UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1996
Commission File Number: 000-20739
EAGLE BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
37-1353957
(IRS Employer Identification No.)
301 Fairway Drive, Bloomington, IL 61701
(309) 663-6345
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
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
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.
YES XX NO ___
As of July 19, 1996, there were 1,302,705 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
Eagle BancGroup, Inc.
Consolidated Statement of Condition
(amounts in thousands)
June 30, 1996 Dec 31, 1995
ASSETS
Cash on hand & in other inst 545 1,047
Fed funds sold & overnight dep 9,544 2,853
Investment securities 13,642 11,810
Mortgage backed securities 38,432 41,376
Loans receivable, net 95,058 88,786
Real estate owned 653 644
Premises and equipment 2,995 3,112
Other assets 1,650 1,346
Total Assets 162,519 150,974
LIABILITIES AND EQUITY
Deposits 136,735 138,396
FHLB advances 2,000 0
Other borrowed funds 0 0
Other liabilities 1,439 1,063
Total Liabilities 140,174 139,459
Capital stock 13 0
Paid-in capital 12,364 0
Retained earnings 9,968 11,515
Total Stockholder's Equity 22,345 11,515
Total Liabilities and Equity 162,519 150,974
See accompanying notes.
Eagle BancGroup, Inc.
Consolidated Statement of Income
(amounts in thousands except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
Interest income:
Interest and fees on loans 1,833 1,717 3,593 3,367
Interest on investment sec &
temporary investments 239 202 460 397
Interest on mtg-backed sec 593 537 1,210 1,032
Total Interest Income 2,665 2,456 5,263 4,796
Interest expense:
Interest on deposits:
Passbook 155 124 292 243
MMDA and NOW 50 48 96 95
Certificates of deposit 1,701 1,666 3,420 3,064
Interest on borrowings 11 2 11 76
Total Interest Expense 1,917 1,840 3,819 3,478
Net Interest Income 748 616 1,444 1,318
Provision for loan losses 20 15 35 30
Net Int Inc After Prov for
Loan Losses 728 601 1,409 1,288
Non-interest income:
Gains on loans sold 3 (4) 41 (1)
Other 74 127 149 220
Total Non-Interest Income 77 123 190 219
Non-interest expense
Salaries and employee ben 395 372 772 776
Net occupancy expense 131 136 268 270
Federal deposit ins prem 89 79 178 158
Data processing expense 57 52 123 109
Other 157 23 331 37
Total Non-Interest Expense 829 662 1,672 1,350
Income(Loss) Bef Fed Inc Tax (24) 62 (73) 157
Federal inc tax ben (exp) 8 (20) 23 (50)
Net Income (Loss) (16) 42 (50) 107
Per Share Data
Earnings per share (.01) .03 (.04) .08
Dividends per share .00 .00 .00 .00
See accompanying notes.
Eagle BancGroup, Inc
Consolidated Statement of Cash Flows
(amounts in thousands)
For the Six Months Ended June 30,
1996 1995
Operating activities:
Net (loss) income (50) 107
Adjustments to reconcile net
(loss)income to net cash provided
by operating activities:
Provision for loan loss 35 30
Provision for depreciation 146 239
Amort of prem/disc on
investment securities 45 56
Net (gain)loss on sale
of securities 6 0
Purchase of FHLB stock (35) (44)
Proceeds from sale of mortgage
loans originated-for-sale 3,980 1,976
Loans rec originated-for-sale (2,517) (1,166)
Increase in accrued int rec (97) (51)
Inc(dec) in accrued int pay 12 (13)
Increase in other assets (68) (136)
Increase in other liabilities 374 135
Net cash provided by operating
activities 1,831 1,133
Investing activities:
Proceeds from sale of inv sec 3,026 1,024
Purchases of investment securities (4,984) 0
Purchases of mtg-backed securities (3,854) (5,044)
Proceeds from sale of mtg-bkd sec 3,567 0
Principal coll on mtg-backed sec 2,720 1,314
Principal coll on loans receivable 17,127 10,021
Loans receivable originated (24,872) (16,313)
Purchases of premises and equip (28) (102)
Net (purch)sale of real estate owned (9) 34
Net cash used by investing
activities (7,307) (9,066)
Financing activities:
Net change in savings, demand
and NOW accounts 598 (514)
Net change in certificate accts (2,268) 17,583
Net change in short-term borrowings 2,000 (7,936)
Proceeds from sale of capital stock 11,335 0
Net cash provided by financing
activities 11,665 9,133
Net increase in cash and cash
equivalents 6,189 1,200
Cash and cash equivalents at
beginning of period 3,900 2,703
Cash and cash equivalents at
end of period 10,089 3,903
See accompanying notes.
Eagle BancGroup, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and therefore do not include all information and disclosures
required by generally accepted accounting principles for complete financial
statements. All adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the periods reported,
consisting only of normal recurring adjustments, have been included
in the accompanying consolidated financial statements.
2. Conversion
In June, 1996, First Federal Savings and Loan ('First Federal') converted
from a federally-chartered mutual savings association to a federally-
chartered capital stock savings association and issued all of its common
stock to the Company in exchange for $6,200,000. The Company sold 1,302,705
shares of common stock in a subscription offering simultaneous to the charter
conversion using a portion of the net proceeds to purchase First Federal, now
a wholly-owned subsidiary of the Company.
3. SFAS 122
Statement of Financial Accounting Standards No. 122, 'Accounting for
Mortgage Servicing Rights' was adopted as of January 1, 1996 resulting in
the recognition of a net servicing asset related to loans sold of $21,000 in
the first six months of 1996. No adjustment to 1995 results was made as the
statement was not retroactively adopted.
4. Earnings Per Share and Dividends
The Company issued 1,302,705 shares of common stock in June, 1996 after
completion of its initial stock subscription offering. As of June 30, 1996,
1,302,705 shares of common stock were issued and outstanding. For comparison
purposes, this number of outstanding shares was used to calculate per share
amounts in prior periods in which no stock was actually outstanding. The
Company has not yet paid any dividends.
Eagle BancGroup, Inc.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
GENERAL. For the six months ended June 30, 1996, the Company had a net loss
of $50,000, or $(.04) per share, compared to net income of $107,000, or $.08
per share, for the six months ended June 30, 1995. For the three months
ended June 30, 1996, the Company had a net loss of $16,000, or $(.01) per
share, compared to net income of $42,000, or $.03 per share, for the three
months ended June 30, 1995.
NET INTEREST INCOME. Net interest income increased to $1,444,000 for the six
months ended June 30, 1996 from $1,318,000 for the six months ended June 30,
1995. In the first half of 1996, interest income totaled $5,263,000 and
interest expense totaled $3,819,000 compared to $4,796,000 and $3,478,000,
respectively, for the same periods in 1995. In the second quarter of 1996,
net interest income increased to $748,000 from $616,000 in the same period in
1995. Interest income was $2,665,000 and interest expense was $1,917,000 in
the second quarter of 1996 compared to $2,456,000 and $1,840,000,
respectively, in the second quarter of 1995.
In 1996, the interest rate spread decreased to 1.63% for the first six months
from 2.05% for the same period in 1995. In the second quarter, the interest
rate spread decreased to 1.62% in 1996 from 1.82% in 1995. The interest rate
spread is the difference between the rate earned on average interest earning
assets and the rate paid on average interest bearing liabilities. The net
interest margin (net interest income divided by average interest earning
assets) was 1.97% for both the first half of 1996 and 1995 while in the
second quarter of 1996, th margin increased to 2.01% from 1.79% in 1995.
In the first half of 1996, average interest earning assets were $147,824,000
and average interest bearing liabilities were $138,893,000 compared to
$134,803,000 and $136,661,000, respectively, in 1995. In the second quarter,
average interest earning assets were $150,203,000 and average interest
bearing liabilities were $139,586,000 in 1996 compared to $138,083,000 and
$138,764,000, respectively, in 1995. The increase in interest earning assets
in 1996 from 1995 was primarily due to the sale, in the fourth quarter of
1995, of a large commercial property previously held as real estate owned and
the 1995 marketing effort to attract new deposits. The rate earned on
average interest earning assets was 7.16% for the first half of 1996 compared
to 7.17% in 1995 and was 7.14% for the second quarter of 1996 compared to
7.15% in 1995. The decrease in the interest rate spread in 1996 from 1995
was due to the increase in the rate paid on average interest bearing
liabilities which was 5.53% for the first six months of 1996 compared to
5.13% for 1995 and was 5.52% for the second quarter of 1996 compared to 5.33%
for the second quarter of 1995.
The increase in the rate paid on average interest bearing liabilities in 1996
from 1995 was due to an overall increase in deposit rates in 1995 and 1996
over previous years. Certificates opened in 1993 and 1994 that renewed in
1995 and 1996 earned higher rates than in previous years. The average rate
paid on certificates of deposit increased to 6.02% for the first six months of
1996 from 5.54% for the same period in 1995. For 1995, the average rate paid
on certificates of deposit was 5.81%.
During the first half of 1996, average borrowed funds, all FHLB advances,
were $714,000 compared to $2,325,000 for the first six months of 1995.
Interest expense on the advances totaled $11,000 and $76,000 for the first
half of 1996 and 1995, respectively, and $11,000 and $2,000 for the second
quarter of 1996 and 1995, respectively.
In June, 1996, the Company completed its initial stock offering that resulted
in net proceeds of $11,335,000. Of this amount, $6,200,000 was paid to First
Federal Savings and Loan in exchange for all of First Federal's common stock.
First Federal will use the funds to originate residential mortgage loans and
retail automobile loans and to purchase short-term investments. The Company
will invest the remaining proceeds in various investment securities.
All loans contractually past due 90 days or more are classified as non-
performing and no interest income is accrued on such balances. In the first
six months of 1996, $11,000 was recorded as income on non-accrual loans. On
an accrual basis, $35,000 would have been recognized as income on the loans.
PROVISION FOR LOAN LOSS. The provision for loan loss for the first half of
1996 was $35,000 compared to $30,000 for the first six months of 1995. The
amount of the provision is calculated as the amount necessary to increase the
allowance for loan loss to a level deemed adequate to absorb estimated future
losses inherent in the loan portfolio. At June 30, 1996, the allowance for
loan loss was $882,000, or .92% of total loans, compared to $907,000, or
1.01% of total loans, at December 31, 1995 and $867,000, or .96% of total
loans, at June 30, 1995. In the first six months of 1996, loans totaling
$63,000 were charged against the allowance while recoveries of loans
previously charged-off were $3,000. Non-performing loans were $544,000 at
June 30, 1996 compared to $513,000 at December 31, 1995, both amounts
equaling .57% of total loans.
NON-INTEREST INCOME. Non-interest income decreased to $190,000 for the first
half of 1996 from $219,000 for the same period in 1995. In the first six
months of 1995, $100,000 was recognized as income as the result of a
reduction in the valuation allowance for loans held for sale. In 1996, a
charge to the valuation allowance was included in non-interest expense.
Gains on the sale of loans totaled $41,000 in the first six months of 1996
compared to $(1,000) in the first half of 1995. Included in the 1996 income
is $21,000 recognized as a servicing asset as a result of the adoption, as of
January 1, 1996, of SFAS 122, "Accounting for Mortgage Servicing Rights."
The remainder of the increase in gains on loans sold was due to increased
originations of mortgage loans which totaled $15,982,000 in the first half of
1996 compared to $5,975,000 in the same period in 1995. In addition, in the
first six months of 1996 brokerage commission income increased to $32,000
from $14,000 in the same period of 1995 and deposit account service fees
increased to $25,000 in the first six months of 1996 from $14,000 in the same
period in 1995 both due to an increased number of accounts and higher
transaction volumes.
For the three months ended June 30, 1996, non-interest income decreased to
$77,000 from $123,000 for the same period in 1995. In the second quarter of
1995, $64,000 was recognized as income as a result of a reduction in the loans
held for sale valuation allowance. In 1996, an increase in the allowance was
charged to non-interest expense. In the second quarter of 1996, brokerage
commission income increased $7,000 and deposit account service fees increased
$5,000 from the same period in 1995 due to the same factors previously noted.
NON-INTEREST EXPENSE. For the first six months of 1996, non-interest expense
increased to $1,672,000 from $1,350,000 for the same period in 1995. In the
first half of 1995, net income from real estate owned operations was $180,000
compared to zero in 1996 due to the sale, late in 1995, of the large
commercial property held as real estate owned on which net rental income was
generated. In addition, in the first half of 1996, marketing expense
increased to $73,000 from $13,000 in the same period in 1995 due to increased
home mortgage lending and customer service related advertising. An increase
in the valuation allowance for loans held for sale of $16,000 was charged to
non-interest expense in the first half of 1996 compared to a reduction in the
valuation credited to non-interest income in 1995. Increased deposits in
1996 resulted in a $20,000 increase in FDIC premium expense to $178,000 in
the first half of 1996 compared to the first half of 1995.
Data processing, ATM service fees, office supplies and postage expense
increased $14,000, $12,000, $9,000 and $6,000, respectively, in the first half
of 1996 compared to the first half of 1995 due to increased number of deposit
accounts and higher transaction volumes in 1996 than 1995.
For the three months ended June 30, 1996, non-interest expense increased to
$829,000 from $662,000 for the same period in 1995. During the second quarter
of 1995, net income on real estate owned operations was $87,000 on the
commercial property sold in late 1995. Marketing expense increased to $37,000
in the second quarter of 1996 from $4,000 in the same period in 1995 due to
increased advertising. Salaries and employee benefits increased to $395,000
in the second quarter of 1996 from $372,000 in the second quarter of 1995 due
to staff additions. In the second quarter of 1995, net gains on the sale of
foreclosed assets were $15,000 compared to $1,000 in the second quarter of
1996. Increased deposits in 1996 compared to 1995 resulted in higher FDIC
premium expense of $89,000 in the second quarter of 1996 compared to $79,000
in the same period in 1995.
INCOME TAX EXPENSE. For the six months ended June 30, income tax expense
totaled $(23,000) in 1996 and $50,000 in 1995. For the three months ended
June 30, income tax expense was $(8,000) in 1996 and $20,000 in 1995. The
effective rate for each period was 32%. The changes in pre-tax income
resulted in the differences in income tax expense.
Results of operations for the six and three months ended June 30, 1996 may
not be indicative of what the results of operations will be for all of 1996.
FINANCIAL CONDITION
Total assets at June 30, 1996 increased to $162,519,000 from $150,974,000 at
December 31, 1995 primarily due to the net proceeds of $11,335,000 from the
initial stock sale by the Company that was finalized in June, 1996. Cash and
cash equivalents increased to $10,089,000 at June 30, 1996 from $3,900,000 at
December 31, 1995 due to short-term investment of a portion of the stock sale
proceeds. Net loans increased to $95,058,000 at June 30, 1996 from
$88,786,000 at year-end, 1995 with the increase divided between residential
mortgage loans and retail automobile loans. Mortgage-backed securities
decreased to $38,432,000 at June 30, 1996 from $41,376,000 at December 31,
1995. Deposits decreased to $136,735,000 at June 30, 1996 from $138,396,000
at December 31, 1995. At June 30, 1996, FHLB advances were $2,000,000
compared to no advances at December 31, 1995.
Regulation requires savings institutions to maintain minimum capital levels as
measured by three capital-to-asset ratios: Risk-based capital to risk weighted
assets of 8%; core capital to adjusted tangible assets of 3% and tangible core
capital to tangible assets of 1.50%. At June 30, 1996, the Company's savings
institution subsidiary had ratios of 20.92%, 10.62% and 10.62%, respectively,
compared to December 31, 1995 ratios of 15.78%, 7.73% and 7.73%,
respectively. The Company's capital to asset ratio at June 30, 1996 was
13.74% compared to 7.63% at December 31, 1995. The significant increases in
these ratios at June 30, 1996 from December 31, 1995 were due to additional
capital from the stock sale.
Savings institutions must also maintain a minimum 5% liquidity ratio measured
as the ratio of cash, short-term investments and certain long-term investments
to deposits and certain borrowed funds. At June 30, 1996, the Company's
savings institution subsidiary had a liquidity ratio of 11.26% compared to
12.79% at December 31, 1995.
Commitments for loan originations and loans in process totaled $1,191,000 and
unused lines of credit totaled $2,784,000 at June 30, 1996. Funds to meet
these commitments are available from scheduled principal and interest
payments on loans, mortgage-backed and investment securities as well as new
new deposits and borrowings. In addition to the commitments and unused
lines, funds are invested primarily in residential mortgages, retail
automobile loans and mortgage-backed securities in addition to being
available for deposit interest payments, maturities and withdrawals.
Eagle BancGroup, Inc.
PART II--OTHER INFORMATION
Item 5. Other Information
On June 11, 1996, a special meeting of the members of First Federal Savings
and Loan Association ('First Federal') was held at which the members voted to
approve the Plan of Conversion adopted by the Board of Directors of First
Federal on November 21, 1995 and amended and restated on February 13, 1996,
March 12, 1996 and April 29, 1996. Under the Plan of Conversion, First
Federal converted from a federally-chartered mutual savings institution to a
federally-chartered capital stock savings institution and issued all of its
stock to the Company in exchange for a share of the proceeds of the
simultaneous subscription stock offering conducted by the Company.
The subscription stock offering was also closed by the Company on June 11,
1996. The total number of shares issued was 1,302,705. On June 28, 1996,
NASDAQ approved the Company's application to allow trading of its stock on the
NASDAQ National Market System and actual trading began on July 1, 1996. The
Company's stock symbol is 'EGLB.'
The Company filed a Registration Statement with the SEC on Form S-1 in
May, 1996.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(27) - Financial Data Schedule
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
SIGNATURES
Pursuant to the requirments 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.
EAGLE BANCGROUP, INC.
/s/ Gerald A. Bradley
DATE July 26, 1996 ---------------------
GERALD A. BRADLEY
Chairman of the Board
/s/ Donald L. Fernandes
DATE July 26, 1996 -----------------------
DONALD L. FERNANDES
President and Chief
Executive Officer