1996 Annual Report
Eagle BancGroup, Inc.
Holding Company for First Federal Savings and Loan Association
Bloomington, IL
(front cover)
Table of Contents
Financial Highlights 1
Management's Discussion and Analysis 2
Report of Independent Auditors 8
Consolidated Statements of Condition 9
Consolidated Statements of Income 10
Consolidated Statements of Cash Flow 11
Consolidated Statement of Changes in Stockholders' Equity 12
Notes to Consolidtaed Financial Statements 12
Other Corporate Information 29
To Our Stockholders:
It is truly an honor to present to our stockholders this 1996 Annual Report,
as it is our first annual report as a public company. In the seventy-seven
year history of our subsidiary, First Federal Savings and Loan, many changes
have accurred, but in no one year have the changes been more numerous and more
dramatic than in 1996. Besides converting from a mutual savings and loan
association and the creation of the new holding company, we also saw the
entire industry recapitalize the federal deposit insurance fund through
legislation that most likely will ultimely result in the modernization of
banking charters. The impact of these events perhaps cannot be fully
appreciated at this time, but it is certain that 1996 will be remembered as the
year in which our Company and the entire industry established the framework
for many years of prosperity and growth in the future.
We have made many changes in the past year, all with the intent of better
serving our customers, improving the performance of the Company and enhancing
the long-term investment value for our stockholders. We appreciate the
support we have received from our customers, employees and stockholders and we
look forward to an exciting and challenging year in 1997.
Sincerely,
/S/ Donald L. Fernandes /S/ Gerald A. Bradley
Donald L. Fernandes Gerald A. Bradley
President and Chief Executive Officer Chairman of the Board
(inside front cover)
<TABLE>
Eagle BancGroup, Inc. - Financial Highlights
<CAPTION>
At and For the Year Ended December 31,
1996 1995 1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Condition Data
Total assets 172,666 150,974 140,932 137,368 142,940
Cash on hand and in
other institutions 1,487 1,072 1,092 938 485
Federal funds sold and
overnight deposits 5,573 2,828 1,611 8,882 10,376
Investments 53,883 53,186 42,680 50,468 30,508
Loans receivable, net 106,641 88,786 83,589 67,939 93,228
Deposits 133,995 138,396 122,388 125,156 132,265
FHLB advances and other
borrowings 15,300 - 7,936 - -
Total equity 22,141 11,515 9,501 11,320 10,190
Selected Operating Data
Interest income 11,094 9,933 8,595 8,913 11,219
Interest expense 7,703 7,376 5,396 5,838 7,778
Net interest income before
provision for loan losses 3,391 2,557 3,199 3,075 3,441
Provision for loan losses 183 100 (32) (3) -
Net interest income after
provision for loan losses 3,208 2,457 3,231 3,078 3,441
Non-interest income 418 395 261 1,206 105
Non-interest expense 4,373 2,955 2,840 2,584 2,426
Income (loss) before
federal income taxes (747) (103) 652 1,700 1,120
Federal income tax
(benefit) expense (258) (30) 222 570 345
Net income (loss) (489) (73) 430 1,130 775
Selected Financial Ratios and Other Data
Performance Ratios (based on balance sheet averages) <F1>
Return on assets -0.31% -0.05% 0.31% 0.81% 0.53%
Return on equity -2.85 -0.68 4.15 10.31 8.48
Interest rate spread
during period <F2> 1.69 1.83 2.54 2.27 2.39
Net interest margin
during period <F3> 2.20 1.85 2.55 2.38 2.47
Non-interest expense
to assets <F4> 2.74 1.98 2.06 1.86 1.64
Non-interest income
to assets 0.26 0.26 0.19 0.87 0.07
Interest-earning assets
to interest-bearing
liabilities 1.10x 1.01x 1.00x 1.02x 1.02x
Asset Quality Ratios
Non-performing loans
to gross loans <F5> 0.66% 0.57% 0.47% 1.19% 0.90%
Non-performing assets
to total assets <F6> 0.79 0.80 4.86 5.56 4.39
Allowance for loan losses
to total loans 0.86 1.01 1.04 1.38 1.01
Allowance for loan losses
to non-performing loans 130.92 176.80 219.35 115.09 111.66
Net charge-offs to
average gross loans 0.17 0.08 0.05 0.00 0.21
Regulatory Capital and Capital Ratios <F7>
Tangible capital ratio 9.66% 7.73% 8.20% 8.22% 6.51%
Core capital ratio 9.66 7.73 8.20 8.22 6.51
Risk-based capital ratio 18.29 15.78 15.80 17.70 13.60
Average equity to
average assets 10.76 7.21 7.55 7.89 6.19
Equity to assets at
end of period 12.82 7.63 6.74 8.24 7.13
Note: Data prior to 1996 relates to First Federal Savings and Loan only
<FN>
<F1>
With the exception of end of period ratios, all ratios are based on
average month-end balances during the respective periods.
<F2>
Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and weighted average cost of
interest-bearing liabilities.
<F3>
Net interest margin represents net interest income as a percentage of
average interest-earning assets.
<F4>
The 1996 ratio includes the effect of the SAIF special assessment.
<F5>
Non-performing loans consist of non-accrual and accruing loans which are
contractually past due 90 days or more.
<F6>
Non-performing assets consist of non-performing loans and foreclosed real
estate owned. The significant decline in this ratio between the 1994 and 1995
periods occurred as a result of the sale by First Federal of a substantial
real estate owned property during the fourth quarter of 1995.
<F7>
Tangible capital, Core capital and Risk-based capital ratios relate to
First Federal only.
</FN>
</TABLE>
-Page 1-
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of results of operations and financial
condition is intended to assist in understanding the financial condition,
changes in financial condition and results of operations of Eagle BancGroup,
Inc. This discussion should be read in conjunction with the Consolidated
Financial Statements, accompanying Notes to Consolidated Financial Statements
and other information contained elsewhere in this document.
Eagle BancGroup, Inc. is a non-diversified unitary savings and loan holding
company engaged in the business of managing its investments and directing,
planning and coordinating the business activities of its wholly-owned
subsidiary, First Federal Savings and Loan, a federally chartered savings
association, and First Federal's wholly-owned subsidiary, FFS Investment
Services, Inc., a service corporation that sells investment products
(collectively, 'the Company').
Financial information for periods before 1996 relate to First Federal Savings
and Loan Association only.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
GENERAL. In 1996 the Company had a net loss of $489,000, or $(.38) per share,
compared to a net loss of $73,000 in 1995. The 1996 results include the SAIF
recapitalization special assessment, which, net of tax, reduced earnings
$600,000. Excluding the net effect of the SAIF recapitalization, the Company
had net income in 1996 of $111,000.
NET INTEREST INCOME. Net interest income increased 32.6% to $3,391,000 in
1996 from $2,557,000 in 1995. Interest income increased 11.7% to $11,094,000
in 1996 from $9,933,000 in 1995 while interest expense increased 4.4% to
$7,703,000 in 1996 from $7,376,000 in 1995. Interest-earning assets increased
in 1996 compared to 1995 resulting in the increase in interest income and in
net interest income. Average interest-earning assets increased to
$154,244,000 in 1996 compared to $138,244,000 in 1995 as the Company realized
net proceeds of $11,186,000 from its subscription stock offering in June, 1996
and over $5,000,000 from the sale in late 1995 of a large commercial property
that was held as real estate owned. These funds were used to originate
residential mortgage and retail automobile loans or were invested in
government and mortgage-backed securities. Comparing 1996 to 1995, average
loans increased to $97,380,000 from $87,782,000 and average investments
increased to $52,998,000 from $46,444,000. In 1996, loan originations
amounted to over $63,000,000. The yield on average interest-earning assets
was 7.19% in 1996 and 1995.
Average interest-bearing liabilities increased to $140,009,000 in 1996 from
$137,498,000 in 1995. Average deposits decreased to $135,623,000 in 1996 from
$136,255,000 in 1995 while average borrowed funds increased to $4,386,000 in
1996 from $1,243,000 in 1995. The rate paid on average interest-bearing
liabilities increased to 5.50% in 1996 from 5.36% in 1995 due to an increase
in the rate paid on average certificates of deposit to 5.97% in 1996 from
5.82% in 1995. The increase in the rate paid on average certificates of
deposit in 1996 from 1995 was due to the higher rate environment in 1995 and
1996 than prior years and the effects for a full year of the 1995 deposit
attraction marketing program, which involved offering to match the certificate
of deposit rates of all local competitors. The rate paid on average borrowed
funds decreased to 6.20% in 1996 from 6.52% in 1995.
The difference between the rate earned on average interest-earning assets and
the rate paid on average interest-bearing liabilities is the interest rate
spread. In 1996, the interest rate spread decreased to 1.69% from 1.83% in
1995 due to the higher rate paid on average interest-bearing liabilities in
1996 than 1995. The net interest margin, net interest income divided by
average interest-earning assets, increased in 1996 to 2.20% from 1.85% in 1995
due to the increase in net interest income.
All loans contractually past due 90 days or more are classified as non-
performing and no interest income is accrued on such loans. In the twelve
months ended December 31, 1996, cash interest payments of $47,000 were
recorded as income on such loans. Additional income of $40,000 would have
been recorded on these loans on an accrual basis. Non-accrual loans at
December 31, 1996 totaled $705,000.
-Page 2-
PROVISION FOR LOAN LOSSES. In 1996, the provision for loan losses was
$183,000 compared to $100,000 in 1995. The increase was in part the result of
an increase in net charge-offs to $167,000 in 1996 from $66,000 in 1995.
Analysis of the allowance for loan losses, including a review of loan charge-
offs and delinquencies as well as industry practice and experience, and an
increase in the loan portfolio in 1996 from 1995, justified the amount of the
provision. The increase in the allowance for loan losses relates primarily to
consumer loans. The average balance of consumer loans increased $4,097,000 to
$31,308,000 in 1996. At December 31, 1996, the allowance for loan losses was
$923,000, or .86% of total loans, compared to $907,000, or 1.01% of total
loans, at December 31, 1995.
NON-INTEREST INCOME. Total non-interest income increased to $418,000 in 1996
from $395,000 in 1995. In 1996, the Company adopted Statement of Financial
Accounting Standards No 122, 'Accounting for Mortgage Servicing Rights' which
resulted in the recognition of a net servicing rights asset totaling $51,000.
Gains on loans sold increased to $68,000 in 1996 from $51,000 in 1995 due to
increased loan sales. Net gains on securities sold were $15,000 in 1996
compared to zero in 1995. Deposit account service fees increased $17,000 to
$51,000 and brokerage commissions increased $19,000 to $44,000 in 1996 from
1995 due to an increased number of accounts. 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 1996. As a percent of average assets, non-interest
income was .26% in both 1996 and 1995.
NON-INTEREST EXPENSE. Total non-interest expense increased to $4,373,000 in
1996 from $2,955,000 in 1995. Of this increase, $875,000 was due to the SAIF
recapitalization special assessment paid in 1996. In 1995, net income from
real estate owned operations totaled $184,000 compared to zero in 1996 due to
the sale of the large commercial property on which the net rental income was
generated. A gain of $50,000 was also realized on the sale of the property in
1995. Salaries and employee benefits increased $118,000 to $1,736,000 in 1996
from 1995 primarily due to the funding of the Employee Stock Ownership Plan
which resulted in expense of $104,000 in 1996.
New advertising campaigns accounted for a $78,000 increase in advertising
expense to $121,000 in 1996 from 1995. The increased number of deposit
accounts resulted in the expense increases in 1996 from 1995 as follows: data
processing increased $26,000 to $249,000; net ATM fees increased $24,000 to
$30,000 and office supplies increased $19,000 to $59,000. Regular FDIC
premium expense increased $21,000 to $356,000 in 1996 compared to 1995 due to
higher deposits. Expenses related to holding company matters of $15,000 were
realized following formation of the Company in 1996.
Net of the SAIF recapitalization special assessment, non-interest expense was
2.19% of average assets in 1996. In 1995, non-interest expense was 1.98% of
average assets.
INCOME TAX EXPENSE. In 1996, a benefit for income taxes of $258,000 was
recorded compared to a benefit of $30,000 recorded in 1995. The decrease in
pre-tax income in 1996 from 1995 resulted in the increase in the income tax
benefit. The effective tax benefit rate in 1996 was 35% compared to 29% in
1995.
-Page 3-
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL. Due primarily to a decline in net interest income caused by a
sharply higher cost of certificates of deposit, the Company recognized a net
loss of $73,000 in 1995, compared to net income of $430,000 in 1994.
NET INTEREST INCOME. Net interest income decreased 20.1% to $2,557,000 in
1995 from $3,199,000 in 1994. Interest income increased 15.6% to $9,933,000
in 1995 from $8,595,000 in 1994 and interest expense increased 36.7% to
$7,376,000 in 1995 from $5,396,000 in 1994. Interest income and interest
expense increased in 1995 from 1994 due to increases in average balances of
both interest-earning assets and interest-bearing liabilities. The opening of
a new branch office in November, 1994 and a marketing strategy of matching
competitors' terms on certain certificates of deposit from December, 1994
through June, 1995 resulted in an increase in average interest-bearing
deposits from $122,578,000 in 1994 to $136,255,000 in 1995. The new funds
deposited and proceeds from the sale in late 1995 of a large real estate owned
property resulted in an increase in average interest-earning assets to
$138,244,000 in 1995 from $125,678,000 in 1994.
The increase in average interest-earning assets in 1995 from 1994 was
primarily in residential mortgage loans and indirect automobile loans. The
yield on average loans increased to 7.86% in 1995 from 7.71% in 1994 and the
yield on average interest-earning assets increased to 7.19% in 1995 from 6.84%
in 1994.
The average balance of certificates of deposit increased to $113,876,000 in
1995 from $97,950,000 in 1994 due to the new branch office and the marketing
program. The new certificates were gained during a period of increasing
interest rates as evidenced by an increase in the rate paid on average
certificates of deposit to 5.81% in 1995 from 4.64% in 1994. Average
interest-bearing liabilities were $137,498,000 in 1995 and $125,340,000 in
1994. The rate paid on average interest-bearing liabilities was 5.36% in 1995
and 4.30% in 1994.
The interest rate spread decreased to 1.83% in 1995 from 2.54% in 1994 due to
the increase in the rate paid on average interest-bearing liabilities. The net
interest margin decreased to 1.85% in 1995 from 2.55% in 1994 due to the
decrease in net interest income in the year ended December 31, 1995 compared
to the same period in 1994.
PROVISION FOR LOAN LOSSES. In 1995, a provision for loan losses of $100,000
was recorded compared to a negative provision of $32,000 in 1994. The
provision for loan losses in 1995 was deemed prudent based on continued growth
of the consumer loan portfolio and actual net charge-offs in 1995 of $66,000.
Even though consumer loan delinquencies improved in 1995 from 1994, management
determined, based on industry practice and experience, that actual losses
would likely increase which warranted the addition to the allowance for loan
losses. The negative provision in 1994 was recorded due to a decline in non-
performing loans at December 31, 1994 to .47% of total loans from 1.19% of
total loans at December 31, 1993. The allowance for loan losses was $907,000,
or 1.01% of total loans, at December 31, 1995 compared to $873,000, or 1.04%
of total loans, at December 31, 1994.
NON-INTEREST INCOME. Non-interest income increased to $395,000 in 1995 from
$261,000 in 1994 due primarily to the recognition as income of the $100,000
valuation allowance for loans held for sale. The allowance was established as
a charge to non-interest expense at December 31, 1994 due to a decline in the
market value of loans then held for sale. Gains on loans sold increased to
$51,000 in 1995 from $26,000 in 1994. Other loan fees increased $11,000 to
$146,000 in 1995 from 1994. As a percentage of average assets, non-interest
income was .26% in 1995 compared to .19% in 1994.
NON-INTEREST EXPENSE. Non-interest expense increased from $2,840,000 in 1994
to $2,955,000 in 1995. Salaries and employee benefits increased to $1,618,000
in 1995 from $1,514,000 in 1994 due to a severance payment in 1995 and normal
increases in employee costs. Net occupancy expense increased to $552,000 in
1995 from $423,000 in 1994 due expenses related to the opening of the new
branch office in late 1994. Data processing expense increased $37,000 to
$223,000 in 1995 from 1994 due mainly to the outsourcing of deposit account
statement and document imaging services, which was offset by a $13,000
decrease in office supplies and a $4,000 decrease in postage expense in 1995
from 1994, both of which related to the services no longer handled in-house.
Advertising expense decreased $40,000 to $41,000 in 1995 due to special
promotional advertising in 1994 that was not repeated in 1995. In 1994,
$100,000 was charged to non-interest expense to establish a valuation
allowance related to loans held for sale. As a percentage of average assets,
non-interest expense was 1.98% in 1995 and 2.06% in 1994.
INCOME TAX EXPENSE. In 1995, a benefit for income taxes of $30,000 was
recorded compared to expense of $222,000 recorded in 1994 due to the decrease
in pre-tax income in 1995 from 1994. The effective tax benefit rate was 29%
in 1995 compared to the effective rate of 34% in 1994.
-Page 4-
FINANCIAL CONDITION
The Company had total assets at December 31, 1996 of $172,666,000 compared to
$150,974,000 at December 31, 1995. The increase in assets in 1996 was due
to the subscription stock offering completed in 1996, the net proceeds of
which totaled over $11,000,000, and the use of FHLB advances to fund
origination of residential mortgage loans and to purchase adjustable-rate
mortgage-backed securities.
Net loans receivable increased 20.1% to $106,641,000 at December 31, 1996 from
$88,786,000 at December 31, 1995. Much of the increase was in residential
mortgage loans which totaled $70,600,000 at December 31, 1996 compared to
$55,786,000 at year-end, 1995. Total residential mortgage loan originations
in 1996 were $37,188,000 compared to $13,171,000 in 1995. Consumer loans
increased to $32,159,000 at year-end, 1996 from $28,720,000 at year-end, 1995.
Consumer loan originations in 1996 totaled $24,200,000 compared to $20,300,000
in 1995.
Total deposits at December 31, 1996 were $133,995,000, a decrease of 3.2% from
the total of $138,396,000 at year-end, 1995. Certificate of deposit balances
increased substantially in 1995 as a result of the marketing strategy used by
the Company in the first half of 1995. In 1996, the Company was focused on
reducing its cost of funds and did not offer special promotional terms on
certificates of deposit to attract and retain deposit balances. Due in part
to the absence of these programs upon the maturity of accounts opened in 1995,
total certificates of deposit decreased to $109,072,000 at December 31, 1996
from $114,999 at December 31, 1995.
Due to the decline in certificates of deposit and the increase in loan demand
in 1996, the Company chose to fund loan originations with borrowings, with
various rates and terms, from the Federal Home Loan Bank which totaled
$15,300,000 at December 31, 1996 compared to none at year-end, 1995.
Stockholders' equity increased to $22,141,000 at December 31, 1996 from
$11,515,000 at December 31, 1995 due to the net proceeds realized from the
subscription stock sale in 1996. As a percent of total assets, stockholders'
equity was 12.8% at December 31, 1996 compared to 7.6% at December 31, 1995.
Savings institutions are required to maintain minimum capital levels 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 1.5%. The Company's savings institution
subsidiary had ratios of 18.29%, 9.66% and 9.66%, respectively, at December
31, 1996 compared to December 31, 1995 ratios of 15.78%, 7.73% and 7.73%,
respectively.
INTEREST RATE RISK
The management of interest rate risk includes evaluation of the interest rate
risk inherent in certain assets and liabilities, determination of the
appropriate risk level given the Company's business strategy, operating
environment, capital and liquidity requirements and management of the risk
consistent with guidelines approved by the Board of Directors. Successful
management of interest rate risk reduces the vulnerability of the Company's
operations to changes in interest rates, which could have a negative impact on
earnings.
The management of interest rate risk was enhanced in 1996 by the receipt of
funds from the subscription stock sale. The funds were used to continue the
strategies utilized in recent years, namely (i) emphasizing origination of
one-to-four family adjustable rate and balloon mortgage loans; (ii) sale at
origination of longer-term, fixed-rate one-to-four family mortgage loans;
(iii) diversifying the loan portfolio (primarily into short-term consumer
loans such as indirect auto and home equity loans); (iv) classifying all
investment securities as available for sale; (v) holding primarily adjustable
rate or short-term (five years or less) fixed-rate investment securities; (vi)
reducing interest sensitivity of liabilities by offering locally competitive
rates on longer term certificates and implementing programs to attract low
cost demand deposits.
Interest rate sensitivity is measured on a quarterly basis through the use of
a model produced by the Office of Thrift Supervision ('OTS') based on data
submitted as part of the Company's savings association subsidiary's quarterly
Thrift Financial Reports. The model generates estimates of the change in net
portfolio value ('NPV') over a range of interest rate scenarios. NPV is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts. The NPV ratio of each scenario
is defined as the NPV in that scenario divided by the present value of assets
in the same scenario.
<TABLE>
At December 31, 1996, the Company's savings association subsidiary's NPV
information was as follows (dollars in thousands):
<CAPTION>
Net Portfolio Value NPV as Percent of Present
Change Value of Assets
in Dollar Dollar Percent NPV Basis Point
Rate Amount Change Change Ratio Change
- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
+400 bp 12,498 -5,249 -30% 7.78% -257 bp
+300 bp 14,158 -3,588 -20% 8.65% -170 bp
+200 bp 15,677 -2,069 -12% 9.41% - 93 bp
+100 bp 16,852 - 894 - 5% 9.96% - 38 bp
0 17,746 10.35%
- -100 bp 18,322 575 3% 10.56% 21 bp
- -200 bp 18,584 838 5% 10.60% 25 bp
- -300 bp 18,872 1,125 6% 10.65% 30 bp
- -400 bp 19,529 1,783 10% 10.87% 53 bp
</TABLE>
<TABLE>
-Page 5-
RISK MEASURES: 200 BP RATE SHOCK:
<S> <C>
Pre-shock NPV Ratio 10.35%
Exposure measure: Post-shock NPV ratio 9.41%
Sensitivity measure: Change in NPV ratio - 93 bp
</TABLE>
At December 31, 1996, the changes in NPV in the various interest rate
scenarios were all within the limits approved by the Board of Directors.
The methodology used in the above measurement of interest rate risk has
certain shortcomings due primarily to assumptions utilized in the model.
Actual changes in market interest rates may result in different yield and cost
changes than assumed in the model. In addition, holdings of interest
sensitive assets and liabilities are assumed to remain constant under each
interest rate change scenario which may be different than actual
circumstances. Accordingly, the NPV measurements provide an indication of
interest rate risk exposure at a particular point in time and are not intended
and should be used to forecast the effect of changes in interest rates on the
Company's net interest income.
LIQUIDITY
Primary sources of funds are deposits, FHLB advances and proceeds from
principal and interest payments on loans and mortgage-backed and other
securities. Scheduled maturities of loans and mortgage-backed and other
securities are predictable sources of funds while deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
Funds are invested in one-to-four family residential loans, short-term
consumer loans and mortgage-backed and other securities. 1n 1996, 1995 and
1994, originations of one-to-four family residential mortgages totaled
$36,970,000, $13,171,000 and $21,215,000, respectively, and purchases of
mortgage-backed and other securities totaled $26,686,000, $11,890,000 and
$11,158,000, respectively. In 1996, the net cash used by investing activities
was $20,309,000 and the net cash provided by financing activities was
$22,079,000.
An adequate level of liquidity must be maintained to ensure the availability
of sufficient funds to support loan growth and deposit withdrawals, satisfy
financial commitments and take advantage of investment opportunities. At
December 31, 1996, approved loan commitments totaled $301,000 and unused lines
of credit amounted to $3,544,000. Certificates of deposit scheduled to mature
in 1997 total $63,865,000. Scheduled loan payments and maturities in 1997
amount to $15,446,000 and maturities of mortgage-backed and other securities
total $1,068,000 in 1997. An unknown amount of principal payments on
mortgage-backed securities will also be received in 1997. Principal payments
on mortgage-backed securities in 1996 amounted to $5,625,000.
OTS regulations require savings institutions to maintain a minimum 5%
liquidity ratio measured as the ratio of cash, cash equivalents, short-term
investments and certain long-term investments to deposits and certain short-
term borrowed funds. The Company's savings institution subsidiary had
liquidity ratios of 12.04% and 12.79% at December 31, 1996 and 1995,
respectively.
INFLATION
The Consolidated Financial Statements and Notes thereto included in this
report have been prepared in accordance with GAAP and reflect the results of
operations and financial position measured in historical dollars without
regard for the changes in the relative purchasing power of money over time due
to inflation. Inflation impacts the Company due to the increased cost of
operations and as an inherent factor in the general level of interest rates.
Due to the monetary nature of most of the Company's assets and liabilities,
changes in interest rates have a greater impact on the Company's financial
performance than the general level of inflation. Effective interest rate risk
management can minimize the effects of inflation on the Company's monetary
assets and liabilities. Inflation has not had a significant impact on the
costs of operation or the non-monetary assets of the Company.
RECENT LEGISLATIVE DEVELOPMENTS
DEPOSIT INSURANCE. On September 30, 1996, the Deposit Insurance Funds Act of
1996 (the 'Act') was signed into law by the President. Included in the Act
was a provision to recapitalize the Savings Association Insurance Fund
('SAIF') through a one-time special assessment on SAIF deposits that was paid
in November, 1996. The special assessment, which amounted to $875,000 for the
Company, increased the SAIF reserve ratio to the statutory minimum of 1.25% of
SAIF deposits. The Act also included provisions for partial sharing of
Financing Corporation ('FICO') obligations among SAIF and Bank Insurance Fund
('BIF') members from 1997 through 1999 and pro-rata sharing starting in 2000.
SAIF members will pay approximately 83% of the FICO obligation through 1999.
The assessment rate for SAIF deposits cannot be less than the rate for BIF
deposits for two years. The FDIC cannot set assessment rates that will exceed
the amount needed to maintain the statutory required reserve for SAIF or BIF
members. For the Company, the 1997 assessment rate is expected to be
approximately $0.065 per $100 of deposits compared to $0.26 per $100 of
deposits in 1996. SAIF and BIF will merge to form the Deposit Insurance Fund
in 1999 if certain conditions are met. The Act also directed the Treasury
Department to provide recommendations to Congress in 1997 regarding a common
charter for savings institutions and banks as well as numerous regulatory
relief provisions that are not expected to significantly impact the Company.
CHARTER REFORM. In early 1997, two bills regarding charter reform were
introduced into the 105th Congress. Both bills would require federally
chartered savings institutions, such as the Company's savings institution
subsidiary, to recharter as national banks or state depository institutions by
1998. Institutions that do not voluntarily recharter would automatically
convert to national banks. Both bills provide for merger of SAIF and BIF in
1999 or earlier. Savings institutions would have to divest of activities that
do not conform to national bank powers and would have restrictions on other
activities allowed under the present charter though the bills have different
provisions in these regards. Congressional debate on these bills is expected
to start by March, 1997. Management cannot predict whether any bill with any
of the provisions mentioned will be enacted. As such, no determination on the
effect these provisions could have on the Company is possible.
-Page 6-
IMPACT OF NEW ACCOUNTING PRONOUNCMENTS
ACCOUNTING FOR IMPAIRMENT OF A LOAN. On January 1, 1995, the Company adopted
Statement of Financial Accounting Standards No. 114, 'Accounting by Creditors
for Impairment of a Loan' ('SFAS 114') and its amendment, Statement of
Financial Accounting Standards No. 118, 'Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures' ('SFAS 118'). These
statements require a loan to be classified as impaired if it is probable that
collection of all contractual principal and interest payments will not be
made. A loan valuation allowance must be established for the amount by which
the carrying amount of the impaired loan exceeds the estimated discounted
future cash flows or the fair market value of the collateral for certain
collateral dependent loans. No interest income on impaired loans can be
accrued. The Company recognizes interest income on impaired loans only upon
cash receipt. SFAS 114 and SFAS 118 have not had a significant impact on the
results of operations, financial condition or disclosures contained in the
Company's financial statements.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. Statement of Financial Accounting
Standards No. 122, 'Accounting for Mortgage Servicing Rights' ('SFAS 122') was
adopted as of January 1, 1996. SFAS 122, an amendment of SFAS 65, 'Accounting
for Certain Mortgage Banking Activities', requires the recognition as a
separate asset the rights to service mortgage loans regardless of how the
servicing rights were acquired. The capitalized servicing rights asset must
be evaluated for impairment based on the fair value of the rights with any
impairment recognized in a valuation allowance. At December 31, 1996, the
Company had a servicing rights asset in the amount of $51,000. Actual
capitalized servicing rights in 1996 totaled $58,000 of which $7,000 was
amortized during the year. No impairment of the servicing rights asset was
recognized.
ACCOUNTING FOR STOCK-BASED COMPENSATION. Statement of Financial Accounting
Standards No. 123, 'Accounting for Stock-Based Compensation' ('SFAS 123') will
be adopted in 1997 based on the approval by the Company's shareholders of the
1996 Stock Option Plan ('SOP') and the Management Development and Recognition
Plan and Trust Agreement ('MDRP'). A special meeting of shareholders was held
in February, 1997 to vote on both plans, which will require disclosures under
SFAS 123. SFAS 123 allows entities the choice of accounting for stock-based
compensation plans under Accounting Practices Board Opinion No. 25 ('APB 25')
or SFAS 123. The accounting provisions of APB 25 were followed by all
entities prior to SFAS 123. Entities choosing to follow the accounting
provisions of APB 25 will still be required to make pro-forma disclosure of
net income and earnings per share, including option valuation methods and
assumptions, as if the accounting provisions of SFAS 123 had been adopted.
The Company anticipates following the accounting provisions of APB 25 for the
SOP and the MDRP and providing the pro-forma disclosures required by SFAS 123.
Employee Stock Ownership Plans ('ESOP'), including the Company's ESOP, are
specifically excluded from the scope of SFAS 123.
-Page 7-
Report of Independent Auditors
Board of Directors
Eagle BancGroup, Inc.
We have audited the accompanying consolidated statements of condition of Eagle
BancGroup, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income cash, and cash flows and changes in
stockholders' equity for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Eagle bancGroup,
Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note 2 of the Notes to the Consolidated Financial Statements,
in 1994 the Company changed its method of accounting for certain investments
in debt and equity securities as a result of adopting a new accounting
standard.
/S/ Ernst & Young LLP
Indianapolis, Indiana
January 17, 1997
-Page 8-
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Condition
December 31,
1996 1995
(amounts in thousands)
<S> <C> <C>
ASSETS
Cash on hand and in other institutions 1,487 1,072
Federal funds sold and overnight deposits 5,573 2,828
Investment securities - available for sale(Note 2) 16,438 11,810
Mortgage-backed securities - available for sale(Note 2) 37,445 41,376
Loans receivable, net (Note 3) 106,641 88,786
Real estate owned 652 644
Premises and equipment (Note 4) 2,889 3,112
Other assets 1,541 1,346
Total Assets 172,666 150,974
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 5) 133,995 138,396
FHLB advances (Note 6) 15,300 -
Other liabilities 1,230 1,063
Total Liabilities 150,525 139,459
Commitments and contingencies - -
Stockholders' equity (Notes 8 and 9):
Preferred stock, par value $.01 per share,
100,000 shares authorized, none issued - -
Common stock, par value $.01 per share,
5,000,000 shares authorized, 1,302,705
and no shares issued, respectively 13 -
Paid in capital 12,215 -
Unearned ESOP shares (938) -
Retained earnings - substantially restricted (Note 8) 11,188 11,677
Unrealized losses on investments - net of tax (Note 2) (337) (162)
Total Stockholders' Equity 22,141 11,515
Total Liabilities and Stockholders' Equity 172,666 150,974
See accompanying notes.
</TABLE>
-Page 9-
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Income
For the Year Ended December 31,
1996 1995 1994
(amounts in thousands except per share data)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans 7,681 6,899 5,809
Interest on investment securities
and temporary investments 1,055 804 708
Interest on mtg-backed securities 2,358 2,230 2,078
Total Interest Income 11,094 9,933 8,595
Interest expense:
Interest on deposits:
Passbooks 577 494 474
MMDA and NOW 181 189 238
Certificates of deposit 6,673 6,612 4,542
Total interest on deposits 7,431 7,295 5,254
Interest on borrowed funds 272 81 142
Total Interest Expense 7,703 7,376 5,396
Net Interest Income Before Provision
for Loan Losses 3,391 2,557 3,199
Provision for loan losses 183 100 (32)
Net Interest Income After Provision
for Loan Losses 3,208 2,457 3,231
Non-interest income:
Loan servicing 146 97 106
Gains on loans sold (Note 3) 68 51 26
Gains on securities sold (Note 2) 15 - 6
Other 189 247 123
Total Non-Interest Income 418 395 261
Non-interest expense
Salaries and employee benefits 1,736 1,618 1,514
Net occupancy 544 552 423
Federal deposit insurance
premiums (Note 14) 1,231 335 319
Data processing 249 223 186
Other 613 227 398
Total Non-Interest Expense 4,373 2,955 2,840
Income(Loss) Before Federal Income Taxes (747) (103) 652
Federal income tax (benefit)
expense(Note 7) (258) (30) 222
Net Income(Loss) (489) (73) 430
Earnings per share (Note 1) $(0.38) N/A N/A
See accompanying notes.
</TABLE>
-Page 10-
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Cash Flows
For the Year Ended December 31,
1996 1995 1994
(amounts in thousands)
<S> <C> <C> <C>
Operating Activities
Net (loss)income (489) (73) 430
Adjustment to reconcile net (loss)
income to net cash provided by
operating activities:
Provision for loan losses 183 100 (32)
Provision for depreciation 288 452 396
Deferred income taxes (39) 103 75
Amortization of premiums and discounts
on investment securities 74 29 27
Net gains on sales of investment
securities (15) - (6)
(Purchase)sale of FHLB stock (261) (44) 334
Release of ESOP shares 104 - -
Proceeds from sale of mortgage loans
originated-for-sale 10,776 7,039 2,317
Loans receivable originated-for-sale (9,209) (6,988) (2,291)
Increase in accrued interest receivable (130) (84) (94)
Increase(decrease) in accrued
interest payable 94 (19) 27
Increase in other assets (65) (195) (242)
Increase (decrease)in other liabilities 79 (19) (141)
Net Cash Provided by Operating Activities 1,390 301 800
Investing Activities
Proceeds from sale of investment
securities 10,602 1,035 2,076
Purchases of investment securities (15,019) (1,998) (4,444)
Purchases of mtg-backed securities (11,667) (9,892) (6,714)
Proceeds from sale of mtg-backed
securities 9,749 - 9,927
Principal collected on mtg-backed
securities 5,625 3,457 3,318
Principal collected on loans receivable 34,270 22,456 21,059
Loans receivable originated (53,796) (27,757) (36,739)
Purchases of premises and equipment (65) (91) (1,753)
Net (purchases) sales of real estate (8) 5,620 187
Net Cash Used by Investing Activities (20,309) (7,170) (13,083)
Financing Activities
Change in savings accounts, demand
deposits and NOW accounts 1,520 605 (2,982)
Change in certificate accounts (5,927) 15,397 212
Increase(decrease) in borrowings 15,300 (7,936) 7,936
Proceeds from the sale of capital stock 11,186 - -
Net Cash Provided by Financing Activities 22,079 8,066 5,166
Net increase(decrease) in cash and cash
equivalents 3,160 1,197 (7,117)
Cash and cash equivalents at beginning
of year 3,900 2,703 9,820
Cash and Cash Equivalents at End of Year 7,060 3,900 2,703
See accompanying notes.
</TABLE>
-Page 11-
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statement of Changes in Stockholders' Equity
Unearned
Common Paid-In Retained Unrealized ESOP
Stock Capital Earnings Gain(loss) Shares Total
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1994 - - 11,320 - - 11,320
Net income 430 430
Change in unrealized
loss (2,249) (2,249)
Balance as of
December 31, 1994 - - 11,750 (2,249) - 9,501
Net loss (73) (73)
Change in unrealized
loss 2,087 2,087
Balance as of
December 31, 1995 - - 11,677 (162) 11,515
Sale of capital
stock 13 12,215 12,228
Common stock
acquired by ESOP (1,042) (1,042)
Release of ESOP shares 104 104
Net loss (489) (489)
Change in unrealized
loss (175) (175)
Balance as of
December 31, 1996 13 12,215 11,188 (337) (938) 22,141
See accompanying notes.
</TABLE>
Eagle BancGroup, Inc.
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Organization
Eagle BancGroup, Inc. ('Eagle') was formed in January, 1996 and purchased all
of the stock of First Federal Savings and Loan Association ('First Federal')
with the proceeds of a subscription stock offering completed in June, 1996.
Simultaneous to the stock offering, First Federal converted from a federally-
chartered mutual savings association to a federally-chartered capital stock
savings association. Prior to June, 1996, Eagle had no assets or liabilities.
All financial information prior to 1996 relates to First Federal only.
Eagle issued 1,302,705 shares of common stock following the subscription stock
offering. Expenses related to the offering totaled $799,000 and $1,042,000
was loaned to First Federal to create an Employee Stock Ownership Plan (Note
9). Net proceeds to Eagle were $11,186,000 of which $6,200,000 was paid to
First Federal in exchange for all of the common stock of First Federal.
-Page 12-
Business and Principles of Consolidation
The consolidated financial statements include the accounts of Eagle, its
wholly-owned subsidiary, First Federal and First Federal's wholly-owned
subsidiary, FFS Investment Services, Inc.(collectively, the 'Company'). Eagle
is an unitary savings and loan holding company engaged in the business of
managing its investments and directing, planning and coordinating the business
activities of First Federal. First Federal operates as a traditional thrift
institution in McLean and surrounding counties of Central Illinois. FFS
Investment Services, Inc. sells investment products, including annuities. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents
Cash equivalents include federal funds sold and overnight deposits.
Generally, federal funds are sold for one-day periods.
Investments
Management determines the appropriate classification of debt securities at the
time of purchase. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost. Debt
securities not classified as held-to-maturity are classified as available for
sale and are carried at fair value, with unrealized gains and losses, net of
tax, reported in a separate category of equity. At December 31, 1996 and 1995
all debt securities are classified as available-for-sale.
The carrying value of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity computed using the level-yield method. Such
amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary on available-for-sale
securities are included in other income. The cost of securities sold is based
on the specific identification method.
Stock in the Federal Home Loan Bank of Chicago is stated at cost and the
amount of stock First Federal is required to own is determined by regulation.
Loans Receivable
First Federal has a mortgage lien on all property on which mortgage,
participation or purchased loans are made. Loans secured by deposits are
secured by equal or greater deposit account balances. In general, First
Federal originates all long-term fixed rate mortgage loans for sale in the
secondary market. Other fixed rate loans and all adjustable rate loans are
held for long-term investment unless designated as held for sale at the time
of origination. Loans designated as held for sale are carried at the lower of
cost or market value with changes in the valuation allowance reflected in
income. All loans are sold without recourse.
-Page 13-
Allowance for Loan Losses
The allowance for loan losses is established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses and subsequent recoveries, if any, are
credited to the allowance. In 1995, Statement of Financial Accounting
Standards No. 114, 'Accounting by Creditors for Impairment of a Loan' ('SFAS
114') and Statement of Financial Accounting Standards No. 118, 'Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures' ('SFAS
118'), an amendment to SFAS 114, were adopted. The allowance for loan losses
related to troubled loans identified for evaluation in accordance with SFAS
114 is based on estimated discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. Consumer loans and one-to-four family residential
loans are collectively evaluated for impairment as homogeneous loan groups
which are outside the scope of SFAS 114. Under SFAS 118, no interest income
on loans determined to be impaired is accrued. Interest income on such loans
is recognized only upon cash receipt. SFAS 114 and SFAS 118 have not had a
significant impact on results of operations in 1996 or 1995.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated future losses inherent in the loan portfolio.
Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio including consideration of past loan experience,
current economic conditions, volume, growth and composition of the loan
portfolio and other relevant factors. This evaluation is inherently
subjective as it requires material estimates including the amounts and timing
of future cash flows expected to be received on impaired loans that may be
susceptible to significant change.
Interest on Loans, Mortgage Loan Fees and Discounts
Interest income on loans is computed monthly based upon the principal amount
of the loans outstanding. Allowances are established for uncollected interest
on mortgage loans on which any payments are more than 90 days past due.
Loan origination and commitment fees and certain direct loan origination costs
are deferred and the net amount is amortized as an adjustment to yield over
the contractual life of the related loans for loans originated after December
31, 1987. For loans originated prior to that date, such fees were generally
recognized in income in the year the loan was made.
Real Estate Owned
Real estate owned includes land acquired for investment and properties arising
from loan foreclosure or deed in lieu of foreclosure. All real estate owned
is carried at the lower of cost (the unpaid balance at the date of acquisition
plus foreclosure and other related costs) or fair value, less estimated
selling costs. Costs of improvements made to facilitate sale are capitalized;
costs of holding the property, including depreciation, are charged to expense.
Premises and Equipment
Premises and equipment is stated at cost less accumulated depreciation.
Provisions for depreciation of premises and equipment are computed using
straight-line and accelerated methods over the estimated useful lives of the
related assets.
The Company recognizes impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying amount. Assets to be disposed of are recorded at the lower of their
carrying amount or fair value less cost to sell.
-Page 14-
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Earnings Per Share
Earnings per share are based on 1,302,705 average shares outstanding for 1996.
Earnings per share information for 1995 and 1994 is not applicable as no
shares were issued or outstanding prior to the subscription stock offering in
1996.
Reclassifications
Certain elements of the 1995 and 1994 consolidated financial statements have
been reclassified to conform with the presentation herein.
2. Investments
Statement of Financial Accounting Standards No. 115, 'Accounting for Certain
Investments in Debt and Equity Securities', was adopted as of January 1, 1994
resulting in a $200,000 increase in the carrying value of investment
securities to reflect the net unrealized holding gains on securities
classified as available-for-sale on that date. The securities had previously
been carried at amortized cost. The after tax effect of $133,000 was
recognized as an addition to equity. These additions represent non-cash
adjustments of carrying value. Investments are summarized as follows:
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(amounts in thousands)
December 31, 1996
<S> <C> <C> <C> <C>
Investment securities
U. S. Treasury and
agencies 15,181 4 149 15,036
Stock in Federal Home
Loan Bank of Chicago 955 - - 955
Other debt securities 447 - - 447
Total Investment Securities 16,583 4 149 16,438
Mortgage-backed securities
Collateralized mortgage
obligations 18,125 6 298 17,833
Other mortgage-backed
securities 19,685 77 150 19,612
Total Mortgage-Backed
Securities 37,810 83 448 37,445
Total Investments 54,393 87 597 53,883
</TABLE>
-Page 15-
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(amounts in thousands)
December 31, 1995
<S> <C> <C> <C> <C>
Investment securities
U. S. Treasury and
agencies 10,664 27 57 10,634
Stock in Federal Home
Loan Bank of Chicago 694 0 0 694
Other debt securities 482 0 0 482
Total Investment Securities 11,840 27 57 11,810
Mortgage-backed securities
Collateralized mortgage
obligations 21,305 25 358 20,972
Other mortgage-backed
securities 20,286 182 64 20,404
Total Mortgage-Backed
Securities 41,591 207 422 41,376
Total Investments 53,431 234 479 53,186
</TABLE>
<TABLE>
The amortized cost and market value of investment and mortgage-backed
securities at December 31, 1996, by contractual maturity, are as follows:
Amortized Market
Cost Value
(amounts in thousands)
<S> <C> <C>
Due in one year or less 1,068 1,072
Due after one year through five years 15,827 15,668
Due after five years through ten years 4,204 4,100
Due in more than ten years 33,294 33,043
Total 54,393 53,883
</TABLE>
At December 31, 1996, $36,370,000 par value of mortgage-backed and related
securities were insured or guaranteed by quasi-governmental agencies (e.g.
GNMA, FNMA, FHLMC). $1,116,000 par value of these securities were not insured
or guaranteed by such agencies.
Accrued interest receivable on investment and mortgage-backed securities
totaled $439,000 and $389,000 at December 31, 1996 and 1995, respectively.
Gross realized gains on sales of investments were $49,000, $0 and $59,000 and
gross realized losses on sales of investments were $34,000, $0 and $53,000 in
1996, 1995 and 1994, respectively.
-Page 16-
3. Loans Receivable
<TABLE>
Loans receivable consist of the following at December 31 (in thousands):
1996 1995
<S> <C> <C>
Residential mortgage loans 70,600 55,786
Commercial real estate loans 3,827 4,484
Consumer loans 32,159 28,720
Commercial installment loans 1,145 541
Accrued interest receivable 563 489
Gross Loans 108,294 90,020
Less:
Deferred loan fees 80 36
Reserve for uncollected interest 40 45
Allowance for loan losses 923 907
Undisbursed portion of loan proceeds 610 246
Loans Receivable, net 106,641 88,786
Weighted average interest rate 7.93% 8.02%
</TABLE>
Loans serviced at December 31, 1996, 1995 and 1994 totaled $35,278,000,
$32,913,000 and 30,650,000, respectively. On January 1, 1996, Statement of
Financial Accounting Standards No. 122, 'Accounting for Mortgage Servicing
Rights' ('SFAS 122') was adopted. SFAS 122 requires recognition of the rights
to service loans for others, regardless of how the servicing rights were
acquired, as a separate asset at the time of acquisition. The servicing
rights asset will be amortized over the expected life of the serviced loans.
In addition, SFAS 122 requires that the servicing rights asset be assessed for
impairment based on the fair value of the rights with any impairment
recognized in a valuation allowance. The Company used the discounted cash
flow method to determine the value of servicing rights asset. At December 31,
1996, no impairment of the servicing rights asset was recognized. Retroactive
adoption of SFAS 122 was not allowed. A summary of the 1996 activity in the
servicing rights asset follows (in thousands):
<TABLE>
<S> <C>
Servicing rights on loans sold $58
Amortization of servicing rights 7
Balance at end of year $51
</TABLE>
Loans totaling $10,776,000, $7,039,000 and $2,317,000 were sold resulting in
net gains of $68,000, $51,000 and $26,000 in 1996, 1995 and 1994,
respectively.
Advances from the Federal Home Loan Bank of Chicago are secured by a floating
lien on First Federal's one-to-four family residential mortgage loans (see
note 6).
Lending activities are concentrated within a 50-mile radius of Bloomington,
Illinois. Unused consumer lines of credit totaled $3,544,000 and $2,480,000
at December 31, 1996 and 1995, respectively.
-Page 17-
<TABLE>
Changes in the allowance for loan losses are as follows (in thousands):
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year 907 873 946
Provision for losses 183 100 (32)
Charge-offs (178) (68) (43)
Recoveries 11 2 2
Balance at end of year 923 907 873
</TABLE>
4. Premises and Equipment
<TABLE>
Premises and equipment is summarized as follows at December 31 (in thousands):
1996 1995
<S> <C> <C>
Land 775 775
Buildings 2,906 2,900
Furniture and equipment 2,127 2,069
5,808 5,744
Less allowance for depreciation 2,919 2,632
2,889 3,112
</TABLE>
5. Deposits
<TABLE>
Deposits at December 31 are summarized as follows (in thousands):
1996 1995
Weighted Weighted
Average Average
Interest Rate Amount Interest Rate Amount
<S> <C> <C> <C> <C>
Passbook accounts 3.663% $15,668 3.622% $14,700
NOW accounts 1.941 9,230 2.083 8,678
Certificate accounts
(original term)
91 day 4.433 614 4.386 654
6 month 5.013 8,095 5.286 9,160
9 month 5.088 3,922 5.750 5,603
1 year 5.388 19,537 6.195 22,980
2 year 6.376 13,851 6.181 12,854
2 1/2 year 6.121 18,151 5.943 16,901
3 year 5.700 6,179 5.357 7,800
4 year 6.988 5,370 7.068 5,094
5 year 5.584 3,182 6.053 3,606
6 year 6.679 10,202 6.678 9,840
Jumbo (over
($100,000) 6.180 8,058 6.637 7,764
IRA 6.210 11,911 6.391 12,743
133,970 138,377
Accrued interest 25 19
5.416% $133,995 5.603% $138,396
</TABLE>
-Page 18-
Interest totaling $7,609,000, $7,395,000 and $5,368,000 was paid on deposits
and other borrowings in 1996, 1995 and 1994, respectively. Investments with a
book value of approximately $5,150,000 were pledged as of December 31, 1996 to
secure public deposits and for other purposes as required or permitted by law.
Deposits over $100,000 are not federally insured. Contractual maturities of
certificates of deposit at December 31, 1996 were: 1997- $63,865,000; 1998-
$17,241,000; 1999- $15,215,000; 2000- $10,333,000; 2001- $2,085,000 and after
2001- $333,000.
6. Other Borrowings
FHLB advances are funds borrowed from the Federal Home Loan Bank of Chicago
under various terms and conditions. Open line, variable rate advances are
generally held for short terms. Fixed amount advances can have fixed or
variable rates with short or long term maturities and generally allow
prepayments under certain conditions. At December 31, 1996 all FHLB advances
were fixed amounts. All advances are secured by all stock in the Federal Home
Loan Bank and a blanket floating lien on First Federal's one-to-four family
residential mortgage loans. During 1996 and 1995, First Federal entered into
repurchase agreements under which funds were borrowed in exchange for
investment securities pledged to and held by counterparties. No such
agreements were in effect at any month end in 1996 or 1995, including
December. The average amount of repurchase agreements outstanding was $44,000
and $171,000 and the average rates paid on the repurchase agreements were
5.25% and 6.78% in 1996 and 1995, respectively. A summary of FHLB advances
follows (in thousands):
<TABLE>
1996 1995
<S> <C> <C>
Balance on December 31 15,300 -
Highest month-end balance 19,100 5,000
Average balance during the year 4,342 1,075
Average rate during the year 6.20% 6.49%
Average rate at year-end 5.73% -
</TABLE>
7. Income Taxes
<TABLE>
The provision for federal income taxes for the years ended December 31
consists of the following (in thousands):
1996 1995 1994
<S> <C> <C> <C>
Current (benefit) expense (254) (145) 150
Deferred (benefit) expense (4) 115 72
Total (Benefit) Expense (258) (30) 222
</TABLE>
<TABLE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate for the years ended December 31 follows:
1996 1995 1994
<S> <C> <C> <C>
Statutory rate 34% 34% 34%
Recoveries on sales of real estate owned - (4%) -
Municipal bond interest and other 1% (1%) -
35% 29% 34%
</TABLE>
-Page 19-
<TABLE>
The components of the deferred tax asset (liability) at December 31 are as
follows (in thousands):
1996 1995
<S> <C> <C>
Deferred tax assets:
Provision for holding losses on investment
securities and mortgage-backed securities 172 80
Allowance for loan and real estate losses 314 334
Deferred compensation 71 70
Other 158 114
Gross Deferred Tax Asset 715 598
Deferred tax liabilities:
Depreciation (280) (288)
Other (45) (45)
Gross Deferred Tax Liability (325) (333)
Net Deferred Tax Asset 390 265
</TABLE>
Income tax payments of $0, $10,000 and $280,000 were made in 1996, 1995 and
1994, respectively.
8. Stockholders' Equity
Eagle has authorized the issuance of 100,000 shares of preferred stock with a
par value of $.01 per share. Preferred stock may be issued by the Board of
Directors from time to time on terms set by the Board without further
authorization from the stockholders.
Pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ('FIRREA'), as implemented by a rule promulgated by the Office of Thrift
Supervision ('OTS'), savings institutions must meet three separate minimum
capital-to-assets requirements: (i) a risk based capital requirement of 8% of
risk-weighted assets, (ii) a leverage ratio of 3% core capital to adjusted
tangible assets and (iii) a tangible capital requirement of 1.5% tangible core
capital to tangible assets. The following table summarizes, as of December
31, 1996 and 1995, the capital requirements under FIRREA, the actual capital
and the capital ratios of First Federal (in thousands):
<TABLE>
Capital Actual
Requirements Capital
Percent Amount Percent Amount Excess
<S> <C> <C> <C> <C> <C>
December 31, 1996
Risk-based 8.0% 7,513 18.29% 17,175 9,662
Leverage 3.0% 5,070 9.66% 16,325 11,255
Tangible 1.5% 2,535 9.66% 16,325 13,790
December 31, 1995
Risk-based 8.0% 6,330 15.78% 17,175 10,845
Leverage 3.0 4,534 7.73 16,325 11,791
Tangible 1.5 2,267 7.73 16,325 14,058
</TABLE>
<TABLE>
At December 31, 1996, equity is reconciled to Actual Capital in the above
table as follows (in thousands):
<S> <C>
Equity - per statement of condition 22,141
Equity at parent company (6,145)
Equity at First Federal 15,996
Unrealized investment holding losses at First Federal 329
Lverage and tangible capital 16,325
General loan loss allowance 850
Risk-based capital 17,175
</TABLE>
-Page 20-
The Company qualified under provisions of the Internal Revenue Code which
permitted it to deduct from taxable income a provision for bad debts which was
differs from the provision for such losses charged to income. Accordingly,
retained earnings at December 31, 1996 includes approximately $3,563,000 for
which no provision for federal income taxes has been made. If, in the future,
this portion of retained earnings is used for any purpose other than to absorb
loan losses, federal income taxes may be imposed at the then appicable rates.
First Federal established a liquidation account at the time of conversion from
a mutual savings association to a capital stock savings association. The
account balance was equal to the amount of First Federal's net worth on June
29, 1996. The account will be maintained for the benefit of eligible deposit
account holders who continue to maintain deposit accounts following the
conversion. In the unlikely event of a complete liquidation, each eligible
deposit account holder will be entitled to receive a liquidation distribution
of any assets remaining after payment of all valid creditor's claims,
including the claims of all depositors to the withdrawal values of their
deposit accounts, but before any liquidation distribution may be made with
respect to Eagle's common stock. Eligible deposit account holders have a
subaccount in the liquidation account for each deposit account as of March 31,
1996. The liquidation account balance will gradually decrease as eligible
deposit account holders subaccount balances are reduced or cease to exist.
Dividends cannot be paid from the liquidation account.
The Board of Directors may declare dividends to be paid on Eagle's common
stock the payment of which may depend on dividends paid by First Federal to
Eagle. The amount First Federal can pay in dividends is limited by Office of
Thrift Supervision rules that generally allow for capital distributions in any
calendar year equal to the higher of net income for the calendar year to date
plus an amount that would reduce by one-half the surplus capital ratio at the
beginning of the calendar year or 75% of the net income over the previous four
quarters. As of January 1, 1997, First Federal's allowable capital
distribution amount was approximately $5,600,000.
9. Employee and Director Benefit Plans
Pension Plan - First Federal has a defined benefit pension plan that was
frozen on March 31, 1996 as a result of the creation of the Employee Stock
Ownership Plan (see below). Benefits, which were based on years of service
and compensation, ceased to accrue January 1, 1996. Annual contributions are
made to the plan as required by actuarial calculation and as allowed as a
deduction for federal income tax purposes. Contributions are intended to
provide for benefits attributed to service through December 31, 1995. The
following table sets forth the plan's funded status and amounts recognized in
the Company's statement of financial condition at December 31 (in thousands):
<TABLE>
1996 1995
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $511,000 in 1996 and $393,000 in 1995 546 402
Projected benefit obligation for service rendered 562 657
Plan assets at fair value 473 447
Plan assets in excess of (less than) projected
benefit obligation (89) (210)
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions 64 189
Prior service cost, subsequent to the curtailment,
not yet recognized in net periodic pension cost 4 26
Unrecognized net asset at December 31 (19) (20)
Prepaid (Accrued) Pension Cost (40) (15)
</TABLE>
-Page 21-
<TABLE>
Net pension expense for the years ended December 31 included the following
components (in thousands):
1996 1995 1994
<S> <C> <C> <C>
Service costs-benefits earned during the year 19 64 48
Interest cost on projected benefit obligation 42 55 54
Actual return on plan assets (54) (61) 17
Net amortization and deferral 26 28 (50)
Net Periodic Pension Expense 33 86 69
</TABLE>
401(k) Plan - First Federal maintains a 401(k) plan that allows eligible
employees to establish a tax-favored savings plan. Matching contributions
were made by First Federal up to a maximum of $1,000 per employee annually to
all eligible employees on the last day of 1996, 1995 and 1994. Future
contributions may be made by First Federal at the discretion of the Board of
Directors. Eligible employees fully vest in their share of employer
contributions after six years of qualified service. Matching expense for
1996, 1995 and 1994 totaled $22,000, $24,000 and $22,000, respectively.
Employee Stock Ownership Plan ('ESOP') - In conjunction with Eagle's
subscription stock offering, an ESOP was created and 104,216 shares of Eagle's
stock were purchased for future allocation to employees. The purchase was
funded with a loan from Eagle. Shares will be allocated to all eligible
employees annually on the last day of the fiscal year based on a pro rata
share of total compensation for the year. Benefits will vest over a six year
schedule and in full upon completion of six years of qualified service
commencing with 1996.
First Federal will make minimum contributions to the ESOP sufficient to meet
annual principal and interest obligations on the loan from Eagle.
Contributions in excess of this amount may be made at First Federal's
discretion. Cash dividends received with respect to unallocated shares, if
any, will be applied to principal and interest due on the loan.
On December 31, 1996, 10,422 shares were released for allocation to eligible
participants in the ESOP and 93,794 shares remain unallocated. First Federal
contributed $147,000 to the ESOP with this amount accounted for as
compensation and employee benefits expense. Of this amount, $43,000 was
recognized as interest income by the Company, which resulted in net expense on
a consolidated basis of $104,000 for 1996.
Management Development and Recognition Plan and Stock Option Plan - A special
meeting of stockholders scheduled for February, 1997 will be held for the
purpose of voting on a Management Development and Recognition Plan ('MDRP')
and a Stock Option Plan ('SOP'). If approved, the MDRP will serve as a means
of providing existing directors and selected officers and employees of Eagle
and First Federal with a proprietary interest in the Company by awarding
shares of stock to the participants. Under the plan, shares awarded would
vest over a five year period. Annual compensation and employee benefits
expense equal to the fair market value of the shares that vest at the end of
each fiscal year would be recognized.
The SOP, if approved, would promote stock ownership by directors and selected
officers and employees of Eagle and First Federal by granting stock options to
participants. Options granted will vest and become exercisable over a five
year period. Options granted are not expected to result in any compensation
and employee benefits expense for the Company either at time of the grant or
at the time of exercise of the option.
-Page 22-
10. Loans to Related Parties
Certain directors and officers of the Company were loan customers in the
ordinary course of business during 1996 and 1995. Such loans were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
parties. A summary of the activity in such loans follows (in thousands):
<TABLE>
1996 1995
<S> <C> <C>
Balance at beginning of year 617 654
New loans made 336 126
Less: Repayments 156 163
Balance at end of year 797 617
</TABLE>
11. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, 'Disclosures About Fair
Value of Financial Instruments' ('SFAS 107'), requires disclosure of fair
value information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate the value. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for cash and short-term investments approximate their fair
values.
Investment securities (including mortgage-backed securities): Fair
values for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Loans receivable: For variable rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on
carrying values. The fair values for all other loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. The carrying amount of accrued interest approximates its fair
value.
-Page 23-
Deposit liabilities: The fair values disclosed for demand deposits,
including interest-bearing and non-interest bearing accounts, passbook
savings and certain types of money market accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e. their
carrying amounts). Fair values for fixed-rate certificates of deposit
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Off-balance-sheet instruments: Fair values of off-balance-sheet
instruments (loan commitments) are based on quoted rates and fees
currently charged to enter into similar agreements, taking into account
the counterparties' credit standing. The terms of loan commitments
outstanding at December 31, 1996 are comparable to terms available for
new commitments at that date.
<TABLE>
The estimated fair values of the Company's financial instruments at December
31 are as follows (in thousands):
1996
Carrying Fair
Amount Value
<S> <C> <C>
Assets
Cash on hand and in other institutions 1,487 1,487
Federal funds sold and overnight deposits 5,573 5,573
Investment securities 53,883 53,883
Net loans 106,641 106,487
Liabilities
Deposits 133,995 134,456
Borrowed funds 15,300 15,297
</TABLE>
<TABLE>
1995
Carrying Fair
Amount Value
<S> <C> <C>
Assets
Cash on hand and in other institutions 1,072 1,072
Federal funds sold and overnight deposits 2,828 2,828
Investment securities 53,186 53,186
Net loans 88,786 89,021
Liabilities
Deposits 138,396 141,001
Borrowed funds - -
</TABLE>
-Page 24-
12. Quarterly Financial Data (Unaudited)
<TABLE>
Summarized quarterly financial data for 1996 and 1995 follows:
1996
First Second Third Fourth
Quarter Quarter Quarter Quarter
(in thousands except per share data)
<S> <C> <C> <C> <C>
Operating Summary
Interest income 2,598 2,664 2,820 3,012
Interest expense 1,902 1,916 1,881 2,004
Net interest income 696 748 939 1,008
Provision for loan losses 15 20 103 45
Net interest income after
provision for loan losses 681 728 836 963
Non-interest income 109 75 69 165
Non-interest expense 839 827 1,772 935
Income before income tax (49) (24) (867) 193
Income tax (benefit) expense (15) ( 8) (277) 42
Net income (loss) (34) (16) (590) 151
Per Share Data
Net income (loss) N/A (.01) (.45) .12
Book value N/A 17.15 16.76 17.00
Selected Balance Sheet Averages
Assets 151,136 155,718 160,432 170,168
Investment securities 56,153 56,513 56,610 58,168
Loans 89,292 93,690 100,375 106,035
Interest bearing deposits 138,200 138,158 133,834 132,356
Borrowed funds - 1,428 2,224 13,812
Stockholders' equity (Note 1) 11,434 14,432 21,219 21,448
</TABLE>
-Page 25-
<TABLE>
1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
(in thousands except per share data)
<S> <C> <C> <C> <C>
Operating Summary
Interest income 2,340 2,456 2,527 2,610
Interest expense 1,638 1,840 1,951 1,947
Net interest income 702 616 576 663
Provision for loan losses 15 15 15 55
Net interest income after
provision for loan losses 687 601 561 608
Non-interest income 96 123 92 84
Non-interest expense 688 662 874 731
Net income before tax 95 62 (221) (39)
Income tax (benefit) expense 30 20 (68) (12)
Net income (loss) 65 42 (153) (27)
Per Share Data:
Net income (loss) N/A N/A N/A N/A
Book value N/A N/A N/A N/A
Selected Balance Sheet Averages
Assets 144,358 150,369 152,828 150,513
Investment securities 45,817 50,167 52,063 53,696
Loans 85,670 87,916 88,093 89,405
Interest bearing deposits 129,886 138,737 138,289 137,997
Borrowed funds 4,649 27 117 240
Equity 9,700 10,774 11,477 11,125
</TABLE>
-Page 26-
13. Parent Company Information
<TABLE>
Condensed financial information for Eagle BancGroup, Inc (parent company only)
follows (in thousands):
December 31, 1996
Condensed Balance Sheet
<S> <C>
Assets
Cash on deposit with bank subsidiary 1,074
Investment securities available for
sale at market value, cost $4,060 4,048
Investment in subsidiary 15,995
First Federal ESOP loan 1,085
Total Assets 22,202
Liabilities and Stockholders' Equity
Liabilities 61
Stockholders' Equity 22,141
Total Liabilities and Stockholders' Equity 22,202
</TABLE>
<TABLE>
Condensed Statement of Income
Year Ended
December 31, 1996
<S> <C>
Interest income on investments 154
Interest income on ESOP loan 43
Total Interest Income 197
Non-interest income 9
Non-interest expense 15
Income Before Income Tax 191
Income tax expense 65
Income Before Equity in Undistributed
Net Income of Subsidiary 126
Equity in undistributed net income (loss)
of subsidiary (615)
Net Loss (489)
</TABLE>
-Page 27-
<TABLE>
Condensed Statement of Cash Flows
Year Ended
December 31, 1996
<S> <C>
Operating Activities
Net loss (489)
Adjustments to reconcile net income to net
cash provided by operating activities
Undistributed earnings of subsidiary 615
Increase in accrued interest receivable (105)
Increase in other liabilities 61
Net Cash Provided by Operating Activities 82
Investing Activities
Purchases of available for sale securities (6,030)
Proceeds from sale of available for sale
securities 2,036
Loan to ESOP for stock purchase (1,042)
Net Cash Used by Investing Activities (5,036)
Financing Activities
Proceeds from sale of common stock 12,228
Purchase of First Federal common stock (6,200)
Net Cash Provided by Financing Activities 6,028
Increase in cash and cash equivalents 1,074
Cash and cash equivalents at beginning of period -
Cash and Cash Equivalents at End of Year Period 1,074
</TABLE>
14. SAIF Recapitalization
The Deposit Insurance Funds Act of 1996 (the 'Act')
was signed into law on September 30, 1996. The Act included a provision to
bring the Savings Association Insurance Fund ('SAIF') reserve ratio to the
statutory minimum of 1.25% of insured deposits through a one-time special
assessment on SAIF members. In November, 1996, savings institutions paid an
assessment of $0.657 per $100 of deposits as of March 31, 1995. First
Federal's special assessment amounted to $875,000. Net of tax, 1996 earnings
were reduced $600,000. Starting in 1997, deposit insurance premium rates will
be lower than in previous years as only the amount necessary to maintain the
statutory minimum SAIF reserve ratio will be paid. SAIF members will continue
to pay additional premiums to service the Financing Corporation debt, though
the portion paid by SAIF members will decrease in three years.
-Page 28-
OTHER CORPORATE INFORMATION
Directors of Eagle BancGroup, Inc.
Gerald A. Bradley, Chairman of the Board, Bloomington Tent and Awning Copmany,
Bloomington, Illinois
Robert P. Dole, Retired President, National Union Electric Coporation,
Normal, Illnois
Louis F. Ulbrich, Attorney-at-Law, retired, Bloomington, Illinois
William J. Hanfland, Assistant Treasurer, Illinois Agricultural Association,
Bloomington, Illinois
Steven J. Wannemacher, Executive Vice President, Heritage Enterprises, Inc.,
Bloomington, Illinois
Donald L. Fernandes, President and Chief Executive Officer, Eagle BancGroup,
Inc., Bloomington, Illinois
Executive Officers - Eagle BancGroup, Inc.
Donald L. Fernandes, President and Chief Executive officer
Louis F. Ulbrich, Secretary
Senior Officers - First Federal Savings
Donald L. Fernandes, President and Chief Executive Officer
Gary Richardson, Vice President - Lending
Larry C. McClellan, Vice President - Operations
Laurel Beth Donovan, Vice President - Retail Banking Services
Corporate Headquarters
Eagle BancGroup, Inc., 301 Fairway Drive, P. O. Box 429, Bloomington, IL 61701
Telephone (309) 663-6345 Facsimile (309) 663-8763
Corporate Attorneys
Schiff Hardin & Waite, 7200 Sears Tower, Chicago, IL 60606
Independent Auditors
Ernst & Young LLP, One Indiana Square, Indianapolis, IN 46204
Transfer Agent and Registrar
Registrar and Transfer Company, 10 Commerce Drive, Cranford, NJ 07016
(908) 272-8511
Annual Meeting
The annual meeting of stockholders of Eagle BancGroup, Inc. will be held at
2:00 p.m. (CDT) on Wednesday, April 16, 1997 at The Best Western Eastland
Suites Conference Center, Bloomington, Illinois.
Form 10-K Report
Single copies of Eagle BancGroup, Inc.'s 1996 Report on Form 10-K, as filed
withthe Securities and Exchange Commission, are available at no charge.
Contact Lori Campbell, Assistant Secretary, Eagle BancGroup, Inc., 301 Fairway
Drive, Bloomington, IL 61701 or phone (309) 663-6345.
Common Stock - Market Information
The Company's common stock trades on The Nasdaq Stock Market under the symbol
EGLB. At December 31, 1996, there were 1,302,705 shares of the Company's
common stock issued and outstanding and there were approximately 450 holders
of record and beneficial holders.
<TABLE>
The high and low sales price of the Company's common stock for the quarters
ended September 31 and December 31, 1996, as provided by Nasdaq, are as
follows:
High Low
<S> <C> <C>
Quarter ended:
September 30, 1996 13 10 1/4
December 31, 1996 15 12 13/16
</TABLE>
The Company has not paid any dividends. For information regarding resrictions
on dividend payments see Note 8 of the Notes to Consolidated Financial
Statements.
-Page 29 (inside back cover)-
