UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1997
Commission File Number: 000-20739
EAGLE BANCGROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
37-1353957
(IRS Employer Identification No.)
301 Fairway Drive, Bloomington, IL 61701
(309) 663-6345
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No __
As of July 31, 1997, there were 1,220,205 shares of the Registrant's
Common Stock, par value $.01 per share, outstanding.
<PAGE>
PART I-FINANCIAL INFORMATION
Item. Financial Statements
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Condition
(amounts in thousands)
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash on hand and in other institutions 1,254 1,487
Fed funds sold and overnight deposits 2,940 5,573
Investment securities 17,208 16,438
Mortgage-backed securities 27,604 37,445
Loans receivable, net 120,208 106,641
Real estate owned 652 652
Premises and equipment 2,870 2,889
Other assets 1,574 1,541
Total Assets 174,310 172,666
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits 131,382 133,995
FHLB advances 21,050 15,300
Other liabilities 1,216 1,230
Total Liabilities 153,648 150,525
Capital stock 13 13
Paid in capital 12,244 12,215
Retained earnings 8,796 10,250
Unrealized loss on investments-net of tax (391) (337)
Total Stockholders' Equity 20,662 22,141
Total Liabilities and
Stockholders' Equity 174,310 172,666
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Income
(amounts in thousands except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996,
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans 2,392 1,833 4,556 3,593
Interest on investment securities
and temporary investments 281 238 555 460
Interest on mortgage-backed
securities 467 593 1,003 1,209
Total Interest Income 3,140 2,664 6,114 5,262
Interest expense:
Interest on deposits:
Passbook 148 154 295 291
MMDA and NOW 47 50 89 96
Certificates of deposit 1,566 1,701 3,144 3,420
Interest on borrowings 279 11 475 11
Total Interest Expense 2,040 1,916 4,003 3,818
Net Interest Income 1,100 748 2,111 1,444
Provision for loan losses 60 20 120 35
Net Interest Income After Provision
for Loan Losses 1,040 728 1,991 1,409
Non-interest income:
Gains on loans sold 14 2 31 20
Other 147 73 229 164
Total Non-Interest Income 161 75 260 184
Non-interest expense:
Salaries and employee benefits 513 394 992 771
Net occupancy expense 137 132 270 270
Federal deposit insurance premium 22 89 26 178
Data processing expense 72 58 142 123
Other 200 154 373 324
Total Non-Interest Expense 944 827 1,803 1,666
Income(Loss) Before Fed Income Tax 257 (24) 448 (73)
Federal income tax expense (benefit) 87 (8) 152 (23)
Net Income (Loss) 170 (16) 296 (50)
Per Share Data:
Earnings Per Share .14 N/A .24 N/A
Dividends Per Share .00 N/A .00 N/A
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Eagle BancGroup, Inc.
Consolidated Statements of Cash Flows
(amounts in thousands)
For the Six Months Ended June 30,
1997 1996
<S> <C> <C>
Operating Activities:
Net income (loss) 296 (50)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Provision for loan loss 120 35
Provision for depreciation 141 146
Amortization of premiums and discounts
on investments 17 45
Net (gain) loss on sale of securities (62) 6
Purchase of FHLB stock (148) (35)
Proceeds from sale of mortgage loans
originated-for-sale 2,731 3,980
Loans receivable originated-for-sale (2,718) (2,517)
Increase in accrued interest receivable (19) (97)
Increase in accrued interest payable 3 12
Compensation expense related to
incentive plans 126 -
Increase in other assets (5) (68)
(Decrease) increase in other liabilities (22) 374
Net Cash Provided by Operating Activities 460 1,831
Investing Activities:
Proceeds from sale of investment securities 2,049 3,026
Purchases of investment securities (2,543) (4,984)
Purchases of mortgage-backed securities (1,916) (3,854)
Proceeds from sale of mortgage-backed
securities 9,674 3,567
Principal collected on mortgage-backed
securities 1,850 2,720
Principal collected on loans receivable 21,496 17,127
Loans receivable originated (35,108) (24,872)
Purchases of premises and equipment (122) (28)
Net purchases of real estate owned - (9)
Net Cash Used by Investing Activities (4,620) (7,307)
Financing Activities:
Net change in savings, demand and NOW accounts (64) 598
Net change in certificate accounts (2,544) (2,268)
Net change in short-term borrowings 5,750 2,000
Purchase of treasury stock (1,008) -
Purchase of MDRP shares (840) -
Proceeds from sale of capital stock - 11,335
Net Cash Provided by Financing Activities 1,294 11,665
Net (decrease) increase in cash and cash
equivalents (2,866) 6,189
Cash and cash equivalents at beginning of period 7,060 3,900
Cash and Cash Equivalents at End of Period 4,194 10,089
See accompanying notes.
</TABLE>
<PAGE>
Eagle BancGroup, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and therefore do not include all information and disclosures
required by generally accepted accounting principles for complete financial
statements. All adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the periods reported,
consisting only of normal recurring adjustments, have been included in the
accompanying consolidated financial statements. Operating results for the six
months ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
2. Conversion
In June, 1996, First Federal Savings and Loan ('First Federal') converted from
a federally-chartered mutual savings association to federally-chartered
capital stock savings association and issued all of its common stock to Eagle
BancGroup, Inc. (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 the
stock of First Federal, now a wholly-owned subsidiary of the Company.
3. Earnings Per Share and Dividends
There were 1,141,189 and 1,105,395 average shares outstanding for the six and
three months ended June 30, 1997, respectively. Average shares outstanding
includes ESOP and incentive plan shares to the extent such shares have been
earned. At June 30, 1997, there were 1,237,705 actual shares outstanding.
For 1997 earnings per share calculations, 84,671 shares were added to the
average share amounts to reflect the shares that could be issued if all
options awarded to date under the Company's 1996 Stock Option Plan, as
approved by stockholders in February, 1997, were exercised. Per share amounts
for the three and six months ended June 30, 1996 are not meaningful since no
shares were issued or outstanding prior to completion of the Company's
subscription stock offering in June, 1996.
In February, 1997, the Financial Accounting Standards Board issued Statement
No. 128, 'Earnings Per Share', which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share, which will be referred to
as 'Basic Earnings Per Share', for the three and six months ended June 30,
1997 of $.01 and $.02 per share, respectively. The impact of Statement 128
on the calculation of fully diluted earnings per share for these periods is
not expected to be material.
The Company has not yet paid any dividends.
<PAGE>
Eagle BancGroup, Inc.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
GENERAL: In the three months ended June 30, 1997, Eagle BancGroup, Inc. (the
'Company') had net income of $170,000, or $.14 per share, compared to a net
loss of $16,000 in the same period in 1996. In the six months ended June 30,
1997, the Company had net income of $296,000, or $.24 per share, compared to a
net loss of $50,000 in the first half of 1996. Per share figures for the 1996
periods are not meaningful since the Company did not issue stock until June,
1996. Net income increased in 1997 from 1996 due to improvement in the net
interest margin and the interest rate spread.
NET INTEREST INCOME: In the second quarter, net interest income increased to
$1,100,000 in 1997 from $748,000 in 1996 while in the first half, net interest
income increased to $2,111,000 in 1997 from $1,444,000 in 1996. Interest
income was $3,140,000 and $6,114,000 in the second quarter and first half of
1997, respectively, compared to $2,664,000 and $5,262,000 in the same periods
in 1996. Interest expense in the second quarter was $2,040,000 in 1997
compared to $1,916,000 in 1996 and was $4,003,000 in the first half of 1997
compared to $3,818,000 in the same period in 1996. Interest income increased
in 1997 from 1996 due to both higher average interest earning assets and
higher yields on interest earning assets in 1997 than 1996. The increase in
interest expense in 1997 from 1996 was due to higher average interest bearing
liabilities partially offset by the lower cost of certificates of deposit in
1997 than 1996.
Average interest earning assets increased due to investment of the proceeds of
the Company's subscription offering and the use of Federal Home Loan Bank
('FHLB') advances to fund loan originations. The stock offering proceeds were
originally invested in federal agency and mortgage-backed securities but some
of the securities were sold in 1997 to provide additional funds for loan
originations. Average interest earning assets for the first half of 1997 were
$165,181,000 compared to $147,824,000 in the same period in 1996. Average
loans increased to $113,693,000 in the first half of 1997 from $91,491,000 in
the same period in 1996. The yield on average interest earning assets
increased to 7.46% for the first half of 1997 from 7.16% for the same period
in 1996 due to increased yields on all interest earning assets and the
increased percentage of loans, which earn higher yields than other earning
assets, to total interest earning assets in 1997 from 1996. The yield on
average loans increased to 8.08% in the first half of 1997 from 7.90% in the
same period in 1996. The increase in loans was primarily in residential real
estate loans.
In the second quarter, average interest earning assets increased to
$166,370,000 in 1997 from $150,203,000 in 1996. The yield on average interest
earning assets increased to 7.57% in the second quarter of 1997 from 7.14% in
the same period in 1996. The yield on average loans increased to 8.17% in the
second quarter of 1997 from 7.87% in the same period of 1996 and average loans
increased to $117,431,000 in the second quarter of 1997 from $93,690,000 in
the second quarter of 1996.
Average interest bearing liabilities increased to $148,008,000 in the first
half of 1997 from $138,893,000 in the same period in 1996. Average deposits
decreased to $131,844,000 from $138,179,000 and average borrowed funds, all
FHLB advances, increased to $16,164,000 from $714,000 comparing the first half
of 1997 to the same period in 1996. The decline in deposits related to
certificates of deposit, the average balance of which decreased to
$107,337,000 in the first half of 1997 from $114,300,000 in the same period in
1996. The cost of average interest bearing liabilities decreased to 5.45% for
the first half of 1997 from 5.53% for the same period in 1996 due to a
decrease in the cost of average deposits which resulted from the decline in
certificates of deposit. The cost of average deposits decreased to 5.40% from
5.54% comparing the first half of 1997 to the first half of 1996. The cost of
average borrowed funds was 5.93% in the first half of 1997 compared to 5.50%
in the same period in 1996.
Average interest bearing liabilities increased to $149,627,000 in the second
quarter of 1997 from $139,586,000 in the second quarter of 1996. In the
second quarter, average deposits decreased to $131,221,000 in 1997 from
$138,158,000 and average borrowed funds increased to $18,406,000 in 1997 from
$1,428,000 in 1996. The cost of average interest bearing liabilities
decreased to 5.47% in the second quarter of 1997 from 5.52% in the same period
in 1996. In the second quarter, the cost of average deposits decreased to
5.38% in 1997 from 5.55% in 1996 and the cost of average borrowed funds
increased to 6.08% in 1997 from 5.50% in 1996.
The net interest margin, net interest income divided by average interest
earning assets, increased to 2.58% for the first half of 1997 from 1.97% for
the first half of 1996. The interest rate spread, the difference between the
yield on average interest earning assets and the cost of average interest
bearing liabilities, increased to 2.01% in the first half of 1997 from 1.63%
in the same period in 1996. In the second quarter, the net interest margin
increased to 2.65% in 1997 from 2.01% in 1996 and the interest rate spread
increased to 2.10% in 1997 from 1.62% in 1996. The 1997 increases in both
ratios were due to the increase in the amount and yield on interest earning
assets and the increased amount of loans as percentage of earning assets which
resulted in the increase in the yield on average interest earning assets. In
addition, by changing the funding mix to include a higher amount of borrowed
funds, the cost of average interest bearing liabilities was reduced which
further increased the net interest margin and interest rate spread.
At June 30, 1997, all loans contractually past due 90 days or more were
classified as non-accrual. Interest income is recognized only upon cash
receipt and no interest income is accrued on such loans. In the first six
months of 1997, cash interest payments of $10,000 were included in interest
income. Additional interest income of $10,000 would have accrued had the
loans not been 90 days or more past due.
PROVISION FOR LOAN LOSS: In the first six months of 1997, the provision for
loan loss was $120,000 compared to $35,000 in the same period in 1996. In the
second quarter, the provision for loan loss was $60,000 in 1997 compared to
$20,000 in 1996. The provision is determined as the amount necessary to
maintain the allowance for loan losses at a level deemed adequate to absorb
estimated future losses inherent in the loan portfolio. At June 30, 1997, the
allowance for loan losses was $924,000, or .76% of total loans, compared to
$923,000, or .86% of total loans, at December 31, 1996. Non-performing loans,
consisting entirely of non-accrual loans, were $282,000, or .23% of total
loans, at June 30, 1997. In the first six months of 1997, loans totaling
$125,000 were charged against the allowance for loan losses while $6,000 was
added to the allowance for loan losses due to recoveries of loans previously
charged off.
NON-INTEREST INCOME: In the first six months of 1997, non-interest income
increased to $260,000 from $184,000 in the same period in 1996. Net gains on
securities sold totaled $62,000 in the first half of 1997 compared to net
losses of $6,000 in the first six months of 1996. In May, 1997, over
$8,000,000 of securities were sold for gains of $58,000 with the proceeds used
to fund loan originations. Gains on loans sold in the first half of 1997
were $31,000 compared to $20,000 in the same period in 1996. In the second
quarter of 1997, non-interest income was $161,000 compared to $75,000 in the
same period in 1996. Gains on securities sold were $58,000 in the second
quarter of 1997 compared to a $1,000 loss on securities sold in the same
period in 1996. Gains on loans sold in the second quarter were $14,000 in
1997 compared to $2,000 in 1996. Loan servicing income was $34,000 in the
second quarter of 1997 compared to $21,000 in the same period in 1996 due
primarily to servicing rights on loans sold recognized per SFAS No. 122,
'Accounting for Mortgage Servicing Rights.' The SFAS 122 servicing rights
adjustment was $10,000 in the second quarter of 1997 compared to no net
adjustment in the same period in 1996.
NON-INTEREST EXPENSE: Non-interest expense was $1,803,000 in the first six
months of 1997 compared to $1,666,000 in the same period in 1996. Salaries
and employee benefits increased to $992,000 in the first half of 1997 from
$771,000 in the same period in 1996 due to expenses related to employee
benefit plans implemented since the subscription stock offering, staff
increases and normal increases in employee costs. Professional fees increased
to $136,000 in the first half of 1997 from $55,000 in the same period in 1996
due primarily to corporate and shareholder meeting expenses not previously
incurred by the Company. Data processing expense increased to $142,000 in the
first half of 1997 from $123,000 in the first half of 1996 due to higher
volumes processed and expenses related to an upcoming data conversion.
Offsetting the expense increases was FDIC premium expense which decreased to
$26,000 in the first half of 1997 from $178,000 in the first half of 1996 due
to the premium rate reduction following the SAIF recapitalization special
assessment paid in 1996. As a percentage of average assets, non-interest
expense was 2.10% for the first half of 1997 compared to 2.17% for the first
half of 1996.
In the second quarter, non-interest expense increased to $944,000 in 1997 from
$827,000 in 1996. Salaries and employee benefits increased to $513,000 in the
second quarter of 1997 from $394,000 in the same period in 1996.
Professional fees increased to $82,000 in the second quarter of 1997 from
$26,000 in the second quarter of 1996 and data processing expense increased to
$72,000 in the second quarter of 1997 from $58,000 in the same period in
1996. FDIC premium expense decreased to $22,000 in the second quarter of 1997
from $89,000 in the second quarter of 1996. The differences in expense
amounts in the second quarter were due to the same factors noted above.
INCOME TAX EXPENSE: The provision for income taxes was $152,000 in the first
half of 1997 compared to a benefit for income taxes of $23,000 in the first
half of 1996. In the second quarter, the provision for income taxes was
$87,000 in 1997 compared to a benefit for income taxes of $8,000 in 1996. In
both periods, the increase in net income before tax resulted in the increase
in the provision for income taxes. The effective tax rate was 34% for 1997
compared to an effective benefit rate of 35% for 1996.
FINANCIAL CONDITION
Total assets at June 30, 1997 were $174,310,000 compared to $172,666,000 at
December 31, 1996. Net loans receivable increased to $120,208,000 at June 30,
1997 from $106,641,000 at December 31, 1996 Loan originations and
participations totaled $37,800,000 in the first six months of 1997.
Investment and mortgage-backed securities decreased to $44,812,000 at June 30,
1997 from $53,883,000 at December 31, 1996 due primarily to securities sold in
1997. Proceeds received were used to fund loan originations. Deposits
decreased to $131,382,000 at June 30, 1997 from $133,995,000 at December 31,
1996. FHLB advances increased to $21,050,000 at June 30, 1997 from
$15,300,000 at December 31, 1996 with the additional amount used to fund loan
originations.
Stockholders' equity decreased to $20,662,000, or 11.9% of total assets, at
June 30, 1997 from $22,141,000, or 12.8% of total assets, at December 31,
1996 primarily due to the purchase of treasury stock and the purchase of stock
for the Management Development and Incentive Plan. Book value per share was
$16.69 at June 30, 1997 compared to $17.00 at December 31, 1996.
Savings institutions are required to maintain minimum capital levels as
measured by three ratios: Risk-based capital to risk weighted assets ratio of
8.00%; Core capital to tangible assets ratio of 3.00%; and Tangible core
capital to adjusted tangible assets ratio of 1.5%. At June 30, 1997, the
Company's savings institution had ratios of 17.59%, 9.69% and 9.69%,
respectively. At December 31, 1996, the ratios were 18.29%, 9.66% and 9.66%,
respectively.
Savings institutions are also required 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 borrowed funds. The
Company's savings institution subsidiary had a liquidity ratio of 11.12% and
12.04% at June 30, 1997 and December 31, 1997, respectively.
At June 30, 1997, funds committed for loan originations and loans in process
totaled $3,752,000 and unused lines of credit totaled $3,480,000. Funds to
meet these commitments are available from scheduled principal and interest
payments on loans, mortgage-backed and investment securities, new deposits and
borrowed funds. Funds are invested primarily in residential and commercial
mortgage loans, indirect automobile loans and mortgage-backed securities and
are also available for deposit interest payments, maturities and withdrawals.
Eagle BancGroup, Inc.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its annual meeting on April 16, 1997.
(b) The following directors were elected to a three-year (expiring in 2000)
term:
Gerald A. Bradley
William J. Hanfland
Directors who term in office continued after the meeting are listed
below:
Term Expires in 1998:
Donald L. Fernandes
Steven J. Wannemacher
Term Expires in 1999:
Robert P. Dole
Louis F. Ulbrich
(c) The voting results of the director elections were as follows:
Gerald A Bradley
Votes FOR: 913,014 (99.1% of votes cast)
Votes AGAINST: 8,122 (.9%)
William J. Hanfland
Votes FOR: 921,036 (100%)
Votes AGAINST: 0
At the meeting, 921,036 shares, representing 72.1% of total shares
outstanding, were represented in person or in proxy.
No other matters were submitted to a vote of shareholders.
(d) not applicable
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
(27) - Financial Data Schedule
Eagle BancGroup, Inc. did not file any reports on Form 8-K during the three
months ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EAGLE BANCGROUP, INC.
/s/ Gerald A. Bradley
---------------------
DATE: August 5, 1997 GERALD A. BRADLEY
Chairman of the Board
/s/ Donald L. Fernandes
-----------------------
DATE: August 5, 1997 DONALD L. FERNANDES
President and Chief
Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1254
<INT-BEARING-DEPOSITS> 1540
<FED-FUNDS-SOLD> 1400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44812
<INVESTMENTS-CARRYING> 44812
<INVESTMENTS-MARKET> 44812
<LOANS> 121132
<ALLOWANCE> 924
<TOTAL-ASSETS> 174310
<DEPOSITS> 131382
<SHORT-TERM> 16050
<LIABILITIES-OTHER> 1216
<LONG-TERM> 5000
0
0
<COMMON> 13
<OTHER-SE> 20649
<TOTAL-LIABILITIES-AND-EQUITY> 174310
<INTEREST-LOAN> 2392
<INTEREST-INVEST> 732
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<INTEREST-TOTAL> 3140
<INTEREST-DEPOSIT> 1761
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<INCOME-PRETAX> 257
<INCOME-PRE-EXTRAORDINARY> 257
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<NET-INCOME> 170
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
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</TABLE>
