UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-25808
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GREAT AMERICAN BANCORP, INC.
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Delaware 52-1923366
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State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
1311 S. Neil St., P.O. Box 1010, Champaign, IL 61824-1010
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(Address of principal executive offices) (Zip Code)
(217) 356-2265
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(Registrant's telephone number, including area code)
At July 31, 2001, the Registrant had 941,600 shares of Common Stock
outstanding, for ownership purposes, which excludes 1,111,150 shares held as
treasury stock.
Transitional Small Business Disclosure Format (Check One): Yes No X
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Table of Contents
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Income Statements
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
As of June 30, 2001 and December 31, 2000
(in thousands)
June 30, 2001 Dec. 31, 2000
(Unaudited)
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ASSETS
Cash and due from banks $ 5,857 $ 6,104
Interest-bearing demand deposits 4,055 4,539
--------------------------------
Cash and cash equivalents 9,912 10,643
Investment securities
Available for sale 2,008 3,009
Held to maturity (fair value of $2,436
and $3,116) 2,436 3,153
--------------------------------
Total investment securities 4,444 6,162
Loans 141,743 133,620
Allowance for loan losses (947) (889)
--------------------------------
Net loans 140,796 132,731
Premises and equipment 6,540 6,802
Federal Home Loan Bank stock 950 890
Other assets 2,110 2,449
--------------------------------
Total assets $ 164,752 $ 159,677
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest bearing $ 10,256 $ 11,573
Interest bearing 114,212 112,112
--------------------------------
Total deposits 124,468 123,685
Federal Home Loan Bank Advances 19,000 14,000
Other liabilities 1,812 1,760
--------------------------------
Total liabilities 145,280 139,445
--------------------------------
Commitments and Contingent Liabilities
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets (Continued)
As of June 30, 2001 and December 31, 2000
(in thousands)
June 30, 2001 Dec. 31, 2000
(Unaudited)
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STOCKHOLDERS' EQUITY $ $
Preferred stock, $0.01 par value
Authorized and unissued --
1,000,000 shares -- --
Common stock, $0.01 par value
Authorized -- 7,000,000 shares
Issued and outstanding -- 2,052,750 shares 21 21
Additional paid-in-capital 20,089 20,036
Retained earnings -- substantially restricted 17,383 17,043
Accumulated other comprehensive income 4 5
--------------------------------
37,497 37,105
Less:
Treasury stock, at cost - 1,096,150 and
1,014,250 shares (17,843) (16,570)
Unallocated employee stock ownership plan
shares - 9,876 and 19,748 shares (99) (197)
Unearned incentive plan shares - 5,671 and
7,377 shares (83) (106)
--------------------------------
(18,025) (16,873)
--------------------------------
Total stockholders' equity 19,472 20,232
--------------------------------
Total liabilities and
stockholders' equity $ 164,752 $ 159,677
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements
For the Six Months Ended June 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
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Interest income:
Loans $ 5,477 $ 5,216
Investment securities
Taxable 217 226
Tax exempt -- 7
Deposits with financial
institutions and other 157 139
--------------------------------
Total interest income 5,851 5,588
--------------------------------
Interest expense:
Deposits 2,558 2,449
Federal Home Loan Bank advances 441 198
Other 18 19
--------------------------------
Total interest expense 3,017 2,666
--------------------------------
Net interest income 2,834 2,922
Provision for loan losses 72 150
--------------------------------
Net interest income after
provision for loan losses 2,762 2,772
--------------------------------
Noninterest income:
Brokerage commissions 74 95
Insurance sales commissions 602 372
Service charges on deposit accounts 274 273
Loan servicing fees 6 10
Other customer fees 83 72
Other income 11 5
--------------------------------
Total noninterest income 1,050 827
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements (Continued)
For the Six Months Ended June 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
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Noninterest expense:
Salaries and employee benefits $ 1,583 $ 1,512
Net occupancy expenses 303 341
Equipment expenses 306 296
Data processing fees 36 40
Deposit insurance expense 12 13
Printing and office supplies 151 135
Legal and professional fees 120 105
Directors and committee fees 50 49
Insurance expense 26 22
Marketing and advertising expenses 97 87
Other expenses 199 182
--------------------------------
Total noninterest expense 2,883 2,782
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Income before income tax 929 817
Income tax expense 379 322
--------------------------------
Net income $ 550 $ 495
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.57 $ 0.45
================================
Average number of shares 966,487 1,111,979
================================
Diluted:
Net income $ 0.56 $ 0.44
================================
Average number of shares 984,926 1,130,405
================================
Dividends $ 0.22 $ 0.22
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements
For the Quarter Ended June 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
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Interest income:
Loans $ 2,790 $ 2,626
Investment securities
Taxable 106 113
Tax exempt -- 3
Deposits with financial
institutions and other 57 78
--------------------------------
Total interest income 2,953 2,820
--------------------------------
Interest expense:
Deposits 1,268 1,244
Federal Home Loan Bank advances 225 98
Other 8 10
--------------------------------
Total interest expense 1,501 1,352
--------------------------------
Net interest income 1,452 1,468
Provision for loan losses 36 75
--------------------------------
Net interest income after
provision for loan losses 1,416 1,393
--------------------------------
Noninterest income:
Brokerage commissions 38 45
Insurance sales commissions 283 155
Service charges on deposit accounts 148 139
Loan servicing fees 3 6
Other customer fees 41 38
Other income 10 5
--------------------------------
Total noninterest income 523 388
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(Continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements (Continued)
For the Quarter Ended June 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
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Noninterest expense:
Salaries and employee benefits $ 788 $ 757
Net occupancy expenses 148 179
Equipment expenses 151 150
Data processing fees 17 20
Deposit insurance expense 6 7
Printing and office supplies 75 70
Legal and professional fees 64 54
Directors and committee fees 25 24
Insurance expense 13 11
Marketing and advertising expenses 58 49
Other expenses 104 99
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Total noninterest expense 1,449 1,420
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Income before income tax 490 361
Income tax expense 201 145
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Net income $ 289 $ 216
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.30 $ 0.20
================================
Average number of shares 947,729 1,087,899
================================
Diluted:
Net income $ 0.30 $ 0.20
================================
Average number of shares 969,582 1,104,494
================================
Dividends $ 0.11 $ 0.11
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2001 and 2000
(unaudited, in thousands)
2001 2000
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Operating Activities:
Net income $ 550 $ 495
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 72 150
Depreciation and amortization 320 338
Amortization of deferred loan fees (12) (7)
Deferred income tax -- 47
Investment securities amortization, net -- 1
Federal Home Loan Bank stock dividend (34) --
Employee stock ownership plan
compensation expense 151 136
Incentive plan expense 23 104
Net change in:
Other assets 317 (71)
Other liabilities 59 45
--------------------------------
Net cash provided by
operating activities 1,446 1,238
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Investing Activities:
Proceeds from maturities of securities
held to maturity 425 100
Proceeds from maturities of securities
available for sale 1,000 --
Proceeds from principal repayments of
mortgage-backed securities 292 85
Purchase of Federal Home Loan Bank stock (26) (92)
Net change in loans (8,125) (3,431)
Purchase of premises and equipment (36) (172)
--------------------------------
Net cash used by
investing activities (6,470) (3,510)
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended June 30, 2001 and 2000
(unaudited, in thousands)
2001 2000
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Financing Activities:
Net change in:
Noninterest-bearing demand, interest-
bearing demand and savings deposits $ 197 $ 1,418
Certificates of deposit 586 (1,478)
Proceeds from Federal Home Loan Bank advances 8,500 3,000
Repayment of Federal Home Loan Bank advances (3,500) (1,000)
Cash dividends (217) (252)
Purchase of treasury stock (1,273) (1,518)
--------------------------------
Net cash provided by
financing activities 4,293 170
--------------------------------
Net Change in Cash and Cash Equivalents (731) (2,102)
Cash and Cash Equivalents, Beginning
of Period 10,643 10,013
--------------------------------
Cash and Cash Equivalents, End of
Period $ 9,912 $ 7,911
================================
Additional Cash Flows Information
Interest paid $ 3,006 $ 2,664
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Income tax paid $ 236 $ 240
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
1. Background Information
Great American Bancorp, Inc. (the "Company") was incorporated on February 23,
1995 and on June 30, 1995 acquired all of the outstanding shares of common
stock of First Federal Savings Bank of Champaign-Urbana, (the "Bank") upon the
Bank's conversion from a federally chartered mutual savings bank to a
federally chartered stock savings bank. The Company purchased 100% of the
outstanding capital stock of the Bank using 50% of the net proceeds from the
Company's initial stock offering, which was completed on June 30, 1995. The
Company began trading on the NASDAQ Stock Market on June 30, 1995 under the
symbol "GTPS". On April 23, 2001, the Company began trading on the Nasdaq
SmallCap Market, maintaining the "GTPS" symbol. The move to the Nasdaq
SmallCap Market resulted from having a public float below the required minimum
of 750,000 shares.
2. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and Item 310(b) of
Regulation S-B, and, in the opinion of management, contain all adjustments
necessary to present fairly the financial position as of June 30, 2001 and
December 31, 2000, the results of operations for the six months and three
months ended June 30, 2001 and 2000, and the cash flows for the six months
ended June 30, 2001 and 2000. All adjustments to the financial statements
were normal and recurring in nature. These results have been determined on the
basis of generally accepted accounting principles. Reclassifications of
certain amounts in the 2000 financial statements have been made to conform to
the 2001 presentation. The results of operations for the six months ended June
30, 2001 are not necessarily indicative of the results to be expected for the
entire fiscal year.
At June 30, 2001 and June 30, 2000, the amounts to be disclosed by the Company
under SFAS No. 130, "Reporting Comprehensive Income," are considered
immaterial and are therefore not shown in the accompanying financial
statements.
The consolidated financial statements are those of the Company and the Bank.
These consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's 2000
Annual Report to Shareholders.
PART I -- Item 2.
GREAT AMERICAN BANCORP, INC.
Management's Discussion and Analysis
or Plan of Operation
Forward-Looking Information
In addition to historical information, this 10-QSB may include certain
forward-looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies
of the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Company's
loan and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. Further description of the risks and uncertainties to the business
are included in detail under the caption: Liquidity and Capital Resources.
General
The Company is the holding company for the Bank. The Bank operates a wholly
owned subsidiary, Park Avenue Service Corporation ("PASC"). PASC offers full
service brokerage activities through Scout Brokerage Services, Inc., a
subsidiary of United Missouri Bank, and also engages in the sale of fixed-rate
and variable-rate tax deferred annuities. PASC also operates the GTPS
Insurance Agency which offers a variety of insurance products, including life,
health, automobile, and property and casualty insurance.
Financial Condition
The Company's total assets increased from $159.68 million at December 31, 2000
to $164.75 million at June 30, 2001, an increase of $5.07 million, or 3.2%.
Total assets grew primarily as a result of loan growth offset by declines in
cash and cash equivalents and investment securities.
Net loans increased from $132.73 million at December 31, 2000 to $140.80
million at June 30, 2001, an increase of $8.07 million, or 6.1%. This loan
growth was mainly in 1-4 family residential mortgage loans and commercial
loans. Total 1-4 family residential mortgage loans grew from $77.07 million
as of December 31, 2000 to $83.03 million as of June 30, 2001, an increase of
$5.96 million, or 7.7%. Total commercial loans increased from $6.57 million
at December 31, 2000 to $7.91 million at June 30, 2001, an increase of $1.34
million, or 20.4%. Loan growth was funded by reductions in cash and cash
equivalents and investment securities and by increases in total deposits and
advances from the Federal Home Loan Bank ("FHLB").
Cash and cash equivalents dropped $730,000 from $10.64 million at December 31,
2000 to $9.91 million at June 30, 2001 with the majority of the decline in
interest-bearing demand deposits. Total investment securities fell $1.72
million, from $6.16 million at December 31, 2000 to $4.44 million at June 30,
2001. Municipal securities totaling $425,000 matured in January 2001 and an
U.S. agency security totaling $1.0 million was called in June 2001. Also,
principal payments received on mortgage-backed securities totaled $292,000
during the six months ended June 30, 2001.
Total deposits increased by $780,000 in 2001, from $123.69 million at December
31, 2000 to $124.47 million at June 30, 2001. Noninterest-bearing deposits
decreased by $1.32 million, while interest-bearing deposits increased by $2.10
million during the first six months of 2001. Noninterest-bearing deposits
fell in 2001 largely due to seasonal fluctuations in commercial checking
accounts. Interest-bearing deposit growth was mainly in insured money market
accounts ("IMMA") and certificates of deposit. IMMA deposits grew from $9.85
million at December 31, 2000 to $11.50 million at June 30, 2001, an increase
of $1.65 million, or 16.8%. This growth occurred primarily in the Company's
Club Fed IMMA deposits and was mainly due to new accounts opened. The
Company's Club Fed products, which include Club Fed IMMA and Club Fed NOW
accounts, provide enhanced services to customers including a higher rate of
interest for maintaining required minimum balances. Certificates of deposit
were $71.93 million at June 30, 2001 and $71.35 million at December 31, 2000.
The growth in certificates of deposit in 2001 was predominantly in shorter-
term certificates with maturities ranging from six to eighteen months.
FHLB advances increased by $5.00 million from $14.00 million at December 31,
2000 to $19.00 million at June 30, 2001. The Company increased the level of
FHLB borrowings mostly to provide funding for loans. In January 2001, the
Company borrowed $5.00 million in FHLB advances that mature in 2011, but are
callable by the FHLB in 2002, at a rate of 4.55%. Part of this advance was
used to offset $2.00 million in advances with an average rate of 6.88% that
matured in January 2001. In March 2001, the Company borrowed $1.50 million in
FHLB advances that mature in 2006, callable in 2002 at a rate of 4.48%. The
$1.50 million advance replaced a $1.50 million advance that matured in April
2001 which was at a rate of 6.74%. The Company borrowed an additional $2.00
million in May 2001 that matures in 2002 at a rate of 4.40%.
Total stockholders' equity decreased $760,000, or 3.8%, from $20.23 million at
December 31, 2000 to $19.47 million at June 30, 2001. Book value per
outstanding voting share increased from $19.48 at December 31, 2000 to $20.36
at June 30, 2001. The decrease in stockholders' equity is summarized as
follows (in thousands):
Stockholders' equity, December 31, 2000 $ 20,232
Net income 550
Purchase of treasury stock (1,273)
Dividends declared (210)
Incentive plan shares allocated 23
ESOP shares allocated 151
Decrease in unrealized gain on securities
available for sale, net of income tax effect (1)
------
Stockholders' equity, June 30, 2001 $ 19,472
======
Results of Operations
Comparison of Six Month Periods Ended June 30, 2001 and 2000
Net income for the six months ended June 30, 2001 was $550,000, an increase of
$55,000, or 11.1% over the $495,000 recorded for the six months ended June 30,
2000. Basic earnings per share were $0.57 for the six months ended June 30,
2001, compared to $0.45 for the six months ended June 30, 2000. Diluted
earnings per share were $0.56 for the first six months in 2001, compared to
$0.44 for the first six months in 2000. The diluted earnings per share
increase of $0.12 represents an increase of 27.3% over the $0.44 diluted
earnings per share for 2000.
Net income increased in 2001 primarily due to growth in insurance sales
commissions and a reduction in the provision for loan losses.
Net interest income was $2,834,000 for the six months ended June 30, 2001,
$88,000, or 3.0%, lower than the $2,922,000 recorded for the same period in
2000. Net interest income was lower in 2001 principally due to higher
interest expense associated with the increase in FHLB advances.
Interest income was $5,851,000 for the six months ended June 30, 2001,
compared to $5,588,000 for the same period in 2000, with the majority of the
increase due to interest income on loans. Interest income on loans during the
first six months in 2001 was $5,477,000, $261,000, or 5.0%, greater than the
$5,216,000 recorded in 2000.
Interest income on loans was higher in 2001 due primarily to loan growth
experienced in the latter half of 2000 and in the first six months of 2001.
Average total loans for the six months ended June 30, 2001 were $135.46
million compared to $129.70 million for the same period in 2000, an increase
of $5.76 million, or 4.4%. The majority of the increase in average total
loans was in 1-4 family residential mortgage loans. Total 1-4 family
residential mortgage loans averaged $78.76 million for the six months ended
June 30, 2001, compared to $71.43 million for the six months ended June 30,
2000, an increase of $7.33 million, or 10.3%. The growth in 1-4 family
residential mortgage loans was offset by a decline in the average balance of
total commercial mortgage loans. Average total commercial mortgage loans were
$16.78 million during the six months ended June 30, 2001 while total
commercial mortgage loans averaged $18.77 million for the same period in 2000.
This decline was primarily the result of one large payoff in July 2000.
Average total commercial loans were $7.44 million for the six months ended
June 30, 2001, compared to $6.92 million for the same period in 2000, an
increase of $520,000, or 7.5%. Average total consumer loans were $11.49
million during the six months ended June 30, 2001, an increase of $300,000, or
2.7%, above the $11.19 million average total balance during the same period in
2000. The average yield on loans was 8.21% for the six months ended June 30,
2001, compared to 8.14% for the six months ended June 30, 2000.
Interest income on investment securities decreased from $233,000 for the six
months ended June 30, 2000 to $217,000 for the same period in 2001, due mainly
to municipal securities maturing in January 2001 and a reduction in interest
earned on mortgage-backed securities due to principal repayments. The average
yield on investment securities increased from 6.60% for the six months ended
June 30, 2000 to 6.73% for the same period in 2001.
Interest income on deposits with financial institutions and other was $157,000
for the six-month period ended June 30, 2001 compared with $139,000 for the
same period in 2000. The average balance of total deposits with financial
institutions and other was $6.61 million for the six months ended June 30,
2001, $1.6 million higher than compared to the $5.01 million average for 2000.
However, the increase in interest income on deposits with financial
institutions and other that was due to maintaining higher balances during 2001
was offset by a decline in the average yield due to the general decline in
short-term interest rates in 2001. The average yield on deposits with
financial institutions and other decreased from 5.58% for the six months ended
June 30, 2000 to 4.79% for the same period in 2001.
Interest expense increased by $351,000, or 13.2%, from $2,666,000 for the six
months ended June 30, 2000 to $3,017,000 for the same period in 2001. The
increase was attributable to higher interest expense on both FHLB advances and
deposits. Interest expense on deposits increased $109,000, or 4.5%, from
$2,449,000 for the six months ended June 30, 2000 to $2,558,000 for the same
period in 2001. Interest expense on deposits was higher in 2001 primarily due
to a shift in the mix of deposits to higher rate certificates of deposit,
mainly certificates maturing in eighteen months to two years. This shift
occurred primarily in the latter half of 2000 and in the first quarter of
2001. The average total balance of certificates maturing in eighteen months
through two years increased from $21.65 million for the first six months of
2000 to $27.93 million for the same period, an increase of $6.28 million, or
29.0%. Part of this increase was due to a special 21-month certificate
promotion held during the last six months of 2000. Growth in certificates
maturing in eighteen-months to two-years was offset by declines in six month
to one-year certificates, savings accounts and certificates with maturities
from two and a half years through four years. Average total interest-bearing
deposits decreased from $114.14 million in the first six months of 2000 to
$112.10 million during the same period in 2001, a decrease of $2.04 million,
or 1.8%. The average rates on deposits were 4.60% and 4.31% for the six
months ended June 30, 2001 and 2000.
Interest expense on FHLB advances increased $243,000, or 122.7%, from $198,000
for the six months ended June 30, 2000 to $441,000 for the six months ended
June 30, 2001. Growth in interest expense on FHLB advances was primarily due
to an increase in the balance of FHLB advances during 2001. The Company
increased the level of FHLB borrowings in order to provide funding for loans.
Average FHLB advances for the six months ended June 30, 2001 were $17.59
million compared to $8.28 million for the six months ended June 30, 2000.
Net interest income as a percent of average interest earning assets was
3.87% for the six months ended June 30, 2001 versus 4.17% for the same period
in 2000. The spread between the yield on interest earning assets and the rate
on interest bearing liabilities was 3.32% and 3.61% for the six months ended
June 30, 2001 and 2000, respectively.
The provision for loan losses was $72,000 for the six months ended June 30,
2001 compared to $150,000 for the six months ended June 30, 2000. The reduced
provision for 2001 directly correlates with a decline in non-performing loans
in 2001.
There were $18,000 in loans charged-off and $4,000 in recoveries in the first
six months of 2001. The loans charged-off during 2001 included $12,000
related to commercial loans to one borrower that have been non-performing
since the fourth quarter of 1998. This borrower filed Chapter 11, or business
reorganization, bankruptcy in 1999 and subsequently the reorganization plan
changed to a liquidation of assets arrangement. The total balance of these
loans at the time they became non-performing was $1.36 million. Since 1998,
the Company has collected $380,000 in principal repayments and charged-off
$902,000 related to this borrower. As of June 30, 2001, business assets
secure the remaining balance of $78,000 and the Company is expecting repayment
by the end of 2001. There were $35,000 in loans charged off and $5,000 in
recoveries in the first six months of 2000.
Non-performing loans, which are loans past due 90 days or more and
non-accruing loans, totaled $177,000 at June 30, 2001, compared to $717,000 at
June 30, 2000. Non-performing loans at June 30, 2001 consisted of three
residential mortgage loans totaling $99,000 and the commercial loans to one
borrower previously discussed totaling $78,000. All of these loans were past
due 90 days or more at June 30, 2001, with the $78,000 in commercial loans in
non-accrual status. The non-performing loans totaling $717,000 at June 30,
2000 were comprised of two residential mortgage loans totaling $114,000, one
multi-family mortgage loan totaling $243,000, three consumer loans totaling
$2,000 and the commercial loans to one borrower discussed above totaling
$358,000. All of these loans were past due 90 days or more at June 30, 2000,
with the $358,000 in non-accrual status. One residential mortgage loan,
totaling $33,000 at June 30, 2001 and $34,000 at June 30, 2000, was non-
performing at both June 30, 2001 and 2000. The $243,000 multi-family mortgage
loan and all three consumer loans that were non-performing at June 30, 2000
were paid off as of June 30, 2001.
The ratio of the Company's allowance for loan losses to total loans was .67%
at June 30, 2001 and .62% at June 30, 2000. Management assesses the adequacy
of the allowance for loan losses based on evaluating known and inherent risks
in the loan portfolio and upon management's continuing analysis of the factors
underlying the quality of the loan portfolio. While management believes that,
based on information currently available, the allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurance can be given that the level of the allowance for loan losses will be
sufficient to cover future possible loan losses incurred by the Company or
that future adjustments to the allowance for loan losses will not be necessary
if economic and other conditions differ substantially from the economic and
other conditions used by management to determine the current level of the
allowance for loan losses. Management may in the future increase the level of
the allowance for loan losses as a percentage of total loans and non-
performing loans in the event it increases the level of commercial real
estate, multifamily, or consumer lending as a percentage of its total loan
portfolio. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require the Company to provide additions to the allowance
based upon judgements different from management.
Noninterest income totaled $1,050,000 for the six months ended June 30, 2001,
compared to $827,000 for the same period in 2000, an increase of $223,000, or
27.0%. Insurance sales commissions generated by GTPS Insurance Agency, which
totaled $602,000 for the six months ended June 30, 2001 compared to $372,000
for the same period in 2000, accounted for the majority of the increase in
noninterest income. Insurance commissions were higher in 2001 mainly due to
commissions generated from new business. Commissions earned by Scout
Brokerage Services, Inc. decreased from $95,000 for the six months of 2000 to
$74,000 for the first six months in 2001. Brokerage commissions were lower in
2001 due to a decline in the volume of transactions primarily caused by the
fall in the stock markets during 2001.
Noninterest expense was $2,883,000 for the first six months of 2001 compared
to $2,782,000 for the same period in 2000, an increase of $101,000, or 3.6%.
Salaries and employee benefits expenses, which were $71,000, or 4.7%, higher
in 2001, comprised the majority of the increase in noninterest expense.
Normal salary increases, additional staff hired for the GTPS Insurance Agency,
and an increase in health insurance premiums were the primary reasons for the
increase in salary and benefits expenses.
Total income taxes increased by $57,000, or 17.7%, from $322,000 for the six
months ended June 30, 2000 to $379,000 for the same period in 2001 due to the
increase in pretax net income. The effective tax rates for the six months
ended June 30, 2001 and 2000, were 40.8% and 39.4% respectively.
Comparison of Three Month Periods Ended June 30, 2001 and 2000
Net income for the three months ended June 30, 2001 was $289,000, an increase
of $73,000, or 33.8%, over the $216,000 recorded for the three months ended
June 30, 2000. Both basic earnings per share and diluted earnings per share
increased from $0.20 for the three months ended June 30, 2000 to $0.30 for the
same period in 2001.
Net income for the second quarter of 2001 was higher than net income for the
second quarter of 2000 mainly due to an increase in noninterest income and a
reduction in the provision for loan losses.
Net interest income was $1,452,000 for the quarter ended June 30, 2001 and
$1,468,000 for the quarter ended June 30, 2000, a decrease of $16,000, or
1.1%. Interest income increased 4.7%, or $133,000, from $2,820,000 for the
quarter ended June 30, 2000 to $2,953,000 for the second quarter of 2001,
chiefly due to an increase in interest income from loans.
Interest income on loans increased $164,000, or 6.2%, from $2,626,000 for the
quarter ended June 30, 2000 to $2,790,000 for the same quarter in 2001 due
primarily to growth in loans, mainly 1-4 family residential mortgage loans and
commercial loans, offset by a decrease in commercial mortgage loans.
Average total 1-4 family residential mortgage loans were $79.97 million for
the second quarter of 2001 compared to $72.06 million in the second quarter of
2000, an increase of $7.91 million, or 11.0%. Average total commercial loans
for the three months ended June 30, 2001 and June 30, 2000 were $7.84 million
and $6.02 million, respectively. This represents an increase of $1.82
million, or 30.2%. Average total commercial mortgage loans decreased $1.86
million, or 9.7%, from $19.13 million for the three months ended June 30, 2000
to $17.27 million for the same period in 2001. The average yield on loans
increased from 8.16% for the three months ended June 30, 2000 to 8.17% for the
same period in 2001.
Interest income on investment securities decreased from $116,000 for the three
months ended June 30, 2000 to $106,000 for the same period in 2001, due to a
reduction in average total investments. Average total investments for the
second quarter of 2001 were $6.39 million, down $720,000, or 10.1%, from $7.11
million for the second quarter of 2000. This decline was due to investment
maturities and principal repayments on mortgage-backed securities. Interest
income on deposits with financial institutions and other decreased $21,000, or
26.9%, from $78,000 for the three months ended June 30, 2000 to $57,000 for
the three months ended June 30, 2001. This decrease was mainly the result of
the overall drop in short-term market interest rates during 2001. The average
balance for the quarter ended June 30, 2001 for deposits with financial
institutions and other was $5.52 million compared to $5.35 million for the
same period in 2000, up $170,000, or 3.2%. The average yield on investment
securities for the three months ended June 30, 2001 was 6.65%, while the
average yield was 6.57% for the same period in 2000. The average yield on
deposits with financial institutions and other was 4.15% for the three months
ended June 30, 2001 and 5.87% for the three months ended June 30, 2000.
Interest expense increased $149,000, or 11.0%, from $1,352,000 for the three
months ended June 30, 2000 to $1,501,000 for the same period in 2001. The
increase was mainly due to the growth in FHLB advances. Average total
deposits decreased from $114.63 million for the quarter ended June 30, 2000 to
$112.35 million for the quarter ended June 30, 2001, with the largest
decreases in savings accounts, six-month to one-year certificates of deposit
and two and a half year to four year certificates of deposit. The average
rate on total deposits for the three months ended June 30, 2001 was 4.53% and
4.36% for the three months ended June 30, 2000.
Interest expense on FHLB advances increased by $127,000, or 129.6%, from
$98,000 for the three months ended June 30, 2000 to $225,000 for the same
period in 2001. The average total balance of FHLB advances increased from
$8.18 million for the second quarter of 2000 to $18.48 million for the second
quarter of 2001, an increase of $10.30 million, or 125.9%. The average rate
on FHLB advances was 4.88% for the three months ended June 30, 2001, compared
to 4.82% for the three months ended June 30, 2000.
Net interest income as a percent of interest earning assets was 3.91% for the
three months ended June 30, 2001 versus 4.16% for the same period in 2000.
The spread between the yield on interest earning assets and the rate on
interest bearing liabilities was 3.38% and 3.59% for the three months ended
June 30, 2001 and 2000, respectively.
The provision for loan losses was $36,000 for the three months ended June 30,
2001 compared to $75,000 for the three months ended June 30, 2000. The higher
provision in 2000 reflected an increase in the monthly provision for loan
losses that the Company implemented as a result of the commercial loans to one
borrower totaling $1.36 million becoming non-performing in late 1998.
Noninterest income increased $135,000, or 34.8%, from $388,000 for the quarter
ended June 30, 2000 to $523,000 for the three months ended June 30, 2001. The
increase was due to higher commission income from insurance activities.
Insurance sales commissions were $283,000 for the quarter ended June 30, 2001
compared to $155,000 for the same period in 2000, an increase of $128,000, or
82.6%.
Noninterest expense was $1,449,000 for the three months ended June 30, 2001
compared to $1,420,000 for the same period in 2000, an increase of $29,000, or
2.0%. Noninterest expense was higher in 2001 primarily due to increases in
salary and benefits expense, legal and professional fees, and marketing
expenses offset by a reduction in occupancy expenses.
Total income taxes for the three months ended June 30, 2001 were $201,000,
compared to $145,000 recorded for the same period in 2000, an increase of
$56,000, or 38.6%. The effective tax rates for the three months ended June
30, 2001 and 2000, were 41.0% and 40.2%, respectively.
Business Industry Segments
The Company's primary business involves the typical banking services of
generating loans and receiving deposits. Through PASC, the Company also
provides insurance and brokerage services to customers. The following segment
financial information has been derived from the internal profitability
reporting system used by management to monitor and manage the financial
performance of the Company.
Six Months Ended June 30, 2001
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 5,851 -- 5,851 -- 5,851
Interest expense 3,017 -- 3,017 -- 3,017
Noninterest income 389 681 1,070 (20) 1,050
Net income 409 141 550 -- 550
Total assets 164,966 1,003 165,969 (1,217) 164,752
Six Months Ended June 30, 2000
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 5,588 -- 5,588 -- 5,588
Interest expense 2,666 -- 2,666 -- 2,666
Noninterest income 370 467 837 (10) 827
Net income 423 72 495 -- 495
Total assets 155,174 950 156,124 (870) 155,254
Three Months Ended June 30, 2001
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 2,953 -- 2,953 -- 2,953
Interest expense 1,501 -- 1,501 -- 1,501
Noninterest income 207 326 533 (10) 523
Net income 227 62 289 -- 289
Three Months Ended June 30, 2000
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 2,820 -- 2,820 -- 2,820
Interest expense 1,352 -- 1,352 -- 1,352
Noninterest income 193 200 393 (5) 388
Net income 201 15 216 -- 216
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, and FHLB advances. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition. Recent legislation repealed the Office
of Thrift Supervision's ("OTS") minimum liquidity ratio requirement. OTS
regulations now require the Bank to maintain sufficient liquidity to ensure
its safe and sound operation.
A review of the Consolidated Statements of Cash Flows included in the
accompanying financial statements shows that the Company's cash and cash
equivalents ("cash") decreased $731,000 for the six months ended June 30,
2001, compared to a decrease of $2.10 million for the six months ended June
30, 2000. During the six months ended June 30, 2001, cash was primarily
provided from earnings, proceeds from maturities of investment securities,
increases in noninterest-bearing, interest bearing demand, savings and
certificates of deposit, and FHLB advances. During that period cash was
primarily used to fund loans, repay FHLB advances, purchase treasury stock and
pay dividends.
During the six months ended June 30, 2000, cash was primarily provided from
earnings, increases in noninterest-bearing and interest-bearing demand and
savings deposits and FHLB advances. During 2000, cash was primarily used to
fund loans, fund a decrease in certificates of deposit, purchase treasury
stock, and to pay dividends.
The Company's primary investment activity during the six months ended June 30,
2001 was the origination of loans. During the six months ended June 30, 2001
and June 30, 2000, the Company originated mortgage loans in the amounts of
$15.11 million and $13.82 million, respectively, commercial loans in the
amounts of $3.67 million and $3.82 million, respectively, and consumer loans
in the amounts of $5.64 million and $5.23 million, respectively.
As of June 30, 2001, the Company had outstanding commitments (including
undisbursed loan proceeds) of $5.72 million. The Company anticipates it will
have sufficient funds available to meet its current loan origination
commitments. Certificates of deposit that are scheduled to mature in one year
or less from June 30, 2001 totaled $50.51 million. Management believes a
significant portion of such deposits will remain with the Company.
At June 30, 2001, the Bank exceeded all of its regulatory capital requirements
with tangible capital and core capital both at $10.36 million or 6.65% of
total adjusted tangible assets, core capital at $10.36 million or 6.65% of
adjusted total assets, and risk-based capital at $11.30 million or 11.86% of
total risk-weighted assets. The required ratios are 1.5% for tangible capital
to tangible assets, 2.0% for core capital to total adjusted tangible assets,
4.0% for core capital to adjusted total assets and 8.0% for risk-based capital
to risk-weighted assets.
Current Accounting Issues
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement requires companies to record derivatives on the
balance sheet at their fair value. Statement No. 133 also acknowledges that
the method of recording a gain or loss depends on the use of the derivative.
The new Statement applies to all entities. If hedge accounting is elected by
the entity, the method of assessing the effectiveness of the hedging
derivative and the measurement approach of determining the hedge's
ineffectiveness must be established at the inception of the hedge.
Statement No. 133 amends Statement No. 52 and supercedes Statements No. 80,
105 and 119. Statement No. 107 is amended to include the disclosure
provisions about the concentrations of credit risk from Statement No. 105.
Several Emerging Issues Task Force consensuses are also changed or modified by
the provisions of Statement No. 133.
Statement No. 137 amended the effective date of Statement No. 133 to fiscal
years beginning after June 15, 2000. The adoption of the Statement had no
material impact on the Corporation's financial condition or results of
operations.
In June 2001, Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations" was issued establishing accounting and reporting
standards requiring all business combinations initiated after June 30, 2001 to
be accounted for using the purchase method. SFAS No. 141 is effective for the
Company for the fiscal quarter beginning July 1, 2001. The impact of this
statement is dependent on future acquisition activity.
Also in June 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was
issued effective for the first period of all fiscal years beginning after
December 13, 2001, with early adoption permitted for entities with fiscal
years beginning after March 15, 2001. SFAS No. 142 addresses how acquired
intangible assets should be accounted for in financial statements upon their
acquisition, and also how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. In general, non-goodwill intangible assets are to be amortized in
accordance with their estimated useful lives. In addition, amortization of
goodwill has been eliminated, with capitalized goodwill now being subjected to
at least an annual assessment for impairment. A two-step process is to be
used to determine, first whether an impairment exists, and then whether an
adjustment is required. SFAS No. 142 is effective for the Company for the
fiscal quarter beginning January 1, 2002. The Company has not yet quantified
the impact of adopting this statement on its financial position or results of
its operation.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions incident to
its business, none of which is believed by management to be
material to the financial condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Certificate of Incorporation of Great American
Bancorp, Inc.*
3.2 By-laws of Great American Bancorp, Inc.*
11.0 Computation of earnings per share (filed herewith)
b. Report on Form 8-K
1. On April 11, 2001, the Registrant filed a Current
Report on Form 8-K reporting information under
Items 5 and 7, incorporating by reference a press
release dated April 10, 2001 relating to the
Registrant's unaudited results for the three months
ended March 31, 2001.
2. On April 23, 2001, the Registrant filed a Current
Report on Form 8-K reporting information under
Items 5 and 7, incorporating by reference a press
release dated April 20, 2001 relating to the
Company's announcement that its stock will begin
trading on the Nasdaq SmallCap Market on April 23,
2001.
_______________
* Incorporated herein by reference into this document from Form
S-1 Registration Statement, as amended, filed on March 24, 1995,
Registration No. 33-90614.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Great American Bancorp, Inc.
Dated: August 10, 2001 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: August 10, 2001 /s/ Jane F. Adams
-------------------------- ----------------------------
Jane F. Adams
Chief Financial Officer,
Secretary and Treasurer
Exhibit 11.0
Earnings per share (unaudited)
Earnings per share (EPS) were computed as follows
(dollar amounts in thousands except share data):
Six Months Ended
June 30, 2001
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 550 966,487 $ 0.57
Effect of Dilutive Securities
Stock options 12,035
Unearned incentive plan shares 6,404
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 550 984,926 $ 0.56
===============================
Six Months Ended
June 30, 2000
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 495 1,111,979 $ 0.45
Effect of Dilutive Securities
Unearned incentive plan shares 18,426
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 495 1,130,405 $ 0.44
===============================
Options to purchase 187,601 shares of common stock at $14.21 were outstanding
at June 30, 2000, but were excluded from the computation of the diluted
earnings per share because the options exercise price was greater than the
average market price of the common shares.
Three months ended
June 30, 2001
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 289 947,729 $ 0.30
Effect of Dilutive Securities
Stock options 15,756
Unearned incentive plan shares 6,097
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 289 969,582 $ 0.30
===============================
Three months ended
June 30, 2000
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 216 1,087,899 $ 0.20
Effect of Dilutive Securities
Unearned incentive plan shares 16,595
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 216 1,104,494 $ 0.20
===============================
Options to purchase 187,601 shares of common stock at $14.21 were outstanding
at June 30, 2000, but were excluded from the computation of the diluted
earnings per share because the options exercise price was greater than the
average market price of the common shares.
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