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 SEPTEMBER 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
September 30, 1998 0-19228
EAGLE BANCORP, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1860526
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification
No.)
335 South Main Street, P.O. Box 638
Statesboro, Georgia 30459
(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.
907,610 shares of Common Stock, $1 par value per share, were outstanding as of
November 10, 1998.
EAGLE BANCORP, INC.
AND SUBSIDIARY
Index
Part I. Financial Statements
Page No.
Item 1. Consolidated Balance Sheets..................................1
Consolidated Statements of Income..........................2-3
Consolidated Statements of Cash Flows.......................4
Notes to Consolidated Financial Statements.................5
Item 2. Management's Discussion and Analysis
or Plan of Operations.................................6-14
Part II. Other Information
Item 1. Legal Proceedings...........................................15
Item 2. Changes in Securities.......................................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...........................................................16
Part I. Financial Statements
Item 1.
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
ASSETS 9/30/98 12/31/97
Cash and due from banks $ 2,044,964 $ 1,677,651
Federal funds sold 2,930,000 1,280,000
---------- ---------
Total cash and cash equivalents 4,974,964 2,957,651
Investment securities:
Available for sale 8,085,488 6,597,422
Held to maturity 3,665,329 4,541,697
---------- ---------
Total Investment Securities 11,750,817 11,139,119
Loans, net of unearned income 51,476,804 49,474,280
Reserve for Loan Loss (732,200) (706,237)
--------- ---------
Loans, net 50,744,604 48,768,043
Premises and Equipment, net 2,416,200 2,437,122
Other Assets 1,088,159 1,033,491
---------- ---------
TOTAL ASSETS 70,974,744 66,335,426
=========== ==========
LIABILITIES:
Non-Interest Bearing Deposits 7,257,757 6,175,919
Interest Bearing Deposits 50,595,625 49,491,445
----------- -----------
Total Deposits 57,853,382 55,667,364
FHLB advances 4,745,901 2,643,507
Accrued expenses and other liabilities 954,893 1,272,136
-------- ----------
Total Liabilities 63,554,176 59,583,007
SHAREHOLDER'S EQUITY:
Common Stock, $1 par value 907,610 873,875
Authorized 10,000,000 shares;
907,610 shares issued and outstanding
Additional Paid in Capital 5,137,485 4,887,567
Retained Earnings 1,339,654 980,884
Accumulated other
Comprehensive income 35,819 10,093
------- -------
Total Shareholder's Equity 7,420,567 6,752,419
TOTAL LIABILITIES
AND SHAREHOLDER'S EQUITY $ 70,974,744 $ 66,335,426
=========== ==========
See accompanying notes to consolidated financial statements.
Page 1
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Nine Months ended
September 30, September 30,
1998 1997
INTEREST INCOME:
Loans, including fees $ 3,590,626 $ 3,298,041
Interest on deposits in financial institutions - 1,205
Federal funds sold 33,865 45,452
Investment securities:
Taxable 400,914 401,980
Nontaxable 94,272 91,662
------- ------
Total Interest Income 4,119,677 3,838,342
Interest expense - Deposits 1,873,211 1,774,573
Other Borrowings 158,568 72,030
-------- ------
Total Interest Expense 2,031,779 1,846,603
Net Interest Income 2,087,898 1,991,738
Provision for possible loan losses 34,332 90,000
------- ------
Net interest income after provision
for possible loan losses 2,053,565 1,901,738
NONINTEREST INCOME:
Service Charges 269,086 296,904
Referral fees - mortgages 254,034 170,184
Security gains (losses) 913 1,293
Other income 144,237 72,095
-------- ------
Total noninterest income 668,270 540,475
NONINTEREST EXPENSE:
Salaries and employee benefits 919,609 840,545
Net occupancy and equipment expense 219,507 231,579
Other operating expense 743,248 667,908
-------- -------
Total noninterest expense 1,882,364 1,740,032
Income before income taxes 839,471 702,182
Income taxes 268,271 245,000
-------- -------
NET INCOME $ 571,200 $ 457,182
======== =======
Net income per share $ 0.63 $ 0.53
===== ====
See accompanying notes to consolidated financial statements.
Page 2
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
Three months
ended
September 30, September 30,
1998 1997
INTEREST INCOME:
Loans, including fees $ 1,228,374 $ 1,190,519
Federal funds sold 16,139 6,560
Investment securities:
Taxable 136,385 133,905
Nontaxable 30,043 31,191
------- ------
Total Interest Income 1,362,175 1,410,941
Interest expense - Deposits 630,095 612,717
Other Borrowings 64,416 43,753
------- ------
Total Interest Expense 694,511 656,470
Net Interest Income 716,430 705,705
Loan Loss Provision 2,000 49,000
------ ------
Net Income After Loan Loss Prov. 714,430 656,705
NONINTEREST INCOME:
Service Charges 83,835 103,987
Referral fees - mortgages 90,816 77,348
Security gains (losses) - -
Other income 51,959 29,722
------- ------
Total noninterest income 226,609 211,057
NONINTEREST EXPENSE:
Salaries and employee benefits 313,377 285,687
Net occupancy and equipment expense 73,101 79,213
Other operating expense 255,270 224,718
-------- -------
Total noninterest expense 641,748 589,618
Income before income taxes 299,292 278,144
Income taxes 96,929 100,278
------- -------
NET INCOME $ 202,363 $ 177,866
============ ==============
Net income per share $ 0.22 $ 0.21
===== ====
See accompanying notes to consolidated financial statements
Page 3
EAGLE BANCORP, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine months ended
September 30,
1998 1997
Net Income $ 571,200 $ 457,182
Adjustments to reconcile net income
Provisions for possible loan losses 32,332 90,000
Depreciation 110,036 133,434
Securities gains (losses) 913 (1,293)
Amortization (accretion), net (6,197) (20,843)
Accretion of loan fees - (80,552)
Loan fees, net - 46,979
Increase in other assets 30,576 (123,440)
Increase (decrease) in other liabilities (317,242) (320,231)
Net cash provided by operating activities 421,618 181,236
Cash Flows from investing activities:
Decrease in loans, net (2,008,893) (7,871,523)
Purchase of investments - AFS (4,204,240) (1,416,432)
Purchase of investments - HTM - (1,431,155)
Purchase of premises and equipment (89,114) (112,038)
Proceeds from certificate of deposits - 1,000,000
Maturities of investments - HTM 800,000 1,020,000
Maturities of investments - AFS 90,000 729,500
Called investments - AFS 900,000 250,000
Called investments - HTM 250,000 -
Sale of investments - AFS 1,498,306 -
Sale of investments - HTM - 498,652
Net Cash used in investing activities (2,763,941) (7,332,996)
Cash Flow From Financing Activities
Increase in Deposits, Net 2,186,018 4,029,342
FHLB Advances 2,102,394 1,365,250
Repayment of FHLB advance - (39,005)
Proceeds from reverse repurchases - 977,000
Cash dividends (212,429) -
Options Exercised 283,652 -
Federal funds purchased - 1,380,000
Net Cash Provided By Financing Activities 4,359,636 7,712,587
Net Increase (Decrease) in Cash and Cash Equivalents 2,017,313 560,827
Cash And Cash Equivalents At Beginning of Period 2,957,651 3,737,822
Cash And Cash Equivalents At End of Period $ 4,974,964 $ 4,298,649
Supplemental disclosures of cash paid durning period for:
Interest $ 2,110,873 $ 1,829,258
Income taxes $ 321,747 $ 196,242
See accompanying notes to consolidated financial statements.
Page 4
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 Nine Months ended
September 30, September 30,
1998 1997 1998 1997
Income available to common stockholders:
Used in basic earnings per share $ 202,363 $ 177,866 $ 571,200 $ 457,182
======== ======== ======== =======
Used in diluted earnings per share $ 202,363 $ 177,866 $ 571,200 $ 457,182
======== ======== ======== =======
Weighted average number of common shares used
in basic earnings per share 873,875 862,845 907,610 862,845
Effect of dilutive securities:
stock options 51,088 44,118 17,353 44,118
------- ------- ------- ------
Weighted average number of common and dilutive
Potential common shares used in
diluted earnings per share 927,963 906,963 927,963 906,963
======== ======== ======== =======
(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.
Page 5
(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 first quarter of 1999 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 5 (cont'd)
Item 2.
Management's Discussion and Analysis or Plan of Operations
GENERAL
The following is a discussion of the Company's financial condition at September
30, 1998 compared to December 31, 1997, and the results of its operations for
the three and nine month periods ended September 30, 1998 compared to the
comparable periods ended September 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 main banking facility in Statesboro, Georgia.
Page 6
FINANCIAL CONDITION
During the first nine months of 1998, total assets increased $4,639,318 or
approximately 7% as compared to amounts at December 31, 1997. This increase was
primarily a result of the bank's deposit base increasing by approximately
$2,186,018 and other borrowings of $2,102,394.
The following is a summary of deposits:
DEPOSITS
9/30/98 12/31/97
Noninterest-bearing demand deposits $ 7,257,757 $6,175,919
NOW accounts 8,097,668 6,867,141
Money market accounts 2,443,908 2,137,149
Savings accounts 2,881,874 2,824,983
Individual retirement accounts 3,639,384 3,476,101
Certificates of deposits of $100,000 or more 10,267,189 10,897,602
Certificates of deposits of less than $100,000 23,265,602 23,288,469
-------- ---------- ----------
Total deposits $ 57,853,382 $ 55,667,364
============ ============
The Company's rate of growth was approximately 7% for the nine months of 1998 as
compared to 13% for the same period in 1997. Factors expected to contribute to a
continuation in the Company's growth rate include:
1) the current loan demand in the local area and the bank's
community activities,
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 7 to 10%
range.
Page 7
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 September 30, 1998, the Company's cash and due
from banks equaled $4,974,964, its investment securities available for sale
equaled $8,085,488. 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. As of September 30, 1998 and December 31,
1997, the Company had outstanding borrowings of $4,745,901 and $2,643,507
respectfully, on a long-term basis from the Federal Home Loan Bank to match loan
funding rates and maturities with borrowing rates and maturities.
The Company's liquidity position, calculated as cash and due from banks, federal
funds sold, and investment securities not pledged divided by deposits, equaled
26.10% as of September 30, 1998 compared to 22.87% as of December 31, 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. At September 30, 1998
jumbo deposits equaled 17.75% of total deposits of $57,853,382. At December 31,
1997 jumbo deposits equaled 21.10% of total deposits of $56,005,795. Jumbo
deposits are primarily with individuals who reside in the Company's primary
service area and to whom the Bank has had consistent deposit relations since
inception and county, city and educational funds. The jumbo deposit balances are
funds on deposit from various local governmental agencies and are secured by
pledged collateral having a fair market value equal to at least 110% of those
deposits.
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 September
30, 1998.
Page 8
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 $ 13,877 $ 11,808 $ 25,685 $ 21,882 $ 47,567 $ 2,774 $ 50,341
Investment securities 185 2,864 3,049 6,683 9,732 2,019 11,751
--- ----- ----- ----- ----- ----- ------
Total interest-sensitive assets 14,062 14,672 28,734 28,565 57,299 4,793 62,092
Interest-sensitive liabilities:
NOW, money market and
savings accounts 13,423 0 13,423 0 13,423 0 13,423
Individual retirement accounts and
certificates of deposits 7,320 22,655 29,975 7,197 37,172 0 37,172
Borrowings 50 2,151 2,202 1,807 4,008 738 4,746
-- ----- ----- ----- ----- --- -----
Total interest-sensitive liabilities 20,794 24,806 45,601 9,003 54,604 738 55,342
------ ------ ------ ----- ------ --- ------
Interest-sensitivity gap $ (6,733) $ (10,134) $ (16,867) $ 19,562 $ 2,695 $ 4,056 $ 6,750
======== ========= ========= ======== ======= ======= =======
Ratio to total interest
sensitive assets -10.84% -16.32% -27.16% 31.50% 4.34% 6.53% 10.87%
===== ===== ===== ===== ==== ==== =====
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 9
CAPITAL RESOURCES
The Company continues to maintain a satisfactory level of capital as measured by
its total shareholders' equity to total assets ratio of 10.46% at September 30,
1998 as compared to 10.18% 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.
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 tables compare the Company's and its subsidiary's capital ratios
to the minimum capital ratios required to be maintained under applicable
regulatory guidelines at September 30, 1998.
Required
Actual Minimum Excess
-------- ---------- --------
% Amount % Amount % Amount
------ ------ ----- ------- ----- ------
Consolidated
Tier 1 capital......... 10.31% 7,313 6.00% 4,256 4.31% 3,057
Risk based capital..... 14.94% 7,961 8.00% 4,262 6.94% 3,699
Leverage ratio......... 10.31% 7,313 3.00% 2,128 7.31% 5,185
Eagle Bank and Trust
Tier 1 capital......... 9.97% 7,068 6.00% 4,256 3.97% 2,812
Risk based capital..... 14.52% 7,734 8.00% 4,262 6.52% 3,472
Leverage ratio......... 9.97% 7,068 3.00% 2,128 6.97% 4,940
Page 10
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 consist of deposits, secured and/or
unsecured borrowings.
Net interest income for the three month period ended September 30, 1998 equaled
$716,430 or 1.52% more than the three month period ended September 30, 1997. The
average yield earned on interest-earning assets was 8.80% for the three month
period ended September 30, 1998 compared to 8.93% for the similar period ended
September, 30, 1997 and the average rate paid on interest-bearing liabilities
was 5.10% for the three month period ended September 30, 1998 compared to 5.00%
for the comparable period ended September 30, 1997. The Company's net interest
margin for the three month period ended September 30, 1998 was 4.47% compared to
4.63% for the three month period ended September 30, 1997.
Net interest income for the nine month period ended September 30, 1998 equaled
$2,087,898 or 4.83% more than the nine month period ending September 30, 1997.
The average yield earned on interest-earning assets was 8.77% for the nine month
period ended September 30, 1998 compared to 8.90% for the similar period ended
September 30, 1997 and the average rate paid on interest-bearing liabilities was
5.06% for the nine month period ended September 30, 1998 compared to 4.95% for
the nine month period ended September 30, 1997. The Company's net interest
margin for the nine month period ended September 30, 1998 was 4.44% compared to
4.60% for the period ended September 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.
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 1.46% of outstanding loans
at September 30, 1998 as compared to 1.43% at December 31, 1997. The allowance
increased to $732,200 at September 30, 1998 from $706,237 at December 31, 1997.
The change in the allowance relates primarily to the change in the loan
portfolio and to related credit risks. The provision for the first nine months
of 1998 was $34,332 compared to $90,000 for the first nine months of 1997. This
provision is a result of evaluation as describe above of the loan portfolio
during the first nine months of 1998 as compared to the first nine months of
1997. Net charge-offs for the nine month period ended September 30, 1998 equaled
$8,369 compared to net charge-offs of $33,574 for the comparable period in 1997.
Page 11
The following table summarizes nonperforming loans, potential problem loans, and
allowance for possible loan losses data as of September 30, 1998 and December
31, 1997.
September 30, December 31,
1998 1997
(in thousands)
Nonperforming loans (0ver 90 days) 149 48
Potential problem loans (internally classified) 296 399
Asset Quality Ratios:
Nonperforming loans to total loans,
Net of unearned income 0.30% 0.09%
Nonperforming loans to total assets 0.21% 0.07%
Nonperforming loans and potential
Problem loans to total assets 0.63% 0.67%
Allowance for possible loan losses to
Nonperforming loans 4.91x 14.71x
Allowance for possible loan losses to
Nonperforming loans and
Potential problem loans 1.64x 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.
Noninterest Income
Noninterest income, net of securities gains (losses), primarily comprised of
service charges on deposit accounts and mortgage referral fees, for the nine
month period ended September 30, 1998 was approximately $668,270 compared to
$540,475 for the comparable period in 1997 and represents and increase of
approximately 23.64%. Service charges on deposit accounts includes fees on
deposit accounts, fees for returned checks and fees for overdraft accounts.
Noninterest income from the three months ended September 30, 1998 was $226,609
compared to $211,057 for the three months ended September 30, 1997 and
represents and increase of approximately 7.37%.
Page 12
Noninterest Expense
Noninterest expense is composed primarily of salaries and employee benefits, net
occupancy and equipment expense, and noninterest expense as shown below. The
Company had noninterest expenses of $ 1,882,364 for the nine month period ended
September 30, 1998 compared to $ 1,740,032 for the comparable period of 1997.
The Company experienced noninterest expense of approximately $641,748 for the
three months ended September 30, 1998 compared to $589,618 for the three months
ended September 30, 1997. Other operating expenses increased approximately 8.17%
and 8.84% for the nine month and three month periods ended September 30, 1998 as
compared to the same periods ended September 30, 1997. Major components of
noninterest expenses are shown below:
Nine Months ended
September 30,
1998 1997
Salaries and employee benefits $ 919,609 $ 840,545
Net occupancy and equipment expense 219,507 231,579
Major Compontents of other operating expenses:
Data processing expense 126,782 121,453
Stationery and supplies expense 44,731 50,133
Postage 41,582 47,409
Accounting and audit fees 24,995 28,550
Advertising and marketing expense 51,064 46,752
Directors Fees 84,550 38,100
Other operating expenses 369,544 335,510
-------- -------
Total noninterest expense $ 1,882,364 $ 1,740,032
========== =========
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Income Taxes
The Company has recorded income tax expense of $268,271 for the first nine
months of 1997 representing an effect tax rate of approximately 32% which
compares to an effective tax rate of 35% recorded for the comparable period of
1997. The Company recorded for the three months ended September 30, 1998 income
tax expense of $96,929 as compared to $100,278 for the same period ended
September 30, 1997.
Net Income
The Company's net income was $202,363 for the three month period ended September
30, 1998 compared to $177,859 for the like period ended September 30, 1997
representing an increase of 13.78%. The Company's net income per share was $0.22
per share for the three month period ended September 30, 1998 compared to $0.21
per share for the comparable period for 1997. The Company's net income was
$571,200 or $0.63 per share for the first nine months of 1998 compared to
$457,182 or $0.53 per share for the comparable period for 1997 or an increase of
approximately 24.94% and 18.87% respectively.
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.
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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.
Financial Data Sheet - Exhibit 27
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
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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/ Gary L. Johnson
Gary L. Johnson
President
(Principal Executive Officer)
By:/s/ William E. Green
William E. Green
Assistant Secretary
(Principal Financial Officer and
Principal Accounting Officer)
Date: November 15, 1998
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