UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-25808
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GREAT AMERICAN BANCORP, INC.
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Delaware 52-1923366
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State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
1311 S. Neil St., P.O. Box 1010, Champaign, IL 61824-1010
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(Address of principal executive offices) (Zip Code)
(217) 356-2265
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) [X] Yes [ ] No
(2) [X] Yes [ ] No
At July 31, 1998, the Registrant had 1,545,378 shares of Common Stock
outstanding, for ownership purposes, which excludes 507,372 shares held as
treasury stock.
Table of Contents
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Income Statements
Consolidated Statements of Cash Flows
Item 2. Management's Discussion and Analysis or
Plan of Operation
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Great American Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1997
(in thousands)
June 30, 1998 Dec. 31, 1997
(unaudited)
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ASSETS
Cash and due from banks $ 6,382 $ 5,285
Interest-bearing demand deposits 5,307 12,191
--------------------------------
Cash and cash equivalents 11,689 17,476
Investment securities
Available for sale 2,000 1,999
Held to maturity 1,200 1,300
--------------------------------
Total investment securities 3,200 3,299
Loans 123,530 112,312
Allowance for loan losses (577) (497)
--------------------------------
Net loans 122,953 111,815
Premises and equipment 7,488 7,090
Federal Home Loan Bank stock 698 580
Other assets 2,314 1,713
--------------------------------
Total assets $ 148,342 $ 141,973
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest bearing $ 6,596 $ 5,463
Interest bearing 110,711 106,521
--------------------------------
Total deposits 117,307 111,984
Short-term borrowings 2,000 --
Other liabilities 1,924 1,695
--------------------------------
Total liabilities 121,231 113,679
--------------------------------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets (Continued)
As of June 30, 1998 and December 31, 1997
(in thousands)
June 30, 1998 Dec. 31, 1997
(unaudited)
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STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value
Authorized and unissued --
1,000,000 shares -- --
Common stock, $0.01 par value
Authorized -- 7,000,000 shares
Issued and outstanding -- 2,052,750 shares 21 21
Paid-in-capital 19,785 19,655
Retained earnings -- substantially restricted 16,372 16,167
Net unrealized gain on securities
available for sale -- 2
--------------------------------
36,178 35,845
Less:
Treasury stock, at cost -- 464,372 and
380,773 shares (7,674) (5,925)
Unallocated employee stock ownership plan
shares - 75,794 and 87,891 shares (758) (879)
Unearned incentive plan shares - 44,008 and
51,802 shares (635) (747)
--------------------------------
(9,067) (7,551)
--------------------------------
Total stockholders' equity 27,111 28,294
--------------------------------
Total liabilities and
stockholders' equity $ 148,342 $ 141,973
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Six Months Ended June 30, 1998 and 1997
(unaudited, in thousands except share data)
1998 1997
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Interest income:
Loans $ 4,927 $ 4,155
Investment securities
Taxable 112 197
Tax exempt 5 7
Deposits with financial
institutions and other 371 566
--------------------------------
Total interest income 5,415 4,925
--------------------------------
Interest expense:
Deposits 2,447 2,174
Other 26 16
--------------------------------
Total interest expense 2,473 2,190
--------------------------------
Net interest income 2,942 2,735
Provision for loan losses 78 78
--------------------------------
Net interest income after
provision for loan losses 2,864 2,657
--------------------------------
Noninterest income:
Brokerage commissions 86 15
Insurance sales commissions 220 --
Service charges on deposit accounts 222 209
Loan servicing fees 13 17
Other customer fees 68 69
Net gains on loan sales -- 1
Other income 10 29
--------------------------------
Total noninterest income 619 340
--------------------------------
(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Six Months Ended June 30, 1998 and 1997
(unaudited, in thousands except share data)
1998 1997
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Noninterest expense:
Salaries and employee benefits 1,408 1,243
Net occupancy expenses 266 232
Equipment expenses 175 143
Data processing fees 99 96
Deposit insurance expense 34 30
Printing and office supplies 126 145
Legal and professional fees 79 120
Directors and committee fees 52 52
Insurance expense 21 19
Marketing and advertising expenses 95 90
Other expenses 199 165
--------------------------------
Total noninterest expense 2,554 2,335
--------------------------------
Income before income tax 929 662
Income tax expense 410 278
--------------------------------
Net income $ 519 $ 384
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.35 $ 0.24
================================
Average number of shares 1,476,129 1,606,697
================================
Diluted:
Net income $ 0.33 $ 0.23
================================
Average number of shares 1,580,606 1,687,852
================================
Dividends $ 0.21 $ 0.20
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements
For the Quarter Ended June 30, 1998 and 1997
(unaudited, in thousands except share data)
1998 1997
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Interest income:
Loans $ 2,546 $ 2,093
Investment securities
Taxable 56 115
Tax exempt 2 4
Deposits with financial
institutions and other 160 278
--------------------------------
Total interest income 2,764 2,490
--------------------------------
Interest expense:
Deposits 1,241 1,122
Other 18 8
--------------------------------
Total interest expense 1,259 1,130
--------------------------------
Net interest income 1,505 1,360
Provision for loan losses 39 39
--------------------------------
Net interest income after
provision for loan losses 1,466 1,321
--------------------------------
Noninterest income:
Brokerage commissions 49 7
Insurance sales commissions 122 --
Service charges on deposit accounts 116 115
Loan servicing fees 6 8
Other customer fees 34 35
Net gain on loan sales -- 1
Other income 10 16
--------------------------------
Total noninterest income 337 182
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(Continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Income Statements (Continued)
For the Quarter Ended June 30, 1998 and 1997
(unaudited, in thousands except share data)
1998 1997
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Noninterest expense:
Salaries and employee benefits 720 628
Net occupancy expenses 140 115
Equipment expenses 94 69
Data processing fees 50 43
Deposit insurance expense 17 16
Printing and office supplies 60 60
Legal and professional fees 39 59
Directors and committee fees 26 27
Insurance expense 10 8
Marketing and advertising expenses 59 48
Other expenses 96 97
--------------------------------
Total noninterest expense 1,311 1,170
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Income before income tax 492 333
Income tax expense 217 140
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Net income $ 275 $ 193
================================
Per Share Data:
Earnings
Basic:
Net income $ 0.19 $ 0.12
================================
Average number of shares 1,461,946 1,591,573
================================
Diluted:
Net income $ 0.18 $ 0.12
================================
Average number of shares 1,569,102 1,673,188
================================
Dividends $ 0.11 $ 0.10
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(unaudited, in thousands)
1998 1997
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Operating Activities:
Net income $ 519 $ 384
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 78 78
Depreciation 218 220
Amortization of deferred loan fees (18) (15)
Deferred income tax (44) 48
Investment securities accretion, net (1) (2)
Net gain on loan sales -- (1)
Employee stock ownership plan
compensation expense 252 202
Incentive plan expense 111 109
Loans originated for sale -- (72)
Proceeds from sales of loans
originated for resale -- 73
Net change in:
Other assets (601) (43)
Other liabilities 273 10
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Net cash provided by
operating activities 787 991
--------------------------------
Investing Activities:
Net change in interest-bearing time deposits -- (1,000)
Purchases of securities available for sale (1,000) (993)
Purchases of securities held to maturity (1,000) (2,995)
Proceeds from maturities of securities held
to maturity 1,100 100
Proceeds from maturities of securities
available for sale 997 --
Purchase of Federal Home Loan Bank stock (118) (126)
Net change in loans (11,197) (8,951)
Purchase of premises and equipment (616) (131)
--------------------------------
Net cash used by
investing activities (11,834) (14,096)
--------------------------------
(continued)
Great American Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended June 30, 1998 and 1997
(unaudited, in thousands)
1998 1997
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Financing Activities:
Net change in:
Noninterest-bearing demand, interest-
bearing demand and savings deposits 1,188 (161)
Certificates of deposit 4,135 5,814
Other short-term borrowings 2,000 --
Cash dividends (314) (336)
Purchase of treasury stock (1,749) (1,468)
--------------------------------
Net cash provided by
financing activities 5,260 3,849
--------------------------------
Net Change in Cash and Cash Equivalents (5,787) (9,256)
Cash and Cash Equivalents, Beginning
of Period 17,476 26,410
--------------------------------
Cash and Cash Equivalents, End of
Period $ 11,689 $ 17,154
================================
Additional Cash Flows Information
Interest paid $ 2,460 $ 2,187
================================
Income tax paid $ 486 $ 181
================================
See notes to consolidated financial statements.
Great American Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. Background Information
Great American Bancorp, Inc. (the "Company") was incorporated on February 23,
1995 and on June 30, 1995 acquired all of the outstanding shares of common
stock of First Federal Savings Bank of Champaign-Urbana, (the "Bank") upon the
Bank's conversion from a federally chartered mutual savings bank to a
federally chartered stock savings bank. The Company purchased 100% of the
outstanding capital stock of the Bank using 50% of the net proceeds from the
Company's initial stock offering which was completed on June 30, 1995. The
Company began trading on the NASDAQ Stock Market on June 30, 1995 under the
symbol "GTPS".
2. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and Item 310(b) of
Regulation S-B, and, in the opinion of management, contain all adjustments
necessary to present fairly the financial position as of June 30, 1998 and
December 31, 1997, the results of operations for the six months ended and
three months ended June 30, 1998 and 1997, and the cash flows for the six
months ended June 30, 1998 and 1997. All adjustments to the financial
statements were normal and recurring in nature. These results have been
determined on the basis of generally accepted accounting principles.
Reclassifications of certain amounts in the 1997 financial statements have
been made to conform to the 1998 presentation. The results of operations for
the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the entire fiscal year.
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income," ("SFAS No. 130") in 1998. At June 30, 1998
and June 30, 1997, the amounts to be disclosed by the Company under SFAS No.
130 are considered immaterial and are therefore not shown in the accompanying
financial statements.
The consolidated financial statements are those of the Company and the Bank.
These consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's 1997
Annual Report to Shareholders.
PART I -- Item 2.
GREAT AMERICAN BANCORP, INC.
Management's Discussion and Analysis
or Plan of Operation
The Company is the holding company for the Bank. The Bank operates a wholly
owned subsidiary, Park Avenue Service Corporation ("PASC"). PASC offers full
service brokerage activities through Scout Brokerage Services, Inc., a
subsidiary of United Missouri Bank, and also engages in the sale of fixed-rate
and variable-rate tax deferred annuities. In September, 1997, PASC also
established the GTPS Insurance Agency which offers a variety of insurance
products, including life, health, automobile, and property and casualty
insurance. At the inception of GTPS Insurance Agency, PASC hired two
insurance agents to provide these services to customers. Effective March 1,
1998, GTPS Insurance Agency merged with another local insurance agency, the
Cox Lowry and Marsh Insurance Agency, and added four additional insurance
agents. The merged entity assumed the GTPS Insurance Agency name.
Financial Condition
The Company's total assets increased from $141.97 million at December 31, 1997
to $148.34 million at June 30, 1998, an increase of $6.37 million, or 4.5%.
This growth was primarily in loans offset by a decrease in interest-bearing
demand deposits. Net loans increased by $11.13 million, or 10.0%, from
$111.82 million at December 31, 1997 to $122.95 million at June 30, 1998.
This increase was mostly in mortgage loans, with increases in residential real
estate loans of $4.22 million, or 7.3%, commercial real estate loans of $4.33
million, or 42.0%, and construction loans of $2.23 million, or 138.3%, over
December 31, 1997 balances. Interest-bearing demand deposits declined by $6.88
million from $12.19 million at December 31, 1997 to $5.31 million at June 30,
1998, due to providing part of the funding for new loans.
Total deposits increased $5.33 million, or 4.8%, from $111.98 million at
December 31, 1997 to $117.31 million at June 30, 1998. Total noninterest-
bearing demand, interest-bearing demand and savings deposits increased $1.19
million, or 2.9%, from $41.52 million at December 31, 1997 to $42.71 million
at June 30, 1998. This increase was mainly due to fluctuations that occur in
the ordinary course of business. Total certificates of deposit increased
$4.14 million, or 5.9%, from $70.46 million at December 31, 1997 to $74.60
million at June 30, 1998. The growth in certificates of deposit was primarily
in certificates maturing in two years and greater. Also, in June 1998, the
Company engaged in a repurchase agreement in the amount of $2.00 million. The
increase in deposits and short-term borrowings assisted in funding the growth
in loans.
Total stockholders' equity decreased $1.18 million, or 4.2%, from $28.29
million at December 31, 1997 to $27.11 million at June 30, 1998. Book value
per outstanding voting share increased from $16.92 at December 31, 1997 to
$17.07 at June 30, 1998. The increase in stockholders' equity is summarized as
follows (in thousands):
Stockholders' equity, December 31, 1997 $ 28,294
Net income 519
Purchase of treasury stock (1,749)
Dividends declared (314)
Incentive plan shares allocated 111
ESOP shares allocated 252
Decrease in unrealized gain on securities
available for sale, net of income tax effect (2)
------
Stockholders' equity, June 30, 1998 $ 27,111
======
On June 19, 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to 5%, or 79,419 shares, of the Company's
common stock. This common stock repurchase was completed in August, prior to
the date of this filing, at an average price of $21.99 per share. The
repurchased shares will be held as treasury shares to be used for general
corporate purposes.
Results of Operations
Comparison of Six Month Periods Ended June 30, 1998 and 1997
Net income was $519,000 for the six months ended June 30, 1998, compared to
$384,000 for the six months ended June 30, 1997. This represents a $135,000,
or 35.2% increase. Basic earnings per share were $0.35 for the six months
ended June 30, 1998, compared to $0.24 for the six months ended June 30, 1997,
and diluted earnings per share were $0.33 in 1998, compared to $0.23 in 1997.
Net income in 1998 was higher than net income in 1997 due to increases in net
interest income and noninterest income, offset by an increase in noninterest
expense.
Net interest income was $2,942,000 for the six months ended June 30, 1998,
compared to $2,735,000 for the same period in 1997, an increase of $207,000,
or 7.6%. Interest income was $5,415,000 for the six months ended June 30,
1998, compared to $4,925,000 for the same period in 1997, an increase of
$490,000, or 9.9%, primarily the result of increased interest income from
loans. Interest income on loans in 1998 was $4,927,000, $772,000, or 18.6%,
greater than the $4,155,000 recorded in 1997.
The increase in interest income on loans was due to higher average total loans
in 1998. Average total loans for the six months ended June 30, 1998 were
$114.96 million, compared to $97.24 million for the same period in 1997, an
increase of $17.72 million, or 18.2%. The average total balance of all loan
categories increased in 1998, with the majority of the increase in mortgage
loans. Total mortgage loans averaged $91.50 million for the six months ended
June 30, 1998, compared to $77.81 million for the six months ended June 30,
1997, an increase of $13.69 million, or 17.6%. This growth occurred in one-to
four-family and multifamily residential loans and in commercial mortgage
loans.
Average total commercial loans were $12.14 million in 1998, compared to $9.01
million in 1997, an increase of $3.13 million, or 34.7%. Average total
consumer loans were $11.85 million during the six months ended June 30, 1998,
an increase of $1.02 million, or 9.4%, over the $10.83 million average total
balance during 1997. The increase in loans is due to strategies management
began implementing during 1996 and 1997 which were designed to promote loan
growth, including special rate promotions, employee referral programs and the
hiring of an additional commercial loan officer. A decline in long-term
interest rates during 1998 also contributed to the growth in residential
mortgage loans. The average yield on loans was 8.64% for the six months ended
June 30, 1998, compared to 8.62% for the six months ended June 30, 1997.
Interest income on investment securities declined from $204,000 for the six
months ended June 30, 1997 to $117,000 for the same period in 1998, due to a
decrease in average total investment securities. Total investment securities
averaged $6.67 million in 1997, compared to $3.72 million in 1998, a decline
of $2.95 million, or 44.2%. Interest income on deposits with financial
institutions and other decreased from $566,000 for the six months ended June
30, 1997 to $371,000 for the six months ended June 30, 1998. The average
total balance of deposits with financial institutions and other declined from
$22.02 million for the six months ended June 30, 1997 to $14.02 million for
the six months ended June 30, 1998, a decrease of $8.0 million, or 36.3%. The
declines in total average investment securities and total average deposits
with financial institutions and other were due to these funds being used to
partially fund loan growth and also to fund the purchase of treasury stock.
The average yield on investment securities increased from 6.16% for the six
months ended June 30, 1997 to 6.34% for the same period in 1998. The average
yield on deposits with financial institutions and other increased from 5.18%
for the six months ended June 30, 1997 to 5.34% for the same period in 1998.
Interest expense increased by $283,000, or 12.9% from $2,190,000 for the six
months ended June 30, 1997 to $2,473,000 for the same period in 1998. The
increase was mainly attributable to growth in interest-bearing deposits during
1997 and continuing into 1998 and the addition of $2,000,000 in short-term
borrowings in 1998. Average total interest-bearing deposits increased from
$101.18 million in the first half of 1997 to $109.22 million during 1998, an
increase of $8.04 million, or 7.95%. Most of this growth occurred in
certificates of deposit, and primarily in certificates maturing in two years
and greater. The average rates on deposits were 4.52% and 4.33% for the six
months ended June 30, 1998 and 1997, respectively.
Net interest income as a percent of average interest earning assets was 4.47%
for the six months ended June 30, 1998 versus 4.38% for the same period in
1997. The spread between the yield on interest earning assets and the rate on
interest bearing liabilities was 3.70% and 3.54% for the six months ended June
30, 1998 and 1997, respectively.
The provision for loan losses was $78,000 for both the six months ended June
30, 1998 and the six months ended June 30, 1997. There were $3,000 in
consumer loans charged-off in the six months ended June 30, 1998 and
recoveries totaled $5,000. Total charge-offs in the first six months of 1997
were $6,000, with $1,000 in recoveries.
Non-performing loans, which are loans past due 90 days or more and
non-accruing loans, totaled $119,000 at June 30, 1998, compared to $317,000 at
June 30, 1997. Non-performing loans at June 30, 1998 consisted of three
residential mortgage loans totaling $89,000, three consumer loans totaling
$29,000, and one commercial loan of $1,000. All of these loans are past due
90 days or more with $20,000 of the balance in non-accrual status.
The ratio of the Company's allowance for loan losses to total loans was .47%
at June 30, 1998 and .44% at June 30, 1997. Management assesses the adequacy
of the allowance for loan losses based on evaluating known and inherent risks
in the loan portfolio and upon management's continuing analysis of the factors
underlying the quality of the loan portfolio. Management believes that, based
on information currently available, the allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time.
However, no assurance can be given that the level of the allowance for loan
losses will be sufficient to cover future possible loan losses incurred by the
Company or that future adjustments to the allowance for loan losses will not
be necessary if economic and other conditions differ substantially from the
economic and other conditions used by management to determine the current
level of the allowance for loan losses. Management may in the future increase
the level of the allowance for loan losses as a percentage of total loans and
non-performing loans in the event it increases the level of commercial real
estate, multifamily, or consumer lending as a percentage of its total loan
portfolio. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require the Company to provide additions to the allowance
based upon judgements different from management.
Noninterest income totaled $619,000 for the six months ended June 30, 1998,
compared to $340,000 for the same period in 1997, an increase of $279,000, or
82.1%. Insurance sales commissions, which totaled $220,000 in 1998 with no
commissions being recorded in 1997, accounted for the majority of the increase
in noninterest income. These commissions were generated by GTPS Insurance
Agency, the division of PASC formed in September, 1997. Brokerage commissions
also increased in 1998 by a total of $71,000, from $15,000 for the quarter
ended June 30, 1997 to $86,000 for the quarter ended June 30, 1998.
Noninterest expense was $2,554,000 for the six months ended June 30, 1998,
compared to $2,335,000 recorded for the six months ended June 30, 1997, an
increase of $219,000, or 9.4%. The majority of this increase was in salaries
and employee benefits, which increased by $165,000, or 13.3%. Salaries and
employee benefits expense was higher in 1998 due partly to additional salaries
and related benefits paid to employees hired for GTPS Insurance Agency. Also,
expenses related to stock based benefit plans were higher in 1998 due to the
growth in the price of the Company's stock during 1997 and in 1998. Net
occupancy expenses, equipment expenses and other expenses were all higher in
1998 due to the expansion of staff for the GTPS Insurance Agency.
Total income taxes increased by $132,000, or 47.5% from $278,000 for the six
months ended June 30, 1997 to $410,000 for the same period in 1998 due to the
increase in pretax net income. The effective tax rates for the six months
ended June 30, 1998 and 1997, were 44.1% and 42.0%, respectively. The
effective tax rate was lower in 1997 due to a higher level of state tax-exempt
interest income from U.S. Treasury and qualified Federal agency securities.
Results of Operations
Comparison of Three Month Periods Ended June 30, 1998 and 1997.
Net income for the three months ended June 30, 1998 was $275,000, an increase
of $82,000, or 42.5%, over the $193,000 recorded for the three months ended
June 30, 1997. Basic earnings per share increased from $0.12 for the three
months ended June 30, 1997 to $0.19 for the same period in 1998, and diluted
earnings per share were $0.18 and $0.12 for the three months ended June 30
1998 and 1997, respectively.
Net income for the second quarter of 1998 was higher due to increases in net
interest income and noninterest income offset by an increase in noninterest
expense.
Net interest income was $1,505,000 for the quarter ended June 30, 1998 and
$1,360,000 for the quarter ended June 30, 1997, an increase of $145,000 or
10.7%. Interest income rose 11.0%, or $274,000, from $2,490,000 for the
quarter ended June 30, 1997 to $2,764,000 for the second quarter of 1998.
The increase in interest income was derived from interest on loans offset by
declines in interest on investments and deposits with financial institutions
and other. Interest income on loans increased $453,000, or 21.6%, from
$2,093,000 for the quarter ended June 30, 1997 to $2,546,000 for the same
quarter in 1998. The majority of the increase was in interest income from
mortgage loans due to growth in these loans. Total average mortgage loans for
the second quarter increased by $16.15 million, or 20.5%, from $78.61 million
in 1997 to $94.76 million in 1998. This growth occurred in both one-to-four
family and multifamily residential loans and in commercial mortgage loans.
Average total commercial loans for the three months ended June 30, 1998 and
June 30, 1997 were $12.90 million and $9.47 million, respectively. This
represents an increase of $3.43 million, or 36.2%. Average total consumer
loans were slightly higher in 1998. The average yield on loans increased from
8.50% for the three months ended June 30, 1997 to 8.59% for the same period in
1998.
Interest income on investment securities declined from $119,000 for the three
months ended June 30, 1997 to $58,000 for the same period in 1998, due to a
decrease in average total investments. Average total investments for the
second quarter of 1998 were $3.87 million, down $3.82 million, or 49.7%, from
$7.69 million for the second quarter of 1997. Interest income on deposits
with financial institutions and other decreased $118,000, or 42.4%, from
$278,000 for the three months ended June 30, 1997 to $160,000 for the three
months ended June 30, 1998. The average balance for the quarter ending June
30, 1998 for deposits with financial institutions and other was $12.36 million
compared to $21.43 million for the same time period in 1997, down $9.07
million, or 42.3%. The average yield on investment securities for the three
months ending June 30 1998 was 6.01%, while the average yield was 6.21% for
the same time period in 1997. The average yield on deposits with financial
institutions and other was 5.19% for the three months ending June 30, 1998 and
5.20% for the three months ending June 30, 1997.
Interest expense increased $129,000, or 11.4%, from $1,130,000 for the three
months ended June 30, 1997 to $1,259,000 for the same period in 1998. The
increase was mainly due to higher average total deposits in 1998. Average
total deposits increased from $102.79 million for the quarter ended June 30,
1997 to $111.36 million for the quarter ended June 30, 1998, with the biggest
increases in certificates maturing in two years or greater. Average total
certificates of deposit grew $7.29 million, or 11.1%, from $65.93 million for
the three months ended June 30, 1997 to $73.22 million for the same time
period in 1998. The average yield on total deposits for the three months
ended June 30, 1998 was 4.47% and 4.38% for the three months ended June 30,
1997. Interest expense on other borrowings increased by $10,000 or 125% due
to repurchase agreements entered into by the Company during the second quarter
of 1998.
Net interest income as a percent of interest earning assets was 4.47% for the
three months ended June 30, 1998 versus 4.26% for the same period in 1997.
The spread between the yield on interest earning assets and the rate on
interest bearing liabilities was 3.72% and 3.42% for the three months ended
June 30, 1998 and 1997, respectively.
The provision for loan losses was $39,000 for the three months ended June 30,
1998 and the three months ended June 30, 1997. There was $3,000 in consumer
loans charged-off in the three months ended June 30, 1998 and recoveries
totaled $4,000. Total charge-offs in the three months ended June 30, 1997
were $1,000, with $1,000 in recoveries.
Noninterest income was up $155,000, or 85.2%, from $182,000 for the quarter
ended June 30, 1997 to $337,000 for the three months ended June 30, 1998. The
increase was due to the higher commission income from brokerage and insurance
activities. Insurance sales commissions were $122,000 for the quarter ended
June 30, 1998 with no amount being recorded for the same period in 1997.
Brokerage commissions were $49,000 for the three months ended June 30, 1998
and $7,000 for the three months ended June 30, 1997, resulting in an increase
of $42,000.
Noninterest expense was $1,311,000 for the three months ending June 30, 1998,
compared to $1,170,000 for the same period in 1997, an increase of $141,000,
or 12.1%. The increase was mostly attributable to increases in salaries and
employee benefits expense, net occupancy expenses, and equipment expenses and
occurred primarily as a result of the increase in staffing levels due to the
creation of the GTPS Insurance Agency.
Total income taxes for the three months ended June 30, 1998 were $217,000,
compared to $140,000 recorded for the same period in 1997, an increase of
$77,000, or 55.0%. The effective tax rates for the three months ended June
30, 1998 and 1997, were 44.11% and 42.04%, respectively.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits and principal and interest
payments on loans. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions, and
competition. The Office of Thrift Supervision ("OTS"), the Company's and the
Bank's primary regulator, requires the Bank to maintain minimum levels of
liquid assets. Currently, the required ratio is 4%. The Bank's liquidity
ratios were 12.28% and 15.38% at June 30, 1998 and December 31, 1997,
respectively, well above the required minimum.
A review of the Consolidated Statements of Cash Flows included in the
accompanying financial statements shows that the Company's cash and cash
equivalents ("cash") decreased $5,787,000 for the six months ended June 30,
1998, compared to a decrease of $9,256,000 for the six months ended June 30,
1997. During the six months ended June 30, 1998, cash was primarily provided
from earnings, maturities of securities, increases in noninterest-bearing,
interest-bearing demand and savings deposits and certificates of deposit, and
an increase in short-term borrowings. During 1998, cash was primarily used to
fund security purchases and loan growth, purchase treasury stock, and to pay
dividends.
During the six months ended June 30, 1997, cash was primarily provided from
earnings, and increases in certificates of deposit. During this period, cash
was primarily used to fund loan originations, purchase securities held to
maturity and available for sale, purchase treasury stock and to pay dividends.
The Company's primary investment activities during the six months ended June
30, 1998 was the origination of loans and the purchase of securities held to
maturity and available for sale. During the six months ended June 30, 1998
and June 30, 1997, the Company originated mortgage loans in the amounts of
$18.6 million and $20.9 million, respectively, commercial loans in the amounts
of $9.4 million and $9.6 million, respectively, and consumer loans in the
amounts of $5.1 million and $6.2 million, respectively. Approximately $8.8
million of the total mortgage loans originated in 1997 was participated to
other financial institutions at the time of origination.
As of June 30, 1998, the Company had outstanding commitments (including
undisbursed loan proceeds) of $5.5 million. The Company anticipates it will
have sufficient funds available to meet its current loan origination
commitments. Certificates of deposit which are scheduled to mature in
one year or less from June 30, 1998 totaled $49.6 million. Management
believes a significant portion of such deposits will remain with the
Company.
The OTS capital regulations require savings institutions to meet three capital
standards: a 1.5% tangible capital standard; a 3% leverage (core capital)
ratio and an 8% risk-based capital standard. The core capital requirement is
effectively 4%, since the OTS prompt corrective action regulations stipulate
that, effective December 19, 1992, an institution with less than 4% core
capital will be deemed to be "undercapitalized." As of June 30, 1998, the
Bank's capital percentages for tangible capital of 7.85%, core capital of
7.85%, and risk-based capital of 13.32% significantly exceeded the regulatory
requirement for each category.
Current Accounting Issues
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income is defined as
"the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners." The comprehensive income
and related cumulative equity impact of comprehensive income items are
required to be disclosed prominently as part of the notes to the financial
statements. Only the impact of unrealized gains or losses on securities
available for sale would be disclosed as an additional component of the
Company's income under the requirements of SFAS No.130. The statement is
effective for fiscal years beginning after December 31, 1997. The Company
adopted SFAS No. 130 in 1998. At June 30, 1998 and June 30, 1997, the amounts
to be disclosed by the Company under SFAS No. 130 are considered immaterial
and are therefor not shown in the accompanying financial statements.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This
statement is effective for all periods beginning after June 15, 1999. The
Company will adopt SFAS No. 133 during fiscal year 2000 and does not
anticipate any impact to its financial statements.
YEAR 2000 Compliance
The Company has contracted with a software company to provide the Company with
software to process the majority of the Company's financial transactions in-
house and is scheduled to convert to this software in October, 1998. The new
software provider has pledged in its contract with the Company that its
software is already year 2000 compliant, meaning that the date fields in its
software are already capable of handling the change to the year 2000. The
Company will perform year 2000 testing on the new software once installation
is complete. The Company has also completed identification of other computer
applications that may be affected by the year 2000 date change. All vendors
and service providers have been contacted, and the majority of these vendors
have assured the Company that their software is or will be year 2000 compliant
by the end of 1998. The Company is also in the process of developing a
contingency plan in the event computer applications fail to handle the year
2000 date change properly. The Company does not expect that the cost of its
year 2000 compliance program will be material to its financial condition or
results of operations and believes that it will be able to satisfy such
compliance program by the end of the first quarter of 1999 without any
material disruption to its operations. There can be no assurances, however,
that such contingency plan or the performance by the Company's vendors will be
effective to remedy all potential problems. To the extent the Company's
systems are not fully Year 2000 compliant, there can be no assurance that
potential systems interruptions or the cost necessary to update software would
not have a materially adverse effect on the Company's business, financial
condition, results of operations and business prospects. Further, any Year
2000 failure on the part of the Company's customers could result in additional
expense or loss to the Company.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal actions incident to
its business, none of which is believed by management to be
material to the financial condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security
Holders
At the annual meeting of stockholders held on April 28, 1998,
the Company's stockholders approved the following items:
1. elected Morgan C. Powell to a three-year term as director:
Broker
For Withheld Non-Votes
----- ---------- ---------
Number 1,361,676 24,876 0
Percent 86% 2% 0%
2. elected George R. Rouse to a three-year term as director:
Broker
For Withheld Non-Votes
----- ---------- ---------
Number 1,370,676 17,576 0
Percent 86% 1% 0%
3. approved the appointment of OLIVE, LLP, formerly known as
Geo. S. Olive & Co., LLC, as independent auditors of
Great American Bancorp, Inc. for the fiscal year ending
December 31, 1998:
Broker
For Against Abstain Non-Votes
----- --------- --------- ---------
Number 1,370,382 14,605 3,265 0
Percent 86.2% .9% .2% 0%
The following directors held terms of office which continued
after the meeting:
Mr. James Acheson
Mr. Clinton C. Atkins
Mr. Ronald Kiddoo
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Certificate of Incorporation of Great American
Bancorp, Inc.*
3.2 By-laws of Great American Bancorp, Inc.*
11.0 Computation of earnings per share (filed herewith)
27.0 Financial Data Schedule
b. Report on Form 8-K
Not Applicable
_______________
* Incorporated herein by reference into this document from Form
S-1 Registration Statement, as amended, filed on March 24, 1995,
Registration No. 33-90614.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Great American Bancorp, Inc.
Dated: August 13, 1998 /s/ George R. Rouse
----------------------- ----------------------------
George R. Rouse
President and
Chief Executive Officer
Dated: August 13, 1998 /s/ Jane F. Adams
-------------------------- ----------------------------
Jane F. Adams
Chief Financial Officer,
Secretary and Treasurer
Exhibit 11.0
Earnings per share (unaudited)
Earnings per share (EPS) were computed as follows
(dollar amounts in thousands except share data):
Six months ended
June 30, 1998
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 519 1,476,129 $ 0.35
Effect of Dilutive Securities
Stock options 62,062
Unearned incentive plan shares 42,415
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 519 1,580,606 $ 0.33
===============================
Six months ended
June 30, 1997
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 384 1,606,697 $ 0.24
Effect of Dilutive Securities
Stock options 19,346
Unearned incentive plan shares 61,809
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 384 1,687,852 $ 0.23
===============================
Three months ended
June 30, 1998
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 275 1,461,946 $ 0.19
Effect of Dilutive Securities
Stock options 66,259
Unearned incentive plan shares 40,897
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 275 1,569,102 $ 0.18
===============================
Three months ended
June 30, 1997
-------------------------------
Weighted
Average Per-Share
Income Shares Amount
-------------------------------
Basic Earnings Per Share
Income available to common stockholders $ 193 1,591,573 $ 0.12
Effect of Dilutive Securities
Stock options 21,601
Unearned incentive plan shares 60,014
-------------------------------
Diluted Earnings Per Share
Income available to common stockholders
and assumed conversion $ 193 1,673,188 $ 0.22
===============================
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,382
<INT-BEARING-DEPOSITS> 5,307
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,000
<INVESTMENTS-CARRYING> 1,200
<INVESTMENTS-MARKET> 1,200
<LOANS> 123,530
<ALLOWANCE> 577
<TOTAL-ASSETS> 148,342
<DEPOSITS> 117,307
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 1,924
<LONG-TERM> 0
0
0
<COMMON> 21
<OTHER-SE> 27,090
<TOTAL-LIABILITIES-AND-EQUITY> 148,342
<INTEREST-LOAN> 4,927
<INTEREST-INVEST> 117
<INTEREST-OTHER> 371
<INTEREST-TOTAL> 5,415
<INTEREST-DEPOSIT> 2,447
<INTEREST-EXPENSE> 2,473
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<LOAN-LOSSES> 78
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<EXPENSE-OTHER> 2,554
<INCOME-PRETAX> 929
<INCOME-PRE-EXTRAORDINARY> 929
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 519
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 4.47
<LOANS-NON> 20
<LOANS-PAST> 99
<LOANS-TROUBLED> 147
<LOANS-PROBLEM> 504
<ALLOWANCE-OPEN> 497
<CHARGE-OFFS> 3
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 577
<ALLOWANCE-DOMESTIC> 577
<ALLOWANCE-FOREIGN> 0
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