UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission File Number: 0-25808
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GREAT AMERICAN BANCORP, INC.
Delaware 52-1923366
- ------------------------------ ------------------------
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
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) [X] Yes [ ] No
(2) [X] Yes [ ] No
As of July 31, 1996 the Registrant had 1,950,112 shares of Common Stock
outstanding.
Table of Contents
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Income Statements
Consolidated Statements of Cash Flows
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
Consolidated Balance Sheets
As of June 30, 1996 and December 31, 1995
(unaudited, in thousands)
Jun 30 Dec 31
1996 1995
ASSETS -------- --------
Cash $ 5,643 8,402
Cash equivalents 9,798 16,635
-------- --------
Total cash and cash equivalents 15,441 25,037
-------- --------
Securities:
Held to maturity (estimated
fair value $3,379 and $403) 3,396 400
Available for sale 5,828 5,859
Loans 86,174 77,676
Allowance for loan losses (262) (267)
-------- --------
Net loans 85,912 77,409
-------- --------
Federal Home Loan Bank stock 454 483
Premises and equipment 7,229 7,257
Investment in joint venture 79 100
Income tax refunds receivable 125 --
Accrued interest income:
Loans 700 803
Investments 110 100
Other assets 388 258
-------- --------
Total assets $119,662 117,706
======== ========
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets (Continued)
As of June 30, 1996 and December 31, 1995
(unaudited, in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 85,119 81,918
Accounts payable and
accrued expenses 1,120 1,012
Deferred income taxes 92 144
-------- --------
Total liabilities 86,331 83,074
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value
Authorized and unissued
-- 1,000,000 shares -- --
Common stock, $.01 par value
Authorized -- 7,000,000 shares
Issued -- 2,052,750 shares
Outstanding -- 1,850,247 shares
in 1996; 1,912,112 in 1995 21 21
Paid-in-capital 19,401 19,381
Retained earnings 16,335 16,719
-------- --------
35,757 36,121
-------- --------
Less:
Unrealized loss on securities
available for sale,
net of income tax effect (101) (83)
Unearned employee stock
ownership plan shares (1,271) (1,406)
Unearned compensation -
incentive plan (1,054) --
-------- --------
(2,426) (1,489)
-------- --------
Total stockholders' equity 33,331 34,632
-------- --------
Total liabilities and
stockholders' equity $119,662 117,706
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Six Months Ended June 30, 1996 and 1995
(unaudited, in thousands except share data)
1996 1995
-------- --------
Interest income:
Loans
Mortgage $ 2,546 2,497
Consumer and other loans 865 774
Securities and certificates
of deposit 769 489
-------- --------
4,180 3,760
-------- --------
Interest expense:
Deposits 1,503 1,474
FHLB advances -- 39
Other 14 14
-------- --------
1,517 1,527
-------- --------
Net interest income 2,663 2,233
Provision for loan losses 110 66
-------- --------
Net interest income
after provision
for loan losses 2,553 2,167
-------- --------
Noninterest income:
Income from joint venture 32 41
Commissions 11 34
Net gain on sale of loans 23 1
Net gain on mortgage servicing 21 --
Service charges -- loans 10 14
Service charges -- deposits 185 200
Other 31 24
-------- --------
313 314
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Six Months Ended June 30, 1996 and 1995
(unaudited, in thousands except share data)
Noninterest expense:
Compensation and employee benefits 1,209 1,089
Occupancy expense 336 345
Data processing 100 99
Insurance of accounts 118 115
Professional fees 115 37
Other 385 329
-------- --------
2,263 2,014
-------- --------
Income before income taxes 603 467
Income taxes 260 183
-------- --------
Net income $ 343 284
======== ========
Earnings per share:
Assuming no dilution
Net income $ 0.18 $ 0.15
Weighted average number ======== ========
of shares 1,873,032 1,888,530
======== ========
Assuming full dilution:
Net income $ 0.17 $ 0.14
Weighted average number ======== ========
of shares 2,055,825 2,052,750
======== ========
See notes to consolidated financial statements
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Quarter Ended June 30, 1996 and 1995
(unaudited, in thousands except share data)
1996 1995
-------- --------
Interest income:
Loans
Mortgage $ 1,294 1,259
Consumer and other loans 439 402
Securities and certificates
of deposit 370 255
-------- --------
2,103 1,916
-------- --------
Interest expense:
Deposits 762 773
FHLB advances -- --
Other 7 7
-------- --------
769 780
-------- --------
Net interest income 1,334 1,136
Provision for loan losses 60 33
-------- --------
Net interest income
after provision
for loan losses 1,274 1,103
-------- --------
Noninterest income:
Income from joint venture 17 29
Commissions 2 8
Net gain on sale of loans 4 1
Net gain on mortgage servicing 4 --
Service charges -- loans 7 3
Service charges -- deposits 98 102
Other 16 12
-------- --------
148 155
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Quarter Ended June 30, 1996 and 1995
(unaudited, in thousands except share data)
Noninterest expense:
Compensation and employee benefits 599 594
Occupancy expense 167 166
Data processing 51 50
Insurance of accounts 58 57
Professional fees 55 20
Other 195 162
-------- --------
1,125 1,049
-------- --------
Income before income taxes 297 209
Income taxes 126 81
-------- --------
Net income $ 171 128
======== ========
Earnings per share:
Assuming no dilution
Net income $ 0.09 $ 0.07
Weighted average number ======== ========
of shares 1,845,698 1,888,530
======== ========
Assuming full dilution:
Net income $ 0.08 $ 0.06
Weighted average number ======== ========
of shares 2,055,390 2,052,750
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(unaudited, in thousands)
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 343 284
Adjustments to reconcile net
income to net cash provided
by operating activities:
Amortization of deferred
loan fees (8) (11)
Amortization of discount
on securities, net -- (26)
Employee stock ownership
plan compensation expense 190 130
Incentive plan expense 96 --
Provision for loan losses 110 66
Provision for deferred taxes (40) --
Net gain on sale of loans (23) (1)
Net gain on sale of loans -- (6)
Depreciation 179 178
Income from joint venture (32) (41)
Change in assets and
liabilities:
(Increase) decrease in
interest receivable 93 75
(Increase) decrease in
income tax refunds
receivable (125) (161)
(Increase) decrease in
other assets (130) 47
(Decrease) increase in
accounts payable and
accrued expenses (83) 207
-------- --------
Net cash provided by
(used in) operating
activities 570 741
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended June 30, 1996 and 1995
(unaudited, in thousands)
Cash flows from investing activities:
Loan originations, net of
principal payments on loans (11,417) (1,562)
Proceeds from sales of loans 2,835 41
Purchase of securities held
to maturity (2,996) (1,373)
Proceeds from matured securities
held to maturity -- 2,000
Proceeds from matured CDs -- 2,000
Distribution from joint venture 53 54
Purchase of premises and equipment (151) (316)
Purchase of FHLB stock -- (83)
Proceeds from the sale of
FHLB stock 29 --
-------- --------
Net cash provided by
(used in) investing
activities (11,647) 761
-------- --------
Cash flows from financing
activities:
Issuance of common stock, net of
underwriting commissions and other
expenses of $1,171 -- 17,714
Purchase of stock for
incentive plan (1,185) --
Dividends paid (535) --
Net increase (decrease) in
demand deposits, NOW
accounts and passbook
savings accounts (1,308) (2,208)
Net increase (decrease) in
time deposits 4,509 (2,133)
Repayment of FHLB advance -- (2,000)
-------- --------
Net cash provided by
(used in) financing
activities 1,481 11,373
-------- --------
Net increase (decrease) in cash
and cash equivalents (9,596) 12,875
Cash and cash equivalents,
beginning of year 25,037 9,067
-------- --------
Cash and cash equivalents,
end of year $ 15,441 21,942
======== ========
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended June 30, 1996 and 1995
(unaudited, in thousands)
Supplemental disclosures:
Cash paid for:
Interest $ 1,570 1,456
======== ========
Income taxes, net of refunds $ 502 375
======== ========
Decrease (increase) in gross
unrealized loss on
securities available for sale $ (31) 116
======== ========
Increase (decrease) in deferred
income taxes attributable to
the unrealized loss on
securities available for sale $ 13 (57)
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. Background Information
Great American Bancorp, Inc. (the "Company") was incorporated on February
23, 1995 and on June 30, 1995 acquired all of the outstanding shares of
common stock of First Federal Savings Bank of Champaign-Urbana, (the
"Bank") upon the Bank's conversion from a federally chartered mutual
savings bank to a federally chartered stock savings bank. The Company
purchased 100% of the outstanding capital stock of the Bank using 50% of
the net proceeds from the Company's initial stock offering which was
completed on June 30, 1995. The Company sold 2,052,750 shares of common
stock in the initial offering at $10 per share, including 164,220 shares
purchased by the Bank's Employee Stock Ownership Plan ("ESOP"). The
Company began trading on the NASDAQ Stock Market on June 30, 1995 under the
symbol "GTPS".
In November, 1995, the Company's Board of Directors voted to change the
Company's fiscal year end from September 30 to December 31, beginning with
December 31, 1995.
2. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and Item 310(b) of
Regulation S-B, and in the opinion of management contain all adjustments
necessary to present fairly the financial position as of June 30, 1996 and
December 31, 1995, the results of operations for the six months ended June
30, 1996 and 1995, the results of operations for the three months ended
June 30, 1996 and 1995, and the cash flows for the six months ended June
30, 1996 and 1995. 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. The results of operations for
the six months ended June 30, 1996 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 1995 Annual Report to Shareholders.
PART I -- Item 2.
GREAT AMERICAN BANCORP, INC.
Management's Discussion and Analysis
or Plan of Operation
Great American Bancorp, Inc. (the "Company") is the holding company for
First Federal Savings Bank of Champaign-Urbana (the "Bank"). The Bank
operates a wholly owned subsidiary, Park Avenue Service Corporation which
engages in the sale of fixed-rate, tax deferred annuities and real estate
development ventures.
Financial Condition
Total assets increased from $117,706,000 at December 31, 1995 to
$119,662,000 at June 30, 1996, an increase of $1,956,000 or 1.7%. The
increase was mainly attributable to an increase in securities held to
maturity and net loans. Securities held to maturity increased by
$2,996,000, from $400,000 at December 31, 1995 to $3,396,000 at June 30,
1996, due to security purchases. The securities purchased were all U.S.
Treasury and callable Agency securities with maturities ranging from 18
months to three years. Net loans increased by $8,503,000, or 11.0% from
$77,409,000 at December 31, 1995 to $85,912,000 at June 30, 1996. Loan
growth occurred primarily in one-to four-family and multi family
residential loans and commercial loans. One-to four-family residential
loans increased from $41,179,000 at December 31, 1995 to $44,039,000 at
June 30, 1996, an increase of $2,860,000, or 7.0%. Multi family loans
increased $3,677,000, or 87.7%, from $4,194,000 at December 31, 1995 to
$7,871,000 at June 30, 1996. Commercial loans increased from $8,038,000 at
December 31, 1995 to $9,268,000 at June 30, 1996, an increase of
$1,230,000, or 15.3%. Security purchases and loan growth were funded by a
decline in short-term investments and an increase in deposits.
Total deposits increased $3,201,000 or 3.9% from $81,918,000 at December
31, 1995 to $85,119,000 at June 30, 1996. The growth in total deposits was
primarily attributable to an increase in time deposits offset by a decrease
in demand deposits, NOW accounts, and passbook savings accounts. Time
deposits increased by $4,509,000, or 10.7% from $42,065,000 at December 31,
1995 to $46,574,000 at June 30, 1996. Demand deposits, NOW accounts, and
passbook savings accounts decreased by $1,308,000, or 3.3% from $39,853,000
at December 31, 1995 to $38,545,000 at June 30, 1996. The decline in
demand deposits, NOW accounts, and passbook savings accounts was due to the
seasonal nature of these deposits which tend to be higher in December.
These deposits normally decline in the spring and summer as income taxes
and real estate taxes are paid. The increase in time deposits was
primarily in short-term certificates of deposits mainly certificates
maturing in one year or less.
Total stockholders' equity decreased $1,301,000 from $34,632,000 at
December 31, 1995 to $33,331,000 at June 30, 1996, resulting in a reduction
in book value per share from $18.11 at December 31, 1995 to $18.01 at June
30, 1996. The decrease is summarized as follows (in thousands):
Stockholders' equity, December 31, 1995 $ 34,632
Net income 343
Dividends declared (727)
Unearned compensation - incentive plan (1,185)
Incentive plan shares allocated 96
ESOP shares allocated 190
Increase in unrealized loss on securities
available for sale, net of income
tax effect (18)
------
Stockholders' equity, June 30, 1996 $ 33,331
======
On July 18, 1996, the Company completed the repurchase of 5% of the
Company's common stock or 102,638 shares at an average price of $14.00 per
share. The repurchased shares will be held as treasury shares to be used
for general corporate purposes.
Results of Operations
Comparison of Six Month Periods Ended June 30, 1996 and 1995
Net income was $343,000 for the six months ended June 30, 1996, compared to
$284,000 for the six months ended June 30, 1995. This represents a $59,000
or 20.8% increase. Primary earnings per share were $0.18 for the six
months ended June 30, 1996, compared to $0.15 for the same period ended
June 30, 1995. Fully diluted earnings per share were $0.17 for the six
months ended June 30, 1996, compared to $0.14 for the same period ended
1995. The increase in net income reflects higher net interest income,
offset by increases in both the provision for loan losses and other
expenses.
Interest income was $4,180,000 for the six months ended June 30, 1996
compared to $3,760,000 for the same period in 1995, an increase of
$420,000, or 11.2%. Interest income on loans for the six months ended June
30, 1996 was $3,411,000, or 4.3% greater than the $3,271,000 recorded for
the same period in 1995. Interest income on securities and certificates of
deposit for the six months ended June 30, 1996 was $769,000, or 57.3%
higher than the $489,000 experienced in the same period in 1995.
The increase in interest income on loans was due to higher average balances
in 1996 and higher overall loan yields. The average total loan balance for
the six months ended June 30, 1996 was $79,687,000 compared to $77,090,000
for the same period ended in 1995, an increase of $2,597,000, or 3.4%. The
majority of this increase was in mortgage and consumer loans. Average
total mortgage loans were $61,456,000 during the six months ended June 30,
1996, an increase of $1,322,000, or 2.2% over the $60,134,000 average
balance during the same period in 1995. The average balance of total
consumer loans was $9,743,000, or 18.2% higher for the six months ended
June 30, 1996 as compared to the average balance of $8,244,000 for the six
months ended June 30, 1995.
The average yield on loans was 8.56% for the six months ended June 30, 1996
compared to 8.44% for the six months ended June 30, 1995. The higher
average yield for 1996 was primarily due to commercial loans renewing at
higher rates during late 1995 and in 1996.
The increase in interest income on securities and certificates of deposit
was primarily attributable to an increase in short-term investments from
the cash proceeds generated from the Company's initial stock offering in
connection with the conversion of the Bank. The average balance of
securities and certificates of deposit, which includes interest earning
cash equivalents, was $28,471,000 for the six months ended June 30, 1996,
compared to $16,831,000 for the six months ended June 30, 1995, an increase
of $11,640,000, or 69.2%. The average yield on securities and certificates
of deposit, however, declined from 5.80% for the six months ended June 30,
1995 to 5.40% for the six months ended June 30, 1996.
Interest expense decreased by $10,000, or .6% from $1,527,000 for the six
months ended June 30, 1995 to $1,517,000 for the same period ended in 1996.
This decrease was due to a reduction in interest expense on FHLB advances,
offset by an increase in interest expense on deposits. The reduction in
interest expense on FHLB advances from $39,000 for the six months ended
June 30, 1995 to zero for the same period ended in 1996 reflects the
repayment of FHLB advances in March, 1995. Interest expense on deposits
increased by $29,000, or 2.0% from $1,474,000 for the six months ended June
30, 1995 to $1,503,000 for the same period ended in 1996. The increase was
mainly due to a shift in the overall mix of deposits from interest-bearing
demand accounts to certificates of deposit. Average interest-bearing
demand accounts declined from $40,264,000 in the first six months of 1995
to $36,385,000 during the same period in 1996, a decline of $3,879,000, or
9.6%. Average certificates of deposits declined only slightly:
$44,557,000 during the first six months of 1995 versus $44,243,000 for the
first six months of 1996. The average rate on deposits increased from
3.48% for the six months ended June 30, 1995 to 3.61% for the six months
ended June 30, 1996.
Net interest income was $2,663,000, or 19.3% higher for the six months
ended June 30, 1996 compared to $2,233,000 recorded for the same period
ended in 1995. Net interest income as a percent of average interest
earning assets was 4.92% for the six months ended June 30, 1996 versus
4.75% for the six months ended June 30, 1995. The spread between the
yield on interest earning assets and the rate on interest bearing
liabilities was 4.11% and 4.48% for the six months ended June 30, 1996 and
1995, respectively.
The provision for loan losses was $110,000 for the six months ended June
30, 1996 compared to $66,000 for the same period in 1995. The higher
provision for 1996 reflects management's decision to increase the allowance
for loan losses as a result of an increase in non-performing loans and
increased charge-off activity occurring in late 1995 and in 1996. Non-
performing loans, which are loans past due 90 days or more and non accruing
loans, totaled $227,000 at June 30, 1996, compared to $160,000 at June 30,
1995. The delinquent balance at June 30, 1996 was comprised of four
residential mortgage borrowers with balances totaling $72,000, two consumer
borrowers with unsecured balances totaling $43,000, and three commercial
borrowers with secured balances totaling $112,000. There were no loans on
nonaccrual status at June 30, 1996. The past due residential mortgage
loans were adequately secured at June 30, 1996. The Bank is working with
the consumer borrowers to establish an acceptable repayment schedule. In
the event the Bank is unable to workout an acceptable repayment schedule
for these loans, the Bank may incur a charge-off of the balance of such
loans and any accrued interest. Two of the past due commercial loans with
balances totaling $82,000 were adequately secured by second mortgages on
the borrower's residences. The Bank was in the process of repossession of
the collateral on the remaining commercial loan past due balance of $30,000
at June 30, 1996. Loans charged-off in 1996 were comprised of consumer
loans with seven different borrowers totaling $105,000 and one commercial
loan totaling $13,000. Recoveries totaled $4,000, with net charge-offs
totaling $114,000. This compares to charge-offs in the first six months of
1995 of $10,000, recoveries totaling $8,000, equaling net charge-offs of
$2,000. The ratios of the Company's allowance for loan losses to total
loans and allowance for loan losses to nonperforming loans were .30% and
115.4%, respectively, at June 30, 1996, as compared to .34% and 166.9%,
respectively, at June 30, 1995.
Noninterest income totaled $313,000 for the six months ended June 30, 1996,
compared to $314,000 for the same period ended in 1995. The increase in
noninterest income was primarily due to gains on the sale of mortgage loans
and gains recorded on mortgage servicing rights, which were offset by
decreases in commissions and service charges. During the first six months
of 1996, the Company sold $2,812,000 in one- to four-family mortgages
recording gains totaling $23,000 in response to declining interest rates at
the beginning of 1996. During the first six months of 1995, the Company
sold $40,000 in one- to four-family mortgages with gains totaling $1,000.
The recording of mortgage servicing rights was introduced in January, 1996
upon the adoption of Statement of Financial Accounting Standards No. 122
"Accounting for Mortgage Servicing Rights" ("SFAS No. 122"). SFAS No. 122
requires rights to service mortgage loans for others be recorded as an
asset. The Company recorded a $21,000 gain on mortgage servicing rights
for the six months ended June 30, 1996 versus zero recorded for the six
months ended June 30, 1995. Commissions decreased by $23,000, or 67.6% for
the six months ended June 30, 1996 as compared to the same period ended
1995. This decrease was due to reduced sales of tax-deferred annuities as
other long-term savings rates have become more attractive. Service charges
on loans decreased by $4,000 due to lower loan application fees and late
charge fees. Service charges on deposits decreased by $15,000 due mainly
to lower overdraft fees.
Noninterest expense was $2,263,000 for the six months ended June 30, 1996,
compared to $2,014,000 recorded for the six months ended June 30, 1995, an
increase of $249,000, or 12.4%. Compensation and employee benefits expense
was $120,000, or 11% higher in the first six months ended June 30, 1996 as
compared to the same period ended 1995, due to compensation expense
recorded for stock based benefit plans implemented 1996. The increases in
professional fees and other noninterest expense of $78,000 and $56,000,
respectively, was due to increased franchise fees, accounting fees, and
professional fees and other costs associated with the annual meeting of
stockholders held on February 14, 1996.
Total income taxes increased by $77,000, from $183,000 for the six months
ended June 30, 1995 to $260,000 for the same period ended 1996. Income
taxes increased in 1996 due to greater earnings along with an increase in
nondeductible expenses, primarily expenses associated with the stock based
benefit plans. The effective tax rates for the six months ended June 30,
1996 and 1995, were 43.12% and 39.19%, respectively.
Results of Operations
Comparison of Three Month Periods Ended June 30, 1996 and 1995.
Net income for the quarter ended June 30, 1996 was $171,000 compared to
$128,000 for the quarter ended June 30, 1995, an increase of $43,000, or
33.6%. Primary earnings per share were $0.09 for the quarter ended June
30, 1996, compared to $0.07 for the quarter ended June 30, 1995. Fully
diluted earnings per share were $0.08 for the quarter ended June 30, 1996,
compared to $0.06 for the same quarter ended in 1995. The increase in net
income was primarily due to higher net interest income, offset by increases
in the provision for loan losses and noninterest expenses, and a reduction
in noninterest income.
Interest income increased by $187,000, or 9.8% from $1,916,000 for the
quarter ended June 30, 1995 to $2,103,000 for the quarter ended June 30,
1996. Interest income on loans was $72,000, or 4.3% greater for the
quarter ended June 30, 1996 as compared to the same quarter in 1995.
Interest income on securities and certificates of deposit was $115,000, or
45.1% greater, in the three months ended June 30, 1996, when compared to
the same period in 1995.
Interest income on loans was higher in 1996 due to larger average balances.
Average total loans for the quarter ended June 30, 1996 were $81,772,000
compared to $77,508,000 for the quarter ended June 30, 1995. All loan
categories experienced growth over 1995 levels with the greatest increases
in mortgage and consumer loans. The average yield on loans declined only
slightly from 8.51% for the quarter ended June 30, 1995 to 8.48% for the
quarter ended June 30, 1996.
Interest income from securities and certificates of deposit was higher in
1996 mainly due to an increase in short-term investments related to the
proceeds obtained from the initial stock offering in connection with the
conversion of the Bank. The average balance of securities and certificates
of deposit, which includes interest earning cash equivalents, was
$27,514,000 for the quarter ended June 30, 1996, compared to $17,011,000
for the quarter ended June 30, 1995, an increase of $10,503,000, or 61.7%.
The average yield on securities and certificates of deposit declined from
5.96% for the quarter ended June 30, 1995 to 5.38% for the quarter ended
June 30, 1996, due to the decline in short-term interest rates during the
latter part of 1995 and in early 1996.
Interest expense decreased by $11,000, or 1.4% from $780,000 for the
quarter ended June 30, 1995 to $769,000 for the quarter ended June 30,
1996, primarily interest expense on deposits.
Net interest income was $198,000, or 17.4% higher for the quarter ended
June 30, 1996 compared to the same quarter in 1995. Net interest income as
a percent of average interest earning assets was 4.87% for the quarter
ended June 30, 1996 versus 4.80% for the quarter ended June 30, 1995. The
spreads between the yield on interest earning assets and the rate on
interest bearing liabilities were 4.07% and 4.55% for the quarters ended
June 30, 1996 and 1995, respectively.
The provision for loan losses was $60,000 for the quarter ended June 30,
1996, compared to $33,000 for the same quarter in 1995. The higher
provision was a result of increases in non-performing loans and charge-off
activity since late 1995.
Noninterest income was $148,000 for the quarter ended June 30, 1996 versus
$155,000 for the quarter ended June 30, 1995, a decrease of $7,000, or
4.5%. The decrease was mainly due to decreased income from the joint
venture and lower commissions. The majority of the vacant lots sold the
joint venture were sold prior to the beginning of the quarter ended June
30, 1996. With five lots remaining at June 30, 1996, the Company expects
the joint venture to be completed within the next several months. The
decrease in commissions of $6,000, or 75% was due to reduced sales of tax
deferred annuities.
Noninterest expense was $1,125,000 for the quarter ended June 30, 1996,
compared to $1,049,000 for the quarter ended June 30, 1995, an increase of
$76,000, or 7.2%. This change was mainly due to increases in professional
and other noninterest expense of $35,000 and $33,000, respectively. The
Company incurred increased franchise, auditing and other professional fees
in 1996 as compared to 1995.
Total income taxes increased from $81,000 for the quarter ended June 30,
1995 to $126,000 for the same quarter ended in 1996, an increase of
$45,000, or 55.6%, due mainly to higher earnings. The effective tax rates
for the three months ended June 30, 1996 and 1995, were 42.4% and 38.8%,
respectively.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits and principal and interest
payments on loans. 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. The Company's initial stock offering which was completed on
June 30, 1995 contributed substantially to the Company's overall liquidity
levels. The Office of Thrift Supervision ("OTS"), the Company's and the
Bank's primary regulator, requires the Bank to maintain minimum levels of
liquid assets. Currently, the required ratio is 5%. The Bank's liquidity
ratios were 15.93% and 19.46% at June 30, 1996 and December 31, 1995,
respectively, well above the required minimum.
A review of the Consolidated Statements of Cash Flows included in the
accompanying financial statements shows that the Company's cash and cash
equivalents ("cash") decreased $9,596,000 for the six months ended June 30,
1996, compared to an increase of $12,875,000 for the six months ended June
30, 1995. During the six months ended June 30, 1996, cash was primarily
provided from earnings, proceeds from the sale of loans, and an increase in
time deposits. During these six months, cash was primarily used to fund
loan originations, purchase securities held to maturity, purchase Company
common stock for an employee incentive plan, and to pay dividends. Cash
was also used during this period to fund a decrease in demand deposits, NOW
accounts, and passbook savings accounts. During the six months ended June
30, 1995, cash was primarily provided from earnings, proceeds from matured
CDs and other securities held to maturity, and the issuance of common stock
in connection with the conversion of the Bank as of June 30, 1995. During
these six months, cash was primarily used to fund a decrease in demand
deposits, NOW accounts, passbook savings accounts, and time deposits, and
for the repayment of FHLB advances. During this period, cash was also used
to fund loan originations, purchase securities held to maturity, and to pay
for conversion expenses.
The Bank's primary investment activities during the six months ended June
30, 1996 was the origination of loans, and the purchase of securities held
to maturity. During the six months ended June 30, 1996 and June 30, 1995,
the Bank originated mortgage loans in the amounts of $18,186,000 and
$8,578,000, respectively, commercial loans in the amounts of $8,613,000 and
$7,778,000, respectively, and consumer loans in the amounts of $6,791,000
and $5,766,000, respectively. The increase in new mortgage loan volume
from the six months ended June 30, 1995 to the six months ended June 30,
1996 of $9,608,000, or 112.0%, was mainly due to intensified marketing
efforts made by management. The increase in new consumer loan volume from
the six months ended June 30, 1995 to the six months ended June 30, 1996 of
$1,025,000, or 17.8%, was primarily due to advertising and special
promotions for consumer loans.
As of June 30, 1996, the Bank had outstanding commitments (including
undisbursed loan proceeds) of $4,002,000. The Bank 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 June 30, 1996 totaled $36,198,000. Management believes
a significant portion of such deposits will remain with the Bank.
The OTS capital regulations require savings institutions to meet three
capital standards: a 1.5% tangible capital standard; a 3% leverage (core
capital) ratio and an 8% risk-based capital standard. The core capital
requirement is effectively 4%, since OTS regulations stipulate that,
effective December 19, 1992, an institution with less than 4% core capital
will be deemed to be "undercapitalized." As of June 30, 1996, the Bank's
capital percentages for tangible capital of 22.14%, core capital of 22.14%,
and risk-based capital of 36.12% significantly exceed the regulatory
requirement for each category.
On August 23, 1993, the OTS issued a final rule which sets forth the
methodology for calculating an interest rate risk component that would be
incorporated into the OTS regulatory capital rule. The regulation requires
certain institutions with more than a "normal level" of interest rate risk
to maintain capital in addition to the 8.0% risk based capital requirement.
This ruling is not expected to have a material impact on the financial
condition of the Bank. The OTS recently deferred implementation of this
regulation.
Pending Federal legislation currently provides for a one-time, special
assessment on all SAIF insured deposits of approximately $.70 to $.90 per
$100 of deposits as of March 31, 1995. However, it is unclear as to when
such legislation will be enacted or what date will be selected for the
determination of the deposit base upon which the special assessment will be
levied. If the assessment is made at the proposed rates, based on the
Bank's deposits as of June 30, 1996, the effect on the Bank would be a
charge in the period enacted of approximately $350,000 to $450,000 on an
after tax basis. It is anticipated that if the one-time assessment is
levied, all SAIF insured institutions will have their deposit insurance
premiums reduced in future periods.
Legislation regarding bad debt recapture has been passed by Congress and
sent to the President for signature. The legislation requires recapture of
reserves accumulated after 1987. The recapture tax on post 1987 reserves
must be paid over a six year period starting in 1996. The payment of the
tax can be deferred in each of 1996 and 1997 if an institution originates
at least the same average annual principal amount of mortgage loans that it
originated in the six years prior to 1996. The Company estimates its post
1987 reserves to be approximately $301,000, resulting in additional tax
liability of approximately $124,000, with no financial statement impact.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings of a
material nature at this time other than those occurring
in the ordinary course of business which in the aggregate
involves amounts which are believed by management to be
immaterial 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. Reports on Form 8-K
On June 13, 1996, the Registrant filed a Current Report
on Form 8-K reporting information under Items 5 and 7
relating to the Registrant's stock repurchase program
and quarterly cash dividend declaration.
On July 19, 1996, the Registrant filed a Current Report
on Form 8-K reporting information under Items 5 & 7
relating to the Registrant's completion of its common
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
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Great American Bancorp, Inc.
Dated: August 14, 1996 /s/ George R. Rouse
--------------------------- ----------------------------------
George R. Rouse
President and Chief Executive Officer
Dated: August 14, 1996 /s/ Jane F. Adams
--------------------------- ----------------------------------
Jane F. Adams
Chief Financial Officer, Secretary
and Treasurer
Exhibit 11.0
Statement Regarding Computation of Earnings Per Share
For the Six Months Ended June 30, 1996 and 1995
(unaudited)
1996 1995
--------- ---------
Assuming no dilution:
Net income (in thousands) $ 343 284
========= =========
Weighted average number
of shares:
Average shares outstanding 1,869,957 1,888,530
Average incremental shares
related to stock options 3,075 --
--------- ---------
1,873,032 1,888,530
========= =========
Earnings per share assuming
no dilution $ 0.18 $ 0.15
========= =========
Assuming full dilution:
Net income (in thousands) $ 343 284
========= =========
Weighted average number
of shares:
Average shares issued 2,052,750 2,052,750
Average incremental shares
related to stock options 3,075 --
--------- ---------
2,055,825 2,052,750
========= =========
Earnings per share assuming
full dilution $ 0.17 $ 0.14
========= =========