SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to __________
Commission File No. 0-27714
Crazy Woman Creek Bancorp Incorporated
(Exact name of registrant as specified in its charter)
Wyoming 83-0315410
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Fort Street, Buffalo, Wyoming 82834
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(Address of principal executive offices)
(307) 684-5591
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $.10 per share
Outstanding at May 11, 2001: 799,608
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
CRAZY WOMAN CREEK BANCORP INCORPORATED
INDEX TO FORM 10-QSB
Page
----
PART I FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements (unaudited)
Consolidated Condensed Statements of Financial Condition at
March 31, 2001 and September 30, 2000 1
Consolidated Condensed Statements of Income for the Three and
Six Months ended March 31, 2001 and 2000 2
Consolidated Condensed Statements of Comprehensive Income for
the Three and Six Months ended March 31, 2001 and 2000 3
Consolidated Condensed Statements of Cash Flows for the Six
Months ended March 31, 2001 and 2000 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Financial Condition
(Unaudited)
March 31, September 30,
2001 2000
---------- ---------
Assets (Dollars in thousands,
- ------ except per share data)
Cash and cash equivalents $ 4,654 $ 2,796
Investment and mortgage-backed securities available-for-sale 23,867 28,869
Stock in Federal Home Loan Bank of Seattle, at cost 1,090 1,055
Loans receivable, net 33,380 30,980
Accrued interest receivable 448 534
Premises and equipment, net 1,415 525
Income tax receivable - 28
Intangible assets, net of accumulated amortization of $12 at
March 31, 2001 298 -
Other assets 35 39
-------- --------
Total assets $ 65,187 $ 64,826
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Deposits $ 34,231 $ 32,081
Advances from Federal Home Loan Bank 16,750 19,300
Advances from borrowers for taxes and insurance 38 72
Income taxes payable 25 -
Deferred income taxes 188 -
Dividends payable 96 96
Accrued expenses and other liabilities 415 198
-------- --------
Total liabilities 51,743 51,747
-------- --------
Stockholders' equity:
Preferred stock, par value $.10 per share, 2,000,000 shares authorized; none
issued and outstanding at March 31, 2001
and September 30, 2000 - -
Common stock, par value $.10 per share, 5,000,000 shares
authorized; 1,058,000 issued and outstanding at March 31, 2001
and September 30, 2000 106 106
Additional paid-in surplus 10,106 10,100
Unearned ESOP/MSBP shares (476) (528)
Retained earnings, substantially restricted 7,221 7,271
Accumulated other comprehensive income (loss) 139 (218)
Treasury stock at cost, 275,976 shares at March 31, 2001 and
September 30, 2000 (3,652) (3,652)
-------- --------
Total stockholders' equity 13,444 13,079
-------- --------
Total liabilities and stockholders' equity $ 65,187 $ 64,826
======== ========
See notes to consolidated condensed financial statements.
Page 1
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
2001 2000 2001 2000
------ ------ ------ ------
(Dollars in thousands except per share data)
Interest income:
Loans receivable $ 645 $ 569 $1,250 $1,141
Mortgage-backed securities 169 194 351 376
Investment securities 223 277 492 578
Other 41 25 78 57
------ ------ ------ ------
Total interest income 1,078 1,065 2,171 2,152
Interest expense:
Deposits 407 390 800 817
Advances from Federal Home Loan Bank 267 216 566 422
Other interest expense 2 - 2 -
------ ------ ------ ------
Total interest expense 676 606 1,368 1,239
------ ------ ------ ------
Net interest income 402 459 803 913
Provision for loan losses - - - -
------ ------ ------ ------
Net interest income after provision for loan losses 402 459 803 913
------ ------ ------ ------
Non-interest income:
Customer service charges 18 15 35 30
Other operating income 8 8 16 12
------ ------ ------ ------
Total non-interest income 26 23 51 42
------ ------ ------ ------
Non-interest expense:
Compensation and benefits 213 121 369 244
Occupancy and equipment 36 18 56 36
FDIC/SAIF deposit insurance premiums 2 2 4 6
Advertising 9 8 21 21
Data processing services 32 27 58 54
Professional fees 27 20 47 33
Loss on disposal of assets 11 - 11 -
Goodwill amortization 3 - 3 -
Other 62 60 106 98
------ ------ ------ ------
Total non-interest expense 395 256 675 492
------ ------ ------ ------
Income before income taxes 33 226 179 463
Income tax expense 7 72 52 142
------ ------ ------ ------
Net income $ 26 $ 154 $ 127 $ 321
====== ====== ====== ======
Dividends declared per common share $ 0.12 $ 0.12 $ 0.24 $ 0.24
====== ====== ====== ======
Basic earnings per common share $ 0.03 $ 0.19 $ 0.16 $ 0.39
====== ====== ====== ======
Diluted earnings per common share $ 0.03 $ 0.19 $ 0.16 $ 0.39
====== ====== ====== ======
See notes to consolidated condensed financial statements.
Page 2
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Comprehensive Income
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
---------------- ----------------
2001 2000 2001 2000
----- ----- ----- -----
(Dollars in thousands)
Net income $ 26 $ 154 $ 127 $ 321
Other comprehensive income
Unrealized gains (losses) on investment and
mortgage-backed securities available-for-sale:
Realized and unrealized holding gains (losses)
arising during the period 109 (28) 541 (182)
Income tax benefit (expense) related to items of other
comprehensive income (37) 10 (184) 62
----- ----- ----- -----
Other comprehensive income (loss), after tax 72 (18) 357 (120)
----- ----- ----- -----
Comprehensive income $ 98 $ 136 $ 484 $ 201
===== ===== ===== =====
See notes to consolidated condensed financial statements.
Page 3
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
Six Months ended March 31, 2001 and 2000
(Unaudited)
2001 2000
-------- --------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 127 $ 321
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and discounts on securities available-for-sale, net (4) (1)
Amortization of intangibles, net 12 -
Federal Home Loan Bank stock dividend (35) (34)
Depreciation 34 18
Loss on sale of foreclosed real estate - 2
Loss on disposal of fixed assets 11 -
Mutual funds dividends reinvested (6) (28)
Deferred loan origination fees, net 4 (11)
ESOP shares committed to be released 29 25
MSBP deferred compensation expense 29 24
Change in:
Accrued interest receivable 86 (20)
Income taxes 53 76
Other assets 4 38
Deferred income taxes 4 (3)
Accrued expenses and other liabilities 5 (50)
-------- --------
Net cash provided by operating activities 353 357
Cash flows from investing activities:
Purchases of securities available-for-sale - (1,669)
Proceeds from maturities, calls and prepayments of securities available-for-sale 5,553 995
Origination of loans receivable (6,674) (3,728)
Repayment of principal on loans receivable 4,365 3,646
Acquisition of branch office 773 -
Purchase of premises and equipment (548) (6)
Proceeds from the sale of foreclosed real estate - (2)
-------- --------
Net cash provided by (used in) investing activities 3,469 (764)
Cash flows from financing activities:
Net increase (decrease) in deposits 797 (23)
Advances from Federal Home Loan Bank 4,350 13,800
Repayment of advances from Federal Home Loan Bank (6,900) (13,350)
Net change in advances from borrowers for taxes and insurance (34) (33)
Repurchase of common stock - (475)
Dividends paid to stockholders (177) (193)
-------- --------
Net cash used in financing activities (1,964) (274)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,858 (681)
Cash and cash equivalents at beginning of period 2,796 2,189
-------- --------
Cash and cash equivalents at end of period $ 4,654 $ 1,508
======== ========
Cash paid during period for:
Interest $ 1,265 $ 1,237
Income taxes - 69
Noncash Investing and Financing Activities:
The Company transferred loans of $0 and $73 to other real estate owned
during the six months ended March 31, 2001 and 2000, respectively.
See notes to consolidated condensed financial statements.
Page 4
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
March 31, 2001
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated condensed financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. For further information, the reader
should refer to the Annual Report on Form 10-KSB of Crazy Woman Creek Bancorp
Incorporated (the "Company") for the fiscal year ended September 30, 2000.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. The
results of operations for the three and six months ended March 31, 2001 are not
necessarily indicative of the results which may be expected for an entire year
or any other period.
The accompanying consolidated financial statements include the accounts of the
Company and Buffalo Federal Savings Bank (the "Bank"), a wholly-owned subsidiary
of the Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
NOTE 2: EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding during the period less
unvested management stock bonus plan (MSBP) and unallocated and not yet
committed to be released Employee Stock Ownership Plan (ESOP) shares. Diluted
EPS is calculated by dividing net income by the weighted-average number of
common shares used to compute basic EPS plus the incremental amount of potential
common stock determined by the treasury stock method.
For the Three Months ended March 31, 2001
Net Income Average Shares Per Share Amount
------------------- ------------------- -------------------
Basic EPS
Net income available to common stockholders $ 26,000 777,172 $ 0.03
======
Effect of Dilutive Securities
Incremental shares under stock option plan -- 11,370
Incremental shares related to MSBP -- 562
------------------- -------------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 26,000 789,104 $ 0.03
=========== ======= ======
For the Three Months ended March 31, 2000
Net Income Average Shares Per Share Amount
-------------------- -------------------- --------------------
Basic EPS
Net income available to common stockholders $ 154,000 802,538 $ 0.19
======
Effect of Dilutive Securities
Incremental shares under stock option plan -- 215
-------------------- --------------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 154,000 802,753 $ 0.19
=========== ======= ======
Page 5
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Notes to Consolidated Condensed Financial Statements
March 31, 2001
For the Six Months ended March 31, 2001
Net Income Average Shares Per Share Amount
------------------- ------------------- -------------------
Basic EPS
Net income available to common stockholders $ 127,000 775,986 $ 0.16
======
Effect of Dilutive Securities
Incremental shares under stock option plan -- 947
Incremental shares related to MSBP -- 281
------------------- -------------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 127,000 777,214 $ 0.16
=========== ======= ======
For the Six Months ended March 31, 2000
Net Income Average Shares Per Share Amount
-------------------- -------------------- --------------------
Basic EPS
Net income available to common stockholders $ 321,000 816,341 $ 0.39
======
Effect of Dilutive Securities
Incremental shares under stock option plan -- 947
-------------------- --------------------
Diluted EPS
Income available to common stockholders plus
assumed conversions $ 321,000 817,288 $ 0.39
=========== ======= ======
Page 6
CRAZY WOMAN CREEK BANCORP INCORPORATED
AND SUBSIDIARY Management Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2001
FORWARD LOOKING STATEMENTS
- --------------------------
The Company may from time to time make written or oral "forward-looking
statements", including statements contained in the Company's filings with the
Securities and Exchange Commission (including this Quarterly Report on Form
10-QSB and the exhibits thereto), in its reports to stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to changes based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economy in which the Company conducts operations;
the effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the board of governors of the federal
reserve system, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute competitors' products and
services for the Company's products and services; the success of the Company in
gaining regulatory approval of its products and services, when required; the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological changes;
acquisitions; changes in consumer spending and saving habits; and the success of
the Company at managing the risks resulting from these factors.
The Company cautions that the listed factors are not exclusive. The Company does
not undertake to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the Company.
GENERAL
- -------
The Company is a unitary savings and loan holding company of the Bank. The
Company's assets are comprised of its investment in the Bank, its loan to the
ESOP, and shares held in mutual funds. The Bank operates as a traditional
savings association, attracting deposit accounts from the general public and
using those deposits, together with other funds, primarily to originate and
invest in fixed-rate conventional loans secured by single-family residential
real estate. The Bank also utilizes funds obtained from the Federal Home Loan
Bank of Seattle ("FHLB") to purchase investment securities and to originate
loans. The Bank also originates commercial real estate loans, business loans,
home equity loans, consumer loans and loans secured by savings accounts. The
Bank invests in mortgage-backed securities (including Real Estate Mortgage
Investment Conduits ("REMICs")), municipal bonds and short-term and medium-term
U.S. Agency securities. The Bank hired a new commercial and agriculture loan
officer in April 2000, and a branch president in December 2000, for its new
branch located in Gillette, Wyoming. These new officers have extensive
commercial and Small Business Administration lending experience. These loan
officers will focus on the Bank's existing commercial customers for the
origination of new commercial and agricultural loans.
The Bank's net income is dependent primarily on its net interest income, which
is the difference between interest income earned on its interest-earning assets
and interest expense paid on interest-bearing liabilities.
Page 7
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
Net interest income is determined by (i) the difference between yields earned on
interest-earning assets and rates paid on interest-bearing liabilities (interest
rate spread) and (ii) the relative amounts of interest-earning assets and
interest-bearing liabilities. The Bank's interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. To a lesser extent, the Bank's net income is also
affected by the level of non-interest income, which primarily consists of
service charges and other operating income. In addition, net income is affected
by the level of non-interest (general and administrative) expenses.
PURCHASE OF BRANCH
On December 27, 2000, the Bank purchased the building, equipment, loans and
acquired the deposit liabilities of the Gillette, Wyoming branch of Hulett
National Bank. The transaction was accounted for as a purchase and accordingly,
the Consolidated Condensed Statement of Income for the three and six months
ended March 31, 2001 includes the results of operations of the acquired branch
since the date of purchase. Cash received in the branch acquisition totaled
$773,000. The purchase consisted of $95,000 of loans, $387,000 of premises and
equipment and the assumption of $1.353 million in deposits. The premium paid
over historical carrying values was $310,000, which has currently been allocated
to goodwill and deposit premium. The branch is called "The Bank of Gillette, a
branch of Buffalo Federal Savings Bank" ("Branch").
FINANCIAL CONDITION
- -------------------
ASSETS
At March 31, 2001, assets totaled $65.187 million compared to total assets of
$64.826 million at September 30, 2000. The increase was primarily a result of
increases in cash, net loans, premises and equipment and intangible assets,
which more than offset the decrease in securities available-for-sale.
Cash and cash equivalents increased $1.858 million during the period. The
increase was primarily the result of the increase in deposits and the maturity
of investment securities available-for-sale, offset somewhat by increased loan
demand and the repayment of FHLB advances.
Securities available for sale decreased by $5.002 million during the six months
ended March 31, 2001. Securities prepayments, calls and maturities of $5.553
million were received on investment securities available-for-sale and the market
value of the securities increased $541,000 during the period. Amortization of
premium discounts and dividends accounted for $10,000 of the increase in
securities.
Loans receivable increased $2.400 million during the six months ended March 31,
2001. During this period, the Bank originated residential mortgage loans
totaling $1.993 million, non-residential mortgage loans totaling $2.372 million,
consumer loans totaling $1.550 million, and commercial loans totaling $485,000.
During the same period, the Bank received scheduled principal payments and
prepayments totaling $4.365 million on its loan portfolio.
Bank property and equipment increased by $890,000 and was primarily the result
of the Branch purchase totaling $387,000, plus an additional lot in Gillette,
Wyoming for $70,000 and additional bank equipment totaling $185,000 including
purchase since the date of acquisition. In addition, during the six months ended
March 31, 2001, the Bank purchased land in Sheridan, Wyoming for $321,000,
Page 8
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
for the purpose of constructing a new branch. The Sheridan parcel of land
consists of 1.48 acres. The total cost of the branch is estimated to be $1.4
million and the projected opening date is the first quarter of 2002.
Intangible assets increased $298,000 from the purchase of the Branch. Goodwill
of $188,000 will be amortized straight line over fifteen years. Deposit premiums
of $122,000 will be amortized over seven years using an accelerated method.
LIABILITIES
Deposits increased by $2.150 million from $32.081 million at September 30, 2000
to $34.231 million at March 31, 2001. The increase consisted primarily of $1.353
million of deposits assumed in the Branch purchase and an increase in deposits
of $787,000.
Advances from the FHLB decreased $2.550 million during the six months ended
March 31, 2001. The advances are a supplement to the Bank's retail deposits and
were paid down from the cash received in the Branch purchase.
Deferred income taxes increased by $188,000 during the six months ended March
31, 2001 and was mainly the result of the increase in market value of
available-for-sale securities. The market value of these securities increased
$541,000 during the period, which resulted in the increase in deferred income
taxes.
Accrued expenses and other liabilities increased $217,000 during the six months
ended March 31, 2001 as a result of an increase in accrued interest payable,
outstanding corporate checks, and the $98,000 amount due to seller from the
Branch purchase.
STOCKHOLDERS' EQUITY
Overall, stockholders' equity increased $365,000 during the six months ended
March 31, 2001. The increase in was primarily the result of increased market
value on available-for-sale securities.
ASSET QUALITY
- -------------
Non-performing assets totaled $201,000 at March 31, 2001, or 0.59% of gross
loans. This compares to $62,000 at September 30, 2000 or 0.20% of total loans.
Non-performing loans at March 31, 2001 were comprised of five single-family
mortgage loans, one commercial loan, and one consumer loan.
RESULTS OF OPERATIONS
- ---------------------
Comparison of Three Months Ended March 31, 2001 and 2000.
- ---------------------------------------------------------
Net Income. Net income for the three months ended March 31 2001 totaled $26,000
compared to $154,000 for the three months ended March 31, 2000. Net income was
lower in 2001 than in 2000 primarily due to the Branch operations, specifically
a $57,000 decrease in net interest income, a $92,000 increase in compensation
and benefits resulting primarily from the hiring of a new commercial loan
officer in April 2000, a Branch president in December 2000 and three staff
members in the new branch, a $18,000 increase in occupancy and equipment, a
$5,000 increase in data processing costs, a $7,000
Page 9
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
increase in professional fees associated with general and corporate matters, an
$11,000 increase in loss on disposal of equipment, a $3,000 increase in
amortization and a $2,000 increase in other expenses associated with supplies,
and a $65,000 decrease in tax expense related to a decrease in taxable income.
Interest Income. For the three months ended March 31, 2001, interest income
totaled $1.078 million compared to $1.065 million for the three months ended
March 31, 2000. A decrease in the volume of average earning assets from $62.384
million for the three months ended March 31, 2000 to $62.069 million for the
same period in 2001 did not materially affect interest income. A slight increase
was experienced in the yield on average earning assets from 6.84% for the three
months ended March 31, 2000 to 6.95% for the three months ended March 31, 2001,
which contributed to a $13,000 increase in interest income.
Interest Expense. Total interest expense increased by $70,000 from $606,000 for
the three months ended March 31, 2000 to $676,000 for the same period in 2001.
This was primarily a result of an increase in the cost of average
interest-bearing liabilities.
Interest expense for deposits including deposit premium amortization increased
by $17,000 from $390,000 for the three months ended March 31, 2000 to $407,000
for the same period in 2001. The cost of average interest-bearing deposits
increased slightly from 4.64% for the three months ended March 31, 2000 to 4.94%
for the three months ended March 31, 2001, which caused interest expense for
deposits to increase by $24,000. A decrease in the volume of average
interest-bearing deposits from $33.597 million for the three months ended March
31, 2000, to $32.981 million for the three months ended March 31, 2001, resulted
in a $7,000 decrease in interest expense for deposits.
Interest expense for advances from the FHLB increased by $51,000 from $216,000
for the three months ended March 31, 2000 to $267,000 for the same period in
2001. The cost of average interest-bearing advances from the FHLB increased from
5.50% for the three months ended March 31, 2000 to 6.33% for the same period in
2001. This increase in the cost of average interest-bearing advances caused a
$32,000 increase in interest expense. Average interest-bearing advances
increased from $15.714 million for the three month period ended March 31, 2000,
to $17.011 million for the three month period ended March 31, 2001, resulting in
a $21,000 increase in interest expense for advances.
Net Interest Income. Net interest income decreased by $57,000 from $459,000 for
the three months ended March 31, 2000 to $402,000 for the three months ended
March 31, 2001. The increase in the cost and volume of average interest-bearing
liabilities were the major factors for the decrease in net interest income. The
decrease in average interest-earning assets was not offset by a corresponding
decrease in average interest-bearing liabilities as evidenced by the decrease of
the ratio of average interest-earning assets to average interest-bearing
liabilities from 126.51% in 2000 to 124.16% in 2001.
Net interest margin decreased from 2.96% for the three months ended March 31,
2000 to 2.59% for the three months ended March 31, 2001. The decrease in net
interest margin was primarily caused by the disproportionate increase in cost of
interest-bearing liabilities compared to interest-earning assets.
Provision for Loan Losses. No provision was recorded during the three months
ended March 31, 2001 and 2000. There were $7,000 in loan charge-offs for the
three months ended March 31, 2001 while recoveries totaled $22,000. In the three
months ended March 31, 2000, there were $4,000 in loan charge-offs while
recoveries totaled $4,000.
Page 10
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
Total Non-interest Income. Total non-interest income increased by $3,000 from
$23,000 for the three months ended March 31, 2000 to $26,000 for the three
months ended March 31, 2001 primarily due to an increase in customer service
charges.
Total Non-interest Expense. Total non-interest expense increased by $139,000
from $256,000 for the three months ended March 31, 2000 to $395,000 for the
three months ended March 31, 2001. There were increases in compensation,
occupancy and equipment, data processing costs, professional fees, loss on
disposal of equipment, amortization and other non-interest expenses.
Provision for Income Taxes. The effective tax rate for the three months ended
March 31, 2001 and 2000 was 21.21% and 31.86%, respectively. The effective tax
rate is lower than the expected tax rate of 34% due to permanent tax differences
arising from the dividends received deduction and tax exempt interest income.
March 31, 2001 tax is significantly lower than 2000 due to lower net income and
the effect of tax exempt interest income in relation to the lower taxable
income.
Comparison of Six Months Ended March 31, 2001 and 2000.
- -------------------------------------------------------
Net Income. Net income for the six months ended March 31 2001, totaled $127,000
compared to $321,000 for the six months ended March 31, 2000. Net income was
lower in 2001 than in 2000 primarily due to a $110,000 decrease in net interest
income, a $20,000 increase in occupancy and equipment expenses associated with
the additional Branch and increased depreciation expense, a $14,000 increase in
professional fees associated with general and corporate matters, a $11,000 loss
on disposal of equipment related to new signage, a $8,000 increase in other
expenses associated with supplies for the Branch, and a $125,000 increase in
compensation and benefits resulting primarily from the hiring of a new
commercial loan officer in April 2000, a Branch president in December 2000 and
three staff members for the new branch, and a $90,000 decrease in tax expense
related to a decrease in taxable income.
Interest Income. For the six months ended March 31, 2001, interest income
totaled $2.171 million compared to $2.152 million for the six months ended March
31, 2000. A slight increase in the volume of average earning assets from $62.462
million for the six months ended March 31, 2000 to $62.575 million for the same
period in 2001 caused interest income to increase by $12,000. A slight increase
was experienced in the yield on average earning assets from 6.89% for the six
months ended March 31, 2000 to 6.94% for the six months ended March 31, 2001,
which contributed to a $7,000 increase in interest income.
Interest Expense. Total interest expense increased by $129,000 from $1.239
million for the six months ended March 31, 2000 to $1.368 million for the same
period in 2001. This was primarily a result of an increase in the cost of
average interest-bearing liabilities.
Interest expense for deposits including deposit premium amortization decreased
by $17,000 from $817,000 for the six months ended March 31, 2000 to $800,000 for
the same period in 2001. The cost of average interest-bearing deposits increased
slightly from 4.82% for the six months ended March 31, 2000 to 4.99% for the six
months ended March 31, 2001, which caused interest expense for deposits to
increase by $29,000. A decrease in the volume of average interest-bearing
deposits from $33.924 million for the six months ended March 31, 2000 to $32.052
million for the six months ended March 31, 2001, resulted in a $46,000 decrease
in interest expense for deposits.
Page 11
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
Interest expense for advances from the FHLB increased by $144,000 from $422,000
for the six months ended March 31, 2000 to $566,000 for the same period in 2001.
The cost of average interest-bearing advances from the FHLB increased from 5.42%
for the six months ended March 31, 2000 to 6.41% for the same period in 2001.
This increase in the cost of average interest-bearing advances caused an $82,000
increase in interest expense. Average interest-bearing advances increased from
$15.564 million for the six month period ended March 31, 2000 to $17.731 million
for the six month period ended March 31, 2001, resulting in a $64,000 increase
in interest expense for advances.
Net Interest Income. Net interest income decreased by $110,000 from $913,000 for
the six months ended March 31, 2000 to $803,000 for the six months ended March
31, 2001. The decrease in net interest income was primarily caused by the
increase in the cost and volume of interest-bearing liabilities. The increase in
average interest-bearing liabilities was not offset by a corresponding increase
in average interest-earning assets as evidenced by the decrease of the ratio of
average interest-earning assets to average interest-bearing liabilities from
126.22% in 2000 to 125.70% in 2001. The increase in the cost and volume of
average interest-bearing liabilities were the major factors for the decrease in
net interest income.
Net interest margin decreased from 2.92% for the six months ended March 31, 2000
to 2.57% for the six months ended March 31, 2001. The decrease in net interest
margin was primarily caused by the disproportionate increase in cost of
interest-bearing liabilities compared to interest-earning assets.
Provision for Loan Losses. No provision was recorded during the six months ended
March 31, 2001 and 2000. There was $7,000 in loan charge-offs for the six months
ended March 31, 2001 while recoveries totaled $32,000. In the six months ended
March 31, 2000, there was $4,000 in loan charge-offs while recoveries totaled
$32,000.
Total Non-interest Income. Total non-interest income increased by $9,000 from
$42,000 for the six months ended March 31, 2000 to $51,000 for the six months
ended March 31, 2001 primarily due to an increase in customer service charges.
Total Non-interest Expense. Total non-interest expense increased by $183,000
from $492,000 for the six months ended March 31, 2000 to $675,000 for the six
months ended March 31, 2001. There were increases in compensation, occupancy and
equipment, professional fees, loss on disposal of equipment, amortization of
goodwill and other non-interest expenses.
Provision for Income Taxes. The effective tax rate for the six months ended
March 31, 2001 and 2000 was 29.05% and 30.74%, respectively. The effective tax
rate is lower than the expected tax rate of 34% due to permanent tax differences
arising from the dividends received deduction and tax exempt interest income.
CAPITAL COMPLIANCE AND LIQUIDITY
- --------------------------------
Capital Compliance. The following table presents the Bank's compliance with its
regulatory capital requirements:
Page 12
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
At March 31, 2001
-------------------------------
Percentage
Amount of Assets
-------- --------
(Dollars in thousands)
GAAP Capital.................................... $ 11,708
Tangible capital................................ $ 11,387 17.91%
Tangible capital requirement.................... 953 1.50%
-------- -----
Excess.......................................... 10,434 16.41%
======== =====
Core capital.................................... $ 11,434 17.99%
Core capital requirements....................... 1,907 3.00%
-------- -----
Excess.......................................... 9,527 14.99%
========= =====
Total risk-based capital (1).................... $ 11,729 41.03%
Total risk-based capital requirement (1)........ 2,287 8.00%
-------- -----
Excess (1)...................................... 9,442 33.03%
======== =====
1) Based on risk-weighted assets of $28,584
Management believes that, under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and, as a result, the ability of the Bank to meet its future minimum
capital requirements.
The Bank, before and after any proposed capital distributions must meet or
exceed all capital requirements, is permitted to make capital distributions with
prior notice to the Office of Thrift Supervision during any calendar year up to
a total of current year net income and the preceding two years net income less
dividends paid during the previous two years. The Bank currently exceeds all
capital requirements and has been assessed as "well-capitalized" under the
regulatory guidelines.
Liquidity. The Bank is required under federal regulations to maintain sufficient
liquidity to ensure its safe and sound operation. The Bank's liquidity is a
measure of its ability to fund loans, pay withdrawals of deposits, and other
cash outflows in an efficient, cost effective manner. The Bank's primary source
of funds are deposits and scheduled amortization and prepayment of loans. During
the past several years, the Bank has used such funds primarily to fund maturing
time deposits, pay savings withdrawals, fund lending commitments, purchase new
investments, and increase liquidity. The Bank funds its operations internally
but supplements with borrowed funds from the FHLB. As of March 31, 2001 such
borrowed funds totaled $16.750 million. Loan payments and maturing investments
are greatly influenced by general interest rates, economic conditions and
competition.
Page 13
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
Management Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
March 31, 2001
The amount of certificate accounts and FHLB advances, which are scheduled to
mature during the twelve months ending March 31, 2002 is approximately $10.432
million and $10.050 million, respectively. To the extent that these deposits do
not remain at the Bank upon maturity, the Bank believes that it can replace
these funds with deposits, excess liquidity, FHLB advances or outside
borrowings. It has been the Bank's experience that a substantial portion of such
maturing deposits remain at the Bank. No assurances, however, can be made that
deposits can be maintained in the future without further increasing the cost of
funds if interest rates continue to increase.
At March 31, 2001, the Bank had loan commitments outstanding of $2.293 million.
Funds required to fill these commitments are derived primarily from current
excess liquidity, deposit inflows or loan and investment and mortgage-backed
security repayments and if necessary through FHLB advances.
The Company's primary source of liquidity on a stand alone basis is dividends
received from the Bank. As indicated above under "Capital Compliance", dividends
paid by the Bank are subject to regulatory restrictions. The Bank paid $200,000
in dividends for the six months ended March 31, 2001, to the Company for the
payment of cash dividends to stockholders.
KEY OPERATING RATIOS
- --------------------
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------- ------------------------------
2001 (1) 2000 (1) 2001 (1) 2000 (1)
----------------------------------------------------------------------
(Dollars in thousands, except per share data)
(Unaudited)
Return on average assets 0.16% 0.96% 0.40% 1.01%
Return on average equity 0.77% 4.60% 1.92% 4.88%
Interest rate spread 1.54% 1.92% 1.44% 1.96%
Net interest margin 2.59% 2.96% 2.56% 2.96%
Non-interest expense to average
assets 2.44% 1.58% 2.09% 1.55%
Net charge-offs to average
outstanding loans (0.04%) 0.00% (0.07%) (0.09%)
At March 31, At September
2001 31, 2000
------------------ ----------------
Nonaccrual and 90 days past due
loans $201 $ 62
Repossessed real estate, held under
judgment -- --
--------------- ----------------
Total nonperforming assets $201 $ 62
=============== ================
Nonperforming loans to gross loans 0.59% 0.20%
Nonperforming assets to total assets 0.31% 0.10%
Book value per share (2) $17.19 $16.73
- ----------------
(1) The ratios for the three-month periods are annualized.
(2) The number of shares outstanding as of March 31, 2001 and September 30,
2000 was 782,024. These include shares purchased by the ESOP.
Page 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Neither the Company nor the Bank was engaged in any legal proceeding of
a material nature at March 31, 2001. From time to time, the Company is
a party to legal proceedings in the ordinary course of business wherein
it enforces its security interest in loans.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On January 24, 2001, the Company held its annual meeting of
stockholders and the following items were presented:
Election of Directors Greg L. Goddard and Douglas D. Osborn for terms
of three years ending 2004 and the ratification of the appointment of
KPMG LLP as the Company's auditors for the 2001 fiscal year.
Votes were as follows:
For Against Withheld
------- --------- ----------
Greg L. Goddard 710,097 -- 20,904
Douglas D. Osborn 710,122 -- 20,879
Ratification of KPMG LLP 725,010 3,730 2,261
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None.
Page 15
CRAZY WOMAN CREEK BANCORP INCORPORATED AND SUBSIDIARY
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.
CRAZY WOMAN CREEK BANCORP INCORPORATED
Date: May 11, 2001 By: /s/ Deane D. Bjerke
--------------------------------------------
Deane D. Bjerke
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 11, 2001 By: /s/ John B. Snyder
--------------------------------------------
John B. Snyder
Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)