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 September 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 October 21, 1996, there were 1,302,705 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
Eagle BancGroup, Inc.
Consolidated Statement of Condition
(amounts in thousands)
Sept 30, 1996 Dec 31, 1995
<S> <C> <C>
ASSETS
Cash on hand & in other inst 2 1,047
Fed funds sold & overnight dep 248 2,853
Investment securities 18,077 11,810
Mortgage backed securities 34,914 41,376
Loans receivable, net 104,967 88,786
Real estate owned 653 644
Premises and equipment 2,944 3,112
Other assets 1,935 1,346
Total Assets 163,740 150,974
LIABILITIES AND EQUITY
Deposits 132,093 138,396
FHLB advances 8,000 0
Other borrowed funds 0 0
Other liabilities 1,818 1,063
Total Liabilities 141,911 139,459
Capital stock 13 0
Paid-in capital 12,364 0
Retained earnings 9,452 11,515
Total Stockholder's Equity 21,829 11,515
Total Liabilities and Equity 163,740 150,974
See accompanying notes.
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<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statement of Income
(amounts in thousands except per share data)
For the Three Months For the Nine Months
Ended Sept 30, Ended Sept 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 1,982 1,734 5,575 5,101
Interest on investment sec &
temporary investments 284 193 744 590
Interest on mtg-backed sec 553 600 1,763 1,632
Total Interest Income 2,819 2,527 8,082 7,323
Interest expense:
Interest on deposits:
Passbook 142 123 434 366
MMDA and NOW 43 49 139 144
Certificates of deposit 1,648 1,777 5,068 4,841
Interest on borrowings 47 2 58 78
Total Interest Expense 1,880 1,951 5,699 5,429
Net Interest Income 939 576 2,383 1,894
Provision for loan losses 103 15 138 45
Net Int Inc After Prov for
Loan Losses 836 561 2,245 1,849
Non-interest income:
Gains on loans sold - 37 41 36
Other 56 55 205 275
Total Non-Interest Income 56 92 246 311
Non-interest expense
Salaries and employee ben 474 467 1,246 1,243
Net occupancy expense 139 139 407 409
Federal deposit ins prem 971 87 1,149 245
Data processing expense 61 57 184 166
Other 114 124 445 161
Total Non-Interest Expense 1,759 874 3,431 2,224
Income(Loss) Bef Fed Inc Tax (867) (221) (940) (64)
Federal inc tax ben (exp) 277 68 300 18
Net Income (Loss) (590) (153) (640) (46)
Per Share Data
Earnings per share (.45) (.12) (.49) (.04)
Dividends per share .00 .00 .00 .00
See accompanying notes.
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<CAPTION>
Eagle BancGroup, Inc
Consolidated Statement of Cash Flows
(amounts in thousands)
For the Six Months Ended June 30,
1996 1995
<S> <C> <C>
Operating activities:
Net (loss) income (640) (46)
Adjustments to reconcile net
(loss)income to net cash provided
by operating activities:
Provision for loan loss 138 45
Provision for depreciation 218 361
Amort of prem/disc on
investment securities 69 62
Net (gain)loss on sale
of securities (7) 0
Purchase of FHLB stock (35) (44)
Proceeds from sale of mortgage
loans originated-for-sale 5,269 3,759
Loans rec originated-for-sale (3,205) (1,611)
Increase in accrued int rec (47) (8)
Inc(dec) in accrued int pay 58 (23)
Increase in other assets (364) (128)
Inc(dec) in other liabilities 761 (282)
Net cash provided by operating
activities 2,215 2,085
Investing activities:
Proceeds from sale of inv sec 4,545 1,035
Purchases of investment securities (10,984) (1,000)
Purchases of mtg-backed securities (4,340) (6,988)
Proceeds from sale of mtg-bkd sec 5,582 0
Principal coll on mtg-backed sec 4,678 2,257
Principal coll on loans receivable 25,352 17,092
Loans receivable originated (43,659) (24,129)
Purchases of premises and equip (50) (89)
Net (purch)sale of real estate owned (9) 2
Net cash used by investing
activities (18,885) (11,820)
Financing activities:
Net change in savings, demand
and NOW accounts (34) (649)
Net change in certificate accts (6,281) 16,370
Net change in short-term borrowings 8,000 (7,436)
Proceeds from sale of capital stock 11,335 0
Net cash provided by financing
activities 13,020 8,285
Net decrease in cash and cash
equivalents (3,650) (1,450)
Cash and cash equivalents at
beginning of period 3,900 2,703
Cash and cash equivalents at
end of period 250 1,253
See accompanying notes.
</TABLE>
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 $25,000 in
the first nine 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 September 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 nine months ended September 30, 1996, Eagle BancGroup, Inc.
(the 'Company') had a net loss of $640,000 compared to a net loss of $46,000
in the same period in 1995. For the three months ended September 30, 1996,
the Company had a net loss of $590,000 compared to a net loss of $153,000 in
the third quarter of 1995. The 1996 results include the SAIF recapitalization
special assessment. Net of tax, the assessment reduced earnings $600,000.
NET INTEREST INCOME. Net interest income increased to $2,383,000 in the nine
months ended September 30, 1996 from $1,894,000 in the same period in 1995.
Interest income increased to $8,082,000 from $7,323,000 and interest expense
increased to $5,699,000 from $5,429,000 comparing the first nine months of
1996 to the first nine months of 1995. For the three months ended September
30, net interest income increased to $939,000 in 1996 from $576,000 in 1995.
In the third quarter of 1996, interest income was $2,819,000 and interest
expense was $1,880,000 compared to 1995 amounts of $2,527,000 and $1,951,000,
respectively.
The increase in net interest income in 1996 from 1995 was due primarily to an
increase in interest earning assets. In June, 1996, the Company completed
its initial stock sale, the net proceeds of which totaled $11,335,000. In
addition, in the fourth quarter of 1995, the Company sold a large commercial
property previously held as other real estate. These funds were used to
originate residential mortgage and retail automobile loans or were invested
in government and mortgage-backed securities. As a result, average interest
earning assets were $150,900,000 for the first nine months of 1996 compared to
$136,607,000 in the same period in 1995. For the three months ended September
30, 1996, average interest earning assets were $156,985,000 compared to
$140,156,000 for the same period in 1995. Average interest bearing
liabilities were $137,941,000 for the first nine months of 1996 compared to
$137,249,000 for the same period in 1995. For the three months ended
September 30, average interest bearing liabilities were $136,058,000 in 1996
compared to $138,406,000 in 1995.
The net interest margin (net interest income divided by average interest
earning assets) increased to 2.11% for the first nine months of 1996 from
1.85% for the same period in 1995 and increased to 2.38% for the three months
ended September 30, 1996 from 1.63% for the same period in 1995. The interest
rate spread (the difference between the rate earned on average interest
earning assets and the rate paid on average interest bearing liabilities)
decreased to 1.64% in the first nine months of 1996 from 1.89% in the same
period in 1995. The interest rate spread did increase in the third quarter of
1996 to 1.64% from 1.56% in the third quarter of 1995. The rate earned on
average interest earning assets was 7.15% for the first nine months of 1996
and 7.14% for the third quarter of 1996 compared to 7.17% for both periods in
1995. For the nine months ended September 30, 1996, the rate paid on average
interest bearing liabilities increased to 5.52% from 5.29% for the same period
in 1995. For the three months ended September 30, the rate paid on average
interest bearing liabilities decreased to 5.50% in 1996 from 5.61% in 1995.
An overall increase in deposit rates in 1995 and early 1996 over previous
years resulted in the increase in the rate paid on average interest bearing
liabilities in the first nine months of 1996 over the same period in 1995.
Certificates opened in 1993 and 1994 that renewed in 1995 and early 1996
earned higher rates at renewal than when initially deposited. In 1996,
deposit rates have decreased slightly during the year. The average rate paid
on certificates for the first nine months of 1996 was 5.99% compared to 5.73%
for the same period in 1995. For the third quarter, the average rate paid on
certificates was 5.94% in 1996 compared to 6.09% in 1995.
Interest expense on borrowed funds was $58,000 for the nine months ended
September 30, 1996 compared to $78,000 for the same period in 1995 and was
$47,000 for the third quarter of 1996 compared to $2,000 for the same period
in 1995. Average borrowed funds for the first nine months of 1996 were
$1,221,000 compared to $1,581,000 for the same period in 1995.
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
nine months of 1996, $25,000 was recognized as income on non-accrual loans.
Additional income of $32,000 would have been recognized on the loans on an
accrual basis.
PROVISION FOR LOAN LOSS. For the first nine months of 1996, the provision for
loan loss was $138,000 compared to $45,000 for the same period in 1995. The
amount of the provision is calculated as the amount necessary to maintain the
allowance for loan loss at a level deemed adequate to absorb estimated future
losses inherent in the loan portfolio. At September 30, 1996, the allowance
for loan losses was $919,000 or .87% of total loans compared to $860,000 or
.96% of total loans at September 30, 1995 and $907,000 or 1.01% of total loans
at December 31, 1995. In the first nine months of 1996, loans totaling
$134,000 were charged against the allowance and recoveries of loans previously
charged off totaling $7,000 were added to the allowance. Non-performing loans
were $549,000 or .52% of total loans at September 30, 1996 compared to
$513,000 or .57% of total loans at December 31, 1995.
NON-INTEREST INCOME. For the first nine months of 1996, non-interest income
decreased to $246,000 from $311,000 in the same period in 1995. In 1995,
$100,000 was recognized as income as the result of a reduction in the
valuation allowance for loans held for sale. No income was recognized as a
result of changes to the valuation allowance in the first nine months of 1996.
Deposit account service fees increased $13,000 to $37,000 and brokerage
commissions increased $13,000 to $35,000 in the first nine months of 1996
from the same period in 1995. Both increases were due to an increased number
of deposit accounts and higher transaction volumes. Gains on loans sold
increased to $41,000 in the first nine months of 1996 from $36,000 in the
same period in 1995. Included in the 1996 income is $25,000 recognized as a
servicing asset as a result of the adoption, as of January 1, 1996, of SFAS
122, "Accounting for Mortgage Servicing Rights."
For the three months ended September 30, 1996, non-interest income decreased
to $56,000 from $92,000 for the same period in 1995. Gains on loans sold
were $37,000 in the third quarter of 1995 compared to no gains in the same
period in 1996.
NON-INTEREST EXPENSE. For the nine months ended September 30, 1996, non-
interest expense increased to $3,431,000 from $2,224,000 for the same period
in 1995. Of this increase, $880,000 was due to the SAIF recapitalization
special assessment realized in 1996. In the first nine months of 1995, net
income from real estate owned operations was $151,000 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. Marketing and
promotional expenses increased $86,000 to $119,000 in the first nine months
of 1996 from the same period in 1995 due primarily to increased home mortgage
and customer service related advertising. Increased deposits in 1996 from
1995 resulted in an increase in regular FDIC premium expense of $24,000 in
the first nine months of 1996 from the same period in 1995.
Comparing the first nine months of 1996 to the same period in 1995, ATM
service fees increased $19,000 to $23,000; data processing expense increased
$18,000 to $184,000; office supplies expense increased $15,000 to $43,000 and
postage expense increased $9,000 to $39,000. These expense increases were
due to the increased number of deposit accounts and higher transaction
volumes processed in 1996 compared to 1995.
Non-interest expense increased to $1,759,000 for the three months ended
September 30, 1996 from $874,000 for the same period in 1995 primarily due to
the $880,000 SAIF recapitalization special assessment. In the third quarter
of 1995, net expense of $29,000 was realized related to real estate owned
operations compared to no expense in the same period in 1996. Advertising
and promotional expenses increased $18,000 in the third quarter of 1996
compared to the same period in 1995 due to increased advertising. Office
supplies expense increased $8,000 and ATM service fees increased $7,000 in
the third quarter of 1996 from the same period in 1995 for the same reasons
previously noted.
INCOME TAX EXPENSE. For the nine months ended September 30, the income tax
benefit was $300,000 in 1996 and $18,000 in 1995. For the three months ended
September 30, the income tax benefit was $277,000 in 1996 and $68,000 in 1995.
Changes in pre-tax income caused the changes in income taxes. The effective
tax rate was 34% in 1996 and was 32% in 1995.
Results of operations for the nine and three months ended September 30, 1996
may not be indicative of what the results of operations will be for the
twelve months ended December 31, 1996.
FINANCIAL CONDITION
Total assets at September 30, 1996 increased to $163,740,000 from
$150,974,000 at December 31, 1995 primarily due to the net proceeds of
$11,335,000 from the initial stock sale finalized by the Company in June,
1996. Cash and cash equivalents decreased to $250,000 at September 30, 1996
from $3,900,000 at December 31, 1995 due to increased loan originations. Net
loans increased to $104,967,000 at September 30, 1996 from $88,786,000 at the
prior year end. Loan originations in the first nine months of 1996 totaled
$46,864,000 compared to $25,740,000 in the first nine months of 1995. Sixty
percent of the 1996 originations were mortgage loans and the remainder were
consumer loans. Deposits decreased to $132,093,000 at September 30, 1996
from $138,396,000 at December 31, 1995 as some time deposits gained in a 1995
marketing effort were not renewed at maturity in 1996. FHLB advances were
$8,000,000 at September 30, 1996 compared to none at December 31, 1995.
Savings institutions must, by regulation, 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 September 30, 1996, the Company's
savings institution subsidiary had ratios of 18.75%, 10.02% and 10.02%,
respectively, compared to December 31, 1995 ratios of 15.78%, 7.73% and 7.73%,
respectively. The Company's capital to asset ratio at September 30, 1996 was
13.33% compared to 7.63% at December 31, 1995. These ratios indicate that
the Company is well positioned for future growth. The significant increases
in these ratios at September 30, 1996 from year end, 1995 were due to
additional capital from the stock sale.
Regulation also requires that savings institutions 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
September 30, 1996, the Company's savings institution subsidiary had a
liquidity ratio of 10.95% compared to 12.79% at December 31, 1995.
Commitments for loan originations and loans in process totaled $1,544,000 and
unused lines of credit totaled $3,305,000 at September 30, 1996. Funds to
meet these commitments are available from new deposits, borrowings and
scheduled principal and interest payments on loans, mortgage-backed and
investment securities. Funds are either invested in residential mortgages,
retail automobile loans and mortgage-backed and investment securities or
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
The Company did not file any reports on Form 8-K during the three months
ended September 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 October 25, 1996 ---------------------
GERALD A. BRADLEY
Chairman of the Board
/s/ Donald L. Fernandes
DATE October 25, 1996 -----------------------
DONALD L. FERNANDES
President and Chief
Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2
<INT-BEARING-DEPOSITS> (72)
<FED-FUNDS-SOLD> 320
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,991
<INVESTMENTS-CARRYING> 52,991
<INVESTMENTS-MARKET> 52,991
<LOANS> 105,886
<ALLOWANCE> (919)
<TOTAL-ASSETS> 163,740
<DEPOSITS> 132,093
<SHORT-TERM> 8,000
<LIABILITIES-OTHER> 1,818
<LONG-TERM> 0
0
0
<COMMON> 13
<OTHER-SE> 21,816
<TOTAL-LIABILITIES-AND-EQUITY> 163,740
<INTEREST-LOAN> 5,575
<INTEREST-INVEST> 2,376
<INTEREST-OTHER> 131
<INTEREST-TOTAL> 8,082
<INTEREST-DEPOSIT> 5,641
<INTEREST-EXPENSE> 5,699
<INTEREST-INCOME-NET> 2,383
<LOAN-LOSSES> 138
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 3,431
<INCOME-PRETAX> (940)
<INCOME-PRE-EXTRAORDINARY> (940)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
<YIELD-ACTUAL> (5.07)
<LOANS-NON> 549
<LOANS-PAST> 549
<LOANS-TROUBLED> 1,682
<LOANS-PROBLEM> 136
<ALLOWANCE-OPEN> 907
<CHARGE-OFFS> 134
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 919
<ALLOWANCE-DOMESTIC> 919
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 847
</TABLE>
