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 March 31, 1999
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 0-25923
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.)
7815 Woodmont Avenue, Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
(301) 986-1800
(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 March 31, 1999, the registrant had 1,650,000 shares of Common Stock
outstanding.
<PAGE>
EAGLE BANCORP, INC.
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash and due from banks $ 1,609,913 $ 1,292,006
Federal funds sold 7,443,529 5,429,047
Investment securities available for sale 26,712,478 22,569,699
Loans(net of allowance for credit losses
of $229,800 and $163,800) 27,140,579 19,984,124
Premises and equipment, net 2,577,683 2,396,075
Other assets 464,653 368,232
------------ ------------
TOTAL ASSETS $ 65,948,835 $ 52,039,183
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand $ 7,466,263 $ 4,096,392
Interest-bearing transaction accounts 8,299,147 3,664,012
Savings and money market 15,083,322 17,061,269
Time, $100,000 or more 7,102,588 5,621,543
Other time 5,659,093 4,187,677
------------ ------------
Total deposits 43,610,413 34,630,893
Customer repurchase agreements 7,644,053 2,304,694
Other liabilities 178,564 154,101
------------ ------------
Total liabilities 51,433,030 37,089,688
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 5,000,000
authorized, 1,650,000 issued and outstanding 16,500 16,500
Surplus 16,483,500 16,483,500
Accumulated deficit (1,923,279) (1,561,660)
Accumulated other comprehensive
income (loss) (60,916) 11,155
------------ ------------
Total stockholders' equity 14,515,805 14,949,495
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,948,835 $ 52,039,183
============ ============
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
EAGLE BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 468,296 $ --
Taxable interest and dividends on investment securities 378,960 --
Interest on federal funds and securities
purchased under agreement to resell 74,927 23,446
--------- ---------
Total interest income 922,183 23,446
--------- ---------
INTEREST EXPENSE:
Interest on deposits 360,216 --
Interest on customer repurchase agreements 32,888 --
Interest on short-term borrowings 1,177 5,082
--------- ---------
Total interest expense 394,281 5,082
--------- ---------
NET INTEREST INCOME 527,902 18,364
PROVISION FOR CREDIT LOSSES 66,000 --
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 461,902 18,364
--------- ---------
NONINTEREST INCOME:
Service charges on deposit accounts 23,303 --
Other income 12,317 --
--------- ---------
Total noninterest income 35,620 --
--------- ---------
NONINTEREST EXPENSES:
Salaries and employee benefits 475,172 66,696
Premises and equipment expenses 162,566 --
Advertising 25,059 --
Insurance expense 23,584 --
Outside data processing 24,537 --
Other expenses 148,223 57,023
--------- ---------
Total noninterest expenses 859,141 123,719
--------- ---------
NET LOSS BEFORE INCOME TAX BENEFIT (361,619) (105,355)
INCOME TAX BENEFIT -- --
--------- ---------
NET LOSS $(361,619) $(105,355)
========= =========
LOSS PER SHARE:
Basic $ (0.22) No shares outstanding
Diluted $ (0.22) No shares outstanding
</TABLE>
3
<PAGE>
EAGLE BANCORP, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 and 1998
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net loss $ (361,619) $ (105,355)
Adjustments to reconcile net loss to net cash used by operating activities:
Provision for credit losses 66,000 --
Depreciation and amortization 68,269 348
Increase in accrued interest
and other assets (96,421) (23,750)
Increase (decrease) in accrued expenses
and other liabilities 48,314 (17,308)
------------ ------------
Net cash (used) by operating activities
(275,457) (146,065)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available for sale investment securities (37,636,052) --
Proceeds from maturities of available for sale securities 33,421,202 --
Increase in federal funds sold (2,014,482) --
Net increase in loans (7,222,455) --
Bank premises and equipment acquired (249,877) (24,140)
------------ ------------
Net cash used by investing activities (13,701,664) (24,140)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits 8,955,669 --
Increase in customer repurchase agreements 5,339,359 --
Decrease in payable to organizers -- 340,000
Increase in common stock subscriptions -- 9,934,300
------------ ------------
Net cash provided by financing activities 14,295,028 10,274,300
------------ ------------
NET INCREASE IN CASH 317,907 10,104,095
CASH AT BEGINNING OF PERIOD 1,292,006 7,214
------------ ------------
CASH AT END OF PERIOD $ 1,609,913 $ 10,111,309
============ ============
</TABLE>
4
<PAGE>
EAGLE BANCORP, INC
Consolidated Statements Of Changes In Stockholders' Equity For The
Quarter Ending March 31, 1999
<TABLE>
<CAPTION>
Accumulated
Other Total
Accumulated Comprehensive Stockholders'
Common Stock Surplus Deficit Income Equity
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 $ 16,500 $ 16,483,500 $ (1,561,660) $ 11,155 $ 14,949,495
Net Loss (361,619) (361,619)
Other comprehensive income-
Unrealized gain on investment
securities available for sale
Total other comprehensive
income (loss) - - - (72,071) (72,071)
--------- ------------ -------------- ---------- ------------
Balances at March 31, 1999 $ 16,500 $ 16,483,500 $ (1,923,279) $ (60,916) $ 14,515,805
========= ============ ============== ========== ============
</TABLE>
5
<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 three months
ended March 31, 1999, are not necessarily indicative of the results of
operations to be expected for the remainder of the year.
2. NATURE OF BUSINESS
The Company, through its bank subsidiary, provides domestic financial
services primarily in Montgomery County, Maryland. The primary financial
services include real estate, commercial and consumer lending, as well as
traditional demand deposits and savings products. From October 28, 1997
until July 20, 1998, when the Bank received regulatory approval, the
Company was considered a development stage enterprise.
3. 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 existing 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.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis provides an overview of the financial
condition and results of operations of Eagle Bancorp, Inc. (Company) and
EagleBank (Bank) for the quarter ending March 31, 1999. In general,
comparative discussion of the results of operations for the quarter ended
March 31, 1998 and March 31, 1999 is not provided, as the Company had no
operations other than organizational activity in the first and second
quarters of 1998, and as such, comparisons do not provide accurate or
meaningful information regarding the Company's financial position or
results of operations.
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 statements.
GENERAL
Eagle Bancorp, Inc. was incorporated under the general corporation laws of
the State of Maryland, on October 28, 1997, and is headquartered in
Bethesda, Maryland. The Company was formed to be a bank holding company as
defined by the Federal Reserve System.
On July 20, 1998, having received the required approvals from the State of
Maryland and Federal Reserve System and been accepted for deposit insurance
by the FDIC, EagleBank opened its first office in Rockville, Maryland. On
that date the Company became a bank holding company by capitalizing the
Bank with $7.75 million. Since its opening the Bank has established a
branch in Silver Spring and its main office in Bethesda. The Company has
also increased its capital contributions to $9.25 million.
FINANCIAL CONDITION
As of March 31, 1999, assets were $65.9 million and deposits and customer
repurchase agreements were $51.2 million, an increase from year end 1998,
of 26.7% and 38.7% respectively. Management is pleased with the growth
experienced during the quarter as it represents a cross section of business
targeted by the Bank.
The growth in loans, while satisfactory at $7.1 million is behind
projections; however, based on recent activity, management believes, the
loan portfolio should continue to grow at an acceptable rate.
RESULTS OF OPERATIONS
On a consolidated basis the Company is reporting a net loss of $361,619 for
the quarter ended March 31, 1999. This loss was expected and is consistent
with anticipated results. The Bank reported a loss of $451,021 while the
Company realized net earnings on capital not invested in the Bank of
$89,402. These losses are expected to be reduced in the future as the Bank
increases its deposit base and generates additional loan volume.
The Bank ended the quarter with deposits and customer repurchase agreements
at $51.2 million and lending activity increased resulting in a net increase
in loans, from year end, of $7.1 million. The market is very
7
<PAGE>
competitive and the Bank is committed to maintaining a high quality
portfolio which returns a reasonable market rate.
The Bank plans to maintain the allowance for credit losses at an adequate
level and ended the quarter with an allowance of 1% of its outstanding
loans. The Company, exclusive of the Bank, held $4.7 million in
participation loans. No allowance is being maintained on $4 million of
those loans considered to be of minimal risk due to an underlying
guarantee, however, 1% is maintained for the remaining approximate $0.7
million.
Based on original proformas, it was expected that the Bank would sustain
losses during its start up period and not show an operating profit for any
month for at least eighteen months after opening for business. Additional
branching commitments could extend that period for several 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, the
Company may show a monthly profit earlier, although there can be no
assurance of this.
NET INTEREST INCOME
Net interest income is the difference between income on assets and the cost
of funds supporting those assets. Earning assets are composed primarily of
loans and investments; interest bearing deposits and customer repurchase
agreements and other borrowings make up the cost of funds. Noninterest
bearing deposits and capital are other components representing funding
sources. Changes in the volume and mix of assets and funding sources along
with the changes in yields earned and rates paid, determine changes in net
interest income.
The net interest income for the quarter was $527,902. The investment
portfolio, including interest on federal funds, accounted for nearly 50% of
interest income. As the loan portfolio continues to grow it will contribute
a greater portion of interest income both because of volume and yield. The
yield on loans is 3% to 5% higher than on investment portfolio holdings.
The cost of funds, primarily interest on deposits, is a function of the
market and the Bank has offered competitive rates while building
relationships and does not have any brokered funds.
ALLOWANCE AND PROVISION FOR CREDIT LOSSES
The provision for credit losses represents the expense recognized to fund
the allowance for credit losses. This amount is based on many factors which
reflect management's assessment of the risk in its loan portfolio. Those
factors include economic conditions and trends, the value and adequacy of
collateral, volume and mix of the portfolio, performance of the portfolio,
internal loan processes and capital adequacy of the Company and Bank.
During the quarter, management elected to maintain an allowance of 1% of
outstanding loans. Based principally on current economic conditions,
perceived asset quality and a strong capital position, the allowance is
believed to be adequate. At March 31, there were no commercial or real
estate loans past due more than thirty days and only one consumer loan over
thirty days in the amount of $6,000.
NONINTEREST INCOME
Noninterest income is primarily deposit account service charges and fees
and noninterest loan fees and amounted to $35,620 for the quarter. This
source of income is expected to increase as the Bank's deposit account base
increases and if fee generating income sources being considered by
management prove viable.
NONINTEREST EXPENSE
Noninterest expense was $859,141 for the quarter with more than 50% in
salaries and wages. Management has made a concentrated effort to budget and
monitor noninterest expenses and believes it has established practices to
control these expenses while meeting the requirements of an aggressively
growing bank.
8
<PAGE>
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, 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 with embedded systems and programs purchased years ago,
but has, and is installing, new monitored applications. The Bank's data
processing is outsourced and the Bank is carefully reviewing its service
provider to assure that it is meeting its schedule for full compliance.
During the months of March and April the Bank has and will be testing the
servicer's compliance with year 2000. The tests conducted in March went
well and all systems seemed to be compliant.
Year 2000 was a major issue in the selection of the Bank's data processing
provider and was 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 commenced 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.
Because all systems and services are new and were purchased Y2K compliant,
the estimated cost of testing and reviewing is not expected to exceed
$25,000.
The Bank is also working with customers to increase awareness in their
businesses 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 effect,
if any, on the Company, financial markets or society in general of the
public's reaction to Y2K.
9
<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.
10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
11
<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: May 13, 1999 By: /s/ Ronald D. Paul
--------------------------------------------
Ronald D. Paul, President
Date: May 13, 1999 By: /s/ Wilmer L. Tinley
--------------------------------------------
Wilmer L. Tinley, Senior Vice President, CFO
12
<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 DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,610
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,444
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,712
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 27,141
<ALLOWANCE> 230
<TOTAL-ASSETS> 65,949
<DEPOSITS> 43,587
<SHORT-TERM> 7,644
<LIABILITIES-OTHER> 202
<LONG-TERM> 0
17
0
<COMMON> 0
<OTHER-SE> 14,499
<TOTAL-LIABILITIES-AND-EQUITY> 65,949
<INTEREST-LOAN> 468
<INTEREST-INVEST> 379
<INTEREST-OTHER> 75
<INTEREST-TOTAL> 922
<INTEREST-DEPOSIT> 360
<INTEREST-EXPENSE> 394
<INTEREST-INCOME-NET> 528
<LOAN-LOSSES> 66
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 859
<INCOME-PRETAX> (362)
<INCOME-PRE-EXTRAORDINARY> (362)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (362)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
<YIELD-ACTUAL> 6.41
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 164
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 230
<ALLOWANCE-DOMESTIC> 230
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 230
</TABLE>
