UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from _____________ to _____________.
Commission file number 0-29687
------------------------------
Eagle Bancorp
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(Exact name of small business issuer as specified in its charter)
United States 81-0531318
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Prospect Avenue, Helena, MT 59601
----------------------------------------
(Address of principal executive offices)
(406) 442-3080
---------------------------
(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No[ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock, par value $0.01 per share 1,223,572 shares outstanding
--------------------------------------------------------------------------------
As of November 10, 2000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition (As of
September 30, 2000 (unaudited) and June 30, 2000) ......... 1 and 2
Consolidated Statements of Income (For the three months
ended September 30, 2000 and 1999 (unaudited)) ............ 3 and 4
Consolidated Statements of Stockholders' Equity (For the
three months ended September 30, 2000 (unaudited)) ........ 5
Consolidated Statements of Cash Flows (For the three
months ended September 30, 2000 and 1999 (unaudited)) .... 6 and 7
Notes to Consolidated Financial Statements ................ 8 to 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 12 to 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 17
Item 2. Changes in Securities ....................................... 17
Item 3. Defaults Upon Senior Securities ............................. 17
Item 4. Submission of Matters to a Vote of Security-Holders ......... 17
Item 5. Other Information ........................................... 17
Item 6. Exhibits and Reports on Form 8-K ............................ 17 to 19
Signatures
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks ........................ $ 2,888,935 $ 3,477,650
Interest-bearing deposits with banks ........... -- --
------------ ------------
Total cash and cash equivalents ............ 2,888,935 3,477,650
Investment securities available for sale,
at market value .............................. 18,266,211 18,414,219
Investment securities held-to-maturity ......... 9,762,479 9,922,687
Federal Home Loan Bank stock, at cost .......... 1,415,700 1,393,000
Mortgage loans held-for-sale ................... 2,044,197 861,290
Loans receivable, net of deferred loan fee
and allowance for loan losses ................ 111,783,683 107,447,437
Accrued interest and dividends receivable ...... 943,263 832,204
Mortgage servicing rights ...................... 1,313,581 1,338,271
Property and equipment, net .................... 6,852,915 6,962,081
Cash surrender value of life insurance ......... 2,064,897 2,040,973
Real estate acquired in settlement of loans,
net of allowance for losses .................. 107,280 121,006
Other assets ................................... 248,038 219,857
------------ ------------
Total assets ............................... $157,691,179 $153,030,675
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Continued)
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
------------------ -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts:
Noninterest bearing .......................... $ 5,792,980 $ 5,732,528
Interest bearing ............................. 119,287,079 118,780,477
Advances from Federal Home Loan Bank ........... 11,766,111 8,682,778
Accrued expenses and other liabilities ......... 2,131,939 1,505,750
------------ ------------
Total liabilities .......................... 138,978,109 134,701,533
------------ ------------
Stockholders' Equity:
Preferred stock (no par value, 1,000,000 shares
authorized, none issued or outstanding) ......
Common stock (par value $0.01 per share;
10,000,000 shares authorized; 1,223,572 shares
issued and outstanding at Sept. 30, 2000) .... 12,236 12,236
Additional paid-in capital ..................... 3,833,546 3,831,887
Unallocated common stock held by employee
stock ownership plan ("ESOP") ................ (340,448) (349,648)
Retained earnings .............................. 15,421,711 15,158,415
Accumulated other comprehensive loss ........... (213,975) (323,748)
------------ ------------
Total stockholders' equity ................. 18,713,070 18,329,142
------------ ------------
Total liabilities and stockholders' equity . $157,691,179 $153,030,675
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY STATEMENTS OF INCOME
Three Months Ended
September 30,
------------------------
2000 1999
---------- ----------
(unaudited)
Interest and dividend income:
Interest and fees on loans ....................... $2,253,185 $1,982,300
Interest on deposits with banks .................. 5,145 41,466
Securites held to maturity ....................... 162,123 214,820
Securities available for sale .................... 287,239 245,610
FHLB stock dividends ............................. 22,760 23,778
---------- ----------
Total interest and dividend income ........... 2,730,452 2,507,974
---------- ----------
Interest expense:
Deposits ......................................... 1,232,617 1,119,214
FHLB advances .................................... 144,934 168,790
---------- ----------
Total interest expense ....................... 1,377,551 1,288,004
---------- ----------
Net interest income .............................. 1,352,901 1,219,970
Loan loss provision .............................. -- 15,000
---------- ----------
Net interest income after loan loss provision 1,352,901 1,204,970
---------- ----------
Noninterest income:
Net gain on sale of loans ........................ 42,599 88,337
Demand deposit service charges ................... 134,679 118,605
Mortgage loan servicing fees ..................... 72,594 74,108
Net gain (loss) on sale of available for sale
securities ..................................... -- (30,355)
Other ............................................ 93,431 81,678
---------- ----------
Total noninterest income ..................... 343,303 332,373
---------- ----------
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY STATEMENTS OF INCOME
(Continued)
Three Months Ended
September 30,
------------------------
2000 1999
---------- ----------
(unaudited)
Noninterest expense:
Salaries and employee benefits ................... $ 668,560 $ 642,073
Occupancy expenses ............................... 114,051 106,670
Furniture and equipment depreciation ............. 81,816 79,466
In-house computer expense ........................ 41,779 38,843
Advertising expense .............................. 43,935 40,521
Amortization of mortgage servicing fees .......... 31,007 36,761
Federal insurance premiums ....................... 7,072 16,866
Postage .......................................... 21,667 23,636
Legal,accounting, and examination fees ........... 47,688 17,909
Consulting fees .................................. 9,447 16,620
ATM processing ................................... 14,296 19,674
Other ............................................ 167,055 169,625
---------- ----------
Total noninterest expense .................... 1,248,373 1,208,664
---------- ----------
Income before provision for income taxes ........... 447,831 328,679
Provision for income taxes ......................... 144,280 120,117
---------- ----------
Net income ......................................... $ 303,551 $ 208,562
========== ==========
Earnings per share ................................. $ 0.26 n/a
========== ==========
Weighted average shares outstanding ................ 1,180,258 n/a
========== ==========
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL UNALLOCATED OTHER
PREFERRED COMMON PAID-IN ESOP RETAINED COMPREHENSIVE
STOCK STOCK CAPITAL SHARES EARNINGS INCOME TOTAL
--------- ------- ---------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 2000 ...................... $ -- $12,236 $3,831,887 $(349,648) $15,158,415 $(323,748) $18,329,142
Net income ................................ -- -- -- -- 303,551 -- 303,551
Other comprehensive income ................ -- -- -- -- -- 109,773 109,773
-----------
Total comprehensive income ............ -- -- -- -- -- -- 413,324
Dividends paid ($.07 per share) ........... -- -- -- -- (40,255) -- (40,255)
ESOP shares allocated or committed to be
released for allocation (1,150 shares) .. -- -- 1,659 9,200 -- -- 10,859
------- ------- ---------- --------- ----------- --------- -----------
Balance, September 30, 2000 ................. $ -- $12,236 $3,833,546 $(340,448) $15,421,711 $(213,975) $18,713,070
======= ======= ========== ========= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 303,551 $ 208,562
Adjustments to reconcile net income to
net cash from operating activities
Provision for loan losses ............................. -- 15,000
Depreciation, accretion and amortization expense ...... 139,400 175,899
Deferred loan fees .................................... 20,328 (16,180)
Amortization of capitalized mortgage servicing rights . 31,007 36,761
Gain on sale of loans ................................. (42,599) (88,337)
Net realized (gain) loss on sale of available-for-sale
securities .......................................... -- 30,355
Dividends reinvested .................................. (22,700) (23,700)
Increase in cash surrender value of life insurance .... (23,924) (22,875)
Change in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends receivable ............. (111,059) (147,832)
Loans held-for-sale ................................... (1,140,308) 673,632
Other assets .......................................... (17,322) 31,540
Increase (decrease) in liabilities:
Accrued expenses and other liabilities .................. 129,870 389,688
Deferred compensation payable ........................... 6,340 --
Deferred income taxes payable ........................... 147,231 --
----------- -----------
Net cash provided by (used in) operating activities (580,185) 1,262,513
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Investment securities held-to-maturity .................. (326,150) (449,936)
Investment securities available-for-sale ................ -- (1,576,303)
Proceeds from maturities, calls and principal payments:
Investment securities held-to-maturity .................. 492,334 330,706
Investment securities available-for-sale ................ 311,227 --
Proceeds from sales of investment securities
available-for-sale .................................... -- 1,715,580
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
(CONTINUED)
Net (increase) decrease in loan receivable, excludes
transfers to real estate acquired in settlement of loans $(4,349,163) $(2,982,031)
Purchase of property and equipment ........................ (21,069) (247,297)
Proceeds from sale of equipment ........................... -- 221,274
----------- -----------
Net cash used in investing activities ............. (3,892,821) (2,988,007)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking and savings accounts ............. 567,054 2,982,606
Net increase in advances to borrowers for
taxes and insurance ..................................... 274,160 --
Net increase (decrease) in FHLB advances .................. 3,083,333 (4,066,667)
Dividends paid ............................................ (40,256) --
----------- -----------
Net cash provided by financing activities ......... 3,884,291 (1,084,061)
----------- -----------
Net decrease in cash ........................................ (588,715) (2,809,555)
CASH AND CASH EQUIVALENTS, beginning of period .............. 3,477,650 6,741,171
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .................... $ 2,888,935 $ 3,931,616
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest .................. $ 1,339,866 $ 1,265,033
=========== ===========
Cash paid during the period for income taxes .............. $ -- $ 73,000
=========== ===========
NON-CASH INVESTING ACTIVITIES:
(Increase) decrease in market value of securities
available-for-sale ........................................ $ 109,773 $ (26,825)
=========== ===========
Mortgage servicing rights capitalized ....................... $ 6,317 $ 80,681
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions for Form 10-QSB. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. However, such
information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the unaudited interim periods.
The results of operations for the three months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the fiscal year ending
June 30, 2001 or any other period. The unaudited consolidated financial
statements and notes presented herein should be read in conjunction with the
audited consolidated financial statements and related notes thereto included in
Eagle's Form 10-KSB dated June 30, 2000.
-8-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES
------------------------------
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
September 30, 2000 June 30, 2000
-------------------------------------- --------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED FAIR AMORTIZED UNREALIZED FAIR
COST (LOSSES) VALUE COST (LOSSES) VALUE
----------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Available-for-sale:
U.S. government and agency
obligations .............. $ 4,231,813 $ (59,279) $ 4,172,534 $ 4,250,803 $ (99,656) $ 4,151,147
Municipal obligations ...... 3,307,603 (217,909) 3,089,694 3,307,967 (251,657) 3,056,310
Corporate obligations ...... 6,171,277 (44,413) 6,126,864 6,184,453 (122,998) 6,061,455
Mortgage-backed securities . 4,351,012 (18,313) 4,332,699 4,623,260 (40,258) 4,583,002
Collateralized mortgage
obligations .............. 350,782 (7,362) 343,420 372,372 (11,067) 361,305
Corporate preferred stock .. 201,397 (397) 201,000 201,398 (398) 201,000
----------- --------- ----------- ----------- --------- -----------
Total .................. $18,613,884 $(347,673) $18,266,211 $18,940,253 $(526,034) $18,414,219
=========== ========= =========== =========== ========= ===========
Held-to-maturity:
U.S. government and agency
obligations .............. $ 2,889,808 $ (13,563) $ 2,876,245 $ 2,888,392 $ (29,659) $ 2,858,733
Municipal obligations ...... 959,398 (11,719) 947,679 1,069,806 (21,234) 1,048,572
Mortgage-backed securities . 5,913,273 (121,442) 5,791,831 5,964,489 (164,775) 5,799,714
----------- --------- ----------- ----------- --------- -----------
Total .................. $ 9,762,479 $(146,724) $ 9,615,755 $ 9,922,687 $(215,668) $ 9,707,019
=========== ========= =========== =========== ========= ===========
</TABLE>
-9-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. LOANS RECEIVABLE
-------------------------
Loans receivable consist of the following:
September 30, June 30,
2000 2000
------------- ------------
First mortgage loans:
Residential mortgage (1-4 family) ..... $ 75,406,212 $ 74,336,712
Commercial real estate ................ 7,945,244 7,784,333
Real estate construction .............. 2,034,169 1,453,371
Other loans:
Home equity ........................... 15,198,639 13,654,250
Consumer .............................. 9,277,328 8,279,049
Commercial ............................ 2,744,714 2,757,708
------------ ------------
Total ............................... 112,606,306 108,265,423
Less:
Allowance for loan losses ............. (696,474) (712,165)
Deferred loan fees .................... (126,149) (105,821)
------------ ------------
Total ............................... $111,783,683 $107,447,437
============ ============
Loans net of related allowance for loan losses on which the accrual of interest
has been discontinued were $616,000 and $504,000 at September 30, 2000 and June
30, 2000, respectively. Classified assets, including real estate owned, totaled
$1.50 million and $1.58 million at September 30, 2000 and June 30, 2000,
respectively.
The following is a summary of changes in the allowance for loan losses:
3 Months Ended 12 Months Ended
September 30, June 30,
2000 2000
-------------- ---------------
Balance, beginning of period ............ $712,165 $736,624
Reclassification to REO reserve ....... (13,725) (11,519)
Provision charged to operations ....... -- 15,000
Charge-offs ........................... (5,444) (30,623)
Recoveries ............................ 3,478 2,683
-------- --------
Balance, end of period .............. $696,474 $712,165
======== ========
-10-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. DEPOSITS
-----------------
Deposits are summarized as follows:
September 30, June 30,
2000 2000
------------- ------------
Noninterest checking .................... $ 5,792,980 $ 5,732,528
Interest-bearing checking ............... 22,552,879 22,849,549
Passbook ................................ 21,245,181 20,936,122
Money market ............................ 14,850,077 14,716,098
Time certificates of deposit ............ 60,638,942 60,278,708
------------ ------------
Total ............................... $125,080,059 $124,513,005
============ ============
-11-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This report contains certain "forward-looking statements." Eagle desires to take
advantage of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of the safe harbor with respect to all such
forward-looking statements. These forward-looking statements, which are included
in Management's Discussion and Analysis, describe future plans or strategies and
include Eagle's expectations of future financial results. The words "believe,"
"expect," "anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. Eagle's ability to predict results or the effect of
future plans or strategies or qualitative or quantitative changes based on
market risk is inherently uncertain. Factors which could affect actual results
but are not limited to include (i) change in general market interest rates, (ii)
general economic conditions, (iii) local economic conditions, such as the Butte
economy, (iv) legislative/regulatory changes, (v) monetary and fiscal policies
of the U.S. Treasury and Federal Reserve, (vi) changes in the quality or
composition of Eagle's loan and investment portfolios, (vii) demand for loan
products, (viii) deposit flows, (ix) compensation, and (x) demand for financial
services in Eagle's markets. These factors should be considered in evaluating
the forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements which speak only as of their dates.
Financial Condition
Total assets increased by $4.66 million, or 3.05%, from $153.03 million at June
30, 2000, to $157.69 million at September 30, 2000. Total liabilities increased
by $4.28 million from $134.70 million at June 30, 2000, to $138.98 million at
September 30, 2000. Total equity increased $380,000 from $18.33 million at June
30, 2000 to $18.71 million at September 30, 2000.
Growth in the loan portfolio of $4.34 million accounted for the majority of the
growth in total assets. The loan category with the largest increase was home
equity loans, which increased $1.54 million. This represented an 11.28% increase
over the balance at June 30, 2000 of $13.65 million. Total loan originations
increased from $15.30 million for the quarter ended June 30, 2000, to $17.41
million for the quarter ended September 30, 2000 due to an increase in single
family mortgages from $7.64 million to $9.93 million for the respective
quarters. Loans held for sale increased from $861,000 at June 30, 2000 to $2.04
million at September 30, 2000.
Asset growth was funded primarily by Federal Home Loan Bank advances, which had
grown to $11.77 million by September 30, 2000. This was an increase of $3.09
million, or 35.60%, from the balance of $8.68 million at June 30, 2000. Deposits
grew a modest $570,000, or 0.46%, from $124.51 million at June 30, 2000 to
$125.08 million at September 30, 2000. Strong competition from local banks
continues to limit deposit growth in all of our market areas. Other liabilities
-12-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition (continued)
increased from $1.51 million at June 30, 2000 to $2.13 million at September 30,
2000, primarily due to an increase in the balance of escrows for borrowers tax
and insurance payments.
The growth in total equity was the result of earnings for the quarter of
$304,000 and a decrease in the unrealized loss on securities available for sale
of $110,000, offset by the payment of the cash dividend during the quarter of
$40,000.
Results of Operations for the Three Months Ending September 30, 2000 and 1999
Net Income
Eagle's net income was $304,000 and $209,000 for the three months ended
September 30, 2000, and 1999, respectively. The increase of $95,000, or 45.45%,
was primarily due to an increase in net interest income of $133,000, partially
offset by an increase in non-interest expense of $39,000.
Net Interest Income
Net interest income increased from $1.22 million for the quarter ended September
30, 1999 to $1.35 million for the quarter ended September 30, 2000. This
increase of $133,000 was the result of an increase in interest and dividend
income of $220,000, partially offset by an increase in interest expense of
$89,000.
Interest and Dividend Income
Total interest and dividend income was $2.73 million for the quarter ended
September 30, 2000, compared to $2.51 million for the quarter ended September
30, 1999, representing an increase of $220,000, or 8.76%. Interest and fees on
loans increased from $1.98 million for 1999 to $2.25 million for 2000. This
increase of $270,000, or 13.64%, was due primarily to an increase in the average
balances of loans receivable for the quarter ended September 30, 2000. Average
balances for loans receivable, net, for the quarter ended September 30, 2000
were $110.79 million, compared to $98.92 million for the previous year. This
represents an increase of $11.87 million, or 12.00%. All loan categories had
shown increases from the previous year. The average interest rate earned on
loans receivable also increased by 12 basis points, from 8.01% at September 30,
1999 to 8.13% at September 30, 2000. Interest and dividends on investment
securities available-for-sale (AFS) increased from $246,000 for the quarter
ended September 30, 1999 to $287,000 for quarter ended September 30, 2000, while
interest on securities held to maturity (HTM) decreased from $215,000 to
$162,000. Interest earned from deposits held at other banks decreased from
$41,000 for the quarter ended September 30, 1999 to $5,000 for the quarter ended
September 30, 2000 due primarily to lower average balances in these accounts
resulting from funding the increase in loans receivable.
-13-
<PAGE>
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending September 30, 2000 and 1999
(continued)
Interest Expense
Total interest expense increased from $1.29 million for the quarter ended
September 30, 1999, to $1.38 million for the quarter ended September 30, 2000,
an increase of $90,000 due primarily to an increase in interest paid on
deposits. Interest on deposits increased from $1.12 million for the quarter
ended September 30, 1999, to $1.23 million for the quarter ended September 30,
2000. This increase of $110,000, or 9.82%, was the result of an increase in
average rates paid on deposit accounts. Time certificate of deposits (CD's)
accounted for the largest gain in balances during the period from September 30,
1999 to September 30, 2000. Special certificate of deposit offerings contributed
to the increase. Average balances in CD accounts increased from $58.50 million
at September 30, 1999 to $59.88 million at September 30, 2000. The average rate
paid on CD accounts also increased, from 5.07% to 5.66% for the period. The
increase in deposit interest expense was offset by a decrease in interest paid
on borrowings from $169,000 for the quarter ended September 30, 1999 to $145,000
for the quarter ended September 30, 2000. The decrease in borrowing costs was
due to a decrease in the average balance of Federal Home Loan Bank advances.
Provision for Loan Losses
Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered adequate by Eagle's subsidiary,
American Federal Savings Bank, to provide for probable loan losses based on
prior loss experience, volume and type of lending conducted by American Federal,
available peer group information, and past due loans in portfolio. The Bank's
policies require the review of assets on a quarterly basis. The Bank classifies
loans as well as other assets if warranted. While the Bank believes it uses the
best information available to make a determination with respect to the allowance
for loan losses, it recognizes that future adjustments may be necessary. No
provision was made for loan losses for the quarter ended September 30, 2000,
compared to $15,000 for the quarter ended September 30, 1999. This is a
reflection of the continued strong asset quality of American Federal's loan
portfolio, as non-performing loan ratios continue to be below peer averages.
Total classified assets declined from $1.58 million at June 30, 2000 to $1.50
million at September 30, 2000. A transfer of $14,000 was made from the loan loss
reserve to the real estate owned (REO) reserve. The transfer was made to write
down the balances of the two foreclosed properties in Butte, Montana to their
net realizable value. Both properties have received valid offers, and will be
sold in the upcoming quarter.
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<PAGE>
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending September 30, 2000 and 1999
(continued)
Noninterest Income
Total noninterest income increased from $332,000 for the quarter ended September
30, 1999, to $343,000 for the quarter ended September 30, 2000, an increase of
$11,000 or 3.31%. This was the result of an increase in the amount of demand
deposit service charges of $16,000, an increase in other noninterest income
items of $12,000, and a decrease in the loss on sale of available for sale
securities of $30,000. These increases to income were offset by a decrease in
gain on sale of loans of $46,000. Demand deposit related fees were raised in
late 1999, contributing to the increase in that category, while no securities
were sold in the quarter ended September 30, 2000. Decreased loan originations
compared to a year ago combined with management's decision to retain mortgage
loans with maturities of 15 years or less contributed to the reduction in income
from sale of loans. Mortgage loan servicing fees declined slightly from $74,000
in the quarter ended September 30, 1999 to $73,000 in the quarter ended
September 30, 2000.
Noninterest Expense
Noninterest expense increased by $40,000 or 3.31% from $1.21 million for the
quarter ended September 30, 1999, to $1.25 million for the quarter ended
September 30, 2000. This increase was primarily due to an increase in legal and
accounting fees of $30,000 and in salaries and benefits of $26,000. The increase
in legal and accounting fees were related to the costs of becoming a public
company, while the increase in salaries was due to merit raises and an increase
in health insurance costs. These increases were partially offset by decreases of
$10,000 in federal deposit insurance premiums and $7,000 in consulting fees. The
decrease in deposit insurance premiums was due to the FDIC lowering their
assessment rate by 64%, while higher consulting costs in 1999 were related to
Year 2000 issues and the implementation of the new Window NT system installed in
the middle of fiscal year 1999.
Income Tax Expense
Eagle's income tax expense was $120,000 for the quarter ended September 30,
1999, compared to $144,000 for the quarter ended September 30, 2000. The
effective tax rate for the quarter ended September 30, 1999 was 36.55% and was
32.22% for the quarter ended September 30, 2000. The effective tax rate is lower
in the September 2000 quarter primarily due to the purchase of approximately
$3.31 million of tax-free municipal bonds in the fourth quarter of fiscal 1999.
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<PAGE>
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity, Interest Rate Sensitivity and Capital Resources
The company's subsidiary, American Federal Savings Bank (the Bank), is required
to maintain minimum levels of liquid assets as defined by the Office of Thrift
Supervision (OTS) regulations. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of our deposits and short-term borrowings. The Bank's liquidity ratio average
was 13.93% and 18.06% at September 30, 2000 and September 30, 1999,
respectively. Liquidity declined due to an increase in loans receivable for the
period ending September 30, 2000.
The Bank's primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments, funds provided from
operations, and advances from the Federal Home Loan Bank of Seattle. Scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are generally predictable. However, other sources of funds, such as
deposit flows and loan prepayments, can be greatly influenced by the general
level of interest rates, economic conditions and competition. The Bank uses
liquidity resources principally to fund existing and future loan commitments. It
also uses them to fund maturing certificates of deposit, demand deposit
withdrawals and to invest in other loans and investments, maintain liquidity,
and meet operating expenses.
Liquidity may be adversely affected by unexpected deposit outflows, higher
interest rates paid by competitors, and similar matters. Management monitors
projected liquidity needs and determines the level desirable, based in part on
commitments to make loans and management's assessment of the bank's ability to
generate funds.
At June 30, 2000 (the most recent report available), the Bank's measure of
sensitivity to interest rate movements, as measured by the OTS, improved from
the previous quarter. This was due to the infusion of proceeds from the capital
stock offering in April 2000 and management's strategy of retaining assets with
shorter maturities while emphasizing longer-term funding sources such as
transaction accounts, longer-term CD's and FHLB advances. The Bank is well
within the guidelines set forth by the Board of Directors for interest rate risk
sensitivity.
As of September 30, 2000, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At September 30, 2000, the Bank's tangible,
core, and risk-based capital ratios amounted to 11.1%, 11.1%, and 18.8%,
respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
respectively.
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<PAGE>
EAGLE BANCORP AND SUBSIDIARY
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company nor the Bank is involved in any pending legal
proceedings other than non-material legal proceedings occurring in the
ordinary course of business.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 -- Financial Data
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EAGLE BANCORP
Date: November 10, 2000 By: /s/ Larry A. Dreyer
-----------------------
Larry A. Dreyer
President/CEO
Date: November 10, 2000 By: /s/ Peter J. Johnson
-----------------------
Peter J. Johnson
Sr. VP/Treasurer
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