<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 period ended December 31, 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 (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4305 Lynburn Drive, Tucker, Georgia 30084-4441
------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(770) 908-6690
------------------------------------------------------
(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 January 31, 1998
----------------------------- -------------------------------
Common Stock, $1.00 Par Value 5,718,668 shares
Index of Exhibit on Page 26
<PAGE> 2
EAGLE BANCSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Income -
Three and Nine months ended
December 31, 1997 and 1996 3
Consolidated Statements of Financial Condition at
December 31, 1997 and March 31, 1997 4
Consolidated Statements of Cash Flows -
Nine months ended December 31, 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 24
Item 2. Changes in Securities 24
Item 3. Defaults upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form8-K 24
Signatures 25
Index of Exhibits 26
</TABLE>
<PAGE> 3
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Unaudited) December 31, December 31,
(in thousands except per share data) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest on loans $15,412 $13,494 $44,238 $38,389
Interest on mortgage-backed securities 1,194 1,363 3,769 4,181
Interest on investment securities and other interest earning assets 1,502 1,788 4,650 5,201
- ----------------------------------------------------------------------------------------------------------------------
Total interest income 18,108 16,645 52,657 47,771
- ----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 7,492 6,534 21,636 18,680
Interest on borrowings 2,787 2,218 7,449 6,351
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 10,279 8,752 29,085 25,031
- ----------------------------------------------------------------------------------------------------------------------
Net interest income 7,829 7,893 23,572 22,740
PROVISION FOR LOAN LOSSES 657 377 1,974 1,825
- ----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 7,172 7,516 21,598 20,915
- ----------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Mortgage production fees 2,542 1,793 6,774 5,470
Gain on sale of investment in real estate 760 107 1,391 512
Real estate commissions, net 121 97 314 291
Service charges 512 490 1,618 1,331
(Loss)/gain on investment securities available for sale 5 (60) (46) (21)
Gain on sale of loans - - 16 60
Miscellaneous 1,001 433 2,053 1,252
- ----------------------------------------------------------------------------------------------------------------------
Total noninterest income 4,941 2,860 12,120 8,895
- ----------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES:
Salaries and employee benefits 5,024 4,204 14,556 13,082
Net occupancy expense 1,324 962 3,416 2,668
Data processing 499 238 1,508 653
Federal insurance premium 70 399 209 880
Marketing 279 381 710 1,015
Provisions for losses on real estate acquired in settlement of loans 225 45 515 45
SAIF assessment - - - 1,946
Miscellaneous 2,244 1,716 5,797 4,477
- ----------------------------------------------------------------------------------------------------------------------
Total noninterest expenses 9,665 7,945 26,711 24,766
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 2,448 2,431 7,007 5,044
INCOME TAX EXPENSE 684 932 1,960 1,539
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,764 $ 1,499 $ 5,047 $ 3,505
- ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE - BASIC $ 0.31 $ 0.27 $ 0.89 $ 0.63
- ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE - DILUTED $ 0.30 $ 0.26 $ 0.87 $ 0.61
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Unaudited) DECEMBER 31, March 31,
(in thousands except per share data) 1997 1997
- ------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
ASSETS:
Cash and amounts due from banks $ 18,307 $ 17,405
Federal funds sold 4,650 8,470
Securities available for sale 86,230 96,921
Investment securities held to maturity 69,154 51,907
Loans held for sale 128,987 62,882
Loans receivable, net 545,073 515,749
Stock in Federal Home Loan Bank, at cost 11,198 7,864
Premises and equipment, net 22,298 20,379
Investment in real estate 29,629 25,828
Real estate acquired in settlement of loans, net 2,115 2,074
Accrued interest receivable 6,418 5,472
Deferred income taxes 1,509 2,284
Other assets 8,890 6,647
- ------------------------------------------------------------------------ ----------------- ----------------
TOTAL ASSETS $934,458 $823,882
- ------------------------------------------------------------------------ ----------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $604,514 $557,724
Advance payments by borrowers for property taxes and insurance 731 1,279
Federal Home Loan Bank advances and other borrowings 230,716 153,805
Drafts outstanding 11,186 29,043
Accrued expenses and other liabilities 14,108 14,157
- ------------------------------------------------------------------------ ----------------- ----------------
TOTAL LIABILITIES $861,255 $756,008
- ------------------------------------------------------------------------ ----------------- ----------------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 10,000,000 shares authorized, 6,020,468 and
5,961,494 shares issued at December 31, and March 31, 1997, respectively 6,020 5,961
Additional paid-in capital 37,217 36,628
Retained earnings 30,727 28,236
Net unrealized gain (loss) on securities available for sale, net of 835 (1,025)
taxes (165) (836)
Employee Stock Ownership Plan note payable (355) (14)
Unamortized restricted stock (1,076) (1,076)
Treasury stock, 301,800 shares at cost
- ------------------------------------------------------------------------ ----------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 73,203 67,874
- ------------------------------------------------------------------------ ----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $934,458 $823,882
- ------------------------------------------------------------------------ ----------------- ----------------
</TABLE>
<PAGE> 5
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands)
Nine Months ended December 31, 1997 1996
- ---------------------------------------------------------------------------- --------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,047 $ 3,505
Adjustments to reconcile net income to net cash used in operating
Activities:
Depreciation, amortization and accretion 1,666 1,317
Provision for loan losses 1,974 1,825
Provision for losses on real estate acquired in settlement of loans 515 45
Loss/(gain) on sale of investments 46 21
Loss (gain) on sale of real estate acquired in settlement of loans 7 20
Gain on sale of investment in real estate (1,391) (512)
Gain on sale of loans (16) (60)
Amortization of restricted stock award 14 100
Deferred income tax (benefit) expense (285) 610
Amortization of deferred loan fees (2,097) (1,676)
Proceeds from sale of loans held for sale 452,601 437,260
Originations of loans held for sale (518,706) (402,619)
Changes in assets and liabilities:
(Increase) decrease in accrued interest receivable (946) (724)
Decrease (increase) in other assets (2,378) (615)
Increase (decrease) in drafts outstanding (17,857) (6,765)
Increase (decrease) in accrued expense and other liabilities (56) (1,778)
- ---------------------------------------------------------------------------- --------------- ------------
Net cash provided by (used in) operating activities (81,862) 29,954
- ---------------------------------------------------------------------------- --------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (2,953) (14,051)
Proceeds from sale of securities available for sale 1,957 6,731
Purchases of investment securities held to maturity (37,184) (20,588)
Principal payments received on securities available for sale 4,762 3,977
Principle payments received on investment securities held to maturity 1,659 2,281
Proceeds from calls of securities available for sale 5,523 1,008
Proceeds from calls of investment securities held to maturity 10,000 3,000
Proceeds from maturities of securities available for sale 4,250 9,040
Proceeds from maturities of investment securities held to maturity 8,300 10,300
Loan originations, net of repayments (29,409) (69,502)
Purchases of loans receivable (569) (18,022)
Proceeds from sale of real estate acquired in settlement of loans 230 551
Purchases of FHLB stock (5,315) (4,297)
Redemption of FHLB stock 1,981 4,477
Purchase of premises and equipment, net (3,380) (5,322)
Additions to investment in real estate (7,594) (16,188)
Proceeds from sale of investment in real estate 5,118 2,660
- ---------------------------------------------------------------------------- --------------- ------------
Net cash (used in) provided by investing activities $ (42,624) $(103,945)
- ---------------------------------------------------------------------------- --------------- ------------
</TABLE>
<PAGE> 6
EAGLE BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Nine Months ended December 31, 1997 1996
- ---------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in time deposits $ 29,631 $ 74,434
Net change in demand deposit accounts 17,159 6,022
Repayment of FHLB advances and other borrowings (418,826) (216,182)
Proceeds from FHLB advances and other borrowings 495,737 212,488
Principal reduction of ESOP note payable 671 -
Proceeds from exercise of stock options 293 -
Dividends paid (2,549) (1,566)
Increase (decrease) in advance payments from borrowings for
property taxes and insurance (548) (312)
- ---------------------------------------------------------------------------- --------------- ------------
Net cash (used in) provided by financing activities 121,568 74,884
- ---------------------------------------------------------------------------- --------------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,918) 893
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 25,875 19,911
- ---------------------------------------------------------------------------- --------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,957 $ 20,804
- ---------------------------------------------------------------------------- --------------- ------------
- ---------------------------------------------------------------------------- --------------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH PAID DURING THE PERIOD FOR:
Interest $ 27,045 $ 24,657
Income Taxes $ 3,350 $ 1,526
Supplemental schedule of noncash investing and financing activities:
Acquisition of real estate in settlement on loans $ 1,488 $ 2,423
Loans made to finance real estate acquired in settlement of loans $ 695 $ 1,078
</TABLE>
<PAGE> 7
Eagle Bancshares, Inc. and Subsidiaries
Notes to Interim Unaudited Consolidated Financial Statements
December 31, 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 and nine month
period ended December 31, 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.
On March 26, 1997, the Company acquired all of the outstanding shares
of Southern Crescent Financial Corp ("SCFC"), a bank holding company located in
Union City, Georgia. The merger was accounted for as a pooling of interests, and
accordingly, the consolidated financial statements have been restated to include
SCFC in all periods presented.
C. Recent Accounting Pronouncements
The Company adopted the provisions in Statement of Accounting Standards
("SFAS") No. 128, "Earnings per Share". SFAS No. 128 requires basic earnings per
share to be based on the weighted average number of common shares outstanding
during each period. Diluted earnings per share are based on the weighted average
number of common shares outstanding during each period, plus common shares
calculated for stock options and restricted stock outstanding using the treasury
stock method. All share and per share information included in this 10-Q have
been restated to give effect to the Company's adoption.
In the calculation of basic and diluted earnings per share, net income
is identical. Below is a reconciliation for the three and nine month periods
ended December 31, 1997 and 1996 of the difference between average basic common
shares outstanding and average diluted common shares outstanding.
<TABLE>
<CAPTION>
(in thousands) Three Months Nine Months
December 31, December 31,
1997 1996 1997 1996
-------------------------------------------------
<S> <C> <C> <C> <C>
Average common shares - basic 5,695 5,528 5,671 5,528
Effect of dilutive stock options 174 177 146 177
-------------------------------------------------
Average common shares - diluted 5,869 5,705 5,817 5,705
-------------------------------------------------
</TABLE>
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income", which is effective for annual and interim
periods beginning after December 15, 1997. This statement requires that all
items that are required to be recognized under accounting standards as
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information",
which is effective for annual and interim periods beginning after December 15,
1997. This statement establishes standards for the method that public entities
use to report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographical areas and major customers.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SUMMARY FINANCIAL DATA
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
% Change
Quarter Ended Dec. 31, 1997
Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
For the quarter: 1997 1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $ 1,764 $ 1,723 $ 1,499 2.38 17.68
Per common share:
Closing Stock Price 22.00 19.375 15.50 13.55 41.94
Earnings per common share-basic 0.31 0.30 0.27 3.33 14.81
Earnings per common share-diluted 0.30 0.30 0.26 NMF 15.38
Dividends declared 0.15 0.15 0.15 NMF NMF
Book value per share 12.84 12.59 12.34 1.99 4.05
Average common shares outstanding-basic 5,695 5,666 5,528 0.51 3.02
Average common shares outstanding-diluted 5,869 5,831 5,705 0.65 2.87
Profitability ratios: (%)
Return on average assets 0.81 0.81 0.76 NMF 6.58
Return on average equity 9.71 9.68 8.85 0.31 9.72
Efficiency ratio 75.69 74.68 73.89 1.35 2.44
Net interest margin - taxable equivalent 4.04 4.23 4.46 (4.49) (9.42)
Equity to assets 7.83 8.17 8.45 (4.16) (7.34)
At quarter end:
Loans held for sale $128,987 $ 85,924 $ 57,911 50.12 122.73
Loans receivable, net 545,073 548,615 496,840 (0.65) 9.71
Reserve for loan losses 6,265 6,004 5,009 4.35 25.07
Assets 934,458 872,706 806,725 7.08 15.83
Deposits 604,514 595,115 538,914 1.58 12.17
FHLB advances and other borrowings 230,716 174,966 170,643 31.86 35.20
Stockholders' equity 73,203 71,343 68,199 2.61 7.34
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
Dec. 31,
For the nine months: 1997 1996 % Change
---------------------------------------
<S> <C> <C> <C>
Net income $5,047 $3,505 43.99
Per common share:
Earnings per common share-basic 0.89 0.63 41.27
Earnings per common share-diluted 0.87 0.61 42.62
Dividends declared 0.45 0.45 NMF
Average common shares outstanding-basic 5,671 5,528 2.59
Average common shares outstanding-diluted 5,817 5,705 1.96
Profitability ratios: (%)
Return on average assets 0.79 0.61 29.51
Return on average equity 9.45 6.95 35.97
Efficiency ratio 74.84 78.29 (4.41)
Net interest margin - taxable equivalent 4.17 4.41 (5.44)
</TABLE>
8
<PAGE> 9
Overview
The Company's net income for the three and nine month period ended
December 31, 1997, was $1,764,000 or $.30 per share and $5,047,000 or $.87 per
share, respectively. This compares to net income for the three and nine month
period ended December 31, 1996, of $1,499,000 or $.26 per share and $3,505,000
or $.61 per share, respectively. The increase in the Company's quarterly
earnings is attributable to a 72.76% increase in non-interest income primarily
from higher gains on the sale of real estate investments and improved mortgage
production fees. The increase in earnings for the nine month comparative periods
is attributable to the $1,946,000 SAIF Assessment recorded in the prior year.
The effect of the assessment on prior year earnings after tax was $1,495,000 or
$.26 per share, net income would have been $5,000,000 or $.87 per share after
removing this effect from prior year earnings.
Earnings Highlights
(Three month period ended December 31, 1997, compared to the three month period
ended December 31, 1996)
- Net interest income remained stable at $7,829,000 compared to $7,893,000
for the three month period last year.
- The interest rate spread decreased to 3.92% during the current quarter
from 4.13% during the same period last year.
- Non-interest income increased $2,081,000 or 72.76% to $4,941,000 compared
to $2,860,000 for the three month period last year.
- Increases in mortgage production fees and gains on sale of real estate
were the main contributors to this increase.
- Return on average shareholders' equity was 9.71% for the current quarter
compared to 8.85% for the same period a year ago.
- Return on average assets was .81% for the current quarter compared to .76%
for the same quarter a year ago.
- Non-interest expenses increased $1,720,000 or 21.65% to $9,665,000
compared to $7,945,000 in the prior year.
Earnings Highlights
(Nine month period ended December 31, 1997, compared to the nine month period
ended December 31, 1996)
- Net interest income increased $832,000 or 3.66% to $23,572,000 compared to
$22,740,000 for the nine month period last year.
- The interest rate spread decreased to 3.94% during the current nine months
from 4.03% during the same period last year.
- Non-interest income increased $3,225,000 or 36.26% to $12,120,000 compared
to $8,895,000 for the nine month period last year. Increases in mortgage
production fees and gains on sale of real estate were the main
contributors to this increase.
- Return on average shareholders' equity was 9.45% for the current nine
months compared to 6.95% for the same period a year ago.
- Return on average assets was .79% for the current nine months compared to
.61% for the same period a year ago.
- Non-interest expenses increased $1,945,000 or 7.85% to $26,711,000
compared to $24,766,000 in the prior year.
Net Interest Income
Net interest income decreased by $64,000 or .81% to $7,829,000 in the
third quarter of fiscal 1998 from $7,893,000 for the same quarter last year. Net
interest income increased by $832,000 or 3.66% to $23,572,000 during the first
nine months of fiscal 1998 from $22,740,000 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 9 basis points to 3.94% from 4.03% in the same period last year.
Non-Interest Income
Non-interest income increased by $2,081,000 or 72.76% to $4,941,000 for
the third quarter of fiscal 1998 from $2,860,000 for the same period last year.
In addition, non-interest income increased by $3,225,000 or 36.26% to
$12,120,000 for the first nine months of fiscal 1998 from $8,895,000 for the
same period last year.
9
<PAGE> 10
Credit Quality
Total problem assets were $14,471,000 on December 31, 1997, or 1.55% of
total assets compared to 1.51% on March 31, 1997. The reserve for loan losses
totaled $6,265,000 at quarter end, or 43.29% of problem assets, compared to
$5,009,000 or 61.67% one year earlier. During the quarter, the provision for
loan losses was $657,000, exceeding net charge-offs of $396,000. Net charge-offs
for the quarter equaled 0.06% of average loans, remaining stable when compared
to 0.07% for the same quarter last year.
Capital Strength
Total shareholders' equity was $73,203,000 on December 31, 1997 or
7.83% of period-end assets. Book value per common share rose to $12.84 at the
end of the quarter.
EARNINGS ANALYSIS
Net Interest Income - Quarterly Analysis
Net interest income decreased by $64,000 or .81% to $7,829,000 in the
third quarter of fiscal 1998 from $7,893,000 for the same quarter last year.
This decrease resulted from a decrease in interest rate spread. The net interest
spread (the difference between the yield earned on interest earning assets and
the cost of interest bearing liabilities) declined 21 basis points to 3.92% from
4.13% in the same period last year. The primary reason for the decrease was the
increase in the cost of interest bearing liabilities. Yield on interest earning
assets decreased 6 basis points to 9.25% from 9.31% while the cost of interest
bearing liabilities increased 15 basis points to 5.33% from 5.18%.
Interest income received on loans increased $1,918,000 or 14.21% to
$15,412,000 for the third quarter of fiscal 1998 from $13,494,000 in fiscal
1997. The increase in interest received on loans was primarily attributable to
growth in the loan portfolio through originations of residential construction
loans and conforming single family loans held for sale. The yield on the loan
portfolio declined 13 basis points to 9.78% for the quarter compared to 9.91% in
the same quarter last year. Interest received on mortgage backed securities
decreased $169,000 or 12.40% to $1,194,000 for the third quarter of fiscal 1998
from $1,363,000 in the third quarter of fiscal 1997. Interest received on
investment securities decreased $286,000 or 16.00% to $1,502,000 in fiscal 1998
from $1,788,000 in the prior period.
Interest expense increased $1,527,000 or 17.45% to $10,279,000 for the
third quarter of fiscal 1998 from $8,752,000 in the third quarter of fiscal
1997. This is primarily the result of growth in deposits and FHLB advances.
Interest expense on deposits increased $958,000 or 14.66% to $7,492,000 from
$6,534,000 in the same period in the prior year. The cost of deposits increased
12 basis points to 5.17% during the quarter from 5.05% in the prior period.
Interest expense on FHLB advances and other borrowings also increased $569,000
or 25.65% to $2,787,000 for the third quarter of fiscal 1998 from $2,218,000 in
the third quarter of fiscal 1997. The Bank's cost of FHLB advances increased 24
basis points to 5.84% from 5.60% in the same period in the prior year. The Bank
utilizes short term FHLB advances to fund construction loans and loans held for
sale.
Net Interest Income - Nine Month Analysis
Net interest income increased by $832,000 or 3.66% to $23,572,000
during the first nine months of fiscal 1998 from $22,740,000 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 9 basis points to 3.94% from 4.03% in the same
period last year. The primary reason for the decrease was the increase in the
cost of interest bearing liabilities. Yield on interest earning assets improved
4 basis points to 9.22% from 9.18% while the cost of interest bearing
liabilities increased 13 basis points to 5.28% from 5.15%.
Interest income received on loans increased $5,849,000 or 15.24% to
$44,238,000 for the first nine months of fiscal 1998 from $38,389,000 in fiscal
1997. The increase in interest received on loans was primarily attributable to
growth in the loan portfolio through originations of residential construction
loans and conforming single family mortgages held for sale. The yield on the
loan portfolio declined 8 basis points to 9.72% for the first nine months of
fiscal 1998 compared to 9.80% in the same period last year. Interest received on
mortgage backed securities decreased $412,000 or 9.85% to $3,769,000 for the
first nine months of fiscal 1998 from $4,181,000 in
10
<PAGE> 11
the first nine months of fiscal 1997. Interest received on investment securities
decreased $551,000 or 10.59% to $4,650,000 in fiscal 1998 from $5,201,000 in the
prior period.
Interest expense increased $4,054,000 or 16.20% to $29,085,000 for the
first nine months of fiscal 1998 from $25,031,000 in the same period of fiscal
1997. This is primarily the result of growth in deposits and FHLB advances.
Interest expense on deposits increased $2,956,000 or 15.82% to $21,636,000 from
$18,680,000 in the same period in the prior year. The cost of deposits increased
9 basis points to 5.13% during the period from 5.04% in the prior period.
Interest expense on FHLB advances and other borrowings also increased $1,098,000
or 17.29% to $7,449,000 for the first nine months of fiscal 1998 from $6,351,000
in the same period of fiscal 1997. The Bank's cost of FHLB advances increased 29
basis points to 5.77% from 5.48% in the same period in the prior year. The Bank
utilizes short term FHLB advances to fund construction loans and loans held for
sale.
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
assets. The net interest margin decreased to 4.04% for the third quarter of
fiscal 1998 from 4.46% for the third quarter of fiscal 1997. In addition, the
net interest margin decreased to 4.17% for the first nine months of fiscal 1998
from 4.41% for the nine months of fiscal 1997. The following average balance
sheets present the individual components of net interest income and expense, net
interest spread and net interest margin.
The decrease in the net interest margin in the third quarter and first
nine months of fiscal 1998 was primarily attributable to the increase in the
cost of interest bearing liabilities. The yield earned on average loans during
the third quarter and first nine months decreased to 9.78% and 9.72%
respectively, compared to 9.91% and 9.80% for the corresponding periods in the
prior year. Average loans outstanding increased $84,401,000 or 16.16% to
$606,767,000 for the first nine months of fiscal 1998 from $522,366,000 for the
same period last year. This is attributable to the Company's ability to expand
its loan portfolio through originations of construction, consumer and to a
lesser extent commercial loans. In addition, the cost of deposits increased in
part due to the Company's philosophy for attracting transaction accounts.
Beginning in June 1997, the Company began offering a new line of savings,
checking and money market accounts which offer more competitive rates. The
expanded products and their rate structure is an attempt to reduce the Company's
reliance on short term FHLB advances which bear a higher interest rate. Average
FHLB bank advances represent 23.43% of average interest bearing liabilities for
the first nine months of fiscal 1998 compared to 23.83% for the same period last
year. The Company will continue to rely on borrowing from the FHLB as a funding
source and the cost of FHLB advances increased during the third quarter and
first nine months to 5.84% and 5.77% respectively, compared to 5.60% and 5.48%
for the corresponding periods in the prior year.
11
<PAGE> 12
The following tables reflect 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 and nine
months ended December 31, 1997 and 1996:
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
Three months ended December 31, 1997 1996
AVERAGE YIELD/ Average Yield/
(dollars in thousands) BALANCE INTEREST COST Balance Interest Cost
- ----------------------------------------------------------------------------------------------------------------------------
Earning Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans* $630,656 $15,412 9.78% $544,428 $13,494 9.91%
Mortgage-backed securities 65,978 1,194 7.24% 73,920 1,363 7.38%
FHLB stock 9,439 167 7.08% 8,366 151 7.22%
Taxable investments 39,275 665 6.77% 45,276 792 7.00%
Tax-exempt investment securities 39,816 784 7.88% 44,820 940 8.39%
Interest earning deposits and Federal funds 3,815 27 2.83% 5,191 69 5.32%
- ----------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 788,979 18,249 9.25% 722,001 16,809 9.31%
Non-interest earning assets 85,640 65,267
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $874,619 $787,268
- ----------------------------------------------------------------------------------------------------------------------------
Savings $ 40,092 253 2.52% $ 45,431 $ 282 2.48%
Checking 65,882 246 1.49% 54,690 251 1.84%
Money market 33,157 261 3.15% 19,627 125 2.55%
Certificates of deposit 440,987 6,732 6.11% 397,339 5,876 5.92%
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 580,118 7,492 5.17% 517,087 6,534 5.05%
FHLB advances and other borrowings 190,777 2,787 5.84% 158,357 2,218 5.60%
- ----------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 770,895 10,279 5.33% 675,444 8,752 5.18%
Non-interest bearing liabilities 31,043 44,068
Stockholders' equity 72,681 67,756
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $874,619 $787,268
- ----------------------------------------------------------------------------------------------------------------------------
Net interest rate spread $7,970 3.92% $ 8,057 4.13%
Taxable-equivalent adjustment (142) (164)
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income, actual $7,828 $ 7,893
Net interest earning assets/net interest margin $ 18,084 4.04% $ 46,557 4.46%
Interest earning assets as a percentage of
Interest bearing liabilities 102.35% 106.89%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Non-accrual loans are included in average balances and income on such loans, if
recognized, is recorded on a cash basis.
12
<PAGE> 13
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
Nine months ended December 31, 1997 1996
AVERAGE YIELD/ Average Yield/
(dollars in thousands) BALANCE INTEREST COST Balance Interest Cost
- ----------------------------------------------------------------------------------------------------------------------------
Earning Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans* $606,767 $44,238 9.72% $522,366 $38,389 9.80%
Mortgage-backed securities 69,045 3,769 7.28% 75,684 4,181 7.37%
FHLB stock 8,585 487 7.56% 8,278 452 7.28%
Taxable investments 40,554 2,200 7.23% 48,061 2,447 6.79%
Tax-exempt investment securities 35,058 2,103 8.00% 40,410 2,498 8.24%
Interest earning deposits and Federal funds 7,129 274 5.12% 5,251 229 5.81%
- ----------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 767,138 53,071 9.22% 700,050 48,196 9.18%
Non-interest earning assets 85,270 60,351
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $852,408 $760,401
- ----------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Savings $ 43,023 $ 807 2.50% $ 46,151 $ 850 2.46%
Checking 62,069 876 1.88% 53,641 735 1.83%
Money market 28,122 679 3.22% 19,195 365 2.54%
Certificates of deposit 428,849 19,274 5.99% 375,018 16,730 5.95%
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 562,063 21,636 5.13% 494,005 18,680 5.04%
Advances 172,034 7,449 5.77% 154,511 6,351 5.48%
- ----------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 734,097 29,085 5.28% 648,516 25,031 5.15%
Non-interest bearing liabilities 47,125 44,654
Stockholders' equity 71,186 67,231
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $852,408 $760,401
- ----------------------------------------------------------------------------------------------------------------------------
Net interest rate spread $23,986 3.94% $23,165 4.03%
Taxable-equivalent adjustment (414) (425)
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income, actual $23,572 $22,740
Net interest earning assets/net interest margin $ 33,041 4.17% $ 51,534 4.41%
Interest earning assets as a percentage of
Interest bearing liabilities 104.50% 107.95%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Non-accrual loans are included in average balances and income on such loans, if
recognized, is recorded on a cash basis.
Non-Interest Income
Non-interest income increased by $2,081,000 or 72.76% to $4,941,000 for
the third quarter of fiscal 1998 from $2,860,000 for the same period last year.
In addition, non-interest income increased by $3,225,000 or 36.26% to
$12,120,000 for the first nine months of fiscal 1998 from $8,895,000 for the
same period last year.
Mortgage production fees are the largest component of non-interest
income and such fees for the third quarter of fiscal 1998 increased $749,000 or
41.77% to $2,542,000 compared to $1,793,000 in the same period last year. For
the first nine months of fiscal 1998, mortgage production fees increased
$1,304,000 or 23.84% to $6,774,000 compared to $5,470,000 for the same period
last year. The dollar amount of loans sold fluctuates based on the demand for
mortgages in the Company's market. The margin received on loan sales fluctuates
due to changes in the general interest rate environment. The following table
shows mortgage production fees, the dollar amount of loans sold in the secondary
market and the margin earned on those loans for the periods indicated:
13
<PAGE> 14
The following table shows mortgage production fees, the dollar amount
of loans sold in the secondary market and the margin earned on those loans for
the periods indicated:
<TABLE>
<CAPTION>
Three months Ended Nine months Ended
Dec. 31, Dec. 31,
(dollars in thousands) 1997 1996 1997 1996
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Mortgage production fees $2,542 $1,793 $6,774 $5,470
Dollar volume sold $132,594 $125,494 $452,601 $437,260
Margin earned 1.92% 1.43% 1.50% 1.25%
</TABLE>
Non-interest income generated from the Company's real estate
subsidiary, Eagle Real Estate Advisors includes gains on the sale of real estate
and real estate commissions. These sources of revenue increased by $677,000 or
331.86% to $881,000 for the third quarter of fiscal 1998 compared to $204,000
for the same quarter last year. The primary reason was an increase in the number
of lots sold in the Company's developments. During the current quarter, 51 lots
were sold compared to 39 lots in the third quarter last year.
Service charges increased $22,000 or 4.49% to $512,000 in the third
quarter of fiscal 1998 compared to $490,000 in the third quarter of fiscal 1997.
In addition, for the first nine months service charges increased $287,000 or
21.56% to $1,618,000 compared to $1,331,000 for the same period last year. This
is the result of growth in the number of checking accounts during the year as
well as the introduction of new product lines in June of 1997 which are designed
to attract higher fee income.
Non-Interest Expense
Non-interest expense increased by $1,720,000 or 21.65% to $9,665,000
for the third quarter of fiscal 1998 from $7,945,000 for the same period last
year. In addition, for the first nine months of fiscal 1998 non-interest expense
increased $1,945,000 or 7.85% to $26,711,000 from $24,766,000 for the same
period last year. During the prior period, the Bank was assessed a one time
charge to replenish the Savings Association Insurance Fund. In general the
increase in all categories of non-interest expense is attributable to the
Company's rapid growth.
Salaries and employee benefits increased $820,000 or 19.51% to
$5,024,000 for the third quarter of fiscal 1998 from $4,204,000 for the same
period last year. This increase is due to the addition of employees to support
the Company's growth. Occupancy expense increased $362,000 or 37.63% to
$1,324,000 in the third quarter of fiscal 1998 from $962,000 for the same period
last year. Federal insurance premiums decreased $329,000 or 82.46% to $70,000
for the third quarter of fiscal 1998 from $399,000 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 $528,000 or 30.77% to $2,244,000 for
the third quarter of fiscal 1998 from $1,716,000 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 nine months of fiscal 1998, investment securities
increased to $155,384,000 from $148,828,000 at March 31, 1997 and decrease from
$159,969,000 at December 31, 1996. The investment securities portfolio at
December 31, 1997, was comprised of $69,154,000 of investment securities held to
maturity at amortized cost compared to $51,907,000 and $60,407,000 at March 31,
1997 and December 31,1996, 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 $86,230,000 at December 31,1997 compared to $96,921,000 and
$99,562,000 at March 31, 1997 and December 31, 1996, respectively. Investment
securities available for sale had a net unrealized gain as shown in the
Company's stockholders' equity section of $835,000 at December 31, 1997 versus a
net unrealized loss of $1,025,000 at March 31, 1997. For the nine months ended
December 31, 1997, investment securities increased to $155,384,000 from
$148,828,000 at March 31, 1997 and decreased from $159,969,000 at December 31,
1996. The Company classifies its securities in one of three categories in
accordance with Statement of Financial Accounting Standards (SFAS) No.
14
<PAGE> 15
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.
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 December 31, 1997, March 31, 1997 or
December 31, 1996.
The following table reflects securities held in the Bank's securities portfolio
for the periods indicated:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
- ----------------------------------------------------------------------------------------------------------
(dollars in thousands) Dec. 31, March 31, Dec. 31,
1997 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Securities Held to Maturity:
US Treasury and US Government Agencies $ 46,686 $ 27,780 $35,777
Mortgage-backed securities 5,419 6,406 6,700
Corporate bonds 7,431 7,429 7,429
Other debt securities 9,618 10,292 10,501
- ----------------------------------------------------------------------------------------------------------
Total $ 69,154 $ 51,907 $60,407
- ----------------------------------------------------------------------------------------------------------
Securities Available for Sale:
US Treasury and US Government Agencies $ 7,721 $ 15,176 $16,272
Mortgage-backed securities 60,180 62,352 64,933
Corporate Bonds 2,030 2,005 2,020
Other debt securities 3,889 3,970 4,008
Equity securities - preferred stock 12,410 13,418 12,329
- ----------------------------------------------------------------------------------------------------------
Total $ 86,230 $ 96,921 $99,562
- ----------------------------------------------------------------------------------------------------------
Total Investment Securities:
US Treasury and US Government Agencies $ 54,407 $ 42,956 $52,049
Mortgage-backed securities 65,599 68,758 71,633
Corporate bonds 9,461 9,434 9,449
Other debt securities 13,507 14,262 14,509
Equity securities 12,410 13,418 12,329
- ----------------------------------------------------------------------------------------------------------
Total $155,384 $148,828 $159,969
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Loan Portfolio and Concentration
The loan portfolio has grown $48,233,000 or 9.70% to $545,073,000 at
December 31, 1997, compared to $496,840,000 at December 31, 1996. Each loan
category showed increases with the exception of leases which declined
$13,225,000 or 54.08% to $11,230,000 down from $24,455,000.
Construction and acquisition and development loans, net of the
undisbursed portion of loans in process, increased $22,231,000 or 14.64% to
$174,122,000 at December 31, 1997, from $151,891,000 at December 31, 1996.
Construction and acquisition and development loans represent 40.10% of gross
loans receivable at December 31, 1997, remaining consistent when compared to
39.76% at December 31, 1996. Residential mortgage loans increased $7,274,000 or
3.74% to $201,892,000 at December 31, 1997 from $194,618,000 at December 31,
1996.
Commercial loans increased $8,940,000 or 20.93% to $51,655,000 at
December 31, 1997 compared to $42,715,000 at December 31, 1996. Consumer loans
increased $10,817,000 or 50.07% to $32,420,000 at December 31, 1997 compared to
$21,603,000 at December 31, 1996.
15
<PAGE> 16
LOAN PORTFOLIO MIX
<TABLE>
<CAPTION>
% Change
Dec. 31, 1997 from
Dec. 31, March 31, Dec. 31, March 31, Dec. 31,
(dollars in thousands) 1997 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real Estate - construction loans
Construction $217,494 $205,086 $197,556 6.05 10.09
Acquisition & Development 35,818 35,408 34,459 1.16 3.94
Real Estate - mortgage loans
Non-Residential 35,937 28,764 28,865 24.94 24.50
Residential 201,892 194,821 194,618 3.63 3.74
Home equity and second mortgages 45,300 43,752 39,204 3.54 15.55
- ----------------------------------------------------------------------------------------------------------------
Total real estate loans 536,441 507,831 494,702 5.63 8.44
- ----------------------------------------------------------------------------------------------------------------
Other loans:
Commercial 51,655 52,144 42,715 (.94) 20.93
Leases 11,230 19,939 24,455 (43.68) (54.08)
Consumer and other 32,420 23,648 21,603 37.09 50.07
- ----------------------------------------------------------------------------------------------------------------
Total other loans 95,305 95,731 88,773 (.44) 7.36
- ----------------------------------------------------------------------------------------------------------------
Total gross loans receivable 631,746 603,562 583,475 4.67 8.27
- ----------------------------------------------------------------------------------------------------------------
Less:
Undisbursed portion of loans
in process (79,190) (80,801) (80,124) (1.99) (1.17)
Deferred loan origination fees (1,290) (1,684) (1,740) (23.40) (25.86)
Unearned income (171) (212) (235) (19.34) (27.23)
Reserves for loan losses (6,265) (5,198) (5,009) 20.53 25.07
Premium/(discount) on loans purchased 243 82 473 196.34 (48.63)
- ----------------------------------------------------------------------------------------------------------------
Loans receivable, net $545,073 $515,749 $496,840 5.69 9.71
================================================================================================================
</TABLE>
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, increased by $2,028,000 or 16.30% to
$14,471,000 at December 31, 1997 from $12,443,000 at March 31, 1997. The
majority of this increase is attributable to one acquisition and development
loan and 16 construction loans located in Jacksonville, Florida. The loans were
classified substandard on December 1997 because the borrower experienced
cashflow difficulties in completing presold homes and failed to provide timely
financial statements. Additionally, total problem assets increased $6,349,000 or
78.17% since the December 31, 1996, level of $8,122,000. Total problem assets as
a percent of total assets increased to 1.55% at December 31, 1997 from 1.51% and
1.01% at March 31, 1997 and December 31, 1996, respectively. At December 31,
1997, the Company had non-accrual loans of $8,895,000 compared to $7,866,000 at
March 31, 1997 and $4,856,000 at December 31, 1996. Interest income not
recognized on these loans amounted to $460,000 during the first nine months of
fiscal 1998.
Approximately 48.51% of all non-accrual loans were represented by
single-family mortgage loans and 24.31% of all non-accrual loans were
represented by construction loans. The majority of these construction loans are
attributable to two borrowers. Loans outstanding to one borrower located in
Hinesville, Georgia consists of one acquisition and development loan and two
construction loans totaling $725,000. The second borrower is located in Cobb
County, Georgia, and has one acquisition and development loan and three
construction loans for a total of $923,000. This borrower has filed for
bankruptcy protection. Based on an abundance of collateral, the Bank anticipates
it will receive full repayment upon removal of the bankruptcy. At December 31,
1997, 20.73% of non-
16
<PAGE> 17
accrual loans were represented by equipment leases. One relationship with a
lessor of seven leases was for $1,783,000. The Company's equipment lease
portfolio continues to repay and stood at $11,230,000 at December 31, 1997
versus $24,455,000 at December 31, 1996.
In addition, at December 31, 1997, the ACC identified $3,461,000 of
loans as potential problem loans compared to $2,503,0000 and $1,187,000 at March
31, 1997 and December 31, 1996, respectively. Loans outstanding to one borrower
represents $2,352,000 of potential problem loans, this consists of one
acquisition and development loan and sixteen construction loans in Jacksonville,
Florida. Interest payments on these loans were 30 days in arrears at December
31, 1997. Since then, the borrower has repaid four construction loans, brought
his payments current and provided timely financial information indicating
profitable operations. Real estate owned increased by $41,000 to $2,115,000 at
December 31, 1997, from $2,074,000 at March 31, 1997 and by $36,000 from
$2,079,000 at December 31, 1996.
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>
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
(dollars in thousands) 1997 1997 1997 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Residential real estate-construction $ 2,162 $2,343 $ 728 $1,692 $ 163
Residential real estate-mortgage 4,315 3,942 3,301 2,934 1,377
Commercial real estate - - - 427 422
Commercial 40 169 23 93 84
Commercial leases 1,844 1,775 2,396 2,508 2,706
Installment 534 244 333 212 104
- ---------------------------------------------------------------------------------------------------------
Total non-accrual 8,895 8,473 6,781 7,866 4,856
- ---------------------------------------------------------------------------------------------------------
Potential problem loans 3,461 919 2,630 2,503 1,187
Loans contractually delinquent 90
days which still accrue interest - - - - -
Troubled debt restructurings - - - - -
- ---------------------------------------------------------------------------------------------------------
Total non-accrual and problem loans $12,356 $ 9,392 $ 9,411 $10,369 $6,043
- ---------------------------------------------------------------------------------------------------------
Real estate owned, net 2,115 2,492 2,267 2,074 2,079
- ---------------------------------------------------------------------------------------------------------
Total problem assets $14,471 $11,884 $11,678 $12,443 $8,122
- ---------------------------------------------------------------------------------------------------------
Total problem assets/Total assets 1.55% 1.36% 1.38% 1.51% 1.01%
- ---------------------------------------------------------------------------------------------------------
Total problem assets/Net loans plus
Reserves 2.62% 1.35% 2.14% 2.41% 1.62%
- ---------------------------------------------------------------------------------------------------------
Reserve for loan losses/Total
Problem assets 43.29% 50.52% 49.33% 41.78% 61.67%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
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 December 31, 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 $ 1,028 $1,959 - $ 40 $ - $ 529 $ 3,556 23.57%
Augusta - 791 - - - - 791 5.24%
Hinesville 725 117 - - - - 842 5.58%
Savannah 222 - - 222 1.47%
Warner Robins 143 - - - - - 143 .95%
All other locations 44 1,448 - - 1,844 5 3,341 22.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-accrual 2,162 4,315 - 40 1,844 534 8,895 58.96%
- ---------------------------------------------------------------------------------------------------------------------------------
Potential problem loans:
Atlanta 118 - 218 199 - - 535 3.55%
Jacksonville 2,352 - - - - - 2,352 15.59%
Savannah 247 - - - - - 247 1.64%
Warner Robins 327 - - - - - 327 2.17%
- ---------------------------------------------------------------------------------------------------------------------------------
Total potential problem loans 3,044 - 218 199 - - 3,461 22.95%
- ---------------------------------------------------------------------------------------------------------------------------------
Real estate owned:
Aiken 66 149 - - - - 215 1.42%
Atlanta 271 98 649 - - - 1,018 6.75%
Augusta 27 87 - - - - 114 0.76%
Hinesville 121 - - - - - 121 0.80%
Jacksonville 333 - - - - - 333 2.21%
All other locations 128 726 74 - - - 928 6.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Total real estate owned(1) 946 1,060 723 - - - 2,729 18.09%
- ---------------------------------------------------------------------------------------------------------------------------------
Total problem assets by type 6,152 $5,375 $ 941 $ 239 $1,844 $ 534 $15,085 100.00%
- --------------------------------------------------------------------------------------------------------------------
% of total problem assets by
type 40.78% 35.63% 6.24% 1.58% 12.23% 3.54% 100.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include reserves of $614,000: real estate owned, net, equals
$2,115,000.
Concentrations to Single Borrowers
The Bank has lease exposure, to one company, of $1,783,000. 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. The Bank also has a combined exposure of $1,648,000 to
two borrowers, one in Atlanta, Georgia and one in Hinesville, Georgia. The
borrower located in Atlanta has $923,000 of construction loans and has filed for
bankruptcy protection. The borrower in Hinesville has $725,000 in construction
loans and these loans are in the process of collection. See Non-Performing
Assets.
In addition, there is one borrower with potential problem loans located
in Jacksonville, Florida. The borrower has one acquisition and development loan
and 16 construction loans with a combined balance of $2,352,000. As of December
31, 1997, interest on all loans is paid to December 1, 1997. Since then the
borrower has repaid four of the construction loans, paid interest current and
provided timely financial information demonstrating an acceptable level of
profits.
Loan Impairment
At December 31, 1997, the recorded investment in impaired loans, which
excludes non-accrual first mortgage loans and residential construction loans,
increased $3,000 or .17% to $1,783,000 from $1,780,000 at March 31, 1997 and
decreased $922,000 or 34.09% from $2,705,000 at December 31, 1996. At December
31, 1997, March 31, 1997 and December 31, 1996, all impaired loans were on a
nonaccrual basis. At December 31, 1997 and March 31, 1997, the valuation
allowance related to these impaired loans was $453,000 compared to $1,152,000 at
December 31, 1996. At December 31, 1997, March 31, 1997 and December 31, 1996,
all impaired loans had a
18
<PAGE> 19
related loan loss reserve. For the quarter and nine months ended December 31,
1997, the average recorded investment in impaired loans was $1,779,000 compared
to $1,884,000 and $1,413,000 for the same periods ended December 31, 1996.
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 $657,000 and $377,000, respectively, of
additional reserves for possible loan losses during the third quarter of fiscal
1998 and 1997. During the first nine months of fiscal 1998, the Company set
aside $1,974,000 compared to $1,825,000 for the same period last year. At
December 31, 1997, reserves represented 0.99% and 1.03% of average loans
outstanding for the third quarter and nine months of fiscal 1998 compared to
0.92% and 0.96% for the same periods one year ago. During the third quarter and
first three quarters of fiscal 1998, the Company charged-off $422,000 and
$1,044,000, respectively, compared to $423,000 and $2,433,000 for the same
periods last year. In the third quarter and first nine months of fiscal 1998,
charge-offs represented 0.06% and 0.15% of average loans outstanding, a decrease
from 0.07% and 0.44% for the third quarter and first nine months of fiscal 1997.
Loan loss reserves totaled $6,265,000 at December 31, 1997 compared to
$5,198,000 and $5,009,000 at March 31, 1997 and December 31, 1996, respectively.
Loan loss reserves to total problem assets increased to 43.29% at December 31,
1997 from 41.78% at March 31, 1997 and decreased from 61.67% at December 31,
1996. 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.
19
<PAGE> 20
ANALYSIS OF THE RESERVE FOR LOAN LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Dec. 31, Dec. 31,
------------------------ -------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Reserve for loan losses, beginning of period $ 6,004 $ 5,006 $ 5,198 $ 5,464
Charge-offs:
Real estate - construction - 54 72 54
Real estate - mortgage 161 14 567 101
Consumer 261 33 398 37
Commercial - 235 7 237
Commercial leases - 87 - 2,004
- ----------------------------------------------------- -------------- -------- -------- --------
Total charge-offs 422 423 1,044 2,433
Recoveries 26 49 137 153
- ----------------------------------------------------- -------------- -------- -------- --------
Net charge-offs 396 374 907 2,280
Reserve on purchased loans - - - -
Reserve from acquisitions - - - -
Provision for loan losses 657 377 1,974 1,825
- ----------------------------------------------------- -------------- -------- -------- --------
Reserve for loan losses, end of period $ 6,265 $ 5,009 $ 6,265 $ 5,009
- ----------------------------------------------------- -------------- -------- -------- --------
Average loans outstanding for the period $630,655 $544,428 $606,767 $522,366
- ----------------------------------------------------- -------------- -------- -------- --------
Ratio of net charge-offs to average loans 0.06% 0.07% 0.15% 0.44%
- ----------------------------------------------------- -------------- -------- -------- --------
Reserves to average loans outstanding 0.99% 0.92% 1.03% 0.96%
- ----------------------------------------------------- -------------- -------- -------- --------
</TABLE>
Investment in Real Estate
The Company's investment in real estate increased $3,801,000 to
$29,629,000 at December 31, 1997 from $25,828,000 at March 31, 1997 and
$2,844,000 from $26,785,000 at December 31, 1996. The Company currently has six
real estate projects in the Atlanta area.
Deposits
Deposits are the Company's primary funding source. During the first
nine months of fiscal 1998, total deposits increased $46,790,000 or 8.39% to
$604,514,000 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 deposit which grew 7.20% to $441,334,000 at December 31, 1997
from $411,703,000 at March 31, 1997. Demand deposits including NOW accounts,
passbook accounts and money market accounts were 26.99% of the Company's
deposits at December 31, 1997. The weighted average interest rate on deposits
remained relatively stable at 4.88% at December 31, 1997 and 4.84% and 4.87% at
March 31, 1997 and December 31, 1996, respectively.
21
<PAGE> 21
For the periods indicated, deposits are summarized by type and
remaining term as follows (dollars in thousands):
DEPOSIT MIX
<TABLE>
<CAPTION>
Dec. 31, March 31, Dec. 31,
1997 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Demand deposits:
Noninterest-bearing deposits $ 37,834 $ 29,843 $ 19,088
Interest-bearing deposits 53,188 48,923 56,175
Money market accounts 32,328 20,902 18,397
Savings accounts 39,830 46,353 45,588
----------------------------------
163,180 146,021 139,248
----------------------------------
Time deposits:
Maturity one year or less 321,716 308,459 297,387
Maturity greater than one year through
two years 38,086 33,155 31,054
Maturity greater than two years through
three years 37,342 29,312 22,735
Maturity greater than three years 44,190 40,777 48,490
----------------------------------
441,334 411,703 399,666
----------------------------------
Total deposits $604,514 $557,724 $538,914
----------------------------------
</TABLE>
The weighted average interest rate on time deposits at December 31,
1997, March 31, 1997 and December 31, 1996, was 5.90%, 5.84% and 5.82%.
For the periods indicated, interest expense on deposits is summarized
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Dec. 31, Dec. 31,
1997 1996 1997 1996
--------------------------------------------
<S> <C> <C> <C> <C>
Interest-bearing deposits $ 399 $ 251 $ 1,029 $ 739
Money market accounts 278 125 662 366
Savings accounts 252 281 797 849
Time deposits 6,563 5,877 19,148 16,726
--------------------------------------------
$7,492 $6,534 $21,636 $18,680
--------------------------------------------
</TABLE>
Federal Home Loan Bank Advances
The FHLB system functions as a reserve credit facility for thrift
institutions and certain other member home financing institutions. The Bank
utilizes advances from the FHLB to fund a portion of its assets. At December 31,
1997, advances were $215,205,000 compared to $141,383,000 at March 31, 1997. At
December 31, 1997, the weighted average interest rate on these borrowings was
5.86% compared to 6.80% at March 31, 1997.
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
21
<PAGE> 22
source of funds. The Company has also experienced significant growth in assets.
Total assets increased $110,576,000 over the previous nine months and were
primarily funded by deposits which increased $46,790,000. The Company's other
primary funding source was provided by advances from the Federal Home Loan Bank.
At December 31, 1997, advances were $215,205,000 or 23.03% of total assets.
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 increased 28.83% to $518,706,000 for the first nine months of
fiscal 1998 compared to $402,619,000 for the same period last year. The Company
manages the funding requirements of these loans primarily with short term
advances from the FHLB.
The Bank acquired certain assets of Southern Federal Savings and Loan
Association from the RTC on November 23, 1992. In connection with this
acquisition, the Bank entered into an agreement (the "Agreement") with a
corporation owned by two individuals to participate in the future profits and
losses of the operation of the Prime Lending Division of Tucker Federal Bank
pursuant to the Agreement. On December 5, 1997, the corporation and these two
individuals filed a complaint alleging that the Bank has not properly calculated
the profits and losses of the Prime Lending Division. Additionally, in the
complaint, the corporation and these individuals asked the court to declare the
Agreement terminated and allow the individuals the opportunity to exercise an
option to purchase assets of the division for 75% of the appraised fair market
value as described in the Agreement. On January 23, 1998, the Bank terminated
the Agreement and its employment of the two individuals. The Bank continues to
believe its calculations of profits and losses are proper and in full compliance
with the terms of the Agreement and that it was within its rights to terminate
the Agreement and the employment of the individuals. The specific impact on the
financial condition of the Bank, if any, which might be caused by terminating
the Agreement and the purchase of the assets of the division by the corporation
and the two individuals, if the corporation and the two individuals have the
option to purchase and choose to exercise that option, cannot be determined at
this time.
On September 19, 1997, the Bank hired the employees and acquired
certain assets of the wholesale mortgage operation of Eastern Mortgage Services,
Inc. a subsidiary of Dauphin Deposit Bank and Trust Company. This wholesale
operation originates mortgages with a low fixed cost and provides the Company an
opportunity to leverage its technology and mortgage banking operations.
The Company is continuing its 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. The Company experienced increased single-family mortgage originations in
all offices in December 1997 as a result of an increased volume of refinances
caused by lower interest rates. Due to the increased volume of refinances, the
Company has delayed any changes in operations. The Board will continue to
determine the viability of each mortgage banking office by considering its
profitability and business prospects.
Cash Flows from Operating Activities
For the first nine months of fiscal 1998, the Company used cash from
operating activities of $81,862,000 compared to $29,954,000 cash provided from
operating activities for the same period one year ago. 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 first nine months of
fiscal 1998, the Company originated and sold $518,706,000 and $452,601,000 of
loans held for sale, respectively. This resulted in a $66,105,000 use of cash.
For the same period last year, the Company originated and sold $402,619,000 and
$437,260,000 of loans held for sale, respectively, resulting in a use of cash of
$34,641,000.
Cash Flows from Investing Activities
During the first nine months of 1998, the Company used $42,624,000 of
cash for investing activities compared to $103,945,000 for the same period last
year. Loan originations net of repayments represented 69.00% of cash used or
$29,409,000 compared to 66.86% or $69,502,000 for the same period one year ago.
For the first nine months of fiscal 1998, purchases of loans receivable
decreased $17,453,000 to $569,000 from $18,022,000 for the same period last
year. This represented a 1.33% use of cash for the first nine months versus
17.34% for the same period in fiscal 1997. During the first nine months of
fiscal 1998, the Company invested an additional $7,594,000 in investment in real
estate, representing a 17.82% use of cash. In comparison, for the first nine
months one year age, the Company invested an additional $16,188,000 in
investment in real estate, representing a 15.57% use of cash.
22
<PAGE> 23
Proceeds from the sale of investment in real estate for the first nine months of
1998, were $5,118,000, a 12.01% source of cash versus $2,660,000 or a 2.56%
source of cash for the same period last year. In the first nine months of fiscal
1998, there were $37,184,000 in purchases of investment securities held to
maturity and $2,953,000 in purchases of securities available for sale
representing 94.17% of total cash used for investing activities. Comparatively,
for the same period last year, the Company purchased $20,588,000 of investment
securities held to maturity and $14,051,000 of securities available for sale
representing 33.32% of cash used in investing activities.
Cash Flows from Financing Activities
Cash provided from financing activities during the first nine months of
fiscal 1998, was $121,568,000 compared to $74,884,000 during the same period one
year ago. FHLB advances provided the most significant increase in cash provided
from financing activities. The Company borrowed $495,737,000 and repaid
$418,826,000 during the same period last year. This compares to borrowings of
$212,488,000 and repayments of $216,182,000 the same nine months last year. The
Company's deposits increased by $46,790,000 during the nine months. The increase
is comprised of $29,631,000 of time deposits and $17,159,000 in demand deposits.
Comparatively, for the first nine months last year, deposits increased
$80,456,000 comprised of $74,434,000 in time deposits and $6,022,000 in demand
deposits. The Company paid cash dividends to its shareholders of $2,549,000 and
$1,566,000 for the first nine months of fiscal 1998 and 1997, 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 December 31, 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. On December 31, 1997, the Bank paid a dividend to the Company in
the amount of $10,526,000. The dividend was paid in the form of cash in the
amount of $2,600,000 and loans receivable in the amount of $7,926,000. The cash
was used to finance the Company's residential real estate developments. The
loans receivable are nine mezzanine financing loans which were transferred to
Eagle Bancshares Capital Group. Eagle Bancshares Capital Group also made three
other mezzanine financing loans in the quarter ending December 31, 1997,
bringing the total investments made by Eagle Bancshares Capital Group to
$10,579,000. These loans were made to an existing customer of the Bank and offer
the possibility of a return higher than traditional bank loans. In fiscal 1997,
the Bank paid a dividend in the form of equity securities to the Company in the
amount of $6,094,000.
REGULATORY CAPITAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Regulatory Required Excess
(dollars in thousands) Capital % Capital % Capital %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 Risk-based ratios:
Tier 1 capital $50,078 8.17 $24,505 4.00 $25,573 4.17
Total Capital $55,625 9.08 $49,010 8.00 $ 6,615 1.08
Tier 1 leverage $50,078 5.57 $35,969 4.00 $14,109 1.57
Tangible equity $50,078 5.91 $13,119 1.50 $36,959 4.41
- --------------------------------------------------------------------------------------------------------
At December 31, 1996
Risk-based ratios:
Tier 1 capital $57,092 11.51 $20,998 4.00 $36,094 7.51
Total capital $60,570 12.21 $41,997 8.00 $18,573 4.21
Tier 1 leverage $57,092 7.48 $31,460 4.00 $25,632 3.48
Tangible equity $57,092 7.60 $11,809 1.50 $45,283 6.10
</TABLE>
23
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank acquired certain assets of Southern Federal Savings
and Loan Association from the RTC on November 23, 1992. In
connection with this acquisition, the Bank entered into an
agreement (the "Agreement") with a corporation owned by two
individuals to participate in the future profits and losses of
the operation of the Prime Lending Division of Tucker Federal
Bank pursuant to the Agreement. On December 5, 1997, the
corporation and these two individuals filed a complaint
alleging that the Bank has not properly calculated the profits
and losses of the Prime Lending Division. Additionally, in the
complaint, the corporation and these individuals asked the
court to declare the Agreement terminated and allow the
individuals the opportunity to exercise an option to purchase
assets of the division for 75% of the appraised fair market
value as described in the Agreement. On January 23, 1998, the
Bank terminated the Agreement and its employment of the two
individuals. The Bank continues to believe its calculations of
profits and losses are proper and in full compliance with the
terms of the Agreement and that it was within its rights to
terminate the Agreement and the employment of the individuals.
The specific impact on the financial condition of the Bank, if
any, which might be caused by terminating the Agreement and
the purchase of the assets of the division by the corporation
and the two individuals, if the corporation and the two
individuals have the option to purchase and choose to exercise
that option, cannot be determined at this time.
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
EXHIBIT 11 Computation of per share earnings.
EXHIBIT 27 Financial Data Schedule
C. 9. Reports on Form 8-K
None
<PAGE> 25
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: February 17, 1998 /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: February 17, 1998 /s/Richard B. Inman, Jr.
----------------------------------------
Richard B. Inman, Jr.
Director, Secretary and Treasurer
Date: February 17, 1998 /s/ Conrad J. Sechler, Jr.
----------------------------------------
Conrad J. Sechler, Jr.
Chairman of the Board and President
Date: February 17, 1998 /s/ LuAnn Durden
----------------------------------------
LuAnn Durden
Chief Financial Officer
25
<PAGE> 26
EAGLE BANCSHARES, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
11 Computation of per share earnings 27
27 Financial Data Schedule (for SEC use only) 28
</TABLE>
26
<PAGE> 1
EXHIBIT 11
EAGLE BANCSHARES, INC.
Statement re: Computation of per share earnings
Below is a reconciliation for the three and nine month periods ended December
31, 1997 and 1996 of the difference between average basic common shares
outstanding and average diluted common shares outstanding.
<TABLE>
<CAPTION>
(in thousands) THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
Average common shares - basic 5,695 5,528 5,671 5,528
Effect of dilutive stock options 174 177 146 177
--------------------------------------------------------
Average common shares - diluted 5,869 5,705 5,817 5,705
--------------------------------------------------------
</TABLE>
27
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 18,307
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 86,230
<INVESTMENTS-CARRYING> 69,154
<INVESTMENTS-MARKET> 70,170
<LOANS> 545,073
<ALLOWANCE> 6,265
<TOTAL-ASSETS> 934,458
<DEPOSITS> 604,514
<SHORT-TERM> 230,716
<LIABILITIES-OTHER> 14,108
<LONG-TERM> 0
0
0
<COMMON> 6,020
<OTHER-SE> 67,183
<TOTAL-LIABILITIES-AND-EQUITY> 934,458
<INTEREST-LOAN> 44,238
<INTEREST-INVEST> 4,650
<INTEREST-OTHER> 3,769
<INTEREST-TOTAL> 52,657
<INTEREST-DEPOSIT> 21,636
<INTEREST-EXPENSE> 29,085
<INTEREST-INCOME-NET> 23,572
<LOAN-LOSSES> 1,974
<SECURITIES-GAINS> (46)
<EXPENSE-OTHER> 26,711
<INCOME-PRETAX> 7,007
<INCOME-PRE-EXTRAORDINARY> 7,007
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,047
<EPS-PRIMARY> .89
<EPS-DILUTED> .87
<YIELD-ACTUAL> 3.94
<LOANS-NON> 8,895
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,461
<ALLOWANCE-OPEN> 5,198
<CHARGE-OFFS> 1,044
<RECOVERIES> 137
<ALLOWANCE-CLOSE> 6,265
<ALLOWANCE-DOMESTIC> 6,265
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
