,953 4,582,783 4,791,429
Borrowed money (note 7) 3,207,441 2,951,948 2,941,217
---------- ---------- ----------
Total interest expense 7,444,394 7,534,731 7,732,646
---------- ---------- ----------
Net interest income before provision for loan losses 6,211,729 6,370,039 6,441,513
Provision for loan losses (note 3) -- -- --
---------- ---------- ----------
Net interest income after provision for loan losses 6,211,729 6,370,039 6,441,513
---------- ---------- ----------
Noninterest income:
Gain on sale of securities available-for-sale -- -- 469,752
Service fees 260,069 255,244 220,095
Other 43,313 28,918 34,097
---------- ---------- ----------
Total noninterest income 303,382 284,162 723,944
---------- ---------- ----------
Noninterest expense:
Compensation and benefits 3,115,737 2,936,718 2,934,805
Office occupancy 1,125,842 1,089,704 1,043,396
Federal deposit insurance premiums 49,262 75,076 78,173
Real estate held for sale and development 8,351 48,910 43,355
Provision for loss, investment in real estate held for
sale and development -- 108,000 --
Professional services 896,870 319,005 340,498
Other 687,470 787,057 833,250
---------- ---------- ----------
Total noninterest expense 5,883,532 5,364,470 5,273,477
---------- ---------- ----------
Income before income taxes 631,579 1,289,731 1,891,980
Income tax expense (note 8) 173,000 471,853 711,913
---------- ---------- ----------
Net income $ 458,579 817,878 1,180,067
========== ========== ==========
Earnings per share:
Basic $ .24 .37 .50
Diluted .24 .37 .49
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
23
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2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
COMMON COMMON
ADDITIONAL STOCK STOCK
PREFERRED COMMON TREASURY PAID-IN RETAINED ACQUIRED ACQUIRED
STOCK STOCK STOCK CAPITAL EARNINGS BY ESOP BY RRP
----- ----- ----- ------- -------- ------- ------
<S> > <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $ -- 25,128 -- 24,038,934 14,868,464 (1,909,690) --
Comprehensive income:
Net income -- -- -- -- 1,180,067 -- --
Other comprehensive income,
net of tax:
Unrealized holding gains on
investment securities
arising during the year -- -- -- -- -- -- --
Less reclassification adjust-
ment for gains included
in net income -- -- -- -- -- -- --
Total comprehensive income
Purchase of RRP shares -- -- -- (6,737) -- -- (724,955)
Amortization of awards of
RRP shares -- -- -- -- -- -- 193,482
Cost of ESOP shares released -- -- -- -- -- 201,020 --
Market adjustment for release
of ESOP shares -- -- -- 191,974 -- -- --
-------- -------- ----------- ---------- ----------- ----------- -----------
Balance at June 30, 1998 -- 25,128 -- 24,224,171 16,048,531 (1,708,670) (531,473)
Comprehensive income:
Net income -- -- -- -- 817,878 -- --
Other comprehensive income,
net of tax -
unrealized holding loss on
investment securities
arising during the year -- -- -- -- -- -- --
Total comprehensive income
Purchase of Treasury stock -- -- (3,259,062) -- -- -- --
Purchase of RRP shares -- -- -- 195,100 -- -- (1,299,258)
Amortization of award of
RRP shares -- -- -- (38,210) -- -- 445,366
Cost of ESOP shares released -- -- -- -- -- 201,020 --
Market adjustment for release
of ESOP shares -- -- -- 82,043 -- -- --
-------- -------- ----------- ---------- ----------- ----------- -----------
Balance at June 30, 1999 -- 25,128 (3,259,062) 24,463,104 16,866,409 (1,507,650) (1,385,365)
Comprehensive income:
Net income -- -- -- -- 458,579 -- --
Other comprehensive income,
net of tax -
unrealized holding loss on
investment securities
arising during the year -- -- -- -- -- -- --
Total comprehensive income
Purchase of Treasury stock -- -- (6,307,698) -- -- -- --
Purchase of RRP shares -- -- -- -- -- -- (36,683)
Cash dividends, $.20 share -- -- -- -- (377,377) -- --
Amortization of award of
RRP shares -- -- -- (54,200) -- -- 381,768
Cost of ESOP shares released -- -- -- -- -- 201,020 --
Market adjustment for release
of ESOP shares -- -- -- 46,766 -- -- --
-------- -------- ----------- ---------- ----------- ----------- -----------
Balance at June 30, 2000 $ -- 25,128 (9,566,760) 24,455,670 16,947,611 (1,306,630) (1,040,280)
======== ======== =========== =========== =========== =========== ===========
</TABLE>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS) TOTAL
------------- -----
Balance at June 30, 1997 (45,683) 36,977,15
Comprehensive income:
Net income -- 1,180,067
Other comprehensive income,
net of tax:
Unrealized holding gains on
investment securities
arising during the year 392,092 392,092
Less reclassification adjust-
ment for gains included
in net income (310,032) (310,032)
----------
Total comprehensive income 1,262,127
Purchase of RRP shares -- (731,692)
Amortization of awards of
RRP shares -- 193,482
Cost of ESOP shares released -- 201,020
Market adjustment for release
of ESOP shares -- 191,974
-------------- ----------
Balance at June 30, 1998 36,377 38,094,064
Comprehensive income:
Net income -- 817,878
Other comprehensive income,
net of tax -
unrealized holding loss on
investment securities
arising during the year (516,731) (516,731)
----------
Total comprehensive income 301,147
Purchase of Treasury stock -- (3,259,062)
Purchase of RRP shares -- (1,104,158)
Amortization of award of
RRP shares -- 407,156
Cost of ESOP shares released -- 201,020
Market adjustment for release
of ESOP shares -- 82,043
-------------- -----------
Balance at June 30, 1999 (480,354) 34,722,210
Comprehensive income:
Net income -- 458,579
Other comprehensive income,
net of tax -
unrealized holding loss on
investment securities
arising during the year (422,723) (422,723)
------------- -----------
Total comprehensive income 35,856
Purchase of Treasury stock -- (6,307,698)
Purchase of RRP shares -- (36,683)
Cash dividends, $.20 share -- (377,377)
Amortization of award of
RRP shares -- 327,568
Cost of ESOP shares released -- 201,020
Market adjustment for release
of ESOP shares -- 46,766
------------- -----------
Balance at June 30, 2000 (903,077) 28,611,662
============= ===========
See accompanying notes to consolidated financial statements.
24
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
2000 1999 1998
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 458,579 817,878 1,180,067
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 487,602 450,888 407,469
Deferred income tax benefit (48,091) (77,066) (29,391)
Market adjustment for committed ESOP shares 46,766 82,043 191,974
Cost of ESOP shares released 201,020 201,020 201,020
Amortization of award of RRP shares 381,768 445,366 193,482
Gain on sale of securities available-for-sale -- -- (469,752)
Net amortization of deferred loan fees (46,598) (45,791) (50,420)
Net amortization of discounts and premiums 333,968 377,194 (32,114)
Provision for investment in real estate held for sale and development -- 108,000 --
(Increase) decrease in accrued interest receivable 25,229 (10,351) 81,919
(Increase) decrease in prepaid expenses and other assets 26,028 (106,062) (186,593)
Increase (decrease) in accrued interest payable and other liabilities 738,970 (610,236) 160,547
------------ ----------- ------------
Net cash provided by operating activities 2,605,241 1,632,883 1,648,208
------------ ----------- ------------
Cash flows from investing activities:
Net increase in loans receivable (16,701,833) (22,998,592) (21,797,951)
Purchases of mortgage-backed securities held-to-maturity -- -- (9,995,700)
Purchases of mortgage-backed securities available-for-sale -- (10,121,376) --
Purchases of investment in mutual funds and preferred stock (4,405,762) (1,066,249) (2,672,247)
Principal repayments on mortgage-backed securities held-to-maturity 10,419,333 17,863,208 10,603,911
Principal repayments on mortgage-backed securities available-for-sale 5,472,021 17,163,985 18,331,120
Proceeds from sale of mortgage-backed securities available-for-sale -- -- 9,383,638
Proceeds from sale of investments in mutual funds and preferred stock -- -- 1,324,652
Proceeds from sale of real estate held for sale and development 154,259 -- --
Purchase of stock in Federal Home Loan Bank of Chicago (700,000) -- (1,350,000)
Proceeds from redemption of stock in Federal Home Loan Bank of Chicago -- 800,000 430,000
Purchase of office properties and equipment, net (179,583) (603,835) (338,040)
------------ ----------- ------------
Net cash provided by (used in) investing activities (5,941,565) 1,037,141 3,919,383
------------ ----------- ------------
Cash flows from financing activities:
Net increase (decrease) in savings deposits (8,422,765) 81,955 854,021
Proceeds from borrowed money 52,000,000 -- 47,000,000
Repayments of borrowed money (38,000,000) (1,000,000) (43,600,000)
Increase in advance payments by borrowers for taxes and insurance 187,653 92,769 163,882
Purchase of treasury stock (6,307,698) (3,259,062) --
Purchase of RRP shares (36,683) (1,104,158) (731,692)
Cash dividends paid (377,377) -- --
------------ ----------- ------------
Net cash provided by (used in) financing activities (956,870) (5,188,496) 3,686,211
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents (4,293,194) (2,518,472) 9,253,802
Cash and cash equivalents at beginning of year 10,627,462 13,145,934 3,892,132
------------ ----------- ------------
Cash and cash equivalents at end of year $ 6,334,268 10,627,462 13,145,934
============ =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 7,401,282 7,568,520 7,746,111
Income taxes 440,000 550,000 866,000
Noncash activity - transfer of loans to foreclosed real estate 78,216 -- --
============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(1) SUMMARY OF Significant ACCOUNTING POLICIES
Big Foot Financial Corp. and subsidiary (the Company) prepares its
financial statements on the basis of generally accepted accounting
principles in the United States of America. The following is a
description of the more significant of those policies which the Company
follows in preparing and presenting its financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Big Foot Financial Corp. and its wholly owned subsidiary,
Fairfield Savings Bank, F.S.B. All significant intercompany
balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and
accompanying notes. Actual results could differ from these
estimates.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities which the Company has the positive
intent and ability to hold to maturity are carried at
amortized cost. All other mortgage-backed securities are
designated as available-for-sale and are carried at fair
value. The difference between amortized cost and fair value of
the available-for-sale portfolio is reflected as a separate
component of accumulated other comprehensive income, net of
related tax effects. Unearned premiums and discounts are
amortized over the estimated life of the security using the
interest method. Gains and losses on the sale of
mortgage-backed securities are determined using the specific
identification method.
INVESTMENT IN MUTUAL FUNDS AND PREFERRED STOCK
Investment in mutual funds and preferred stock is designated
as available-for-sale and is carried at fair value. The
difference between amortized cost and fair value is reflected
as a separate component of accumulated other comprehensive
income, net of related tax effects. If a decrease in the
market value of a security is expected to be other than
temporary, then the security is written down to its fair value
through a charge to income. Gains and losses on the sale of
investments in mutual funds and preferred stock are determined
using the specific identification method.
LOANS RECEIVABLE
Loans receivable are stated at unpaid principal balances less
deferred loan fees and the allowance for loan losses. The
Company defers loan origination fees and certain direct costs
associated with loan originations. Net deferred fees are
amortized as yield adjustments over the contractual life of
the related loans using the interest method.
It is the policy of the Company to provide valuation
allowances for estimated losses on loans when any significant
and permanent decline in value is identified. Periodic reviews
are made to
(Continued}
26
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
identify potential problems. In addition to specific
allowances, the Company maintains a general allowance for loan
losses. Additions to the allowance for loan losses are charged
to operations. Also, various regulatory agencies, as an
integral part of their examination process, periodically
review the Company's allowance for loan losses. Such agencies
may require the Company to recognize additions to the
allowance based on their judgments using information available
to them at the time of their examination. In the opinion of
management, the allowance for loan losses, when taken as a
whole, is adequate to absorb losses in the loan portfolio.
The accrual of interest income is suspended and previously
accrued interest income is reversed when a loan is
contractually delinquent for 90 days or more and where
collection of interest is doubtful. Accrual is resumed when
the loan becomes less than 90 days contractually delinquent
and collection of interest is probable.
Impaired loans are measured at the present value of expected
future cash flows discounted at the loan's effective interest
rate, or, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent.
Impaired loans exclude homogeneous loans that are collectively
evaluated for impairment, including one- to four-family
residential real estate loans and consumer loans.
FORECLOSED REAL ESTATE
Foreclosed real estate represents real estate acquired through
foreclosure which is recorded at the lower of cost or fair
value less estimated costs to sell. After foreclosure,
additional reserves are recorded as necessary to reflect
further impairment of the estimated net realizable value.
DEPRECIATION AND AMORTIZATION
Depreciation of office properties and equipment and
amortization of leasehold improvements are recorded using the
straight-line method over the estimated useful lives of the
related assets. Estimated useful lives range between 3 and 40
years.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases, as well
as operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period
that includes the enactment date.
(Continued)
27
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Compensation expense under the ESOP is equal to the fair value
of common shares released or committed to be released annually
to participants in the ESOP. Common stock purchased by the
ESOP and not allocated to participants is included in the
consolidated balance sheets at cost as a reduction of
stockholders' equity. Dividends on allocated ESOP shares are
recorded as a reduction of stockholders' equity; dividends on
unallocated ESOP shares are used to pay debt service on the
ESOP loan.
STOCK OPTION PLAN
As allowed under the Financing Accounting Standards Board's
(FASB) Statement of Financial Accounting Standards No. 123
(Statement 123), "Accounting for Stock-Based Compensation",
the Company measures stock-based compensation cost in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has
included in note 11 the impact of the fair value of employee
stock-based compensation plans on net income and earnings per
share on a pro forma basis for awards granted since January 1,
1997, pursuant to Statement 123.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing income
available to common stockholders by the weighted average
number of common shares outstanding. Diluted earnings per
share is calculated by dividing income available to common
stockholders by the weighted average number of common shares
adjusted for the dilutive effect of outstanding stock options.
ESOP shares are only considered outstanding for earnings per
share calculations when they are committed to be released.
(Continued)
28
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
The following table sets forth the computation of basic and
diluted earnings per share for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Basic:
Net income $ 458,579 817,878 1,180,067
Weighted average common shares
outstanding 1,930,614 2,233,284 2,341,883
--------------- -------------- --------------
Basic earnings per share $ .24 .37 .50
=============== ============== ==============
Diluted:
Net income $ 458,579 817,878 1,180,067
--------------- -------------- --------------
Weighted average common shares
outstanding 1,930,614 2,233,284 2,341,883
Effect of dilutive stock options
outstanding -- 422 55,820
--------------- -------------- --------------
Diluted weighted average common
shares outstanding 1,930,614 2,233,706 2,397,703
--------------- -------------- --------------
Diluted earnings per share $ .24 .37 .49
=============== ============== ==============
</TABLE>
COMPREHENSIVE INCOME
Comprehensive income includes net income as well as certain items
that are reported as a separate component of stockholders' equity
that bypass net income. Currently, the Company's only component of
other comprehensive income is the unrealized gains (losses) on
securities available-for-sale.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three
months or less to be cash equivalents. Cash and cash equivalents
also include cash on hand and due from banks.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to
the 2000 financial statement presentation.
(Continued)
29
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(2) MORTGAGE-BACKED SECURITIES AND INVESTMENT IN MUTUAL FUNDS AND PREFERRED
STOCK
The amortized cost and estimated fair value of mortgage-backed
securities and investment in mutual funds and preferred stock are
summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 2000
------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DESCRIPTION COST GAINS LOSSES VALUE
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Held-to-maturity - mortgage-backed
securities
Federal National Mortgage
Association $ 17,893,963 -- (667,081) 17,226,882
=============== =============== =============== ===============
Available-for-sale:
Mortgage-backed securities
Federal National Mortgage
Association $ 18,475,507 1,554 (753,234) 17,723,827
Federal Home Loan Mortgage
Corporation 1,792,003 355 (46,422) 1,745,936
--------------- --------------- --------------- ---------------
Total mortgage-backed
securities available-for-
sale 20,267,510 1,909 (799,656) 19,469,763
--------------- --------------- --------------- ---------------
Investment in mutual funds 870,930 -- (161,197) 709,733
Investment in preferred stock 7,209,875 59,708 (468,464) 6,801,119
--------------- --------------- --------------- ---------------
Total investment in mutual
funds and preferred stock 8,080,805 59,708 (629,661) 7,510,852
--------------- --------------- --------------- ---------------
Total securities
available-for-sale $ 28,348,315 61,617 (1,429,317) 26,980,615
=============== =============== =============== ===============
</TABLE>
(Continued)
30
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DESCRIPTION COST GAINS LOSSES VALUE
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Held-to-maturity - mortgage-backed
securities
Federal National Mortgage
Association $ 28,567,158 33,511 (545,350) 28,055,319
=============== =============== =============== ===============
Available-for-sale:
Mortgage-backed securities
Federal National Mortgage
Association $ 23,343,908 46,461 (415,935) 22,974,434
Federal Home Loan Mortgage
Corporation 2,479,842 15,759 (22,669) 2,472,932
--------------- --------------- --------------- ---------------
Total mortgage-backed
securities available-for-
sale 25,823,750 62,220 (438,604) 25,447,366
--------------- --------------- --------------- ---------------
Investment in mutual funds 870,930 -- (198,373) 672,557
Investment in preferred stock 2,800,000 -- (152,224) 2,647,776
--------------- --------------- --------------- ---------------
Total investment in mutual
funds and preferred stock 3,670,930 -- (350,597) 3,320,333
--------------- --------------- --------------- ---------------
Total securities
available-for-sale $ 29,494,680 62,220 (789,201) 28,767,699
=============== =============== =============== ===============
</TABLE>
Proceeds from the sale of securities available-for-sale for the year
ended June 30, 1998 were $10,708,290, with gross gains of $469,752.
There were no sales of securities available-for-sale during the years
ended June 30, 2000 and 1999.
Mortgage-backed securities with an amortized cost of approximately
$853,000 and $1,100,000 have been pledged to secure certain savings
deposits of local municipal agencies as of June 30, 2000 and 1999,
respectively. Mortgage-backed securities with an amortized cost of
approximately $2,576,000 and $2,985,000 have been pledged to secure
Federal Home Loan Bank of Chicago (FHLB) advances as of June 30, 2000
and 1999, respectively.
(Continued)
31
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(3) LOANS RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Real estate loans:
One- to four-family residential $ 153,802,982 136,923,697
Multifamily 603,169 609,625
Commercial 428,920 592,572
Land, construction, and development loans -- 58,155
Home equity 730,910 597,177
----------------- -----------------
Total real estate loans 155,565,981 138,781,226
Consumer loans 155,028 316,166
----------------- -----------------
Gross loans receivable 155,721,009 139,097,392
Less:
Deferred loan fees (234,204) (280,802)
Allowance for loan losses (300,000) (300,000)
----------------- -----------------
$ 155,186,805 138,516,590
================= =================
</TABLE>
Activity in the allowance for loan losses is summarized as follows for
the years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
Balance at beginning of year $ 300,000 300,000 300,000
Provision for loan losses -- -- --
Charge-offs -- -- --
------------ ------------- ------------
Balance at end of year $ 300,000 300,000 300,000
============ ============= ============
</TABLE>
(Continued)
32
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
Loans receivable delinquent three months or more at June 30 are as
follows:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF GROSS LOANS
YEAR LOANS AMOUNT RECEIVABLE
---- --------------- ------------- -------------------
<S> <C> <C> <C>
2000 2 $ 248,783 .16%
1999 3 192,615 .14
1998 3 342,317 .29
=============== ============= ===================
</TABLE>
The Company discontinues recognizing interest on loans 90 days and
greater delinquent where collection of interest is doubtful. The
reduction in interest income associated with loans 90 days and greater
delinquent where collection of interest is doubtful was approximately
$4,200, $4,000, and $-0-for the years ended June 30, 2000, 1999, and
1998, respectively.
No loans were identified as impaired by the Savings Bank at June 30,
2000 or 1999. Additionally, no loans were considered impaired during the
years ended June 30, 2000, 1999, or 1998.
The Company serviced loans for others with principal balances
approximating $569,000, $701,000, and $1,170,000 at June 30, 2000, 1999,
and 1998, respectively. As part of the loan sale agreements to the
Federal National Mortgage Association, the Company is required to
repurchase loans which become contractually delinquent. The Company was
not required to repurchase loans during the years ended June 30, 2000,
1999, and 1998.
Real estate first mortgage loans aggregating approximately $3,896,000,
$4,264,000, and $6,045,000, at June 30, 2000, 1999, and 1998,
respectively, had interest rates which adjust based on the movement of
various economic indices.
(4) ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
JUNE 30,
-----------------------------
2000 1999
-------------- -------------
Mortgage-backed securities $ 211,455 299,022
Other investments 69,387 56,621
Loans receivable 672,939 623,367
-------------- -------------
$ 953,781 979,010
============== =============
(Continued)
33
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(5) OFFICE PROPERTIES AND EQUIPMENT, NET
A summary of office properties and equipment at cost, less accumulated
depreciation and amortization, is as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Land $ 930,845 930,845
Buildings 6,336,818 6,280,745
Furniture, fixtures, and equipment 5,226,386 5,184,056
--------------- ---------------
12,494,049 12,395,646
Less accumulated depreciation and amortization 7,981,885 7,575,463
--------------- ---------------
$ 4,512,164 4,820,183
=============== ===============
</TABLE>
Depreciation and amortization expense was $487,602, $450,888, and
$407,469, for the years ended June 30, 2000, 1999, and 1998,
respectively.
(6) SAVINGS DEPOSITS
Savings deposits are summarized as follows:
<TABLE>
<CAPTION>
STATED OR
WEIGHTED AVERAGE JUNE 30,
INTEREST RATE -----------------------------------------------------------
JUNE 30, 2000 1999
----------------------- ---------------------------- -----------------------------
2000 1999 AMOUNT PERCENT AMOUNT PERCENT
----------- ---------- --------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
NOW accounts -- -- 6,592,748 5.7% $ 5,948,780 4.8%
NOW accounts 2.01% 2.01% 8,943,754 7.8 10,020,046 8.1
Money market
demand accounts 3.24 2.82 10,752,181 9.3 10,864,901 8.8
Passbook accounts 2.50 2.50 37,446,801 32.4 39,357,636 31.7
----------- ---------- --------------- ----------- ---------------- -----------
63,735,484 55.2 66,191,363 53.4
Certificate accounts 5.09 4.86 51,758,544 44.8 57,725,430 46.6
----------- ---------- --------------- ----------- ---------------- -----------
3.55% 3.47% 115,494,028 100% $ 123,916,793 100.0%
=========== ========== =============== =========== ================ ===========
</TABLE>
(Continued)
34
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------------------
2000 1999
---------------------------- -----------------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
Remaining maturities of certificate accounts:
Under 12 months $ 38,356,042 74.1% $ 45,298,415 78.5%
12 to 36 months 12,391,960 23.9 11,205,438 19.4
Over 36 months 1,010,542 2.0 1,221,577 2.1
--------------- ----------- --------------- ------------
$ 51,758,544 100% $ 57,725,430 100%
=============== =========== =============== ============
</TABLE>
The aggregate amount of certificate accounts with a balance of $100,000
or greater was approximately $7,240,000 and $6,979,000 at June 30, 2000
and 1999, respectively.
Interest expense on savings deposits is summarized as follows for the
years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
--------------- -------------- --------------
<S> <C> <C> <C>
NOW accounts $ 176,590 167,258 144,808
Money market demand accounts 347,064 339,728 381,935
Passbook accounts 944,224 969,329 976,986
Certificate accounts 2,769,075 3,106,468 3,287,700
--------------- -------------- --------------
$ 4,236,953 4,582,783 4,791,429
=============== ============== ==============
</TABLE>
(Continued)
35
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(7) BORROWED MONEY
Borrowed money is summarized as follows :
<TABLE>
<CAPTION>
AMOUNT
INTEREST RATE AT OUTSTANDING AT
JUNE 30, JUNE 30,
------------------------ --------------------------------
DUE DATE 2000 1999 2000 1999
-------------- ------------ ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Advances from the FHLB:
07/19/1999 -- 6.64 $ -- 1,000,000
02/21/2000 -- 6.08 -- 7,000,000
10/30/2000 6.02% 6.02 10,000,000 10,000,000
11/01/2000 6.86 -- 8,000,000 --
08/08/2002 -- 5.40 -- 9,000,000
11/22/2004 5.57 -- 5,000,000 --
05/02/2005 6.70 -- 8,000,000 --
06/19/2008 5.44 5.44 12,000,000 12,000,000
06/19/2008 5.19 5.19 13,000,000 13,000,000
FHLB Open Line of Credit N/A 7.32 -- 10,000,000 --
------------ ---------- -------------- ---------------
$ 66,000,000 52,000,000
============== ===============
Weighted average interest rate 6.10 % 5.59%
============ ==========
</TABLE>
Certain advances are callable by the FHLB as follows: $5,000,000 in
advances due in 2004 are callable quarterly beginning November 2000;
$8,000,000 in advances due in 2005 are callable quarterly beginning May
2002; $13,000,000 in advances due in 2008 are callable quarterly
beginning June 2001; and $12,000,000 in advances due in 2008 have a one
time call date of June 19, 2003.
The Company has a collateral pledge agreement whereby the Company has
agreed to keep on hand at all times, free of all other pledges, liens,
and encumbrances, residential first mortgages with unpaid principal
balances aggregating no less than 167% of the outstanding advances from
the FHLB. Additionally, at June 30, 2000 and 1999, all stock in the FHLB
and mortgage-backed securities with an amortized cost of approximately
$2,576,000 and $2,985,000 were pledged to secure FHLB advances as of
June 30, 2000 and 1999, respectively.
(Continued)
36
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(8) INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------
2000 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
Current:
Federal $ 221,091 548,919 741,304
State -- -- --
------------ ------------- ------------
221,091 548,919 741,304
------------ ------------- ------------
Deferred:
Federal (48,091) (77,066) (29,391)
State -- -- --
------------ ------------- ------------
(48,091) (77,066) (29,391)
------------ ------------- ------------
Total income tax expense $ 173,000 471,853 711,913
============ ============= ============
</TABLE>
The reasons for the difference between the effective income tax rate and
the corporate Federal income tax rate of 34% are as follows for the
years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
------------ ----------- ------------
<S> <C> <C> <C>
Federal income tax rate of 34% 34.0% 34.0 34.0
Dividends received deduction (9.1) (1.4) (0.2)
Other 2.5 4.0 3.8
------------ ----------- ------------
Effective income tax rate 27.4% 36.6 37.6
============ =========== ============
</TABLE>
(Continued)
37
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June
30, 2000 and 1999 are presented below:
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 102,000 102,000
Deferred loss on sales of real estate 92,335 98,938
Capitalized interest -- 15,831
State net operating loss carryforwards 265,942 270,302
Unrealized loss on securities available-for-sale 464,623 246,627
Depreciation 26,016 10,258
------------- ------------
950,916 743,956
Less valuation allowance 265,942 270,302
------------- ------------
Total deferred tax assets, net of valuation allowance 684,974 473,654
------------- ------------
Deferred tax liabilities:
Excess of tax bad debt reserve over base year amount 113,131 141,414
Federal Home Loan Bank stock dividends not
currently taxable 111,694 95,136
Deferred loan fees 118,676 161,498
Other 4,103 4,323
------------- ------------
Total gross deferred tax liabilities 347,604 402,371
------------- ------------
Net deferred tax asset $ 337,370 71,283
============= ============
</TABLE>
The Company has Illinois net operating loss carryforwards in the amount
of $5,612,000 at June 30, 2000, which expire in varying amounts through
July 31, 2015.
The valuation allowance for deferred tax assets was $265,942 and
$270,302 as of June 30, 2000 and 1999, respectively, resulting in a
decrease of $4,360 for the year ended June 30, 2000. The valuation
allowance relates to state net operating loss carryforwards and certain
deductible temporary differences which may not generate future state tax
benefits. The reduction in the valuation allowance is primarily due to
the utilization of state net operating loss carryforwards in the current
year.
Retained earnings at June 30, 2000 and 1999 include $6,149,000 for which
no provision for Federal income tax has been made. These amounts
represent allocations of income to bad debt deductions for tax purposes
only. Reduction of amounts so allocated for purposes other than tax bad
debt losses will create income for tax purposes only, which will be
subject to the then current Federal and state corporate income tax
rates.
(Continued)
38
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(9) OFFICER, DIRECTOR, AND EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
In conjunction with the Savings Bank's conversion, the Company
formed an ESOP. The ESOP covers substantially all employees that
are age 21 or over and with at least 1,000 hours of service. The
ESOP borrowed $2,010,200 from the Company and purchased 201,020
common shares issued in the conversion. The Savings Bank intends
to make discretionary contributions to the ESOP sufficient to
service the requirements of the loan over a period of ten years.
During the years ended June 30, 2000, 1999, and 1998, 20,102
shares were allocated annually. A total of 70,357 and 50,255
shares had been allocated as of June 30, 2000 and 1999,
respectively. The fair value of unallocated shares totaled
$1,445,459 and $2,261,475 at June 30, 2000 and 1999, respectively.
ESOP expense for the years ended June 30, 2000, 1999, and 1998
totaled $247,786, $283,063, and $392,994, respectively.
RECOGNITION AND RETENTION PLAN (RRP)
On December 22, 1997, the Company adopted an RRP and 4%, or
100,510 shares, of the common stock issued in the Company's
initial public offering were granted to eligible directors and
certain key officers of the Company. Shares vest as follows: 10%
on June 30, 1998; 20% on June 30, 1999, 2000, 2001, and 2002; and
10% on January 1, 2003. Compensation expense relating to the above
shares totaled $1,934,818, the fair value of the shares on the
date of grant, and is being recognized as the participants vest in
those shares.
In February 1999, an additional 3,149 RRP shares were granted, of
which 804 and 335 shares vested at June 30, 2000 and 1999,
respectively. In addition, 804 shares will vest at June 30, 2001
and 2002, respectively, and 402 shares will vest at June 30, 2003.
Compensation expense relating to the additional RRP shares totaled
$40,347, the fair value of the shares on the date of grant, and is
being recognized as the participants vest in those shares.
During the years ended June 30, 2000, 1999, and 1998, 20,101,
23,248, and 10,051 RRP shares vested, respectively, and for the
years ended June 30, 2000, 1999, and 1998, the Company recorded
RRP compensation expense of $381,768, $445,366, and $193,482,
respectively.
During the years ended June 30, 2000, 1999, and 1998, 3,316,
69,269, and 37,660 shares of the Company's common stock were
purchased by the RRP in the open market at weighted average prices
of $11.06, $15.94, and $19.43 per share, respectively. The
aggregate purchase price of all unvested shares acquired by the
RRP is reflected as a reduction of stockholders' equity as
deferred compensation.
PENSION PLAN
The Savings Bank has a qualified noncontributory pension plan
covering employees over 21 years of age working more than 1,000
hours per year.
(Continued)
39
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
In February 1998, FASB Statement 132, "Employer's Disclosures about
Pensions and Other Postretirement Benefits," was issued, and is
effective for fiscal years beginning after December 31, 1997. The
statement revised the required disclosures for pensions and other post
retirement plans but does not change the measurement or recognition of
such plans. The following tables set forth the plan's funded status and
net periodic benefit cost for the years ended June 30, as per the
disclosure requirements of Statement 132:
<TABLE>
<CAPTION>
2000 1999
---------------- ----------------
<S> <C> <C>
Change in benefit obligation:
Projected benefit obligation at beginning of year $ 1,200,928 885,468
Projected benefit obligation actuarial loss 50,487 83,612
Service cost 67,131 62,369
Interest cost 86,118 77,204
Benefits paid (3,563) (7,323)
Change in discount rate (147,712) 99,598
---------------- ----------------
Projected benefit obligation at end of year $ 1,253,389 1,200,928
================ ================
Change in plan assets:
Fair value of plan assets at beginning of year $ 1,180,383 1,133,347
Actual return on plan assets 95,632 20,150
Employer contribution 59,588 34,209
Benefits paid (3,563) (7,323)
---------------- ----------------
Fair value of plan assets at end of year $ 1,332,040 1,180,383
================ ================
Accrued pension cost:
Funded status $ 78,651 (20,545)
Unrecognized net actuarial loss 31,435 141,881
Unrecognized net asset (45,271) (62,356)
---------------- ----------------
Prepaid pension cost $ 64,815 58,980
================ ================
Weighted-average assumptions as of April 30:
Discount rate 7.75% 6.75%
Expected return on plan assets 8.00 8.00
Rate of compensation increase Varies by age Varies by age
================ ================
</TABLE>
(Continued)
40
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------
2000 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 67,131 62,369 44,829
Interest cost 86,118 77,204 52,172
Expected return on plan assets (92,267) (92,878) (60,971)
Amortization of unrecognized transition cost (17,085) (17,085) (14,238)
Unrecognized net loss 9,856 -- --
------------ ------------- ------------
Net periodic benefit cost $ 53,753 29,610 21,792
============ ============= ============
</TABLE>
The Company also has a contributory profit-sharing and savings plan
covering substantially all full-time employees. The Company makes
matching contributions to the plan equal to a percentage of each
participant's contribution for the plan year. For the years ended June
30, 2000, 1999, and 1998, the Company made contributions of $19,164,
$17,850, and $16,803, respectively.
(10) STOCK OPTION PLAN
On June 24, 1997, the Company adopted a stock option plan (the Plan)
pursuant to which the Company's Board of Directors may grant stock
options to directors, officers, and employees of the Company and the
Savings Bank. Stock options for 251,275 shares initially granted under
the Plan vest at a rate of 20% per year beginning on the first
anniversary date of the grant. During the year ended June 30, 1999, an
additional 6,868 shares were granted. As of June 30, 2000, a total of
2,842 of these additional shares have vested and the remaining shares
vest as follows: 2,010 shares at June 24, 2001 and 2002, respectively.
The exercise price of shares granted is equal to the fair value of the
common stock at the date of grant. The option term cannot exceed ten
years from the date of grant.
The per share weighted average fair value of stock options granted
during 1999 was $7.59 on the date of grant using the Black-Scholes
option pricing model. The following weighted average assumptions were
used for grants issued in 1999: an expected dividend yield of 0.0%,
expected volatility of 23.96%, risk-free interest rate of 5.39%, and an
expected life of 8.2 years. There were no stock options granted during
the years ended June 30, 2000 and 1998.
(Continued)
41
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
Under FASB Statement 123, the Company is required to disclose pro forma
net income and earnings per share as if compensation expense relative to
the fair value of options granted had been included in earnings. Had the
Company determined compensation cost based on the fair value at the
grant date for its stock options under Statement 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
------------- ------------- --------------
<S> <C> <C> <C>
Net income:
As reported $ 458,579 817,878 1,180,067
Pro forma 338,351 700,011 1,067,295
Earnings per share:
Basic:
As reported .24 .37 .50
Pro forma .18 .31 .46
Diluted:
As reported .24 .37 .49
Pro forma .18 .31 .45
============= ============= ==============
</TABLE>
A summary of the status of the Company's stock option transactions under
the Plan for the years ended June 30 is presented below:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------- ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
--------------------------------- ----------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 258,143 $ 15.55 251,275 $ 15.63 251,275 $ 15.63
Granted -- -- 6,868 12.81 -- --
Exercised -- -- -- -- -- --
----------- ------------ ---------- ------------ ---------- ------------
Outstanding at end of year 258,143 15.55 258,143 15.55 251,275 15.63
----------- ------------ ---------- ------------ ---------- ------------
Exercisable at year end 153,613 15.55 101,348 15.55 50,255 15.63
=========== ------------ ========== ------------ ========== ------------
Weighted average grant date
fair value of options
granted during the year $ -- $ 5.62 $ --
============ ============ ============
</TABLE>
(Continued)
42
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(11) REGULATORY MATTERS
The Savings Bank is subject to various regulatory capital requirements
administered by its primary federal regulator, the Office of Thrift
Supervision (OTS). Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect
on the Company's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Savings
Bank must meet specific capital guidelines that involve quantitative
measures of the entity's assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The
Savings Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Savings Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier 1 capital to
risk-weighted assets and of Tier 1 capital to adjusted total assets and
of tangible capital to adjusted total assets. As of June 30, 2000 and
1999, the most recent notification from the OTS categorized the Savings
Bank as well-capitalized under the regulatory framework. At June 30,
2000, there are no conditions or events since the most recent
notification that management believes would affect the Savings Bank's
category.
The following table summarizes the Company's and the Savings Bank's
actual capital and the Savings Bank's required capital at June 30, 2000
and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
2000
--------------------------------------------------------------------------
TO BE WELL
CAPITALIZED
FOR CAPITAL UNDER PROMPT
ACTUAL ADEQUACY PURPOSES CORRECTIVE ACTION
------------------------ ----------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (to risk-
weighted assets):
Consolidated $ 29,815 29.51% $ N/A N/A $ N/A N/A
Fairfield Savings Bank, FSB 21,854 22.93 7,625 8.00% 9,531 10.00%
=========== =========== =========== ========== ========== ===========
Tier 1 capital (to risk-weighted
assets):
Consolidated 29,515 29.22% N/A N/A N/A N/A
Fairfield Savings Bank, FSB 21,554 22.62 N/A N/A 5,718 6.00%
=========== =========== =========== ========== ========== ===========
Tier 1 capital (to adjusted total
assets):
Consolidated 29,515 13.68% N/A N/A N/A N/A
Fairfield Savings Bank, FSB 21,554 10.28 6,291 3.00 10,485 5.00%
=========== =========== =========== ========== ========== ===========
Tangible capital (to adjusted
total assets):
Consolidated 29,515 13.68% N/A N/A N/A N/A
Fairfield Savings Bank, FSB 21,554 10.28 3,145 1.50 N/A N/A
=========== =========== =========== ========== ========== ===========
</TABLE>
(Continued)
43
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------------------
TO BE WELL
CAPITALIZED
FOR CAPITAL UNDER PROMPT
ACTUAL ADEQUACY PURPOSES CORRECTIVE ACTION
------------------------ ----------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (to risk-
weighted assets):
Consolidated $ 35,502 38.11% N/A N/A N/A N/A
Fairfield Savings Bank, FSB 27,098 30.49 $ 7,110 8.00% $ 8,888 10.00%
=========== =========== =========== ========== ========== ===========
Tier 1 capital (to risk-weighted
assets):
Consolidated 35,202 37.78 N/A N/A N/A N/A
Fairfield Savings Bank, FSB 26,798 30.15 N/A N/A 5,333 6.00
=========== =========== =========== ========== ========== ===========
Tier 1 capital (to adjusted
total assets):
Consolidated 35,202 16.28 N/A N/A N/A N/A
Fairfield Savings Bank, FSB 26,798 12.78 6,290 3.00 10,483 5.00
=========== =========== =========== ========== ========== ===========
Tangible capital (to adjusted
total assets):
Consolidated 35,202 16.28 N/A N/A N/A N/A
Fairfield Savings Bank, FSB 26,798 12.78 3,145 1.50 N/A N/A
=========== =========== =========== ========== ========== ===========
</TABLE>
(12) CREDIT CONCENTRATION AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of its business. These instruments are
commitments to originate loans and involve credit and interest rate risk
in excess of the amount recognized in the consolidated balance sheets.
Commitments to originate fixed rate mortgage loans at June 30, 2000 were
approximately $4,129,000 at rates ranging between 7.625% and 8.50%.
Commitments to fund new and existing home equity lines of credit of
approximately $70,000 and $710,000, respectively, at June 30, 2000
represent amounts which the Company has committed to fund if requested
by the borrower within the normal commitment period. The Company
evaluates each customer's creditworthiness prior to extension of credit,
as it does for loans recorded on the consolidated balance sheet.
The majority of the Company's loans are secured by residential real
estate in the Chicago metropolitan area. Management believes the Company
has a diversified loan portfolio, and the concentration of lending
activities in these local communities does not result in an acute
dependency upon economic conditions of the lending region.
(Continued)
44
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(13) COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings incidental to the
normal course of business. Although the outcome of such litigation
cannot be predicted with any certainty, management is of the opinion,
based on the advice of legal counsel, that final disposition of any
litigation should not have a material effect on the consolidated
financial statements of the Company.
In connection with the development of the Trails of Olympia Fields (a
planned unit development of homesites and commercial land developed by
the Savings Bank and its subsidiary in prior years), the Company
initiated action against a municipality and certain parties involved in
the development. During the year ended June 30, 1996, the Bank received
$184,415 in full settlement of claims against the municipality.
A trial date regarding the remaining claims, previously scheduled for
May 2000, has been postponed by the trial judge and a new trial date has
not yet been set. The Company expects to incur additional legal and
other expenses in connection with this action.
In July 1999, the Company sold its remaining parcel of real estate held
for sale and development in Olympia Fields by means of an auction. The
cost basis of the property at June 30, 1999 was $262,259; the sale
price, net of selling costs, was approximately $154,000 resulting in a
loss of approximately $108,000. A loss accrual was recorded by the
Company in fiscal 1999 for this amount.
(14) DIVIDEND RESTRICTIONS
The OTS imposes limitations upon all capital distributions by savings
institutions, including cash dividends. An institution that exceeds all
fully phased-in capital requirements before and after a proposed capital
distribution (Tier 1 Association) and has not been advised by the OTS
that it is in need of more than normal supervision could, after prior
notice but without the approval of the OTS, make capital distributions
during a calendar year up to the higher of (i) 100% of its net income to
date during the calendar year, plus the amount that would reduce by 1/2
its surplus capital ratio (the excess capital over its fully phased-in
capital requirements) at the beginning of the calendar year; or (ii) 75%
of its net income over the most recent four-quarter period. Any
additional capital distributions would require prior regulatory
approval.
(Continued)
45
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(15) FAIR VALUES OF FINANCIAL INSTRUMENTS
FASB Statement 107, "Disclosure about Fair Value of Financial
Instruments," requires the disclosure of estimated fair values of all
asset, liability, and off-balance sheet financial instruments. Statement
107 defines fair value as the amount at which the instrument could be
exchanged in a current transaction between willing parties. Fair value
estimates, methods, and assumptions are set forth below for the
Company's financial instruments:
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 2,904,868 2,904,868 3,126,148 3,126,148
Interest-bearing deposits 3,429,400 3,429,400 7,501,314 7,501,314
Mortgage-backed securities 37,363,726 36,696,645 54,014,524 53,502,685
Investment in mutual funds
and preferred stock 7,510,852 7,510,852 3,320,333 3,320,333
Loans receivable, net 155,186,805 149,725,797 138,516,590 135,168,878
Accrued interest receivable 953,781 953,781 979,010 979,010
Federal Home Loan Bank
of Chicago stock 3,300,000 3,300,000 2,600,000 2,600,000
---------------- ---------------- ---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Financial liabilities:
Nonmaturing savings deposits $ 63,735,484 63,735,484 66,191,363 66,191,363
Savings deposits with stated
maturities 51,758,544 51,758,544 57,725,430 57,830,527
Borrowed money 66,000,000 64,499,616 52,000,000 51,168,795
Accrued interest payable 899,395 899,395 856,283 856,283
---------------- ---------------- ---------------- ----------------
</TABLE>
(Continued)
46
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
CASH AND DUE FROM BANKS AND INTEREST-EARNING DEPOSITS
The carrying value of cash and due from banks and interest-earning
deposits approximates fair value due to the short period of time
between origination of the instruments and their expected
realization.
MORTGAGE-BACKED SECURITIES AND INVESTMENT IN
MUTUAL FUNDS AND PREFERRED STOCK
The fair value of mortgage-backed securities and investment in
mutual funds and preferred stock is estimated based on quoted
market prices.
LOANS RECEIVABLE, NET
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type and then
further segmented into fixed and variable rate interest terms and
by performing and nonperforming categories. The fair value of
performing fixed rate loans is calculated by discounting
contractual cash flows adjusted for prepayment estimates, using
discount rates based on new loan rates adjusted to reflect
differences in servicing and credit costs. For variable rate
loans, the carrying amount is a reasonable estimate of fair value
as these loans reprice frequently or have a relatively short term
to maturity and there has been little or no change in credit
quality since origination. Fair value for nonperforming loans is
calculated by discounting estimated future cash flows using a rate
commensurate with the risk associated with the cash flows.
ACCRUED INTEREST RECEIVABLE
The carrying amount of accrued interest receivable approximates
its fair value due to the relatively short period of time between
accrual and expected realization.
FEDERAL HOME LOAN BANK OF CHICAGO STOCK
The fair value of this stock is based on its redemption value.
SAVINGS DEPOSITS
Under Statement 107, the fair value of deposits with no stated
maturity, such as noninterest-bearing demand deposits, NOW
accounts, money market accounts, and passbook accounts, is equal
to the amount payable on demand as of the date of estimate. The
fair value of certificates of deposit is based on the discounted
value of contractual cash flows. The discount rate is estimated
using the rates offered for deposits of similar remaining
maturities. If the estimated fair value is less than the amount
payable on demand, the fair value disclosed is the amount payable.
The fair value estimates do not include the benefit that results
from the low-cost funding provided by the deposit liabilities
compared to the cost of borrowing funds in the market.
(Continued)
47
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
BORROWED MONEY
The fair value of FHLB advances is based on the discounted value
of contractual cash flows. The discount rate is estimated using
the rates offered for FHLB advances of similar remaining
maturities.
ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable approximates its
fair value due to the relatively short period of time between
accrual and expected realization.
LIMITATIONS
The fair value estimates are made at a specific point in time
based on relevant market information and information about the
financial instrument. Because no market exists for a significant
portion of the Company's financial instruments, fair value
estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates.
In addition, the fair value estimates are based on existing on-
and off-balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value of
assets and liabilities that are not considered financial
instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include the mortgage
origination operation, deferred taxes, and office properties and
equipment. In addition, the tax ramifications related to the
realization of unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any
of the estimates.
(Continued)
48
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(16) OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) as well as the
related tax (expense) benefit are summarized below for the years ended
June 30:
<TABLE>
<CAPTION>
BEFORE INCOME AFTER
TAX TAX TAX
------------- -------------- -------------
<S> <C> <C> <C>
2000
----
Unrealized holding losses on investment
securities $ (640,719) 217,996 (422,723)
============= ============== =============
1999
----
Unrealized holding losses on investment
securities $ (782,012) 265,281 (516,731)
============= ============== =============
1998
----
Unrealized holding gains on investment
securities $ 594,079 (201,987) 392,092
Reclassification adjustments for gains
included in net income (469,752) 159,720 (310,032)
------------- -------------- -------------
$ 124,327 (42,267) 82,060
============= ============== =============
</TABLE>
(Continued)
49
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(17) CONDENSED PARENT COMPANY ONLY FINANCIAL INFORMATION
The following condensed statements of financial condition as of June 30,
2000 and 1999 and statements of earnings and cash flows for the years
ended June 30, 2000, 1999, and 1998 for Big Foot Financial Corp. should
be read in conjunction with the consolidated financial statements and
the notes thereto.
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL CONDITION 2000 1999
-------------- --------------
<S> <C> <C>
Assets:
Cash and cash equivalents $ 431,309 598,737
Mortgage-backed securities available-for-sale -- 2,559,480
Investment in mutual funds and preferred stock 5,626,379 3,320,333
Equity investment in the Savings Bank 21,110,988 26,577,302
ESOP loan receivable from the Savings Bank 1,306,630 1,507,650
Accrued interest receivable 14,531 30,133
Investment in real estate held for sale and development -- 154,259
Other assets 221,920 172,868
-------------- --------------
Total assets $ 28,711,757 34,920,762
============== ==============
Liabilities - other liabilities $ 100,095 198,552
-------------- --------------
Stockholders' equity:
Common stock 25,128 25,128
Treasury stock, at cost (9,566,760) (3,259,062)
Additional paid-in capital 24,455,670 24,463,104
Retained earnings 16,947,611 16,866,409
Common stock acquired by ESOP (1,306,630) (1,507,650)
Common stock acquired by RRP (1,040,280) (1,385,365)
Accumulated other comprehensive loss (903,077) (480,354)
-------------- --------------
Total stockholders' equity 28,611,662 34,722,210
-------------- --------------
Total liabilities and stockholders' equity $ 28,711,757 34,920,762
============== ==============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF EARNINGS 2000 1999 1998
------------ ------------- -------------
<S> <C> <C> <C>
Equity in undistributed earnings of the Savings Bank $ 275,649 627,217 660,478
Interest income 483,003 680,079 872,547
Interest expense (29,502) -- --
Noninterest income 1,639 -- 240,649
Noninterest expense (252,211) (377,378) (331,794)
------------ ------------- -------------
Income before income taxes 478,579 929,918 1,441,880
Income tax expense 20,000 112,040 261,813
------------ ------------- -------------
Net income $ 458,579 817,878 1,180,067
============ ============= =============
</TABLE>
(Continued)
50
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS 2000 1999 1998
--------------- -------------- --------------
<S> <C> <C> <C>
Operating activities:
Net income $ 458,579 817,878 1,180,067
Equity in undistributed earnings of the Savings Bank (275,649) (627,217) (660,478)
Dividends received from Savings Bank 5,767,000 -- --
Amortization of award of RRP shares 381,768 445,366 193,482
Amortization of premiums 28,242 24,708 24,708
Provision for loss on real estate held for sale and
development -- 108,000 --
Gain on sale of investment securities
available-for-sale -- -- (240,649)
Decrease (increase) in other assets (49,052) 153,522 (229,859)
Decrease in accrued interest receivable 15,602 5,340 102,939
Increase (decrease) in other liabilities (115,510) 1,325 (17,616)
--------------- -------------- --------------
Net cash provided by operating activities 6,210,980 928,922 352,596
--------------- -------------- --------------
Investing activities:
Net decrease in ESOP loan receivable 201,020 201,020 301,530
Proceeds from sale of real estate held for development 154,259 -- --
Principal repayments on mortgage-backed
securities available-for-sale 551,276 2,641,002 3,384,764
Proceeds from sales of mortgage-backed
securities available-for-sale 2,021,905 -- --
Sale of investment in mutual funds and preferred stock -- -- 1,324,652
Purchase of investment in mutual funds and preferred
stock (2,585,110) (1,066,249) (2,672,247)
--------------- -------------- --------------
Net cash provided by investing activities 343,350 1,775,773 2,338,699
--------------- -------------- --------------
Financing activities:
Purchase of treasury stock (6,307,698) (3,259,062) --
Purchase of RRP stock (36,683) (1,104,158) (731,692)
Cash dividends paid (377,377) -- --
--------------- -------------- --------------
Net cash used in financing activities (6,721,758) (4,363,220) (731,692)
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (167,428) (1,658,525) 1,959,603
Cash and cash equivalents at beginning of year 598,737 2,257,262 297,659
--------------- -------------- --------------
Cash and cash equivalents at end of year $ 431,309 598,737 2,257,262
=============== ============== ==============
</TABLE>
(Continued)
51
<PAGE>
2000 ANNUAL REPORT
================================================================================
BIG FOOT FINANCIAL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000, 1999, and 1998
================================================================================
(18) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth certain unaudited income and expense and
per share data on a quarterly basis for the years ended June 30, 2000
and 1999:
<TABLE>
<CAPTION>
2000 1999
----------------------------------- -----------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 3,378 3,403 3,413 3,462 3,562 3,554 3,408 3,381
Interest expense 1,812 1,824 1,854 1,954 1,950 1,928 1,835 1,822
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income before
provision for loan losses 1,566 1,579 1,559 1,508 1,612 1,626 1,573 1,559
Provision for loan losses -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 1,566 1,579 1,559 1,508 1,612 1,626 1,573 1,559
Noninterest income 80 83 65 75 69 73 68 74
Noninterest expense 1,359 1,492 1,440 1,592 1,285 1,465 1,293 1,321
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes 287 170 184 (9) 396 234 348 312
Income tax expense (benefit) 106 61 65 (59) 145 93 126 108
-------- -------- -------- -------- -------- -------- -------- --------
Net income $ 181 109 119 50 251 141 222 204
======== ======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic $ .09 .05 .06 .04 .11 .06 .10 .10
Diluted .09 .05 .06 .04 .11 .06 .10 .10
======== ======== ======== ======== ======== ======== ======== ========
Cash dividends declared per share $ .05 .05 .05 .05 -- -- -- --
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
52
<PAGE>
2000 ANNUAL REPORT
================================================================================
STOCKHOLDER INFORMATION
CORPORATE OFFICE
MAILING ADDRESS:
1190 RFD
Long Grove, IL 60047
Located At:
Route 83 and Old McHenry Road
Long Grove, IL 60047
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on October 24, 2000 at 2:00
p.m. at the Holiday Inn Mundelein, located at 510 East Route 83, Mundelein,
Illinois 60060.
ANNUAL REPORT ON FORM 10-K
A copy of Big Foot Financial Corp.'s Annual Report on Form 10-K as filed with
the Securities and Exchange Commission may be obtained without charge upon
written request to Timothy L. McCue, Big Foot Financial Corp., 1190 RFD, Long
Grove, Illinois 60047, or by calling (847) 634-2100 or via the internet at:
www.edgar-online.com.
LOCAL COUNSEL
Vedder Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
SPECIAL COUNSEL
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
REGISTRAR/TRANSFER AGENT (1)
LaSalle Bank N.A.
135 South LaSalle Street, Room 1960
Chicago, Illinois 60603
(312) 904-2584
(1) Communications regarding change of address, transfer of stock, and lost
certificates should be sent directly to the LaSalle Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
STOCK LISTING
Big Foot Financial Corporation's common stock is traded over the counter and is
listed on the Nasdaq National Market System of the Nasdaq Stock Market under the
symbol "BFFC." At June 30, 2000, there were 1,745,668 shares of Big Foot
Financial Corp. common stock issued and outstanding and there were approximately
364 holders of record. The price range of the common stock for the past two
fiscal years was as follows:
QUARTER ENDED HIGH LOW DIVIDENDS
September 30, 1998 $18.500 $12.750 $N/A
December 31, 1998 15.000 13.250 N/A
March 31, 1999 14.250 12.313 N/A
June 30, 1999 15.313 12.125 N/A
September 30, 1999 15.063 13.125 0.05
December 31, 1999 13.500 11.500 0.05
March 31, 2000 13.000 10.250 0.05
June 30, 2000 11.438 10.500 0.05
The stock price information set forth in the table above was provided by the
National Association of Securities Dealers, Inc. High, low, and closing prices
and daily trading volume are reported in most major newspapers.
The Company declared a cash dividend payment of $0.05 per share each quarter in
the fiscal year ended June 30, 2000. The Board of Directors considers the
payment of cash dividends, dependent on the results of operations and financial
condition of the Company, tax considerations, industry standards, economic
conditions, regulatory restrictions, general business practices, and other
factors. The Company's ability to pay dividends is dependent on the dividend
payments it receives from its subsidiary, Fairfield Savings Bank, F.S.B. which
are subject to regulations and the Bank's continued compliance with all
regulatory capital requirements. See Note 14 of the Notes to the Consolidated
Financial Statements for information regarding limitations of the Bank's ability
to pay dividends to the Company.
MARKET MAKERS (PARTIAL LIST)
ABN AMRO
AnPac Securities Group, Inc.
Friedman Billings Ramsey & Company
Herzog, Heine, Geduld, Inc.
Trident Securities, a Division of McDonald Investments
WEBSITE
www.fairfieldbank.com
