UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number
Emerald Isle Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3300934)
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
730 Hancock Street
Quincy, Massachusetts, 02170
(Address of principal executive offices)
(617) 479-5001
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: March 31, 1997, Common
Stock--Par Value $1.00 2,235,467 shares outstanding.
1
EMERALD ISLE BANCORP, INC.
INDEX
Page Number
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Cover Page.................................................................... 1
Index......................................................................... 2
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance Sheet--March 31, 1997 and December 31, 1996................... 3
Statement of Income--Three months ended
March 31, 1997 and 1996............................................... 4
Statement of Changes in Stockholders' Equity--Three months
ended March 31, 1997 and 1996......................................... 5
Statement of Cash Flows--Three months ended March 31, 1997 and 1996... 6
Notes to Financial Statements......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 8
PART II--OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 14
Item 6. Exhibits and Reports on Form 8-K...................................... 14
2
EMERALD ISLE BANCORP, INC
CONSOLIDATED BALANCE SHEET
31-MAR-97 31-DEC-96
(Unaudited) (Audited)
-------------- --------------
ASSETS:
Total cash and due from banks...................................... $ 4,248,634 $ 5,521,299
Short term investments............................................. 8,500,000 11,679,798
Securities held to maturity........................................ 80,521,103 83,512,156
Securities available for sale...................................... 29,967,705 33,431,990
Loans, net......................................................... 276,190,381 263,208,189
Banking premises & equipment, net.................................. 7,600,127 7,711,423
Accrued interest receivable........................................ 2,461,267 2,501,071
Other real estate owned............................................ 105,690 0
Other assets....................................................... 2,546,302 2,072,839
-------------- --------------
Total assets...................................................... $ 412,141,209 $ 409,638,765
-------------- --------------
-------------- --------------
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Now & demand deposits............................................. $ 31,644,312 $ 31,190,026
Money market accounts............................................. 39,323,925 37,811,552
Other deposits.................................................... 49,072,022 47,771,658
Term certificates accounts........................................ 227,720,454 220,316,691
-------------- --------------
Total deposits................................................... 347,760,713 337,089,927
Federal Home Loan Bank advances.................................... 33,668,000 41,668,000
Mortgagors' escrow payments........................................ 1,531,783 1,371,878
Income taxes payable............................................... (57,060) 643,901
Other liabilities.................................................. 547,556 928,672
-------------- --------------
Total liabilities................................................ 383,450,992 381,702,378
Commitments and contingencies
STOCKHOLDERS' EQUITY
Serial preferred stock, $1.00 par value 1,000,000 shares
authorized: none issued.......................................... 0 0
Common stock, $1.00 par value, 5,000,000 shares authorized
2,235,467 and 2,210,888 shares issued and outstanding............ 2,235,467 2,210,888
Additional paid-in-capital......................................... 11,938,652 11,586,709
Undivided profits.................................................. 15,051,085 14,329,844
Net unrealized (loss)/gain on securities available for sale........ (533,987) (191,054)
-------------- --------------
Total stockholders' equity....................................... 28,691,217 27,936,387
-------------- --------------
Total Liabilities & Stockholders' Equity........................ $ 412,142,209 $ 409,638,765
-------------- --------------
-------------- --------------
3
EMERALD ISLE BANCORP, INC
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended
--------------------------
March 31 March 31
1997 1996
------------ ------------
INTEREST & DIVIDEND INCOME
Interest on loans.......................................................... $ 5,893,786 $ 4,845,051
Income & dividends on investment securities................................ 1,683,582 1,913,255
Interest on short-term investments........................................ 246,824 35,831
------------ ------------
Total interest & dividend income........................................ 7,824,192 6,794,137
INTEREST EXPENSE
Interest on deposits....................................................... 3,907,509 3,379,976
Interest on borrowed funds................................................. 513,024 569,896
------------ ------------
Total interest & dividend expense....................................... 4,420,533 3,949,872
------------ ------------
Net interest income........................................................ 3,403,659 2,844,265
Provision for possible loan losses......................................... 100,000 1,020,000
------------ ------------
Net interest income after loan loss provision........................... 3,303,659 1,824,265
------------ ------------
OTHER INCOME
Gains (losses) securities sales............................................ (38,125) 54,201
Gains (losses) real estate sale............................................ (3,508) (12,948)
Gains (losses) on loan sales net........................................... (6,321) 10,042
Miscellaneous.............................................................. 196,281 176,803
------------ ------------
Total other income....................................................... 148,327 228,098
------------ ------------
OPERATING EXPENSES
Salaries & employee benefits............................................... 1,098,148 992,002
Net occupancy & Equipment.................................................. 377,162 310,915
Other real estate owned.................................................... 1,970 26,711
Other noninterest expenses................................................. 708,188 523,598
------------ ------------
Total operating expenses................................................ 2,185,468 1,853,226
------------ ------------
Income (loss) before taxes................................................ 1,266,518 199,137
Income taxes............................................................... 385,687 77,663
------------ ------------
Net income................................................................. 880,831 121,474
------------ ------------
------------ ------------
Per common share
Net income
Primary (1)................................................................ $ 0.38 $ 0.06
Average number of common shares
Primary (1)................................................................ 2,291,353 1,964,765
- ------------------------
(1) Effective February 3, 1997 the Company declared a stock dividend of
twenty-five percent (25%).
Prior years figures have been adjusted to reflect stock dividend.
4
EMERALD ISLE BANCORP, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1997
(Unaudited in thousands)
NET UNREALIZED
ADDITIONAL LOSS ON
COMMON PAID-IN UNDIVIDED MARKETABLE
STOCK CAPITAL PROFITS EQUITY SECURITIES TOTAL
------------ ------------- ------------- --------------------- -------------
Balance at December 31, 1996.... $ 2,210,888 $11,586,709 $ 14,329,844 $(191,054) $ 27,936,387
Net income...................... 880,831 880,831
Issuance of additional stock.... 24,579 351,943 376,522
Increase in net unrealized loss
on securities held for sale.... (342,933) (342,933)
Cash dividend paid.............. (159,590) (159,590)
------------ ------------- ------------- ---------- -------------
Balance at March 31, 1997....... $ 2,235,467 $11,938,652 $ 15,051,085 $(533,987) $ 28,691,217
------------ ------------- ------------- ---------- -------------
EMERALD ISLE BANCORP, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1996
(Unaudited in thousands)
NET UNREALIZED
ADDITIONAL LOSS ON
COMMON PAID-IN UNDIVIDED MARKETABLE
STOCK CAPITAL PROFITS EQUITY SECURITIES TOTAL
------------ ------------- ------------- --------------------- -------------
Balance at December 31, 1995.... $ 1,532,431 $ 8,824,970 $ 12,406,361 $ 60,854 $ 22,824,616
Net income...................... 121,474 121,474
Issuance of additional stock.... 23,437 323,480 346,917
Increase in net unrealized loss
on securities held for sale.... (76,244) (76,244)
Cash dividend paid.............. (108,371) (108,371)
------------ ------------- ------------- -------- -------------
Balance at March 31, 1996....... $ 1,555,868 $ 9,148,450 $ 12,419,464 $ (15,390) $ 23,108,392
------------ ------------- ------------- -------- -------------
5
EMERALD ISLE BANCORP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31
---------------------------
1997 1996
------------- ------------
Cash flows from operating activities
Net Income......................................................... $ 880,831 $ 121,474
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation..................................................... 194,937 156,324
Amortization of bond premium..................................... (23,685) 90,041
Loan loss provision.............................................. 100,000 1,020,000
(Gain) on sale of loans, real estate owned, securities, and joint
venture interest, (net)........................................ 47,954 (51,295)
Deferred loan fees............................................... (92,466) 27,123
Loans sold....................................................... 9,010,394 2,590,680
Loans originated for sale........................................ (9,016,715) (2,580,638)
Increase (decrease) in accrued expenses, income taxes, and other
liabilities.................................................... (1,082,078) (921,033)
(Increase) decrease in accrued interest receivable............... 39,804 (216,081)
(Increase) decrease in other assets.............................. (258,589) 266,648
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Total adjustments................................................ (1,080,444) 381,769
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Net cash provided by operating activities.......................... (199,613) 503,243
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Cash flows from investing activities
Loans purchased.................................................... (6,725,766) (3,012,891)
Loans paid(net).................................................... (6,373,158) (2,561,517)
Proceeds of OREO Sales............................................. 494,163
Short-term investments (net)....................................... 3,179,799 1,585,000
Purchases of securities held to maturity........................... (21,961,856)
Proceeds from maturities of securities held to maturity............ 2,907,467 2,798,275
Purchase of securities available for sale.......................... (22,750)
Proceeds of securities available for sale.......................... 2,975,625 14,228,870
Purchases of premises and equipment................................ (83,642) (642,972)
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Net cash used by investing activities.............................. (4,119,675) (9,095,678)
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Cash flows from financing activities
Deposits, net...................................................... 10,830,691 7,067,031
FHL Bank Advances (net)........................................... (8,000,000) 1,700,000
Proceeds from sale of Common Stock................................. 376,523 346,917
Dividends Paid..................................................... (159,590) (108,371)
------------- -----------
Net cash provided by financing activities.......................... 3,047,624 9,005,577
Net increase (decrease) in cash.................................... (1,271,664) 413,142
Cash and cash equivalents--beginning of year....................... 5,521,299 3,212,260
------------- -----------
Cash and cash equivalents--end of year............................. $ 4,249,635 $ 3,625,402
------------- -----------
Supplemental disclosures of cash flow information:
Interest paid..................................................... $ 4,380 $ 3,754
Federal income taxes paid......................................... $ 625 $ 300
6
EMERALD ISLE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of Emerald Isle Bancorp, Inc.
and its subsidiary The Hibernia Savings Bank and it's subsidiaries (Kildare
Corporation/The Limerick Securities Corporation/ Meath Corporation) presented
herein should be read in conjunction with the consolidated financial statements
of Emerald Isle Bancorp, Inc. for the year ended December 31, 1996. Consolidated
financial information as of March 31, 1997 and the results of operations and the
changes in stockholders' equity and cash flows for the three months ended March
31, 1997 and 1996 are unaudited, and in the opinion of management reflect all
adjustments (consisting solely of normal recurring accruals) necessary for a
fair presentation of such information. Interim results are not necessarily
indicative of results to be expected for the entire year.
2) COMMITMENTS
At March 31, 1997 the Company had outstanding commitments to originate loans
amounting to approximately $15,686,941 which are not reflected in the
consolidated balance sheet.
3) EARNINGS PER SHARE
The earnings per share computations for the quarter ended March 31, 1997 are
based on 2,291,353 common shares outstanding, and for the quarter ended March
31, 1996 are based on 1,964,765 common equivalent shares outstanding.
7
4) FORMATION OF HOLDING COMPANY
At the annual meeting of Stockholders on April 29,1996 The Hibernia
Savings Bank stockholders voted to approve a plan of reorganization and
acquisition between the Bank and Emerald Isle Bancorp, Inc. a newly formed
Massachusetts corporation organized at the direction of the Bank, and each of
the transactions contemplated thereby, pursuant to which the Bank will become
a wholly owned subsidiary of the Emerald Isle Bancorp, Inc. The plan of
reorganization and acquisition, dated February 15, 1996, between the Bank and
Emerald Isle Bancorp, Inc. provides that each share of the Bank's outstanding
common stock, will be automatically converted into and exchanged for one
share of common stock of Emerald Isle Bancorp, Inc. October 1, 1996 marked
the completion of the formation of the holding company Emerald Isle Bancorp,
Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of the financial conditions and results
of operations for the three month period ended March 31, 1997.
The Company's total assets increased 2.4% on an annualized basis to
$412,141,209 at March 31, 1997 from total assets of $409,638,765 at December
31, 1996 and increased 16.1% from total assets of $355,071,229 at March 31,
1996. Short term investments, securities held to maturity and securities held
for sale totaled $118,988,808 or 28.9% of total assets at March 31, 1997 a
decrease of $9,635,136 from $128,623,944 or 31.4% of total assets at December
31, 1996 and a decrease of $9,536,783 from $128,525,591 or 36.2% of total
assets at March 31, 1996. Loans, net
8
increased $12,982,192 or 19.7% to $276,190,381 or 67.0% of total assets at
March 31, 1997 from $263,208,189 or 64.3% of total assets at December 31,
1996 and increased $63,413,484 from $212,776,897 or 59.9% of total assets at
March 31, 1996. The Company, during the first quarter of 1997, originated and
purchased loans totaling $42,353,176 and sold loans totaling $9,016,715 as
compared to loans originated and purchased of $24,853,411 and sold loans
totaling $2,580,638 during the first quarter of 1997. Foreclosed real estate
at March 31, 1997 totaled $105,690 or 0.03% of total assets compared to $0 or
0% of total assets at December 31, 1996 and $0 or 0% of total assets at March
31, 1996. The Company's non-performing loans totaled $2,454,297, or 0.60% of
total assets at March 31, 1997 as compared to $1,058,195 or 0.26% of total
assets at December 31, 1996 and $951,660 or 0.27% of total assets at March
31, 1996. The Company's loan loss provision for the first quarter ended March
31, 1997 was $100,000 as compared to $1,020,000 for the first quarter of
1996. The allowance for loan losses totaled $2,693,667 at March 31, 1997 as
compared to $2,623,406 at December 31, 1996 and $2,213,289 at March 31, 1996.
Deposits at March 31, 1997 totaled $347,760,713 as compared to $337,089,927
at December 31, 1996 an increase of $10,670,786, or 12.7% on an annualized
basis, and also increased $58,078,162 or 20.0% from deposits of $289,682,551 at
March 31, 1996. Outstanding borrowings totaled $33,668,000 at March 31, 1997 a
decrease of $8,000,000 from $41,668,000 at December 31, 1996 and decreased
$7,000,000 from $40,668,000 at March 31, 1996.
Stockholders' Equity increased to $28,691,217 at March 31, 1997 from
$27,936,387 at December 31, 1996 and $23,108,392 at March 31, 1996. The
increase for the first quarter is due to earnings of $880,831, the
9
issuance of 24,579 shares of stock, raising $376,522 of new capital, a
decrease as a result of the payment of a $.07 dividend on common shares
outstanding totaling $159,590 and increase in unrealized loss on marketable
equity securities of $342,933.
Material Changes in Results of Operations
Net income for the first quarter ended March 31, 1997 was $880,831 or $.38
per share as compared to net income in the first quarter ended March 31, 1997 of
$121,424 or $.06 per share.
Interest and dividend income increased in the first quarter of 1996 to
$7,824,192 from $6,794,137 for the first quarter of 1996 or 15.2%. The Company's
total yield on average earning assets for the first quarter of 1996 was 7.90% as
compared to 8.03% for the first quarter of 1996. Total earning assets increased
$52,854,440 or 15.4% to $395,418,558 at March 31, 1997 from $342,564,118 at
March 31, 1996. The increase in earning assets accounts for the increase of
$1,030,055 in interest income.
Interest expense increased by $470,661 or 11.9% to $4,420,533 for the first
quarter ended March 31, 1997 from $3,949,872 for the first quarter ended March
31, 1996. The average cost of funds on average earning assets for the first
quarter was 4.46% at March 31, 1997 as compared to 4.67% for the same quarter in
1996. The increase of $58,078,163 in total deposits, along with a decrease in
outstanding borrowings of $8,000,000 to $33,668,000 at March 31, 1997 from
$41,668,000 at March 31, 1996 explains the increase in interest expense.
10
Non-interest expenses totaled $2,185,468 for the first quarter ended March
31, 1997 as compared to $1,853,226 for the same period in 1996, an increase of
$332,242 or 17.9%. The principal increases are wage and benefit costs, occupancy
costs, and marketing costs. The Bank has increased personnel in all customer
related areas. The Company's lending perspective has grown and along with this
the Company has increased staff to be able to meet its customers borrowing needs
and to maintain our portfolio. The increase of branch personnel relates to two
new locations, a location in Hingham which opened in May of 1996 and a second
Quincy location that opened in November of 1996. Occupancy expenses increased
due to the addition of the two new full service branches mentioned above.
Marketing and advertising costs also increased as a result of the ongoing
expansion of our franchise.
Other income decreased by $79,771 to $148,327 for the first quarter ended
March 31, 1997 from $228,098 for the same period in 1996. Other income for the
first quarter of 1997 included service charges of $196,281, losses on the sale
of loans of $6,321, losses on the sale of securities of $38,125 and losses on
sale of real estate owned of $3,508 compared to service charges of $176,803,
gains on the sale of loans of $10,042, gains on the sale of securities of
$54,201 and losses on sale of real estate owned of $12,948 for the first quarter
of 1996.
Income Tax
Provision for income taxes for the quarter ended March 31, 1997 was $385,687
as compared to $77,663 for the same period in 1996.
Liquidity and Capital
11
The Company attempts to maximize interest-earning assets while maintaining
sufficient funds on hand to meet loan commitments, cash disbursements and
possible deposit outflows. The Company obtains funds for investment and other
banking purposes principally from deposits, borrowings, loan repayments and
through sales of loans, loan participations and securities available for sale,
and maturity of investment securities are a relatively stable source of funds,
deposit flows are greatly influenced by general interest rates, economic
conditions and competitive factors. Borrowings may also be used to offset
reductions in other sources of funds such as deposits. The Bank may borrow up to
30% of its total assets but not more than 20 times its capital stock holdings in
the FHLB for any sound business purpose for which the Bank has legal authority.
Borrowings authorized totaled $53,414,000 at March 31, 1997.
Capital Resources and Dividends
The Company's regulators have classified and defined capital into the
following components: (1) Tier I capital, which includes tangible
stockholders' equity for common stock and certain perpetual preferred stock,
and (2) Tier II capital, which includes a portion of the allowance for
possible loan losses, certain qualifying long-term debt and preferred stock
which does not qualify for Tier I capital. In addition, they have implemented
risk-based capital guidelines that require a bank to maintain certain minimum
capital as a percent of such bank's assets and certain off-balance sheet
items adjusted for pre-defined credit risk factors (risk-adjusted assets). As
of March 31, 1997 the Bank's Tier I and Tier II capital ratios were 11.2% and
12.25%, respectively. In addition to the risk-based guidelines discussed
above, the Bank's regulators require that the Bank maintain a minimum
leverage (Tier I capital as a percent of
12
tangible assets) of 4.0%. As of March 31, 1997 the Bank had a leverage
capital ratio of 6.96%.
Asset/Liability Management
The overall interest rate sensitivity of the Bank is dependent upon the
bank's ability to reprice its interest rate sensitive assets and liabilities.
The ability to successfully manage the repricing of assets and liabilities
significantly reduces the interest rate risk in any interest rate
environment. As of March 31, 1997 the Bank is net liability sensitive for the
next twelve months going forward, and for the following one to two year
period, net asset sensitive in the two to three and three to five year time
horizons, liability sensitive in the five to ten year horizon and asset
sensitive thereafter. The Bank's management monitors and manages interest
rate risk as an integral part of its overall business strategy.
13
PART II--OTHER INFORMATION
For the quarter ended March 31, 1997, Items 2, 3, 4 and 5 of Part II are
either inapplicable or would elicit a response of "None" and therefore no
reference thereto has been made herein.
Item 1. Legal Proceedings
From time to time the Company and its subsidiaries may be parties to
legal proceedings incident to their business. At March 31, 1997, there were
no legal proceedings to which the Company or any of its subsidiaries was a
party or to which any of their properties were subject, which, in the opinion
of management, were expected to result in a material loss.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit Description
27 Financial Data Schedule
(b)(1) On February 3, 1997, the Company filed a Form 8-K and reported in
response to Item 5 the issuance of a stock dividend to holders of record as
of the close of business on January 22, 1997.
(b)(2) On March 26, 1997, the Company filed a Form 8-K and reported in
response to Item 5 the resignation of its Executive Vice President.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Emerald Isle Bancorp, Inc.
Date: May 14, 1997 By: /s/ Gerard F. Linskey
---------------------------
Gerard F. Linskey,
Treasurer
15