UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from _____________ to _____________.
Commission file number 0-29687
------------------------------
Eagle Bancorp
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
United States 81-0531318
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Prospect Avenue, Helena, MT 59601
----------------------------------------
(Address of principal executive offices)
(406) 442-3080
---------------------------
(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock, par value $0.01 per share 1,203,572 shares outstanding
--------------------------------------------------------------------------------
April 30, 2001
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
EAGLE BANCORP AND SUBSIDIARY
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
March 31, 2001 (unaudited) and June 30, 2000 .............. 1 and 2
Consolidated Statements of Income for the three and
nine months ended March 31, 2001 and 2000 (unaudited) ..... 3
Consolidated Statements of Stockholders' Equity for the
nine months ended March 31, 2001 (unaudited) .............. 4
Consolidated Statements of Cash Flows for the nine
months ended March 31, 2001 and 2000 (unaudited) .......... 5 and 6
Notes to Consolidated Financial Statements ................ 7 to 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 11 to 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 19
Item 2. Changes in Securities ....................................... 19
Item 3. Defaults Upon Senior Securities ............................. 19
Item 4. Submission of Matters to a Vote of Security-Holders ......... 19
Item 5. Other Information ........................................... 19
Item 6. Exhibits and Reports on Form 8-K ............................ 19
Signatures
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 2001 June 30, 2000
-------------- -------------
(Unaudited) (Audited)
ASSETS
Cash and due from banks ........................ $ 2,543,932 $ 3,477,650
Interest-bearing deposits with banks ........... 3,850,000 --
------------ ------------
Total cash and cash equivalents ............ 6,393,932 3,477,650
Investment securities available for sale,
at market value .............................. 20,949,809 18,414,219
Investment securities held-to-maturity ......... 7,978,180 9,922,687
Federal Home Loan Bank stock, at cost .......... 1,461,800 1,393,000
Mortgage loans held-for-sale ................... 2,586,831 861,290
Loans receivable, net of deferred loan fee
and allowance for loan losses ................ 114,269,650 107,447,437
Accrued interest and dividends receivable ...... 989,365 832,204
Mortgage servicing rights ...................... 1,313,121 1,338,271
Property and equipment, net .................... 6,623,767 6,962,081
Cash surrender value of life insurance ......... 2,114,883 2,040,973
Real estate acquired in settlement of loans,
net of allowance for losses .................. -- 121,006
Other assets ................................... 213,354 219,857
------------ ------------
Total assets ............................... $164,894,692 $153,030,675
============ ============
See accompanying notes to consolidated financial statements.
-1-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Continued)
March 31, 2001 June 30, 2000
-------------- -------------
(Unaudited) (Audited)
LIABILITIES
Deposit accounts:
Noninterest bearing .......................... $ 5,532,226 $ 5,732,528
Interest bearing ............................. 125,954,187 118,780,477
Advances from Federal Home Loan Bank ........... 12,107,778 8,682,778
Accrued expenses and other liabilities ......... 1,984,443 1,505,750
------------ ------------
Total liabilities .......................... 145,578,634 134,701,533
------------ ------------
EQUITY
Preferred stock (no par value, 1,000,000 shares
authorized, none issued or outstanding) ......
Common stock (par value $0.01 per share;
10,000,000 shares authorized; 1,223,572 shares
issued; 1,203,572 outstanding at March 31,
2001, 1,223,572 outstanding at June 30, 2000) 12,236 12,236
Additional paid-in capital ..................... 3,840,986 3,831,887
Unallocated common stock held by employee
stock ownership plan ("ESOP") ................ (322,048) (349,648)
Treasury stock, at cost (20,000 shares) ........ (235,000) --
Retained earnings .............................. 15,885,901 15,158,415
Accumulated other comprehensive loss ........... 133,983 (323,748)
------------ ------------
Total equity ............................... 19,316,058 18,329,142
------------ ------------
Total liabilities and equity ............... $164,894,692 $153,030,675
============ ============
See accompanying notes to consolidated financial statements.
-2-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
---- ---- ---- ----
Interest and Dividend Income: (unaudited) (unaudited)
Interest and fees on loans ............................. $ 2,294,079 $ 2,063,253 $ 6,848,557 $ 6,081,573
Interest on deposits with banks ........................ 46,859 579 74,458 58,298
FHLB Stock dividends ................................... 23,060 21,803 68,951 69,792
Securities available for sale .......................... 314,536 266,235 887,452 770,068
Securities held to maturity ............................ 126,495 182,456 433,539 592,243
--------- --------- --------- ---------
Total interest and dividend income ................... 2,805,029 2,534,326 8,312,957 7,571,974
--------- --------- --------- ---------
Interest Expense:
Deposits ............................................... 1,297,021 1,120,994 3,829,644 3,378,415
FHLB Advances .......................................... 185,926 164,932 497,291 472,955
--------- --------- --------- ---------
Total interest expense ............................... 1,482,947 1,285,926 4,326,935 3,851,370
--------- --------- --------- ---------
Net Interest Income ...................................... 1,322,082 1,248,400 3,986,022 3,720,604
Loan loss provision ...................................... -- -- -- 15,000
--------- --------- --------- ---------
Net interest income after loan loss provision ........ 1,322,082 1,248,400 3,986,022 3,705,604
Noninterest income:
Net gain on sale of loans .............................. 87,636 35,564 218,914 193,816
Demand deposit service charges ......................... 125,016 123,434 398,845 368,350
Mortgage loan servicing fees ........................... 74,163 74,690 219,524 225,269
Net gain (loss) on sale of available for sale securities 4,755 -- 4,755 (30,355)
Other .................................................. 108,350 104,809 302,563 271,410
--------- --------- --------- ---------
Total noninterest income ............................. 399,920 338,497 1,144,601 1,028,490
--------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits ......................... 741,461 696,621 2,103,716 2,000,984
Occupancy expenses ..................................... 118,062 113,291 359,767 327,898
Furniture and equipment depreciation ................... 82,523 81,148 247,769 240,377
In-house computer expense .............................. 44,461 34,903 133,370 112,740
Advertising expense .................................... 31,664 21,981 119,259 96,287
Amortization of mtg servicing fees ..................... 33,704 25,479 89,806 87,255
Federal insurance premiums ............................. 6,077 7,279 18,471 41,856
Postage ................................................ 34,771 34,403 81,967 76,902
Legal,accounting, and examination fees ................. 36,048 25,251 134,964 59,369
Consulting fees ........................................ 7,482 7,645 23,958 27,070
ATM processing ......................................... 14,079 17,799 44,597 55,740
Other .................................................. 150,037 149,309 507,852 501,983
--------- --------- --------- ---------
Total noninterest expense ............................ 1,300,369 1,215,109 3,865,496 3,628,461
--------- --------- --------- ---------
Income before provision for income taxes ................. 421,633 371,788 1,265,127 1,105,633
--------- --------- --------- ---------
Provision for income taxes ............................... 149,735 119,000 418,099 349,134
--------- --------- --------- ---------
Net income ............................................... $ 271,898 $ 252,788 $ 847,028 $ 756,499
=========== =========== =========== ===========
Earnings per share - basic ............................... $ 0.23 n/a $ 0.72 n/a
=========== =========== =========== ===========
Earnings per share - diluted ............................. $ 0.23 n/a $ 0.72 n/a
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements
-3-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended March 31, 2001
ACCUMULATED
ADDITIONAL UNALLOCATED OTHER
PREFERRED COMMON PAID-IN ESOP TREASURY RETAINED COMPREHENSIVE
STOCK STOCK CAPITAL SHARES STOCK EARNINGS INCOME TOTAL
----- ----- ------- ------ ----- -------- ------ -----
Balance, June 30, 2000 .....................$-- $ 12,236 $3,831,887 $(349,648) $ -- $15,158,415 $(323,748) $18,329,142
Net income ............................... -- -- -- -- -- 847,028 -- 847,028
Other comprehensive income ............... -- -- -- -- -- -- 457,731 457,731
Total comprehensive income ............. -- -- -- -- -- -- -- 1,304,759
Dividends paid ($.21 per share) ............ -- -- -- -- -- (119,542) -- (119,542)
Stock repurchased (20,000 shares
@ $11.75/sh) -- -- -- -- (235,000) -- -- (235,000)
ESOP shares allocated or committed to be
released for allocation (3,450 shares) .. -- -- 9,099 27,600 -- -- -- 36,699
--- -------- ---------- --------- --------- ----------- --------- -----------
Balance, March 31, 2001 ....................$-- $ 12,236 $3,840,986 $(322,048) $(235,000) $15,885,901 $ 133,983 $19,316,058
=== ======== ========== ========= ========= =========== ========= ===========
See accompanying notes to consolidated financial statements
-4-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 31,
2001 2000
---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 847,028 $ 756,500
Adjustments to reconcile net income to net cash
from operating activities
Provision for loan losses ........................... -- 15,000
Depreciation, accretion and amortization expense ..... 390,835 463,139
Deferred loan fees ................................... 28,846 (35,291)
Amortization of capitalized mortgage servicing rights 89,805 87,254
Gain on sale of loans ............................... (218,914) (193,816)
Gain on sale of real estate owned ................... (8,951) --
Net realized (gain) loss on sale of available
for-sale securities ............................... -- 30,355
Dividends reinvested ................................ (68,800) (69,700)
Increase in cash surrender value of life insurance .. (73,910) (68,886)
Change in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends receivable ........... (157,161) (115,577)
Loans held-for-sale ................................. (1,506,627) 941,684
Other assets ........................................ 43,603 (210,712)
Increase (decrease) in liabilities:
Accrued expenses and other liabilities ................ (61,501) 4,134,522
Deferred compensation payable ......................... 17,305 9,647
Deferred income taxes payable ......................... (7,108) 111,716
-------- ---------
Net cash provided by (used in) operating activities (685,550) 5,855,835
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Investment securities held-to-maturity ................ (641,150) (949,936)
Investment securities available-for-sale .............. (3,904,060) (3,562,621)
Proceeds from maturities, calls and principal payments:
Investment securities held-to-maturity ................ 2,597,139 4,302,253
Investment securities available-for-sale .............. 1,901,519 564,059
See accompanying notes to consolidated financial statements
-5-
Nine Months Ended
March 31,
2001 2000
---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES:
(CONTINUED)
Proceeds from sales of investment securities
available-for-sale ..................................... 201,396 1,715,580
Net (increase) decrease in loan receivable, excludes
transfers to real estate acquired in settlement of loans (6,916,112) (8,444,616)
Proceeds from the sale of real estate aquired in the
settlement of loans .................................... 129,957 --
Purchase of property and equipment ....................... (54,717) (338,872)
Proceeds from sale of equipment .......................... -- 221,274
---------- ----------
Net cash used in investing activities ................ (6,686,028) (6,490,879)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking and savings accounts ............ 6,973,408 429,372
Net increase (decrease) in advances to borrowers for ..... 243,994 (3,662)
taxes and insurance
Net increase (decrease) in FHLB advances ................. 3,625,000 (4,000,000)
Payments on FHLB advances ................................ (200,000) (200,000)
Purchase of Treasury Stock ............................... (235,000)
Dividends paid ........................................... (119,542) --
---------- ----------
Net cash provided by financing activities ............ 10,287,860 (3,774,290)
---------- ----------
Net increase (decrease) in cash ............................ 2,916,282 (4,409,334)
CASH AND CASH EQUIVALENTS, beginning of period ............. 3,477,650 6,741,171
---------- ----------
CASH AND CASH EQUIVALENTS, end of period ................... $ 6,393,932 $ 2,331,837
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest ................. $ 3,869,803 $ 3,523,287
============ ============
Cash paid during the period for income taxes ............. $ 429,500 $ 144,000
============ ============
NON-CASH INVESTING ACTIVITIES:
(Increase) decrease in market value of securities
available-for-sale ..................................... $ (457,731) $ 125,341
============ ============
Mortgage servicing rights capitalized .................... $ 64,655 $ 154,836
============ ============
See accompanying notes to consolidated financial statements
-6-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions for Form 10-QSB. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the unaudited interim periods.
The results of operations for the three and nine month periods ended March 31,
2001 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2001 or any other period. The unaudited consolidated
financial statements and notes presented herein should be read in conjunction
with the audited consolidated financial statements and related notes thereto
included in Eagle's Form 10-KSB dated June 30, 2000.
-7-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES
-----------------------------
Investment securities are summarized as follows:
March 31, 2001 (Unaudited) June 30, 2000 (Audited)
---------------------------------------- ----------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED FAIR AMORTIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE COST GAINS (LOSSES) VALUE
---- -------------- ----- ---- -------------- -----
Available-for-sale:
U.S. government and
agency obligations . $ 5,097,990 $ 40,441 $ 5,138,431 $ 4,250,803 $ (99,656) $ 4,151,147
Municipal obligations 3,634,125 (21,284) 3,612,841 3,307,967 (251,657) 3,056,310
Corporate obligations 7,223,746 132,639 7,356,385 6,184,453 (122,998) 6,061,455
Mortgage-backed
securities ......... 4,473,040 66,270 4,539,310 4,623,260 (40,258) 4,583,002
Collateralized
mortgage obligations 303,209 (367) 302,842 372,372 (11,067) 361,305
Corporate preferred
stock .............. -- -- -- 201,398 (398) 201,000
----------- ----------- ----------- ----------- ----------- -----------
Total ............. $20,732,110 $ 217,699 $20,949,809 $18,940,253 $ (526,034) $18,414,219
=========== =========== =========== =========== =========== ===========
Held-to-maturity:
U.S. government and
agency obligations . $ 2,395,051 $ 19,955 $ 2,415,006 $ 2,888,392 $ (29,659) $ 2,858,733
Municipal obligations 1,079,297 17,735 1,097,032 1,069,806 (21,234) 1,048,572
Mortgage-backed
securities ......... 4,503,832 32,479 4,536,311 5,964,489 (164,775) 5,799,714
----------- ----------- ----------- ----------- ----------- -----------
Total ............. $ 7,978,180 $ 70,169 $ 8,048,349 $ 9,922,687 $ (215,668) $ 9,707,019
=========== =========== =========== =========== =========== ===========
-8-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. LOANS RECEIVABLE
------------------------
Loans receivable consist of the following:
March 31, June 30,
2001 2000
(Unaudited) (Audited)
------------- -------------
First mortgage loans:
Residential mortgage (1-4 family) ...... $ 75,816,800 $ 74,336,712
Commercial real estate ................. 8,478,841 7,784,333
Real estate construction ............... 2,192,683 1,453,371
Other loans:
Home equity ............................ 15,621,372 13,654,250
Consumer ............................... 10,085,502 8,279,049
Commercial ............................. 2,900,424 2,757,708
------------- -------------
Total ................................ 115,095,622 108,265,423
Less: Allowance for loan losses ......... (691,305) (712,165)
Deferred loan fees ............. (134,667) (105,821)
------------- -------------
Total ................................ $ 114,269,650 $ 107,447,437
============= =============
Loans net of related allowance for loan losses on which the accrual of interest
has been discontinued were $525,000 and $504,000 at March 31, 2001 and June 30,
2000, respectively. Classified assets, including real estate owned, totaled
$1.46 million and $1.58 million at March 31, 2001 and June 30, 2000,
respectively.
The following is a summary of changes in the allowance for loan losses:
Nine months Twelve months
ended ended
March 31, 2001 June 30, 2000
(Unaudited) (Audited)
-------------- ---------------
Balance, beginning of period ............. $ 712,165 $ 736,624
Reclassification to REO reserve ........ (13,725) (11,519)
Reclassification to repossessed property
reserve ............................... (1,137)
Provision charged to operations ........ -- 15,000
Charge-offs ............................ (12,168) (30,623)
Recoveries ............................. 6,170 2,683
--------- ---------
Balance, end of period ............... $ 691,305 $ 712,165
========= =========
-9-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. DEPOSITS
-----------------
Deposits are summarized as follows:
March 31, June 30,
2001 2000
(Unaudited) (Audited)
------------ ------------
Noninterest checking ..................... $ 5,532,226 $ 5,732,528
Interest-bearing checking ................ 22,500,564 22,849,549
Passbook ................................. 20,724,111 20,936,122
Money market ............................. 15,927,858 14,716,098
Time certificates of deposit ............. 66,801,654 60,278,708
------------ ------------
Total .................................. $131,486,413 $124,513,005
============ ============
NOTE 5. EARNINGS PER SHARE
---------------------------
Basic earnings per share for the three months ended March 31, 2001 is computed
using 1,169,701 weighted average shares outstanding. Basic earnings per share
for the nine months ended March 31, 2001 is computed using 1,177,178 weighted
average shares outstanding. Diluted earnings per share is computed by adjusting
the number of shares outstanding by the weighted average number of dilutive
common equivalent shares. The common equivalent shares are shares in the
treasury to fund the Company's restricted stock plan, for which stock was
awarded in January 2001, as determined by the treasury stock method. The
weighted average shares outstanding for the diluted earnings per share
calculations are 1,182,562 for the three months ended March 31, 2001 and
1,181,411 for the nine months ended March 31, 2001. No earnings per share
information is given for periods ending March 31, 2000 as shares of common stock
were not issued until April 4, 2000.
NOTE 6. DIVIDENDS AND STOCK REPURCHASE PROGRAM
-----------------------------------------------
Eagle has paid three dividends of $0.07 per share on August 25, 2000, November
17, 2000, and February 16, 2001. Its fourth dividend of $0.07 per share was
declared on April 19, 2001, payable May 18, 2001 to stockholders of record on
May 4, 2001. Eagle Financial MHC, Eagle's mutual holding company, has waived the
receipt of dividends on its 648,493 shares.
A stock repurchase program was announced on December 21, 2000, covering 4% of
the Company's outstanding common stock. Through April 30, 2001, 20,000 shares
had been repurchased. At the annual meeting held October 19, 2000, shareholders
approved stock option and restricted stock plans for the Company covering
aggregate grants of up to 80,511 and 23,003, respectively. The repurchase plan
announced in December is intended to meet the needs of the restricted stock
plan.
-10-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This report contains certain "forward-looking statements." Eagle Bancorp
("Eagle" or the "Company") desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protections of the safe harbor with respect to all such forward-looking
statements. These forward-looking statements, which are included in Management's
Discussion and Analysis, describe future plans or strategies and include Eagle's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. Eagle's ability to predict results or the effect of
future plans or strategies or qualitative or quantitative changes based on
market risk is inherently uncertain. Factors which could affect actual results
but are not limited to include (i) change in general market interest rates, (ii)
general economic conditions, (iii) local economic conditions, (iv)
legislative/regulatory changes, (v) monetary and fiscal policies of the U.S.
Treasury and Federal Reserve, (vi) changes in the quality or composition of
Eagle's loan and investment portfolios, (vii) demand for loan products, (viii)
deposit flows, (ix) competition, and (x) demand for financial services in
Eagle's markets. These factors should be considered in evaluating the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements which speak only as of their dates.
Financial Condition
Total assets increased by $11.86 million, or 7.75%, from $153.03 million at June
30, 2000, to $164.89 million at March 31, 2001. Total liabilities increased by
$10.88 million from $134.70 million at June 30, 2000, to $145.58 million at
March 31, 2001. Total equity increased $990,000 from $18.33 million at June 30,
2000 to $19.32 million at March 31, 2001.
Growth in the loan portfolio of $6.82 million accounted for the majority of the
growth in total assets. The loan categories with the largest increase were home
equity loans, which increased $1.97 million and consumer loans, which increased
$1.81 million. These represented increases over the balances at June 30, 2000 of
14.43% and 21.86%, respectively. Total loan originations were $51.56 million for
the nine months ended March 31, 2001, with single family mortgages accounting
for $31.77 million of the total. Home equity loan and consumer loan originations
totaled $6.40 million and $6.11 million, respectively, for the same period.
Loans held for sale increased from $861,000 at June 30, 2000 to $2.59 million at
March 31, 2001.
-11-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition (continued)
Deposits and Federal Home Loan Bank (FHLB) advances funded asset growth.
Deposits have grown $6.98 million, or 5.61%, from $124.51 million at June 30,
2001 to $131.49 million at March 31, 2001. Our offerings of special rates on
certificates of deposit (CD's) contributed to the increase in deposits. Advances
grew to $12.11 million by March 31, 2001, an increase of $3.43 million, or
39.52%, from the balance of $8.68 million at June 30, 2000. Other liabilities
increased from $1.51 million at June 30, 2000 to $1.98 million at March 31,
2001, primarily due to increases in the balances of deferred income taxes and
escrow balances for borrowers' tax and insurance payments.
The growth in total equity was the result of earnings for the nine months of
$847,000 and an increase in the unrealized gain on securities available for sale
of $458,000. This was offset by the payment of three $0.07 per share regular
cash dividends and the purchase of 20,000 shares of treasury stock during the
period.
Results of Operations for the Three Months Ending March 31, 2001 and 2000
Net Income. Eagle's net income was $272,000 and $253,000 for the three months
ended March 31, 2001, and 2000, respectively. The increase of $19,000, or 7.51%,
was primarily due to increases in net interest income of $74,000 and noninterest
income of $61,000, partially offset by an increase in noninterest expense of
$85,000. Earnings per share were $0.23 for the current period. No earnings per
share are available for the period ended March 31, 2000 as shares of common
stock were not issued until April 4, 2000.
Net Interest Income. Net interest income increased from $1.25 million for the
quarter ended March 31, 2000 to $1.32 million for the quarter ended March 31,
2001. This increase of $74,000 was the result of an increase in interest and
dividend income of $271,000, partially offset by an increase in interest expense
of $197,000.
Interest and Dividend Income. Total interest and dividend income was $2.80
million for the quarter ended March 31, 2001, compared to $2.53 million for the
quarter ended March 31, 2000, representing an increase of $271,000, or 10.71%.
Interest and fees on loans increased from $2.06 million for 2000 to $2.29
million for 2001. This increase of $230,000, or 11.17%, was due primarily to an
increase in the average balances of loans receivable for the quarter ended March
31, 2001. Average balances for loans receivable, net, for the quarter ended
March 31, 2001 were $114.78 million, compared to $104.07 million for the
previous year. This represents an increase of $10.71 million, or 10.29%. All
loan categories had shown increases from the previous year. The average interest
rate earned on loans receivable also increased by 6 basis points, from 7.93%
-12-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending March 31, 2001 and 2000
(continued)
at March 31, 2000 to 7.99% at March 31, 2001. Interest and dividends on
investment securities available-for-sale (AFS) increased from $266,000 for the
quarter ended March 31, 2000 to $315,000 for the current quarter, while interest
on securities held to maturity (HTM) decreased from $182,000 to $126,000.
Interest earned from deposits held at other banks increased from $1,000 for the
quarter ended March 31, 2000 to $47,000 for the quarter ended March 31, 2001.
Interest Expense. Total interest expense increased from $1.28 million for the
quarter ended March 31, 2000, to $1.48 million for the quarter ended March 31,
2001, an increase of $197,000,or 15.39%, due primarily to an increase in
interest paid on deposits. Interest on deposits increased from $1.12 million for
the quarter ended March 31, 2000, to $1.30 million for the quarter ended March
31, 2001. This increase of $176,000, or 15.71%, was the result of an increase in
average rates paid and higher balances on deposit accounts. Time certificate of
deposits (CD's) accounted for the largest gain in balances during the period
from March 31, 2000 to March 31, 2001. Special certificate of deposit offerings
contributed to the increase. Average balances in CD accounts increased from
$57.89 million for the quarter ended March 31, 2000 to $65.56 million for the
quarter ended March 31, 2001. The average rate paid on CD accounts also
increased, from 5.18% to 5.81% for the period. Interest paid on borrowings
increased from $165,000 for the quarter ended March 31, 2000 to $186,000 for the
quarter ended March 31, 2001. The increase in borrowing costs was due to an
increase in the average balance of Federal Home Loan Bank advances. The cost of
deposits is expected to decline in the coming quarter. CD accounts opened in
previous quarters will be renewed at lower rates, as market rates have fallen. A
small FHLB advance was prepaid in April, which will reduce borrowing costs for
the next quarter.
Provision for Loan Losses. Provisions for loan losses are charged to earnings to
maintain the total allowance for loan losses at a level considered adequate by
Eagle's subsidiary, American Federal Savings Bank, to provide for probable loan
losses based on prior loss experience, volume and type of lending conducted by
American Federal, available peer group information, and past due loans in
portfolio. The Bank's policies require the review of assets on a quarterly
basis. The Bank classifies loans as well as other assets if warranted. While the
Bank believes it uses the best information available to make a determination
with respect to the allowance for loan losses, it recognizes that future
adjustments may be necessary. No provision was made for loan losses for either
the quarter ended March 31, 2001 or the quarter ended March 31, 2000. This is a
reflection of the continued strong asset quality of American Federal's loan
portfolio, as non-performing loan ratios continue to be below peer averages.
Total classified assets declined from $1.58 million at June 30, 2000 to $1.46
million at March 31, 2001. The Bank currently has no foreclosed real estate.
-13-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending March 31, 2001 and 2000
(continued)
Noninterest Income. Total noninterest income increased from $338,000 for the
quarter ended March 31, 2000, to $400,000 for the quarter ended March 31, 2001,
an increase of $62,000 or 18.34%. This was the result of an increase in net gain
on sale of loans of $52,000. Increased loan originations compared to a year ago
combined with management's decision to resume selling mortgage loans with
maturities of 15 years or less contributed to the increase in income from sale
of loans. The other categories of noninterest income registered small increases.
Noninterest Expense. Noninterest expense increased by $85,000 or 7.00% from
$1.21 million for the quarter ended March 31, 2000, to $1.30 million for the
quarter ended March 31, 2001. This increase was primarily due to an increase in
salaries and benefits of $44,000 and in legal and accounting fees of $11,000.
The increase in salaries was due to merit raises, while the increase in legal
and accounting fees were related to the costs of being a public company.
Advertising expense increased $10,000 due to increased advertising for internet
banking and lending promotions. In-house computer expense increased $10,000
primarily due to internet banking costs.
Income Tax Expense. Eagle's income tax expense was $119,000 for the quarter
ended March 31, 2000, compared to $150,000 for the quarter ended March 31, 2001.
The effective tax rate for the quarter ended March 31, 2000 was 32.01% and was
35.51% for the quarter ended March 31, 2001. The effective tax rate is higher in
the current quarter due to an adjustment to bring the year-to-date effective tax
rate up to 33%. Management expects Eagle's effective tax rate to be
approximately 33%.
Results of Operations for the Nine Months Ending March 31, 2001 and 2000
Net Income. Eagle's net income was $847,000 and $756,000 for the nine months
ended March 31, 2001 and 2000, respectively. The increase of $91,000, or 12.03%,
was primarily due to increases in net interest income (before provision for loan
losses) of $265,000 and noninterest income of $116,000, partially offset by an
increase in non-interest expense of $237,000. Earnings per share for the period
ended March 31, 2001 were $0.72. No earnings per share were available for the
period ended March 31, 2000 as shares of common stock were not issued until
April 4, 2000.
-14-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ending March 31, 2001 and 2000
(continued)
Net Interest Income. Net interest income (before provision for loan losses)
increased from $3.72 million for the nine months ended March 31, 2000 to $3.99
million for the nine months ended March 31, 2001. This increase of $265,000 was
the result of an increase in interest and dividend income of $741,000, partially
offset by an increase in interest expense of $476,000.
Interest and Dividend Income. Total interest and dividend income was $8.31
million for the nine months ended March 31, 2001, compared to $7.57 million for
the same period ended March 31, 2000, representing an increase of $741,000, or
9.79%. Interest and fees on loans increased from $6.08 million for 2000 to $6.85
million for 2001. This increase of $767,000, or 12.62%, was due primarily to an
increase in the average balances of loans receivable for the nine months ended
March 31, 2001. Average balances for loans receivable, net, for this period were
$113.01 million, compared to $101.44 million for the previous year. This is an
increase of $11.57 million, or 11.41%. All loan categories had shown increases
from the previous year. The average interest rate earned on loans receivable
also increased by 9 basis points, from 7.99% to 8.08%. Interest and dividends on
investment securities available-for-sale (AFS) increased from $770,000 for the
nine months ended March 31, 2000 to $887,000 for the same period ended March 31,
2001, while interest on securities held to maturity (HTM) decreased from
$592,000 to $434,000. Interest earned from deposits held at other banks
increased from $58,000 for the nine months ended March 31, 2000 to $74,000 for
the same period ended March 31, 2001 due primarily to higher average balances in
these accounts.
Interest Expense. Total interest expense increased from $3.85 million for the
nine months ended March 31, 2000 to $4.33 million for the nine months ended
March 31, 2001, an increase of $476,000, or 12.36%, due almost entirely to the
increase in interest paid on deposits. Interest on deposits increased from $3.38
million for the nine months ended March 31, 2000 to $3.83 million for the nine
months ended March 31, 2001. This increase of $452,000, or 13.37%, was the
result of an increase in balances and average rates paid on deposit accounts.
Time certificate of deposits (CD's) accounted for the largest gain in balances
during the period from March 31, 2000 to March 31, 2001. Special certificate of
deposit offerings contributed to the increase. Average balances in CD accounts
increased from $58.39 million at March 31, 2000 to $62.54 million at March 31,
2001. The average rate paid on CD accounts also increased, from 5.11% to 5.81%.
Interest paid on borrowings increased from $473,000 for the nine months ended
March 31, 2000 to $497,000 for the same period ended March 31, 2001. The
increase in borrowing costs was due to an increase in the average balance of
Federal Home Loan Bank advances.
-15-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ending March 31, 2001 and 2000
(continued)
Provision for Loan Losses. Provisions for loan losses are charged to earnings to
maintain the total allowance for loan losses at a level considered adequate by
Eagle's subsidiary, American Federal Savings Bank, to provide for probable loan
losses based on prior loss experience, volume and type of lending conducted by
American Federal, available peer group information, and past due loans in
portfolio. The Bank's policies require the review of assets on a quarterly
basis. The Bank classifies loans as well as other assets if warranted. While the
Bank believes it uses the best information available to make a determination
with respect to the allowance for loan losses, it recognizes that future
adjustments may be necessary. No provision was made for loan losses for the nine
months ended March 31, 2001, compared to $15,000 for the same period ended March
31, 2000. This is a reflection of the continued strong asset quality of American
Federal's loan portfolio, as non-performing loan ratios continue to be below
peer averages. Total classified assets declined from $1.58 million at June 30,
2000 to $1.46 million at March 31, 2001. During the current nine month period, a
transfer of $14,000 was made from the loan loss reserve to the real estate owned
(REO) reserve. The transfer was made to write down the balances of the two
foreclosed properties in Butte, Montana to their net realizable value. Both REO
properties were sold during the period with no additional loss incurred. The
Bank currently has no foreclosed real estate.
Noninterest Income. Total noninterest income increased from $1.03 million for
the nine months ended March 31, 2000, to $1.15 million for the nine months ended
March 31, 2001, an increase of $116,000 or 11.26%. This was the result of an
increase in the gain on sale of available for sale securities of $35,000, an
increase in other noninterest income items of $31,000, an increase in demand
deposit service charges of $30,000, and an increase in net gain on sale of loans
of $25,000. Two securities were sold for small gains in the current period,
compared to securities sold for losses of $30,000 in the previous nine month
period. Demand deposit service charges were higher as the increased fees were in
effect for the entire nine month period ended March 31, 2001, whereas in the
previous period the increases were only in effect for four months. Increased
loan sales contributed to the increase in net gain on sale of loans. Mortgage
loan servicing fees declined slightly from $225,000 in the nine month period
ended March 31, 2000 to $220,000 in the nine months ended March 31, 2001.
-16-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ending March 31, 2001 and 2000
(continued)
Noninterest Expense. Noninterest expense increased by $237,000 or 6.53% from
$3.63 million for the nine months ended March 31, 2000, to $3.87 million for the
nine months ended March 31, 2001. This increase was primarily due to increases
in salaries and benefits of $103,000, legal and accounting fees of $76,000, and
occupancy expense of $32,000. The increase in salaries was due to merit raises,
while the increase in legal and accounting fees were related to the costs of
being a public company. The increase in occupancy expense was due to higher
property taxes and repairs. These increases were partially offset by decreases
of $23,000 in federal deposit insurance premiums and $11,000 in ATM processing
fees. The decrease in deposit insurance premiums was due to the FDIC lowering
their assessment rate by 64%, while lower costs passed on from the Bank's ATM
processor led to lower processing expense for ATMs and debit cards.
Income Tax Expense. Eagle's income tax expense was $349,000 for the nine months
ended March 31, 2000, compared to $418,000 for the nine months ended March 31,
2001. The effective tax rate for the nine months ended March 31, 2000 was 31.58%
and was 33.05% for the nine months ended March 31, 2001.
Liquidity, Interest Rate Sensitivity and Capital Resources
The company's subsidiary, American Federal Savings Bank (the Bank), is required
to maintain minimum levels of liquid assets as defined by the Office of Thrift
Supervision (OTS) regulations. The OTS recently eliminated the statutory
requirement based upon a percentage of deposits and short-term borrowings. The
OTS states that the liquidity requirement is retained for safety and soundness
purposes, and that appropriate levels of liquidity will depend upon the types of
activities in which the company engages. The Bank's liquidity increased due to
an increase in deposit balances for the period ending March 31, 2001.
The Bank's primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments, funds provided from
operations, and advances from the Federal Home Loan Bank of Seattle. Scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are generally predictable. However, other sources of funds, such as
deposit flows and loan prepayments, can be greatly influenced by the general
level of interest rates, economic conditions and competition. The Bank uses
liquidity resources principally to fund existing and future loan commitments. It
also uses them to fund maturing certificates of deposit, demand deposit
withdrawals and to invest in other loans and investments, maintain liquidity,
and meet operating expenses.
-17-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity, Interest Rate Sensitivity and Capital Resources (continued)
Liquidity may be adversely affected by unexpected deposit outflows, higher
interest rates paid by competitors, and similar matters. Management monitors
projected liquidity needs and determines the level desirable, based in part on
commitments to make loans and management's assessment of the bank's ability to
generate funds.
At December 31, 2000 (the most recent report available), the Bank's measure of
sensitivity to interest rate movements, as measured by the OTS, improved from
the previous quarter. This was due to management's strategy of retaining assets
with shorter maturities while emphasizing longer-term funding sources such as
transaction accounts and FHLB advances. The Bank is well within the guidelines
set forth by the Board of Directors for interest rate risk sensitivity.
As of March 31, 2001, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31, 2001, the Bank's tangible,
core, and risk-based capital ratios amounted to 11.0%, 11.0%, and 18.6%,
respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
respectively. See the following table (amounts in thousands):
At March 31, 2001
-------------------
% of
Amount Assets
------- ------
Tangible capital:
Capital level ................................ $17,952 10.96%
Requirement .................................. 2,457 1.50
------- -----
Excess ....................................... $15,495 9.46%
======= =====
Core capital:
Capital level ................................ $17,952 10.96%
Requirement .................................. 4,913 3.00
------- -----
Excess ....................................... $13,039 7.96%
======= =====
Risk-based capital:
Capital level ................................ $18,619 18.63%
Requirement .................................. 7,995 8.00
------- -----
Excess ....................................... $10,624 10.63%
======= =====
-18-
EAGLE BANCORP AND SUBSIDIARY
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company nor the Bank is involved in any pending legal
proceedings other than non-material legal proceedings occurring in the
ordinary course of business.
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
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EAGLE BANCORP
Date: May 9, 2001 By: /s/ Larry A. Dreyer
--------------------
Larry A. Dreyer
President/CEO
Date: May 9, 2001 By: /s/ Peter J. Johnson
--------------------
Peter J. Johnson
Sr. VP/Treasurer
-19-