SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year Commission file number
ended December 31, 1996 0-19228
EAGLE BANCORP, INC.
(Name of small business issuer in its charter)
Georgia 58-1860526
(State of Incorporation) (I.R.S. Employer
Identification No.)
335 South Main Street
Statesboro, Georgia 30458
(Address of principal executive office)(Zip Code)
(912) 764-8900
(Issuer's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act: Common stock,
par value $1.00
Check whether Issuer (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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive Proxy or Information Statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $5,299,684.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 1, 1997 was $11,648,408 based on private trades at $13.50
per share, although there is no established trading market.
The number of shares outstanding of Issuer's class of common stock at March 1,
1997 was 862,845 shares of common stock.
Documents Incorporated By Reference: Portions of the Proxy Statement for the
1997 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days of the Registrant's fiscal year end are incorporated
by reference into Part III.
Page 1 of 65
Exhibit Index on Page 62
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TABLE OF CONTENTS
Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTIES 13
ITEM 3. LEGAL PROCEEDINGS 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 13
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 14
ITEM 7. FINANCIAL STATEMENTS 32
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 61
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT 61
ITEM 10. EXECUTIVE COMPENSATION 61
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 61
ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 62
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 62
SIGNATURES 64
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Eagle Bancorp, Inc. (the "Company"), Statesboro, Georgia, was incorporated as a
Georgia business corporation on September 19, 1989, for the purpose of becoming
a bank holding company by acquiring all of the common stock of Eagle Bank and
Trust, Statesboro, Georgia (the "Bank") upon its formation. The Company filed
applications to the Board of Governors of the Federal Reserve System (the
"Board") and the Georgia Department of Banking and Finance (the "DBF") for prior
approval to become a bank holding company. The Company received Board approval
on May 11, 1990, and the DBF approval on March 5, 1990. The Company became a
bank holding company within the meaning of the federal Bank Holding Company Act
(the "Act") and the Georgia bank holding company law (the "Georgia Act") upon
the acquisition of all of the Common Stock of the Bank on September 7, 1990.
The Bank currently is the sole operating subsidiary of the Company. On January
5, 1990, the Bank received the approval of its Articles of Incorporation from
the DBF and its permit to begin business was issued by the DBF on February 18,
1991. The Bank opened for business on February 20, 1991. The deposits at the
Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC").
(b) Business of Issuer
The Bank conducts a general commercial banking business in its primary service
area, emphasizing the banking needs of individuals and small- to medium-sized
businesses. The Company and the Bank conduct business from the main office
located at 335 South Main Street, Statesboro, Georgia 30458, and from the Bank's
branch facility located at 726 Northside Drive East, Statesboro, Georgia 30458.
The Company is authorized to engage in any activity permitted by law to a
corporation, subject to applicable Federal regulatory restrictions on the
activities of bank holding companies. The Company was formed for the purpose of
becoming a holding company to own 100% of the stock of the Bank. The holding
company structure provides the Company with greater flexibility than the Bank.
While the Company has no present plans to engage actively in any nonbanking
business activities, management anticipates studying the feasibility of
establishing or acquiring subsidiaries to engage in other business activities to
the extent permitted by law.
The principal business of the Bank is to accept deposits from the public and to
make loans and other investments in and around Bulloch County, Georgia, its
primary service area.
The Bank offers a full range of deposit services that are typically available
from financial institutions, including NOW accounts, demand, savings and other
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time deposits. In addition, retirement accounts such as Individual Retirement
Accounts are available. All deposit accounts are insured by the FDIC up to the
maximum amount currently permitted by law.
The Bank offers a full range of commercial and personal loans. The Bank makes
loans to individuals for purposes such as home mortgage financing, personal
vehicles and various consumer purchases, and other personal and family needs.
The Bank makes commercial loans to businesses predominantly in the primary
service area for purposes such as equipment and machinery purchases, commercial
real estate purchases and working capital. The Bank's lending philosophy is to
make loans, taking into consideration the safety of the Bank's depositors'
funds, the preservation of the Bank's liquidity, the interest of the Company's
shareholders, and the welfare of the community. Interest income from the Bank's
lending operations is the principal component of the Bank's income, so therefore
prudent lending is essential for the prosperity of the Bank.
The Bank's loan portfolio at December 31, 1996, contains approximately 7% real
estate construction loans, 62% real estate mortgage loans, 19% commercial loans,
3% agricultural loans, and 9% consumer loans. The Bank's loan to deposit ratio
at December 31, 1996 was approximately 81% with management's goal to maintain a
loan to deposit ratio between 75% and 85%.
The principal sources of income for the Bank are interest and fees collected on
loans, interest and dividends collected on other investments, and mortgage
brokerage fees. The principal expenses of the Bank are interest paid on
deposits, employee compensation, office and equipment expenses, and other
overhead expenses.
The Bank's business plan relies principally upon local advertising and
promotional activity and upon personal contacts by its directors, officers and
shareholders to attract business and to acquaint potential customers with the
Bank's personalized services. The Bank emphasizes a high degree of personalized
client service to provide for each customer's banking needs. The Bank's
marketing approach emphasizes the advantages of dealing with an independent,
locally-owned and managed state chartered bank to meet the particular needs of
individuals, professionals and small-to- medium-size businesses in the
community. All banking services will be continually evaluated with regard to
their profitability and efforts will be made to modify the Bank's business plan
if the plan does not prove successful. The Bank does not currently offer trust
or permissible securities services.
Supervision and Regulation
Regulation of the Bank. The operations of the Bank are subject to state and
federal statutes applicable to state chartered banks whose deposits are insured
by the FDIC and the regulations of the DBF and the FDIC. Such statutes and
regulations relate to, among other things, required reserves, investments,
loans, mergers and consolidations, issuances of securities, payment of
dividends, establishment of branches and other aspects of the Bank's operations.
Under the provisions of the Federal Reserve Act, the Bank is subject to certain
restrictions on any extensions of credit to the Company or, with certain
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exceptions, other affiliates, and on the taking of such stock or securities as
collateral on loans to any borrower. In addition, the Bank is prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or the providing of any property or service.
The Bank, as a state chartered bank, will be permitted to branch to the extent
that banks are permitted to branch under Georgia law. In January 1996, the
Georgia legislature passed a bill designed to eliminate Georgia's current
branching restrictions. The new legislation provides that effective after July
1, 1996, banks in Georgia, with prior approval of the DBF (and the appropriate
federal regulatory authority), may establish up to three new branches to be
located in any county in the state. Effective July 1, 1998, Georgia banks may
establish an unlimited number of branches in any county in the state, upon
receipt of appropriate regulatory approvals.
The FDIC adopted final risk-based capital guidelines for all FDIC insured state
chartered banks that are not members of the Federal Reserve System effective
December 31, 1990. All banks are required to maintain a minimum ratio of total
capital to risk weighted assets of 8 percent (of which at least 4 percent must
consist of Tier 1 capital). Tier 1 capital of state chartered banks (as defined
in regulations) generally consists of (i) common stockholders equity; (ii)
noncumulative perpetual preferred stock and related surplus; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.
In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets
of banks. This capital measure is generally referred to as the leverage capital
ratio. The FDIC has established a minimum leverage capital ratio of 3 percent if
the FDIC determines that the institution is not anticipating or experiencing
significant growth and has well-diversified risk, including no undue interest
rate exposure, excellent asset quality, high liquidity, good earnings and, in
general, is considered a strong banking organization, rated Composite 1 under
the Uniform Financial Institutions Rating System. Other financial institutions
are expected to maintain leverage capital at least 100 to 200 basis points above
the minimum level.
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "Improvement Act") was enacted into law. The Improvement Act
provides for, among other matters, addressing the safety and soundness of
deposit insurance funds, prompt regulatory corrective action by federal agencies
when a bank begins to experience difficulties that may threaten loss to the
FDIC, revised limitations on borrowings by insiders of banks, the parent bank
holding companies and their affiliates, limited guarantees of capital
restoration by bank holding companies of their subsidiary banks and new
provisions for depository institution conversions. The FDIC has adopted
regulations which, among other matters, implement provisions of the Improvement
Act that require or permit the FDIC to take specific supervisory actions when
FDIC-insured institutions come within one of five specific capital categories.
The five capital categories are designated as (1) well capitalized, (2)
adequately capitalized, (3) undercapitalized, (4) significantly
undercapitalized, and (5) critically undercapitalized. At December 31, 1996, the
Bank was categorized as "well capitalized" under provisions of the Improvement
Act. The full effects of the Improvement Act will only be known over time.
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Regulation of the Company. The Company is a bank holding company within the
meaning of the Act and the Georgia Act. As a bank holding company, the Company
is required to file with the Board an annual report and such additional
information as the Board may require pursuant to the Act. The Board may also
make examinations of the Company and each of its subsidiaries. Bank holding
companies are required by the Act to obtain approval from the Board prior to
acquiring, directly or indirectly, ownership or control of more than 5% of the
voting shares of a bank. The Act also prohibits bank holding companies, with
certain exceptions, from acquiring more than 5% of the voting shares of any
company that is not a bank and from engaging in any business other than banking
or managing or controlling banks and other subsidiaries authorized by the Act or
furnishing services to, or performing services for, its subsidiaries without the
prior approval of the Board. The Board is empowered to differentiate between
activities that are initiated de novo by a bank holding company or a subsidiary
and activities commenced by acquisition of a going concern. The Company has no
present intention to engage in nonbanking activities.
Pursuant to Section 4 (j) of the Bank Holding Company Act (12 U.S.C. Section
1843 (j)), a bank holding company must submit a written notice to the Federal
Reserve Board at least sixty days before engaging, directly or indirectly, in a
non-banking activity authorized under Section 4(c)(8), which authorizes holding
companies to engage in activities that are closely related to banking or
managing or controlling banks. The processing period begins to run form the date
the Federal Reserve Board receives a complete notice, and may be extended under
certain circumstances. In acting on a notice to engage in Section 4(c)(8)
activities, the Federal Reserve Board is required by certain sections of the
Bank Holding Company Act to consider whether the benefits of the proposed
activity (such as greater convenience, increased competition, or gains in
efficiency) outweigh the potential adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices). Section 4(c)(8) also requires that proposals to engage in
permissible activities are subject to public notice and an opportunity for a
hearing only in case of an acquisition of a savings association. Section 4(j) of
the Bank Holding Company Act was amended by the Economic Growth and Regulatory
Paperwork Reduction Act of 1996, enacted as a part of the Omnibus Consolidated
Appropriations Act for Fiscal Year 1997 to permit a well-capitalized and
well-managed bank holding company, that controls predominantly well-capitalized
and well-managed depository institutions, as defined by amendments to The Bank
Holding Company Act, to engage de novo in any permissible 4(c)(8) activity or
acquire any company engaged in permissible 4(c)(8) activities (except for an
insured depository institution, i.e., a savings association) under expedited
procedures. To be eligible for the expedited procedures, the book value of the
assets acquired may not exceed 10% of the holding company's consolidated risk
weighted assets and the consideration paid may not exceed 15% of Tier One
capital. The Federal Reserve Board may adjust these percentages. In addition, no
administrative enforcement action may have been commenced or be pending nor may
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any cease and desist order pursuant to Section 8 of the FDIC Act have been
issued or be pending against the holding company or any of its depository
institution subsidiaries.
While all qualifying holding companies engaging in Section 4(c) (8) activities
under the expedited procedures must provide notice to the Federal Reserve Board,
the notice provisions differ. First, to engage de novo directly or through a
subsidiary in activities that the Fed has already approved by regulation, the
bank holding company must provide notice within ten days after commencing the
activity. Second, to engage in activities that the Fed has permitted by order or
to acquire the shares or assets of an existing company, the bank holding company
must provide notice at least twelve business days prior to commencing the
activity during which time the Fed may require the full 60-day notice procedure.
As a bank holding company, the Company is subject to capital adequacy guidelines
as established by the Board. The Board established risk based capital guidelines
for bank holding companies effective March 15, 1989. Beginning on December 31,
1992, the minimum required ratio for total capital to risk weighted assets
became 8 percent (of which at least 4 percent must consist of Tier 1 capital).
Tier 1 capital (as defined in regulations of the Board) consists of common and
qualifying preferred stock and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and other intangible assets required to
be deducted under the Board's guidelines.
The Board's guidelines apply on a consolidated basis to bank holding companies
with total consolidated assets of $150 million or more. For bank holding
companies with less than $150 million in total consolidated assets (such as the
Company), the guidelines will be applied on a bank only basis, unless the bank
holding company is engaged in nonbanking activity involving significant leverage
or has significant amount of debt outstanding that is held by the general
public. The Board has stated that risk based capital guidelines establish
minimum standards and that bank holding companies generally are expected to
operate well above the minimum standards.
The Company is also a bank holding company within the meaning of the Georgia
Act, which provides that, without the prior approval of the DBF, it is unlawful
(i) for any bank holding company to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank, (ii) for any bank
holding company or subsidiary thereof, other than a bank, to acquire all or
substantially all of the assets of a bank, or (iii) for any bank holding company
to merge or consolidate with any other bank holding company.
It also is unlawful for any company to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank in Georgia unless such
bank has been in existence and continuously operating or incorporated as a bank
for a period of five years or more prior to the date of application to the DBF
for approval of such acquisition. Bank holding companies themselves are
prohibited from acquiring another bank until the initial bank in the bank
holding company has been incorporated for a period of twenty-four months.
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The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act") allows adequately capitalized and managed bank holding
companies to acquire existing banks across state lines without regard to whether
the acquisition is expressly authorized under state law. Certain requirements
such as minimum age restrictions for banks to be acquired will be preserved.
Further, under the Interstate Banking Act, effective June 1, 1997 a bank holding
company may consolidate its interstate bank subsidiaries into branches and a
bank may merge with an unaffiliated bank across state lines to the extent that
the applicable states have not "opted out" of interstate branching prior to such
effective date. States may enact legislation to permit interstate mergers prior
to June 1, 1997. The Interstate Banking Act also permits de novo branching to
the extent that a particular state "opts in" to the de novo branching
provisions. The Interstate Banking Act generally prohibits an interstate
acquisition (other than an initial entry into a state by a bank holding company)
which would result in either the control of more than (i) 10% of the total
amount of insured deposits in the United States or (ii) 30% of the total insured
deposits in the home state of the target bank, unless such 30% limitation is
waived by the home state on a basis which does not discriminate against
out-of-state institutions.
The Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Improvement Act") provides for the creation of a community development
financial institutions' fund to promote economic revitalization in community
development. Banks and thrift institutions are allowed to participate in such
community development banks. The Improvement Act also contains (i) provisions
designed to enhance small business capital formation and to enhance disclosure
with regard to high cost mortgages for the protection of consumers, and (ii)
more than 50 regulatory relief provisions that apply to banks and thrift
institutions, including the coordination of examinations by various federal
agencies, coordination of frequency and types of reports financial institutions
are required to file and reduction of examinations for well capitalized
institutions.
Bank holding companies may be compelled by bank regulatory authorities to invest
additional capital in the event a subsidiary bank experiences either significant
loan losses or rapid growth of loans or deposits. In addition, the Company may
be required to provide additional capital to any additional banks it acquires as
a condition to obtaining the approvals and consents of regulatory authorities in
connection with such acquisitions.
The Company is an "affiliate" of the Bank within the meaning of the Federal
Reserve Act, which imposes restrictions on loans to the Company by the Bank or
investments by the Bank in securities of the Company and on the use of such
securities as collateral security for loans by the Bank to any borrower.
However, recent legislation exempts from the insider lending restrictions of
Section 22(h) of the Federal Reserve Act (12 U.S.C. Section 375(b)) company-wide
benefit or compensation plans that are widely available to employees of the Bank
and that did not give preference to any officer, director or principal
shareholder (or any related interest) over other employees of the bank. In
addition, the Federal Reserve Board may now exempt, by regulation, the
prohibition on preferential loans to executive officers and directors of
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affiliates who do not have the authority to participate in the major
policy-making functions of the Bank, provided that the assets of these
affiliates do not exceed 10% of the consolidated assets of the holding company
and the affiliate is not controlled by another company.
Recent Regulatory Developments. On September 3, 1996, President Clinton signed
the Omnibus Consolidated Appropriations Act for FY 1997. Subtitle G of Title Two
of that Act is titled the "Deposit Insurance Funds Act of 1996" (Deposit
Insurance Funds Act), which among other things provides for the recapitalization
of the Savings Association Insurance Fund ("SAIF") as of October 1, 1996. To
accomplish this recapitalization, the FDIC imposed a special assessment on each
insured depository institution with deposits assessable under the SAIF so that
SAIF would achieve its designated reserve ratio (DRR) on the first business day
of the first month after the date of the enactment of the Deposit Insurance
Funds Act. Because the legislation was enacted as of September 30, 1996, under
the Deposit Insurance Funds Act, SAIF achieved its DRR and became fully
capitalized on October 1, 1996. For purposes of the SAIF special assessment, the
amount of SAIF-assessable deposits is determined as of March 31, 1995. However,
the term "SAIF-assessable deposits" includes deposits assumed after March 31,
1995 if the deposits were assumed from an institution that is no longer insured
when the special assessment to recapitalize SAIF is imposed under this section.
Therefore, some institutions will be required to pay the special assessment on
SAIF insured deposits that were assumed after March 31, 1995.
A major part of the plan to recapitalize SAIF involves imposing a one-time
special assessment on SAIF-assessable deposits that may be paid in two
installments under certain conditions. Subject to certain statutory adjustments,
the FDIC has discretion to determine the rates of the assessments after
considering certain factors, including the most recent SAIF balance, data on
insured deposits, and any other factors that the FDIC has discretion to
determine the rates of the assessments after considering certain factors,
including the most recent SAIF balance, data on insured deposits, and any other
factors that the FDIC deems appropriate. This one-time special assessment is
subject to certain exceptions, and the FDIC has discretion to issue orders
exempting weak institutions from paying this special assessment if the exemption
will reduce the risk to SAIF. The FDIC prescribed guidelines for issuing such an
exemption within 30 days of enactment of the Deposit Insurance Funds Act. The
Act required FDIC to exempt from the special assessment (1) institutions that
existed on October 1, 1995 and held no SAIF assessable deposits before January
1, 1993, (2) federal savings banks newly established in April, 1994 to acquire
the deposits of savings institutions in default that received assistance from
the RTC in connection with the transactions, and (3) an SAIF insured savings
association that, before January 1, 1987, was a federal savings bank insured by
the FSLIC for the purpose of acquiring the assets or assuming the liabilities of
a national bank in a transaction consummated after July 1, 1986 and had assets
less than $150 million. Exempt institutions generally are required to pay
semi-annual assessments at former rates under the schedule applicable to SAIF
fund members on June 30, 1995, with certain exceptions.
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There are three statutory adjustments that the FDIC must consider in setting the
SAIF recapitalization rates. The first of these relates to Oakar transactions,
which are generally defined to include bank purchases of SAIF-assessable
deposits. Generally, Bank Insurance Fund (BIF) members acquiring SAIF-assessable
deposits in Oakar transactions prior to March 31, 1995 (or after March 31, 1995
if the institution from which the deposits were acquired is no longer insured at
the time the special assessment is imposed), are subject to the SAIF special
assessment but the amount of assessable deposits would, as a general
proposition, be reduced by 20% for purposes of the assessment if certain
conditions are satisfied. The 20% haircut for these BIF members applies for
purposes of the special assessment and for purposes of future semi-annual
assessments on SAIF-assessable deposits that were acquired prior to March 31,
1995. To be eligible for the 20% haircut, a BIF member must satisfy certain
requirements that are based on a suggested attributable deposit amount as of
June 30, 1995.
The second statutory adjustment the FDIC must consider for purposes of computing
this special assessment relates to "converted associations," a term defined by
the Act. An institution meeting one of the Act's definitions of "converted
association" may also reduce by 20% the amount of deposits that are SAIF insured
as of March 31, 1995 (or after March 31 1995 is subject to the special
assessment because the institution from which the deposits were acquired is no
longer insured at the time the special assessment is imposed). In addition to
"converted associations," Sasser banks - a savings association that converted to
a bank charter prior to SAIF reaching its DRR and as a result the resulting bank
was required to remain an SAIF member may qualify under this second adjustment
under very limited criteria.
Third, if payment of the special assessment would pose a significant risk that
an insured depository institution or its holding company may default on payments
under debt obligations or preferred stock, the institution may elect to pay the
special assessment under extended terms that would include a supplemental
special assessment.
The SAIF was initially capitalized through the issuance of bond obligations by
the Financing Corporation (FICO), commonly referred to as FICO bonds. The
Deposit Insurance Funds Act also addresses repayment of the interest on those
bonds. Beginning with the semi-annual periods after December 31, 1996,
assessments to pay approximately $8 million in interest on FICO bonds will be
shared among all insured depository institutions, including insured national
banks, instead of only SAIF members. For purposes of the assessments to pay the
interest on the FICO bonds, BIF assessable deposits will be assessed at a rate
of 20% of the assessment rate applicable to SAIF-assessable deposits until
December 31, 1999. After the earlier of December 31, 1999 or the date the last
savings association ceases to exist, full pro rata sharing of FICO assessments
will begin.
For purposes of paying the interest on the FICO bonds, "BIF assessable deposits"
means deposits that are subject to assessments under BIF. The term
"SAIF-assessable deposits" means deposits that are assessable under SAIF and
includes any deposits that were assumed after March 31, 1995 if the insured
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institution from which the deposits were acquired is not insured when the SAIF
special assessment is imposed.
The Deposit Insurance Funds Act also provides that, as of the date of enactment
and ending on the earlier of December 31, 1999 or the date that the last savings
association ceases to exist, the federal banking agencies must take appropriate
action to prohibit deposit shifting from SAIF to BIF, including enforcement
actions, denial of applications, or imposing exit and interest fees as if the
transaction qualified as a conversion. The legislation requires the Office of
the Comptroller of the Currency, the FDIC, the Federal Reserve Board, and the
Office of Thrift Supervision to take necessary actions to prevent insured
depository institutions and depository institution holding companies from
facilitating or encouraging the shifting of deposits from SAIF-assessable to
BIF-assessable for the purpose of evading the assessments imposed on
SAIF-assessable deposits. The FDIC may issue regulations to prevent deposit
shifting. It is a rule of construction, however, that this portion of the
Deposit Insurance Funds Act does not prohibit an institution from engaging in
conduct or activity that is part of the ordinary course of business and is not
directed at depositors of an insured affiliated institution.
The Deposit Insurance Funds Act also provides for the merger of BIF and SAIF
into the Deposit Insurance Fund (DIF) on January 1, 1999, if no insured
depository institution is a "savings association" on that date. If an insured
savings association still exists on January 1, 1999, the Deposit Insurance Funds
Act does not make provision for the merger of the funds to occur on a subsequent
date. For purposes of the BIF/SAIF merger, the term "savings association" is
defined as having the same meaning as it does in section 3(b) of the FDI Act (12
U.S.C. Section 1813 (b)), and thus includes both federal and state savings
associations.
If immediately before the merger, the SAIF reserve ratio exceeds the DRR, the
excess will be placed in DIF's special reserve. While the DIF special reserve
will not be included for purposes of calculating the DIF DRR and the FDIC an not
refund any amount in the special reserve, it can be drawn upon for emergency
purposes if the reserve ratio of the DIF should drop below 50% of its DRR for a
sustained period of time. This portion of the Deposit Insurance Fund Act also
makes conforming changes to the FDI Act and other provisions of the law
effective on January 1, 1999 if the funds are so merged. If the funds are not
merged, the Deposit Insurance Fund Act establishes an SAIF special reserve as of
January 1, 1999 that will consist of the excess in the SAIF over the DRR as of
that date. While the amount in the SAIF special reserve can not be used to
calculate any future DRR and can not be used for refunds from the SAIF, it would
be available for emergency purposes if the reserve ratio of the SAIF is less
than 50% of its DRR for a sustained period of time.
The Deposit Insurance Funds Act also required the FDIC on such basis as it deems
appropriate to refund any amounts in excess of the DRR to BIF members and, after
it is established, to DIF members. There are no similar provisions for refunds
to SAIF members. A member can not, however, receive any refund for any
semi-annual assessment period that exceeds the assessment paid during that
period. Institutions that are not "well-capitalized" or that have other
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weaknesses are not eligible for refunds. The refund provision becomes effective
as of the end of any semi-annual assessment period beginning after the date of
enactment of the Deposit Insurance Funds Act.
The United States Congress and the Georgia General Assembly periodically
consider and adopt legislation that results in, and could further result in,
deregulation, among other matters, of banks and other financial institutions.
Such legislation could modify or eliminate geographic restrictions on banks and
bank holding companies and current prohibitions with other financial
institutions, including mutual funds, securities brokerage firms, insurance
companies, banks from other states and investment banking firms. The effect of
any such legislation on the business of the Company or the Bank cannot be
accurately predicted. The Company cannot predict what legislation might be
enacted or what other implementing regulations might be adopted, and if enacted
or adopted, the effect thereof.
Competition
The banking business is highly competitive. The Bank competes with other
commercial banks in its primary service area.
Banks generally compete with other financial institutions through the banking
products and services offered, the pricing of services, the level of service
provided, the convenience and availability of services, and the degree of
expertise and the personal manner in which services are offered. The Bank
encounters strong competition from most of the financial institutions in the
Bank's primary service area. In the conduct of certain areas of its banking
business, the Bank also competes with credit unions, consumer finance companies,
mortgage companies, insurance companies, money market mutual funds and other
financial institutions, some of which are not subject to the same degree of
regulation and restrictions imposed upon the Bank. Many of these competitors
have substantially greater resources and lending limits than the Bank has and
offer certain services, such as trust services, that the Bank does not provide
presently. Management believes that competitive pricing and personalized service
will provide it with a method to compete effectively in the primary service
area.
12
<PAGE>
Employees
As of December 31, 1996, the Bank employed 31 full-time employees and 6
part-time employees. Except for the officers of the Bank who presently serve as
officers of the Company, the Company does not have any employees. Neither the
Company nor the Bank is a party to any collective bargaining agreement, and
management believes the Bank enjoys satisfactory relations with its employees.
ITEM 2. DESCRIPTION OF PROPERTIES
The operations of the Company and the Bank are conducted from the Bank's main
office located at 335 South Main Street, Statesboro, Georgia and from the Bank's
branch facility located at 726 Northside Drive East, Statesboro, Georgia. The
Bank owns both facilities which contain approximately 11,500 and 2,500 square
feet, respectively.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any pending legal proceedings,
other than routine litigation incidental to the Bank's business, which
management believes would have a material effect upon the operations or
financial condition of the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the Company's
fourth quarter of the fiscal year ended December 31, 1996.
13
<PAGE>
PART II
ITEM 5. MARKET FOR ISSUER'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
As of December 31, 1996, there were approximately 927 shareholders of record of
the Company's common stock. Although there is no established trading market for
the Company's common stock, the Company is aware of 25 private trades during the
1996 fiscal year at prices ranging from $12.74 to $13.50 per share. On October
15, 1996, the Company declared a cash dividend in the amount of $.50 per share
payable January 15, 1997. This was declared as an annual dividend of $.30 per
share and a special one time dividend of $.20 per share. Certain regulatory
requirements restrict the amount of dividends that can be paid to the Company by
the Bank without obtaining the prior approval of the DBF. No assurance can be
given that dividends will continue to be declared, or if declared, by the
Company, what the amount of the dividends will be.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Introduction
The Company is a one-bank holding company providing a full range of banking
services to individual and corporate customers in the Bulloch County and
surrounding areas through its wholly-owned bank subsidiary, the Bank. The Bank
operates under a state charter granted by the DBF and serves its customers from
its two banking facilities in Statesboro, Georgia. The Company and the Bank were
formed in September 1989 and were a developmental stage enterprise until the
Bank began operations on February 20, 1991. The following discussion of the
Company's financial condition and results of operations should be read in
conjunction with the Company's consolidated financial statements and related
notes presented in Item 7 of this Annual Report on Form 10-KSB.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for Eagle Bancorp, Inc. and
subsidiary should be read in conjunction with the consolidated financial
statements and related notes included in another section of this Annual
Report on Form 10-KSB.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
(amounts in thousands, except
per share information and
financial ratios)
<S> <C> <C> <C>
Income Statement data:
Interest income ........................... $ 4,664 $ 4,236 $ 3,495
Interest expense .......................... (2,269) (1,988) (1,418)
------- ------- --------
Net interest income .............. 2,395 2,248 2,077
Provision for possible loan losses ......... (108) (75) (88)
Noninterest income .......................... 636 490 395
Noninterest expense ........................ (2,171) (1,953) (1,815)
Income tax expense ........................ (250) (210) (140)
------- ------- --------
Net income .............................. $ 502 $ 500 $ 429
======= ======= ========
Balance sheet data:
Loans, net of unearned income ........... $42,639 $37,442 $ 33,482
======= ======= ========
Deposits ............................... $52,465 $44,883 $ 40,703
======= ======= ========
Total assets ............................. $60,730 $52,774 $ 47,058
======= ======= ========
Average shareholders' equity ............. $ 6,336 $ 6,122 $ 5,659
======= ======= ========
Average assets ........................... $56,045 $49,974 $ 46,224
======= ======= ========
Per share data:
Net income .............................. $ .57 $ .57 $ .49
======= ======= ========
Book value .............................. $ 7.25 $ 7.19 $ 6.70
======= ======= ========
Cash dividends declared ................. $ .50 $ .25 $ .00
======= ======= ========
Financial ratios:
Return on average assets ................ .90% 1.00% 0.93%
======= ======= ========
Return on average shareholders' equity .. 7.92% 8.17% 7.58%
======= ======= ========
Dividend payout ratio ................... 85.97% 43.12% 0%
======= ======= ========
Average shareholders' equity to average
assets . 11.31% 12.25% 12.24%
======= ======= ========
Note: Per share data has been restated for all periods presented to reflect
a three-for-two stock split effected in May, 1995.
</TABLE>
RESULTS OF OPERATIONS
The Company's net income and net income per share for the year ended
December 31, 1996 were $501,856 or $0.57 per share on a fully diluted basis
compared to net income and net income per share for the year ended December
31, 1995 of $500,180 or $0.57 per share. Net income and net income per
share for the year ended December 31, 1994 were $428,671 or $.49 per share.
15
<PAGE>
Increases in net interest income of approximately $147,000 in 1996 and
$171,000 in 1995 and increases in noninterest income of approximately
$146,000 in 1996 and $95,000 in 1995 are the primary reasons the Company
increased its profitability during 1996 and 1995. The Company's total
assets grew from approximately $52.8 million at December 31, 1995 to $60.7
million at December 31, 1996 or approximately 15%. The Company's total
assets grew from approximately $47.1 million at December 31, 1994 to $52.8
at December 31, 1995 or approximately 12%. The increase in the growth rate
from approximately 12% in 1995 to approximately 15% in 1996 was the result
of the emphasis on customer service, marketing efforts, and the opening of
the Company's first branch facility in October, 1995. Noninterest expense
increased approximately $218,000 in 1996 and $137,000 in 1995 primarily
relating to the new branch.
The following table summarizes the results of operations and certain
financial ratios of the Company for each of the years in the three-year
period ended December 31, 1996.
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
amounts in thousands, except
share and per share
information and financial ratios
<S> <C> <C> <C>
Interest income .............................. $ 4,664 $ 4,236 $ 3,495
Interest expense ............................. (2,269) (1,988) (1,418)
--------- --------- ---------
Net interest income .......................... 2,395 2,248 2,077
Provision for possible loan losses ........... (108) (75) (88)
Noninterest income ........................... 636 490 395
Noninterest expense .......................... (2,171) (1,953) (1,815)
Income tax expense ........................... ( 250) (210) (140)
--------- --------- ---------
Net Income ................................... $ 502 $ 500 $ 429
========= ========= =========
Net income per common share and common share
equivalent $ 0.57 $ 0.57 $ 0.49
========= ========= =========
Weighted average number of common share and
common share equivalents ............... 885,198 883,332 876,088
========= ========= =========
Return on average assets .................... .90% 1.00% 0.93%
========= ========= =========
Return on average shareholders' equity ...... 7.92% 8.17% 7.58%
========= ========= =========
Dividend payout ratio ........................ 85.97% 43.12% 0%
========= ========= =========
Average loans to average deposits ............ 82.96% 82.32% 75.98%
========= ========= =========
Loan to deposit ratio (period-end) ........... 81.27% 83.49% 82.26%
========= ========= =========
Average shareholders' equity to average assets . 11.31% 12.25% 12.24%
========= ========= =========
Shareholders' equity to assets (period-end) ... 10.31% 11.74% 12.37%
========= ========= =========
Note: Per share data has been restated for all periods presented to reflect
a three-for-two stock split effected in May, 1995.
</TABLE>
16
<PAGE>
Net Interest Income
The Company's net interest income, the difference between interest income
on interest-earning assets and interest expense on interest-bearing
liabilities, is the Company's principal source of income. Interest-earning
assets for the Company include loans, federal funds sold, investment
securities, and interest-earning deposits in financial institutions. The
Company's interest-bearing liabilities include its interest-bearing deposit
liabilities, federal funds purchased, and advances from the Federal Home
Loan Bank.
In 1996, net interest income was $2,395,000, representing an increase of
$147,000 or 6.54% when compared to 1995 of $2,248,000. Net interest income
for 1995 was approximately 8.23% higher than 1994 net interest income of
$2,077,000. The average yield earned on interest earning assets was 9.19%
in 1996 compared to 9.31% in 1995 and the average rate paid on
interest-bearing liabilities was 5.13% in 1996 compared to 5.07% in 1995.
The average yield earned on interest-earning assets for 1994 was 8.29% and
the average rate paid on interest bearing liabilities was 3.89% for 1994.
The Company's net interest margin (net interest income divided by average
interest-earning assets) equaled 4.72% in 1996 compared to 4.94% in 1995.
The decline in net interest margin in 1996 is attributable to the
intensely competitive market for quality loans in the Bank's market area.
The Company's net interest margin for 1994 was 4.93%. The Company's average
loan to deposit ratio in 1996 of 83.00% as compared to 82.3% for 1995 and
76.0% for 1994. The Bank's loan to deposit ratio at December 31, 1996 was
81.27% as compared to 83.49% at December 31, 1995.
17
<PAGE>
The following table presents average balance sheets, yields, and interest
earned on interest-earning assets and rates and interest paid on
interest-bearing liabilities of the Company for the years ended December
31, 1996 and 1995.
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995
Average Yields/ Average Yields/
balances Interest rates balances Interest rates
(amounts in thousands, except percentages and ratios)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Interest-earning deposits in
financial institutions ........... $ 32 1 3.13%$ 99 6 6.06%
Federal funds sold .................. 1,084 59 5.44 1,504 89 5.92
Investment securities ............... 10,222 580 5.67 8,334 453 5.44
Loans, net (1)(2) ................... 39,403 4,024 10.21 35,542 3,600 10.38
------- ------- ----- ------- ----- -----
Total interest-earning assets ..... 50,741 4,664 9.19% 45,479 4,236 9.31%
======= ======= ===== ======= ===== =====
Noninterest-earning assets:
Cash and due from banks ............. 1,990 1,620
Premises and equipment, net ......... 2,509 2,168
Other assets ........................ 805 707
----- -----
Total noninterest-earning assets .. 5,304 4,495
----- -----
TOTAL ASSETS ........................ $56,045 $49,974
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits .... $ 6,706 175 2.61% $ 6,580 197 2.99%
Money market & savings accounts ..... 4,741 145 3.06 4,838 163 3.37
Certificates of deposit ............. 29,268 1,733 5.92 25,472 1,491 5.85
Individual retirement accounts ...... 2,823 179 6.34 2,291 137 5.98
Other Borrowed Funds ................ 703 37 5.84 0 0 0
------- ------- ----- ------- ----- -----
Total interest-bearing liabilities 44,241 2,269 5.13% 39,181 1,988 5.07%
------- ------- ----- ------- ----- -----
Noninterest-bearing liabilities and
shareholders" equity:
Noninterest-bearing demand deposits $ 4,681 $ 3,996
Other liabilities ................... 867 675
Shareholders' equity ................ 6,336 6,122
----- -----
Total noninterest-bearing
liabilities and shareholders'
equity .................. 11,804 10,793
------ -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ................ $56,045 $49,974
====== ======
INTEREST RATE DIFFERENTIAL (3) ...... 4.06% 4.24%
===== =====
NET INTEREST INCOME ................. $ 2,395 $ 2,248
===== =====
NET INTEREST MARGIN (4) ............. 4.72% 4.94%
===== =====
AVERAGE INTEREST-EARNING
ASSETS TO AVERAGE TOTAL ASSETS ...... 90.54% 91.01%
===== =====
AVERAGE LOANS TO AVERAGE DEPOSITS ... 82.96% 82.32%
===== =====
</TABLE>
(1) Average loans are shown net of unearned income/deferred loan cost and
the allowance for possible loan losses. Nonperforming loans are
included.
(2) Interest income includes loan fees as follows (amounts in
thousands): 1996 - $173, 1995 - $156
(3) Interest rate differential is the average yield earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
18
<PAGE>
The following table presents the changes in the Company's net interest
income as a result of changes in the volume and rate of its
interest-earning assets and interest-bearing liabilities from 1995 to 1996
and from 1994 to 1995.
<TABLE>
<CAPTION>
1996 vs. 1995 1995 vs. 1994
--------------------------- -------------------------
Volume(1) Rate(1) Net Volume (1) Rate(1) Net
Change Change
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest-earning deposits
in financial institutions $ (3) (2) (5) $ 0 3 3
Federal funds sold ........ (24) (6) (30) 4 25 29
Investment securities ..... 103 24 127 (95) 23 (72)
Loans, including fees ..... 402 (66) 336 448 334 782
----- --- ---- ----- --- ----
Total interest income ..... 478 (50) 428 357 385 742
===== === ==== ===== === ====
Interest expense:
Individual retirement
accounts ................ 32 10 42 (83) 12 (71)
Money Market and
Savings Deposits ........ (3) (15) (18) 21 20 41
Certificates of deposits .. 222 20 242 229 308 537
Interest-bearing demand
deposits ................ 3 (25) (22) 21 42 (63)
Other borrowed funds ...... 37 0 37 0 0 0
----- --- ---- ----- --- ----
Total interest expense .... 291 (10) 281 188 382 570
===== === ==== ===== === ====
Net interest income ....... $ 187 (40) 147 169 3 172
===== === ==== ===== === ====
</TABLE>
(1) The change in interest due to both rate and volume has been
allocated to the volume and rate components in proportion to
the relationship of the dollar amounts of the change in each.
Allowance for Possible Loan Losses
The Company provides for possible loan losses based upon information
available at the end of each period. By evaluating the adequacy of the
allowance for possible loan losses at the end of each period, management
maintains the allowance for possible loan losses at a level adequate to
provide for losses that can reasonably be anticipated. The level of the
allowance for possible loan losses is based on management's periodic
loan-by-loan evaluation of its loan portfolio, as well as its assessment of
prevailing and anticipated economic conditions in Southeast Georgia.
A substantial portion of the Company's loans is secured by real estate,
including real estate and other collateral in Bulloch County and
surrounding counties. Accordingly, the ultimate collectibility of a
substantial portion of the Company's loan portfolio is susceptible to
changes in economic conditions in these market areas.
19
<PAGE>
The allowance for possible loan losses approximated 1.50% of outstanding
loans at December 31, 1996 and 1.52% of outstanding loans at December 31,
1995. The allowance increased to $639,500 at December 31, 1996 from
$570,000 at December 31, 1995. The increase in the Company's provision for
possible loan losses from $75,503 in 1995 to $107,842 in 1996 reflects
management's evaluation as discussed above, the growth in loans, and the
Company's goal of maintaining an allowance for possible loan losses to
outstanding loans at a target level of 1.50%.
The Company experienced net charge offs in 1996 of $38,000 as compared to
net charge offs of $33,000 in 1995. As the Company continues to grow and as
the Company's loan portfolio continues to mature, management believes that
net loans charged off will increase in 1997 and future years. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for
possible loan losses. Such agencies may require the Company to recognize
additions to the allowance based on their judgments about information
available to them at the time of their examination.
The following table summarizes the changes in the allowance for possible
loan losses arising from loans charged off and recoveries on loans
previously charged off during 1996, 1995, and 1994:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
(amounts in thousands, except ratios)
<S> <C> <C> <C>
Average loans outstanding, net of unearned income, deferred
costs and allowance for possible loan losses ............ $ 39,403 $ 35,542 $ 30,536
======== ======== ========
Allowance for possible loan losses at beginning of year ... 570 528 436
Loans-Consumer installment(charged off) ................... (59) (35) (6)
Recoveries of loans - Consumer installment
previously charged off ................................. 21 2 10
-------- -------- --------
Net loans (charged off) recovered ......................... (38) (33) 4
Additions to allowance for possible loan losses charged
to income ............................................... 108 75 88
-------- -------- --------
Allowance for possible loan losses at end of year ......... $ 640 $ 570 $ 528
======== ======== ========
Ratio of net loans charged off to average loans
outstanding, net of unearned income ..................... 0.10% 0.09% -
======== ======== ========
Allowance for possible loan losses to loans,
net of unearned income .................................. 1.50% 1.52% 1.58%
======== ======== ========
</TABLE>
Nonperforming Loans, Nonperforming Assets, and Underperforming
Loans
Nonperforming loans include loans placed on nonaccrual status and
restructured loans. The Company has restructured only one loan since its
inception. Nonperforming assets include nonperforming loans, real estate
acquired through foreclosure, and repossessed assets. Underperforming loans
consist of loans which are past due with respect to principal or interest
more than 90 days which are not classified as nonaccrual loans.
20
<PAGE>
Accrual of interest on loans is discontinued when reasonable doubt exists
as to the full, timely collection of interest or principal or they become
contractually in default for 90 days or more as to either interest or
principal unless they are both well secured and in the process of
collection. When a loan is placed on nonaccrual status, previously accrued
and uncollected interest of the year in which the loan is placed on
nonaccrual status is charged to interest income on loans.
Management is not aware of any loans classified for regulatory purposes as
loss, doubtful, substandard, or special mention that have not been
disclosed which (1) represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating
results, liquidity, or capital resources, or (2) represent material credits
about which management is aware of any information which causes management
to have serious doubts as to the abilities of such borrower to comply with
the loan repayment terms. Potential problem loans are loans classified as
substandard, doubtful, or loss by management.
Nonperforming loans were $123,000 at December 31, 1996 and $629,000 at
December 31, 1995. Nonperforming loans represented 0.29% of outstanding
loans at December 31, 1996, as compared to 1.68% of outstanding loans at
December 31, 1995. The Company has continued to emphasize asset quality
during 1996. The Company restructured one loan in the amount of $571,980 in
1995 which was adequately secured by real estate, which if not included in
the ratios, would result in a nonperforming loan ratio of 0.15% at December
31, 1995. The Company received payment of all unpaid principal and interest
related to this loan in March, 1996.
The table below provides information concerning nonperforming and
underperforming loans and certain asset quality ratios at December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
1996 1995 1994
amounts in thousands,
except ratios)
<S> <C> <C> <C>
Nonperforming loans ..................................... $ 123 $ 629 $ 3
Underperforming loans ................................... $ 0 $ 0 $ 0
Potential problem loans ................................. $ 611 $ 291 $ 100
Asset quality ratios:
Nonperforming loans to total loans, net of unearned
income ................................................ 0.29% 1.68% 0.01%
Underperforming loans to total loans, net of unearned
income ................................................ 0.00% 0.00% 0.00%
Potential problem loans to total loans, net of unearned
income ................................................ 1.43% 0.78% 0.30%
Nonperforming, underperforming and potential problem
loans to total loans, net of unearned income .......... 1.72% 2.46% 0.31%
Allowance for possible loan losses to nonperforming
loans ................................................. 5.20x 0.91x 176.0x
Allowance for possible loan losses to nonperforming,
underperforming, and potential problem loans .......... 0.87x 0.62x 5.13x
</TABLE>
21
<PAGE>
The Company has allocated the allowance for possible loan losses according
to the amount deemed to be reasonably necessary to provide for the
possibility of losses being incurred within the categories of loans set
forth in the table below. This allocation is based on management's
evaluation of the loan portfolio under current economic conditions,
adequacy and nature of collateral, and such factors which, in the judgment
of management, deserve recognition in estimating loan losses. Because the
allocation is based on estimates and subjective judgment, it is not
necessarily indicative of specific amounts or loan categories in which
charge-offs may occur.
The amount of such components of the allowance for possible loan losses and
the ratio of each loan category to loans outstanding are presented below:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
---- ---- ----
Allowance % Allowance % Allowance %
<S> <C> <C> <C> <C> <C> <C>
Real estate ............... $423 68 $428 70 $359 72
Commercial and agricultural 147 22 63 19 116 18
Consumer .................. 70 10 79 11 53 10
---- --- ---- --- ---- ---
Total ................... $640 100 $570 100 $528 100
==== === ==== === ==== ===
</TABLE>
(1) Loan amount in each category expressed as a percentage of total loans
outstanding.
Noninterest Income
Noninterest income of $635,199 in 1996 and $490,534 in 1995 is primarily
comprised of mortgage loan referral fees in 1996 of $245,897 and $113,289
in 1995 and service charges on deposit accounts. The increase of $144,665
or 29.49% in 1996 from 1995 in noninterest income is primarily attributable
to the increase in mortgage loan referral fees and service charges on
deposit accounts. The substantial portion of service charges on deposit
accounts includes monthly transaction fees on demand accounts and fees for
returned checks. The Company continually evaluates the pricing of its
demand deposit products to ensure such products remain competitive in the
marketplace, while providing appropriate levels of noninterest income to
the Company to cover the costs of servicing and maintaining such accounts.
Securities gains (losses), net of ($10,467) were recognized by the Company
during 1996 compared to ($4,531) in 1995 and resulted from the Company's
sale of investment securities to meet loan demand. There were no investment
security sales in 1994.
22
<PAGE>
Noninterest Expense
Noninterest expense increased $218,071 or 11.17% in 1996 compared to 1995
and increased $137,105 or 7.55% in 1995 compared to 1994. Noninterest
expense for 1996 was $2,170,030, for 1995 was $1,952,959, and for 1994 was
$1,815,854 and represented approximately 3.87%, 3.91% and 3.93% of average
assets in 1996, 1995 and 1994 respectively. Salaries and employee benefits
expense was the largest component of noninterest expense. Salaries and
employee benefits expense was $1,071,635 in 1996, $953,836 in 1995 and
$814,323 in 1994 and represented approximately 49.36%, 48.84% and 44.85% of
non-interest expense in 1996, 1995 and 1994 respectively. These amounts
include wages, payroll taxes, group medical insurance, profit sharing plan
contributions, and all benefits paid to the Company's employees. The
increase in salaries and employee benefits expense of approximately
$117,799 is attributable to increased employees with the new branch, normal
salary increases and an increase in group medical insurance premiums. Net
occupancy and equipment expenses of approximately $280,089 in 1996,
$222,197 in 1995 and $240,127 in 1994 also represented approximately
12.90%, 11.37% and 13.22% of noninterest expense in 1996, 1995 and 1994
respectively. All other expenses of approximately $819,306 in 1996,
$776,926 in 1995 and $761,404 in 1994 represented approximately 37.74%,
39.78% and 41.93% of noninterest expense in 1996, 1995 and 1994
respectively. Both salaries and occupancy and equipment expense increases
reflect the first full year of expenses associated with the branch opening
which occurred in October 1995. FDIC insurance expense decreased by
approximately $48,000 in 1996 and $40,000 in 1995 due to decreased
assessments from the Bank Insurance Fund. The Company began paying
directors fees in 1994 to compensate these individuals consistent with
other bank holding companies. The more significant components of other
operating expenses for each of the last three years are shown as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Stationery and supplies ................ $ 84,717 74,317 66,051
Insurance .............................. 27,289 30,378 27,627
Data Processing ........................(1) 109,217 87,845 41,183
Advertising and marketing .............. 52,366 51,605 51,301
Amortization of organizational cost .... 4,895 17,959 21,095
FDIC insurance premiums ................ 14,498 62,520 102,353
Travel, meals and education ............ 31,773 21,906 26,806
Postage ................................ 56,267 51,066 44,049
Other taxes and licenses ............... 37,540 27,693 24,987
Telephone .............................. 19,345 12,716 10,865
Dues and memberships ................... 23,559 13,453 11,132
ATM transaction fees ................... 23,872 45,387 54,580
Correspondent bank services ............ 29,385 27,106 28,477
Customers checks ....................... 13,329 23,467 22,642
Professional fees - legal and accounting 74,864 54,471 55,531
Director fees .......................... 53,300 55,400 23,375
Consulting fees ........................ 42,284 0 0
</TABLE>
(1) The bank out sourced item processing in November, 1994 which
resulted in this expense increasing; however, decreases in
depreciation, maintenance and salary expenses also resulted from
this out sourcing.
23
<PAGE>
Income Taxes
The Company provided income tax expense of $250,000 for 1996 and $210,000
for 1995 representing effective tax rates of approximately 33% and 30%
respectively. The Company's effective tax rate was lower in 1995 because of
the impact of the reduction of the valuation allowance for deferred tax
assets recorded in 1995. Refer to note 8 to the consolidated financial
statements for further disclosure of income taxes. The Company believes its
effective income tax rate will increase in 1997 to an effective rate of
approximately 36%. The Company will continue to seek appropriate tax
planning strategies such as investing in tax-free securities in an effort
to minimize its effective tax rate.
Net Income
The Company achieved net income of $501,856 or approximately $0.57 per
common share and common share equivalent for 1996, net income of $500,180
or approximately $0.57 per common share and common share equivalent during
1995 and net income of $428,671 or $0.49 pershare during 1994. This
leveling of income from 1995 to 1996 was a result of additional expenses
associated with the branch opening in October 1995 which reduced income
before taxes by approximately $238,000.
Loan Portfolio
The Company does not have any concentrations of loans exceeding 10% of
total loans of which management is aware and which are not otherwise
disclosed as a category of loans in the table below or in another section
of this annual report on Form 10-KSB.
Average loans were $40.0 million in 1996, $36.1 million in 1995, and $30.5
million in 1994. Average loans as a percentage of average interest-earning
assets were 78.8%, 79.4% and 72.3% respectively. Average loans as a
percentage of average total assets were 71.37%, 72.24% and 66.0%
respectively.
24
<PAGE>
The following two tables present the composition of the Company's loan
portfolio at December 31, 1996 and 1995 and the contractual maturities and
interest rate sensitivity of certain categories of loans as of December 31,
1996.
<TABLE>
<CAPTION>
December 31,
1996 1995
(amounts in thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 29,309 $24,531
Real estate - construction ........... 3,097 2,932
Real estate - mortgage ............... 6,538 6,221
Consumer ............................. 3,693 3,511
-------- -------
Total loans ........................ 42,637 37,470
Less:
Allowance for possible loan losses 640 570
Unearned income ................... (1) 28
-------- -------
Loans , net ....................... $ 41,999 $36,872
======== =======
</TABLE>
<TABLE>
<CAPTION>
Maturing
After one
Within but within After
one year five years five years
(amounts in thousands)
<S> <C> <C> <C>
Commercial, financial and agricultural ..... $14,039 $13,810 $1,460
Real estate - construction ................. 3,097 0 0
Real estate - mortgage ..................... 3,242 3,029 267
Consumer ................................... 2,118 1,489 86
Summary of loans:
Total fixed rate due after one year .... $16,531
Total adjustable rate due after one year 3,610
------
Total loans due after one year ........... $20,141
======
</TABLE>
Actual repayments of loans may differ from the contractual maturities
reflected above because borrowers may have the right to prepay obligations
with or without prepayment penalties. Additionally, the refinancing of such
loans or the potential delinquency of such loans could also cause
differences between the contractual maturities reflected above and the
actual repayment of such loans.
Investment Securities
The Company's investment securities portfolio serves several essential
functions, such as providing a vehicle for the investment of available
funds, furnishing liquidity, and supplying securities to pledge as required
for certain deposits. Average investment securities increased $1.9 million
or 22.7% in 1996 as compared to 1995 and decreased $1.8 million or 17.5% in
1995 as compared to 1994. The increase in average investment securities
results from the Company's growth in deposits and other borrowings. During
1996, 1995 and 1994 average investment securities comprised 20.1%, 18.3%
and 24.0% of average interest-earning assets, respectively, and 18.2%,
16.7% and 21.9% of average total assets, respectively.
25
<PAGE>
The two tables below present the amortized cost or carrying values and the
composition of investment securities at the end of each of the past two
years and the contractual maturities and yields of investment securities at
December 31, 1996. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
----------- ---------
Available Held to Available Held to
for Sale Maturity for Sale Maturity
(amounts in thousands)
<S> <C> <C> <C> <C>
U.S. Treasury ................. $ 997 $1,740 $ 756 $1,737
U.S. Government Agencies ...... 2,887 2,050 2,556 2,350
State, County and Municipal ... 2,857 0 1,484 0
Federal Home Loan Bank Stock .. 158 0 149 0
------ ------ ------ ------
Total investment securities $6,899 3,790 $4,945 $4,087
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Maturing Maturing Maturing
within after one but after
one year within five years five years
Amount Yield Amount Yield Amount Yield
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury ............. $ 746 5.03% $ 1,991 6.42% $ 0 0%
U.S. Government Agencies .. 334 6.02 4,103 6.60 500 6.51
State, County and Municipal 170 3.67 2,459 4.15 228 5.02
Federal Home Loan Bank .... 0 0 0 0 158 7.25
------ ---- ------ ---- ----- ----
Total investment
securities .......... 1,250 5.34% $8,533 5.67% $ 886 6.45%
====== ==== ====== ==== ====== ====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Investment Securities Investments Securities
available for sale held to maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year $ 1,258 $ 1,258 $ 0 $ 0
Due after one year through five years 5,276 5,263 3,290 3,307
Due after five years through ten years 125 125 500 485
Over ten years 255 261 0 0
----- ----- ----- -----
$ 6,917 $ 6,899 $3,790 $ 3,792
===== ===== ====== =====
</TABLE>
Excluding obligations of the U.S. Treasury and U.S. Government agencies,
the Company did not have any investment which exceeded 10% of the Company's
shareholders' equity at December 31, 1995.
26
<PAGE>
Deposits
Average deposits increased $5.0 million or 11.68% to $48.2 million during
1996 from $43.2 million during 1995. The increase in average deposits
represents growth in the Company's existing market and reflects the results
of the Company's marketing efforts in attracting new customers from
competing financial institutions.
The average deposits by type, their relationship to total average deposits,
and the average rate paid on deposits by type for the years ended December
31, 1996 and 1995 are presented below.
<TABLE>
<CAPTION>
December 31,
1996 1995
Amount % Rate Amount % Rate
(amounts in thousands, except percentages and ratios)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 4,681 10% -- $ 3,996 9% --
Interest-bearing demand deposits .. 6,706 14 2.61 6,580 15 2.99
Money Market and Savings accounts . 4,741 10 3.06 4,838 11 3.37
Certificates of deposit ........... 29,268 60 5.92 25,472 59 5.85
Individual retirement accounts .... 2,823 6 6.34 2,291 6 5.98
------- ------- ---- ------- ------- ----
Total average deposits .......... $48,219 100% 5.13% $43,177 100 5.07%
======= ======= ==== ======= ======= ====
</TABLE>
The maturities of certificates of deposits and individual retirement
accounts of $100,000 or more as of December 31, 1996 and 1995 are
presented below.
<TABLE>
<CAPTION>
December 31,
1996 1995
(amounts in thousands)
<S> <C> <C>
Three months or less $ 4,509 $ 1,750
Over three months through six months 2,068 905
Over six months through 12 months 1,820 2,388
Over 12 months 2,818 1,412
------ ------
Total certificates of deposit and individual retirement
accounts of $100,000 or more $11,215 $ 6,455
====== ======
</TABLE>
The Company has analyzed the composition of certificates of deposit and
individual retirement accounts of $100,000 or more. The large deposits
comprised 22.6% of average deposits during 1996 compared to 14.9% of
average deposits for 1995. Total deposits included large deposits of
$10,906,000 and $6,455,000 at December 31, 1996 and 1995, representing
20.8% and 14.4% of total deposits at the end of these periods,
respectively. These large deposits are with governmental bodies in the
local community that the Company serves or are with individuals who reside
in the local area and to whom the Company has had consistent deposit
relations since the Company's inception. There is no material reliance on
brokered deposits as a source of large deposit funding.
27
<PAGE>
Liquidity and Interest Rate Sensitivity
Liquidity management involves the matching of the cash flow requirements of
customers, with depositors withdrawing funds or borrowers requiring loans,
and the ability of the Company to meet those requirements. Management
monitors and maintains appropriate levels of assets and liabilities so that
maturities of assets are such that adequate funds are provided to meet
customer withdrawals and loan requests.
The Company's liquidity position depends primarily upon the liquidity of
its assets relative to its need to respond to short-term demand for funds
caused by withdrawals from deposit accounts and loan funding commitments.
Primary sources of liquidity are scheduled payments on the Company's loans
and interest on and maturities of its investments. Occasionally, the
Company will sell investment securities in connection with the management
of its interest sensitivity gap. The Company may also utilize its cash and
due from banks, interest-earning deposits in financial institutions and
federal funds sold to meet liquidity requirements as needed.
The Company also has the ability on a short-term basis to purchase federal
funds from other financial institutions. Presently, the Company has made
arrangements with commercial banks for short-term unsecured advances up to
$2,500,000 and with the Federal Home Loan Bank, Atlanta, Ga. for a secured
credit line of $5,000,000.
The relative interest rate sensitivity of the Company's assets and
liabilities indicates the extent to which the Company's net interest income
may be affected by interest rate movements. The Company's ability to
reprice assets and liabilities in the same dollar amounts and at the same
time minimizes interest rate risk. One method of measuring the impact of
interest rate changes on net interest income is to measure, in a number of
time frames the interest sensitivity gap by subtracting interest-sensitive
liabilities from interest-sensitive assets, as reflected in the following
table. Such interest-sensitivity gap represents the risk or opportunity, in
repricing. If more assets than liabilities are repriced at a given time in
a rising rate environment, net interest income improves; in a declining
rate environment, net interest income deteriorates. Conversely, if more
liabilities than assets are repriced while interest rates are rising, net
interest income deteriorates; if interest rates are falling, net interest
income improves. The Company's strategy in minimizing interest rate risk is
to minimize the impact of short-term interest rate movements on its net
interest income while managing its middle and long-term interest
sensitivity gap in light of overall economic trends in interest rates.
Because of continued pressures of rising rates and the Company's net
liability sensitive position in the one year horizon at December 31, 1996,
the Company believes downward pressure on its net interest margin could
have a negative impact on net interest income in 1997.
28
<PAGE>
The following table illustrates the relative sensitivity of the Company to
changing interest rates as of December 31, 1996.
<TABLE>
<CAPTION>
0-90 days 91-365 days One to five years Over five years
Current Current Cumulative Current Cumulative Current Cumulative
(amounts in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-sensitive
assets:
Loans .............. $ 6,849 $ 19,217 $ 26,066 $ 15,194 $ 41,260 $ 1,379 $ 42,639
Interest earning
deposits in other
banks ......... 1,000 -- 1,000 -- 1,000 -- 1,000
Investment
securities ....... -- 1,250 1,250 8,553 9,503 886 10,689
Federal Funds Sold 1,500 -- 1,500 -- 1,500 -- 1,500
-------- -------- -------- -------- -------- -------- --------
Total interest-
sensitive assets . 9,349 20,467 29,816 23,747 53,563 2,265 55,828
======== ======== ======== ======== ======== ======== ========
Interest-sensitive
liabilities:
NOW, Money Market,
and savings
accounts ........ 13,084 -- 13,084 -- 13,084 -- 13,084
Certificates of
deposits and IRA's
$100,000 or more .. 4,509 3,888 8,397 2,818 11,215 -- 11,215
Other certificates
of deposits and
IRA's ............ 6,524 11,957 18,481 4,501 22,982 -- 22,982
Federal Funds
Purchased ....... 200 -- 200 -- 200 -- 200
Other borrowed
funds ........... 15 45 60 236 296 252 548
-------- -------- -------- -------- -------- -------- --------
Total interest
sensitive
liabilities .... $ 24,332 $ 15,890 $ 40,022 $ 7,555 $ 47,777 $ 252 $ 48,029
======== ======== ======== ======== ======== ======== ========
Interest-
sensitivity gap .... $(14,983) $ 4,577 $(10,406) $ 16,192 $ 5,786 $ 2,013 $ 7,799
======== ======== ======== ======== ======== ======== ========
Ratio to
interest-
sensitive assets ... (26.84)% 8.20% (18.64)% 29.00% 10.36% 3.61% 13.97%
======== ======== ======== ======== ======== ======== ========
</TABLE>
Eagle Bancorp, Inc. believes that cash on hand of approximately $774,702 at
December 31, 1996 should be sufficient to fund its holding company annual
cash requirements for the foreseeable future which consist principally of
holding company annual cash expenses of approximately $70,000 and the
funding of a $0.50 per share cash dividend of $431,423 which was paid on
January 15, 1997.
Capital Resources
The Company continues to maintain a satisfactory level of capital which
exceeds regulatory requirements and is available for supporting future
growth. The Company's level of capital can be measured by its average
shareholders' equity to average assets ratio of 11.31% and 12.25% during
1996 and 1995, respectively. At December 31, 1996 the Company's regulatory
capital and the required minimum amounts under existing regulatory
requirements are summarized as follows:
29
<PAGE>
Eagle Bancorp, Inc. and Subsidiary:
<TABLE>
<CAPTION>
Required
Actual Minimum Excess
% Amount % Amount % Amount
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk Based Capital ... 14.99% $6,842 8.00% $3,652 6.99% $3,190
Tier 1 Capital ....... 13.71 6,259 8.00 3,652 5.71 2,607
Leverage Capital Ratio 10.60 6,271 4.00 2,367 6.60 3,904
</TABLE>
Eagle Bank and Trust:
<TABLE>
<CAPTION>
Required
Actual Minimum Excess
% Amount % Amount % Amount
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk Based Capital ... 14.37% $6,561 8.00% $3,652 6.37% $2,909
Tier 1 Capital ....... 13.12 5,978 4.00 3,652 5.12 2,326
Leverage Capital Ratio 10.12 5,990 4.00 2,367 6.12 2,623
</TABLE>
The Company is not aware of any recommendations by regulatory authorities
which, if implemented would have a significant impact on its liquidity,
capital resources, or operations.
The Georgia Department of Banking and Finance requires that state-chartered
banks in Georgia maintain a ratio of primary capital, as defined, to total
assets of not less than 6%. The Company intends to maintain a satisfactory
level of capital necessary to satisfy regulatory requirements and to
accommodate expected growth patterns.
Inflation
Inflation impacts the growth in total assets in the banking industry and
causes a need to increase equity capital at higher than normal rates in
order to meet regulatory capital requirements. The Company copes with the
effects of inflation through effectively managing its interest rate
sensitivity gap position and by periodically reviewing and adjusting the
pricing of services to consider current costs.
30
<PAGE>
Recent Accounting Pronouncements
On January 1, 1996, the Company adopted SFAS 123 which requires entities to
recognize as expense over the vesting period the fair value of all stock
based awards measured at the date of grant. Alternatively, SFAS 123 also
allows entities to continue to apply the provisions of APB Opinion 25 and
provide proforma net income and proforma earnings per share disclosures for
employee stock option grants made in 1995 and later years as if the fair
value-based method defined in SFAS 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion 25. The proforma
and fair value disclosures required by SFAS 123 are not provided herein
because there have been no grants in 1996 or 1995.
The provisions of Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights": did not have an impact on the
Company as it does not service loans for others.
31
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements, notes thereto and independent auditors'
report thereon included on the following pages are incorporated herein by
reference.
Index to Consolidated Financial Statements
Page
Independent Auditors' Report 34
Consolidated Balance Sheets - December 31, 1996 and 1995. 35
Consolidated Statements of Income for the
Years Ended December 31, 1996, 1995 and 1994 36
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994 37
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996, 1995 and 1994 38
Notes to Consolidated Financial Statements -
December 31, 1996, 1995 and 1994 40
32
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1996 and 1995
With Independent Auditors' Report Thereon
33
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Eagle Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Eagle Bancorp,
Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Eagle Bancorp, Inc.
and subsidiary at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of accounting for investment securities in 1994 to adopt the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities.
KPMG PEAT MARWICK LLP
February 7, 1997
Atlanta, Georgia
34
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Cash and due from banks (note 2) $ 2,237,822 2,316,465
Federal funds sold 1,500,000 1,260,000
Interest-earning deposits in other banks 1,000,000 -
Investment securities available for sale (note 3) 6,898,784 4,945,680
Investment securities held to maturity (approximate
fair value of $3,791,932 in 1996 and $4,156,000
in 1995) - (note 3) 3,790,335 4,087,345
Loans, net of unearned income (note 4) 42,638,858 37,442,325
Less allowance for possible loan losses 639,500 570,000
---------- ----------
Loans, net 41,999,358 36,872,325
---------- ----------
Premises and equipment, net (note 5) 2,474,386 2,548,695
Other assets 829,308 743,665
---------- ----------
$ 60,729,993 52,774,175
========== ==========
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Noninterest-bearing deposits $ 5,184,539 4,253,543
Interest-bearing deposits (note 6) 47,280,321 40,629,146
---------- ----------
Total deposits 52,464,860 44,882,689
Federal funds purchased 200,000 700,000
Federal Home Loan Bank advances (note 7) 548,250 -
Accrued expenses and other liabilities 1,257,832 992,555
---------- ----------
Total liabilities 54,470,942 46,575,244
---------- ----------
Shareholders' equity (notes 9, 11, and 14):
Common stock, $1 par value. Authorized 10,000,000
shares; issued and outstanding 862,845 shares in 1996
and 862,755 shares in 1995 862,845 862,755
Additional paid-in capital 4,821,527 4,820,492
Retained earnings 586,583 516,150
Net unrealized holding losses on investment securities
available for sale, net of deferred income taxes (11,904) (466)
---------- ----------
Total shareholders' equity 6,259,051 6,198,931
Commitments (notes 4 and 10)
$ 60,729,993 52,774,175
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans, including fees $4,024,844 3,687,797 2,906,210
Federal funds sold 58,743 89,364 59,602
Interest-earning deposits in
financial institutions 1,055 6,429 3,118
Investment securities:
Taxable 491,027 419,279 498,290
Nontaxable 88,815 33,191 27,565
------- ------- -------
Total interest income 4,664,484 4,236,060 3,494,785
--------- --------- ---------
Interest expense:
Deposits (note 6) 2,232,006 1,987,952 1,417,831
Borrowed funds 36,949 - -
------- ------- ------
Total interest expense 2,268,955 1,987,952 1,417,831
--------- --------- ---------
Net interest income 2,395,529 2,248,108 2,076,954
Provision for possible loan losses (note 4) 107,842 75,503 87,906
------- ------- -------
Net interest income after provision for
possible loan losses 2,287,687 2,172,605 1,989,048
--------- --------- ---------
Noninterest income:
Service charges on deposit accounts 346,052 322,888 296,422
Securities losses, net (note 3) (10,467) (4,531) -
Other operating income 299,614 172,177 99,055
------- ------- -------
Total noninterest income 635,199 490,534 395,477
------- ------- -------
Noninterest expense:
Salaries and employee benefits (note 10) 1,071,635 953,836 814,323
Net occupancy and equipment expense 280,089 222,197 240,127
Other operating expenses (note 13) 819,306 776,926 761,404
------- ------- -------
Total noninterest expense 2,171,030 1,952,959 1,815,854
--------- --------- ---------
Income before income tax expense 751,856 710,180 568,671
Income tax expense (note 8) 250,000 210,000 140,000
------- ------- -------
Net income $ 501,856 500,180 428,671
======= ======= =======
Net income per common share and common share equivalent $ .57 .57 .49
=== === ===
Weighted average number of common shares and common
share equivalents outstanding 885,198 883,332 876,088
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Net
unrealized
holding gains
(losses) on
Retained investment
Additional earnings securities Total
Common stock paid-in (accumulated available shareholders'
Shares Amount capital deficit) for sale equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ......... 735,405 $ 735,405 4,099,191 (197,012) -- 4,637,584
Cumulative effect of change in
accounting method - net
unrealized holding gains (losses)
on investment securities available
for sale on January 1, 1994 ....... -- -- -- -- 51,542 51,542
Exercise of warrants (note 9(c)) ..... 127,350 127,350 721,650 -- -- 849,000
Net income ........................... -- -- -- 428,671 -- 428,671
Change in net unrealized holding gains
(losses) on investment securities
available for sale ................ -- -- -- -- (144,404) (144,404)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994 ......... 862,755 862,755 4,820,841 231,659 (92,862) 5,822,393
Cash paid in lieu of fractional shares
in connection with stock split
(note 9(a)) ....................... -- -- (349) -- -- (349)
Net income ........................... -- -- -- 500,180 -- 500,180
Cash dividends declared, $.25 per
share ............................... -- -- -- (215,689) -- (215,689)
Change in net unrealized holding gains
(losses) on investment securities
available for sale ................ -- -- -- -- 92,396 92,396
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 ......... 862,755 862,755 4,820,492 516,150 (466) 6,198,931
Net income ........................... -- -- -- 501,856 -- 501,856
Cash dividends declared, $.50 per
share ............................ -- -- -- (431,423) -- (431,423)
Issuance of shares for employee
compensation ...................... 90 90 1,035 -- -- 1,125
Change in net unrealized holding gains
(losses) on investment securities
available for sale ................ -- -- -- -- (11,438) (11,438)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 ......... 862,845 $ 862,845 4,821,527 586,583 (11,904) 6,259,051
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 501,856 500,180 428,671
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible loan losses 107,842 75,503 87,906
Depreciation 165,622 134,666 133,672
Securities losses, net 10,467 4,531 -
Amortization of organizational costs 4,513 17,959 21,095
Compensation expense under stock awards and options 1,125 - 14,471
Amortization and (accretion), net (25,106) (4,748) (21,300)
Accretion of deferred loan fees (50,120) (34,978) (38,606)
Loan fees deferred 45,143 35,735 32,015
Deferred income tax benefit (19,128) (62,760) (69,500)
Increase in other assets (64,869) (5,890) (43,723)
Increase in other liabilities 49,543 244,430 228,068
--------- --------- ---------
Net cash provided by operating activities 726,888 904,628 772,769
--------- --------- ---------
Cash flows from investing activities:
Increase in loans, net (5,229,898) (3,994,395) (5,111,487)
Investment in interest-earning deposits
in financial institutions (1,000,000) - -
Purchases of investment securities available for sale (4,250,098) (1,613,872) (6,277,389)
Purchases of investment securities held to maturity (748,359) (1,727,027) (561,547)
Additions to premises and equipment (91,313) (618,177) (108,769)
Proceeds from sales of investment securities
available for sale 1,739,405 992,938 -
Proceeds from maturates of interest-earning deposits
in financial institutions - - 595,000
Proceeds from maturities or calls of investment securities
held to maturity 1,050,000 - 140,000
Proceeds from maturities of investment securities available
for sale 550,000 2,143,333 6,016,918
--------- --------- ---------
Net cash used in investing activities (7,980,263) (4,817,200) (5,307,274)
--------- --------- ---------
Cash flows from financing activities:
Increase in deposits, net 7,582,171 4,179,869 2,101,945
(Decrease) increase in federal funds purchased (500,000) 700,000 -
Proceeds from exercise of warrants - - 849,000
Cash paid in lieu of fractional shares - (349) -
Dividends paid (215,689) - -
Federal Home Loan Bank advances 548,250 - -
--------- --------- --------
Net cash provided by financing activities 7,414,732 4,879,520 2,950,945
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents,
carried forward $ 161,357 966,948 (1,583,560)
========= ========= =========
</TABLE>
38
<PAGE>
(Continued)
EAGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net increase (decrease) in cash and cash equivalents,
brought forward $ 161,357 966,948 (1,583,560)
Cash and cash equivalents at beginning of year 3,576,465 2,609,517 4,193,077
--------- --------- ---------
Cash and cash equivalents at end of year $ 3,737,822 3,576,465 2,609,517
========= ========= =========
Supplemental disclosures of cash paid during year for:
Interest $ 2,204,231 1,609,873 1,369,270
========= ========= =========
Income taxes $ 316,093 379,699 20,713
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1996, 1995, and 1994
(1) Summary of Significant Accounting Policies
The accounting and reporting policies of Eagle Bancorp, Inc. and subsidiary
(the "Company") conform to generally accepted accounting principles and to
general practices within the banking industry. The following is a
description of the more significant of those policies.
Business
Eagle Bancorp, Inc. was incorporated as a Georgia corporation, primarily
to serve as a bank holding company for Eagle Bank and Trust (the
"Bank"). The Bank provides a full range of banking services to
individual and corporate customers from its main office and branch
facilities in Statesboro, Georgia. The Company and the Bank are subject
to competition from other financial institutions, are subject to the
regulations of certain Federal and state agencies, and undergo periodic
examinations by those regulatory agencies.
Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated balance sheet and income
and expenses for the period. Actual results could differ significantly
from those estimates. A material estimate that is particularly
susceptible to significant change in the near term relates to the
determination of the allowance for possible loan losses.
The consolidated financial statements include the accounts of Eagle
Bancorp, Inc. and its wholly owned subsidiary, Eagle Bank and Trust. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
Cash and Cash Equivalents
Cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for periods of less than 90 days.
40
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Investment Securities
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities ("SFAS 115") on January 1, 1994. SFAS 115 requires
investments to be classified in three categories: securities held to
maturity reported at amortized cost, trading securities reported at fair
value, and securities available for sale reported at fair value.
Unrealized gains or losses on trading securities are included in
earnings while unrealized gains and losses on securities available for
sale are excluded from earnings and reported as a separate component of
shareholders' equity.
On January 1, 1994, the Company transferred investment securities with
an aggregate amortized cost of $6,161,382 to investment securities
available for sale. Such investment securities available for sale had an
aggregate fair value of $6,244,515 at January 1, 1994, which resulted in
an increase in shareholders' equity at January 1, 1994 of $51,542, net
of deferred income taxes amounting to $31,591.
Premiums and discounts are amortized and accreted using a method which
approximates a level yield. Gains and losses on sales of investment
securities are recognized upon disposition, based on the adjusted cost
of the specific security.
A decline in the market value of any security below cost that is deemed
other than temporary is charged to income resulting in the establishment
of a new cost basis for the security.
Loans, Interest Income, and Fee Income
Loans are reported at principal amounts outstanding, net of unearned
income and less the allowance for possible loan losses. Interest income
on loans is recognized on a level-yield basis.
Loan fees, net of certain direct origination costs, are deferred and
amortized over the terms of the loans using a method which approximates
a level yield.
Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Accrual of interest on loans is
discontinued when reasonable doubt exists as to the full, timely
collection of interest or principal or when they become contractually in
default for 90 days or more as to either interest or principal, unless
they are both well secured and in process of collection. When a loan is
placed on nonaccrual status, previously accrued and
41
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
uncollected interest for the year in which the loan is placed on
nonaccrual status is charged to interest income on loans.
The Company adopted the provisions of SFAS No. 114, Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures on January 1, 1995. Under the provisions of SFAS No. 114
and SFAS No. 118, management considers a loan to be impaired when it is
probable that the Company will be unable to collect all amounts due
according to the contractual terms of the note agreement. When a loan is
considered impaired, the amount of impairment is measured based on the
present value of expected future cash flows, discounted at the loan's
effective interest rate. If the loan is collateral-dependent, the fair
value of the collateral is used to determine the amount of impairment.
Impairment losses are included in the allowance for possible loan losses
through the provision for possible loan losses. Loans are charged to the
allowance when, in the opinion of management, such loans are deemed
uncollectible. Subsequent recoveries are added to the reserve.
When a loan is considered impaired, cash receipts are applied under the
contractual terms of the loan agreement, first to principal and then to
interest income. Once the recorded principal balance has been reduced to
zero, future cash receipts are applied to interest income, to the extent
that any interest has not been recognized. Additionally, future cash
receipts are recorded as recoveries of any amount previously charged
off.
A loan is also considered impaired if its terms are modified in a
troubled debt restructuring after January 1, 1995. For these accruing
impaired loans, cash receipts are typically applied to principal and
interest receivable in accordance with the terms of the restructured
loan agreement. Interest income is recognized on these loans using the
accrual method of accounting.
The adoption of SFAS 114 and SFAS 118 required no increase to the
allowance for possible loan losses and had no impact on net income for
the year ended December 31, 1995. At December 31, 1996, the Company had
no impaired loans other than those classified as nonaccrual.
Allowance for Possible Loan Losses
The allowance for possible loan losses is based on management's
evaluation of the loan portfolio under current economic conditions,
adequacy of collateral, and such other factors which, in management's
judgment, deserve recognition in estimating loan losses. Loans are
charged against the allowance when, in the opinion of management, such
42
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
loans are deemed to be uncollectible and subsequent recoveries are
added to the allowance.
A substantial portion of the Company's loan portfolio is secured by real
estate and other collateral in Bulloch County and surrounding
areas of Southeast Georgia. Accordingly, the ultimate collectibility
of a substantial portion of the Company's loan portfolio is susceptible
to changes in economic conditions in these markets.
Management believes that the allowance for possible loan losses is
adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions, particularly in Bulloch County
and surrounding areas. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the adequacy of
the Company's allowance for possible loan losses. Such agencies may
require the Company to recognize additions to the allowance based on
their judgments about information available to them at the time of their
examination.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization, which is computed using the straight-line method over
the estimated useful lives of the related assets.
Organizational Costs
Organizational costs incurred during the development stage have been
capitalized and are being amortized using the straight-line method over
a five-year period. All organizational costs have been fully amortized
as of December 31, 1996.
Income Taxes
The Company accounts for income taxes according to the provisions of
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
Accounting for Income Taxes. SFAS 109 utilizes the asset and liability
method of accounting for income taxes. Under the asset and liability
method of SFAS 109, deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, including operating loss and
tax credit carryforwards. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred income tax
assets and
43
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Stock-Based Compensation
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB Opinion 25"), and related
interpretations. As such, compensation expense is recorded only to the
extent that the market price of the underlying stock at the date of
grant exceeds the exercise price. In October 1995, Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), was issued. SFAS 123 allows entities to
continue to apply the provisions of APB Opinion 25 for recognizing
stock-based compensation expense in the basic financial statements.
However, companies are encouraged to adopt a new accounting method based
on the estimated fair value of stock-based compensation. Companies that
do not follow the new fair value-based method are required to provide
expanded disclosures in the notes to consolidated financial statements.
SFAS 123 is effective for the fiscal year ended December 31, 1996. The
Company has elected to continue to apply the provisions of APB Opinion
25 and, to the extent material, follow the disclosure provisions of SFAS
123.
Net Income Per Common Share
Net income per common share and common share equivalent is based on the
weighted average number of common shares outstanding and common share
equivalents derived from dilutive stock options. Net income per common
share and common share equivalent computed on a fully diluted basis is
reflected in the accompanying consolidated statements of income.
Reclassifications
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the presentation adopted in 1996.
(2) Restricted Cash
Aggregate reserves (in the form of vault cash) of approximately
$212,000 and $183,000 were maintained to satisfy regulatory
requirements at December 31, 1996 and 1995, respectively.
44
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(3) Investment Securities
Investment securities available for sale consisted of the following:
<TABLE>
<CAPTION>
December 31, 1996
Amortized Unrealized Unrealized Approximate
cost gains losses fair value
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 3,890,204 11,989 (18,043) 3,884,150
State, county, and municipal
securities 2,868,494 6,855 (19,115) 2,856,234
Federal Home Loan Bank stock 158,400 - - 158,400
----------- ------- ------ ----------
$ 6,917,098 18,844 (37,158) 6,898,784
========= ====== ====== =========
December 31, 1995
Amortized Unrealized Unrealized Approximate
cost gains losses fair value
U.S. Treasury and U.S.
Government agencies $ 3,307,120 6,069 - 3,313,189
State, county, and municipal
securities 1,490,477 - (6,786) 1,483,691
Federal Home Loan Bank stock 148,800 - - 148,800
----------- ------ ----- ----------
$ 4,946,397 6,069 (6,786) 4,945,680
========= ===== ===== =========
The carrying and approximate market values of investment securities held to
maturity are summarized as follows:
December 31, 1996
Carrying Unrealized Unrealized Approximate
value gains losses fair value
U.S. Treasury and U.S.
Government agencies $ 3,790,335 36,868 (35,271) 3,791,932
========= ====== ====== =========
December 31, 1995
Carrying Unrealized Unrealized Approximate
value gains losses fair value
U.S. Treasury and U.S.
Government agencies $ 4,087,345 68,655 - 4,156,000
========= ====== ====== =========
</TABLE>
Proceeds from sales of investment securities during 1996 were $1,739,405
and resulted in securities losses realized of $10,467. Proceeds from sales
of investment securities during 1995 were $992,938 and resulted in
securities gains realized of $628 and securities losses realized of $5,159.
The Company did not sell any investment securities during 1994.
45
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The amortized cost and fair values of investment securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Investment securities Investment securities
available for sale held to maturity
Amortized Approximate Amortized Approximate
cost fair value cost fair value
<S> <C> <C> <C> <C>
Due in one year or less $ 1,258,059 1,250,129 - -
Due after one year through five years 5,275,639 5,263,255 3,290,335 3,306,462
Due after five years through ten years 125,000 125,000 500,000 485,470
Due after ten years 100,000 102,000 - -
Equity securities 158,400 158,400 - -
---------- ---------- --------- --------
$ 6,917,098 6,898,784 3,790,335 3,791,932
========= ========= ========= =========
</TABLE>
Securities with an aggregate carrying value of approximately $2,500,000 and
$1,300,000 at December 31, 1996 and 1995, respectively, were pledged to
secure public funds on deposit and for other purposes as required by law.
(4) Loans
Loans outstanding, by classification, are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Agricultural $ 1,301,314 1,079,205
Commercial 8,275,067 6,085,631
Real estate - commercial 19,194,293 17,211,187
Real estate - commercial construction 2,760,089 1,902,436
Real estate - residential construction 337,196 1,029,534
Real estate - residential 6,538,226 6,220,862
Consumer 3,581,595 3,510,242
Home equity 649,657 431,284
--------- ---------
42,637,437 37,470,381
Deferred loan costs (fees) 1,421 (28,056)
--------- ---------
$42,638,858 37,442,325
=========== ==========
</TABLE>
46
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Transactions in the allowance for possible loan losses are summarized as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 570,000 527,500 436,000
Provision charged to operating expense 107,842 75,503 87,906
Recoveries on loans (consumer) previously
charged off 21,081 2,176 10,277
Loans charged off (consumer) (59,423) (35,179) (6,683)
------- ------- -------
Balance at end of year $ 639,500 570,000 527,500
======= ======= =======
</TABLE>
At December 31, 1996, outstanding loan commitments included commitments to
fund commercial, agricultural, real estate - construction, and home equity
loans of approximately $2,163,000, $678,000, $2,377,000, and $738,000,
respectively. It is the opinion of management that such commitments do not
involve more than the normal risk of loss.
Nonaccrual loans were approximately $123,000 and $629,080 at December 31,
1996 and 1995, respectively, and interest income on nonaccrual loans which
would have been reported for the years ended December 31, 1996, 1995, and
1994 was not significantly different from the interest income actually
included in the accompanying consolidated statements of income for 1996,
1995, and 1994 relating to such loans.
In the ordinary course of business, the Company has direct and indirect
loans outstanding to certain executive officers, directors, and principal
holders of equity securities (including their associates). Such loans are
made substantially on the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions
with unaffiliated customers. The following is a summary of activity during
1996 with respect to the aggregate loans to these individuals and their
associates:
<TABLE>
<S> <C>
Balances at December 31, 1995 $1,850,000
New loans 1,539,000
Repayments (2,040,000)
---------
Balances at December 31, 1996 $1,349,000
=========
</TABLE>
47
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) Premises and Equipment
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Land $ 804,981 804,981
Building and improvements 1,469,358 1,438,634
Furniture, fixtures, and equipment 813,653 753,064
Automobiles 33,798 33,798
-------- --------
3,121,790 3,030,477
Less accumulated depreciation
and amortization 647,404 481,782
-------- --------
$ 2,474,386 2,548,695
=========== =========
</TABLE>
(6) Interest-Bearing Deposits
The following is a summary of interest-bearing deposits:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
NOW accounts $ 7,420,192 6,137,518
Money market accounts 3,077,437 2,096,008
Savings accounts 2,586,187 2,650,107
Individual retirement accounts 2,958,922 2,762,189
Certificates of deposit
of $100,000 or more 10,319,613 5,953,410
Other certificates of deposit 20,917,970 21,029,914
---------- ----------
$47,280,321 40,629,146
=========== ==========
</TABLE>
Interest expense on certificates of deposit of $100,000 or more was
approximately $525,000, $370,000, and $273,000 for the years ended December
31, 1996, 1995, and 1994, respectively.
48
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7)Federal Home Loan Bank Advances
Federal Home Loan Bank advances at December 31, 1996 consist of secured,
term loans with principal payable at maturity and interest due monthly
based on fixed rates, as follows:
<TABLE>
<S> <C>
6.81% maturing March 11, 2006 $ 268,250
7.01% maturing April 1, 2006 280,000
-------
$ 548,250
=======
</TABLE>
(8)Income Taxes
The provision for income tax expense includes income taxes currently payable,
income taxes deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities, and any
increase or decrease in the valuation allowance for deferred income tax
assets.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Current Deferred Total
<S> <C> <C> <C>
Year ended December 31, 1996:
U.S. Federal $ 269,128 (16,268) 252,860
State - (2,860) (2,860)
------ ------ ------
$ 269,128 (19,128) 250,000
======= ====== =======
Year ended December 31, 1995:
U.S. Federal $ 272,760 (52,851) 219,909
State - (9,909) (9,909)
------ ------ ------
$ 272,760 (62,760) 210,000
======= ====== =======
Year ended December 31, 1994:
U.S. Federal $ 209,500 (54,500) 155,000
State - (15,000) (15,000)
------ ------ -------
$ 209,500 (69,500) 140,000
======= ====== =======
</TABLE>
49
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Income tax expense differed from the amounts computed by applying the
statutory U.S. Federal income tax rate of 34% to income before income tax
expense as a result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" income tax expense $ 255,631 241,461 193,348
Increase (reduction) in income tax expense
resulting from:
Tax-exempt interest (19,247) (7,673) (7,758)
Increase (decrease) in valuation allowance
for deferred income tax assets - (29,718) (76,755)
Other, net 13,616 5,930 31,165
------- ------- ------
$ 250,000 210,000 140,000
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to the deferred
income tax assets and liabilities at December 31, 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred income tax assets:
Allowance for possible loan losses $ 202,781 147,338
Preopening costs - 2,623
State operating loss and credit carryforwards 14,138 22,860
Unrealized holding losses on investment
securities available for sale 6,410 251
------ -------
Total deferred income tax assets 223,329 173,072
Less valuation allowance - -
------ ------
Deferred income tax assets, net of
valuation allowance 223,329 173,072
------- -------
Deferred income tax liabilities:
Depreciation 54,017 33,174
Other 4,127 -
------ ------
Total deferred income tax liabilities 58,144 33,174
Net deferred income tax asset, included
within other assets in the accompanying
consolidated balance sheets $ 165,185 139,898
======= =======
</TABLE>
50
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Company recognizes deferred income tax assets and liabilities for
differences between the financial statement carrying amounts and the tax
bases of assets and liabilities which will result in future deductible or
taxable amounts and for net operating loss and tax credit carryforwards. A
valuation allowance is then established to reduce the deferred income tax
assets to the level at which it is "more likely than not" that the tax
benefits will be realized. Realization of tax benefits of deductible
temporary differences and operating loss and tax credit carryforwards
depends on having sufficient taxable income within the carryback and
carryforward periods. Sources of taxable income that may allow for the
realization of tax benefits include (1) taxable income in the current year
or prior years that is available through carryback, (2) future taxable
income that will result from the reversal of existing taxable temporary
differences, and (3) future taxable income generated by future operations.
During the years ended December 31, 1995 and 1994, the Company decreased
its valuation allowance for deferred income tax assets by $29,718 and
$76,555, respectively, as accumulated deficits were recovered and taxable
income was generated. The Company believes that the realization of deferred
income tax assets recorded at December 31, 1996 is more likely than not
because of carryback availability.
The Company has available state business license tax credit carryforwards
of approximately $21,500 for state income tax reporting purposes as of
December 31, 1996 which can be used to reduce future state taxable income
of the Company.
(9) Shareholders' Equity
(a) Stock Split
On May 23, 1995, the Company's Board of Directors declared a
three-for-two stock split of the Company's common stock in the form of a
stock dividend. All share, per share, and shareholders' equity amounts
included herein have been retroactively restated to reflect the split.
51
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(b)Stock Options
The Company maintains a stock option plan under which 120,000 shares of
common stock are reserved to retain the services of certain key
employees and encourage stock ownership by them. The vesting,
expiration, and exercise price of options granted are determined within
the provisions of the Company's Board of Directors. All options granted
under the terms of the plan shall have an exercise price equal to or
greater than the fair market value of the Company's common stock on the
date of grant and shall expire ten years from the date of grant. The
following table summarizes plan activity for the years ended December
31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
Exercise price
Shares per share
<S> <C> <C>
Options outstanding at December 31, 1993 44,118 $ 6.67
Granted -
Exercised or canceled -
-----
Options outstanding at December 31, 1994 44,118 6.67
Granted -
Exercised or canceled -
-----
Options outstanding at December 31, 1995 44,118 6.67
Granted -
Exercised or canceled -
-----
Options outstanding at December 31, 1996 44,118 $ 6.67
======
</TABLE>
As of December 31, 1996, options to acquire 44,118 shares were earned
and were exercisable. The Company has recorded compensation expense of
$14,471 to reflect the compensatory component of the options earned
during 1994. Options expire beginning in March 1998 through August 2000.
As discussed in note 1, on January 1, 1996, the Company adopted SFAS 123
which requires entities to recognize as expense over the vesting period
the fair value of all stock-based awards measured at the date of grant.
Alternatively, SFAS 123 also allows entities to continue to apply the
provisions of APB Opinion 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants
made in 1995 and later years as if the fair value-based method defined
in SFAS 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion 25. The pro forma and fair value
disclosures required by SFAS 123 are not provided herein because there
have been no grants in 1996 or 1995.
52
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(c) Warrants
Upon formation of the Company and Bank, organizers were granted
warrants to acquire 151,650 shares of the Company's common stock in
recognition of the efforts and risks undertaken by the organizers in the
formation of the Company and Bank. On January 5, 1994, warrants to
acquire 127,350 shares of the Company's common stock were exercised
resulting in proceeds to the Company of $849,000. Warrants to acquire
24,300 shares expired on that same date.
(10) Commitments
(a)Credit Facilities
The Company maintains short-term unsecured federal funds arrangements
with other banks. Subject to certain conditions, the Company has
borrowing availability totaling $7.5 million at prevailing market rates.
(b)Letters of Credit
Inthe normal course of business, the Company has outstanding commitments
to extend credit which are not reflected in the accompanying
consolidated financial statements, including approximately $149,000
under standby letters of credit at December 31, 1996. It is the opinion
of management that such commitments do not involve more than the normal
risk of loss.
(c)Employee Benefit Plan
Effective January 1, 1994, the Company established the Eagle Bank Profit
Sharing Plan (the "Plan") to provide a vehicle for the Company's
employees to save for retirement. The Plan allows the Company to make
annual discretionary contributions for the benefit of Plan participants.
All employees are eligible to participate in the Plan after they meet
certain eligibility requirements. Under the terms of the Plan, the
Company's contribution is allocated to participants in the same
proportion that the participant's compensation, as defined, bears to the
total compensation of all participants for the year. The Company has
provided compensation expense of $30,000 in 1996, $25,000 in 1995, and
$25,000 in 1994 to reflect the Company's contributions to the Plan.
53
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(11) Condensed Financial Information of Eagle Bancorp, Inc. (Parent Only)
The following represents parent company only condensed financial
information of Eagle Bancorp, Inc.
Condensed Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Cash $ 774,702 1,091,698
Investment in bank subsidiary, at equity 5,978,113 5,373,917
Other assets - 382
---------- ----------
$ 6,752,815 6,465,997
========= =========
Liabilities and Shareholders' Equity
Liabilities:
Dividends payable $ 431,423 215,689
Other liabilities 62,341 51,377
---------- ----------
Total liabilities 493,764 267,066
---------- ----------
Shareholders' equity:
Common stock 862,845 862,755
Additional paid-in capital 4,821,527 4,820,492
Retained earnings 586,583 516,150
Net unrealized holding losses on investment
securities available for sale (11,904) (466)
---------- ----------
Total shareholders' equity 6,259,051 6,198,931
--------- ---------
$ 6,752,815 6,465,997
========= =========
</TABLE>
Condensed Statements of Income
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating expenses $ 113,778 73,925 94,068
------- -------- --------
Loss before income taxes and equity
in income of bank subsidiary (113,778) (73,925) (94,068)
Income tax benefit allocated from consolidated
income tax return - - -
--------- --------- -------
Loss before equity in income of
bank subsidiary (113,778) (73,925) (94,068)
Equity in income of bank subsidiary 615,634 574,105 522,739
------- ------- -------
Net income $ 501,856 500,180 428,671
======= ======= =======
</TABLE>
54
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Condensed Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 501,856 500,180 428,671
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in income of bank subsidiary (615,634) (574,105) (522,739)
Amortization of organizational costs 382 4,584 4,584
Compensation expense under stock
awards and options 1,125 - 14,471
Decrease (increase) in other assets - 28,420 (10,142)
Increase (decrease) in other liabilities 10,964 (28,105) 7,585
----------- ---------- ----------
Net cash used in operating activities (101,307) (69,026) (77,570)
----------- ---------- ----------
Cash flows from financing activities:
Dividends paid (215,689) - -
Proceeds from exercise of warrants - - 849,000
Cash paid in lieu of fractional shares in
connection with stock split - (349) -
----------- ---------- ---------
Net cash provided by (used in)
financing activities (215,689) (349) 849,000
----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents (316,996) (69,375) 771,430
Cash and cash equivalents at beginning of year 1,091,698 1,161,073 389,643
--------- --------- ---------
Cash and cash equivalents at end of year $ 774,702 1,091,698 1,161,073
=========== ========= =========
Supplemental disclosure of cash paid during
the year for income taxes $ 316,093 379,699 20,713
=========== ========== ==========
Supplemental disclosure of significant noncash
transaction - contribution of land to Eagle Bank $ - 216,753 -
=========== ========== =========
</TABLE>
The amount of dividends payable to the Company from the Bank is limited by
regulatory agencies. State-chartered banks meeting the minimum regulatory
capital requirements are restricted in the payment of dividends, without
prior regulatory approval, to an amount no greater than 50% of net income
of the previous year. As a result of this regulatory limitation, at
December 31, 1996, $5,670,296 of the Company's investment in Bank
subsidiary of $5,978,113 was restricted from transfer by the Bank to the
Company in the form of cash dividends.
55
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(12)Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosure about
Fair Value of Financial Instruments ("SFAS 107"), requires that the
Company disclose estimated fair value for its financial instruments.
Fair value estimates, methods, and assumptions are set forth below for
the Company's financial instruments.
(a) Cash and Cash Equivalents, Interest-Earning Deposits
in Other Banks, and Federal Funds Sold and Purchased
The carrying amount of these instruments approximates fair value
because of the short-term maturities of these instruments.
(b)Investment Securities
The fair value of investment securities, except certain state and
municipal securities,is estimated based on published bid prices or bid
quotations received from securities dealers. The fair value of certain
state and municipal securities is not readily available through market
sources other than dealer quotations, so fair value estimates are
based on quoted market prices of similar instruments, adjusted for
differences between the quoted instruments and the instruments being
valued. In the aggregate, the fair value of investment securities at
December 31, 1996 and 1995 was $10,690,716 and $9,101,680,
respectively, as compared to their carrying value of $10,689,119 and
$9,033,025, respectively. Refer to note 3 for further disclosure of
the estimated fair values of investment securities.
(c) Loans
Fair values are estimated for portfolios of loans with similar
financial characteristics. The fair value of loans is calculated by
discounting scheduled cash flows through the estimated maturity using
estimated market discount rates that reflect the credit and interest
rate risks inherent in the loans. The estimate of maturity is based
on the Company's historical experience with repayments for each loan
classification, modified, as required, by an estimate of the effect
of the current economic and lending conditions.
56
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The following table presents information on the fair value of loans:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Estimated Carrying Estimated
amount fair value amount fair value
<S> <C> <C> <C> <C>
Loans, net $ 41,999,358 41,951,522 36,872,325 36,844,465
========== ========== ========== ==========
</TABLE>
(d)Deposit Liabilities
Under SFAS 107, the fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, NOW accounts, money
market accounts, and savings accounts, is equal to the amount payable
on demand. The fair value of certificates of deposit and individual
retirement accounts with stated maturities are based on the discounted
value of contractual cash flows. The discount rate is estimated using
the rates offered for deposits of similar remaining maturities at
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Estimated Carrying Estimated
amount fair value amount fair value
<S> <C> <C> <C>
Noninterest-bearing demand deposits ............ $5,184,539 5,184,539 4,253,543 4,253,543
NOW accounts ................................... 7,420,192 7,420,192 6,137,518 6,137,518
Money market accounts .......................... 3,077,437 3,077,437 2,096,008 2,096,008
Savings accounts ............................... 2,586,187 2,586,187 2,650,107 2,650,107
Certificates of deposit and individual
retirement accounts:
Maturing within six months or less .......... 21,178,449 21,220,261 15,782,674 15,899,333
Maturing between seven and 12 months ........ 5,699,912 5,722,173 7,202,910 7,599,616
Maturing between one and three years ........ 6,677,510 6,763,895 6,057,427 5,716,365
Maturing beyond three years ................. 640,634 649,374 702,502 723,540
---------- ---------- ---------- ----------
$ 52,464,860 52,624,058 44,882,689 45,076,030
========== ========== ========== ==========
</TABLE>
(e)Federal Home Loan Bank Advances
The fair value of the Company's Federal Home Loan Bank advances is
estimated based on the discounted value of contractual cash flows. The
discount rate is estimated using rates quoted for the same or similar
issues. At December 31, 1996, the fair value of the Federal Home Loan
Bank advances is $554,724 as compared to their carrying value of
$548,250.
(f)Commitments
The fair value of commitments to extend credit is equal to their
cost at December 31, 1996 and 1995. The Company generally does
not offer lending commitments to its customers for long periods and,
57
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
therefore, the underlying rates of the commitments approximate
market rates.
(g)Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities
that are not considered financial instruments. Other significant
assets that are not considered financial instruments include deferred
income tax assets and premises and equipment. In addition, the tax
ramifications related to the realization of the unrealized gains and
losses on financial instruments can have a significant effect on fair
value estimates and have not been considered in any of the estimates.
(13)Supplementary Income Statement Information
Components of other operating expenses in excess of 1% of total income for
each of the respective years are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Stationery and supplies $ 84,717 74,317 66,051
Data processing 109,217 87,845 41,183
Advertising and marketing 52,366 51,605 51,301
FDIC insurance premiums 14,498 62,520 102,353
Postage 56,267 51,066 44,049
ATM transaction fees 23,872 45,387 54,580
Professional fees - legal and accounting 74,864 54,471 55,531
Director fees 53,300 55,400 23,375
</TABLE>
58
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(14)Regulatory Matters
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that,if undertaken, could
have a direct material effect on the Company'sfinancial statements. Under
capital adequacy guidelines and the regulatory framework of prompt
corrective action, the Company must meet specific capital guidelines that
involve quantitative measures of the Company's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined) to
average assets(as defined). Management believes, as of December 31,
1996, that the Company meets all capital adequacy requirements to which
it is subject.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in
the table below. There are no conditions or events since that notification
that management believes have changed the Bank's capital category.
59
<PAGE>
EAGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Bank's actual capital amounts and ratios are also presented in the table
below:
<TABLE>
<CAPTION>
Minimum to be well
capitalized under
Minimum for capital prompt corrective
Actual adequacy purposes action provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total capital - risk-based
(to risk-weighted assets) $ 6,561,517 14% $3,652,080 8% $4,565,100 10%
Tier I capital - risk-based
(to risk-weighted assets) 5,990,017 13% 1,826,040 4% 2,739,060 6%
Tier I capital - leverage
(to average assets) 5,990,017 10% 2,367,400 4% 2,959,250 5%
As of December 31, 1995:
Total capital - risk-based
(to risk-weighted assets) $ 5,832,000 16% $2,942,000 8% $3,677,500 10%
Tier I capital - risk-based
(to risk-weighted assets) 5,374,000 15% 1,471,000 4% 2,206,500 6%
Tier I capital - leverage
(to average assets) 5,374,000 10% 2,085,000 4% 2,606,000 5%
</TABLE>
60
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
...... ACCOUNTING AND FINANCIAL DISCLOSURE
There are no changes in or disagreements with accountants on accounting and
financial disclosure for the year ended December 31, 1996. On January 21, 1997
the Board of Directors of Eagle Bancorp, Inc. voted not to renew the appointment
of KPMG Peat Marwick LLP as the Company's independent auditor for the year
ending December 31, 1997. The engagement of Tiller, Stewart and Company, LLC
will become effective March 31, 1997. The decision to engage Tiller, Stewart and
Company, LLC was made because of lower professional fees.
On January 29, 1997 the Company filed a Form 8-K, SEC File Number 000-19228,
disclosing the foregoing change in principal accountants. On February 10, 1997,
the Company filed an amendment to this Form 8-K as required. Both Form 8-K filed
January 29, 1997, and Form 8-K/A filed February 10, 1997, are incorporated
herein by reference as, respectively, Exhibits 99.1 16.1.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information set forth under the caption "Election of Directors" and "Bank
Management" in the Proxy Statement to be utilized in connection with the
Company's 1997 Annual Shareholders Meeting is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information contained under the caption "Compensation of Executive Officers
and Directors" in the Proxy Statement to be utilized in connection with the
Company's 1997 Annual Shareholders Meeting is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
...... OWNERS AND MANAGEMENT
The information contained under the caption "Principal Shareholders" in the
Proxy Statement to be utilized in connection with the Company's 1997 Annual
Shareholders Meeting is incorporated herein by reference.
61
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement to be utilized in connection with the
Company's 1997 Annual Shareholders Meeting is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements, notes thereto and independent
auditors' report thereon, filed as part hereof, are listed in Item 7.
2. Financial Statement Schedules
All schedules have been omitted as the required information is not
applicable.
3. Exhibits
Exhibit Numbers
3.1* Articles of Incorporation
3.2* Bylaws
3.3* Form of Stock Purchase Warrant
10.1* Employment Contract between Andrew M. Williams III and Statesboro
Financial Partners
10.2* Employment Agreement between Erskine Russell and Statesboro
Financial Partners
10.3* 1990 Employee Stock Option Plan
10.4* Amendment to Employment Contract between Andrew M. Williams III
and Eagle Bank and Trust
10.5* 1996 Employment Contract between Eagle Bancorp, Inc., Eagle Bank
& Trust and Andrew M. Williams, III
11.1 Computation of Earnings per Common Share
16.1**Letter on Change in Certifying Accountant
22.1 Subsidiaries of the Company. The sole subsidiary of the Company is
Eagle Bank and Trust, Statesboro, Georgia, which is wholly-owned by
the Company.
27 Financial Data Schedule
*Items 3.1 through 10.5, as listed above, were previously filed by the
Company as Exhibits (with the same respective Exhibit Numbers as indicated
herein) to the Company's Registration Statement (Registration No.
33-31490-A) and such documents are incorporated herein by reference.
**The letter required by Item 304(a)(3), stating whether the former
accountants agrees or disagrees with statements made by the
Company relating to its change in accountants, was filed with the
Commission on February 10, 1997, on Form 8-K/A, and is incorporated herein
by reference.
(b) Reports on Form 8-K
A Form 8-K was filed on January 29, 1997 regarding the change in
Registrant's independent accountants, and an amendment thereto, filed
February 10, 1997, on Form 8-K/A, included the letter from the former
accountants required by Item 304 of Regulation S-B.
62
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 18, 1997.
EAGLE BANCORP, INC.
By:
Andrew M. Williams III
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 18, 1997.
Signature Title Signature Title
President
(Principal Director
Andrew M. Williams III Executive Robert D. Coston
Officer) and
Director
Director Director
Lemuel A. Deal Julian B. Hodges,
Jr.
Director Director
Robert E. Lane James B. Lanier,
Jr.
Director Director
Betty K. Minick Thad J. Morris,
Jr.
Director Director and
Paul E. Parker W. Dale Parker Secretary
Director Director
Erskine Russell Marcus B. Seligman
Director Director
Solly Trapnell Paul A. Whitlock,
Jr.
63
<PAGE>
Principal
William Earl Green Financial Officer
and Principal
Accounting Officer
ATL1-104085.4
64
<PAGE>
Exhibit 11.1
EAGLE BANCORP, INC.
Computation of Earnings per Common Share
(Unaudited)
<TABLE>
<CAPTION>
Years
ended December 31,
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Primary
Net Income $ 501,856 $ 500,180 $ 428,671
Shares:
Weighted average number of common shares
outstanding 862,845 862,755 861,382
Shares issuable from assumed exercise of
options and warrants 22,261 17,146 12,855
---------- --------- ---------
Weighted average number of common shares
and common share equivalents outstanding 885,106 879,901 874,237
========= ========= =========
Net income per common share and common share
equivalent $ .57 $ .57 $ .49
========= ========= =========
Fully Diluted
Net Income: $ 501,856 $ 500,180 $ 428,671
Shares:
Weighted average number of common shares
and common share equivalent outstanding
as adjusted per primary computation 885,106 879,901 874,237
Additional shares issuable from assumed
exercise of option and warrants computed
on a fully diluted basis 92 3,431 1,851
---------- ---------- ----------
Weighted average number of common shares
and common share equivalents outstanding 885,198 883,332 876,088
========== ========== ==========
Net income per common share and common
share equivalent $ .57 $ .57 $ .49
========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(Replace this text with the legend, if applicable)
</LEGEND>
<CIK> 865792
<NAME> Eagle Bancorp Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 2238
<INT-BEARING-DEPOSITS> 1000
<FED-FUNDS-SOLD> 1500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6899
<INVESTMENTS-CARRYING> 3790
<INVESTMENTS-MARKET> 3792
<LOANS> 42639
<ALLOWANCE> 640
<TOTAL-ASSETS> 60730
<DEPOSITS> 52465
<SHORT-TERM> 200
<LIABILITIES-OTHER> 1258
<LONG-TERM> 548
0
0
<COMMON> 863
<OTHER-SE> 5396
<TOTAL-LIABILITIES-AND-EQUITY> 60730
<INTEREST-LOAN> 4025
<INTEREST-INVEST> 640
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4664
<INTEREST-DEPOSIT> 2232
<INTEREST-EXPENSE> 2269
<INTEREST-INCOME-NET> 2396
<LOAN-LOSSES> 108
<SECURITIES-GAINS> (10)
<EXPENSE-OTHER> 2171
<INCOME-PRETAX> 752
<INCOME-PRE-EXTRAORDINARY> 752
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 502
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 9.19
<LOANS-NON> 123
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 611
<ALLOWANCE-OPEN> 570
<CHARGE-OFFS> (59)
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 640
<ALLOWANCE-DOMESTIC> 640
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
