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 JUNE 30, 1998
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
June 30, 1998 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 Registrant's classes of
common stock, as of the close of the period covered by this Report.
873,875 shares of Common Stock, $1 par value per share, were outstanding as of
July 10, 1998.
EAGLE BANCORP, INC.
AND SUBSIDIARY
Index
Part I. Financial Statements
Page No.
Item 1. Consolidated Balance Sheets.......................................1
Consolidated Statements of Income and Comprehensive Income..............2,3
Consolidated Statements of Cash Flows...................................4,5
Note to Consolidated Financial Statements...............................6,7
Item 2. Management's Discussion and Analysis
or Plan of Operations.............................................8
to 15
Part II. Other Information
Item 1. Legal Proceedings................................................16
Item 2. Changes in Securities............................................16
Item 3. Defaults Upon Senior Securities..................................16
Item 4. Submission of Matters to a Vote
of Security Holders..............................................16
Item 5. Other Information................................................16
Item 6. Exhibits and Reports on Form 8-K.................................16
Signatures...............................................................17
Part I. Financial Statements
Item 1.
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
06/30/98 12/31/97
ASSETS
Cash & Due From Banks $ 2,736,848 $ 1,677,651
Federal Funds Sold - 1,280,000
---- ---------
Total cash and cash equivalents 2,736,848 2,957,651
Investment securities:
Available for sale 7,990,926 6,597,422
held for maturity 4,043,909 4,541,697
---------- ---------
Total investments securities 12,034,835 11,139,119
Loans 50,834,817 49,474,280
Allowance for Loan Loss (728,500) (706,237)
--------- ---------
Loans, net 50,106,317 48,768,043
Premises and equipment, net 2,397,851 2,437,122
Other Assets 1,270,041 1,033,491
---------- ---------
TOTAL ASSETS 68,545,892 66,335,426
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-Interest-bearing deposits 6,176,452 6,175,919
Interest-bearing deposits 50,038,712 49,491,445
---------- ----------
Total Deposits 56,215,164 55,667,364
Borrowings 4,446,166 2,643,507
Accrued expenses and other liabilities 909,511 1,272,136
------- ---------
Total Liabilities 61,570,841 59,583,007
Shareholders' Equity:
Common Stock, $1 par value, Authorized
10,000,000 shares:873,875 shares issued
and outstanding 873,875 873,875
Additional paid-in capital 4,887,568 4,887,567
Retained Earnings 1,209,899 980,884
Accumulated comprehensive income 3,709 10,093
----- ------
Total shareholders' equity 6,975,051 6,752,419
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 68,545,892 $ 66,335,426
=============== ===============
See accompanying notes to consolidated financial statements.
Page 1
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three months ended
June 30, June 30,
1998 1997
----- ----
Interest Income:
Loans, Including fees $ 1,199,047 $ 1,091,198
Federal Funds Sold 7,277 3,311
Investment securities:
Taxable 139,004 141,688
Nontaxable 30,248 31,517
------- ------
Total interest income 1,375,576 1,267,714
Interest Expense:
Deposits 623,168 583,489
Other borrowings 50,805 19,088
------- ------
Total Interest Expense 673,973 602,577
Net interest income 701,603 665,137
Provision for possible loan losses 17,332 35,000
------- ------
Net interest income after provision
for possible loan losses 684,271 630,137
Noninterest income:
Service Charges 87,227 104,221
Referral Fees - Mortgages 82,819 21,267
Net realized gain (loss)
on available for sale securities 913 1,293
Other Income 37,106 42,209
------- ------
Total noninterest income 208,060 168,990
Noninterest expense:
Salaries and employee benefits 308,547 274,697
Net occupancy and equipment expense 70,275 77,596
Other operating expense 266,667 220,277
-------- -------
Total noninterest expenses 645,489 572,570
Income before income taxes 246,842 226,557
Income taxes 78,042 75,622
------- ------
Net income 168,800 150,935
-------- -------
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) onsecurities:
Unrealized holding gains (losses) arising
during the period 4,130 62,333
Less reclassification adjustment for gains
(losses) included in net income (350) (500)
----- -----
Other comprehensive income (loss) 3,780 61,833
Comprehensive Income $ 172,580 $ 212,768
================== ===================
Basic earnings per share $ 0.19 $ 0.17
===== ====
Diluted earnings per share $ 0.18 $ 0.16
===== ====
See accompanying notes to consolidated financial statements
Page 2
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Six months ended
June 30, June 30,
1998 1997
Interest Income:
Loans, Including fees $ 2,362,252 $ 2,107,522
Interest on deposits in
financial institutions 1,205
Federal Funds Sold 17,726 38,892
Investment securities:
Taxable 264,529 268,076
Nontaxable 64,229 60,471
------- ------
Total interest income 2,476,166 2,708,736
Interest Expense:
Deposits 1,161,856 1,243,116
Other borrowings 94,153 28,277
------- ------
Total Interest Expense 1,190,133 1,337,269
--------- ---------
Net interest income 1,286,033 1,371,467
Provision for possible loan losses 32,332 41,000
------- ------
Net interest income after provision
for possible loan losses 1,245,033 1,339,135
Noninterest income:
Service Charges 185,251 192,916
Referral Fees - Mortgages 92,836 163,218
Net realized gain (loss) on
available for sale securities 1,293 913
Other Income 92,278 42,373
--------- ------
Total noninterest income 441,660 329,418
Noninterest expense:
Salaries and employee benefits 606,232 554,858
Net occupancy and equipment expense 146,406 152,366
Other operating expense 487,978 443,190
-------- -------
Total noninterest expenses 1,240,616 1,150,414
Income before income taxes 540,179 424,037
Income taxes 171,342 144,722
-------- -------
Net income $ 368,837 $ 279,315
================= ================
Other comprehensive income (loss),
net of tax: Unrealized gains (losses) on
securities:
Unrealized holding gains (losses)
arising during the period (6,034) 4,923
Less reclassification adjustment for gains
(losses) included in net income (350) (500)
----- -----
Other comprehensive income (loss) 4,423 (6,384)
----- ------
Comprehensive income $ 362,453 $ 283,738
================= =================
Basic earnings per share $ 0.42 $ 0.32
================= ================
Diluted earnings per share $ 0.30 $ 0.40
================= ================
See accompanying notes to consolidated financial statements
Page 3
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
1998 1997
---- ----
Cash Flows from operating activities:
Net Income $ 368,837 $ 279,315
Adjustments to reconcile net income to
cash provided (used) by operating
activities:
Provisions for possible loan losses 32,332 41,000
Depreciation 81,112 87,028
Securities gains (losses) 913 1,294
Amortization (accretion), net (3,316) 5,954
Accretion of loan fees - (60,625)
Loan fees, net - 19,625
Increase in other assets (234,553) (259,080)
Decrease in other liabilities (362,625) (54,864)
Net cash provided (used) by operating
activities (117,301) 59,647
Cash Flows from investing activities:
Increase in loans (1,370,606) (5,611,249)
Purchase of Investment Securities:
Available for sale (3,490,000) (1,495,259)
Held to maturity - (1,247,895)
Purchase of premises and equipment (41,841) (105,815)
Proceeds from:
Maturities of interest earning deposits in
Financial institutions - 1,000,000
Proceeds from:
Maturities/called of investment securities
held to maturity 500,000
sales/called/maturities of investment
securities
Available for sale 2,088,306 1,297,641
--------- ---------
Net cash used by investing activities (2,314,141) (6,162,577)
Cash Flow From Financing Activities
Increase in Deposits 547,800 2,164,365
FHLB Advances 1,802,659 970,500
Proceeds from reverse repurchases - 983,000
Cash dividends (139,820) (431,423)
-------- --------
Net cash provided by financing activities 2,210,639 3,686,442
Page 4
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flow
(Unaudited)
Six months ended June 30,
1998 1997
Net Increase (Decrease) in Cash
and Cash Equivalents (220,803) (2,416,488)
Cash And Cash Equivalents At Beginning of Period 2,957,651 3,537,822
--------- ---------
Cash And Cash Equivalents At End of Period $ 2,736,848 $ 1,121,334
============== ============
Supplemental disclosures of cash paid during period for:
Interest $ 1,513,925 $ 1,441,740
============== ============
Income taxes $ 239,040 $ 131,942
============= ===========
See accompanying notes to consolidated financial statements.
Page 5
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 which, 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.
(2) Earnings Per Share
Earnings per share has been calculated in accordance with the provisions of
Statement of Financial Accounting Standards Board. SFAS No. 128 requires
presentation of earnings per share on a basic computation and a diluted
computation. The basic computation divides net income by only the weighted
average number of common shares outstanding for the year and the diluted
computation gives effect to all diluted common shares that were outstanding
during the year.
Earnings per share amounts for the year 1997 have been restated to give effect
to the application of this new standard.
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
Three Months ended March 31, Six Months ended June 30,
1998 1997 1998 1997
Income available to common stockholders:
Used in basic earnings per share $ 200,032 $ 128,382 $ 368,837 $279,315
Used in diluted earnings per share 200,032 128,382 368,837 279,315
=========== ========== ============== =========
Weighted average number of common shares used
in basic earnings per share 873,875 862,845 873,875 862,845
Effect of dilutive securities:
Stock options 19,912 19,622 51,088 44,118
------ ------ ------ ------
Weighted average number of common and dilutive
Potential common shares used in diluted
earnings per share 893,787 882,467 924,963 906,963
======= ======= ======= =======
Page 6
(3) Merger
On June 30, 1998, Eagle Bank and Trust signed an Agreement and Plan of Merger
with PAB Bankshares, Inc. PAB Bankshares, Inc. is a multibank holding company
for the Park Avenue Bank located in Valdosta, Georgia, Farmers and Merchants
Bank in Adel, Georgia, and First Community Bank of Southwest Georgia in
Bainbridge, Georgia. This merger would result in PAB Bankshares, Inc. acquiring
all of Eagle Bank and Trust's outstanding stock in a business combination
accounted for as a pooling of interest. The merger would constitute a tax-free
reorganization within the meaning of section 368(a) of the Internal Revenue Code
of 1986, as amended (the "code"). Upon consummation of this merger, which is
subject to regulatory and shareholder approvals, shareholders of Eagle Bank and
Trust would receive one(1) share of stock in PAB Bankshares, Inc. in exchange
for each share of Eagle Bancorp, Inc. stock.
(4) Year 2000
The banking industry relies on the validity of financial information, most of
which is generated and maintained by automated data processing systems. Eagle
Bancorp, Inc. directors and management have formed a Year 2000 Committee which
is charged with administering the phases of awareness, assessment, renovation,
validation and implementation which are required to ensure Year 2000 compliance
throughout the organization in a timely manner. The year 2000 committee meets on
a monthly basis and reports monthly to the Board of Directors of the Bank. All
information and environmental systems have been examined by internal and
external technical support. The Committee has contacted all vendors and
supplies. Approximately 60% of the PC's have been replaced with an additional
30% to be replaced during the third quarter of 1998 the other 10% are already
compliant. The committee also contacted all major loan customers. The committee
is of the opinion that the cost of becoming Year 2000 compliant in a timely
manner will not have a material adverse impact on the operating results or
financial condition of the company.
(5) Accounting Change
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprensive Income". This statement establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. Comprehensive income is defined as the change in
equity of a business enterprise during the period from transactions and other
events and circumstances from nonowner sources.
Page 7
Item 2.
Management's Discussion and Analysis or Plan of Operations
GENERAL
The following is a discussion of the Company's financial condition at June 30,
1998 compared to December 31, 1997, and the results of its operations for the
three and six month periods ended June 30, 1998 compared to the comparable
periods ended June 30, 1997. 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 1997 Annual Report on Form 10-KSB as filed with
the Securities and Exchange Commission.
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 six months of 1998, total assets increased $2,210,466 or
Approximately 3.33% (6.66% per annum) as compared to amounts at December 31,
1997. This increase was a result of the bank's deposit base increasing by
approximately $547,800 and borrowings increase of $1,802,659. The Bank's asset
mix changed primarily by an increase in loans of $1,360,537 or approximately
2.74% when compared to the December 31, 1997 levels. This increase in loans was
primarily funded by the increase in deposits and borrowings. The following is a
summary of the Company's deposits by type at June 30, 1998 and December 31,
1997:
DEPOSITS
6/30/98 12/31/97
Noninterest-bearing demand deposits $ 6,176,452 $6,175,919
NOW accounts 7,620,719 6,867,141
Money market accounts 2,252,479 2,137,149
Savings accounts 2,975,894 2,824,983
Individual retirement accounts 3,625,712 3,476,101
Certificates of deposits of $100,000 or more 10,552,013 10,897,602
Certificates of deposits of less than $100,000 23,011,895 23,288,469
---------- ----------
Total deposits $ 56,215,164 $ 55,667,364
============= =============
Page 8
FINANCIAL CONDITION
The Company's rate of growth of approximately 3.3% (6.6% per annum) for the
first half of 1998 approximates half the 6.1% (12.2% per annum) growth that the
Company achieved for the first half of 1997. Factors expected to contribute to a
continuation of the Company's growth rate include:
1) the current loan and deposit rate environment in the local area and the
bank's community involvement
2) a relatively stable economy in the local area, and
3) management's emphasis on profitability.
The Company believes it can continue to achieve growth for 1998 in the 8% range.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management involves the matching of cash flow requirements of
customers, those of depositors withdrawing or depositing funds and borrowers
needing 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 fundings.
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. 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 June 30, 1998, the Company's cash and due from
banks equaled $2,736,848, its investment securities available for sale equaled
$7,990,926. 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 $2,000,000 and with the Federal Home Loan Bank, Atlanta, Ga. for
a secured credit line of $7,000,000. During the first six months of 1998, the
Company had outstanding borrowings of $3,796,166 of a short and long-term basis
from the Federal Home Loan Bank to match loan funding rates and maturities with
loan borrowing rates and maturities. Securities sold under repurchase agreements
are treated as financing activities and are carried at the amounts at which the
securities will be subsequently reacquired as specified in the agreements.
The Company's liquidity position, calculated as cash and due from banks, federal
funds sold, and investment securities not pledged divided by deposits, equaled
28.44% as of June 30, 1998 compared to 22.15% as of June 30, 1997. The Company's
optimum liquidity ratio is 30% with a minimum acceptable ratio of 20%.
Management monitors liquidity daily and is striving to maintain its liquidity
ratio between 20% and 30%.
The Company continues to monitor the percentage of certificates of deposit of
$100 thousand and over (jumbo deposits) to total deposits. A substantial portion
of theses jumbo deposits are with individuals who reside in the Company's
primary service area who are either shareholders, organizers, or directors of
the Company and whom the Bank has had consistent deposit relations since
inception.
Page 9
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 June 30,
1998.
INTEREST RATE SENSITIVITY TABLE
0-90 days 91-365 days One to five years Over five years
Current Current Cumulative Current Cumulative Current Cumulative
Interest-sensitive assets:
Loans $ 10,114 $ 16,779 $ 26,893 $ 21,268 $ 48,159 $ 2,684 $ 50,835
Investment securities 100 2,484 2,584 7,701 10,285 1,749 12,034
---- ------ ------ ------ ------- ------ ------
Total interest-sensitive assets 10,214 19,263 29,477 28,967 58,444 4,433 62,877
Interest-sensitive liabilities:
NOW, money market and
savings accounts 12,849 - 12,849 - 12,849 - 12,849
Individual retirement accounts
and certificates of deposits 22,175 6,819 28,952 8,196 37,190 - 37,190
Borrowings 701 2,208 2,909 1,033 3,942 504 4,446
---- ------ ------ ------ ------ ---- -----
Total interest-sensitive
liabilities 20,369 24,341 44,710 9,229 53,939 504 54,443
------- ------- ------- ------ ------- ---- ------
Interest-sensitivity gap $ 3,929 $(10,155) $ (5,078) $(15,233) $ 19,738 $ 4,505 $ 8,434
========= ======== ========= ======== ======== ======= =========
Ratio to total interest
Sensitive assets -16.15% -8.08% -24.23% 31.39% 7.16% 6.25% 13.41%
======= ====== ======= ====== ===== ===== ======
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.
Page 10
CAPITAL RESOURCES
The Company continues to maintain a satisfactory level of capital as measured by
its total shareholders' equity to total assets ratio of 10.18% at June 30, 1998
and at December 31, 1997. Management anticipates the existing capital levels
will be adequate to sustain the Company's anticipated growth for the foreseeable
future.
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 June 30, 1998.
Eagle Bancorp, Inc. and subsidiary
Required
Eagle Bancorp, Inc. Actual Minimum Excess
% Amount % Amount % Amount
Risk Based Capital 13.76% $7,672 8.00% $4,461 5.76% $3,211
Tier 1 Capital 11.19% 7,672 4.00% 2,742 7.19% 4,930
Leverage Capital 10.18% 6,975 4.00% 2,741 6.18% 4,234
Eagle Bank and Trust
Risk Based Capital 13.89% 7,747 8.00% 4,461 5.89% 3,286
Tier 1 Capital 11.31% 7,747 4.00% 2,740 7.31% 5,007
Leverage Capital 10.29% 7,050 4.00% 2.740 6.29% 4,310
Page 11
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.
Net interest income for the three month period ended June 30, 1998 equaled
$701,603 or 5.48% more than the three month period ending June 30, 1997 of
$665,137. The average yield earned on interest-earning assets decreased to 8.69%
for the three month period ended June 30, 1998 from 9.02% for the similar three
month period ended June, 30, 1997 and the average rate paid on interest-bearing
liabilities decreased to 4.47% for the three month period ended June 30, 1998
from 4.97% for the comparable period ended June 30, 1997. The Company's net
interest margin for the three month period ended June 30, 1998 was 4.43%
compared to 4.73% for the comparable period ended June 30, 1997.
Net interest income for the six month period ended June 30, 1998 equaled
$1,371,467 or 6.64% more than the six month period ending June 30, 1997 of
$1,286,033. The average yield earned on interest-earning assets decreased to
8.55% for the six month period ended June 30, 1998 from 9.14% for the similar
period ended June 30, 1997 and the average rate paid on interest-bearing
liabilities decreased to 4.44% for the six month period ended June 30, 1998 from
4.84% for the six month period ended June 30, 1997. The Company's net interest
margin for the six month period ended June 30, 1998 was 4.33% compared to 4.52%
for the period ended June 30, 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.
Page 12
A substantial portion of the Company's loans are 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 1.43% of outstanding loans
at June 30, 1998 and at December 31, 1997. The allowance increased to $728,500
at June 30, 1998 from $706,237 at December 31, 1997. The allowance relates
primarily to the level of the loan portfolio and related credit risks. The
provision for the first six months of 1998 was $32,332 compared to $41,000 for
the first six months of 1997. The provision for the three months ended June 30,
1998 was $17,332 as compared to $35,000 for the same period ended June 30, 1997.
Net chargeoffs for the six month period ended June 30, 1998 equaled $10,069
compared to net recoveries of $9,203 for the comparable period in 1997.
The following table summarizes nonperforming loans, potential problem loans, and
allowance for possible loan losses data as of June 30, 1998 and December 31,
1997.
June 30, December 31,
1998 1997
(in thousands)
Nonperforming loans (0ver 90 days) 461 48
Potential problem loans (internally classified) 291 399
Asset Quality Ratios:
Nonperforming loans to total loans,
Net of unearned income 0.91% 0.09%
Nonperforming loans to total assets 0.67% 0.07%
Nonperforming loans and potential
Problem loans to total assets 1.10% 0.67%
Allowance for possible loan losses to
Nonperforming loans 1.58x 14.71x
Allowance for possible loan losses to
Nonperforming loans and
Potential problem loans .96x 1.57x
** Potential problem loans are loans 60 to 89 days past due. The Company's
management believes that the allowance for possible loan losses is adequate to
cover potential losses in the loan portfolio.
Page 13
Noninterest Income
Noninterest income, is primarily comprised of service charges on deposit
accounts and referral fees from mortgages, which for the six month period ended
June 30, 1998 was approximately $441,660 as compared to $329,418 for the
comparable period in 1997. Service charges on deposit accounts includes fees on
deposit accounts, fees for returned checks and fees for overdraft accounts.
Noninterest income for the three months ended June 30, 1998 was $208,060
compared to $168,990 for the three months ended June 30, 1997. These increases
were primarily from service charges on deposit accounts which increase with the
overall levels of deposit accounts and referral fees on mortgages.
Noninterest Expense
Noninterest expenses are composed primarily of salaries and employee benefits,
net occupancy and equipment expense, and other operating expense as shown below.
The Company experienced noninterest expenses of approximately $1,240.616 for the
six month period ended June 30, 1998 compared to $1,150,414 for the comparable
period of 1997. The Company experienced noninterest expenses of approximately
$645,489 for the three months ended June 30, 1998 compared to $572,570 for the
three months ended June 30, 1997. Noninterest expenses increased approximately
7.84% and 12.74% for the six month and three month periods ended June 30, 1998
as compared to the same periods ended June 30, 1997.
Six months ended
June 30, June 30,
1998 1997
----- ----
Salaries and employee benefits 606,232 554,858
------- ------
Net occupancy and equipment expense 146,406 152,366
------- -------
Components of other non-interest expense:
Data processing expense 82,773 77,662
Regulatory assessments 10,746 7,721
Insurance expense 13,862 11,708
Stationery and supplies expense 28,311 33,213
Legal expense 42,126 17,472
Postage 26,315 29,205
Accounting and audit fees 17,995 19,550
Advertising and marketing expense 38,532 34,242
ATM expense 15,972 13,768
Directors' fees 55,100 23,400
Dues and subscription 8,007 10,845
Business taxes and licenses 23,250 10,832
Correspondent bank services 13,698 13,681
All other expenses 111,293 139,891
-------- -------
Total other noninterest expense 376,685 303,299
------- -------
Total NonInterest Expense $ 1,240,616 $ 1,150,414
============ ===============
Page 14
Income Taxes
The Company has recorded income tax expense of $171,342 for the six months ended
June 30, 1998 representing an effective tax rate of approximately 32% which
compares to an effective tax rate of 34% recorded for the comparable period of
1997. The Company recorded for the three months ended June 30, 1998 income tax
expense of $78,042 or 32% as compared to $75,622 or 33% for the same period
ended June 30, 1997.
Net Income
The Company earned net income of $368,837 or approximately 0.42 per share for
the six month period ended June 30, 1998. This compares to $279,315 or
approximately 0.32 per share for the like period ended June 30, 1997. The
Company earned net income of $168,800 or approximately 0.19 per share for the
three months ended June 30, 1998. This compares to $150,935 or approximately
0.17 per share for the same period ended June 30, 1997.
Inflation
Inflation impacts the growth in total assets in the banking industry and causes
a need to increase equity capital at higher than normal rates in order to meet
regulatory capital requirements. The Company copes with the effects of inflation
through effectively managing its interest rate sensitivity gap position and by
periodically reviewing and adjusting the pricing of services to consider current
costs.
Page 15
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.
A) At the Annual Meeting of Shareholders held on May 19, 1998, the following
directors were elected to hold office for the coming year:
For
Lemel A. Deal, Sr. 585,657
Robert E. Lane 585,657
James B. Lanier, Jr. 585,657
Macus B. Seligman 585,057
Andrew M. Williams, III 585,657
Gary Johnson 585,657
The following directors will continue their term: T. J. Morris, Jr.,
W. Dale Parker, Erskine Russell, Solly Trapnell.,Robert D. Coston,
J. Bird Hodges, Jr., Betty K. Minick, Paul E. Parker and Paul A. Whitlock, Jr
(B) At the Annual Meeting of Shareholders held on May 19, 1998, Tiller, Stewart
and Company, was ratified as the independent auditors for the Company. Votes
were cast as follows:
For 580,127
Against 600
Abstain 4,930
Item 5.
Other Information
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits. Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K was filed on July 2, 1998 regarding the proposed merger with PAB
Bankshares, Inc.
Page 16
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
Andrew M. Williams, III
President
(Principal Executive Officer)
By:/S/ William E. Green
William E. Green
Assistant Secretary
(Principal Financial Officer and
Principal Accounting Officer)
Date: August 15, 1998