UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
----------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-25808
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GREAT AMERICAN BANCORP, INC.
----------------------------
Delaware 52-1923366
- ----------------------------------------------------------------
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
The Registrant had 1,691,977 shares of Common Stock issued and
outstanding as of October 31, 1997. These shares include 92,168
shares held by the Registrant's Employee Stock Ownership Plan
("ESOP") and 55,441 shares held by the Registrant's 1995
Incentive Plan that have not been committed to be released to
participants.
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 September 30, 1997 and December 31, 1996
(unaudited, in thousands)
September 30, December 31,
1997 1996
Assets -------- --------
Cash and due from banks $ 4,934 $ 6,361
Interest-bearing demand deposits 11,101 20,049
-------- --------
Cash and cash equivalents 16,035 26,410
Interest-bearing time deposits -- 2,000
Investment securities
Available for sale 1,001 --
Held to maturity 3,299 3,400
-------- --------
Total investment securities 4,300 3,400
Loans 110,194 91,817
Allowance for loan losses (468) (374)
-------- --------
Net loans 109,726 91,443
Premises and equipment 7,164 7,306
Federal Home Loan Bank stock 580 454
Other assets 1,763 1,356
-------- --------
Total assets $ 139,568 $ 132,369
======== ========
Liabilities
Deposits
Noninterest bearing $ 5,267 $ 4,253
Interest bearing 104,311 96,461
-------- --------
Total deposits 109,578 100,714
Other liabilities 1,483 1,193
-------- --------
Total liabilities 111,061 101,907
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets (Continued)
As of September 30, 1997 and December 31, 1996
(unaudited, in thousands)
Commitments and Contingent Liabilities
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 -- 2,052,750 shares
Outstanding -- 1,545,901 and
1,671,691 shares 21 21
Paid-in-capital 19,598 19,486
Retained earnings -- substantially
restricted 16,062 15,938
Net unrealized gain on securities
available for sale 3 --
-------- --------
35,684 35,445
Less:
Treasury stock -- 355,774
and 200,144 shares (5,436) (2,875)
Unearned employee stock ownership
plan shares -- 94,308 and
113,566 shares (943) (1,136)
Unearned incentive plan shares --
56,767 and 67,349 shares (798) (972)
-------- --------
Total stockholders' equity 28,507 30,462
-------- --------
Total liabilities and
stockholders' equity $ 139,568 $ 132,369
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Nine Months Ended September 30, 1997 and 1996
(unaudited, in thousands except share data)
1997 1996
-------- --------
Interest income
Loans $ 6,416 $ 5,341
Investment securities
Taxable 304 367
Tax exempt 10 13
Deposits with financial institutions
and other 777 685
-------- --------
Total interest income 7,507 6,406
-------- --------
Interest expense
Deposits 3,329 2,330
Other 24 22
-------- --------
Total interest expense 3,353 2,352
-------- --------
Net Interest Income 4,154 4,054
Provision for loan losses 117 170
-------- --------
Net Interest Income After
Provision for Loan Losses 4,037 3,884
-------- --------
Noninterest income
Income from joint venture 12 39
Commissions 25 17
Service charges on deposit accounts 329 296
Other customer fees 105 39
Net gains on loan sales 1 23
Other income 45 38
-------- --------
517 452
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Nine Months Ended September, 1997 and 1996
(unaudited, in thousands except share data)
Noninterest Expenses
Salaries and employee benefits 1,881 1,724
Net occupancy expenses 351 341
Equipment expenses 225 170
Data processing fees 144 142
Deposit insurance expense 47 721
Printing and office supplies 209 192
Legal and professional fees 163 147
Directors' fees 76 87
Insurance expense 30 30
Marketing and advertising expenses 127 134
Other expenses 256 238
-------- --------
Total noninterest expense 3,509 3,926
-------- --------
Income Before Income Tax 1,045 410
Income tax expense 433 209
-------- --------
Net income $ 612 $ 201
======== ========
Per Share Data:
Earnings per share
Assuming no dilution
Net income $ 0.38 $ 0.11
Average number ======== ========
of shares 1,618,309 1,836,786
======== ========
Assuming full dilution:
Net income $ 0.34 $ 0.10
Average number ======== ========
of shares 1,786,753 2,025,003
======== ========
Dividends $ 0.30 $ 0.48
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statement
For the Three Months Ended September 30, 1997 and 1996
(unaudited, in thousands except share data)
1997 1996
-------- --------
Interest income
Loans $ 2,261 $ 1,921
Investment securities
Taxable 107 142
Tax exempt 3 4
Deposits with financial institutions
and other 211 150
-------- --------
Total interest income 2,582 2,217
-------- --------
Interest expense
Deposits 1,155 827
Other 8 8
-------- --------
Total interest expense 1,163 835
-------- --------
Net Interest Income 1,419 1,382
Provision for loan losses 39 60
-------- --------
Net Interest Income After
Provision for Loan Losses 1,380 1,322
-------- --------
Noninterest income
Income from joint venture 1 7
Commissions 10 6
Service charges on deposit accounts 120 111
Other customer fees 36 13
Net gains on loan sales -- --
Other income 10 11
-------- --------
177 148
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Three Months Ended September 30, 1997 and 1996
(unaudited, in thousands except share data)
Noninterest Expenses
Salaries and employee benefits 638 576
Net occupancy expenses 119 115
Equipment expenses 82 60
Data processing fees 48 42
Deposit insurance expense 17 622
Printing and office supplies 64 71
Legal and professional fees 43 39
Directors' fees 24 26
Insurance expense 11 10
Marketing and advertising expenses 37 46
Other expenses 91 56
-------- --------
Total noninterest expense 1,174 1,663
-------- --------
Income Before Income Tax 383 (193)
Income tax expense 155 (51)
-------- --------
Net income $ 228 $ (142)
======== ========
Per Share Data:
Earnings per share
Assuming no dilution
Net income $ 0.14 $ (0.08)
Average number ======== ========
of shares 1,586,511 1,765,082
======== ========
Assuming full dilution:
Net income $ 0.13 $ (0.07)
Average number ======== ========
of shares 1,744,555 1,964,029
======== ========
Dividends $ 0.10 $ 0.10
======== ========
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(unaudited, in thousands)
1997 1996
-------- --------
Operating Activities
Net income $ 612 $ 201
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 117 170
Depreciation 329 268
Amortization of deferred
loan fees (25) (14)
Deferred income tax 26 (66)
Investment securities accretion,
net (4) (1)
Net gain on loan sales (1) (23)
Employee stock ownership plan
compensation expense 312 281
Incentive plan expense 167 153
Loans originated for sale (72) (2,812)
Proceeds from sales of loans
originated for resale 73 2,835
Net gain on sale of premises
and equipment (2) --
Net change in
Other assets (406) (467)
Other liabilities 273 426
-------- --------
Net cash provided by
operating activities 1,399 951
-------- --------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 1997 and 1996
(unaudited, in thousands)
Investing Activities
Net change in interest-bearing
time deposits 2,000 --
Purchases of securities held
to maturity (2,995) (2,996)
Purchases of securities available
for sale (993) --
Proceeds from maturities of
securities held to maturity 3,098 --
Purchase of Federal Home Loan Bank
stock (126) --
Proceeds from sale of Federal Home
Loan Bank stock -- 29
Net change in loans (18,375) (13,811)
Purchase of premises and equipment (187) (188)
Proceeds from sale of premises
and equipment 2 --
-------- --------
Net cash used by
investing activities (17,576) (16,966)
-------- --------
Financing Activities
Net change in
Noninterest-bearing demand, interest-
bearing demand and savings
deposits 478 (2,159)
Certificates of deposit 8,386 10,687
Cash dividends (501) (727)
Purchase of stock for incentive plan -- (1,185)
Purchase of stock under repurchase
programs (2,561) (1,437)
-------- --------
Net cash provided by
financing activities 5,802 5,179
-------- --------
Net Change in Cash and Cash Equivalents (10,375) (10,836)
Cash and Cash Equivalents,
Beginning of Period 26,410 25,037
-------- --------
Cash and Cash Equivalents,
End of Period $ 16,035 $ 14,201
======== ========
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 1997 and 1996
(unaudited, in thousands)
Additional Cash Flows Information
Interest paid $ 3,344 $ 2,420
======== ========
Income tax paid $ 210 $ 669
======== ========
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. The Company began trading on the NASDAQ Stock Market on June
30, 1995 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, 1997
and December 31, 1996, the results of operations for the nine months and three
months ended September 30, 1997 and 1996, and the cash flows for the nine
months ended September 30, 1997 and 1996. All adjustments to the financial
statements were normal and recurring in nature. These results have been
determined on the basis of generally accepted accounting principles.
Reclassifications of certain amounts in the 1996 financial statements have
been made to conform to the 1997 presentation. The results of operations for
the nine months ended September 30, 1997 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 1996
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
("PASC"). PASC offers full service brokerage activities through Scout
Brokerage Services, Inc., a subsidiary of United Missouri Bank, and also
engages in the sale of fixed-rate and variable-rate tax deferred annuities and
real estate development ventures. In September, 1997, PASC also established
the GTPS Insurance Agency which offers a variety of insurance products,
including life, health, automobile, and property and casualty insurance.
Financial Condition
The Company's total assets increased from $132,369,000 at December 31, 1996 to
$139,568,000 at September 30, 1997, an increase of $7,199,000 or 5.4%. This
growth was mainly due to increases in total investment securities and net
loans offset by decreases in cash and cash equivalents and interest-bearing
time deposits.
Total investment securities increased by $900,000, from $3,400,000 at
December 31, 1996 to $4,300,000 at September 30, 1997 due mainly to security
purchases of $3,988,000, offset by securities called or matured of $3,098,000.
The securities purchased were all callable Agency securities with maturities
ranging from one to two and one-half years.
Net loans increased by $18,283,000, or 20.0%, from $91,443,000 at December 31,
1996 to $109,726,000 at September 30, 1997. The growth in loans occurred
mainly in one-to four-family, multi-family residential, and commercial
business loans. One-to four-family residential loans increased $5,529,000, or
10.7% from $51,710,000 at December 31, 1996 to $57,239,000 at September 30,
1997. Multi-family loans increased from $9,446,000 at December 31, 1996 to
$18,264,000 at September 30, 1997, an increase of $8,818,000, or 93.4%. The
majority of this increase related to two loans secured by several apartment
buildings. Commercial business loans increased $2,212,000 or 27.0% from
$8,191,000 at December 31, 1996 to $10,403,000 at September 30, 1997.
Security purchases and loan growth were funded by an increase in deposits and
by a reduction in cash and cash equivalents.
Total deposits increased from $100,714,000 at December 31, 1996 to
$109,578,000 at September 30, 1997, an increase of $8,864,000, or 8.8%. The
increase in total deposits was mainly due to an increase in certificates of
deposit. Certificates of deposit increased by $8,386,000, or 13.9% from
$60,529,000 at December 31, 1996 to $68,915,000 at September 30, 1997. The
growth was mainly in certificates of deposit maturing in eighteen months to
two and one-half years, and resulted from several special certificate of
deposit promotions held in late 1996 and during 1997.
Total stockholders' equity decreased $1,955,000 from $30,462,000 at
December 31, 1996 to $28,507,000 at September 30, 1997. Book value per
share increased from $18.22 at December 31, 1996 to $18.44 at September 30,
1997. The decrease in stockholders' equity is summarized as follows (in
thousands):
Stockholders' equity, December 31, 1996 $ 30,462
Net income 612
Purchase of stock under repurchase programs (2,561)
Dividends declared (488)
Incentive plan shares allocated 167
ESOP shares allocated 312
Increase in unrealized loss on securities
available for sale, net of income
tax effect 3
------
Stockholders' equity, September 30, 1997 $ 28,507
======
On November 13, 1997, the Company completed the repurchase of an additional 5%
of the Company's common stock or 87,999 shares at an average price of $17.98
per share. The repurchased shares will be held as treasury shares to be used
for general corporate purposes.
Results of Operations
Comparison of Nine Month Periods Ended September 30, 1997 and 1996
Net income was $612,000 for the nine months ended September 30, 1997,
compared to $201,000 for the nine months ended September 30, 1996. This
represents a $411,000, or 204.5% increase. Primary earnings per share
were $0.38 for the nine months ended September 30, 1997, compared to $0.11
for the nine months ended September 30, 1996. Fully diluted earnings per
share were $0.34 in 1997, compared to $0.10 in 1996.
Earnings for the nine months ended September 30, 1996 include a one-time
charge of $572,000 ($350,000 net of taxes), relating to a special assessment
paid to the Federal Deposit Insurance Corporation ("FDIC"). On September 30,
1996, legislation was enacted to recapitalize the Savings Associations
Insurance Fund ("SAIF"). This legislation provided for a one-time special
assessment on all SAIF insured deposits. Excluding this one-time charge,
earnings for the nine months ended September 30, 1996 would have been
$551,000.
Excluding the special SAIF assessment recorded in 1996, the Company's earnings
for the nine months ended September 30, 1997 were $61,000, or 11.1% higher
than the results for the same period in 1996. Primary earnings per share for
1996, before deducting the special SAIF assessment, were $0.30, while fully
diluted earnings per share were $0.27.
Net income in 1997 was higher than net income in 1996 due to increases
in net interest income and noninterest income and a decrease in
noninterest expense.
Net interest income was $4,154,000 for the nine months ended September 30,
1997, compared to $4,054,000 for the same period in 1996, an increase of
$100,000 or 2.5%. Interest income was $7,507,000 for the nine months
ended September 30, 1997, compared to $6,406,000 for the same period in 1996,
an increase of $1,101,000, or 17.2%, primarily the result of higher interest
income on loans. Interest income on loans for the nine months ended September
30, 1997 increased $1,075,000, or 20.1%, from $5,341,000 for the nine months
ended September 30, 1996 to $6,416,000 for the same period in 1997.
The increase in interest income on loans was due to higher average total loans
in 1997. Average total loans for the nine months ended September 30, 1997
were $99,858,000, compared to $82,075,000 for the same period in 1996, an
increase of $17,783,000, or 21.7%. While average total balances of all loan
categories increased, the majority of this increase was in mortgage loans and
consumer loans. Total mortgage loans averaged $79,854,000 for the nine months
ended September 30, 1997, compared to $63,704,000 for the nine months ended
September 30, 1996, an increase of $16,150,000, or 25.4%. Average total
consumer loans were $11,091,000 during the nine months ended September 30,
1997, an increase of $1,349,000, or 13.8% over the $9,742,000 average total
balance during the same period in 1996. Average commercial loans increased by
$419,000, or 4.7% from $8,912,000 for the nine months ended September 30, 1996
to $9,331,000 during the same period in 1997. The growth in mortgage loans
was primarily in multi-family residential loans and commercial real estate
loans and was due to increased marketing efforts for these types of loans.
The increase in consumer loans was due to several consumer loan promotions
held during 1996 and 1997. The average yield on loans was 8.59% for the nine
months ended September 30, 1997, compared to 8.69% for the nine months ended
September 30, 1996.
Interest income on investment securities and deposits with financial
institutions and other increased from $1,065,000 for the nine months ended
September 30, 1996 to $1,091,000 for the nine months ended September 30, 1997.
The average total balance of investment securities and deposits with financial
institutions and other declined slightly from $26,932,000 for the nine months
ended September 30, 1996 to $26,617,000 for the nine months ended September
30, 1997, a decrease of $315,000, or 1.2%. The average yield on investment
securities and deposits with financial institutions and other increased from
5.30% for the nine months ended September, 1996 to 5.48% for the same period
in 1997.
Interest expense increased by $1,001,000, or 42.6% from $2,352,000 for the
nine months ended September 30, 1996 to $3,353,000 for the same period in
1997. The increase was mainly attributable to growth in interest-bearing
deposits during 1996 and in 1997. Average total deposits increased from
$81,490,000 in the first nine months of 1996 to $102,049,000 during the same
period in 1997, an increase of $20,559,000, or 25.2%. Most of this growth
occurred in certificates of deposit, mainly certificates maturing in eighteen
months to two and one-half years. The average rates on deposits were 4.36%
and 3.82% for the nine months ended September 30, 1997 and 1996, respectively.
Net interest income as a percent of average interest earning assets was
4.39% for the nine months ended September 30, 1997 versus 4.97% for the
same period in 1996. The spread between the yield on interest earning
assets and the rate on interest bearing liabilities was 3.56% and 4.01%
for the nine months ended September 30, 1997 and 1996, respectively.
The provision for loan losses was $117,000 for the nine months ended September
30, 1997, compared to $170,000 for the same period in 1996. The lower
provision for 1997 reflects management's decision to decrease the monthly
provision for loan losses as a result of decreased charge-off activity
occurring in the first nine months of 1997, compared to the same period in
1996. Loans charged-off in the nine months ended September 30, 1997, were
comprised of consumer loans with five different borrowers totaling $7,000 and
one commercial loan totaling $19,000. Recoveries in 1997 were $3,000, with
net charge-offs totaling $23,000. Total charge-offs in the first nine months
of 1996 were $119,000 and recoveries totaled $4,000, equaling net charge-offs
of $115,000.
Non-performing loans, which are loans past due 90 days or more and
non-accruing loans, totaled $369,000 at September 30, 1997, compared to
$167,000 at September 30, 1996. Non-performing loans at September 30, 1997
consisted of two residential mortgage loans totaling $55,000, four consumer
loans totaling $33,000, and commercial loans to three customers totaling
$281,000. All of these loans are past due 90 days or more with $20,000 of the
balance in non-accrual status. Management considers all but approximately
$28,000 of the total of non-performing loans adequately secured. The ratios
of the Company's allowance for loan losses to total loans and allowance for
loan losses to non-performing loans were .43% and 126.83%, respectively, at
September 30, 1997, compared to .35% and 192.81%, respectively, at September
30, 1996.
Noninterest income totaled $517,000 for the nine months ended September 30,
1997, compared to $452,000 for the same period in 1996, an increase of
$65,000, or 14.4%. The increase in noninterest income was mainly due to
increases in service charges on deposit accounts and other customer fees,
offset by declines in income from joint venture and net gains on loan sales.
Service charges on deposit accounts increased $33,000 in 1997 due mainly to an
increase in fees charged for returned checks. The Company increased the per
item fee for returned checks in late 1996. Other customer fees increased
$66,000 in 1997 primarily due to higher ATM fees, and credit card fee income.
Income from joint venture declined $27,000 in 1997 due to fewer lot sales.
Substantially all of the lots in the joint venture have been sold. The
Company sold $2,812,000 of loans in 1996 recording net gains of $23,000 versus
$72,000 in loans sold in 1997 for net gains of $1,000.
Noninterest expense was $3,509,000 for the nine months ended September 30,
1997, compared to $3,926,000 recorded for the nine months ended September 30,
1996, a decrease of $417,000, or 10.6%. Noninterest expense was higher in
1996 mainly due to the $572,000 special SAIF assessment. Excluding the
special SAIF assessment, noninterest expense was $3,354,000 for the nine
months ended September 30, 1996. The $3,509,000 recorded for 1997 is
$155,000, or 4.6% higher than the 1996 total, excluding the SAIF assessment.
The increase in noninterest expense in 1997 (excluding the special SAIF
assessment) was mainly due to higher salaries and employee benefits expenses
and equipment expenses, offset by a decrease in deposit insurance expense.
Salaries and employee benefits expense was $157,000, or 9.1% higher due to the
hiring of additional staff, including two insurance agents for the newly
formed GTPS Insurance Agency and a commercial loan officer. Salaries and
employee benefits was also higher in 1997 due to normal pay increases and
higher compensation expense recorded for stock based benefit plans implemented
in February, 1996. Equipment expenses were $55,000, or 32.4% higher in the
first nine months of 1997 due to an increase in depreciation expense, mainly
related to the purchase of check processing and imaging equipment in January,
1997. The Bank began to process checks in-house in January, 1997. Previously,
a correspondent bank provided this service. Deposit insurance expense
(excluding the $572,000 special SAIF assessment) decreased $102,000 in 1997,
from $149,000 to $47,000, due to a reduction in the assessment rates for SAIF
insured institutions.
Total income taxes increased by $224,000, or 107.2% from $209,000 for the
nine months ended September 30, 1996 to $433,000 for the same period in
1997 due to the increase in pretax net income. Prior to recording the special
SAIF assessment in 1996, total income taxes for the nine months ended
September 30, 1996 were $431,000, $2,000 lower than the $433,000 recorded for
the same period in 1997. The effective tax rates for the nine months ended
September 30, 1997 and 1996, were 41.44% and 50.98%, respectively. Prior to
the special SAIF assessment, the effective tax rate for the nine months ended
September 30, 1996 was 43.89%.
Results of Operations
Comparison of Three Month Periods Ended September 30, 1997 and 1996.
Because of the special one-time assessment, the Company recorded a loss of
$142,000 for the quarter ended September 30, 1996. Excluding the effect of
the special assessment, third quarter net income in 1996 was $208,000. The
$228,000 recorded for the quarter ended September 30, 1997 represents a
$20,000, or 9.6% increase over the 1996 total, excluding the special SAIF
assessment. Primary earnings per share for the third quarter of 1997 were
$0.14 in 1997, compared to a loss of ($0.08) in 1996, while fully diluted
earnings per share were $0.13 in 1997, compared to a loss of ($0.07) in 1996.
Prior to the special assessment, primary and fully diluted earnings per share
were $0.12 and $0.11, respectively, for the quarter ended September 30, 1996.
Excluding the special SAIF assessment, net income for the quarter ended
September 30, 1997 was higher than earnings for the third quarter of 1996 due
to increases in net interest income and noninterest income offset by an
increase in noninterest expense.
Net interest income was $1,419,000 for the quarter ended September 30, 1997,
compared to $1,382,000 for the same quarter in 1996, an increase of $37,000,
or 2.7%. Interest income was $2,582,000 for the three months ended September
30, 1997, compared to $2,217,000 for the same period in 1996, an increase of
$365,000, or 16.5%.
Interest income on loans for the three months ended September 30, 1997 was
$2,261,000, $340,000, or 17.7% greater than the $1,921,000 recorded for the
same period in 1996. The increase in interest income on loans was due to
higher average total balances of all loan categories in 1997. Average total
loans for the quarter ended September 30, 1997 were $105,098,000 compared to
$88,934,000 for the same period in 1996, an increase of $16,164,000, or 18.2%.
The majority of this increase was in mortgage loans and consumer loans. The
average yield on loans declined from 8.57% for the quarter ended September 30,
1996 to 8.54% for the quarter ended September 30, 1997.
Interest income on investment securities and deposits with financial
institutions and other increased by $25,000, or 8.4%, from $296,000 for the
quarter ended September 30, 1996 to $321,000 for the same period in 1997. The
increase was mainly due to higher overall average balances. The average
balance of investment securities and deposits with financial institutions and
other increased from $21,030,000 for the three months ended September 30, 1996
to $22,458,000 for the same period in 1996, an increase of $1,428,000, or
6.8%. The average yield on investment securities and deposits with financial
institutions and other increased from 5.59% for the quarter ended September
30, 1996 to 5.68% for the same period in 1997.
Interest expense increased by $328,000, or 39.3%, from $835,000 for the three
months ended September 30, 1996 to $1,163,000 for the same period in 1997.
The increase was mainly due to higher average total interest-bearing deposits
in 1997, primarily certificates of deposit with maturities ranging from
eighteen months to two and one-half years. Average total interest-bearing
deposits increased from $84,060,000 for the quarter ended September 30, 1996
to $103,791,000 for the same period in 1997, an increase of $19,731,000, or
23.5%. Average total certificates of deposit increased from $49,546,000 for
the quarter ended September 30, 1996 to $67,365,000 for the quarter ended
September 30, 1997, an increase of $17,819,000, or 36.0%. The average rate on
interest-bearing deposits was 4.42% for the quarter ended September 30, 1997,
compared to 3.91% for the same period in 1996.
Net interest income as a percent of average interest earning assets was 4.42%
for the three months ended September 30, 1997 versus 5.00% for the same period
in 1996. The spread between the yield on interest earning assets and the rate
on interest bearing liabilities was 3.61% and 4.08% for the three months ended
September 30, 1997 and 1996, respectively.
The provision for loan losses was $39,000 for the three months ended September
30, 1997, compared to $60,000 for the same period in 1996, reflecting the
decrease in charge-off activity.
Noninterest income was $177,000 for the third quarter of 1997, compared to
$148,000 for the quarter ended September 30, 1996, an increase of $29,000, or
19.6%. The increase in noninterest income was mainly due to an increase of
$23,000 in other customer fees.
Noninterest expense for the quarter ended September 30, 1997 was $1,174,000,
$489,000, or 29.4% lower than the $1,663,000 recorded for the same period in
1996. Noninterest expense was higher for the third quarter of 1996 mainly due
to the $572,000 special SAIF assessment. Excluding the special SAIF
assessment, noninterest expense for the third quarter of 1996 was $1,091,000.
The $1,174,000 amount for the third quarter of 1997 is $83,000, or 7.6% higher
than the amount for 1996, excluding the special assessment. The increase in
noninterest expense for 1997, prior to the special SAIF assessment, was
primarily attributable to an increase in salaries and employee benefits
expense and equipment expense, offset by a decrease in deposit insurance
expense.
Total income taxes for the three months ended September 30, 1997 was $155,000,
compared to an income tax benefit of ($51,000) recorded for the same period in
1996. Prior to recording the special SAIF assessment, total income taxes for
the quarter ended September 30, 1996 was $171,000. The effective tax rates
for the three months ended September 30, 1997 and 1996, prior to recording the
special SAIF assessment, were 40.5% and 45.1%, 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 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 17.29% and 18.87% at September 30, 1997 and
December 31, 1996, respectively, well above the required minimum.
The Company's cash and cash equivalents ("cash") decreased $10,375,000 for the
nine months ended September 30, 1997, compared to a decrease of $10,836,000
for the nine months ended September 30, 1996. During the nine months ended
September 30, 1997, cash was primarily provided from earnings, proceeds from
maturities of interest-bearing time deposits and securities held to maturity,
and increases in noninterest-bearing, interest-bearing demand and savings
deposits and certificates of deposit. During 1997, cash was primarily used to
fund loan originations, purchase securities held to maturity and available for
sale, purchase stock under repurchase programs, and to pay dividends. During
the nine months ended September 30, 1996, cash was primarily provided from
earnings, proceeds from the sale of loans, and an increase in certificates of
deposit. During the first nine months of 1996, cash was primarily used to
fund loan originations, purchase securities held to maturity, fund a decrease
in noninterest-bearing demand and interest-bearing demand and savings
deposits, purchase stock for stock based benefit plans, purchase stock under
repurchase programs, and to pay dividends.
The Bank's primary investment activities during the nine months ended
September 30, 1997 was the origination of loans and the purchase of securities
held to maturity and available for sale. During the nine months ended
September 30, 1997 and September 30, 1996, the Bank originated mortgage loans
in the amounts of $28,528,000 and $28,386,000, respectively, commercial loans
in the amounts of $11,235,000 and $11,553,000, respectively, and consumer
loans in the amounts of $9,274,000 and $10,040,000, respectively.
Approximately $9,059,000 of the total mortgage loans originated in 1997 were
participated to other financial institutions at the time of origination.
As of September 30, 1997, the Bank had outstanding commitments (including
undisbursed loan proceeds) of $1,354,000. 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 September 30, 1997 totaled $43,884,000. 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 September 30, 1997,
the Bank's capital percentages for tangible capital of 13.78%, core
capital of 13.78%, and risk-based capital of 23.54% significantly exceed
the regulatory requirement for each category.
Accounting Changes
In March 1997, the FASB issued SFAS No. 128, "Earnings per share", which
supersedes APB No. 15, "Earnings Per Share". SFAS 128 establishes standards
for computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock (i.e. securities such as
options, warrants, convertible securities, or contingent stock agreements).
The statement replaces the presentation of primary earnings per share with a
presentation of basic earnings per share and requires dual presentation of
basic and diluted earnings per share on the face of the income statement.
SFAS 128 is effective for financial statements issued for periods ending after
12/15/97. Earlier application is not permitted; however, restatement of all
prior-period earnings per share data presented will be required. If the
Company had been subject to the requirements of SFAS 128 for the three months
and the nine months ended September 30, 1997 and September 30, 1996, earnings
per common share and earnings per common share - assuming dilution, would have
been unchanged from the amounts presented in the accompanying financial
statements.
YEAR 2000 Compliance
The Company is in the final stages of identifying those computer applications
where program changes will be required in order for the applications to
process information accurately subsequent to 1999. Since the Company
currently uses an outside service bureau for a majority of its data
processing, the Company is dependent on the service bureau to be YEAR 2000
compliant. The service bureau has not yet informed the Company that it is or
will be YEAR 2000 compliant. The Company also uses purchased software
programs for a variety of functions, such as for payroll and check processing.
The majority of the companies providing these software programs have already
assured the Company that the programs are YEAR 2000 compliant. The Company is
also in the process of surveying certain loan customers, primarily commercial
loan customers, to ensure that these customers' computer systems and
operations are or will be YEAR 2000 compliant. The total cost that the
Company may incur for YEAR 2000 compliance is unknown, however, the cost is
not expected to be material since the Company does not use any proprietary
software. In the event that any of the Company's significant vendors do not
successfully and timely achieve YEAR 2000 compliance, the Company's business
or operations could be adversely affected.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions incident to
its business, none of which is believed by management to be
material to the financial condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Certificate of Incorporation of Great American
Bancorp, Inc.*
3.2 By-laws of Great American Bancorp, Inc.*
11.0 Computation of earnings per share (filed herewith)
27.0 Financial Data Schedule**
b. Report on Form 8-K
1. On July 17, 1997, 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 15, 1997 relating to the Registrant's
unaudited results for the second quarter of 1997.
_______________
* Incorporated herein by reference into this document from Form
S-1 Registration Statement, as amended, filed on March 24, 1995,
Registration No. 33-90614.
** Filed only in EDGAR form.
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: November 13, 1997 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: November 13, 1997 /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 Nine Months Ended September 30, 1997 and 1996
(unaudited)
1997 1996
--------- ---------
Assuming no dilution:
Net income (in thousands) $ 612 $ 201
========= =========
Weighted average number
of shares:
Average shares outstanding 1,592,108 1,836,439
Average incremental shares
related to stock options 26,201 347
--------- ---------
1,618,309 1,836,786
========= =========
Earnings per share assuming
no dilution $ 0.38 $ 0.11
========= =========
Assuming full dilution:
Net income (in thousands) $ 612 $ 201
========= =========
Weighted average number
of shares:
Average shares issued 2,052,750 2,052,750
Average incremental shares
related to stock options 26,201 347
Average treasury shares (292,198) (28,094)
--------- ---------
1,786,753 2,025,003
========= =========
Earnings per share assuming
full dilution $ 0.34 $ 0.10
========= =========