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 March 31, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-25808
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GREAT AMERICAN BANCORP, INC.
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Delaware 52-1923366
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State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
1311 S. Neil St., P.O. Box 1010, Champaign, IL 61824-1010
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(Address of principal executive offices) (Zip Code)
(217) 356-2265
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(Registrant's telephone number, including area code)
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
At April 30, 1999, the Registrant had 1,307,383 shares of Common Stock
outstanding, for ownership purposes, which excludes 745,367 shares held as
treasury stock.
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 and use of proceeds
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 March 31, 1999 and December 31, 1998
(unaudited, in thousands)
March 31, 1999 Dec. 31, 1998
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ASSETS
Cash and due from banks $ 6,552 $ 6,429
Interest-bearing demand deposits 15,846 15,386
--------------------------------
Cash and cash equivalents 22,398 21,815
Investment securities
Available for sale -- 1,001
Held to maturity 977 1,977
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Total investment securities 977 2,978
Loans 124,106 122,672
Allowance for loan losses (1,048) (925)
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Net loans 123,058 121,747
Premises and equipment 7,483 7,551
Federal Home Loan Bank stock 736 736
Other assets 2,395 2,344
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Total assets $ 157,047 $ 157,171
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest bearing $ 7,868 $ 8,401
Interest bearing 114,817 114,619
--------------------------------
Total deposits 122,685 123,020
Short term borrowings 2,500 2,000
Long-term debt 7,000 7,000
Other liabilities 2,113 1,999
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Total liabilities 134,298 134,019
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Commitments and Contingent Liabilities
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets (Continued)
As of March 31, 1999 and December 31, 1998
(unaudited, in thousands)
March 31, 1999 Dec. 31, 1998
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STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value
Authorized and unissued --
1,000,000 shares -- --
Common stock, $0.01 par value
Authorized -- 7,000,000 shares
Issued and outstanding -- 2,052,750 shares 21 21
Paid-in-capital 19,903 19,877
Retained earnings -- substantially restricted 16,481 16,411
Accumulated other comprehensive income -- 1
--------------------------------
36,405 36,310
Less:
Treasury stock, at cost - 732,867 and
693,067 shares (12,610) (11,999)
Unallocated employee stock ownership plan
shares - 58,023 and 63,698 shares (580) (637)
Unearned incentive plan shares - 32,317 and
36,214 shares (466) (522)
--------------------------------
(13,656) (13,158)
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Total stockholders' equity 22,749 23,152
--------------------------------
Total liabilities and
stockholders' equity $ 157,047 $ 157,171
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Three Months Ended March 31, 1999 and 1998
(unaudited, in thousands except per share data)
1999 1998
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Interest income:
Loans $ 2,514 $ 2,381
Investment securities
Taxable 38 55
Tax exempt 9 2
Deposits with financial
institutions and other 196 211
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Total interest income 2,757 2,649
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Interest expense:
Deposits 1,205 1,205
Other 115 8
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Total interest expense 1,320 1,213
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Net interest income 1,437 1,436
Provision for loan losses 123 39
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Net interest income after
provision for loan losses 1,314 1,397
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Noninterest income:
Brokerage commissions 25 37
Insurance sales commissions 210 98
Service charges on deposit accounts 131 106
Loan servicing fees 5 7
Other customer fees 35 34
Other income -- 1
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Total noninterest income 406 283
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(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Three Months Ended March 31, 1999 and 1998
(unaudited, in thousands except share data)
1999 1998
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Noninterest expense:
Salaries and employee benefits 740 688
Net occupancy expenses 149 126
Equipment expenses 108 81
Data processing fees 15 50
Deposit insurance expense 18 17
Printing and office supplies 71 65
Legal and professional fees 90 40
Directors and committee fees 26 26
Insurance expense 12 11
Marketing and advertising expenses 39 36
Other expenses 95 103
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Total noninterest expense 1,363 1,243
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Income before income tax 357 437
Income tax expense 145 193
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Net income $ 212 $ 244
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.17 $ 0.16
================================
Average number of shares 1,245,592 1,490,469
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Diluted:
Net income $ 0.17 $ 0.15
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Average number of shares 1,287,850 1,592,773
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Dividends $ 0.11 $ 0.10
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998
(unaudited, in thousands)
1999 1998
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Operating Activities:
Net income $ 212 $ 244
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 123 39
Depreciation 133 109
Amortization of deferred loan fees (5) (8)
Deferred income tax (22) (22)
Investment securities accretion, net -- (1)
Employee stock ownership plan
compensation expense 84 122
Incentive plan expense 55 55
Net change in:
Other assets (29) (179)
Other liabilities 112 235
--------------------------------
Net cash provided by
operating activities (used) 663 594
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Investing Activities:
Purchases of securities available for sale -- (1,000)
Proceeds from maturities of securities
available for sale 1,000 997
Purchases of securities held to maturity -- (1,000)
Proceeds from maturities of securities held
to maturity 1,000 1,100
Net change in loans (1,429) 174
Purchase of premises and equipment (65) (227)
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Net cash used by
investing activities 506 44
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(continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Three Months Ended March 31, 1999 and 1998
(unaudited, in thousands)
1999 1998
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Financing Activities:
Net change in:
Noninterest-bearing demand, interest-
bearing demand and savings deposits (151) 3,795
Certificates of deposit (184) 1,739
Short-term borrowings 500 --
Cash dividends (140) (156)
Purchase of treasury stock (611) (1,749)
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Net cash provided by
financing activities (586) 3,629
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Net Change in Cash and Cash Equivalents 583 4,267
Cash and Cash Equivalents, Beginning
of Period 21,815 17,476
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Cash and Cash Equivalents, End of
Period $ 22,398 $ 21,743
================================
Additional Cash Flows Information
Interest paid $ 1,318 $ 1,210
================================
Income tax paid $ 50 $ 105
================================
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 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 March 31, 1999 and
December 31, 1998, the results of operations for the three months ended March
31, 1999 and 1998, and the cash flows for the three months ended March 31,
1999 and 1998. 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 1998 financial statements have been made to conform to the 1999
presentation. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results to be expected for the
entire fiscal year.
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("SFAS No. 130") in 1998. At March 31, 1999
and March 31, 1998, the amounts to be disclosed by the Company under SFAS No.
130 are considered immaterial and are therefore not shown in the accompanying
financial statements.
The consolidated financial statements are those of the Company and the Bank.
These consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's 1998
Annual Report to Shareholders.
PART I -- Item 2.
GREAT AMERICAN BANCORP, INC.
Management's Discussion and Analysis
or Plan of Operation
The Company is the holding company for the Bank. The Bank operates a wholly
owned subsidiary, Park Avenue Service Corporation ("PASC"). PASC offers full
service brokerage activities through Scout Brokerage Services, Inc., a
subsidiary of United Missouri Bank, and also engages in the sale of fixed-rate
and variable-rate tax deferred annuities. 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. At the inception of GTPS Insurance Agency, PASC hired two
insurance agents to provide these services to customers. Effective March 1,
1998, GTPS Insurance Agency merged with another local insurance agency, the
Cox Lowry and Marsh Insurance Agency, and added four additional insurance
agents. The merged entity assumed the GTPS Insurance Agency name.
In addition to historical information, this 10-QSB may include certain
forward-looking statements based on current management expectations. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies
of the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Company's
loan and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors affecting the Company's operations, markets, products, services and
prices. Further description of the risks and uncertainties to the business
are included in detail under the captions: Liquidity and Capital Resources
and Year 2000 compliance.
Financial Condition
The Company's total assets decreased from $157.17 million at December 31, 1998
to $157.05 million at March 31, 1999. The reduction in total assets was
primarily due to a decrease in investment securities of $2.00 million, from
$2.98 million at December 31, 1998 to $980,000 at March 31, 1999, offset by an
increase in net loans of $1.31 million. Net loans increased from $121.75
million at December 31, 1998 to $123.06 million at March 31, 1999.
Total deposits decreased $335,000 from $123.02 million at December 31, 1998 to
$122.69 million at March 31, 1999, due, primarily, to a decrease of $533,000
in noninterest bearing deposits.
Total stockholders' equity decreased $403,000 or 1.7%, from $23.15 million at
December 31, 1998 to $22.75 million at March 31, 1999. Book value per
outstanding voting share increased from $17.03 at December 31, 1998 to $17.23
at March 31, 1999. The decrease in stockholders' equity is summarized as
follows (in thousands):
Stockholders' equity, December 31, 1998 $ 23,152
Net income 212
Purchase of treasury stock (611)
Dividends declared (142)
Incentive plan shares allocated 55
ESOP shares allocated 84
Decrease in unrealized loss on securities
available for sale, net of income tax effect (1)
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Stockholders' equity, March 31, 1999 $ 22,749
======
Results of Operations
Comparison of Three Month Periods Ended March 31, 1999 and 1998
Net income was $212,000 for the three months ended March 31, 1999,
compared to $244,000 for the three months ended March 31, 1998. This
represents a $32,000, or 13.1% decrease. Basic earnings per share
were $0.17 for the three months ended March 31, 1999, compared to $0.16
for the three months ended March 31, 1998. Diluted earnings per
share were $0.17 in 1999, compared to $0.15 in 1998.
Net income in 1999 was less than net income in 1998 due to increases
in noninterest expense and the provision for loan losses, offset by an
increase in noninterest income.
Net interest income was $1.44 million for both the three months ended March
31, 1999, and 1998. Interest income was $2.76 million for the three months
ended March 31, 1999, compared to $2.65 million for the same period in 1998,
an increase of $108,000, or 4.1%, primarily the result of an increase in
interest income on loans. Interest income on loans during the same period in
1999 was $2.51 million $133,000 or 5.6%, greater than the $2.38 million
recorded in 1998.
The increase in interest income on loans was due to higher average total loans
in 1999. Average total loans for the three months ended March 31, 1999 were
$122.75 million, compared to $111.55 million for the same period in 1998, an
increase of $11.20 million or 10.0%. The majority of the increase in average
total loans was in mortgage loans. Total mortgage loans averaged $99.08
million for the three months ended March 31, 1999, compared to $86.58 million
for the three months ended March 31, 1998, an increase of $12.50 million or
14.4%. This growth occurred in one-to four-family and multifamily residential
loans and in commercial mortgage loans.
Average total commercial loans were $9.28 million for the three months ended
March 31, 1999, compared to $11.38 million for the same period in 1998, a
decrease of $2.10 million or 18.5%. Average total consumer loans were $10.85
million during the three months ended March 31, 1999, an decrease of $1.08
million, or 9.1%, below the $11.93 million average total balance during the
same period in 1998. The average yield on loans was 8.31% for the three months
ended March 31, 1999, compared to 8.66% for the three months ended March 31,
1998.
Interest income on investment securities declined from $57,000 for the three
months ended March 31, 1998 to $47,000 for the same period in 1999, due to a
decrease in average total investment securities and a decrease in the yield on
U.S. agency securities. Total investment securities, including Federal Home
Loan Bank ("FHLB") stock, averaged $3.52 million for the three months ended
March 31, 1999, compared to $3.57 million for the same period in 1998.
Interest income on deposits with financial institutions and other decreased
from $211,000 for the three months ended March 31, 1998 to $196,000 for the
three months ended March 31, 1999 due to a reduction in the yield on these
deposits. The average total balance of deposits with financial institutions
and other increased from $14.74 million for the three months ended March 31,
1998 to $17.09 million for the three months ended March 31, 1999, an increase
of $2.35 million or 15.9%. The average yield on investment securities
decreased from 6.48% for the three months ended March 31, 1998 to 5.42% for
the same period in 1999. The average yield on deposits with financial
institutions and other decreased from 5.81% for the three months ended March
31, 1998 to 4.65% for the same period in 1999.
Interest expense increased by $107,000, or 8.8% from $1,213,000 for the
three months ended March 31, 1998 to $1,320,000 for the same period in
1999. The increase was mainly attributable to growth in interest-bearing
deposits during the three months ended March 31, 1998 and 1999. Also, in
September and October of 1998 the Company borrowed a total of $7.00 million
from the "FHLB." Average total interest-bearing deposits increased from
$107.08 million in the first three months of 1998 to $113.26 million during
the same period in 1999, an increase of $6.18 million, or 5.8%. This growth
occurred in NOW and IMMA accounts and in certificates of deposit, primarily
certificates with maturities from six months to one year. The average rates
on deposits were 4.32% and 4.54% for the three months ended March 31, 1999 and
1998, respectively. Average borrowings at March 31, 1999 were $9.42 million.
There were no borrowings for the same period in 1998.
Net interest income as a percent of average interest earning assets was
4.09% for the three months ended March 31, 1999 versus 4.47% for the
same period in 1998. The spread between the yield on interest earning
assets and the rate on interest bearing liabilities was 3.51% and 3.68%
for the three months ended March 31, 1999 and 1998, respectively.
The provision for loan losses was $123,000 for the quarter ended March 31,
1999 compared to $39,000 for the quarter ended March 31, 1998. The increase
was primarily due to an increase in the monthly provision due to a commercial
loan totaling $1.35 million becoming non-performing during the fourth quarter
of 1998. In the first quarter of 1999, this borrower filed Chapter 11, or
business reorganization, bankruptcy. The loan is secured by business assets;
however, the ratio of the value of the assets to the outstanding balance of
the loan is undetermined at this time. Company management continues to work
closely with attorneys to determine appropriate actions regarding this loan;
however, the loan will most likely remain in a workout status for several
months. There were no loans charged-off and no recoveries in the three months
ended March 31, 1999. There were no loans charged off, and $1000 in
recoveries, in the first three months of 1998.
Non-performing loans, which are loans past due 90 days or more and
non-accruing loans, totaled $1,472,000 at March 31, 1999, compared to $136,000
at March 31, 1998. Non-performing loans at March 31, 1999 consisted of three
residential mortgage loans totaling $121,000, two consumer loans totaling
$1,000 and the afore mentioned commercial loan totaling $1.35 million. All of
these loans are past due 90 days or more with $1.35 million of the balance in
non-accrual status.
The ratio of the Company's allowance for loan losses to total loans was .84%
at March 31, 1999 and .48% at March 31, 1998. Management assesses the
adequacy of the allowance for loan losses based on evaluating known and
inherent risks in the loan portfolio and upon management's continuing analysis
of the factors underlying the quality of the loan portfolio. While management
believes that, based on information currently available, the allowance for
loan losses is sufficient to cover losses inherent in its loan portfolio at
this time, no assurance can be given that the level of the allowance for loan
losses will be sufficient to cover future possible loan losses incurred by the
Company or that future adjustments to the allowance for loan losses will not
be necessary if economic and other conditions differ substantially from the
economic and other conditions used by management to determine the current
level of the allowance for loan losses. Management may in the future increase
the level of the allowance for loan losses as a percentage of total loans and
non-performing loans in the event it increases the level of commercial real
estate, multifamily, or consumer lending as a percentage of its total loan
portfolio. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require the Company to provide additions to the allowance
based upon judgements different from management.
Noninterest income totaled $406,000 for the three months ended March 31,
1999, compared to $283,000 for the same period in 1998, an increase of
$123,000, or 43.5%. Insurance sales commissions, which totaled $210,000 for
the three months ended March 31, 1999 compared to $98,000 for the same period
in 1998, accounted for the majority of the increase in noninterest income.
These commissions were generated by GTPS Insurance Agency, the division of
PASC formed in September, 1997. Service charges on deposits accounts
increased $25,000 in 1999, mainly due to an increase in overdraft fees due to
growth in checking accounts.
Noninterest expense was $1.34 million for the three months ended March 31,
1999, compared to $1.24 million recorded for the three months ended March 31,
1998, an increase of $120,000, or 9.6%. The majority of this increase was in
salaries and employee benefits which increased by $52,000 or 7.6%. Salaries
and employee benefits expense was higher in 1999 due partly to additional
salaries and related benefits paid to employees hired when GTPS Insurance
Agency merged with the Cox, Lowry, Marsh Agency in March, 1998.
Net occupancy expenses were $23,000 higher for the three months ended March
31, 1999 due to depreciation and other expenses associated with the
completion of the third floor of the main banking facility in March 1998.
Equipment expenses were $27,000 higher for the three months ended March 31,
1999 due to depreciation, maintenance and other expenses relating to the
purchase of furniture and computers for the Agency. Also, the Bank purchased
computers, printers and software for a network installed in May, 1998 and
acquired the software for its conversion to a new in-house main operating
system in October, 1998.
Legal and professional fees increased by $50,000 for the three months ended
March 31, 1999, mainly attorney's fees related to the $1.35 million commercial
loan which became non-performing in the fourth quarter of 1998.
Total income taxes decreased by $48,000, or 24.9% from $193,000 for the
three months ended March 31, 1998 to $145,000 for the same period in
1999 due to the decrease in pretax net income. The effective tax rates for
both the three months ended March 31, 1999 and 1998, were 40.6% and 44.2%
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 4%. The
Bank's liquidity ratios were 17.17% and 15.67% at March 31, 1999 and December
31, 1998, 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") increased $583,000 for the three months ended March 31,
1999, compared to an increase of $4.27 million for the three months ended
March 31, 1998. During the three months ended March 31, 1999, cash was
primarily provided from earnings, proceeds from maturities of securities, and
an increase in short-term borrowings, and during that period cash was
primarily used to fund loans and to purchase treasury stock.
During the three months ended March 31, 1998, cash was primarily provided from
an increase in non-interest-bearing demand, interest-bearing demand and
savings deposits and certificates of deposit. During this period, cash was
primarily used to purchase investment securities and treasury stock and to pay
dividends.
The Company's primary investment activity during the three months ended March
31, 1999 was the origination of loans. During the three months ended March
31, 1999 and March 31, 1998, the Company originated mortgage loans in the
amounts of $4.77 million and $7.27 million, respectively, commercial loans in
the amounts of $2.35 million and $3.86 million, respectively, and consumer
loans in the amounts of $1.77 million and $2.22 million, respectively.
As of March 31, 1999, the Company had outstanding commitments (including
undisbursed loan proceeds) of $3.28 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 March 31, 1999 totaled $53.13 million. Management
believes a significant portion of such deposits will remain with the
Company.
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 March 31, 1999,
the Bank's capital percentages for tangible capital of 6.39%, core
capital of 6.39%, and risk-based capital of 11.99% exceed the regulatory
requirement for each category.
Current Accounting Issues
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This Statement requires companies to record derivatives on the
balance sheet at their fair value. Statement No. 133 also acknowledges that
the method of recording a gain or loss depends on the use of the derivative.
The new Statement applies to all entities. If hedge accounting is elected
by the entity, the method of assessing the effectiveness of the hedging
derivative and the measurement approach of determining the hedge's
ineffectiveness must be established at the inception of the hedge.
Statement No. 133 amends Statement No. 52 and supercedes Statements No. 80,
105 and 119. Statement No. 107 is amended to include the disclosure
provisions about the concentrations of credit risk from Statement No. 105.
Several Emerging Issues Task Force consensuses are also changed or modified by
the provisions of Statement No. 133.
Statement No. 133 will be effective for all fiscal years beginning after
June 15, 1999. The Statement may not be applied retroactively to financial
statements of prior periods. The adoption of the Statement will have no
material impact on the Corporation's financial condition or result of
operations.
Accounting for Mortgage-Backed Securities Retained After the Securitization
of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise
Also in 1998, the FASB issued Statement No. 134, "Accounting for Mortgage-
Backed Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise." It establishes accounting standards
for certain activities of mortgage banking enterprises and for other
enterprises with similar mortgage operations. This Statement amends Statement
No. 65.
Statement No. 65, as previously amended by Statements No. 115 and 125,
required a mortgage banking enterprise to classify a mortgage-backed security
as a trading security following the securitization of the mortgage loan held
for sale. This Statement further amends Statement No. 65 to require that
after the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities must classify the resulting mortgage-backed
security or other retained interests based on the entity's ability and intent
to sell or hold those investments.
The determination of the appropriate classification for securities retained
after the securitization of mortgage loans by a mortgage banking enterprise
now conforms to Statement No. 115. The only new requirement is that if an
entity has a sales commitment in place, the security must be classified into
trading.
This Statement is effective for the first fiscal quarter beginning after
December 15, 1998. On the date the Statement is initially applied, an entity
may reclassify mortgage-backed securities and other beneficial interests
retained after the securitization of mortgage loans held for sale from the
trading category, except for those with sales commitments in place. Those
securities and other interests shall be classified based on the entity's
present ability and intent to hold the investments. The adoption of this
Statement will have no material impact on the Company's financial condition
and results of operations.
YEAR 2000 Compliance
As the year 2000 approaches, an important business issue has emerged
regarding how existing computer application software programs and operating
systems can accommodate this date value. Many existing application software
products are designed to accommodate only two digits. If not corrected, many
computer applications and systems could fail or create erroneous results by or
at the Year 2000.
The Company's Board of Directors approved a Year 2000 readiness plan in
early 1998, which included the appointment of a Year 2000 compliance officer.
This compliance officer spent the majority of 1998 identifying and evaluating
areas that could be affected by the century date change and preparing for the
Company's conversion of its primary software applications. In October, 1998,
the Company converted from a service bureau environment to a new in-house
system which processes all customer transactions and maintains balances and
history for all loan and deposit customers. The new software provider has
provided written assurances that its software is year 2000 compliant, meaning
that the date fields in its software are already capable of handling the
change to the year 2000. The Year 2000 compliance officer has begun testing
of the new software program for Year 2000 compliance. The compliance officer
is also in the process of testing other software programs for Year 2000
compatibility, including the Company's area network, wire transfer software
and modem connections, check processing and ATM software and payroll, accounts
payable and general ledger software. The Company expects such testing to be
completed by the end of the second quarter of 1999.
The Company's operations may also be affected by the Year 2000 compliance
of its customers, significant suppliers and other vendors, including those
vendors that provide non-information and technology systems. The Company has
begun the process of requesting information related to the Year 2000
compliance of its major customers, significant suppliers and other vendors, by
distributing questionnaires which request information on their Year 2000
readiness. However, the Company does not currently have complete information
concerning the compliance status of its major customers, significant suppliers
and other vendors. In the event that any of the Company's major customers,
significant suppliers or other vendors do not successfully achieve Year 2000
compliance in a timely manner, the Company's business or operations could be
adversely affected. The Company has prepared a contingency plan in the event
that there are system interruptions. As part of the contingency plan, the
Company intends to engage in alternative suppliers or other vendors if its
current significant suppliers or vendors fail to meet Year 2000 operating
requirements. There can be no assurances, however, that such plan or the
performances by any of the Company's suppliers and vendors will be effective
to remedy all potential problems.
The lending activities of the Company are concentrated primarily in one- to
four-family mortgage lending. Due to the small individual and aggregate
balance of loans to one- to four-family borrowers, it has been determined that
customer Year 2000 readiness issues should have an insignificant impact on the
Company.
The Company's direct expenses to date (other than the salary of Company
employees involved in Year 2000 testing and compliance) have been less than
$10,000 and the Company currently anticipates that the total costs related to
Year 2000 compliance will not exceed $50,000. Material costs, if any, that
may arise from the failure to achieve Year 2000 compliance by either the
Company or its significant suppliers and other vendors is not currently
determinable. To the extent that the Company's systems are not fully Year
2000 compliant, there can be no assurance that potential systems interruptions
or the cost necessary to update software would not have a material adverse
effect on the Company's business, financial condition, results of operations,
cash flows or business projects. In the event that the Company's progress
towards becoming Year 2000 compliant is deemed inadequate, regulatory action
may be undertaken.
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 preceeds
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 February 12, 1999, the Registrant filed a Current
Report on Form 8-K reporting information under Items
5 and 7, incorporating by reference a press release
dated February 9, 1999, relating to the Registrant's
adoption of a stock repurchase program and the
declaration of dividends to its shareholders.
_______________
* 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: May 12, 1999 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: May 12, 1999 /s/ Jane F. Adams
-------------------------- ----------------------------
Jane F. Adams
Chief Financial Officer,
Secretary and Treasurer
Exhibit 11.0
Earnings per share (unaudited)
Earnings per share (EPS) were computed as follows
(dollar amounts in thousands except share data):
Three Months Ended
March 31, 1999
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 212 1,245,592 $ 0.17
Effect of Dilutive Securities
Stock options 8,000
Unearned incentive plan shares 34,258
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 212 1,287,850 $ 0.17
===============================
Three Months Ended
March 31, 1998
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 244 1,490,469 $ 0.16
Effect of Dilutive Securities
Stock options 57,581
Unearned incentive plan shares 44,723
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 244 1,592,773 $ 0.15
===============================