<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997
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 0-14379
--------
EAGLE BANCSHARES, INC.
----------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Georgia 58-1640222
-----------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4305 Lynburn Drive, Tucker, Georgia 30084-4441
---------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(770) 908-6690
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Not Applicable
----------------------------------------------------------
(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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No NOT APPLICABLE
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1997
----------------------------- ----------------------------
Common Stock, $1.00 Par Value 5,659,694 shares
Index of Exhibit on Page 24
<PAGE> 2
EAGLE BANCSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income -
Three months ended June 30, 1997 and 1996 3
Consolidated Statements of Financial Condition at
June 30, 1997 and March 31, 1997 4
Consolidated Statements of Cash Flows -
Three months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Index of Exhibits 24
</TABLE>
2
<PAGE> 3
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited) Three Months Ended
(in thousands except per share data) June 30,
1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest on loans $14,078 $12,181
Interest on mortgage-backed securities 1,305 1,420
Interest on securities and other interest-earning assets 1,674 1,729
- ----------------------------------------------------------------------------------------------------
Total interest income 17,057 15,330
- ----------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 6,797 5,868
Interest on FHLB advances and other borrowings 2,443 2,116
- ----------------------------------------------------------------------------------------------------
Total interest expense 9,240 7,984
- ----------------------------------------------------------------------------------------------------
Net interest income 7,817 7,346
PROVISION FOR LOAN LOSSES 717 524
- ----------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 7,100 6,822
- ----------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage production fees 2,078 1,338
Gain on sale of investment in real estate 226 191
Real estate commissions, net 106 96
Service charges 541 408
Gain on sale of loans 16 25
Miscellaneous 522 486
- ----------------------------------------------------------------------------------------------------
Total other income 3,489 2,544
- ----------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES:
Salaries and employee benefits 4,720 4,194
Net occupancy expense 1,035 863
Data processing expense 548 264
Federal insurance premium 69 200
Marketing expense 271 203
Provision for losses on real estate acquired in the settlement of loans 120 --
Miscellaneous 1,608 1,289
- ----------------------------------------------------------------------------------------------------
Total other expenses 8,371 7,013
- ----------------------------------------------------------------------------------------------------
Income before income taxes 2,218 2,353
INCOME TAX EXPENSE 658 695
- ----------------------------------------------------------------------------------------------------
Net income $ 1,560 $ 1,658
- ----------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ .27 $ .29
- ----------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, March 31,
(dollars in thousands except per share data) 1997 1997
<S> <C> <C>
ASSETS:
Cash and amounts due from banks $ 16,905 17,405
Federal funds sold 19,200 8,470
Accrued interest receivable 5,748 5,472
Securities available for sale 97,205 96,921
Investment securities held to maturity 45,242 51,907
Loans held for sale 59,217 62,882
Loans receivable, net 541,071 515,749
Investment in real estate 25,878 25,828
Real estate acquired in settlement of loans, net 2,268 2,074
Stock in Federal Home Loan Bank, at cost 8,617 7,864
Premises and equipment, net 20,848 20,379
Deferred income taxes 1,656 2,284
Other assets 4,635 6,647
----------------------
Total assets $ 848,490 $ 823,882
----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits 579,113 557,724
Federal Home Loan Bank advances and other borrowings 164,058 153,805
Advance payments by borrowers for property taxes and insurance 1,523 1,279
Drafts outstanding 20,914 29,043
Accrued expenses and other liabilities 12,432 14,157
----------------------
Total liabilities $ 778,040 $ 756,008
----------------------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000,000 shares authorized,
5,961,494 shares issued at June 30 and March 31, 1997 5,961 5,961
Additional paid-in capital 36,628 36,628
Retained earnings 28,947 28,236
Net unrealized gain (loss) on securities available for sale, net of taxes 662 (1,025)
Employee Stock Ownership Plan note payable (672) (836)
Unamortized restricted stock -- (14)
Treasury stock, 301,800 shares at cost (1,076) (1,076)
----------------------
Total stockholders' equity 70,450 67,874
----------------------
Total liabilities and stockholders' equity $ 848,490 $ 823,882
----------------------
</TABLE>
4
<PAGE> 5
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands)
Three Months ended June 30, 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,560 $ 1,658
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation, amortization and accretion 522 410
Provision for loan losses 717 524
Provision for losses on real estate acquired in settlement of loans 120 --
Gain on sale of investments -- (6)
Loss (gain) on sale of real estate acquired in settlement of loans -- (7)
Gain on sale of investment in real estate (226) (191)
Gain on sale of loans (16) (25)
Amortization of restricted stock award 14 39
Deferred income tax (benefit) expense (67) 22
Amortization of deferred loan fees (684) (464)
Proceeds from sale of loans held for sale 157,373 156,947
Originations of loans held for sale (153,708) (158,469)
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable (276) (829)
Decrease (increase) in other assets 1,964 (487)
Increase (decrease) in drafts outstanding (8,129) 1,878
Increase (decrease) in accrued expense and other liabilities (1,725) (1,411)
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (2,561) (411)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (1,000) (6,419)
Proceeds from sale of securities available for sale -- 2,413
Purchases of investment securities held to maturity -- (5,000)
Principal payments received on securities available for sale 1,091 1,197
Principle payments received on investment securities held to maturity 373 921
Proceeds from calls of securities available for sale 1,500 --
Proceeds from maturities of securities available for sale 500 3,057
Proceeds from maturities of investment securities held to maturity 6,300 --
Loan originations, net of repayments (25,718) (8,011)
Purchases of loans receivable (83) (139)
Proceeds from sale of real estate acquired in settlement of loans 148 278
Purchases of FHLB stock (839) (1,165)
Redemption of FHLB stock 86 2,354
Purchase of premises and equipment, net (922) (1,173)
Additions to investment in real estate (750) (2,677)
Proceeds from sale of investment in real estate 904 1,205
- ----------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities $ (18,410) $ (13,159)
- ----------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Three Months ended June 30, 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in time deposits $ 18,602 $ 43,230
Net change in demand deposit accounts 2,787 470
Repayment of FHLB advances and other borrowings (66,417) (72,803)
Proceeds from FHLB advances and other borrowings 76,670 43,335
Dividends paid (849) (792)
Principal reduction of ESOP debt 164 --
Increase (decrease) in advance payments from borrowings for
property taxes and insurance 244 379
- ---------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities 31,201 13,819
- ---------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 10,230 249
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 25,875 19,911
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,105 $ 20,160
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH PAID DURING PERIOD FOR:
- ---------------------------------------------------------------------------------------------
Interest $ 8,969 $ 8,286
- ---------------------------------------------------------------------------------------------
Income Taxes $ 565 $ 404
- ---------------------------------------------------------------------------------------------
Supplemental schedule of noncash investing and financing activities:
- ---------------------------------------------------------------------------------------------
Acquisition of real estate in settlement on loans $ 462 $ 258
- ---------------------------------------------------------------------------------------------
Loans made to finance real estate acquired in settlement of loans $ -- $ 295
- ---------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
Eagle Bancshares, Inc.
Notes to Interim Unaudited Consolidated Financial Statements
June 30, 1997
A. Basis of Presentation:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for preparation of the Securities
and Exchange Commission Form 10-Q. Accordingly, they do not include all of the
information and disclosures required for fair presentation in accordance with
generally accepted accounting principles. These financial statements should
therefore be read in conjunction with management's discussion and analysis of
financial condition and results of operations included in this report and the
complete annual report for the year ended March 31, 1997, which has been filed
with the Company's most recent Form 10-K. In the opinion of management, all
eliminations and normal recurring adjustments considered necessary for fair
presentation have been included. Operating results for the three month period
ended June 30, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending March 31, 1998.
B. Reclassification of Prior Period Amounts:
Certain reclassifications have been made in the Company's financial
statements for the prior fiscal period to conform to the classifications used in
the financial statements for the current fiscal period.
C. Commitments and Contingencies
The Bank acquired the assets of Prime Lending Division of Southern
Federal Savings and Loan Association (the "Division") (now a division of
PrimeEagle) from the RTC on November 23, 1992. In connection with this
acquisition, the Bank entered into an operating agreement with a corporation
owned by two individuals who participate in the profits and losses pursuant to
the agreement. The term of the agreement is for five years and is automatically
renewable for an additional three-year period unless either party gives at least
90 days' prior written notice of their desire not to renew (August 25, 1997). In
the event that the Bank elects not to renew the agreement, the two individuals
have the right, but not the obligation, to purchase certain assets of the
Division for 75% of their appraised fair market value, upon assuming all
obligations associated with the Division. The specific impact of nonrenewal on
the financial condition of the Company, if any, cannot be determined at this
time.
The Company is involved in an in-depth assessment of the mortgage
banking group. This includes evaluating each office's profitability, business
prospects, and carefully considering the business potential of each local
market. In connection with this analysis, the Company is examining the
alternatives with regard to the above-mentioned agreement including nonrenewal.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
<TABLE>
<CAPTION>
SUMMARY FINANCIAL DATA
(dollars in thousands except per share % Change
data) Quarter Ended June 30, 1997 from
June 30, March 31, June 30, March 31, June 30,
For the quarter: 1997 1997 1996 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 1,560 $ 240 $ 1,658 550.00 (5.91)
Per common share:
Net income .27 .04 .29 575.00 (6.90)
Dividends declared .15 .15 .15 -- --
Book value per share 12.45 11.99 12.04 3.84 3.41
Average common shares outstanding 5,811 5,715 5,715 1.68 1.68
Profitability ratios: (%)
Return on average assets .77 .12 .90 541.67 14.44
Return on average equity 8.97 1.42 9.91 531.69 (9.49)
Efficiency ratio 74.04 85.64 70.91 (13.55) 4.41
Net interest margin - taxable equivalent 4.23 4.23 4.39 -- (3.64)
Equity to assets 8.30 8.24 8.85 .73 (6.21)
At quarter end:
Loans held for sale $ 59,217 $ 62,882 $ 94,074 (5.83) (37.05)
Loans receivable, net 541,071 515,749 418,833 4.91 29.19
Reserve for loan losses 5,761 5,198 5,035 10.83 14.42
Assets 848,490 823,882 751,122 2.99 12.96
Deposits 579,113 557,724 502,159 3.84 15.32
FHLB advances and other borrowings 164,058 153,805 144,869 6.67 13.25
Stockholders' equity 70,450 67,874 66,508 3.79 5.93
</TABLE>
Overview
Net income for the current quarter, decreased $98,000 to $1,560,000 or
$.27 per share from $1,658,000 or $.29 per share for the same quarter one year
ago. The decline was primarily due to a 36.83% increase in loan loss provisions.
In addition, increases in noninterest expense of 19.36% also contributed but
were somewhat mitigated by the 37.15% increase in noninterest income.
Net income for the quarter was 5 times greater than fourth quarter net
income of $240,000 or $.04 per share. The increase is directly attributable to
the one time merger related expenses charged during the fourth quarter of
$1,685,000. Net income, for the fourth quarter, excluding merger-related
expense, would have been $1,925,000 or $.34 per share.
Earnings Highlights
(First quarter Fiscal 1998 compared to First quarter Fiscal 1997)
- - Noninterest income increased $945,000 to $3,489,000 from $2,544,000 for the
same quarter one year ago. Increases in mortgage production fees and
service charges were the main contributors to the increase.
- - Return on average shareholders' equity declined to 8.97%, from 9.91% in the
first quarter last year.
- - Return on average assets declined to 0.77% from 0.90% in the first quarter
last year.
8
<PAGE> 9
- - Loan loss provisions increased $193,000 to $717,000 from $524,000 for the
same quarter one year ago. The Company's total problem assets declined to
1.38% of total assets.
- - Noninterest expenses increased $1,358,000 to $8,371,000 from $7,013,000 for
the same quarter one year ago. This increase is directly attributable to
the Company's growth.
Net Interest Income
In the first quarter, net interest income increased $471,000 to
$7,817,000. The growth was achieved through a 16.63% increase in average loans
and a 10 basis-point decline in the net interest spread.
Noninterest income
Noninterest income rose 37.15% to $3,489,000 in the first quarter of
1998. This growth was primarily attributable to higher levels of mortgage
production fees, income from deposit accounts, and fees from Eagle Real Estate
Advisors, the Company's real estate subsidiary.
Efficiency
In the first quarter of fiscal 1998, the efficiency ratio deteriorated
approximately 3.13% to 74.04%, compared to 70.91% in the first quarter of fiscal
1997. The Company is currently analyzing each business unit to determine the
profitability of each line of business. Management is also redesigning workflow
and making technology enhancements to improve efficiencies in its community
banking and mortgage banking lines of business.
Credit Quality
Total nonperforming assets were $9,049,000 on June 30, 1997, or 1.67%
of net loans receivable compared to 2.37% on June 30, 1996. The reserve for loan
losses totaled $5,761,000 at quarter end, or 84.96% of non-performing loans,
compared to $5,035,000 or 62.52% one year earlier. During the quarter, the
provision for loan losses was $717,000, exceeding net charge-offs of $154,000.
Net charge-offs for the quarter equaled 0.03% of average loans, a decrease when
compared to 0.19% for the first quarter last year.
Capital Strength
Total shareholders' equity was $70,450,000 on June 30, 1997. This
represented 8.30% of period-end assets, compared to 8.85% at June 30, 1996. Book
value per common share rose to $12.45 at the end of the quarter.
EARNINGS ANALYSIS
Net Interest Income
Net interest income increased by $471,000 or 6.41% to $7,817,000 in the
first quarter of fiscal 1997 from $7,346,000 for the same period last year. This
increase resulted from growth in interest earning assets primarily through loan
originations. The net interest spread (the difference between the yield earned
on interest earning assets and the cost of interest bearing liabilities)
declined 10 basis points to 402 basis points from 412 basis points in the same
period last year. The primary reason for the decline was the increase in the
cost of interest bearing liabilities, specifically FHLB advances. Yield on
interest earning assets increased 8 basis points to 9.14% from 9.06% while the
cost of interest bearing liabilities increased 18 basis points to 5.12% from
4.94%.
Interest income received on loans increased $1,897,000 or 15.57% to
$14,078,000 for the first quarter of fiscal 1998 from $12,181,000 million in
fiscal 1997. The increase in interest received on loans is attributable to
growth in the loan portfolio. Higher originations of home equity, consumer and
commercial loans reflect the Company's change in loan mix. The yield on the loan
portfolio declined 8 basis points at 9.62% for the quarter compared to 9.70% in
the same quarter last year. Interest received on mortgage backed securities
decreased $115,000 or 8.10% to $1,305,000 million for the first quarter
9
<PAGE> 10
of fiscal 1998 from $1,420,000 in the first quarter of fiscal 1997. Interest
received on securities decreased $55,000 or 3.18% to $1,674,000 in fiscal 1998
from $1,729,000 in the prior period.
Interest expense increased $1,256,000 or 15.73% to $9,240,000 for the
first quarter of fiscal 1998 from $7,984,000 in the first quarter of fiscal
1997. This is primarily the result of growth in deposits. Interest expense on
deposits increased $929,000 or 15.83% to $6,797,000 from $5,868,000 in the same
period in the prior year. The cost of deposits remained stable at 4.85% during
the quarter compared to 4.84% in the prior period. The Company's ability to
attract checking accounts has played a major role in maintaining the cost of
deposits and reflects a clear change in deposit mix. Interest expense on FHLB
advances and other borrowings also increased $327,000 or 15.45% to $2,443,000
for the first quarter of fiscal 1998 from $2,116,000 in the first quarter of
fiscal 1997. The Bank's cost of FHLB advances and other borrowings increased 81
basis points to 6.05% from 5.24% in the same period in the prior year.
Interest Rate Sensitivity
Net interest income on a taxable-equivalent basis expressed as a
percentage of average total assets is referred to as the net interest margin.
The net interest margin represents the average net effective yield on earning
asserts. The net interest margin decreased to 4.23% during the first quarter of
fiscal 1998 from 4.39% during the first quarter of fiscal 1997. The average
balance sheet on the next page presents the individual components of net
interest income and expense, net interest spread and net interest margin. The
decline in the net interest margin in the first quarter of fiscal 1998 was
primarily attributable to the increase in the cost of interests bearing
liabilities.
The following table reflects the average balances, the interest income
or expense and the average yield and cost of funds of the Company's interest
earning assets and interest bearing liabilities during the quarters ended June
30, 1997 and 1996:
10
<PAGE> 11
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET
Quarter ended June 30, 1997 1996
AVERAGE YIELD/ Average Yield/
(dollars in thousands) BALANCE INTEREST COST Balance Interest Cost
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
- ---------------------------------------------------------------------------------------------------------------------------
Loans(1) $585,599 $14,078 9.62% $502,108 $12,181 9.70%
Mortgage-backed securities 70,114 1,305 7.44% 77,576 1,420 7.32%
FHLB stock 8,313 166 7.99% 8,436 152 7.21%
Taxable investments(2) 42,626 781 7.33% 51,771 934 7.22%
Tax-exempt investment securities(2) 34,117 705 8.27% 35,127 668 7.61%
Interest earning deposits and Federal funds 12,187 168 5.51% 8,380 123 5.87%
- ---------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 752,956 17,203 9.14% 683,398 15,478 9.06%
Non-interest earning assets 60,068 55,963
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $813,024 $739,361
- ---------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
- ---------------------------------------------------------------------------------------------------------------------------
Savings accounts $ 46,756 $ 281 2.40% $ 46,726 $ 282 2.41%
Checking 78,995 292 1.47% 67,642 241 1.43%
Money market 22,614 150 2.65% 18,654 119 2.55%
Certificates of deposit 411,758 6,074 5.90% 352,191 5,226 5.94%
- ---------------------------------------------------------------------------------------------------------------------------
Total deposits 560,123 6,797 4.85% 485,213 5,868 4.84%
Advances and other borrowings 161,579 2,443 6.05% 161,631 2,116 5.24%
- ---------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 721,702 9,240 5.12% 646,844 7,984 4.94%
Non-interest bearing liabilities 21,788 25,594
Stockholders' equity 69,534 66,923
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $813,024 $739,361
- ---------------------------------------------------------------------------------------------------------------------------
Net interest rate spread $ 7,963 4.02% $ 7,494 4.12%
Taxable-equivalent adjustment (146) (148)
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income, actual $ 7,817 $ 7,346
Net interest earning assets/net interest margin $ 31,254 4.23% $ 36,554 4.39%
Interest earning assets as a percentage of
interest bearing liabilities 104.33% 105.65%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Non-accrual loans are included in average balances and income on such
loans, if recognized, is recorded on a cash basis.
(2) The yield for investment securities classified for sale is computed using
historical amortized cost balances.
Non-Interest Income
Non-interest income increased by $945,000 or 37.15% to $3,489,000 for
the first quarter of 1998 from $2,544,000 for the same period last year.
Mortgage production fees are the largest component of non-interest income and
these fees increased $740,000 or 55.31% to $2,078,000 compared to $1,338,000 in
the first quarter of fiscal 1997. The volume of loans sold in the secondary
market was comparable for both quarters with $157,373,000 sold during the
current period compared to $156,947,000 during the first quarter last year. The
margin earned on these loans (mortgage production fees divided by mortgage
volume sold) increased to 132 basis points in the current period compared to 85
basis points in the first quarter of fiscal 1997.
During the first quarter of 1998, the Company sold 31 lots and recorded
a gain on sale of investment in real estate of $226,000 compared to 45 lots and
a gain of $191,000 for the same quarter in 1997.
11
<PAGE> 12
Service charges increased $133,000 or 32.60% to $541,000 in the first
quarter of fiscal 1998 compared to $408,000 for the same period last year. This
is the result of growth in the number of checking accounts during the year.
Non-Interest Expense
Non-interest expense increased by $1,358,000 or 19.36% to $8,371,000
for the first quarter of fiscal 1998 from $7,013,000 for the same period last
year. The Company's efficiency ratio was 74.04% for the first quarter of fiscal
1998 compared to 70.91% for the same period last year. In general the increase
in all categories of non-interest expense is attributable to the Company's rapid
growth. The Company is currently analyzing each line of business to determine
their level of profitability and is the process of redesigning workflow to
improve efficiencies.
Salaries and employee benefits increased $526,000 or 12.54% to
$4,720,000 for the first quarter of fiscal 1998 from $4,194,000 for the same
period last year. This increase is due to the addition of employees to support
the Company's growth. Occupancy expense increased $172,000 or 19.93% to
$1,035,000 in the first quarter of fiscal 1998 from $863,000 for the same period
last year. Federal insurance premiums decreased $131,000 or 65.50% to $69,000
for the first quarter of fiscal 1998 from $200,000 for the same period last
year. The decline is due to the reduction of the amount of premiums paid on
deposits from $.23 per one hundred dollar of deposits to $.06 per one hundred
dollar of deposits.
Miscellaneous expenses increased $319,000 or 24.75% to $1,608,000 for
the first quarter of fiscal 1998 from $1,289,000 for the same period last year.
This increase is due to increases in office supplies, telephone and
communications, and consulting and attorney fees due to the Company's expansion.
BALANCE SHEET ANALYSIS
Investment Securities
During the first quarter of fiscal 1998, investment securities
decreased to $142,447,000 from $148,828,000 and $163,663,000 at March 31, 1997
and June 30, 1996, respectively. The Company classifies its securities in one of
three categories in accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities": trading, available for sale, or held to maturity. With the adoption
of SFAS No. 115, the Company has reported the effect of the change in the method
of accounting for investments in debt securities classified as available for
sale as a separate component of equity, net of income taxes. The Company has no
trading securities.
12
<PAGE> 13
The investment securities portfolio at June 30, 1997, was comprised of
$45,242,000 of investment securities held to maturity at amortized cost compared
to $51,907,000 and $59,437,000 at March 31, 1997 and June 30, 1996,
respectively. The Company has the ability and it is the management's intent to
hold these securities to maturity for investment purposes. In addition,
investment securities available for sale had an estimated market value of
$97,205,000 at June 30,1997 compared to $96,921,000 and $104,226,000 at March
31, 1997 and June 30, 1996, respectively. Investment securities available for
sale had a net unrealized gain as shown in the Company's stockholders' equity
section of $662,000 at June 30, 1997 versus a net unrealized loss of $1,025,000
at March 31, 1997.
The Company holds no investment securities by any single issuer, other
than those issued by an agency of the United States government, which equaled or
exceeded 10% of stockholders' equity at June 30, 1997, March 31, 1997 or June
30, 1996.
The following table reflects securities held in the Bank's securities
portfolio for the periods indicated:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
(dollars in thousands) June 30, March 31, June 30,
1997 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Securities Held to Maturity:
US Treasury and US Government Agencies $ 21,482 $ 27,780 $ 32,458
Mortgage-backed securities 6,261 6,406 7,563
Corporate bonds 7,429 7,429 8,425
Other debt securities 10,070 10,292 10,991
- --------------------------------------------------------------------------------
Total $ 45,242 $ 51,907 $ 59,437
- --------------------------------------------------------------------------------
Securities Available for Sale:
US Treasury and US Government Agencies $ 13,347 $ 15,176 $ 21,673
Mortgage-backed securities 63,387 62,352 66,295
Corporate Bonds 2,005 2,005 2,008
Other debt securities 4,010 3,970 4,742
Equity securities - preferred stock 14,456 13,418 9,508
- --------------------------------------------------------------------------------
Total $ 97,205 $ 96,921 $104,226
- --------------------------------------------------------------------------------
Total Investment Securities:
US Treasury and US Government Agencies $ 34,829 $ 42,956 $ 54,131
Mortgage-backed securities 69,648 68,758 73,858
Corporate bonds 9,434 9,434 10,433
Other debt securities 14,080 14,262 15,733
Equity securities - preferred stock 14,456 13,418 9,508
- --------------------------------------------------------------------------------
Total $142,447 $148,828 $163,663
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
Loan Portfolio and Concentration
LOAN PORTFOLIO MIX
<TABLE>
<CAPTION>
June 30, % of Gross March 31, % of Gross June 30, % of Gross
(dollars in thousands) 1997 Loans Recv 1997 Loans Recv 1996 Loans Recv
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate - construction loans
Construction $225,582 35.74% $205,086 33.98% $194,027 37.88%
Acquisition & Development 34,829 5.52% 35,408 5.87% 28,725 5.61%
Real Estate - mortgage loans
Non-Residential 29,643 4.70% 28,764 4.76% 28,154 5.50%
Residential 199,356 31.58% 194,821 32.28% 157,903 30.82%
Home equity and second mortgages 45,421 7.19% 43,752 7.25% 20,156 3.93%
- --------------------------------------------------------------------------------------------------------------------------------
Total real estate loans 534,831 84.73% 507,831 84.14% 428,965 83.74%
- --------------------------------------------------------------------------------------------------------------------------------
Commercial and consumer loans:
Commercial 49,791 7.89% 52,144 8.64% 35,068 6.85%
Leases 16,493 2.61% 19,939 3.30% 33,250 6.49%
Consumer and other 30,076 4.77% 23,648 3.92% 15,000 2.93%
- --------------------------------------------------------------------------------------------------------------------------------
Total commercial and consumer loans 96,360 15.27% 95,731 15.86% 83,318 16.26%
- --------------------------------------------------------------------------------------------------------------------------------
Total gross loans receivable 631,191 100.00% 603,562 100.00% 512,283 100.00%
- --------------------------------------------------------------------------------------------------------------------------------
Less:
Undisbursed portion of loans
in process (82,538) (80,801) (86,351)
Deferred loan origination fees (1,674) (1,684) (1,703)
Unearned income (184) (212) (315)
Reserves for loan losses (5,761) (5,198) (5,035)
Unearned discount on
loans purchased 37 82 (46)
- --------------------------------------------------------------------------------------------------------------------------------
Loans receivable, net $541,071 $515,749 $418,833
================================================================================================================================
</TABLE>
Loan Portfolio and Concentration
The loan portfolio has grown $122,238,000 or 29.19% to $541,071,000 at
June 30, 1997, compared to $418,833,000 at June 30, 1996. Each loan category
showed increases with the exception of leases which declined $16,757,000 or
50.40% to $16,493,000 down from $33,250,000.
Construction and acquisition and development loans, net of the
undisbursed portion of loans in process, increased $41,472,000 or 30.40% to
$177,873,000 at June 30, 1997, from $136,401,000 at June 30, 1996. Construction
and acquisition and development loans represent 41.26% of gross loans receivable
at June 30, 1997, remaining consistent when compared to 43.48% at June 30, 1996.
Residential mortgage loans increased $41,453,000 or 26.25% to $199,356,000 at
June 30, 1997 from $157,903,000 at June 30, 1996. Home equity and second
mortgage loans increased $25,265,000 or 125.35% to $45,421,000 at June 30, 1997
from $20,156,000 at June 30, 1996. These loans represent 7.19% of gross loans
receivable at June 30, 1997.
Commercial loans increased $14,723,000 or 41.98% to $49,791,000 at June
30, 1997 or 7.89% of loans compared to $35,068,000 or 6.85% of loans at June 30,
1996. Consumer loans increased $15,076,000 or 100.51% to $30,076,000 at June 30,
1997 or 4.77% of loans compared to $15,000,000 or 2.93% of loans at June 30,
1996.
14
<PAGE> 15
Non-Performing Assets
Total problem assets, which include non-accrual loans, loans classified
as problem assets by Asset Classification Committee (ACC) and real estate
acquired through the settlement of loans, decreased by $765,000 or 6.15% to
$11,678,000 at June 30, 1997 from $12,443,000 at March 31, 1997. Total problem
assets as a percent of total assets decreased to 1.38% at June 30, 1997 from
1.51% at March 31, 1997. At June 30, 1997, the Company had non-accrual loans of
$6,781,000 compared to $7,866,000 at March 31, 1997. Interest income not
recognized on these loans amounted to $240,000 during the first quarter of
fiscal 1998 and $194,000 for the same period last year. In addition, at June 30,
1997, the ACC identified $2,629,000 of potential problem loans compared to
$2,503,000 at March 31, 1997. Real estate owned increased by $194,000 or 9.35%
to $2,268,000 at June 30, 1997, from $2,074,000 at March 31, 1997.
The following table reflects non-performing loans, potential problem
loans and restructured loans as of the dates indicated. Non-performing loans
consist of non-accrual loans and foreclosed properties, as well as loans past
due 90 days or more as to interest or principal and still accruing. Potential
problem loans are those which management has doubts regarding the ability of the
borrower to comply with current loan repayment terms and have been classified as
such by the ACC regardless of payment status.
NON-ACCRUAL, PAST DUE and RESTRUCTURED LOANS
<TABLE>
<CAPTION>
June 30, March 31, June 30,
(dollars in thousands) 1997 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans:
Residential real estate-construction $ 728 $ 1,692 $ 3,065
Residential real estate-mortgage 3,301 2,934 1,018
Commercial real estate - 427 128
Commercial 23 93 34
Commercial lease 2,396 2,508 3,751
Installment 333 212 57
- -----------------------------------------------------------------------------------------
Total non-accrual 6,781 7,866 8,053
- -----------------------------------------------------------------------------------------
Potential problem loans 2,629 2,503 1,675
Loans contractually delinquent 90
days which still accrue interest -- -- --
Troubled debt restructurings -- -- --
- -----------------------------------------------------------------------------------------
Total non-accrual and problem loans $ 9,410 $10,369 $ 9,728
- -----------------------------------------------------------------------------------------
Real estate owned, net 2,268 2,074 1,464
- -----------------------------------------------------------------------------------------
Total problem assets $11,678 $12,443 $11,192
- -----------------------------------------------------------------------------------------
Total problem assets/Total assets 1.38% 1.51% 1.49%
- -----------------------------------------------------------------------------------------
Total problem assets/Net loans plus
reserves 2.14% 2.41% 2.64%
- -----------------------------------------------------------------------------------------
Reserve for loan losses/Total
problem assets 49.33% 41.78% 44.99%
- -----------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
The following table reflects concentrations of non-accrual, potential
problem loans and real estate owned by geographic location and type.
NON-ACCRUAL, POTENTIAL PROBLEM LOANS AND REAL ESTATE OWNED BY LOCATION AND TYPE
<TABLE>
<CAPTION>
At June 30, 1997 Residential
------------------ Comm'l % of Total
(dollars in thousands) Const Mtgs R-Estate Comm'l Leases Installment Total Location
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-accrual:
Atlanta $ -- $ 2,191 $ -- $ 23 $ -- $ 227 $ 2,441 20.45%
Augusta -- 382 -- -- -- -- 382 3.20%
Jacksonville -- 22 -- -- -- -- 22 0.18%
Savannah 290 -- -- -- -- -- 290 2.43%
Hinesville 31 120 -- -- -- -- 151 1.27%
Warner Robins 292 -- -- -- -- -- 292 2.45%
All other locations 114 587 -- -- 2,396 106 3,203 26.84%
- -----------------------------------------------------------------------------------------------------------------------------
Total non-accrual 727 3,302 -- 23 2,396 333 6,781 56.82%
- -----------------------------------------------------------------------------------------------------------------------------
Potential problem loans:
Atlanta 1,031 19 136 136 -- 29 1,351 11.32%
Hinesville 925 -- -- 353 -- -- 1,278 10.71%
- -----------------------------------------------------------------------------------------------------------------------------
Total potential problem loans 1,956 19 136 489 -- 29 2,629 22.03%
- -----------------------------------------------------------------------------------------------------------------------------
Real estate owned:
Atlanta 471 56 308 341 -- -- 1,176 9.85%
Augusta -- 87 -- -- -- -- 87 0.73%
Jacksonville 333 -- -- -- -- -- 333 2.79%
All other locations 412 516 -- -- -- -- 928 7.78%
- -----------------------------------------------------------------------------------------------------------------------------
Total real estate owned(1) 1,216 659 308 341 -- -- 2,524 21.15%
- -----------------------------------------------------------------------------------------------------------------------------
Total problem assets by type $ 3,899 $ 3,980 $ 444 $ 853 $ 2,396 $ 362 $11,934 100.00%
- -----------------------------------------------------------------------------------------------------------------
% of total problem assets by type 32.68% 33.35% 3.72% 7.15% 20.07% 3.03% 100.00%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include reserves of $256,000; real estate owned, net equals
$2,268,000.
Concentrations to Single Borrowers
The Bank has lease exposure, to one company, of $1,797,000. This
company is the lessor on seven leases and has filed for bankruptcy protection.
The seven leases are a part of the bankruptcy proceedings and the lessees remit
payments to the trustee. The trustee has made settlement offers to the Bank
which have been declined.
In addition, there are two borrowers with potential problem loans, one
in Atlanta, Georgia and one in Hinesville, Georgia. The borrower in Atlanta has
$946,000 of construction loans. The borrower in Hinesville has $1,278,000 of
potential problem loans. This borrower has $925,000 of construction loans and
$353,000 of commercial real estate loans. These loans are in the process of
collection.
16
<PAGE> 17
Loan Impairment
At June 30, 1997, the recorded investment in impaired loans, which
excludes non-accrual first mortgage loans and residential construction loans,
increased $17,000 or .96% to $1,797,000 from $1,780,000 at March 31, 1997 and
decreased $2,370,000 or 56.87% from $4,167,000 at June 30, 1996. At June 30,
1997 and March 31, 1997, no impaired loans were on an accrual basis versus
$432,000 on an accrual basis and $3,735,000 on a non-accrual basis at June 30,
1996. At June 30, 1997 and March 31, 1997, the valuation allowance related to
these impaired loans was $459,000 compared to $1,077,000 at June 30, 1996. At
June 30, 1997, March 31, 1997 and June 30, 1996, all impaired loans had a
related loan loss reserve. For the first quarter of fiscal 1998, the average
recorded investment in impaired loans was $1,798,000 compared to $1,801,000 and
$4,053,000 for the quarters ending March 31, 1997 and June 30, 1996,
respectively.
The Company uses either the cash or cost recovery method to record cash
receipts on impaired loans that are on nonaccrual. Under the cash method,
contractual interest is credited to interest income when received. This method
is used when the ultimate collectibility of the total principal is not in doubt.
Loans on the cost recovery method may be changed to the cash method when the
application of the cash payments has reduced the principal balance to a level
where collection of the remaining recorded investment is no longer in doubt.
Reserve for Loan Losses
The Company set aside $717,000 and $524,000, respectively, of
additional reserves for possible loan losses during the first quarters of fiscal
1998 and 1997. At June 30, 1997, reserves represented 0.98% of average loans
outstanding during the period, remaining unchanged from March 31, 1997.
Charge-offs during the first quarter of 1998, were $154,000 versus $462,000
during the quarter ending March 31, 1997. In the first quarter of 1998,
charge-offs represented 0.03% of average loans outstanding, remaining stable,
compared to 0.09% for the quarter ending March 31, 1997. Loan loss reserves
totaled $5,761,000 and $5,198,000 at June 30, 1997 and March 31, 1997,
respectively. Loan loss reserves to total problem assets increased to 49.33% at
June 30, 1997 from 41.78% at March 31, 1997. An allocation of the reserve for
loan losses has been made according to the respective amounts deemed necessary
to provide for the possibility of incurred losses within the various loan
categories. Although other relevant factors are considered, the allocation is
primarily based on previous charge-off experience adjusted for risk
characteristic changes among each category. Additional reserve amounts are
allocated by evaluating the loss potential of individual loans that management
has considered impaired. The reserve for loan loss allocation is based on
subjective judgment and estimates, and therefore is not necessarily indicative
of the specific amounts or loan categories in which charge-offs may ultimately
occur. Management believes that the reserves for losses on loans are adequate
based upon management's evaluation of, among other things, estimated value of
the underlying collateral, loan concentrations, specific problem loans, and
economic conditions that may affect the borrowers' ability to repay and such
other factors which, in management's judgment, deserve recognition under
existing economic conditions. While management uses available information to
recognize losses on loans, future additions to the allowances may be necessary
based on changes in economic conditions and composition of the Company's loan
portfolio. The following tables provide an analysis of the reserve for losses.
17
<PAGE> 18
ANALYSIS OF THE RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
(dollars in thousands) June 30, 1997 March 31, 1997 June 30, 1996
----------------------------------------------------
<S> <C> <C> <C>
Reserve for loan losses, beginning of quarter $ 5,198 $ 5,008 $ 5,464
Charge-offs:
Real estate - construction 49 32 --
Real estate - mortgage 92 39 57
Consumer 43 23 3
Commercial 27 20 --
Commercial leases -- 402 959
- -----------------------------------------------------------------------------------------------------------
Total charge-offs 211 516 1,019
Recoveries 57 54 66
- -----------------------------------------------------------------------------------------------------------
Net charge-offs 154 462 953
Provision for loan losses 717 652 524
- -----------------------------------------------------------------------------------------------------------
Reserve for loan losses, end of quarter $ 5,761 $ 5,198 $ 5,035
- -----------------------------------------------------------------------------------------------------------
Average loans outstanding for the period $585,599 $531,619 $502,108
- -----------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans .03% .09% .19%
- -----------------------------------------------------------------------------------------------------------
Reserves to average loans outstanding 0.98% 0.98% 1.00%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Investment in Real Estate
The Company's investment in real estate increased $50,000 since March
31, 1997 and $11,382,000 since June 30, 1996. The Company currently has six real
estate projects in the Atlanta market.
Deposits
Deposits are the Company's primary funding source. Total deposits
increased by $21,389,000 or 3.84% to $579,113,000 from $557,724,000 at March 31,
1997. The Bank uses traditional marketing methods to attract new customers. Its
deposit network is serviced from its fourteen branches in Atlanta. The growth in
deposits was primarily in certificates of deposits which grew 4.52% to
$430,305,000 at June 30, 1997 from $411,703,000 at March 31, 1997. Demand
deposits including noninterest-bearing, interest-bearing, savings and money
market accounts were 25.70% of the Company's deposits at June 30, 1997. The
weighted average interest rate on deposits remained stable at 4.85% at June 30,
1997 and 4.84% at March 31, 1997 and June 30, 1996.
18
<PAGE> 19
For the periods indicated, deposits are summarized by type and
remaining term as follows:
Deposit Mix
<TABLE>
<CAPTION>
June 30, March 31, June 30,
(dollars in thousands) 1997 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Demand deposits:
Noninterest-bearing deposits $ 28,174 $ 29,843 $ 22,824
Interest-bearing deposits 54,361 48,923 46,609
Money market accounts 22,039 20,902 17,892
Savings accounts 44,234 46,353 46,371
-------------------------------------
148,808 146,021 133,696
-------------------------------------
Time deposits:
Maturity one year or less 313,231 308,459 262,576
Maturity greater than one year through
two years 39,067 33,155 33,336
Maturity greater than two years through
three years 39,743 29,312 17,522
Maturity greater than three years 38,264 40,777 55,028
-------------------------------------
430,305 411,703 368,462
-------------------------------------
Total deposits $579,113 $557,724 $502,158
-------------------------------------
</TABLE>
The weighted average interest rate on time deposits for the periods
ended June 30, 1997, March 31, 1997 and June 30, 1996 was 5.83%, 5.84% and
5.92%, respectively.
For the periods indicated, interest expense on deposits is summarized
as follows:
<TABLE>
<CAPTION>
June 30, March 31, June 30,
(dollars in thousands) 1997 1997 1996
--------------------------------------
<S> <C> <C> <C>
Interest-bearing deposits $ 292 $ 254 $ 241
Money market accounts 150 137 119
Savings accounts 281 280 282
Time deposits 6,074 5,833 5,226
--------------------------------------
Total $6,797 $6,504 $5,868
--------------------------------------
</TABLE>
Borrowings
The FHLB system functions as a reserve credit facility for thrift
institutions and certain other member institutions. The Bank utilizes advances
from the FHLB to fund a portion of its assets. At June 30, 1997, advances were
$150,437,000 compared to $141,383,000 at March 31, 1997. At June 30, 1997, the
weighted average interest rate on these borrowings was 6.31% compared to 6.80%
at March 31, 1997.
19
<PAGE> 20
Liquidity and Capital Resources
Liquidity Management
The Asset and Liability Committee ("ALCO") manages the Company's
liquidity needs to ensure there is sufficient cash flow to satisfy demand for
credit and deposit withdrawals, to fund operations and to meet other Company
obligations and commitments on a timely and cost effective basis. Increases in
core deposits have provided a significant portion of the Company's cash flow
needs and continue to provide a relatively stable, low cost source of funds. The
Company has also experienced significant growth in assets. Total assets
increased $24,608,000 over the previous three months were funded by deposits
which increased $21,389,000. The Company's core deposits and stockholders'
equity funded 76.55% of total assets at June 30, 1997. The Company's other
primary funding source was provided by advances from the Federal Home Loan Bank.
At June 30, 1997, advances stood at $150,437,000 or 17.73% of total assets.
Under current regulations, the Bank is required to maintain liquid assets at 5
percent or more of its net withdrawal deposits for short term borrowings. At
June 30, 1997, the Company's liquidity ratio was 7.73%. At June 30, 1997, the
Company had commitments to originate loans of approximately $38,002,000. The
Company had commitments to sell mortgage loans of approximately $59,517,000 at
June 30, 1997.
Beginning April 1, 1995, the Bank formed an operating subsidiary,
PrimeEagle, and consolidated all real estate lending activities into this
business unit. This business unit generates revenues by originating construction
loans and permanent mortgage loans. Substantially all fixed rate permanent
mortgage and SBA loans are sold to investors. Permanent mortgage loan
originations decreased 3.00% to $153,708,000 for the first quarter of fiscal
1998 compared to $158,469,000 for the same period last year. The Company manages
the funding requirements of these loans primarily with short term advances from
the FHLB.
Cash Flows from Operating Activities
For the quarter ending June 30, 1997, the Company used cash from
operating activities of $2,561,000 compared to $411,000 for the quarter ending
June 30, 1996. The primary reason for this fluctuation is timing differences
from the sale of loans held for sale versus originations of loans held for sale.
During the 3 months ending June 30, 1997, the Company originated $153,708,000 of
loans held for sale and sold $157,373,000 of loans held for sale. This resulted
in a $3,665,000 source of cash. This compares to the same quarter last year ,
when the Company originated $158,469,000 of loans held for sale and sold
$156,947,000 of loans held for sale.
Cash Flows from Investing Activities
During the quarter ending June 30, 1997, the Company used $18,410,000
of cash for investing activities compared to $13,159,000 for the quarter ending
June 30, 1996. Loan originations net of repayments represented 139.70% of cash
used or $25,718,000 compared to 60.88% or $8,011,0000 for the quarter ending
June 30, 1996. For the quarter ending June 30, 1997, there were no purchases of
investment securities held to maturity and securities available for sale
decreased to $1,000,000 representing 5.43% of total cash used for investing
activities. Comparatively, for the quarter ending June 30, 1996, the Company
purchased $5,000,000 of investment securities held to maturity and $6,419,000 of
securities available for sale representing 86.78% of cash used in investing
activities. In addition, the Company used funds of $750,000 for investment in
real estate compared to $2,677,000 during the quarters ending June 30, 1997 and
1996, respectively.
20
<PAGE> 21
Cash Flows from Financing Activities
Cash provided from financing activities during the quarter ending June
30, 1997, was $31,201,000 compared to $13,819,000 during the quarter ending June
30, 1996. FHLB advances provided the most significant increase in cash provided
from financing activities. The Company borrowed $54,454,000 from the FHLB and
repaid $45,400,000 during the quarter ending June 30, 1997. This compares to
borrowings of $41,020,000 and repayments of $71,700,000 during the quarter
ending June 30, 1996. The Company's deposits increased by $21,389,000 during the
quarter ending June 30, 1997. The increase is comprised of $18,602,000 of time
deposits and $2,787,000 in demand deposits. Comparatively, for the quarter
ending June 30, 1996, deposits increased $43,700,000 comprised of $43,230,000 in
time deposits and $470,000 in demand deposits. The Company paid cash dividends
to its shareholders of $849,000 and $792,000 for the quarters ended June 30,
1997 and June 30, 1996, respectively.
Capital
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established five capital categories for financial institutions. The
OTS places each federally chartered thrift institution into one of five
categories: well capitalized, adequately capitalized, under capitalized,
significantly under capitalized, and critically under capitalized. These
classifications are based on the Bank's level of risk based capital, leverage
ratios and its supervisory ratings. FDICIA defines "well capitalized" banks as
entities having a total risk based capital ratio of 10% or higher, a tier one
risk based capital ratio of 6% or higher and a leveraged ratio of 5% or higher.
At June 30, 1997, the Bank was classified as "well capitalized" under the OTS
regulations that implement the FDICIA provisions described above.
The following table reflects the Bank's minimum regulatory capital
requirements, actual capital and the level of excess capital by category. The
Bank has historically maintained capital substantially in excess of the minimum
requirement. In fiscal 1997, the Bank paid a dividend in the form of equity
securities to the Company in the amount of $6,094,000.
<TABLE>
<CAPTION>
REGULATORY CAPITAL
- ----------------------------------------------------------------------------------------------
Regulatory Required Excess
(dollars in thousands) Capital % Capital % Capital %
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1997
Risk-based ratios:
Tier 1 capital $52,796 9.33 $22,624 4.00 $30,172 5.33
Total capital $58,264 10.30 $45,248 8.00 $13,016 2.30
Tier 1 leverage $52,796 6.41 $32,962 4.00 $19,834 2.41
Tangible equity $52,796 6.55 $12,083 1.50 $40,713 5.05
- ----------------------------------------------------------------------------------------------
March 31, 1997
Tier 1 capital $54,019 10.14 $21,311 4.00 $32,708 6.14
Total capital $59,023 11.08 $42,622 8.00 $16,401 3.08
Tier 1 leverage $54,019 6.72 $32,144 4.00 $21,875 2.72
Tangible equity $54,019 7.05 $11,499 1.50 $42,520 5.55
- ----------------------------------------------------------------------------------------------
June 30, 1996
Tier 1 capital $57,752 12.57 $18,383 4.00 $39,369 8.57
Total capital $62.087 13.51 $36,766 8.00 $25,321 5.51
Tier 1 leverage $57,752 7.70 $29,989 4.00 $27,763 3.70
Tangible equity $57,752 7.81 $11,090 1.50 $46,662 6.31
- ----------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company,
the Association or any subsidiary is a party or to which any of their
property is subject.
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
(11) Computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
Reports on Form 8-K
None
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE BANCSHARES, INC.
(Registrant)
Date: August 18, 1997 /s/ Conrad J. Sechler, Jr.
--------------------------------------------
Conrad J. Sechler, Jr.
Chairman of the Board, President and
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Date: August 18, 1997 /s/Richard B. Inman, Jr.
--------------------------------------------
Richard B. Inman, Jr.
Director, Secretary and Treasurer
Date: August 18, 1997 /s/ Conrad J. Sechler, Jr.
--------------------------------------------
Conrad J. Sechler, Jr.
Chairman of the Board and President
Date: August 18, 1997 /s/ LuAnn Durden
--------------------------------------------
LuAnn Durden
Chief Financial Officer
23
<PAGE> 24
EAGLE BANCSHARES, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------- ----------- --------
<S> <C> <C>
11 Computation of per share earnings 25
27 Financial Data Schedule (for SEC use only)
</TABLE>
24
<PAGE> 1
EXHIBIT 11
EAGLE BANCSHARES, INC.
Statement re: Computation of per share earnings
Weighted average common and common equivalent shares for the three months ending
June 30, 1997 and 1996 are computed as follows:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
<S> <C> <C>
Primary:
Net Income per share $ 0.27 $ 0.34
- ------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 5,659,694 5,527,973
Common shares assumed outstanding to
reflect dilutive effect of common stock options 132,886 176,604
- ------------------------------------------------------------------------------------------------------
Weighted average shares and common
equivalent shares outstanding 5,792,580 5,704,577
- ------------------------------------------------------------------------------------------------------
Fully diluted:
Net Income per share $ 0.27 $ 0.34
- ------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 5,659,694 5,527,973
Common shares assumed outstanding to
reflect dilutive effect of common stock options 187,178 151,634
- ------------------------------------------------------------------------------------------------------
Weighted average shares and common
equivalent shares outstanding 5,811,328 5,715,151
- ------------------------------------------------------------------------------------------------------
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
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