U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-QSB
(Mark One)
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-25284
BIG SKY BANCORP, INC.
(Exact name of registrant as specified in its charter)
State of Delaware 81-0494188
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 South First Street Hamilton, Mt 59840
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (406) 363-4400
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes_X_. No___.
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of the latest practicable date.
Class Outstanding July 31, 1996
Common Stock, par value $.01 308,721
per share
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FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PART I - Financial Information Page Number
Consolidated Statements of Financial Condition 1
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3-4
Notes to Financial Statements 5
Management's Discussion and Analysis of Consolidated
Financial Statements 6-9
PART II - Other Information 10
SIGNATURES 11
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PART I - FINANCIAL INFORMATION
BIG SKY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS JUNE 30, 1996 MARCH 31, 1996
- ------- ( Unaudited ) ( Unaudited )
------------- --------------
Cash ( including interest-bearing accounts
of $ 646,000 and $ 2,228,000 ) $ 1,669,000 $ 3,058,000
Investment securities available for sale, at
fair value ( cost $ 184,000 and $ 182,000 ) 400,000 396,000
Mortgage-backed securities available for sale,
at fair value (cost $2,530,000 and $2,600,000) 2,570,000 2,649,000
Investment securities held to maturity, at
amortized cost (fair value $13,958,000
and $12,938,000) 14,328,000 13,233,000
Mortgage-backed securities held to maturity,
at amortized cost (fair value $ 673,000
and $714,000 ) 647,000 685,000
Loans receivable,net 36,827,000 37,400,000
Accrued interest receivable 469,000 322,000
Real estate owned --- ---
Investment in Federal Home Loan Bank Stock 1,758,000 1,725,000
Premises and equipment 1,326,000 1,343,000
Prepaid expenses and other assets 121,000 111,000
------------- -------------
TOTAL ASSETS $ 60,115,000 $ 60,922,000
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
LIABILITIES
Deposits $ 51,923,000 $ 52,843,000
Advances from borrowers for taxes & insurance 424,000 550,000
Accrued expenses and other liabilities 156,000 155,000
Deferred taxes 671,000 578,000
------------ ------------
TOTAL LIABILITIES 53,174,000 54,126,000
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, ( $0.01 par value per share;
Authorized 1,500,000 shares; Issued
and outstanding, 307,000 shares ) 3,000 3,000
Capital surplus 605,000 605,000
Unrealized appreciation on securities
available for sale 157,000 161,000
Retained earnings, substantially restricted 6,176,000 6,027,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,941,000 6,796,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 60,115,000 $ 60,922,000
1
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BIG SKY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
(Unaudited)
------------- -------------
INTEREST INCOME:
Interest and fees on loans receivable $ 867,000 $ 886,000
Interest on investments 191,000 148,000
Interest on mortgage backed securities 60,000 63,000
Other interest and dividends 66,000 42,000
------------- -------------
Total interest income 1,184,000 1,139,000
INTEREST EXPENSE:
Deposits 620,000 599,000
------------- -------------
Net interest income 564,000 540,000
Provision for loan losses (10,000) (11,000)
------------- -------------
Net interest income after provision
for loan losses 554,000 529,000
OTHER INCOME:
Loan fees and service charges 19,000 23,000
Rental income 34,000 34,000
Other 1,000 2,000
------------- -------------
Total other income 54,000 59,000
------------- -------------
OTHER EXPENSES:
Salaries and employee benefits 174,000 209,000
Occupancy 44,000 53,000
FDIC/SAIF insurance 36,000 36,000
Outside services 26,000 26,000
Advertising 10,000 10,000
Other expense 74,000 66,000
------------- -------------
Total other expense 364,000 400,000
------------- -------------
Income before income taxes 244,000 188,000
Income tax expense 95,000 73,000
------------- -------------
NET INCOME $ 149,000 $ 115,000
NET INCOME PER SHARE $ 0.46 $ 0.36
2
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BIG SKY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
(Unaudited)
------------- -------------
OPERATING ACTIVITIES:
Net income $ 149,000 $ 115,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 17,000 16,000
Provision for loan losses 10,000 11,000
Federal Home Loan Bank stock dividend (33,000) (24,000)
Cash provided (used) by changes in
operating assets and liabilities:
Accrued interest receivable (147,000) (91,000)
Prepaid expenses and other assets (10,000) 121,000
Accrued expenses and other liabilities 1,000 8,000
Deferred taxes 93,000 120,000
Deferred loan fees, net 4,000 6,000
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 84,000 282,000
INVESTING ACTIVITIES:
Principal repayments on loans 3,196,000 1,725,000
Loan originations (2,640,000) (1,485,000)
Principal repayments on mortgage-backed
securities available for sale 72,000 47,000
Principal repayments on mortgage-backed
securities held to maturity 40,000 19,000
Proceeds from maturity of investment
securities -- 600,000
Purchase of investment securities (1,095,000) (1,000)
Purchase of premises and equipment -- (13,000)
------------- -------------
Net cash provided by investing
activities (427,000) 892,000
3
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BIG SKY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS ( Continued )
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1995
(Unaudited)
------------- -------------
FINANCING ACTIVITIES:
Net decrease in deposit accounts due
on demand (312,000) (1,038,000)
Net increase (decrease) in certificate
accounts (608,000) 791,000
Net decrease in advances from borrowers (126,000) (130,000)
------------- -------------
Net cash provided (used) in financing
activities (1,046,000) (377,000)
------------- -------------
NET INCREASE ( DECREASE ) IN CASH (1,389,000) 797,000
CASH, BEGINNING OF PERIOD 3,058,000 1,652,000
------------- -------------
CASH, END OF PERIOD $ 1,669,000 $ 2,449,000
============= =============
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Fair value adjustment to securities
available for sale $ 257,000 $ 198,000
Income tax effect related to fair value
adjustment (100,000) (77,000)
Cash paid for:
Interest 627,000 590,000
Income taxes -- --
Stockholder redemption accrual -- 865,000
4
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BIG SKY BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The information contained in the financial statements is unaudited. In
the opinion of management, the financial statements contain all
adjustments (none of which were other than recurring entries) necessary
for a fair statement of the results of operations for the interim period.
The results of operations for the three months ended June 30, 1996 are
not necessarily indicative of the results which may be expected for the
entire fiscal year.
2. Net Income Per Share
Net income per share is based on net income and the weighted average
number of shares outstanding during the period. The dilutive effect of
outstanding stock options is included in earnings per share.
3. Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Corporation and its wholly-owned subsidiary, First Federal Savings
and Loan Association of Montana ("Association"). Significant
intercompany balances and transactions have been eliminated in the
consolidation.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL STATEMENTS
General
For the quarter ended June 30, 1996, the Association's return on average
assets was .98%, return on beginning equity was 8.80%, and return on average
equity was 8.69%.
Total assets decreased by $ 807,000, or 1.32%, to $ 60,115,000 at June 30,
1996 as compared to $ 60,922,000 at March 31, 1996.
Deposits decreased by $ 920,000, or 1.74%, to $ 51,923,000 at June 30, 1996 as
compared to $ 52,843,000 at March 31, 1996.
Net loans decreased by $ 573,000, or 1.53%, to $ 36,827,000 at June 30, 1996
as compared to $ 37,400,000 at March 31, 1996.
Investments and mortgage-backed securities increased by $ 982,000, or 5.79%,
to $ 17,945,000 at June 30, 1996, as compared to $ 16,963,000 at March 31,
1996.
Cash decreased by $ 1,389,000, or 45.42%, to $ 1,669,000 at June 30, 1996 as
compared to $ 3,058,000 at March 31, 1996.
Capital Position
The Corporation's capital increased by $ 145,000, or 2.13%, to $ 6,941,000 at
June 30, 1996, from $ 6,796,000 at March 31, 1996.
The Association's capital position relative to its minimum capital
requirements under the Financial institution's Reform, Recovery and
Enforcement Act of 1989 (FIRREA) at June 30, 1996 was as follows:
Amount Percentage of
Assets
Tangible capital..................... $ 6,490,000 10.8 %
Minimum tangible capital requirement. 898,000 1.5 %
Excess............................... $ 5,592,000 9.3 %
========= ====
Core capital......................... $ 6,490,000 10.8 %
Minimum core capital requirement..... 1,797,000 3.0 %
Excess............................... $ 4,693,000 7.8 %
========= ====
Risk-based capital................... $ 6,833,000 25.0 %
Minimum risk-based capital requirement. 2,186,000 8.0 %
Excess.................................$ 4,647,000 17.0 %
========= ====
6
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Liquidity
The Association's liquidity ratio decreased to 15.34% at June 30, 1996, from
17.50% at March 31, 1996. The Association is required to maintain cash and
certain investment securities in an amount equal to 5% of its deposit accounts
and short-term borrowings.
Allowance for Loan Losses
The allowance for loan loss reserves was $ 477,000 at June 30, 1996, as
compared to $ 467,000 at March 31, 1996. The allowance is based upon
management's consideration of current and anticipated economic conditions
which may affect the ability of the borrowers in the loan portfolio to repay
the loans. Management also reviews individual loans for which full
collectibility may not be reasonably assured and considers, among other
matters, the estimated net realizable value of the underlying collateral. The
increase in the allowance for potential loan losses was implemented by
management as a prudent risk-management strategy. Management does not believe
that any significant changes in portfolio risk have occurred during the three
month period ended June 30, 1996, as compared to March 31, 1996.
COMPARISON OF THE THREE MONTHS ENDED
JUNE 30, 1996 TO THE THREE MONTHS ENDED JUNE 30, 1995
General
Total assets increased by $ 50,000, or .08%, to $ 60,115,000 at June 30, 1996,
from $ 60,065,000 at June 30, 1995.
Total deposits decreased by $ 154,000, or .30%, to $ 51,923,000 at June 30,
1996, from $ 52,077,000 at June 30, 1995.
Net loans decreased by $ 2,530,000, or 6.43%, to $ 36,827,000 at June 30,
1996, from $ 39,357,000 at June 30, 1995.
Investments and mortgage-backed securities increased by $ 3,727,000, or
26.21%, to $ 17,945,000 at June 30, 1996, from $ 14,218,000 at June 30, 1995.
The Corporation's capital increased by $ 1,050,000, or 17.82%, to $ 6,941,000
at June 30, 1996, from $ 5,891,000 at June 30, 1995.
Net Income
Net income for the three months ended June 30, 1996 increased by $ 34,000, or
29.57%, to $ 149,000, from $ 115,000 for the three months ended June 30, 1995.
The increase was primarily due to additional compensation to officers which
was paid during the quarter ended June 30, 1995,
7
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based on the financial performance of the Company during the fiscal year ended
March 31, 1995, and other factors, however no bonuses were paid during the
corresponding quarter ending June 30, 1996. The Compensation Committee was
unable to meet during the quarter ended June 30, 1996, and has not yet made
any recommendations to the Board of Directors regarding any additional
compensation which may be paid, based primarily on the operating results of
the fiscal year ended March 31, 1996. It is expected that any additional
compensation which may be recommended by the Compensation Committee will be
paid during the quarter ending September 30, 1996.
Earnings per share increased by $ .10, or 27.78%, to $ .46 for the three
months ended June 30, 1996, as compared to $ .36 for the three month period
ended June 30, 1995.
Loan fees and service charges decreased by $ 4,000, or 17.39%, to $ 19,000 for
the quarter ending June 30, 1996, from $ 23,000 for the quarter ending June
30, 1995, primarily as a result of the lower volume of refinancing activity
and loan payoffs in 1996 as compared to 1995.
Rental income was $ 34,000 at June 30, 1996, unchanged from the three month
period ending June 30, 1995.
Total other expense decreased by $ 36,000, or 9.00%, to $ 364,000 for the
quarter ending June 30, 1996, from $ 400,000 for the comparable period in
1995, as a result of decreased salary expense and employee benefits and
occupancy expense.
Salary and employee benefit expense decreased by $ 35,000, or 16.75%, to $
174,000 for the three month period ended June 30, 1996, as compared to $
209,000 for the comparable period last year.
Occupancy expense decreased by $ 9,000, or 16.98%, to $ 44,000 for the three
month period ended June 30, 1996, as compared to $ 53,000 for the three month
period ended June 30, 1995.
Advertising expense was $ 10,000 for the three month period ended June 30,
1996, unchanged from the same period last year.
Outside services expense remained the same at $ 26,000 for the three month
periods ended June 30, 1996 and June 30, 1995.
Income tax expense increased by $ 22,000, or 30.14%, to $ 95,000 for the three
month period ended June 30, 1996, as compared to $ 73,000 for the same period
last year.
Other expense increased by $ 8,000, or 12.12%, to $ 74,000 for the three month
period ended June 30, 1996, as compared to $ 66,000 for the three month period
ended June 30, 1995. The increase was due to additional legal and consulting
fees connected with Corporate strategic planning activities, and the cost of
an examination of the holding company by the Office of Thrift Supervision
during the quarter ended June 30, 1996.
8
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Net Interest Income
Net interest income increased by $ 24,000, or 4.44%, to $ 564,000 for the
three month period ending June 30, 1996, from $ 540,000 for the three month
period ending June 30, 1995.
The cost of funds increased by 19 basis points, to 4.75% at June 30, 1996,
from 4.56% at June 30, 1995, which was partially offset as the yield on
earning assets increased by 2 basis points, to 7.76% at June 30, 1996, from
7.74% at June 30, 1995. As a result, interest spread decreased by 17 basis
points, to 3.01% at June 30, 1996, from 3.18% at June 30, 1995.
Average net interest margin decreased by 4 basis points, to 3.52% for the
three month period ending June 30, 1996, from 3.56% for the three month period
ending June 30, 1995.
Provision for Loan Losses
Provision for loan losses was $ 10,000 for the three month period ending June
30, 1996, as compared to $ 11,000 for the three month period ending June 30,
1995.
9
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PART II - Other Information
Item 1 - Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Association, such as claims to enforce liens, condemnation proceedings on
properties in which the Association holds security interests, claims involving
the making and servicing of real property loans and other issues incident to
the Association's business. In the opinion of management and the
Association's legal counsel, no significant loss is expected from any of such
pending claims or lawsuits. Aside from such pending claims and lawsuits
which are incident to the conduct of the Association's ordinary business, the
Association is not a party to any material pending legal proceedings.
Item 2 - Changes in Securities
None.
Item 3 - Default Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
The Association's Annual Meeting of Stockholders was held on July 23, 1996.
At this meeting, stockholders : (a) elected, as director, nominee Kurt F.
Ingold by a vote of 212,869 shares "FOR", and 700 shares "WITHHELD"; (b)
elected, as director, nominee Douglas N. Klein by a vote of 212,869 shares
"FOR", and 700 shares "WITHHELD"; (c) ratified the appointment of Deloitte &
Touche as independent auditors for the fiscal year ending March 31, 1997 by a
vote of 213,419 votes "FOR", 0 votes "AGAINST", and 150 votes "ABSTAIN".
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits: none
(b) Reports on Form 8-K: No reports on Form 8-K have been
filed during the quarter for which this report is filed.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Big Sky Bancorp, Inc.
---------------------
(Registrant)
DATE: August 10, 1996 BY:/s/ MICHAEL E. McKEE
---------------------
Michael E. McKee
President
(Duly Authorized Officer)
BY:/s/ ERNEST M. KWIATKOWSKI
--------------------------
Ernest M. Kwiatkowski
Vice President - Treasurer
(Principal Financial Officer)
11
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 1023000
<INT-BEARING-DEPOSITS> 646000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2570000
<INVESTMENTS-CARRYING> 14975000
<INVESTMENTS-MARKET> 14631000
<LOANS> 36827000
<ALLOWANCE> 0
<TOTAL-ASSETS> 60115000
<DEPOSITS> 51923000
<SHORT-TERM> 424000
<LIABILITIES-OTHER> 827000
<LONG-TERM> 0
0
0
<COMMON> 3000
<OTHER-SE> 6938000
<TOTAL-LIABILITIES-AND-EQUITY> 60115000
<INTEREST-LOAN> 867000
<INTEREST-INVEST> 191000
<INTEREST-OTHER> 126000
<INTEREST-TOTAL> 1184000
<INTEREST-DEPOSIT> 620000
<INTEREST-EXPENSE> 620000
<INTEREST-INCOME-NET> 564000
<LOAN-LOSSES> 10000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 364000
<INCOME-PRETAX> 244000
<INCOME-PRE-EXTRAORDINARY> 244000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149000
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<YIELD-ACTUAL> 7.76
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<LOANS-PAST> 0
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<CHARGE-OFFS> 0
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<ALLOWANCE-CLOSE> 477000
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