UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number 333-42083
EAGLE BANCORP, INC
(Exact name of registrant as specified in its charter)
Maryland 52-2061461
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8101 Glenbrook Road, Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
(301) 986-9288
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 Exchange
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
As of September 30, 1998, registrant had 1,650,000 shares of Common
Stock outstanding.
<PAGE>
EAGLE BANCORP, INC.
FORM 10-QSB
INDEX
- -----
PART I - FINANCIAL INFORMATION PAGE
-----
Item 1 - Financial Statements (Unaudited)
Balance Sheets -September 30, 1998
and December 31, 1997 1
Statements of Operations 2
Statements of Cash Flows 3
Notes to Financial Statements 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
PART II - OTHER INFORMATION 7
SIGNATURES 9
<PAGE>
EAGLE BANCORP, INC.
BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 494,574 $ 7,214
Federal funds sold 4,231,812
Investment securities available for sale 18,822,057
-------------
Loans 2,922,134
Less: allowance for credit losses (29,300)
--------------
Loans, net 2,892,834
Premises and equipment, net 1,521,073 3,832
Other assets 295,524 -
-------------- -------------
TOTAL ASSETS $ 28,257,874 $ 11,046
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Demand deposits $ 1,269,008
Interest bearing deposits 10,669,891
--------------
Total deposits 11,938,899
Customer repurchase agreements 682,761
Other borrowed money - $ 130,000
Other liabilities 82,653 43,249
-------------- -------------
Total liabilities 12,704,313 173,249
STOCKHOLDERS' EQUITY
Common stock, $.01 par, 5000,000 shares
authorized, 1,650,000 issued (1998)
no shares issued (1997) 16,500
Surplus 16,483,500
Deficit (930,490) (162,203)
Accumulated other comprehensive
income (loss) (15,949) -
-------------- --------------
Total stockholders' equity 15,553,561 (162,203)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 28,257,874 $ 11,046
-------------- -------------
</TABLE>
1
<PAGE>
EAGLE BANCORP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
INTEREST INCOME
Loans $ 17,271 $ 17,271
Securities available for sale 187,816 391,877
Federal funds sold 37,133 37,133
--------------- --------------
Total interest income 242,220 446,281
INTEREST EXPENSE
Deposits 42,535 42,535
Customer repurchase agreements 2,134 2,134
Other borrowed money - 15,699
--------------- --------------
Total interest expense 44,669 60,368
NET INTEREST INCOME 197,551 385,913
Provision for credit losses 29,300 29,300
--------------- --------------
Net interest income after provision for credit losses 168,251 356,613
OTHER INCOME
Service charges and fees 4,858 4,858
--------------- --------------
Total other income 4,858 4,858
OTHER EXPENSE
Salaries, wages and benefits 397,779 617,833
Occupancy 74,500 74,500
Equipment 20,329 20,329
Data processing 43,026 43,026
Legal fees 6,021 70,583
Other expense 155,807 303,487
-------------- --------------
Total other expense 697,462 1,129,758
LOSS BEFORE INCOME TAX BENEFIT (524,353) (768,287)
-------------- --------------
INCOME TAX BENEFIT - -
NET LOSS $ (524,353) $ (768,287)
-------------- --------------
Earnings (loss) per share:
Basic $ (0.32) $ (1.12)
Diluted $ (0.32) $ (1.12)
</TABLE>
2
<PAGE>
EAGLE BANCORP, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (768,287)
Adjustments to reconcile net loss to net
cash used by operating activities:
Provision for credit losses 29,300
Depreciation and amortization 9,364
Increase in accrued interest and
other assets (295,524)
Increase in accrued expenses and
other liabilities 39,404
----------------
Net cash used by operating activities (985,743)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale investment securities (54,095,098)
Proceeds from maturities of available for sale securities 35,257,092
Increase in federal funds sold (4,231,812)
Net increase in loans (2,922,134)
Bank premises and equipment acquired (1,526,605)
---------------
Net cash used by investing activities (27,518,557)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits 11,938,899
Increase in securities sold under agreement to repurchase 682,761
Decrease in payable to organizers (130,000)
Issuance of common stock 16,500,000
--------------
Net cash provided by financing activities 28,991,660
--------------
NET INCREASE IN CASH 487,360
CASH AT BEGINNING OF PERIOD 7,214
CASH AT END OF PERIOD $ 494,574
--------------
</TABLE>
3
<PAGE>
EAGLE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
General - The financial statements of Eagle Bancorp, Inc. (the Company) included
herein are unaudited; however, they reflect all adjustments consisting only of
normal recurring accruals that, in the opinion of Management, are necessary to
present fairly the results for the periods presented. Certain information and
note disclosures normally included in financial statements prepared in
accordance with Generally Accepted Accounting Principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The Company believes that the disclosures are adequate to make the
information presented not misleading. The results of operation for the nine
months ended September 30, 1998, are not necessarily indicative of the results
of operations to be expected for the remainder of the year. It is suggested that
these financial statements be read in conjunction with the original and
supplemental prospectus dated February 9, 1998 and May 13, 1998.
2. NATURE OF BUSINESS
Eagle Bancorp, Inc. was incorporated on October 28, 1997 under the laws of the
State of Maryland to operate as a bank holding company. An application to
organize EagleBank (the Bank) was filed with the Maryland Department of
Financial Regulation on December 5,1997. On July 20, 1998, the Company purchased
all the outstanding shares of common stock of the Bank. On the same date the
Bank opened its first office and a second office was opened August 4, 1998. A
third (main office) is planned to be opened on November 9, 1998.
3. NEW ACCOUNTING PRONOUNCEMENTS
Effective for periods ending after December 15, 1997, SFAS No. 128, "Earnings
Per Share," is applicable for computing and presenting earnings per share (EPS)
for entities with publicly held common stock or potential common stock. This
statement simplifies the standards for computing EPS, making them comparable to
international EPS standards. It replaces the presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation.
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, was issued in June 1997. This statement establishes standards for
disclosing comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as the
change in equity from transactions and other events and circumstances from
nonowner sources. Comprehensive income includes net income which is adjusted for
items such as unrealized gains and losses on certain investment securities and
minimum pension liability adjustments. This statement is effective for fiscal
years beginning after December 15, 1997. Reclassification statements for earlier
periods provided for comparative purposes is required.
Statement of Financial Accounting Standards No. 131, Disclosure about Segments
of an Enterprise and Related Information, was issued in June 1997. This
statement establishes standards for disclosing information about operating
segments in financial statements. Operating segments are components of a
business about which separate financial information is available that is
evaluated by management in deciding how to allocate resources and in assessing
performance. Management has not determined yet whether additional disclosure
will be necessary under the requirements of SFAS No. 131. For year-end
disclosure, this statement is effective for fiscal years beginning after
December 15, 1997. Interim reporting disclosures would not be required in the
first year of adoption, but would begin the first quarter immediately after the
first year of providing year-end disclosures. For interim reporting, the
preceding year's interim information must be presented on a comparative basis.
4. INCOME TAXES
The Company uses the liability method of accounting for income taxes as required
by SFAS No. 109, "Accounting for Income Taxes." Under the liability method,
deferred-tax assets and liabilities are determined based on differences between
the financial statement carrying amounts and the tax basis of exiting assets and
liabilities (i.e., temporary differences) and are measured at the enacted rates
that will be in effect when these differences reverse. Deferred income taxes
will be recognized when it is deemed more likely than not that the benefits of
such deferred income taxes will be realized, accordingly, no deferred income
taxes or income tax benefits have been recorded by the Company.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward looking statements. This discussion contains forward looking statements
within the meaning of the Securities Exchange Act of 1934, as amended, including
statements of goals, intentions, and expectations as to future trends, plans,
events or results of Company operations and policies and regarding general
economic conditions. These statements are based upon current and anticipated
economic conditions, nationally and in the Company's market, interest rates and
interest rate policy, the year 2000 issue, competitive factors and other
conditions which, by their nature, are not susceptible to accurate forecast, and
are subject to significant uncertainty. Because of these uncertainties and the
assumptions on which this discussion and the forward looking statements are
based, actual future operations and results in the future may differ materially
from those indicated herein. Readers are cautioned against placing undue
reliance on any such forward looking statement. The Company does not undertake
to update any forward looking statement to reflect occurrences or events which
may not have been anticipated as of the date of such statement.
GENERAL
Eagle Bancorp, Inc. (the "Company") is a bank holding company, which on June 9,
1998 completed its efforts to raise capital and closed with in excess of
$16,500,000. Subscriptions in excess of the maximum amount acceptable under the
original and supplemental prospectus, dated February 9, 1998 and May 13, 1998,
respectively, have been returned to the subscribers.
On July 20, 1998 the Company became a bank holding company by purchasing all of
the common stock of EagleBank. EagleBank opened its first office on July 20,
1998 and a second office on August 4, 1998. The main office will be opened on
November 9, 1998.
EagleBank was formed to serve the business community of Montgomery County,
Maryland. The Bank has been well received and experienced growth since opening
which has taken deposits almost $12 million at September 30, 1998.
RESULTS OF OPERATIONS
The Company reported net losses of $(524,353) and $(768,287) for the quarter and
nine months ended September 30, 1998. The losses are attributable primarily to
start-up costs associated with filing fees, legal fees, salaries, rents and
other related expenses necessary to complete the offering and prepare the Bank
to do business during the first six months. The loss for the quarter is related
to operating costs of the Bank as it opened for business and developed its
deposit base. These losses will be reduced as the Bank increases its deposit
base and generates loan volume.
While the Bank is pleased with its deposit growth, ending two and one-third
months with deposits at $11,938,899, lending activity has not been as strong as
anticipated. The Bank's lending activity has generated $2,922,134. This is not
up to expectations, however, the market is very competitive and the Bank is
committed to maintaining a high quality portfolio which returns a reasonable
market rate, which adequately compensates the Bank for the risks undertaken.
Although the Bank has developed what it believes to be a quality loan portfolio,
it has contributed 1% to its allowance for credit losses. The Bank currently
plans to maintain the allowance at a minimum of 1% of total loans, and to make
adjustments following further evaluation as the portfolio develops and matures,
and as economic conditions suggest. It is expected that the Bank will have
losses during its start up period and not break even for approximately eighteen
months. Earnings from investments by the Company of capital not invested in the
Bank will partially offset losses of the Bank and, on a consolidated basis,
breakeven could be at an earlier time.
YEAR 2000
The year 2000 ("Y2K") issue is the result of computer programs using two digits
to define the year, rather than four. Therefore, any computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations,
5
<PAGE>
including among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. Timely and
accurate data processing is essential to the operations of the Company.
The Company enjoys certain advantages as it addresses year 2000 issues. It is
not encumbered embedded systems and programs purchased years ago, but has, and
is installing new monitored and applications. The Bank's data processing is
outsourced and the Bank is carefully its service provider to assure that it is
meeting its schedule for full compliance.
Year 2000 was a major consideration in the selection of the Bank's data
processing provider and has foremost in its consideration of other acquisitions
of systems and applications. At the same time the Bank is actively testing its
systems and requiring its vendors to show evidence of readiness for Y2K. As a
result of the base from which the Company is commencing its operations, the
Company believes that incremental costs related to Y2K compliance are not
expected to be material to the financial performance of the Company.
The Bank is also working with customers to increase awareness in their business
of the need for and importance of Y2K attention.
The Board of Directors of the Bank is active in its oversight of Y2K
preparedness and regularly receives reports from management. The failure of the
Company, its principal data processing provider, its customers, or of other
service providers, including utilities and government agencies, to be year 2000
compliant in a timely manner could have a negative impact on the Company's
business, including but not limited to an inability to provide accurate and
timely processing of customer transactions, and delays in loan collection
practices. The Company's belief that it, and its primary suppliers of data
processing services, will be Y2K compliant, are based on a number of assumptions
and on statements made by third parties, involve events and actions which may be
beyond the control of the Company, and are subject to uncertainty. The Company
also is not able to predict the effects, if any, on the Company, financial
markets or society in general of the public's reaction to Y2K.
6
<PAGE>
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
8
<PAGE>
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 BANCORP, INC.
Date: November 13, 1998 By: /s/ Ronald D. Paul
------------------------------------------------
Ronald D. Paul, President
Date: November 13, 1998 By: /s/ Wilmer L. Tinley
------------------------------------------------
Wilmer L. Tinley, Senior Vice President, CFO
9
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0001050441
<NAME> Eagle Bancorp, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> DEC-31-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 495
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,232
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,822
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,922
<ALLOWANCE> 29
<TOTAL-ASSETS> 28,258
<DEPOSITS> 11,938
<SHORT-TERM> 683
<LIABILITIES-OTHER> 83
<LONG-TERM> 0
0
0
<COMMON> 17
<OTHER-SE> 15,537
<TOTAL-LIABILITIES-AND-EQUITY> 28,258
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<INTEREST-TOTAL> 242
<INTEREST-DEPOSIT> 43
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<EXPENSE-OTHER> 697
<INCOME-PRETAX> (768)
<INCOME-PRE-EXTRAORDINARY> (768)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (768)
<EPS-PRIMARY> (1.12)
<EPS-DILUTED> (1.12)
<YIELD-ACTUAL> 5.59
<LOANS-NON> 0
<LOANS-PAST> 0
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</TABLE>
