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 September 30, 2001
----------------------
[ ] 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.
----------------------------
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 October 31, 2001, the Registrant had 883,865 shares of Common Stock
outstanding, for ownership purposes, which excludes 1,168,885 shares held as
treasury stock.
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
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 September 30, 2001 and December 31, 2000
(in thousands)
Sept. 30, 2001 Dec. 31, 2000
(Unaudited)
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ASSETS
Cash and due from banks $ 5,534 $ 6,104
Interest-bearing demand deposits 8,166 4,539
--------------------------------
Cash and cash equivalents 13,700 10,643
Investment securities
Available for sale -- 3,009
Held to maturity (fair value of $2,324
and $3,116) 2,255 3,153
--------------------------------
Total investment securities 2,255 6,162
Loans 142,870 133,620
Allowance for loan losses (991) (889)
--------------------------------
Net loans 141,879 132,731
Premises and equipment 6,406 6,802
Federal Home Loan Bank stock 1,150 890
Other assets 2,231 2,449
--------------------------------
Total assets $ 167,621 $ 159,677
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest bearing $ 11,654 $ 11,573
Interest bearing 112,446 112,112
--------------------------------
Total deposits 124,100 123,685
Federal Home Loan Bank Advances 23,000 14,000
Other liabilities 1,990 1,760
--------------------------------
Total liabilities 149,090 139,445
--------------------------------
Commitments and Contingent Liabilities
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets (Continued)
As of September 30, 2001 and December 31, 2000
(in thousands)
Sept. 30, 2001 Dec. 31, 2000
(Unaudited)
- -----------------------------------------------------------------------------
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 20,122 20,036
Retained earnings -- substantially restricted 17,599 17,043
Accumulated other comprehensive income -- 5
--------------------------------
37,742 37,105
Less:
Treasury stock, at cost - 1,168,885 and
1,014,250 shares (19,085) (16,570)
Unallocated employee stock ownership plan
shares - 4,938 and 19,748 shares (49) (197)
Unearned incentive plan shares - 5,338 and
7,377 shares (77) (106)
--------------------------------
(19,211) (16,873)
--------------------------------
Total stockholders' equity 18,531 20,232
--------------------------------
Total liabilities and
stockholders' equity $ 167,621 $ 159,677
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements
For the Nine Months Ended September 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
- ----------------------------------------------------------------------------
Interest income:
Loans $ 8,320 $ 7,919
Investment securities
Taxable 296 337
Tax exempt -- 13
Deposits with financial
institutions and other 193 208
--------------------------------
Total interest income 8,809 8,477
--------------------------------
Interest expense:
Deposits 3,783 3,718
Federal Home Loan Bank advances 679 362
Other 26 29
--------------------------------
Total interest expense 4,488 4,109
--------------------------------
Net interest income 4,321 4,368
Provision for loan losses 114 225
--------------------------------
Net interest income after
provision for loan losses 4,207 4,143
--------------------------------
Noninterest income:
Insurance sales commissions 875 569
Service charges on deposit accounts 417 414
Brokerage commissions 99 147
Other customer fees 123 111
Net gains on loan sales 49 --
Loan servicing fees 9 14
Other income 12 6
--------------------------------
Total noninterest income 1,584 1,261
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements (Continued)
For the Nine Months Ended September 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
- ----------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits $ 2,412 $ 2,274
Net occupancy expenses 450 498
Equipment expenses 455 450
Data processing fees 59 65
Deposit insurance expense 18 19
Printing and office supplies 226 204
Legal and professional fees 171 172
Directors and committee fees 76 74
Insurance expense 39 33
Marketing and advertising expenses 142 133
Other expenses 297 252
--------------------------------
Total noninterest expense 4,345 4,174
--------------------------------
Income before income tax 1,446 1,230
Income tax expense 579 488
--------------------------------
Net income $ 867 $ 742
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.91 $ 0.68
================================
Average number of shares 949,931 1,083,651
================================
Diluted:
Net income $ 0.89 $ 0.67
================================
Average number of shares 973,126 1,100,245
================================
Dividends $ 0.33 $ 0.33
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements
For the Quarters Ended September 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
- ----------------------------------------------------------------------------
Interest income:
Loans $ 2,843 $ 2,703
Investment securities
Taxable 79 111
Tax exempt -- 6
Deposits with financial
institutions and other 36 69
--------------------------------
Total interest income 2,958 2,889
--------------------------------
Interest expense:
Deposits 1,225 1,269
Federal Home Loan Bank advances 238 164
Other 8 10
--------------------------------
Total interest expense 1,471 1,443
--------------------------------
Net interest income 1,487 1,446
Provision for loan losses 42 75
--------------------------------
Net interest income after
provision for loan losses 1,445 1,371
--------------------------------
Noninterest income:
Insurance sales commissions 273 197
Service charges on deposit accounts 143 141
Brokerage commissions 25 52
Other customer fees 40 39
Net gains on loan sales 49 --
Loan servicing fees 3 4
Other income 1 1
--------------------------------
Total noninterest income 534 434
--------------------------------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Income Statements (Continued)
For the Quarters Ended September 30, 2001 and 2000
(unaudited, in thousands except share data)
2001 2000
- ----------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits $ 829 $ 762
Net occupancy expenses 147 157
Equipment expenses 149 154
Data processing fees 23 25
Deposit insurance expense 6 6
Printing and office supplies 75 69
Legal and professional fees 51 67
Directors and committee fees 26 25
Insurance expense 13 11
Marketing and advertising expenses 45 46
Other expenses 98 70
--------------------------------
Total noninterest expense 1,462 1,392
--------------------------------
Income before income tax 517 413
Income tax expense 200 166
--------------------------------
Net income $ 317 $ 247
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.35 $ 0.24
================================
Average number of shares 917,160 1,027,420
================================
Diluted:
Net income $ 0.33 $ 0.24
================================
Average number of shares 949,026 1,040,352
================================
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 Nine Months Ended September 30, 2001 and 2000
(unaudited, in thousands)
2001 2000
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Operating Activities:
Net income $ 867 $ 742
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 114 225
Depreciation and amortization 476 508
Amortization of deferred loan fees (24) (14)
Deferred income tax 9 --
Federal Home Loan Bank stock dividend (49) (29)
Net gain on loan sales (49) --
Employee stock ownership plan
compensation expense 234 208
Incentive plan expense 29 149
Mortgage loans originated for sale (2,654) --
Proceeds from sale of mortgage loans 2,683 --
Net change in:
Other assets 205 32
Other liabilities 233 (85)
--------------------------------
Net cash provided by
operating activities 2,074 1,736
--------------------------------
Investing Activities:
Proceeds from maturities of securities
held to maturity 425 100
Proceeds from maturities of securities
available for sale 3,000 --
Proceeds from principal repayments of
mortgage-backed securities 473 150
Purchase of Federal Home Loan Bank stock (211) (78)
Net change in loans (9,238) (3,518)
Purchases of premises and equipment (47) (202)
--------------------------------
Net cash used by
investing activities (5,598) (3,548)
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 2001 and 2000
(unaudited, in thousands)
2001 2000
- ----------------------------------------------------------------------------
Financing Activities:
Net change in:
Noninterest-bearing demand, interest-
bearing demand and savings deposits $ 1,106 $ 2,405
Certificates of deposit (691) (1,372)
Proceeds from Federal Home Loan Bank advances 13,500 11,000
Repayment of Federal Home Loan Bank advances (4,500) (7,000)
Cash dividends (319) (370)
Purchase of treasury stock (2,515) (2,408)
--------------------------------
Net cash provided by
financing activities 6,581 2,255
--------------------------------
Net Change in Cash and Cash Equivalents 3,057 443
Cash and Cash Equivalents, Beginning
of Period 10,643 10,013
--------------------------------
Cash and Cash Equivalents, End of
Period $ 13,700 $ 10,456
================================
Additional Cash Flows Information
Interest paid $ 4,473 $ 4,089
================================
Income tax paid $ 399 $ 335
================================
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 September 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 September 30, 1995.
The Company began trading on the NASDAQ Stock Market on September 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 September 30, 2001
and December 31, 2000, the results of operations for the nine months and three
months ended September 30, 2001 and 2000, and the cash flows for the nine
months ended September 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 nine months ended September 30, 2001 are not necessarily indicative of the
results to be expected for the entire fiscal year.
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
(unaudited, table dollar amounts in thousands)
Forward-Looking Information
In addition to historical information, this Form 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 operates the
GTPS Insurance Agency which offers a variety of insurance products, including
life, health, automobile, and property and casualty insurance. PASC also
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.
Financial Condition
The Company's total assets increased from $159.68 million at December 31, 2000
to $167.62 million at September 30, 2001, an increase of $7.94 million, or
5.0%. Total assets grew primarily as a result of loan growth and an increase
in interest-bearing demand deposits, offset by a decline in investment
securities.
Net loans increased from $132.73 million at December 31, 2000 to $141.88
million at September 30, 2001, an increase of $9.15 million, or 6.9%. Loan
growth occurred mainly in 1-4 family residential mortgage loans, construction
loans, commercial loans, and consumer loans. Declining interest rates during
2001 and a stable local economy were factors in the growth in loans. Since
January 1, 2001, the Federal Reserve Board has lowered short-term market
interest rates a total of ten times. The Federal Funds rate has declined from
6.50% as of January 1, 2001 to its current level of 2.00%, a decrease of 450
basis points. The prime rate also declined 450 basis points, from 9.50% as of
January 1, 2001 to 5.00% as of November 8, 2001. The Company lowered loan-
offering rates in response to declining market interest rates, which
contributed to the growth in loans.
The following schedule shows the balances by loan category at September 30,
2001 compared to December 31, 2000, along with the change and percentage
change:
Balance Balance
September 30, December 31, Percentage
2001 2000 Change Change
- ----------------------------------------------------------------------------
One-to four-family
mortgage loans $ 83,341 $ 77,001 $ 6,340 8.2%
Multi-family mortgage loans 18,941 19,750 (809) (4.1)
Commercial mortgage loans 15,994 17,480 (1,486) (8.5)
Construction loans 3,395 1,221 2,174 178.1
- ----------------------------------------------------------------------------
Total real estate loans 121,671 115,452 6,219 5.4
Commercial loans 8,715 6,569 2,146 32.7
Consumer loans 12,484 11,599 885 7.6
- ----------------------------------------------------------------------------
Total loans 142,870 133,620 9,250 6.9
Allowance for loan losses (991) (889) (102) 11.5
- ----------------------------------------------------------------------------
Total loans, net $ 141,879 $ 132,731 $ 9,148 6.9%
============================================================================
Loan growth was mainly funded by an increase in advances from the Federal Home
Loan Bank ("FHLB"). The Company sold $2.6 million in 1-4 family residential
mortgage loans during the third quarter of 2001, recording gains of $49,000,
including $20,000 in gains related to mortgage servicing rights.
Cash and cash equivalents increased $3.06 million during 2001, from $10.64
million at December 31, 2000 to $13.70 million at September 30, 2001, mainly
due to the increase in interest-bearing demand deposits. This increase
resulted primarily from $3.00 million in U.S. agency securities being called
in the second and third quarters of 2001. Total investment securities
decreased $3.90 million in 2001, from $6.16 million at December 31, 2000 to
$2.26 million at September 30, 2001. Besides the $3.00 million in U.S. agency
securities that were called, municipal securities totaling $425,000 matured in
January 2001 and the Company received $473,000 in principal repayments on
mortgage-backed securities during the nine months ended September 30, 2001.
Total deposits increased by $410,000 in 2001, from $123.69 million at December
31, 2000 to $124.10 million at September 30, 2001, mainly due to an increase
in interest-bearing deposits. Interest-bearing deposits increased by $334,000
during the first nine months of 2001, primarily insured money market accounts
("IMMA"). IMMA deposits increased $1.30 million, from $9.85 million at
December 31, 2000 to $11.15 million at September 30, 2001. 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.
Total certificates of deposit decreased by $691,000 from December 31, 2000 to
September 30, 2001, mostly certificates maturing in eighteen months to two
years, offset by increases in the balances of certificates maturing in nine
months to one year.
The following table summarizes the balances of deposits at September 30, 2001
and December 31, 2000, the change in the balances and the percentage change:
Balance Balance
September 30, December 31, Percentage
2001 2000 Change Change
- -----------------------------------------------------------------------------
Noninterest bearing
checking accounts $ 11,654 $ 11,573 $ 81 0.7%
Interest bearing:
NOW accounts 16,497 16,885 (388) (2.3)
IMMA accounts 11,147 9,850 1,297 13.2
Savings accounts 14,145 14,029 116 0.8
Certificates of deposit 70,657 71,348 (691) (1.0)
- -----------------------------------------------------------------------------
Total interest
bearing deposits 112,446 112,112 334 0.3
- -----------------------------------------------------------------------------
Total deposits $ 124,100 $ 123,685 $ 415 0.3%
=============================================================================
FHLB advances increased by $9.00 million from $14.00 million at December 31,
2000 to $23.00 million at September 30, 2001. Proceeds from advances have
provided liquidity for loans and treasury stock purchases. The following
schedule presents FHLB advances at September 30, 2001, by maturity date:
Date Fixed First
of Interest or Maturity Call
Advance Rate Variable Date Date Amount
- -----------------------------------------------------------------------------
October 2000 3.70 Variable October 2001 non callable $ 1,500
August 2001 3.85 Fixed November 2001 non callable 1,000
May 2001 4.40 Fixed February 2002 non callable 2,000
December 2000 5.97 Fixed June 2002 non callable 1,000
October 2000 6.00 Variable October 2002 non callable 3,000
March 2001 4.48 Fixed March 2006 March 2002 1,500
October 1998 4.30 Fixed October 2008 October 2001 5,000
January 2001 4.55 Fixed January 2011 January 2002 5,000
September 2001 3.80 Fixed September 2011 September 2004 3,000
-------
$23,000
=======
Total stockholders' equity decreased $1.70 million, or 8.4%, from $20.23
million at December 31, 2000 to $18.53 million at September 30, 2001,
primarily due to the repurchase of treasury shares. Book value per
outstanding voting share increased from $19.48 at December 31, 2000 to $20.97
at September 30, 2001.
The decrease in stockholders' equity is summarized as follows:
Stockholders' equity, December 31, 2000 $ 20,232
Net income 867
Purchase of treasury stock (2,515)
Dividends declared (311)
Incentive plan shares allocated 29
ESOP shares allocated 234
Decrease in unrealized gain on securities
available for sale, net of income tax effect (5)
----------
Stockholders' equity, September 30, 2001 $ 18,531
==========
Results of Operations
Comparison of Nine Month Periods Ended September 30, 2001 and 2000
Net income for the nine months ended September 30, 2001 was $867,000, an
increase of $125,000, or 16.8%, over the $742,000 recorded for the nine months
ended September 30, 2000. Basic earnings per share were $0.91 for the nine
months ended September 30, 2001, compared to $0.68 for the nine months ended
September 30, 2000. Diluted earnings per share were $0.89 for the first nine
months in 2001, compared to $0.67 for the first nine months in 2000. The
diluted earnings per share increase of $0.22 represents an increase of 32.8%
over the $0.67 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, offset by an
increase in noninterest expense, mainly salaries and benefits.
Net interest income was $4,321,000 for the nine months ended September 30,
2001, $47,000, or 1.1%, lower than the $4,368,000 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 $8,809,000 for the nine months ended September 30, 2001,
compared to $8,477,000 for the same period in 2000, with the majority of the
increase due to interest income from loans. Interest income from loans during
the first nine months in 2001 was $8,320,000, $401,000, or 5.1%, greater than
the $7,919,000 recorded in 2000.
Interest income on loans was higher in 2001 due primarily to loan growth.
Average total loans for the nine months ended September 30, 2001 were $136.81
million compared to $129.44 million for the same period in 2000, an increase
of $7.37 million, or 5.7%. 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 $80.39 million for the nine months ended
September 30, 2001, compared to $72.48 million for the nine months ended
September 30, 2000, an increase of $7.91 million, or 10.9%.
The following schedule compares average total loan balances by major
categories for the first nine months of fiscal 2001 compared to the same
period in 2000:
Average Average
Balance Balance Percentage
2001 2000 Change Change
- ----------------------------------------------------------------------------
One-to four-family
mortgage loans $ 80,393 $ 72,484 $ 7,909 10.9%
Multi-family mortgage loans 19,489 19,846 (357) (1.8)
Commercial mortgage loans 16,625 18,650 (2,025) (10.9)
Construction loans 1,705 1,500 205 13.7
- ----------------------------------------------------------------------------
Total real estate loans 118,212 112,480 5,732 5.1
Commercial loans 7,691 6,480 1,211 18.7
Consumer loans 11,853 11,294 559 5.0
- ----------------------------------------------------------------------------
Total loans 137,756 130,254 7,502 5.8
Allowance for loan losses (943) (812) (131) 16.1
- ----------------------------------------------------------------------------
Total loans, net $136,813 $129,442 $ 7,371 5.7%
============================================================================
The average balance of total commercial mortgage loans decreased due to one
large payoff. The average yield on loans was 8.13% for the nine months ended
September 30, 2001, compared to 8.17% for the nine months ended September 30,
2000.
Interest income on investment securities decreased from $350,000 for the nine
months ended September 30, 2000 to $296,000 for the same period in 2001. This
decline was due mainly to municipal securities maturing in January 2001, U.S.
agency securities being called in the second and third quarters of 2001, and a
reduction in interest earned on mortgage-backed securities due to principal
repayments. The average yield on investment securities increased from 6.58%
for the nine months ended September 30, 2000 to 6.67% for the same period in
2001.
Interest income on deposits with financial institutions and other was $193,000
for the nine-month period ended September 30, 2001 compared with $208,000 for
the same period in 2000. The average balance of total deposits with financial
institutions and other was $5.95 million for the nine months ended September
30, 2001, $1.11 million higher than the $4.84 million average for the same
period in 2000. However, interest income on deposits with financial
institutions and other declined due to the general decline in short-term
market interest rates in 2001. The average yield on deposits with financial
institutions and other decreased from 5.74% for the nine months ended
September 30, 2000 to 4.34% for the same period in 2001.
Interest expense increased by $379,000, or 9.2%, from $4,109,000 for the nine
months ended September 30, 2000 to $4,488,000 for the same period in 2001.
The increase was attributable to higher interest expense on both deposits and
FHLB advances. Interest expense on deposits increased $65,000, or 1.7%, from
$3,718,000 for the nine months ended September 30, 2000 to $3,783,000 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 $23.12 million for the first nine
months of 2000 to $26.61 million for the same period in 2001, an increase of
$3.49 million, or 15.1%. Part of this increase was due to a special 21-month
certificate promotion held during the last nine 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 $113.47 million in the first nine
months of 2000 to $112.30 million during the same period in 2001, a decrease
of $1.17 million, or 1.0%. The average rates on deposits were 4.50% and 4.38%
for the nine months ended September 30, 2001 and 2000.
Interest expense on FHLB advances increased $317,000, or 87.6%, from $362,000
for the nine months ended September 30, 2000 to $679,000 for the nine months
ended September 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 and treasury stock repurchases. Average FHLB advances for the nine
months ended September 30, 2001 were $18.36 million compared to $9.46 million
for the nine months ended September 30, 2000. The average rate on FHLB
advances was 4.94% for the first nine months of 2001 compared to 5.11% for the
same period in 2000.
Net interest income as a percent of average interest earning assets was
3.89% for the nine months ended September 30, 2001 versus 4.13% for the same
period in 2000. The spread between the yield on interest earning assets and
the rate on interest bearing liabilities was 3.35% and 3.57% for the nine
months ended September 30, 2001 and 2000, respectively.
The provision for loan losses was $114,000 for the nine months ended September
30, 2001 compared to $225,000 for the nine months ended September 30, 2000.
The reduced provision for 2001 directly correlates with a decline in non-
performing loans in 2001.
There was $18,000 in loans charged-off and $6,000 in recoveries in the first
nine 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. The remaining principal balance of the
loan was $78,000 at September 30, 2001. In October 2001, the Company
collected this total remaining principal balance.
There was $131,000 in loans charged-off and $6,000 in recoveries in the first
nine months of 2000. The $131,000 in loans charged-off included $90,000
related to the commercial borrower discussed above.
Non-performing loans, which are loans past due 90 days or more and
non-accruing loans, totaled $189,000 at September 30, 2001, compared to
$314,000 at September 30, 2000. Non-performing loans at September 30, 2001
consisted of three residential mortgage loans totaling $89,000, two consumer
loans totaling $22,000 and the commercial loans to one borrower previously
discussed totaling $78,000. All of these loans were past due 90 days or more
at September 30, 2001, with the $78,000 in commercial loans in non-accrual
status. The non-performing loans totaling $314,000 at September 30, 2000 were
comprised of two residential mortgage loans totaling $35,000, four consumer
loans totaling $17,000 and the commercial loans to one borrower discussed
above totaling $262,000. All of these loans were past due 90 days or more at
September 30, 2000, with the $262,000 in non-accrual status. One residential
mortgage loan, totaling $33,000 at September 30, 2001 and $34,000 at September
30, 2000, was non-performing at both September 30, 2001 and 2000.
The ratio of the Company's allowance for loan losses to total loans was .69%
at September 30, 2001 and .61% at September 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 $1,584,000 for the nine months ended September 30,
2001, compared to $1,261,000 for the same period in 2000, an increase of
$323,000, or 25.6%. Insurance sales commissions generated by GTPS Insurance
Agency, which totaled $875,000 for the nine months ended September 30, 2001
compared to $569,000 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 $147,000 for the first
nine months of 2000 to $99,000 for the first nine 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. The Company
sold $2.6 million in 1-4 family residential mortgage loans during the third
quarter of 2001, recording net gains from loan sales of $49,000.
Noninterest expense was $4,345,000 for the first nine months of 2001 compared
to $4,174,000 for the same period in 2000, an increase of $171,000, or 4.1%.
Salaries and employee benefits expenses, which were $138,000, or 6.1%, 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 $91,000, or 18.6%, from $488,000 for the nine
months ended September 30, 2000 to $579,000 for the same period in 2001 due to
the increase in pretax net income. The effective tax rates for the nine
months ended September 30, 2001 and 2000, were 40.0% and 39.7% respectively.
Comparison of Three Month Periods Ended September 30, 2001 and 2000
Net income for the three months ended September 30, 2001 was $317,000, an
increase of $70,000, or 28.3%, over the $247,000 recorded for the three months
ended September 30, 2000. Basic earnings per share increased $0.11, from
$0.24 for the three months ended September 30, 2000 to $0.35 for the same
period in 2001, while diluted earnings per share increased $0.09, from $0.24
for 2000 to $0.33 in 2001.
Net income for the third quarter of 2001 was higher than net income for the
third quarter of 2000 mainly due to increases in net interest income and
noninterest income and a reduction in the provision for loan losses, offset by
an increase in noninterest expense.
Net interest income was $1,487,000 for the quarter ended September 30, 2001
and $1,446,000 for the quarter ended September 30, 2000, an increase of
$41,000, or 2.8%. Interest income increased 2.4%, or $69,000, from $2,889,000
for the quarter ended September 30, 2000 to $2,958,000 for the third quarter
of 2001, primarily due to an increase in interest income from loans.
Interest income on loans increased $140,000, or 5.2%, from $2,703,000 for the
quarter ended September 30, 2000 to $2,843,000 for the same quarter in 2001
due primarily to growth in loans, mainly 1-4 family residential mortgage
loans, commercial loans and consumer loans, offset by a decrease in commercial
mortgage loans.
Average total 1-4 family residential mortgage loans were $83.65 million for
the third quarter of 2001 compared to $74.56 million in the third quarter of
2000, an increase of $9.09 million, or 12.2%. Average total commercial loans
for the three months ended September 30, 2001 and September 30, 2000 were
$8.18 million and $5.60 million, respectively. This represents an increase of
$2.58 million, or 46.1%. Total consumer loans averaged $12.58 million in the
third quarter of 2001, up $1.08 million, or 9.4%, from the average total
balance of $11.50 million in the third quarter of 2000. Average total
commercial mortgage loans decreased $2.11 million, or 11.5%, from $18.42
million for the three months ended September 30, 2000 to $16.31 million for
the same period in 2001. The average yield on loans decreased from 8.24% for
the three months ended September 30, 2000 to 7.98% for the same period in
2001.
Interest income on investment securities decreased from $117,000 for the three
months ended September 30, 2000 to $79,000 for the same period in 2001, due to
a reduction in average total investments. Average total investments for the
third quarter of 2001 were $4.78 million, down $2.32 million, or 32.7%, from
$7.10 million for the third quarter of 2000. This decline was due to
municipal securities maturing in January 2001, U.S. agency securities being
called in the second and third quarters of 2001, and principal repayments on
mortgage-backed securities. The average yield on investment securities for
the three months ended September 30, 2001 was 6.56%, while the average yield
was 6.55% for the same period in 2000.
Interest income on deposits with financial institutions and other decreased
$33,000, or 47.8%, from $69,000 for the three months ended September 30, 2000
to $36,000 for the three months ended September 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 September 30, 2001 for
deposits with financial institutions and other was $4.62 million compared to
$4.51 million for the same period in 2000, up $110,000, or 2.4%. The average
yield on deposits with financial institutions and other was 3.09% for the
three months ended September 30, 2001 and 6.09% for the three months ended
September 30, 2000.
Interest expense increased $28,000, or 1.9%, from $1,443,000 for the three
months ended September 30, 2000 to $1,471,000 for the same period in 2001.
The increase was mainly due to growth in FHLB advances. Average total
deposits only slightly increased in 2001, from $112.13 million for the quarter
ended September 30, 2000 to $112.68 million for the quarter ended September
30, 2001. Most of this increase was in interest-bearing demand deposits - NOW
and IMMA deposits. The average rate on deposits declined from 4.50% for the
quarter ended September 30, 2000 to 4.31% for the quarter ended September 30,
2001.
Interest expense on FHLB advances increased by $74,000, or 45.1%, from
$164,000 for the three months ended September 30, 2000 to $238,000 for the
same period in 2001. The average total balance of FHLB advances increased
from $11.82 million for the third quarter of 2000 to $19.90 million for the
third quarter of 2001, an increase of $8.08 million, or 68.4%. The average
rate on FHLB advances was 4.75% for the three months ended September 30, 2001,
compared to 5.52% for the three months ended September 30, 2000.
Net interest income as a percent of interest earning assets was 3.91% for the
three months ended September 30, 2001 versus 4.05% for the same period in
2000. The spread between the yield on interest earning assets and the rate on
interest bearing liabilities was 3.40% and 3.48% for the three months ended
September 30, 2001 and 2000, respectively.
The provision for loan losses was $42,000 for the three months ended September
30, 2001 compared to $75,000 for the three months ended September 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 $100,000, or 23.0%, from $434,000 for the quarter
ended September 30, 2000 to $534,000 for the three months ended September 30,
2001. The increase was mainly due to higher commission income from insurance
activities and net gains from loan sales. Insurance sales commissions were
$273,000 for the quarter ended September 30, 2001 compared to $197,000 for the
same period in 2000, an increase of $76,000, or 38.6%. The Company sold $2.6
million in 1-4 family residential mortgage loans during the third quarter of
2001, recording gains of $49,000.
Noninterest expense was $1,462,000 for the three months ended September 30,
2001 compared to $1,392,000 for the same period in 2000, an increase of
$70,000, or 5.0%. Noninterest expense was higher in 2001 primarily due to
increases in salary and benefits expense, which was $67,000, or 8.8%, higher
in the third quarter of 2001 compared to the third quarter of 2000. Salary
and benefits expense was higher in 2001 due to normal salary increases, an
increase in the staff of GTPS Insurance Agency and an increase in health
insurance premiums.
Total income taxes for the three months ended September 30, 2001 were
$200,000, compared to $166,000 recorded for the same period in 2000, an
increase of $34,000, or 20.5%. The effective tax rates for the three months
ended September 30, 2001 and 2000, were 38.7% and 40.1%, 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.
Nine Months Ended September 30, 2001
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 8,809 -- 8,809 -- 8,809
Interest expense 4,488 -- 4,488 -- 4,488
Noninterest income 635 979 1,614 (30) 1,584
Net income 687 180 867 -- 867
Total assets 167,800 1,068 168,868 (1,247) 167,621
Nine Months Ended September 30, 2000
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 8,477 -- 8,477 -- 8,477
Interest expense 4,109 -- 4,109 -- 4,109
Noninterest income 560 716 1,276 (15) 1,261
Net income 626 116 742 -- 742
Total assets 157,505 929 158,434 (846) 157,588
Three Months Ended September 30, 2001
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 2,958 -- 2,958 -- 2,958
Interest expense 1,471 -- 1,471 -- 1,471
Noninterest income 246 298 544 (10) 534
Net income 278 39 317 -- 317
Three Months Ended September 30, 2000
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- ------------------------------------------------------------------------------
Interest income $ 2,889 -- 2,889 -- 2,889
Interest expense 1,443 -- 1,443 -- 1,443
Noninterest income 233 206 439 (5) 434
Net income 204 43 247 -- 247
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") increased $3.06 million for the nine months ended
September 30, 2001, compared to an increase of $443,000 for the nine months
ended September 30, 2000. During the nine months ended September 30, 2001,
cash was primarily provided from earnings, proceeds from sales of mortgage
loans, proceeds from maturities of investment securities, increases in
noninterest-bearing, interest bearing demand and savings deposits, and FHLB
advances. During that period cash was primarily used to fund loans and a
reduction in certificates of deposit, repay FHLB advances, purchase treasury
stock and pay dividends.
During the nine months ended September 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 nine months ended
September 30, 2001 was the origination of loans. During the nine months ended
September 30, 2001 and September 30, 2000, the Company originated mortgage
loans in the amounts of $26.69 million and $20.01 million, respectively,
commercial loans in the amounts of $8.20 million and $6.79 million,
respectively, and consumer loans in the amounts of $8.79 million and $7.64
million, respectively.
As of September 30, 2001, the Company had outstanding commitments (including
undisbursed loan proceeds) of $3.49 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 September 30, 2001 totaled $49.76 million. Management believes a
significant portion of such deposits will remain with the Company.
At September 30, 2001, the Bank exceeded all of its regulatory capital
requirements with tangible capital and core capital both at $10.26 million or
6.45% of total adjusted tangible assets, core capital at $10.26 million or
6.45% of adjusted total assets, and risk-based capital at $11.25 million or
11.61% 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
In September 2001, Statement of Financial Accounting Standards ("SFAS") No.
141, "Business Combinations" was issued establishing accounting and reporting
standards requiring all business combinations initiated after September 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 September 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.
In July 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was
issued. SFAS No. 143 establishes standards for accounting and reporting of
obligations associated with the retirement of tangible long-lived assets and
associated asset retirement costs. SFAS No. 143 is effective beginning June
15, 2002. The adoption of this Statement is not expected to have an impact on
the Company.
In October 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. Under SFAS No. 144, long-lived assets to be
sold within one year must be separately identified and carried at the lower of
carrying value or fair value less costs to sell.
Long-lived assets expected to be held longer than one year are subject to
depreciation and must be written down to fair value upon impairment. Long-
lived assets no longer expected to be sold within one year, such as some
foreclosed real estate, must be written down to the lower of current fair
value or fair value at the date of foreclosure adjusted to reflect
depreciation since acquisition. SFAS No. 144 must be implemented by January
1, 2002. The adoption of this Statement will have no impact on the Company
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 September 19, 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 September 19, 2001 relating to the
Company's announcement that its Board of Directors has
approved a 5% stock repurchase program.
_______________
* 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: November 9, 2001 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: November 9, 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):
Nine Months Ended
September 30, 2001
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 867 949,931 $ 0.91
Effect of Dilutive Securities
Stock options 16,967
Unearned incentive plan shares 6,228
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 867 973,126 $ 0.89
===============================
Nine Months Ended
September 30, 2000
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 742 1,083,651 $ 0.68
Effect of Dilutive Securities
Unearned incentive plan shares 16,594
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 742 1,100,245 $ 0.67
===============================
Options to purchase 187,601 shares of common stock at $14.21 were outstanding
at September 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
September 30, 2001
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 317 917,160 $ 0.35
Effect of Dilutive Securities
Stock options 26,009
Unearned incentive plan shares 5,857
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 317 949,026 $ 0.33
===============================
Three months ended
September 30, 2000
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 247 1,027,420 $ 0.24
Effect of Dilutive Securities
Unearned incentive plan shares 12,932
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 247 1,040,352 $ 0.24
===============================
Options to purchase 187,601 shares of common stock at $14.21 were outstanding
at September 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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