UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
----------------------
[ ] TRANSITION REPORT UNDER 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
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(217) 356-2265
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(Registrant's telephone number, including area code)
At October 31, 2002, the Registrant had 822,790 shares of Common Stock
outstanding, for ownership purposes, which excludes 1,229,960 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 Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
Item 3. Controls and Procedures
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, 2002 and December 31, 2001
(in thousands except share data)
Sept. 30, 2002 Dec. 31, 2001
(unaudited)
- -----------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 6,049 $ 4,832
Interest-bearing demand deposits 18,352 6,334
--------------------------------
Cash and cash equivalents 24,401 11,166
Held-to-maturity securities 1,503 2,056
Mortgage loans held for sale 1,559 2,343
Loans, net of allowance for loan losses
of $1,151 and $1,040 in 2002 and 2001,
respectively 130,295 143,063
Premises and equipment 6,230 6,362
Federal Home Loan Bank stock 1,212 1,166
Interest receivable 733 789
Cash surrender value of life insurance 263 251
Insurance premiums receivable 357 204
Deferred income taxes 75 81
Mortgage servicing rights 198 51
Goodwill 485 485
Other 323 328
--------------------------------
Total assets $ 167,634 $ 168,345
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest-bearing deposits $ 12,509 $ 11,890
Interest-bearing deposits
Savings, NOW and money market 53,987 46,300
Time 62,421 69,350
--------------------------------
Total deposits 128,917 127,540
Federal Home Loan Bank advances 18,000 20,500
Deferred compensation - directors 626 648
Advances from borrowers for taxes
and insurance 75 319
Accrued postretirement benefit obligation 245 211
Accrued real estate taxes 97 136
Premiums due insurance companies 83 101
Dividend payable 91 95
Income taxes payable 33 23
Interest payable 74 91
Other 411 122
--------------------------------
Total liabilities 148,652 149,786
--------------------------------
Commitments and Contingent Liabilities
(continued
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Balance Sheets (Continued)
As of September 30, 2002 and December 31, 2001
(in thousands except share data)
Sept. 30, 2002 Dec. 31, 2001
(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 20,166 20,165
Retained earnings 19,055 17,838
--------------------------------
39,242 38,024
Treasury stock, at cost
Common: 2002 - 1,221,160 shares,
2001 - 1,185,583 shares (20,193) (19,393)
Unearned incentive plan shares:
2002 - 4,649 shares,
2001 - 5,010 shares (67) (72)
--------------------------------
Total stockholders' equity 18,982 18,559
--------------------------------
Total liabilities and
stockholders' equity $ 167,634 $ 168,345
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Income
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited, in thousands except share data)
2002 2001
- ----------------------------------------------------------------------------
Interest income
Loans $ 7,812 $ 8,320
Available-for-sale securities -- 120
Held-to-maturity securities 85 127
Deposits with banks and other 196 242
--------------------------------
Total interest income 8,093 8,809
--------------------------------
Interest expense
Deposits 2,638 3,783
Federal Home Loan Bank advances 647 679
Other 22 26
--------------------------------
Total interest expense 3,307 4,488
--------------------------------
Net interest income 4,786 4,321
Provision for loan losses 140 114
--------------------------------
Net interest income after
provision for loan losses 4,646 4,207
--------------------------------
Noninterest income
Insurance sales commissions 1,148 875
Brokerage commissions 89 99
Customer service fees 435 417
Other service charges and fees 151 123
Gain on mortgage banking activities 404 49
Loan servicing fees 17 9
Other 8 12
--------------------------------
Total noninterest income 2,252 1,584
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Income (Continued)
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited, in thousands except share data)
2002 2001
- ----------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits $ 2,546 $ 2,412
Net occupancy expense 433 450
Equipment expense 373 455
Data processing fees 56 59
Deposit insurance premium 17 18
Printing and office supplies 208 226
Legal and professional fees 177 171
Directors and committee fees 82 76
Insurance expense 46 39
Marketing and advertising expense 161 142
Other 382 297
--------------------------------
Total noninterest expense 4,481 4,345
--------------------------------
Income before income tax 2,417 1,446
Income tax expense 922 579
--------------------------------
Net income $ 1,495 $ 867
================================
Per Share Data:
Earnings
Basic:
Net income $ 1.77 $ 0.91
================================
Average number of shares 843,525 949,931
================================
Diluted:
Net income $ 1.63 $ 0.89
================================
Average number of shares 915,889 973,126
================================
Dividends $ 0.33 $ 0.33
================================
See notes to condensed consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Income
For the Three Months Ended September 30, 2002 and 2001
(Unaudited, in thousands except share data)
2002 2001
- ----------------------------------------------------------------------------
Interest income
Loans $ 2,556 $ 2,843
Available-for-sale securities -- 23
Held-to-maturity securities 23 39
Deposits with banks and other 75 53
--------------------------------
Total interest income 2,654 2,958
--------------------------------
Interest expense
Deposits 809 1,225
Federal Home Loan Bank advances 205 238
Other 7 8
--------------------------------
Total interest expense 1,021 1,471
--------------------------------
Net interest income 1,633 1,487
Provision for loan losses 30 42
--------------------------------
Net interest income after
provision for loan losses 1,603 1,445
--------------------------------
Noninterest income
Insurance sales commissions 337 273
Brokerage commissions 21 25
Customer service fees 162 143
Other service charges and fees 57 40
Gain on mortgage banking activities 183 49
Loan servicing fees 6 3
Other 1 1
--------------------------------
Total noninterest income 767 534
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Income (Continued)
For the Three Months Ended September 30, 2002 and 2001
(Unaudited, in thousands except share data)
2002 2001
- ----------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits $ 874 $ 829
Net occupancy expense 147 147
Equipment expense 125 149
Data processing fees 19 23
Deposit insurance premium 6 6
Printing and office supplies 68 75
Legal and professional fees 70 51
Directors and committee fees 32 26
Insurance expense 16 13
Marketing and advertising expense 58 45
Other 137 98
--------------------------------
Total noninterest expense 1,552 1,462
--------------------------------
Income before income tax 818 517
Income tax expense 296 200
--------------------------------
Net income $ 522 $ 317
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.63 $ 0.35
================================
Average number of shares 830,965 917,160
================================
Diluted:
Net income $ 0.57 $ 0.33
================================
Average number of shares 911,134 949,026
================================
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, 2002 and 2001
(Unaudited, in thousands)
2002 2001
- ----------------------------------------------------------------------------
Operating Activities
Net income $ 1,495 $ 867
Items not requiring (providing) cash
Depreciation expense 359 443
Amortization of goodwill -- 33
Provision for loan losses 140 114
Amortization of premiums and
discounts on securities 4 --
Amortization of loan servicing rights 16 2
Amortization of deferred loan fees (22) (24)
Deferred income taxes 6 9
Federal Home Loan Bank stock dividends (46) (49)
Employee stock ownership plan
compensation expense -- 234
Incentive plan expense 6 29
Gain on sales of mortgage loans (404) (49)
Loans originated for sale (15,191) (2,654)
Proceeds from sales of loans 16,216 2,683
Net gain on sale of premises and equipment (4) --
Changes in:
Accrued interest receivable 56 19
Income taxes receivable -- 116
Prepaid expenses and other assets (160) 62
Interest payable (17) 14
Other liabilities 244 197
Income taxes payable 10 225
--------------------------------
Net cash provided by
operating activities 2,708 2,271
--------------------------------
Investing Activities
Net (originations) collections of loans 12,650 (9,238)
Purchase of premises and equipment (227) (47)
Proceeds from sales of premises and equipment 4 --
Proceeds from maturities of available-for-sale
securities -- 3,000
Proceeds from maturities of held-to-maturity
securities -- 425
Proceeds from paydowns of mortgage backed
securities 549 473
Purchase of Federal Home Loan Bank stock -- (211)
--------------------------------
Net cash provided (used) by
investing activities 12,976 (5,598)
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited, in thousands)
2002 2001
- ----------------------------------------------------------------------------
Financing Activities:
Net increase in demand deposits,
money market, NOW and savings accounts $ 8,306 $ 1,106
Net decrease in certificates of deposits (6,929) (691)
Repayment of Federal Home Loan Bank advances (4,500) (4,500)
Proceeds from Federal Home Loan Bank advances 2,000 13,500
Dividends paid (282) (319)
Purchase of treasury stock (800) (2,515)
Net decreases in advances from
borrowers for taxes and insurance (244) (197)
--------------------------------
Net cash provided (used) by
financing activities (2,449) 6,384
--------------------------------
Increase in Cash and Cash Equivalents 13,235 3,057
Cash and Cash Equivalents, Beginning
of Period 11,166 10,643
--------------------------------
Cash and Cash Equivalents, End of
Period $ 24,401 $ 13,700
================================
Supplemental Cash Flows Information
Interest paid $ 3,324 $ 4,473
================================
Income taxes paid (net of refunds) $ 906 $ 399
================================
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
issued and 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's common stock trades on the Nasdaq SmallCap
Market under the symbol "GTPS."
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, 2002
and December 31, 2001, the results of operations for the nine months and
three months ended September 30, 2002 and 2001, and the cash flows for the
nine months ended September 30, 2002 and 2001. All adjustments to the
financial statements were normal and recurring in nature. These results have
been determined on the basis of accounting principles generally accepted in
the United States of America. Reclassifications of certain amounts in the
2001 financial statements have been made to conform to the 2002 presentation.
The results of operations for the three and nine months ended September 30,
2002 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.
Certain information and note disclosures normally included in the Company's
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. These consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's 2001 Annual Report to Shareholders. The condensed
consolidated balance sheet of the Company as of December 31, 2001 has been
derived from the audited consolidated balance sheet of the Company as of that
date.
3. Accounting Changes
Effective January 1, 2002, the Company applied Financial Accounting Standards
Board ("FASB") Statement No. 142, Goodwill and Other Intangible Assets.
Among its provisions is a requirement to disclose what reported net income
would have been in all periods presented exclusive of amortization expense
(net of related income tax effects) recognized in those periods related to
goodwill, intangible assets no longer being amortized, and changes in
amortization periods for intangible assets that will continue to be amortized
together with related per share amounts.
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands, except per share data)
Reported net income $ 522 $ 317 $1,495 $ 867
Add goodwill amortization -- 7 -- 20
------ ------ ------ ------
Adjusted net income $ 522 $ 324 $1,495 $ 887
====== ====== ====== ======
Basic earnings per share:
Reported net income $ 0.63 $ 0.35 $ 1.77 $ 0.91
Goodwill amortization -- 0.00 -- 0.02
------ ------ ------ ------
Adjusted net income $ 0.63 $ 0.35 $ 1.77 $ 0.93
====== ====== ====== ======
Diluted earnings per share:
Reported net income $ 0.57 $ 0.33 $ 1.63 $ 0.89
Goodwill amortization -- 0.01 -- 0.02
------ ------ ------ ------
Adjusted net income $ 0.57 $ 0.34 $ 1.63 $ 0.91
====== ====== ====== ======
Based on current information, the Company determined during the third quarter
that there was no impairment as the result of the application of FASB
Statement No. 142. Impairment testing will be done annually as of September
30, in accordance with the requirement of the statement.
4. Current Accounting Issues
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
September 15, 2002. The adoption of this Statement did not 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 did not have an impact on the
Company.
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 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 decreased $711,000 from December 31, 2001 to
September 30, 2002. Total assets were $167.63 million at September 30, 2002,
compared to $168.35 million at December 31, 2001.
Cash and cash equivalents increased $13.23 million, or 118.4%, from $11.17
million at December 31, 2001 to $24.40 million at September 30, 2002. Cash
and cash equivalents, primarily interest-bearing demand deposits, increased
as a result of proceeds from mortgage loan sales, loan repayments and an
increase in customer deposits, offset by repayments of Federal Home Loan Bank
("FHLB") advances. Interest-bearing demand deposits grew from $6.33 million
at December 31, 2001 to $18.35 million at September 30, 2002, an increase of
$12.02 million, or 189.9%.
Held-to-maturity securities declined from $2.06 million at December 31, 2001
to $1.50 million at September 30, 2002 due to repayments of mortgage-backed
securities.
Mortgage loans held for sale decreased from $2.34 million at December 31,
2001 to $1.56 million at September 30, 2002 due mainly to a change in the
Company's strategy relating to the selling of mortgage loans. In the second
quarter of 2002, Company management began entering into commitments to sell
loans to the secondary market at the time customers commit to the loans.
Previously, mortgage loans held for sale were sold when management considered
the pricing advantageous. The Company changed its strategy in order to
reduce its exposure to changes in interest rates. During the first nine
months of 2002, the Company originated $15.19 million in mortgage loans held
for sale. During this period, the Company sold $16.01 million in loans
recording cash gains of $204,000. The $1.56 million balance of mortgage
loans held for sale at September 30, 2002 consists of loans committed for
sale recorded at their estimated fair value and includes a net gain of
$37,000 that is included in net income for 2002. During the nine months
ended September 30, 2002, the Company also recorded gains from capitalizing
mortgage servicing rights of $163,000. At September 30, 2002 and December
31, 2002, residential mortgage loans serviced for others totaled $22.82
million and $9.15 million, respectively.
The following schedule shows the balances by loan category at September 30,
2002 compared to December 31, 2001, along with the change and percentage
change:
Balance Balance
September 30, December 31, Percentage
2002 2001 Change Change
- ----------------------------------------------------------------------------
One-to-four-family mortgage
loans held for investment $ 69,682 $ 81,657 $(11,975) (14.7)%
Multi-family mortgage loans 19,145 19,775 (630) (3.2)
Commercial mortgage loans 16,291 16,591 (300) (1.8)
Construction loans 2,558 3,907 (1,349) (34.5)
- ----------------------------------------------------------------------------
Total real estate loans 107,676 121,930 (14,254) (11.7)
Commercial loans 9,684 9,553 131 1.4
Consumer loans 14,086 12,620 1,466 11.6
- ----------------------------------------------------------------------------
Total loans 131,446 144,103 (12,657) (8.8)
Allowance for loan losses (1,151) (1,040) (111) (10.7)
- ----------------------------------------------------------------------------
Total loans, net $ 130,295 $ 143,063 $(12,768) (8.9)%
============================================================================
Net loans declined from $143.06 million at December 31, 2001 to $130.30
million at September 30, 2002, a decrease of $12.76 million, or 8.9%. Net
loans, which does not include mortgage loans held for sale, declined mostly
due to principal repayments on one-to-four-family residential mortgage loans
exceeding loan originations. The majority of new one-to-four-family
residential mortgage loans in 2002 were originated for sale rather than for
investment. Mortgage loans held for sale are separately reported on the
consolidated balance sheets. One-to-four-family mortgage loans decreased
$11.98 million from December 31, 2001 to September 30, 2002.
Construction loans declined $1.35 million from December 31, 2001 to September
30, 2002 mainly due to construction being completed on one large commercial
construction loan totaling $1.67 million. This loan was transferred to
commercial mortgage loans during the second quarter of 2002. Two large
commercial mortgage loans, totaling $2.09 million, were paid off during the
first quarter of 2002, contributing to the decline of $300,000 in commercial
mortgage loans.
Total consumer loans increased $1.47 million, or 11.6%, from $12.62 million
at December 31, 2001 to $14.09 million at September 30, 2002, primarily
revolving home equity loans offset by declines in other secured consumer
loans. Home equity loans grew by $2.07 million from December 31, 2001 to
September 30, 2002. The Company has been actively marketing the revolving
home equity product with television and other types of advertising.
Total deposits increased $1.38 million, or 1.1%, from $127.54 million at
December 31, 2001 to $128.92 million at September 30, 2002. Noninterest-
bearing deposits increased by $619,000 and savings, NOW and money market
deposits grew by $7.69 million, while time deposits declined by $6.93 million
during the first nine months of 2002. The growth in savings, NOW and money
market accounts and the decline in time deposits was mostly due to customers
transferring matured certificates of deposit into short-term, interest-
bearing demand accounts. Such transfers, management believes, are in
anticipation that market interest rates will rise in the future. The decline
in time deposits was mainly in certificates of deposit with one to two year
maturities.
The following table summarizes the balances of deposits at September 30, 2002
and December 31, 2001, the change in the balances and the percentage change:
Balance Balance
September 30, December 31, Percentage
2002 2001 Change Change
- -----------------------------------------------------------------------------
Noninterest bearing
checking accounts $ 12,509 $ 11,890 $ 619 5.2%
Interest bearing:
NOW accounts 19,516 17,955 1,561 8.7
IMMA accounts 17,090 13,326 3,764 28.2
Savings accounts 17,381 15,019 2,362 15.7
Certificates of deposit 62,421 69,350 (6,929) (10.0)
- -----------------------------------------------------------------------------
Total interest
bearing deposits 116,408 115,650 758 0.7
- -----------------------------------------------------------------------------
Total deposits $ 128,917 $ 127,540 $ 1,377 1.1%
=============================================================================
FHLB advances totaled $18.00 million at September 30, 2002 compared to $20.50
million at December 31, 2001. In February 2002, a $2.00 million FHLB advance
with a rate of 4.40% matured. In March 2002, a $1.50 million advance with a
rate of 4.48% was called. In June 2002, a $1.00 million advance with a rate
of 5.97% matured. The Company borrowed $2.00 million in fixed rate FHLB
advances with an average rate of 3.32% in March 2002 to replace maturing and
called advances.
The following schedule presents FHLB advances at September 30, 2002, by
maturity date:
Date Fixed First or
of Interest or Maturity Next Call
Advance Rate Variable Date Date Amount
- -----------------------------------------------------------------------------
October 2000 6.00 Variable October 2002 non callable $ 3,000
March 2002 3.06 Fixed March 2003 non callable 1,000
March 2002 3.58 Fixed September 2003 non callable 1,000
October 1998 4.30 Fixed October 2008 October 2002 5,000
January 2001 4.55 Fixed January 2011 October 2002 5,000
September 2001 3.80 Fixed September 2011 September 2004 3,000
-------
$18,000
=======
The $10.00 million in advances callable in October 2002 were not called.
Both of these advances are callable quarterly. The $3.00 million variable
rate advance due in October 2002 has a floor rate of 6.00%.
Total stockholders' equity increased $423,000, from $18.56 million at
December 31, 2001 to $18.98 million at September 30, 2002. Book value per
outstanding voting share increased from $21.40 at December 31, 2001 to $22.83
at September 30, 2002. The increase in stockholders' equity is summarized as
follows (in thousands):
Stockholders' equity, December 31, 2001 $ 18,559
Net income 1,495
Purchase of treasury stock (800)
Dividends declared (278)
Incentive plan shares allocated 6
------
Stockholders' equity, September 30, 2002 $ 18,982
======
Results of Operations
Comparison of Nine Month Periods Ended September 30, 2002 and 2001
Net income totaled $1,495,000 for the nine months ended September 30, 2002
compared to $867,000 for the nine months ended September 30, 2001, an
increase of $628,000, or 72.4%. Basic earnings per share were $1.77 for the
nine months ended September 30, 2002, compared to $0.91 for the nine months
ended September 30, 2001. Diluted earnings per share were $1.63 for the
first nine months of 2002, compared to $0.89 for the first nine months of
2001.
Net income increased in 2002 due to growth in net interest income and
noninterest income, offset by increases in the provision for loan losses,
noninterest expense, and income tax expense.
Net interest income increased $465,000, or 10.8%, from $4,321,000 for the
nine months ended September 30, 2001 to $4,786,000 for the same period in
2002. Interest income declined $716,000, or 8.1%, from $8,809,000 for the
nine months ended September 30, 2001 to $8,093,000 for the first nine months
of 2002. Interest expense decreased $1,181,000, or 26.3%, from $4,488,000 in
2001 to $3,307,000 in 2002.
Interest income from loans was $7,812,000 for the first nine months of 2002,
$508,000, or 6.1% less than the $8,320,000 recorded for the first nine months
of 2001. Interest income from loans declined in 2002 due to a lower average
yield, which was a result of declining interest rates during 2001 and 2002.
The prime rate, the rate used by financial institutions in establishing the
majority of loan offering rates, declined from a high of 9.50% in January
2001 to 4.75% in December 2001. The prime rate did not change in the first
nine months of 2002. However, mortgage interest rates declined during 2002.
The average yield on the Company's loans decreased from 8.13% for the first
nine months of 2001 to 7.63% for the same period in 2002. The total average
balance of loans, including mortgage loans held for sale, was down only
slightly in 2002, from $136.81 million in 2001 to $136.80 million in 2002.
The following schedule compares average total loan balances by major
categories for the first nine months of fiscal 2002 to the same period in
2001:
Average Average
Balance Balance Percentage
2002 2001 Change Change
- ----------------------------------------------------------------------------
One-to-four-family
mortgage loans $ 77,652 $ 80,393 $(2,741) (3.4)%
Multi-family mortgage loans 19,298 19,489 (191) (1.0)
Commercial mortgage loans 15,699 16,625 (926) (5.6)
Construction loans 2,970 1,705 1,265 74.2
- ----------------------------------------------------------------------------
Total real estate loans 115,619 118,212 (2,593) (2.2)
Commercial loans 9,303 7,691 1,612 21.0
Consumer loans 13,009 11,853 1,156 9.8
- ----------------------------------------------------------------------------
Total loans 137,931 137,756 175 0.1
Allowance for loan losses (1,126) (943) (183) (19.4)
- ----------------------------------------------------------------------------
Total loans, net $136,805 $136,813 $ (8) 0.0%
============================================================================
Total average one-to-four-family residential mortgage loans, including
mortgage loans held for sale, declined primarily in 15 and 30 year fixed rate
home loans originated for sale due mainly to loan sales. Average
construction loans increased due mainly to one new commercial construction
loan. The increase in average total commercial loans was due mainly to two
large commercial loans entered into in late 2001 and early 2002. The total
average balance of revolving home equity loans increased by $1.72 million
from $1.08 million for the nine months ended September 30, 2001 to $2.80
million for the same period in 2002.
Interest income from investment securities also decreased in 2002, from
$247,000 for the first nine months in 2001 to $85,000 for the same period in
2002, a decrease of $162,000, or 65.6%. The Company did not maintain
available-for-sale securities during the first nine months of 2002, compared
to an average balance of $2.44 million in 2001. The available-for-sale
securities held in 2001 were all U.S. Agency securities that were called in
the second and third quarters of 2001. Interest income from held-to-maturity
securities declined from $127,000 for the nine months ended September 30,
2001 to $85,000 for the same period in 2002, mainly due to a decline in the
average balance of these investments. The total average balance of held-to-
maturity securities declined from $2.54 million during the first nine months
of 2001 to $1.78 million during the first nine months of 2002. Held-to-
maturity securities were comprised mainly of mortgage-backed securities in
2002 and 2001. The average yield on investment securities decreased from
6.64% for the first nine months of 2001 to 6.37% for the first nine months of
2002.
Interest income from deposits with banks and other declined $46,000, or
19.0%, from $242,000 for the first nine months of 2001 to $196,000 for the
first nine months of 2002. The majority of these deposits are overnight
funds, which were affected by the sharp decline in market interest rates
during 2001. During 2001, the Federal Open Market Committee, or "FOMC", the
Federal Reserve Board's governing body that establishes the Federal funds
rate and the discount rate, lowered these key market interest rates 11 times
for a total of 475 basis points. The FOMC did not adjust market rates in the
first nine months of 2002. The average balance of deposits with banks and
other increased from $6.90 million during the first nine months of 2001 to
$13.97 million during the same period in 2002. However, the average yield on
deposits with banks and other decreased from 4.69% for the first nine months
of 2001 to 1.88% for the first nine months of 2002.
Interest expense decreased by $1,181,000, or 26.3%, from $4,488,000 for the
nine months ended September 30, 2001 to $3,307,000 for the same period in
2002, due mainly to interest expense on deposits. Interest expense on
deposits declined $1,145,000, or 30.3%, from $3,783,000 for the nine months
ended September 30, 2001 to $2,638,000 for the nine months ended September
30, 2002. This decrease was primarily in interest expense on certificates of
deposit, which declined $1,013,000, or 32.4% in 2002. Interest expense on
certificates of deposit was $2,115,000 in the first nine months of 2002
compared to $3,128,000 for the first nine months of 2001.
Certificates of deposit interest expense declined due to a reduction in the
total average balance of certificates and a decrease in the average rate.
Total average certificates of deposit declined from $71.36 million in the
first nine months of 2001 to $64.97 million in the first nine months of 2002.
The decline in average certificates of deposit was primarily in the eighteen
month to two-year maturity categories. Because of the significant decline in
market interest rates during 2001, many customers moved maturing certificates
to shorter-term certificates or into demand or savings accounts. The average
rate on certificates of deposit declined from 5.86% for the nine months ended
September 30, 2001 to 4.35% for the first nine months of 2002. Part of this
decline was due to the shift in the mix of certificates to shorter-term
maturities, which usually carry a lower rate. Also, with the declining rate
environment during 2001, the Company lowered offering rates for new and
renewing certificates.
Interest expense on interest-bearing demand and savings deposits also
declined in 2002, from $655,000 for the nine months ended September 30, 2001
to $523,000 for the nine months ended September 30, 2002, a decline of
$132,000, or 20.2%. The Company lowered rates paid on demand and savings
accounts due to the decline in general market interest rates during 2001.
The average balance of interest-bearing demand and savings accounts increased
$9.78 million, or 23.9%, from $40.94 million in the first nine months of 2001
to $50.72 million for the same period in 2002.
Interest expense on FHLB advances was $647,000 for the nine months ended
September 30, 2002 compared to $679,000 for the same period in 2001. The
average balance of FHLB advances was $18.78 million for the first nine months
of 2002 compared to $18.36 million for the same period in 2001. The average
rate on FHLB advances decreased from 4.94% for the nine months ended
September 30, 2001 to 4.61% for the nine months ended September 30, 2002.
Net interest income as a percent of interest earning assets was 4.19% for the
nine months ended September 30, 2002 versus 3.89% for the same period in
2001. The spread between the yield on interest-earning assets and the rate
on interest bearing liabilities was 3.82% and 3.35% for the nine months ended
September 30, 2002 and 2001, respectively.
The provision for loan losses was $140,000 for the nine months ended
September 30, 2002 compared to $114,000 for the nine months ended September
30, 2001. The higher provision in 2002 was due to an increase in the monthly
provision based on the Company's analysis of the loan portfolio and the
adequacy of the allowance for loan losses during the period. The Company
increased the monthly provision in 2002 primarily due to increased lending in
commercial and consumer loan categories. 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.
During the first nine months of 2002, the Company charged-off one commercial
loan totaling $16,000 and two consumer loans totaling $18,000. During this
period, the Company also collected $5,000 in recoveries. For the nine months
ended September 30, 2001, the Company charged-off $18,000 in loans and
collected $6,000 in recoveries.
Non-performing loans, which are loans past due 90 days or more and non-
accruing loans, totaled $324,000 at September 30, 2002, compared to $189,000
at September 30, 2001. Non-performing loans at September 30, 2002 consisted
of four residential mortgage loans totaling $277,000, one commercial loan of
$12,000 and five consumer loans totaling $35,000. All of these loans were
past due 90 days or more at September 30, 2002, with two consumer loans
totaling $20,000 in non-accrual status. The ratio of the Company's allowance
for loan losses to total loans was .88% at September 30, 2002 and .69% at
September 30, 2001.
Noninterest income totaled $2,252,000 for the nine months ended September 30
2002, compared to $1,584,000 for the same period in 2001, an increase of
$668,000, or 42.2%. This increase was mostly due to commissions generated by
GTPS Insurance Agency and net gains from the sale of mortgage loans, net of
commissions. Insurance sales commissions increased $273,000, or 31.2%, from
$875,000 reported for the first nine months of 2001 to $1,148,000 for the
first nine months of 2002, primarily due to commissions generated from new
customers. The Company sold or committed to sell $17.60 million in loans
during the first nine months of 2002, recording net gains of $404,000. The
$404,000 includes the cash gains on the sale of loans totaling $204,000, net
gains due to a market value adjustment on loans committed to be sold at
September 30, 2002 of $37,000, and the gains from capitalizing mortgage
servicing rights of $163,000. During the first nine months of 2001, the
Company sold $2.65 million in loans, recording net cash gains of $29,000 and
gains from capitalizing mortgage servicing rights of $20,000. The Company
started selling one-to-four-family fixed rate residential mortgage loans to
Fannie Mae in July 2001 in order to provide funding for additional loans and
also to reduce interest rate risk due to the decline in home mortgage rates
during 2001.
Noninterest expense was $4,481,000 for the first nine months of 2002,
$136,000 or 3.1% higher than the $4,345,000 recorded for the first nine
months of 2001. Noninterest expense was higher in 2002 mainly due to
increases in salaries and employee benefits expense and other expenses,
offset by a reduction in equipment expenses. Salaries and employee benefits
expense increased $134,000, or 5.6%, from $2,412,000 for the nine months
ended September 30, 2001 to $2,546,000 for the first nine months of 2002, due
primarily to normal salary raises. Equipment expenses were lower in 2002 due
to a reduction in depreciation expense, mainly depreciation expense related
to the Bank's core processing software. Other expenses increased by $85,000,
from $297,000 for the nine months ended September 30, 2001 to $382,000 for
the nine months ended September 30, 2002. Checking and savings account
losses were $42,000 higher in 2002 and costs associated with the Company's
debit card program implemented in late 2001 were higher by $34,000. Also,
service charges related to check processing and loan expenses tied mainly to
the Company's revolving home equity product were higher in 2002.
Total income taxes were $922,000 for the period ended September 30, 2002 and
$579,000 for the same period in 2001. The effective tax rate for the nine
months ended September 30, 2002 and 2001, were 38.1% and 40.0% respectively.
Comparison of Three Month Periods Ended September 30, 2002 and 2001
Net income for the three months ended September 30, 2002 was $522,000, an
increase of $205,000, or 64.7%, over the $317,000 recorded for the three
months ended September 30, 2001. Basic earnings per share increased $0.28,
from $0.35 for the three months ended September 30, 2001 to $0.63 for the
same period in 2002, while diluted earnings per share increased $0.24, from
$0.33 for 2001 to $0.57 in 2002.
Net income for the third quarter of 2002 was higher than net income for the
third quarter of 2001 mainly due to increases in net interest income and
noninterest income, offset by increases in noninterest expense and taxes.
Net interest income was $1,633,000 for the quarter ended September 30, 2002
compared to $1,487,000 for the quarter ended September 30, 2001, an increase
of $146,000, or 9.8%. Because of the significant decline in general interest
rates during 2001, both interest income and interest expense were lower in
the third quarter of 2002 compared to the third quarter in 2001; however, the
decline in interest expense was greater.
Interest income decreased 10.3%, or $304,000, from $2,958,000 for the quarter
ended September 30, 2001 to $2,654,000 for the third quarter of 2002,
primarily due to reductions in interest income from loans and investment
securities. Interest income on loans decreased $287,000, or 10.1%, from
$2,843,000 for the quarter ended September 30, 2001 to $2,556,000 for the
same quarter in 2002 due to a decline in the average balance of net loans and
a decrease in the average yield on net loans. The average balance of total
net loans declined from $141.37 million during the third quarter of 2001 to
$133.20 million for the third quarter of 2002, a decrease of $8.17 million,
or 5.8%. The decline occurred primarily in one-to-four-family residential
mortgage loans, which decreased $9.98 million. The total average balance of
one-to-four-family residential loans during the quarter ended September 30,
2002 was $73.67 million compared to an average balance of $83.65 million for
the quarter ended September 30, 2001. The average yield on net loans
decreased from 7.98% for the third quarter of 2001 to 7.61% for the third
quarter of 2002.
Interest income on investment securities decreased from $62,000 for the three
months ended September 30, 2001 to $23,000 for the same period in 2002, due
to a reduction in average total investments. Average total investments for
the third quarter of 2002 were $1.62 million, down $2.15 million, or 57.0%,
from $3.77 million for the second quarter of 2001. This decline was mainly
due to U.S. agency securities being called in the third quarter of 2001 and
principal repayments on mortgage-backed securities. The average yield on
investment securities for the three months ended September 30, 2002 was
5.65%, while the average yield was 6.53% for the same period in 2001.
Interest income on deposits with banks and other was $75,000 for the quarter
ended September 30, 2002 compared to $53,000 for the quarter ended September
30, 2001. The average balance of deposits with banks and other was $10.45
million higher for the quarter ended September 30, 2002 compared to the same
quarter in 2001. Average total deposits with banks and other was $16.09
million for the third quarter of 2002 and $5.64 million for the third quarter
of 2001. However, the average yield was significantly lower in 2002 due to
the sharp decline in short-term interest rates during 2001. The average
yield on deposits with banks and other was 1.85% for the three months ended
September 30, 2002 and 3.73% for the three months ended September 30, 2001.
Interest expense decreased $450,000, or 30.6%, from $1,471,000 for the three
months ended September 30, 2001 to $1,021,000 for the same period in 2002.
The decrease was mainly due to a decline in the average rate paid on interest
bearing deposits. This decline was partly due to a shift in deposits from
longer-term, higher rate certificates of deposit to savings, NOW and money
market accounts. The average rate on interest-bearing deposits declined from
4.31% for the quarter ended September 30, 2001 to 2.79% for the quarter ended
September 30, 2002. Average total interest-bearing deposits increased $2.37
million in 2002, from $112.68 million for the quarter ended September 30,
2001 to $115.05 million for the quarter ended September 30, 2002. Average
total interest-bearing demand deposits - NOW, savings and money market
accounts increased $10.65 million, from $41.79 million for the third quarter
of 2001 to $52.44 million for the third quarter of 2002. Average total
certificates of deposit declined $8.28 million, from $70.89 million for the
third quarter of 2001 to $62.61 million for the second quarter of 2002. The
majority of the decrease in average certificates of deposit occurred in one-
year to two-year certificates.
Interest expense on FHLB advances decreased $33,000, from $238,000 for the
three months ended September 30, 2001 to $205,000 for the same period in
2002, due to a decline in the average balance of FHLB advances and a decline
in the average rate. The average total balance of FHLB advances decreased
from $19.90 million for the third quarter of 2001 to $18.00 million for the
third quarter of 2002. The average rate on FHLB advances was 4.52% for the
three months ended September 30, 2002, compared to 4.75% for the three months
ended September 30, 2001.
Net interest income as a percent of interest earning assets was 4.29% for the
three months ended September 30, 2002 versus 3.91% for the same period in
2001. The spread between the yield on interest earning assets and the rate
on interest bearing liabilities was 3.95% and 3.40% for the three months
ended September 30, 2002 and 2001, respectively.
The provision for loan losses was $30,000 for the three months ended
September 30, 2002 compared to $42,000 for the three months ended September
30, 2001. The lower provision for the third quarter of 2002 is due to the
Company reducing the monthly provision because of the decline in total loans.
Noninterest income increased $233,000, or 43.6%, from $534,000 for the
quarter ended September 30, 2001 to $767,000 for the three months ended
September 30, 2002. The increase was mainly due to higher commission income
from insurance activities and net gains from loan sales. Insurance sales
commissions were $337,000 for the quarter ended September 30, 2002 compared
to $273,000 for the same period in 2001, an increase of $64,000, or 23.4%.
The Company sold or committed to sell $7.12 million in one-to-four-family
residential mortgage loans during the third quarter of 2002, recording net
gains of $183,000. The $183,000 includes cash gains on the sale of loans
totaling $98,000, gains due to a market value adjustment on loans committed
to be sold at September 30, 2002 of $37,000, and gains from capitalizing
mortgage servicing rights of $48,000. During the three months ended
September 30, 2001, the Company sold $2.65 million in loans, recording net
cash gains of $29,000 and gains from capitalizing mortgage servicing rights
of $20,000.
Noninterest expense was $1,552,000 for the three months ended September 30,
2002 compared to $1,462,000 for the same period in 2001, an increase of
$90,000, or 6.2%. Noninterest expense was higher in 2002 due to increases in
salary and benefits expense and other expenses. Salary and benefits expense
was $45,000, or 5.4%, higher in the third quarter of 2002 compared to the
third quarter of 2001, mainly due to normal salary raises. Other expenses
were $39,000 higher in 2002, mainly checking and savings account losses,
which were $20,000 higher in 2002, and costs associated with the Company's
debit card program implemented in late 2001, which were higher by $12,000.
Also, service charges related to check processing and loan expenses tied
mainly to the Company's revolving home equity product were higher in the
third quarter of 2002.
Total income taxes for the three months ended September 30, 2002 were
$296,000, compared to $200,000 recorded for the same period in 2001, an
increase of $96,000, or 48.0%. The effective tax rates for the three months
ended September 30, 2002 and 2001, were 36.2% and 38.7%, 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, 2002
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- -----------------------------------------------------------------------------
Interest income $ 8,093 $ -- $ 8,093 $ -- $ 8,093
Interest expense 3,307 -- 3,307 -- 3,307
Noninterest income 1,074 1,238 2,312 (60) 2,252
Net income 1,278 217 1,495 -- 1,495
Total assets 167,866 1,210 169,076 (1,442) 167,634
Nine Months Ended September 30, 2001
(unaudited, in thousands)
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
Three Months Ended September 30, 2002
(unaudited, in thousands)
Insurance/
Banking Brokerage
Services Services Company Eliminations Total
- -----------------------------------------------------------------------------
Interest income $ 2,654 -- 2,654 -- 2,654
Interest expense 1,021 -- 1,021 -- 1,021
Noninterest income 428 359 787 (20) 767
Net income 491 31 522 -- 522
Three Months Ended September 30, 2001
(unaudited, in thousands)
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
Critical Accounting Policies
The notes to the consolidated financial statements contain a summary of the
Company's significant accounting policies, including significant estimates,
presented on pages 32 through 36 of the Annual Report to Shareholders for the
year ended December 31, 2001. Certain of these policies are important to the
portrayal of the Company's financial condition, since they require management
to make difficult, complex or subjective judgements, some of which may relate
to matters that are inherently uncertain. Management believes that its
critical accounting policies and significant estimates include determining
the allowance for loan losses and the valuation of loan servicing rights.
Allowance for Loan Losses
The allowance for loan losses is a significant estimate that can and does
change based on management's assumptions about specific borrowers and current
general economic and business conditions, among other factors. Management
reviews the adequacy of the allowance for loan losses on at least a quarterly
basis. The evaluation by management includes consideration of past loss
experience, changes in the composition of the loan portfolio, the current
condition and amount of loans outstanding, identified problem loans and the
probability of collecting all amounts due.
The determination of the adequacy of the allowance for loan losses is based
on estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. A worsening or protracted
economic decline would increase the likelihood of additional losses due to
credit and market risk and could create the need for additional loss
reserves.
Loan Servicing Rights
The Company recognizes the rights to service loans as separate assets in the
consolidated balance sheets. The total cost of loans when sold is allocated
between loans and loan servicing rights based on the relative fair values of
each. Loan servicing rights are subsequently carried at the lower of the
initial carrying value, adjusted for amortization, or fair value. Loan
servicing rights are evaluated for impairment based on the fair value of
those rights. Factors included in the calculation of fair value of the loan
servicing rights include estimating the present value of future net cash
flows, market loan prepayment speeds for similar loans, discount rates,
servicing costs, and other economic factors. Servicing rights are amortized
over the estimated period of net servicing revenue. It is likely that these
economic factors will change over the life of the loan servicing rights,
resulting in different valuations of the loan servicing rights. The
differing valuations will affect the carrying value of the loan servicing
rights on the consolidated balance sheets as well as the income recorded from
loan servicing in the income statement. As of September 30, 2002 and
December 31, 2001, mortgage servicing rights had carrying values of $198,000
and $51,000, respectively.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, principal and interest
payments on loans, FHLB advances and proceeds from mortgage loan sales.
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. Office of
Thrift Supervision regulations 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 $13.24 million for the nine months ended
September 30, 2002, compared to an increase of $3.06 million for the nine
months ended September 30, 2001. During the nine months ended September 30,
2002, cash was primarily provided from earnings, proceeds from sales of one-
to-four-family residential mortgage loans, loan repayments in excess of loan
originations, an increase in demand, money market, NOW and savings accounts,
and proceeds from FHLB advances. During this period, cash was primarily used
to fund originations of loans held for sale, a decrease in certificates of
deposit, repayment of FHLB advances and to purchase treasury stock.
During the nine months ended September 30, 2001, cash was primarily provided
from earnings, proceeds from sales of one-to-four-family residential mortgage
loans, proceeds from maturities of securities, an increase in demand, money
market, NOW and savings accounts, and proceeds from FHLB advances. During
this period, cash was primarily used to fund loans, a decrease in
certificates of deposit, repayment of FHLB advances and to purchase treasury
stock.
The Company's primary investment activity during the nine months ended
September 30, 2002 was the origination of loans, including mortgage loans
held for sale. During the nine months ended September 30, 2002 and 2001, the
Company originated mortgage loans in the amounts of $23.55 million and $26.69
million, respectively, commercial loans in the amounts of $8.29 million and
$8.20 million, respectively, and consumer loans in the amounts of $9.54
million and $8.79 million, respectively.
As of September 30, 2002, the Company had outstanding commitments (including
undisbursed loan proceeds) of $3.54 million. The Company anticipates it will
have sufficient funds available to meet its current loan origination
commitments. Certificates of deposit, which are scheduled to mature in one
year or less from September 30, 2002, totaled $44.84 million. Management
believes a significant portion of such deposits will remain with the Company.
At September 30, 2002, the Bank exceeded all of its regulatory capital
requirements with tangible capital and core capital both at $11.14 million or
6.97% of total adjusted tangible assets, core capital at $11.14 million or
6.97% of adjusted total assets, and risk-based capital at $12.29 million or
12.81% of total risk-weighted assets. The required ratios are 1.5% for
tangible capital to tangible assets, 2% 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.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company
maintains controls and procedures designed to ensure that information
required to be disclosed in the reports that the Company files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing of this
report, the chief executive officer and the principal financial officer of
the Company concluded that the Company's disclosure controls and procedures
were adequate.
(b) Changes in internal controls. The Company made no significant changes
in its internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation of those controls by
the chief executive officer and principal financial officer.
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
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 July 9, 2002, the Registrant filed a Current Report on Form
8-K reporting information under Items 5 and 7, incorporating by reference a
press release dated July 9, 2002, relating to the Registrant's unaudited
results for the quarter ended June 30, 2002.
_______________
* 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 13, 2002 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: November 13, 2002 /s/ Jane F. Adams
-------------------------- ----------------------------
Jane F. Adams
Chief Financial Officer,
Secretary and Treasure
CERTIFICATION
I, George R. Rouse, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Great American
Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 13, 2002
------------------
/s/ George R. Rouse
-----------------------------
George R. Rouse
President and
Chief Executive Officer
CERTIFICATION
I, Jane F. Adams, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Great American
Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 13, 2002
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/s/ Jane F. Adams
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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, 2002
-------------------------------
Weighted
Average Per Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 1,495 843,525 $ 1.77
Effect of Dilutive Securities
Stock options 66,977
Unearned incentive plan shares 5,387
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 1,495 915,889 $ 1.63
===============================
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
===============================
Three Months Ended
September 30, 2002
-------------------------------
Weighted
Average Per Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 522 830,965 $ 0.63
Effect of Dilutive Securities
Stock options 74,814
Unearned incentive plan shares 5,355
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 522 911,134 $ 0.57
===============================
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
===============================
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