SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
For the quarter ended Commission file number
March 31, 1997 0-19228
EAGLE BANCORP, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1860526
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
335 South Main Street, P.O. Box 638
Statesboro, Georgia 30458
(Address of principal executive offices)
Registrant's telephone number, including area code: (912) 764-8900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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 each of the Registrants's classes
of common stock, as of the close of the period covered by this Report.
862,845 shares of Common Stock, $1 par value per share, were outstanding as of
May 15, 1997.
EAGLE BANCORP, INC.
AND SUBSIDIARY
Index
Part I. Financial Statements Page No.
Item 1. Consolidated Balance Sheets...................... 2
Consolidated Statements of Income................ 3
Consolidated Statements of Cash Flows............ 4
Note to Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis
r Plan of Operations.................. 7
Part II. Other Information
Item 1. Legal Proceedings.......................... 14
Item 2. Changes in Securities...................... 14
Item 3. Defaults Upon Senior Securities............ 14
Item 4. Submission of Matters to a Vote
of Security Holders..................... 14
Item 5. Other Information.......................... 14
Item 6. Exhibits and Reports on Form 8-K........... 14
Signatures................................................... 15
Part I. Financial Statements
Item 1.
EAGLE BANCORP, INC. AND SUBISDIARY
Consolidated Balance Sheets
(Unaudited)
ASSETS 3/31/97 12/31/96
Cash Due From Banks $2,237,822 334,581
Federal Funds Sold
3,780,000 1,500,000
Interest-earning deposits in other banks
- 1,000,000
Investment securities:
available for sale
7,251,281 6,898,784
held for maturity 3,789,338 3,,790,335
Total investment securities
11,040,620 10,689,119
Loans , net of unearned income
42,192,256 42,638,858
Reserve for Loan Loss 635,566 639,500
---------- -----------
Loans, net
41,556,689 41,999,358
Premises and equipment, net
2,525,900 2,474,386
Other Assets 970,115 829,308
------------ ----------
60,207,906 60,729,993
============ ==========
Liabilities and Shareholders Equity
Liabilities:
Deposits:
Noninterest-bearing deposits
5,681,452 5,184,539
Interest-bearing deposits 46,847,857 47,280,321
------------ ----------
Total Deposits
52,529,309 52,464,860
Borrowings
533,500 748,250
Accrued expenses and other liabilities 815,074 1,257,832
---------- ----------
Total Liabilities 53,877,883 54,470,942
---------- ----------
Shareholders' Equity
Common Stock, $1 par value, Authorized 862,845 862,845
10,000,000 shares; 862,845 shares
issued and outstanding
Additional paid-in capital 4,821,527 4,821,527
Retained earnings
714,965 586,583
Net unrealized losses on investment
securities available for sale (69,314) (11,904)
---------- ----------
Total shareholders' equity ........................... 6,330,023 6,259,051
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 60,207,906 $ 60,729,993
============ ============
See accompanying note to consolidated financial statements.
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three months ended
March 31, March 31,
1996
1997
Interest Income:
Loans, including fees $ 961,292 1,016,324
Interest on deposits in financial institutions
1,205
Federal funds sold 35,581 17,372
Investment securities:
taxable 126,388 112,936
nontaxable 28,954 19,494
---------- ----------
Total interest income
1,208,452 1,111,094
Interest Expense:
Deposits 578,367 548,729
Other Borrowings 9,189 1,418
---------- ---------
Total Interest Expense 587,556 550,148
---------- ---------
Net interest income
620,897 560,946
Provision for possible loan losses. 6,000 13,528
---------- ----------
Net interest income after provision
for possible loan losses 614,897 547,418
Noninterest income:
Service Charges 88,696 86,903
Referral Fees - Mortgages 49,335 78,927
Other 22,398 18,702
---------- ---------
Total NonInterest Income
160,428 184,533
Noninterest expense:
Salaries and employee benefits 280,161 284,701
Net occupancy and equipment expense 74,769 71,346
Other operating expense 222,913 208,919
-------- ------
Total noninterest expenses 577,843 564,966
-------- -------
Income before income taxes 197,482 166,985
Income Taxes 69,100 60,674
---------- ------
Net income $ 128,382 $ 106,311
=========== =========
Net income per share $ 0.15 $ 0.12
=========== =========
Weighted average number of shares outstanding 862,845 862,755
=========== =========
See accompanying note to consolidated financial statements.
EAGLE BANCORP, INC.
Consolidated Statements of Cash Flows
(Unaudited)
March 31, March 31,
1997 1996
Cash flows from operating activities:
Net income $ 128,382 $ 106,311
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses. 6,000 13,528
Depreciation. 37,947 43,977
Securities (gains) losses, net. (3,207) -
Amortization of organizational costs 3,790
-
Amortization and (accretion), net 7,790 (692)
Accretion of deferred loan fees (20,638) (9,074)
Loan fees deferred 12,575 8,353
Increase in other assets (140,807) (60,783)
Decrease in other liabilities (11,335) (40,012)
--------------------------------------------
Net cash provided by operating activities 16,707 65,398
--------------------------------------------
Cash flows from investing activities:
Decrease in loans, net. 444,732 162,521
Purchases of investment securities available for sale (1,713,692) (2,001,800)
Purchases of investment securities held to maturity (496,094) -
Additions to premises and equipment. (89,463) (5,473)
Proceeds from sales of investment securities
available for sale 248,141 150,000
Proceeds from maturates of interest-earning deposits
in financial institutions. 1,000,000 -
Proceeds from maturities or calls of investment securities
held to maturity. 498,652 600,000
Proceeds from maturities of investment securities available
for sale 1,049,500 -
--------------------------------------------
Net cash provided (used) in investing activities 941,776 (1,094,752)
--------------------------------------------
Cash flows from financing activities:
Increase in deposits, net. 64,449 2,980,763
Decrease in federal funds purchased (200,000) (700,000)
Dividends paid (431,423) (215,689)
Repayment of borrowed funds (14,750) -
Federal Home Loan Bank advances 290,000
-
--------------------------------------------
Net cash provided (used) by financing activities (581,724) 2,355,074
--------------------------------------------
Net increase in cash and cash equivalents,
carried forward 376,759 1,325,720
Net increase in cash and cash equivalents,
brough forward $ 376,759 1,325,720
Cash and cash equivalents at beginning of year 3,737,822 3,576,465
------------ -----------
Cash and cash equivalents at end of year $ 4,114,581 4,902,185
------------- -----------
Supplemental disclosures of cash paid during year for:
Interest $ 609,404 566,923
------------- -----------
Income taxes $ 3,342 $ 62,573
------------- -----------
See accompanying note to consolidated financial statements
THE REST OF THIS PAGE INTENTIONAL LEFT BLANK.
EAGLE BANCORP, INC. AND SUBSIDIARY
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The unaudited consolidated financial statements include the accounts of Eagle
Bancorp, Inc. ("the Company") and its wholly owned subsidiary, Eagle Bank and
Trust. The accompanying unaudited consolidated financial statements do not
include all information and notes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consisting of normal recurring
accruals that, in the opinion of management, are necessary to a fair statement
of the financial position and results of operations for the periods covered by
this report have been included.
Item 2.
Management's Discussion and Analysis or Plan of Operations
The following is a discussion of the Company's financial condition at March 31,
1997, compared to December 31, 1996, and the results of its operations for the
period ended March 31, 1997, compared to the three month period ended March 31,
1996. This discussion of the Company's financial condition and results of
operations should be read in conjunction with the Company's unaudited
consolidated financial statements appearing elsewhere in this report and the
Company's 1996 Annual Report on Form 10-KSB as filed with the Securities and
Exchange Commission.
GENERAL
Eagle Bancorp, Inc. (the "Company") is a one-bank holding company providing a
full range of banking services to individual and corporate customers in Bulloch
County and surrounding areas through its wholly-owned bank subsidiary, Eagle
Bank and Trust (the "Bank"). The Bank operates under a state charter granted by
the Georgia Department of Banking and Finance (the "GDBF") and serves its
customers from its two banking facilities in Statesboro, Georgia.
FINANCIAL CONDITION
During the first three months of 1997, total assets decreased $.5 million or
approximately 0.86% as compared to amounts at December 31, 1996. During this
period the Bank's deposit base increased by approximately $64,449 as reflected
below. The Bank's asset mix changed by an increase in interest earning
investments of $1,631,501 or approximately 12.37% when compared to the December
31, 1996 levels, while cash and due from banks decreased by $1,903,241 or
approximately 85% as compared to amount at December 31, 1996.
DEPOSITS
3/31/97 12/31/96
Noninterest-bearing demand deposits $ 5,681,452 $ 5,184,539
NOW accounts 7,096,088 7,420,192
Money market accounts 2,690,112 3,077,437
Savings accounts 3,054,170 2,586,187
Individual retirement accounts 3,115,796 2,958,922
Certificates of deposits of $100,000 or more 9,442,099 10,319,613
Certificates of deposits of $100,000 or less 21,449,592 20,917,970
---------- ----------
Total deposits $ 52,529,309 $ 52,464,860
============= =============
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management involves the matching of cash flow requirements of
customers, with depositors withdrawing funds and borrowers requiring loans, and
the ability of the Company to meet those requirements. Management monitors and
maintains appropriate levels of assets and liabilities so maturities of assets
are such that adequate funds are provided to meet estimated customer withdrawals
and loan requests.
The Company's liquidity position depends primarily upon the liquidity of its
assets relative to its needs to respond to short-term demand for funds caused by
withdrawals from deposit accounts and loan funding commitments. Primary sources
of liquidity are scheduled payments on the Company's loans and interest on and
maturities of its investments. Occasionally, the Company will sell investment
securities in connection with the management of its interest sensitivity gap.
The Company may also utilize its cash and due from banks, federal funds sold and
investment securities available for sale to meet liquidity requirements. At
March 31, 1997, the Company's cash and due from banks equaled $334,581, its
investment securities available for sale equaled $7,251,281 and its federal
funds sold equaled $3,780,000. All of these assets could be converted to cash on
short notice.
Subject to certain conditions, the Company also has the ability, on a short-term
basis, to purchase federal funds from other financial institutions. Presently,
the Company has made arrangements with certain banks for short-term unsecured
advances up to $2,500,000 and with the Federal Home Loan Bank, Atlanta, Ga. for
a secured credit line of $7,000,000. During 1996, the Company borrowed on a
long-term basis from the Federal Home Loan Bank to match loan funding rates and
maturities with loan borrowing rates and maturities with balances outstanding of
$533,500 and $548,250 as of March 31, 1997 and December 31, 1996 respectfully.
The Company's liquidity position, calculated as cash and due from banks, federal
funds sold, and investment securities not pledged divided by deposits, equaled
31.30% as of March 31, 1997, compared to 29.94% as of December 31, 1996. The
Company's optimum liquidity ratio is 30% with a minimum acceptable ratio of 20%.
Management monitors liquidity daily and strives to maintain a liquidity ratio
between 20% and 30%.
The Company continues to monitor the percentage of certificates of deposit of
$100 thousand and over to total deposits. At March 31, 1997, deposits over $100
thousand equaled approximately 18% of total deposits. A substantial portion of
these certificates of deposits is with individuals who reside in the Company's
primary service area who are either shareholders, organizers, or directors of
the Company and to whom the Bank has had consistent deposit relations since
inception.
The relative interest rate sensitivity of the Company's assets and liabilities
indicates the extent to which the Company's net interest income may be affected
by interest rate movements. The Company's ability to reprice assets and
liabilities in the same dollar amounts and at the same time minimizes interest
rate risks. One method of measuring the impact of interest rate changes on net
income is to measure, in a number of time frames, the interest sensitivity gap,
by subtracting interest-sensitive liabilities from interest-sensitive assets, as
reflected in the following table. Such interest sensitivity gap represents the
risk, or opportunity, in repricing. If more assets than liabilities are repriced
at a given time in a rising rate environment, net interest income improves; in a
declining rate environment, net interest income deteriorates. Conversely, if
more liabilities than assets are repriced while interest rates are rising, net
interest income deteriorates; if interest rates are falling, net interest income
improves. The Company's strategy in minimizing interest rate risk is to minimize
the impact of short term interest rate movements on its net interest income
while managing its middle and long-term interest sensitivity gap in light of
overall economic trends in interest rates. The following table illustrates the
relative sensitivity of the Company to changing interest rates as of March 31,
1997.
INTEREST RATE SENSITIVITY TABLE
(amounts in thousands)
0-90 days 91-365days One to Five Years Overfive years
Current Current Cumulative Current Cumulative Current Cumulative
Interest-sensitive assets:
Loans 6,251 17,694 23,945 16,577 40,502 1,690 42,192
Investment securities - 980 980 9,052 10,032 1,009 11,041
Federal funds sold 3,780 - 3,780 - 3,780 - 3,780
------ ---- ------ ---- ------ ---- -----
Total interest-sensitive assets 10,031 18,674 28,705 25,609 54,314 2,699 57,013
------- ------ ------ ------ ------- ----- ------
Interest-sensitive liabilities:
NOW, money market and
savings accounts 12,860 - 12,860 - 12,860 12,860
Certificates of deposits and
individual retirement accounts 8,393 17,766 26,159 7,829 33,988 - 33,988
Other borrowing 15 45 60 236 296 238 534
--- --- --- ---- ---- ---
Total interest-sensitivity
liabilities 21,268 17,811 39,079 8,065 47,144 238 47,382
---------- ------ ------- ----- ---------- ------- -------
Interest-sensitivity gap 11,237 863 (10,374) 17,544 7,190 2,461 9,631
====== ======= ======== ====== ====== ======= =====
Ratio to interest-sensitivity
assets -19.71% 1.51% -18.20% 30.77% 12.61% 4.32% 16.89%
======= ===== ======= ====== ====== ===== ======
Since all interest rates and yields do not adjust at the same velocity, the
interest rate sensitivity gap is only an indicator of the potential effects of
interest rate changes on net interest income.
CAPITAL RESOURCES
The Company continues to maintain a satisfactory level of capital as measured by
its total shareholders' equity to total assets ratio of 10.51% at March 31,
1997, as compared to 10.31% at December 31, 1996. Management anticipates the
existing capital levels will be adequate to sustain the Company's anticipated
growth for the future.
Eagle Bancorp, Inc. believes that cash on hand of approximately $299,200 at
March 31, 1997, should be sufficient to fund its holding company annual cash
requirements for the future that consist principally of holding company annual
cash expenses of approximately $70,000. On October 15, 1996, the Company
declared a cash dividend in the amount of $.50 per share payable January 15,
1997. This was declared as an annual dividend of $.30 per share and a special
one time dividend of $.20 per share. In May of 1995, the Company declared a 3
for 2 stock split in the form of a share dividend. On October 16, 1995, the
Company declared a cash dividend in the amount of $.25 per share payable January
15, 1996.
The Company is not aware of any recommendations by regulatory authorities which,
if implemented would have a significant impact on its liquidity, capital
resources, or operations except for the recent FDIC reduction in insurance
premiums on deposits which has had a favorable impact on the Company's results
of operations.
The Georgia Department of Banking and Finance requires that State-chartered
banks in Georgia maintain a ratio of primary capital, as defined, to total
assets of not less than 6%. The Company intends to maintain a satisfactory level
of capital necessary to satisfy regulatory requirements and to accommodate
expected growth patterns.
The following table compares the Company's and its subsidiary's capital ratios
to the minimum capital ratios required to be maintained under applicable
regulatory guidelines at March 31, 1997.
Eagle Bancorp, Inc. and Subsidiary:
Required
Actual Minimum Excess
% Amount % Amount % Amount
(dollars in thousands)
Risk Based Capital ... 15.77% 6,951 8.00% $3,525 7.71% $3,426
Tier 1 Capital ....... 14.52 6,399 4.00 1,763 10.52 4,650
Leverage Capital Ratio 10.56 6,399 3.00 1,818 7.56 4,581
Eagle Bank and Trust:
Required
Actual Minimum Excess
% Amount % Amount % Amount
(dollars in thousands)
Risk Based Capital 15.17 $6,685 8.00 $3,525 7.17 $3,160
Tier 1 Capital 13.92 6,133 4.00 1,763 9.92 4,370
Leverage Capital Ratio 10.12 6,133 3.00 1,818 7.12 4,315
RESULTS OF OPERATIONS
Net Interest Income
The Company's net interest income, the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities, is
the Company's principal source of income. Interest-earning assets for the
Company include loans, federal funds sold and investment securities. The
Company's interest-bearing liabilities include deposits and borrowings.
Net interest income for the three month period ended March 31, 1997, equaled
$620,897 or 10.69% more than net interest income of $560,946 for the three month
period ending March 31, 1996. The average yield earned on average
interest-earning assets decreased to 8.65% for the three month period ended
March 31, 1997 from 9.17% for the similar period ended March 31, 1996 and the
average rate paid on average interest-bearing liabilities decreased to 4.92% for
the three month period ended March 31, 1997 from 5.29% for the three month
period ended March 31, 1996. The Company's interest rate differential for the
three month period ended March 31, 1997, was 3.73% compared to 3.88% for the
period ended March 31, 1996. The net interest margin (net interest income
divided by average interest-earning assets) for the three month period ended
March 31, 1997, was 4.42% as compared to 4.62% for the same period ended March
31, 1996. The Company's average loan to deposit ratio in 1996 was 83.42%
compared to 77.88% for the three months ended March 31, 1997. The Company's loan
to deposit ratio at December 31, 1996, was 81.27% as compared to 80.32% at March
31, 1997.
Although management continues to explore methods to improve its net interest
margin, there are no assurances that current levels can be maintained due to
market interest rate fluctuations and the very competitive local banking
environment.
Provision for Possible Loan losses
The Company provides for possible loan losses based upon information available
at the end of each period. By evaluating the adequacy of the allowance for
possible loan losses at the end of each period, management maintains the
allowance for possible loan losses at a level adequate to provide for losses
that can reasonably be anticipated. The level of allowance for possible loan
losses is based on management's periodic loan-by-loan evaluation and other
analysis of its loan portfolio, as well as its assessment of prevailing and
anticipated economic conditions in Southeast Georgia.
A substantial portion of the Company's loans is secured by real estate,
including real estate and other collateral in Bulloch County and surrounding
counties. Accordingly, the ultimate collectibility of a substantial portion of
the Company's loan portfolio is susceptible to changes in economic conditions in
these market areas.
The allowance for possible loan losses approximated 1.51% of outstanding loans
at March 31, 1997, as compared to approximately 1.50% at December 31, 1996.. The
allowance decreased to $635,566 at March 31, 1997, from $639,500 at December 31,
1996.
The provision for the first three months of 1997 decreased by approximately
$7,528 as compared to the first three months of 1996. Net chargeoffs for the
three month period ended March 31, 1997, were $9,934 compared to $4,528 for the
comparable period in 1996.
The following table summarizes nonperforming loans, potential problem loans, and
allowance for possible loan losses data as of March 31, 1997, and December 31,
1996.
March 31, December 31,
1997 1996
Nonperforming loans $134 $123
Potential problem loans $364 $611
Asset Quality Ratios:
Nonperforming loans to total
loans, net of unearned income .32% .029%
Potential problem loans to total
loans, net of unearned income .88% 1.43%
Nonperforming and potential problem loans
to total loans, net of unearned income 1.20% 1.72%
Allowance for possible loan losses
to nonperforming loans 4.75x 5.20x
Allowance for possible loan
losses to nonperforming loans
and potential problem loans 1.28x .087x
Nonperforming loans are loans on nonaccrual and restructured.
Potential problem loans are internally classified by management and not
included in nonperforming..
The Company's management believes that the allowance for possible loan losses is
adequate to cover potential losses in the loan portfolio.
Noninterest Income
Noninterest income for the three month period ended March 31, 1997, was $160,428
compared to $184,533 for the comparable period in 1996. This income primarily
includes service charges on deposit accounts, in the amount of $88,696 for the
three months ended March 31, 1997 compared to $86,903 in 1996 and mortgage
referral fees in the amount of $49,335 for the three months ended March 31, 1997
compared to $78,927 in 1996.
Noninterest Expense
Noninterest expense is composed primarily of salaries and employee benefits, net
occupancy and equipment expense, and other operating expense as shown below. The
Company recorded noninterest expenses of approximately $577,843 for the three
month period ended March 31, 1997, compared to $564,966 for the comparable
period of 1996. The increase in noninterest expense for the three months ended
March 31, 1997, as compared to the three months ended March 31, 1996, is in a
large part related to the other operating expense of approximately 6.70%.
Three months ended
March 31, December 31,
1997 1996
---- ----- ----
Salaries and employee
benefits $280,161 $284,701
Net occupancy and equipment expense 74,769 71,346
Major components of other non-interest expense
Data processing expense 36,257 25,845
Stationery and supplies expense 27,928 28,610
Postage 13,389 14,155
Accounting and audit fees 10,550 12,351
Advertising and marketing expense 21,334 15,871
Director fees 11,700 11,700
All other non-interest expense items - total 101,755 100,387
Income Taxes
The Company has recorded income tax expense of $69,100 for the first quarter of
1997 representing an effective tax rate of approximately 35%. The Company
recorded income tax expense of $60,674 for the first quarter of 1996
representing an effective tax rate of approximately 36%.
Net Income
The Company earned net income of $128,382 or approximately $.14 per share for
the three month period ended March 31, 1997. This compares to $106,311 or
approximately $.12 per share for the same period ended March 31, 1996.
Part II. Other Information
Item 1.
Legal Proceedings.
None
Item 2.
Changes in Securities
None
Item 3.
Defaults upon Senior Securities
None
Item 4.
Submission of Matters to a Vote of Security Holders.
None
Item 5.
Other Information
None
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are attached:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated January 28, 1997 disclosed the following
reportable event:
Item 4 - Changes in Registrant's Certifying Accountants,
KPMG Peat Marwick, LLP and engaged the services of
Tiller, Stewart & Company, LLC as its principal
accountants.
Item 7 - Financial Statements and Exhibits
No Financial Statements were filed.
An amendment to Form 8-K dated February 10, 1997 disclosed the following
reportable event:
Item 7 - Financial Statements and Exhibits
No Financial Statements were filed.
Former accountants concurence letter filed as an exhibit
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused the Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE BANCORP, INC.
By: \s\
Andrew M. Williams, III
President
(Principal Executive Officer)
By: \s\
William E. Green
Assistant Secretary
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 15, 1997