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 March 31, 1998
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 X No __
As of May 8, 1998, there were 1,177,205 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 Statements of Condition
(amounts in thousands)
March 31 December 31
1998 1997
ASSETS
Cash and due from banks 93 1,628
Fed funds sold and overnight deposits 6,039 3,386
Investment securities 17,727 13,037
Mortgage backed securities 29,134 24,596
Federal Home Loan Bank Stock 1,350 1,310
Loans, net 121,137 122,409
Premises and equipment 2,834 2,834
Other assets 1,897 1,937
Total Assets 180,211 171,137
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 132,105 131,452
FHLB advances 26,000 18,000
Other liabilities 1,436 1,380
Total Liabilities 159,541 150,832
Capital stock 13 13
Paid in capital 12,375 12,323
Retained earnings 10,398 10,134
Treasury stock (2,065) (2,055)
Accumulated other comprehensive income (51) (110)
Total Stockholders' Equity 20,670 20,305
Total Liabilities and
Stockholders' Equity 180,211 171,137
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
Eagle BancGroup, Inc.
Consolidated Statements of Income
(amounts in thousands except per share data)
For the Three Months
Ended March 31,
1998 1997
Interest income:
Interest and fees on loans 2,381 2,164
Interest on investment securities and
other interest earning assets 285 267
Interest on mortgage backed securities 378 536
Federal funds sold 49 7
Total Interest Income 3,093 2,974
Interest expense:
Deposits:
Passbook 139 147
MMDA and NOW 71 42
Certificates of deposit 1,519 1,578
Borrowings 328 196
Total Interest Expense 2,057 1,963
Net Interest Income 1,036 1,011
Provision for loan losses 60 60
Net Interest Income After Provision
for Loan Losses 976 951
Non-interest income:
Gains on loans sold 237 17
Other 82 82
Total Non-Interest Income 319 99
Non-interest expense:
Salaries and employee benefits 568 479
Net occupancy expense 138 133
Federal deposit insurance premium 20 4
Data processing expense 67 70
Other 191 173
Total Non-Interest Expense 984 859
Income Before Federal Income Tax 311 191
Federal income tax expense 110 65
Net Income 201 126
Other comprehensive income, net of tax:
Unrealized gains(losses) on securities:
Unrealized holding gains(losses) arising
during period 55 (274)
Less: reclassification adjustment for
losses(gains) included in net income 3 (3)
Other comprehensive income 58 (277)
Comprehensive Income 259 (151)
Per Share Data:
Basic Earnings Per Share 0.18 0.10
Diluted Earnings Per Share 0.18 0.10
Dividends Per Share 0.00 0.00
See accompanying notes.
Eagle BancGroup, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
For the Three Months
Ended March 31,
1998 1997
Cash Flows from Operating Activities
Net income 201 126
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan loss 60 60
Provision for depreciation 76 70
Amortization of premiums and discounts
on investment securities (23) 13
Losses(gains) on securities sold, net 5 (4)
Gains on loans sold, net (237) (17)
Compensation expense related to incentive plans 115 44
Proceeds from sale of loans originated for sale 19,691 1,496
Loans originated for sale (23,121) (1,109)
(Increase)decrease in accrued interest receivable (56) 15
Increase(decrease) in accrued interest payable 39 (6)
Decrease(increase) in other assets 12 (146)
Increase in other liabilities 18 242
Net cash (used in) provided by operating activities (3,220) 784
Cash Flows from Investing Activities
Investment securities
Purchases (7,584) (998)
Proceeds from sales 3,000 632
Mortgage backed securities
Purchases (6,779) (2)
Proceeds from sales 781 2,132
Principal collected 1,555 1,001
Purchase of FHLB stock (63) -
Principal collected on loans 18,573 10,258
Loans originated, net (13,711) (17,243)
Purchases of premises and equipment (76) (47)
Net cash used in investing activities (4,304) (4,267)
Cash Flows from Financing Activities
Increase in savings, demand and NOW accounts, net 2,450 775
Decrease in certificate accounts, net (1,798) (2,494)
Proceeds from FHLB advances 9,000 6,500
Principal payments on FHLB advances (1,000) (5,500)
Purchase of treasury stock (10) (559)
Purchase of MDRP shares - (840)
Net cash provided by (used in) financing activities 8,642 (2,118)
Increase(decrease) in cash and cash equivalents 1,118 (5,601)
Cash and cash equivalents at beginning of period 5,014 7,060
Cash and cash equivalents at end of period 6,132 1,459
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. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1997.
2. Earnings Per Share and Dividends
Basic earnings per share is computed by dividing net income for the period by
the weighted average number of common shares outstanding of 1,094,920 and
1,199,753 for the three months ended March 31, 1998 and 1997, respectively.
Diluted earnings per share is computed by dividing net income for the period
by the weighted average number of common shares and common share equivalents
outstanding of 1,107,838 and 1,200,849 for the three months ended March 31,
1998 and 1997, respectively. Common share equivalents assume exercise of
stock instruments and use of proceeds to purchase treasury stock at the average
market price for the period.
The Company has not yet paid any dividends.
3. Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" which requires disclosure of comprehensive
income in the financial statements. The Company has included this disclosure
in the statements of income. Comprehensive income consists of the net income
or loss of the entity plus or minus the change in equity of the entity during
the period fom the transaction, other events and circumstances resulting from
non-owner sources. The statement of income for the three months ended March
31, 1997 has been restated to include disclosure of comprehensive income for
the period.
Eagle BancGroup, Inc.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
GENERAL: Eagle BancGroup, Inc. (the 'Company') recorded net income for the
three months ended March 31, 1998 of $201,000, or $0.18 per share, compared to
net income of $126,000, or $0.10 per share, for the same period in 1997. The
increase in net income resulted primarily from an increase in gains on loans
sold in the first quarter of 1998 compared to the first quarter of 1997.
NET INTEREST INCOME: Net interest income was $1,036,000 in the first quarter
of 1998 compared to $1,011,000 in the same period in 1997. In the first
quarter of 1998, the Company obtained $9,000,000 in new FHLB advances for the
purpose of repaying $7,000,000 of FHLB advances that mature in the second
quarter of 1998. The new advances carry interest rates well below the rates
on the maturing advances. The advance proceeds were temporarily invested in
short-term securities which resulted in an increase in average interest-
earning assets to $171,648,000 in the first quarter of 1998 from $163,979,000
in the same period in 1997. Average interest-bearing liabilities increased
to $155,140,000 in the first quarter of 1998 from $146,371,000 in the same
period in 1997.
The increase in the advance portfolio and the short-term investment of the
proceeds resulted in a decrease in the net interest margin, net interest
income divided by average interest-earning assets, to 2.45% in the first
quarter of 1998 from 2.50% in the same period in 1997. The interest rate
spread, the yield on average interest-earning assets less the cost of average
interest-bearing liabilities, was 1.93% in the first quarter of 1998 compared
to 1.92% in the same period in 1997. The yield on average interest-earning
assets was 7.31% and the cost of average interest-bearing liabilities was
5.38% in the first quarter of 1998 compared to 7.36% and 5.44%, respectively,
in the first quarter of 1997.
The Company continued to restructure the interest-earning asset and interest-
bearing liability portfolio, in addition to the changes related to the new
advances, in the first quarter of 1998. Originations of commercial, commercial
real estate and direct consumer loans, primarily home equity loans, increased
to $11,000,000 in the first quarter of 1998 from $3,400,000 in the same period
of 1997. Mortgage originations increased to $25,700,000 in the first quarter
of 1998 from $15,100,000 in the same period in 1997. Loans sold in the first
quarter of 1998 amounted to $19,700,000 compared to $1,500,000 in the same
period in 1997. Since the third quarter of 1997, the Company has sold most
residential mortgage originations in the secondary market.
At March 31, 1998, loans totaling $660,000 were contractually past due 90 days
or more and were classified as non-accrual. No interest income is accrued on
such loans and income is only recognized upon cash receipt. Cash interest
payments of $11,000 were included in interest income in the first quarter of
1998 related to these loans. Additional income of $18,000 would have accrued
had these loans not been past due 90 days or more. No other loans were past
due 90 days or more at March 31, 1998.
PROVISION FOR LOAN LOSS: The provision for loan loss was $60,000 in both the
first quarter of 1998 and 1997. The amount of the provision is the amount
necessary to maintain the allowance for loan losses at a level deemed adequate
to absorb future losses inherent in the loan portfolio. At March 31, 1998,
the allowance for loan losses was $942,000, or .77% of total loans compared to
$935,000, or .76% of total loans, at December 31, 1997. In the first quarter
of 1998, loans totaling $58,000 were charged against the allowance while
$4,000 was added to the allowance from recoveries of loans previously charged
off. Non-performing loans, consisting entirely of non-accrual loans, were
$660,000, or .54% of total loans, at March 31, 1998.
NON-INTEREST INCOME: Non-interest income increased to $319,000 in the first
quarter of 1998 from $99,000 in the same period in 1997 due to the increase
in gains on sales of loans in 1998. Loans sold increased over $18,000,000 in
the first quarter of 1998 from the same period in 1997 resulting in an
increase in gains on loans sold to $237,000 in the first quarter of 1998
from $17,000 in the first quarter of 1997.
NON-INTEREST EXPENSE: Non-interest expense increased to $984,000 in the three
months ended March 31, 1998 from $859,000 in the same period in 1997 due
primarily to salaries and employee benefits, which increased to $568,000 in the
first quarter of 1998 from $479,000 in the first quarter of 1997. The increase
in salaries and employee benefits was due to staff increases, higher costs
related to employee benefit programs and other normal increases in employee
costs. Federal deposit insurance expense increased to $20,000 in the first
quarter of 1998 from $4,000 in the first quarter of 1997 due to a one-time
special premium credit in 1997. Other non-interest expense increased to
$191,000 in the first quarter of 1998 from $173,000 in the first quarter of
1997 due primarily to increased advertising in 1998.
INCOME TAX EXPENSE: The provision for income taxes increased to $110,000 in
the three months ended March 31, 1998 from $65,000 in the same period in 1997
due to the increase in pre-tax income. The effective tax rate was 35% and 34%
in the first quarter of 1998 and 1997, respectively.
FINANCIAL CONDITION
Total assets increased to $180,211,000 at March 31, 1998 from $171,137,000 and
December 31, 1997 due primarily to the new FHLB advances obtained in the first
quarter and investment of the proceeds. FHLB advances increased to $26,000,000
at March 31, 1998 from $18,000,000 at December 31, 1997 while investment and
mortgage-backed securities increased to $46,861,000 at March 31, 1998 from
$37,633,000 at December 31, 1997. Net loans decreased to $121,137,000 at March
31, 1998 from $122,409,000 at December 31, 1997 as increases in commercial and
consumer loans were offset by a decrease in mortgage loans, which resulted from
the refinance of portfolio loans that were subsequently sold in the secondary
market. Deposits increased slightly to $132,105,000 at March 31, 1998 from
$131,452,000 at December 31, 1997 due to increased demand deposits.
Stockholders' equity increased to $20,670,000, or 11.5% of total assets, at
March 31, 1998 from $20,305,000, or 11.9% of total assets, at December 31,
1997. The increase in stockholders' equity was due to first quarter net income
and a reduction in the net unrealized loss on investments from year end to
March 31, 1998. At March 31, 1998, the Company's savings institution
subsidiary had a risk-based capital to risk weighted assets ratio of 16.01%,
a core capital to tangible assets ratio of 9.61% and a tangible core capital
to adjusted tangible assets ratio of 9.61%. At December 31, 1997, these ratios
were 16.30%, 9.99% and 9.99%, respectively. Regulatory minimum levels for
these ratios are 8.00%, 3.00% and 1.50%, respectively.
The Company's savings institution subsidiary must also maintain a minimum 4%
liquidity ratio measured as the ratio of cash, cash equivalents, short-term
investments and certain long-term investments to deposits and certain borrowed
funds. At March 31, 1998, the liquidity ratio was 14.66% compared to 12.07%
at December 31, 1997.
Funds committed for loan originations and loans in process totaled $1,325,000
and unused lines of credit totaled $3,652,000 at March 31, 1998. Funds to meet
these commitments are available from cash and cash equivalents, scheduled
principal and interest payments on loans, mortgage-backed and investment
securities, new deposits and borrowed funds. Funds are primarily invested in
residential mortgage, commercial, commercial real estate and consumer loans,
investment and mortgage-backed securities and are also used for deposit
interest payments, maturities and withdrawals.
Eagle BancGroup, Inc.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(27) - Financial Data Schedule
Eagle BancGroup, Inc. did not file any reports on Form 8-K during the three
months ended March 31, 1998.
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.
DATE: May 11, 1998 /s/ Gerald A. Bradley
GERALD A. BRADLEY
Chairman of the Board
DATE: May 11, 1998 /s/ Donald L. Fernandes
DONALD L. FERNANDES
President and Chief Executive Officer