UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from to .
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Commission file number 0-29687
Eagle Bancorp
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(Exact name of small business issuer as specified in its charter)
United States 81-0531318
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1400 Prospect Avenue, Helena, MT 59601
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(Address of principal executive offices)
(406) 442-3080
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(Issuer's telephone number)
Website address: www.americanfederalsavingsbank.com
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [] No[]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common stock, par value $0.01 per share 1,209,772 shares outstanding
--------------------------------------------------------------------------------
As of February 10, 2003
Transitional Small Business Disclosure Format (Check one): Yes [] No [X]
EAGLE BANCORP AND SUBSIDIARY
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
December 31, 2002 (unaudited) and June 30, 2002..................1 and 2
Consolidated Statements of Income for the three and
six months ended December 31, 2002 and 2001 (unaudited)..........3 and 4
Consolidated Statements of Stockholders' Equity for the
six months ended December 31, 2002 (unaudited).........................5
Consolidated Statements of Cash Flows for the six
months ended December 31, 2002 and 2001 (unaudited)..............6 and 7
Notes to Consolidated Financial Statements ......................8 to 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................13 to 20
Item 3. Controls and Procedures................................................21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................22
Item 2. Changes in Securities..................................................22
Item 3. Defaults Upon Senior Securities........................................22
Item 4. Submission of Matters to a Vote of Security-Holders....................22
Item 5. Other Information......................................................22
Item 6. Exhibits and Reports on Form 8-K.......................................22
Signatures.......................................................................23
Certifications Pursuant to Section 302(a)
of the Sarbanes-Oxley Act of 2002.........................................24 - 27
Exhibit 99-1.....................................................................28
EAGLE BANCORP AND SUBSIDIARY
Consolidated Statements of Financial Condition
December 31, 2002 June 30, 2002
----------------- -------------
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 4,124,137 $ 2,836,853
Interest-bearing deposits with banks 8,955,945 7,786,136
------------- -------------
Total cash and cash equivalents 13,080,082 10,622,989
Investment securities available-for-sale,
at fair value 63,867,569 50,153,872
Investment securities held-to-maturity,
at amortized cost 3,214,320 3,875,124
Federal Home Loan Bank stock, at cost 1,637,400 1,586,200
Mortgage loans held-for-sale 4,508,579 1,352,121
Loans receivable, net of deferred loan fees
and allowance for loan losses 97,087,896 105,623,213
Accrued interest and dividends receivable 956,001 998,378
Mortgage servicing rights, net 1,819,634 1,588,318
Property and equipment, net 6,364,711 6,291,382
Cash surrender value of life insurance 2,296,624 2,244,453
Real estate acquired in settlement of loans,
net of allowance for losses - -
Other assets 538,128 245,417
------------- -------------
Total assets $ 195,370,944 $ 184,581,467
============= =============
See accompanying notes to consolidated financial statements.
-1-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Continued)
December 31, 2002 June 30, 2002
----------------- -------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts:
Noninterest bearing $ 8,404,470 $ 6,835,235
Interest bearing 152,866,259 144,769,504
Advances from Federal Home Loan Bank 9,293,889 9,343,889
Accrued expenses and other liabilities 1,938,559 1,929,962
-------------- -------------
Total liabilities 172,503,177 162,878,590
-------------- -------------
Stockholders' Equity:
Preferred stock (no par value, 1,000,000 shares
authorized, none issued or outstanding) - -
Common stock (par value $0.01 per share;
10,000,000 shares authorized; 1,223,572 shares
issued; 1,205,172 and 1,208,172 outstanding at
December 31, 2002 and June 30, 2002, respectively) 12,236 12,236
Additional paid-in capital 3,916,828 3,885,903
Unallocated common stock held by employee
stock ownership plan ("ESOP") (257,648) (276,048)
Treasury stock, at cost (18,400 and 15,400 shares
at December 31, 2002 and June 30, 2002,
respectively) (242,765) (180,950)
Retained earnings 18,972,230 17,957,601
Accumulated other comprehensive income 466,886 304,135
-------------- -------------
Total stockholders' equity 22,867,767 21,702,877
-------------- -------------
Total liabilities and stockholders' equity $ 195,370,944 $ 184,581,467
============== =============
See accompanying notes to consolidated financial statements.
-2-
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------- ---------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Interest and Dividend Income:
Interest and fees on loans $ 1,926,959 $ 2,364,788 $ 3,997,538 $ 4,740,808
Interest on deposits with banks 40,418 43,974 73,064 110,822
FHLB Stock dividends 27,394 24,799 51,382 52,946
Securities available-for-sale 589,594 346,750 1,198,112 649,886
Securities held-to-maturity 44,016 79,430 93,335 170,261
------------ ------------ ------------ ------------
Total interest and dividend income 2,628,381 2,859,741 5,413,431 5,724,723
------------ ------------ ------------ ------------
Interest Expense:
Deposits 946,296 1,150,361 1,924,323 2,375,050
FHLB Advances 146,661 175,281 293,742 354,090
------------ ------------ ------------ ------------
Total interest expense 1,092,957 1,325,642 2,218,065 2,729,140
------------ ------------ ------------ ------------
Net Interest Income 1,535,424 1,534,099 3,195,366 2,995,583
Loan loss provision - - - -
------------ ------------ ------------ ------------
Net interest income after loan loss provision 1,535,424 1,534,099 3,195,366 2,995,583
------------ ------------ ------------ ------------
Noninterest income:
Net gain on sale of loans 497,060 401,039 806,223 572,157
Demand deposit service charges 125,299 128,240 254,158 253,803
Mortgage loan servicing fees 104,851 78,831 200,923 94,163
Net gain on sale of available-for-sale securities - 1,976 - 1,976
Other 92,235 94,269 193,156 186,478
------------ ------------ ------------ ------------
Total noninterest income 819,445 704,355 1,454,460 1,108,577
------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements.
-3-
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENT OF INCOME
(CONTINUED)
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------- ---------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Noninterest expense:
Salaries and employee benefits 721,976 698,787 1,445,200 1,432,254
Occupancy expenses 117,688 121,788 247,630 235,537
Furniture and equipment depreciation 53,074 71,226 106,371 139,370
In-house computer expense 65,131 48,879 119,968 98,378
Advertising expense 49,482 26,389 82,777 57,915
Amortization of mtg servicing fees 216,702 105,083 314,529 173,792
Federal insurance premiums 6,359 6,088 12,635 12,214
Postage 28,732 22,019 56,894 51,772
Legal, accounting, and examination fees 40,076 49,177 66,792 72,169
Consulting fees 15,190 5,880 21,070 13,236
ATM processing 11,314 12,736 22,903 23,297
Other 215,041 202,846 397,752 384,766
------------ ------------ ------------ ------------
Total noninterest expense 1,540,765 1,370,898 2,894,521 2,694,700
------------ ------------ ------------ ------------
Income before provision for income taxes 814,104 867,556 1,755,305 1,409,460
------------ ------------ ------------ ------------
Provision for income taxes 271,730 305,865 595,550 501,107
------------ ------------ ------------ ------------
Net income $ 542,374 $ 561,691 $ 1,159,755 $ 908,353
============ ============ ============ ============
Basic earnings per share $ 0.46 $ 0.48 $ 0.99 $ 0.78
============ ============ ============ ============
Diluted earnings per share $ 0.46 $ 0.47 $ 0.97 $ 0.77
============ ============ ============ ============
Weighted average shares outstanding (basic eps) 1,172,551 1,166,010 1,172,796 1,165,434
========= ========= ========= =========
Weighted average shares outstanding (diluted eps) 1,190,612 1,186,010 1,190,035 1,185,434
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
-4-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended December 31, 2002
ADDITIONAL UNALLOCATED
PREFERRED COMMON PAID-IN ESOP
STOCK STOCK CAPITAL SHARES
----- ----- ------- ------
Balance, June 30, 2002 $ - $ 12,236 $ 3,885,903 $ (276,048
Net income (unaudited) - - - -
Other comprehensive income (unaudited) - - - -
Total comprehensive income (unaudited) - - - -
Dividends paid ($.26 per share) (unaudited) - - - -
Treasury stock purchased (1,700 shares
@ $19.50/sh; 1,300 shares @ $22.05/sh)
(unaudited) - - - -
ESOP shares allocated or committed to be
released for allocation (2,300 shares)
(unaudited) - - 30,925 18,400
------- -------- ----------- ----------
Balance, December 31, 2002 (unaudited) $ - $ 12,236 $ 3,916,828 $ (257,648
======= ======== =========== ==========
ACCUMULATED
OTHER
TREASURY RETAINED COMPREHENSIVE
STOCK EARNINGS INCOME TOTAL
----- -------- ------ -----
Balance, June 30, 2002 $ (180,950) $17,957,601 $ 304,135 $21,702,877
Net income (unaudited) - 1,159,755 - 1,159,755
Other comprehensive income (unaudited) - - 162,751 162,751
Total comprehensive income (unaudited) - - - 1,322,506
Dividends paid ($.26 per share) (unaudited) - (145,126) - (145,126)
Treasury stock purchased (1,700 shares
@ $19.50/sh; 1,300 shares @ $22.05/sh)
(unaudited) (61,815) - - (61,815)
ESOP shares allocated or committed to be
released for allocation (2,300 shares)
(unaudited) - - - 49,325
---------- ----------- --------- -----------
Balance, December 31, 2002 (unaudited) $ (242,765) $18,972,230 $ 466,886 $22,867,767
========== =========== ========= ===========
See accompanying notes to consolidated financial statements.
-5-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 31,
2002 2001
---------------------------
(Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,159,756 $ 908,353
Adjustments to reconcile net income to net cash
from operating activities:
Provision for mortgage servicing rights valuation losses - 58,433
Depreciation 202,563 236,267
Net amortization of marketable securities premium
and discounts 339,482 45,916
Amortization of capitalized mortgage servicing rights 314,529 171,126
Gain on sale of loans (806,223) (572,157)
Net realized (gain) loss on sale of available-for-sale securities - (1,976)
FHLB & other dividends reinvested (119,441) (72,290)
Increase in cash surrender value of life insurance (52,171) (51,806)
Gain on sale of property & equipment - (950)
Change in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends receivable 42,377 42,746
Loans held-for-sale (2,303,707) (1,269,859)
Other assets (292,711) 15,238
Increase (decrease) in liabilities:
Accrued expenses and other liabilities (392,499) 133,707
Deferred compensation payable 24,912 12,044
Deferred income taxes payable 323,819 (78,339)
------------ -----------
Net cash provided by (used in) operating activities (1,559,314) (423,547)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Investment securities held-to-maturity - (278,708)
Investment securities available-for-sale (21,282,633) (12,972,116)
Proceeds from maturities, calls and principal payments:
Investment securities held-to-maturity 655,163 1,827,982
Investment securities available-for-sale 7,521,248 3,382,835
Proceeds from sales of investment securities available-for-sale - 502,750
See accompanying notes to consolidated financial statements.
-6-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Six Months Ended
December 31,
2002 2001
---------------------------
(Unaudited
CASH FLOWS FROM INVESTING ACTIVITIES (CONTINUED):
Net (increase) decrease in loan receivable, excludes transfers
to real estate acquired in settlement of loans 7,989,472 1,573,005
Purchase of property and equipment (275,892) (81,669)
Proceeds from sale of equipment - 950
------------ -----------
Net cash used in investing activities (5,392,642) (6,044,971)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking and savings accounts $ 9,665,989 $10,720,832
Payments on FHLB advances (50,000) (2,050,000)
Sale (Purchase) of Treasury Stock (61,815) -
Dividends paid (145,126) (111,015)
------------ -----------
Net cash provided by financing activities 9,409,048 8,559,817
------------ -----------
Net increase (decrease) in cash 2,457,092 2,091,299
CASH AND CASH EQUIVALENTS, beginning of period 10,622,990 8,352,038
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 13,080,082 $10,443,337
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,278,331 $ 2,443,441
============ ===========
Cash paid during the period for income taxes $ 682,988 $ 380,152
============ ===========
NON-CASH INVESTING ACTIVITIES:
(Increase) decrease in market value of securities available-for-sale $ (217,911) $ (29,985)
============ ===========
Mortgage servicing rights capitalized $ 544,845 $ 296,430
============ ===========
See accompanying notes to consolidated financial statements.
-7-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
-------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with instructions for Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. However, such information reflects all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of results for the unaudited interim periods.
The results of operations for the three and six month periods ended December 31,
2002 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2003 or any other period. The unaudited consolidated
financial statements and notes presented herein should be read in conjunction
with the audited consolidated financial statements and related notes thereto
included in Eagle's Form 10-KSB dated June 30, 2002.
-8-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES
-------------------------------
Investment securities are summarized as follows:
December 31, 2002 (Unaudited) June 30, 2002 (Audited)
------------------------------------------ -------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED FAIR AMORTIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE COST GAINS (LOSSES) VALUE
------------ ---------------- ------------ ------------ ----------------- ------------
Available-for-sale:
U.S. government and
agency obligations $ 6,603,322 $ 168,736 $ 6,772,058 $ 6,963,730 $ 70,249 $ 7,033,979
Municipal obligations 4,300,383 89,039 4,389,422 4,301,732 (10,233) 4,291,499
Corporate obligations 7,010,939 259,012 7,269,951 8,548,317 177,158 8,725,475
Mortgage-backed
securities 19,801,712 83,295 19,885,007 6,505,009 64,995 6,570,004
Mutual Funds 4,643,620 4,639 4,648,259 4,575,378 10 4,575,388
Collateralized
mortgage obligations 18,863,245 158,302 19,021,547 16,829,068 183,960 17,013,028
Corporate preferred
stock 1,951,011 (69,686) 1,881,325 1,955,215 (10,716) 1,944,499
------------ ----------- ------------ ------------ ---------- ------------
Total $ 63,174,232 $ 693,337 $ 63,867,569 $ 49,678,449 $ 475,423 $ 50,153,872
============ =========== ============ ============ ========== ============
Held-to-maturity:
Municipal obligation $ 1,353,096 $ 57,819 $ 1,410,915 $ 1,354,531 $ 37,458 $ 1,391,989
Mortgage-backed
securities 1,861,224 74,077 1,935,301 2,520,593 90,112 2,610,705
------------ ----------- ------------ ------------ ---------- ------------
Total $ 3,214,320 $ 131,896 $ 3,346,216 $ 3,875,124 $ 127,570 $ 4,002,694
============ =========== ============ ============ ========== ============
-9-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. LOANS RECEIVABLE
---------------------------
Loans receivable consist of the following:
December 31, June 30,
2002 2002
(Unaudited) (Audited)
------------- -------------
First mortgage loans:
Residential mortgage (1-4 family) $ 57,860,887 $ 66,958,637
Commercial real estate 9,487,251 9,454,674
Real estate construction 2,973,546 2,931,032
Other loans:
Home equity 14,936,302 14,235,907
Consumer 9,340,007 10,023,869
Commercial 3,233,046 2,842,782
------------- -------------
Total 97,831,039 106,446,901
Less: Allowance for loan losses (696,201) (702,705)
Deferred loan fees (46,942) (120,983)
------------- -------------
Total $ 97,087,896 $ 105,623,213
============= =============
Loans net of related allowance for loan losses on which the accrual of interest
has been discontinued were $560,000 and $528,000 at December 31, 2002 and June
30, 2002, respectively. Classified assets, including real estate owned, totaled
$1.82 million and $1.66 million at December 31, 2002 and June 30, 2002,
respectively.
The following is a summary of changes in the allowance for loan losses:
Six Months Ended Year ended
December 31, June 30,
2002 2002
(Unaudited) (Audited)
------------- -------------
Balance, beginning of period $ 702,705 $ 688,282
Transfer from interest reserve - 6,510
Provision charged to operations - -
Charge-offs (13,023) (27,390)
Recoveries 6,519 35,303
------------- -------------
Balance, end of period $ 696,201 $ 702,705
============= =============
-10-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. DEPOSITS
-------------------
Deposits are summarized as follows:
December 31, June 30,
2002 2002
(Unaudited) (Audited)
------------- -------------
Noninterest checking $ 8,404,470 $ 6,835,235
Interest-bearing checking 27,211,494 24,908,989
Passbook 23,622,267 22,464,984
Money market 27,534,548 27,568,930
Time certificates of deposit 74,497,950 69,826,601
------------- -------------
Total $ 161,270,729 $ 151,604,739
============= =============
NOTE 5. EARNINGS PER SHARE
-----------------------------
Earnings per share for the three months ended December 31, 2002 is computed
using 1,172,551 weighted average shares outstanding. Earnings per share for the
six months ended December 31, 2002 is computed using 1,172,796 weighted average
shares outstanding. Diluted earnings per share is computed by adjusting the
number of shares outstanding by the shares purchased to fund the Company's
restricted stock plan, for which stock was awarded in January 2001, as
determined by the treasury stock method. The weighted average shares outstanding
for the diluted earnings per share calculations are 1,190,612 for the three
months ended December 31, 2002 and 1,190,035 for the six months ended December
31, 2002. Earnings per share for the three months ended December 30, 2001 is
computed using 1,166,010 weighted average shares outstanding. Earnings per share
for the six months ended December 31, 2001 is computed using 1,165,434 weighted
average shares outstanding. The weighted average shares outstanding for the
diluted earnings per share calculations are 1,186,010 for the three months ended
December 31, 2001 and 1,185,434 for the six months ended December 31, 2001.
NOTE 6. DIVIDENDS AND STOCK REPURCHASE PROGRAM
-------------------------------------------------
This fiscal year Eagle has paid two dividends of $0.13 per share, on August 23,
2002 and November 15, 2002. Another dividend of $0.13 per share was declared on
January 16, 2003, payable February 14, 2003 to stockholders of record on January
31, 2003. Eagle Financial MHC, Eagle's mutual holding company, has waived the
receipt of dividends on its 648,493 shares.
-11-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6. DIVIDENDS AND STOCK REPURCHASE PROGRAM (CONTINUED)
-------------------------------------------------------------
At the annual meeting held October 19, 2000, shareholders approved stock option
and restricted stock plans for the Company covering aggregate grants of up to
80,511 and 23,003, respectively. A stock repurchase program was announced on
December 21, 2000, covering 4% of the Company's outstanding common stock, with
the intent of meeting the needs of the restricted stock plan. By October 24,
2002, 23,000 shares had been repurchased, completing the repurchase program. On
January 18, 2002 and January 21, 2003, 4,600 shares of the restricted stock plan
vested and were distributed to the participants.
NOTE 7. MORTGAGE SERVICING RIGHTS
------------------------------------
The Bank allocates its total cost in mortgage loans between mortgage servicing
rights and loans, based upon their relative fair values, when loans are
subsequently sold or securitized, with the servicing rights retained. Fair
values are generally obtained from an independent third party. Impairment of
mortgage servicing rights is measured based upon the characteristics of the
individual loans, including note rate, term, underlying collateral, current
market conditions, and estimates of net servicing income. If the carrying value
of the mortgage servicing rights exceeds the estimated fair market value, a
valuation allowance is established for any decline, which is viewed to be
temporary. Charges to the valuation allowance are charged against or credited to
mortgage servicing income. Periodic independent valuations of the mortgage
servicing rights are performed. As a result of valuations performed on September
30, 2001 and May 31, 2002, a temporary decline in the fair value was determined
to have occurred, and a valuation allowance of $21,515 has been established. The
following schedules show the activity in the mortgage servicing rights and the
valuation allowance.
Six months Twelve months
ended ended
December 31, June 30,
2002 2002
(Unaudited) (Audited)
Mortgage Servicing Rights
Beginning balance $ 1,609,833 $ 1,315,819
Servicing rights capitalized 545,845 618,085
Servicing rights amortized (314,529) (324,071)
------------ ------------
Ending balance 1,841,149 1,609,833
------------ ------------
Valuation Allowance
Beginning balance 21,515 -
Provision - 21,515
Adjustments - -
------------ ------------
Ending balance 21,515 21,515
------------ ------------
Net Mortgage Servicing Rights $ 1,819,634 $ 1,588,318
============ ============
-12-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain "forward-looking statements." Eagle Bancorp
("Eagle" or the "Company") desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this statement for the express purpose of availing itself of the
protections of the safe harbor with respect to all such forward-looking
statements. These forward-looking statements, which are included in Management's
Discussion and Analysis, describe future plans or strategies and include Eagle's
expectations of future financial results. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify
forward-looking statements. Eagle's ability to predict results or the effect of
future plans or strategies or qualitative or quantitative changes based on
market risk is inherently uncertain. Factors which could affect actual results
but are not limited to include (i) change in general market interest rates, (ii)
general economic conditions, (iii) local economic conditions, (iv)
legislative/regulatory changes, (v) monetary and fiscal policies of the U.S.
Treasury and Federal Reserve, (vi) changes in the quality or composition of
Eagle's loan and investment portfolios, (vii) demand for loan products, (viii)
deposit flows, (ix) competition, and (x) demand for financial services in
Eagle's markets. These factors should be considered in evaluating the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements which speak only as of their dates.
FINANCIAL CONDITION
Comparisons of quarterly results in this section are between the six months
ended December 31, 2002 and June 30, 2002.
Total assets increased by $10.79 million, or 5.85%, to $195.37 million at
December 31, 2002, from $184.58 million at June 30, 2002. Total liabilities
increased by $9.62 million to $172.50 million at December 31, 2002, from $162.88
million at June 30, 2002. Total equity increased $1.17 million to $22.87 million
at December 31, 2002 from $21.70 million at June 30, 2002.
The growth in assets was primarily in the available-for-sale (AFS) investment
portfolio, which increased $13.72 million, or 27.36%, to $63.87 million at
December 31, 2002 from $50.15 million at June 30, 2002. The investment category
with the largest increase was mortgage-backed securities, which increased $13.32
million. The loan portfolio decreased $8.53 million, or 8.08%, to $97.09 million
at December 31, 2002 from $105.62 million at June 30, 2002. Continued
refinancing activity and the sale of predominantly all new originations
contributed to the decline in single-family mortgage loans to $57.86 million at
December 31, 2002 from $66.96 million at June 30, 2002. Consumer loans declined
slightly, while all other loan categories showed moderate increases. Total loan
originations were $75.60 million for the six months ended December 31, 2002,
with single family mortgages (including $2.85 million of construction loans)
accounting for $64.57 million of the total. Home equity loan and consumer loan
originations totaled $5.00 million and $4.28 million, respectively, for the same
period. Loans held for sale increased to $4.51 million at December 31, 2002 from
$1.35 million at June 30, 2002.
-13-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION (CONTINUED)
Growth in deposits funded asset growth. Deposits grew $9.66 million, or 6.37%,
to $161.27 million at December 31, 2002 from $151.61 million at June 30, 2002.
Growth in certificates of deposit and checking accounts contributed to the
increase in deposits. Other deposit types showed modest increases.
The growth in total equity was the result of earnings for the six months of
$1.16 million and an increase in the unrealized gain on securities available for
sale of $163,000. This was partially offset by the payment of two quarterly
$0.13 per share regular cash dividends.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
NET INCOME
Eagle's net income was $542,000 and $562,000 for the three months ended December
31, 2002, and 2001, respectively. The decrease of $20,000, or 3.56%, was
primarily due to an increase in noninterest expense of $170,000, partially
offset by increases in noninterest income of $115,000 and net interest income of
$1,000. Eagle's tax provision was $34,000 lower in the current quarter. Basic
earnings per share were $0.46 for the current period, compared to $0.48 for the
previous year's period.
NET INTEREST INCOME
Net interest income was virtually unchanged at $1.53 million for the quarter
ended December 31, 2002, with an increase of $1,000 over the previous year's
quarter. Total interest and dividend income decreased $231,000, which was offset
by the decrease in interest expense of $232,000.
INTEREST AND DIVIDEND INCOME
Total interest and dividend income was $2.63 million for the quarter ended
December 31, 2002, compared to $2.86 million for the quarter ended December 31,
2001, representing a decrease of $231,000, or 8.08%. Interest and fees on loans
decreased to $1.93 million for the three months ended December 31, 2002 from
$2.36 million for the same period ended December 31, 2001. This decrease of
$430,000, or 18.22%, was due primarily to the decrease in the average balances
of loans receivable for the quarter ended December 31, 2002 and the decline in
the average interest rate earned on loans. Average balances for loans
receivable, net, for the quarter ended December 31, 2002 were $103.05 million,
compared to $118.59 million for the previous year. This represents a decrease of
$15.54 million, or 13.10%. All loan categories except commercial loans have
shown decreases from the previous year. The average interest rate earned on
loans receivable decreased by 50 basis points, from 7.98% at December 31, 2001
to 7.48% at December 31, 2002. Interest and dividends on investment securities
available-for-sale (AFS) increased to $590,000 for the quarter ended December
31, 2002 from $347,000 for the same quarter last year. Average balances on
investments increased significantly, to $63.87 million for the quarter ended
December 31, 2002, compared to $33.35 million for the quarter ended December 31,
2001. The average interest rate
-14-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)
earned on investments dropped to 3.97% from 5.11%. Interest on securities
held-to-maturity (HTM) decreased from $79,000 to $44,000 as new purchases are
placed in the AFS portfolio. Interest earned from deposits held at other banks
decreased to $40,000 for the quarter ended December 31, 2002 from $44,000 for
the quarter ended December 31, 2001, due to the drop in short-term interest
rates. Interest income is expected to increase in the coming quarter due to the
funding in January 2003 of a large government guaranteed commercial real estate
loan.
INTEREST EXPENSE
Total interest expense decreased to $1.09 million for the quarter ended December
31, 2002, from $1.32 million for the quarter ended December 31, 2001, a decrease
of $232,000, or 17.58%, primarily due to a decrease in interest paid on
deposits. Interest on deposits decreased to $946,000 for the quarter ended
December 31, 2002, from $1.15 million for the quarter ended December 31, 2001.
This decrease of $204,000, or 17.74%, was the result of a decrease in average
rates paid on deposit accounts, despite higher balances. All deposit accounts
showed decreases in average rates paid and also had increases in average
balances in the current quarter compared to last year's quarter. Money market
accounts and certificates of deposit saw the largest increases in balances due
primarily to the poor performance of the stock market. Average balances in
interest-bearing deposit accounts increased to $151.13 million for the quarter
ended December 31, 2002, compared to $134.02 million for the same quarter in the
previous year. The average rate paid on liabilities decreased 93 basis points
from the quarter ended December 31, 2001 to the quarter ended December 31, 2002.
Interest paid on borrowings decreased to $147,000 for the quarter ended December
31, 2002 from $175,000 for the quarter ended December 31, 2001. The decrease in
borrowing costs was due to a decrease in the average balance of Federal Home
Loan Bank advances.
PROVISION FOR LOAN LOSSES
Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered adequate by Eagle's subsidiary,
American Federal Savings Bank (the Bank), to provide for probable loan losses
based on prior loss experience, volume and type of lending conducted by the
Bank, available peer group information, and past due loans in portfolio. The
Bank's policies require the review of assets on a quarterly basis. The Bank
classifies loans as well as other assets, if warranted. While the Bank believes
it uses the best information available to make a determination with respect to
the allowance for loan losses, it recognizes that future adjustments may be
necessary. No provision was made for loan losses for either the quarter ended
December 31, 2002 or the quarter ended December 31, 2001. This is a reflection
of the continued strong asset quality of the Bank's loan portfolio. Total
classified assets increased slightly from $1.66 million at June 30, 2002 to
$1.82 million at December 31, 2002. The Bank currently has no foreclosed real
estate.
-15-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)
NONINTEREST INCOME
Total noninterest income increased to $819,000 for the quarter ended December
31, 2002, from $704,000 for the quarter ended December 31, 2001, an increase of
$115,000 or 16.33%. This was the result of increases in net gain on sale of
loans of $96,000 and mortgage servicing fees of $26,000. Increased loan
originations compared to a year ago contributed to the increase in income from
sale of loans. Mortgage loan servicing fees increased due to higher balances in
the loan servicing portfolio. The other categories of noninterest income
registered small decreases.
NONINTEREST EXPENSE
Noninterest expense increased by $170,000 or 12.41% to $1.54 million for the
quarter ended December 31, 2002, from $1.37 million for the quarter ended
December 31, 2001. This increase was primarily due to an increase in
amortization of mortgage servicing fees of $112,000. The increase in
amortization of mortgage servicing fees was related to increased prepayment
activity on mortgage loans. Advertising expenses increased $23,000 due to
increased promotion of home equity loans. Salaries and employee benefits
increased $23,000 due to higher year-end bonuses. Furniture and equipment
depreciation expense decreased $18,000 due to equipment becoming fully
depreciated.
INCOME TAX EXPENSE
Eagle's income tax expense was $272,000 for the quarter ended December 31, 2002,
compared to $306,000 for the quarter ended December 31, 2001. The effective tax
rate for the quarter ended December 31, 2002 was 33.42% and was 35.25% for the
quarter ended December 31, 2001. Management expects Eagle's effective tax rate
to be approximately 35%.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
NET INCOME
Eagle's net income was $1.16 million and $908,000 for the six months ended
December 31, 2002 and 2001, respectively. The increase of $252,000, or 27.75%,
was primarily due to increases in noninterest income of $346,000 and net
interest income of $200,000, partially offset by an increase in noninterest
expense of $200,000. Eagle's tax provision was $94,000 higher in the current
period. Basic earnings per share for the period ended December 31, 2002 were
$0.99, compared to $0.78 per share for the period ended December 31, 2001.
NET INTEREST INCOME
Net interest income increased to $3.20 million for the six months ended December
31, 2002 from $3.00 million for the six months ended December 31, 2001. This
increase of $200,000 was the result of a significant decrease in interest
expense of $510,000, partially offset by a decrease in interest and dividend
income of $310,000.
-16-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)
INTEREST AND DIVIDEND INCOME
Total interest and dividend income was $5.41 million for the six months ended
December 31, 2002, compared to $5.72 million for the same period ended December
31, 2001, representing a decrease of $310,000, or 5.42%. Interest and fees on
loans decreased to $4.00 million for 2002 from $4.74 million for 2001. This
decrease of $740,000, or 15.61%, was due primarily to a decrease in the average
balances of loans receivable for the six months ended December 31, 2002. Average
balances for loans receivable, net, for this period were $105.12 million,
compared to $119.27 million for the previous year. This is a decrease of $14.15
million, or 11.86%. Most loan categories had shown decreases from the previous
year. The average interest rate earned on loans receivable decreased by 34 basis
points, to 7.61% from 7.95%. Interest and dividends on investment securities
available-for-sale (AFS) increased to $1.20 million for the six months ended
December 31, 2002 from $650,000 for the same period ended December 31, 2001.
Interest on securities held-to-maturity (HTM) decreased from $170,000 to
$93,000. Most new purchases of securities are placed in the AFS portfolio, and
the HTM portfolio will continue to shrink as the securities in it mature.
Interest earned from deposits held at other banks decreased to $73,000 for the
six months ended December 31, 2002 from $111,000 for the six months ended
December 31, 2001 due primarily to the drop in short-term interest rates.
INTEREST EXPENSE
Total interest expense decreased to $2.22 million for the six months ended
December 31, 2002 from $2.73 million for the six months ended December 31, 2001,
a decrease of $510,000, or 18.68%, primarily due to the decrease in interest
paid on deposits. Interest on deposits decreased to $1.92 million for the six
months ended December 31, 2002 from $2.37 million for the six months ended
December 31, 2001. This decrease of $450,000, or 18.99%, was the result of a
decrease in average rates paid on deposit accounts despite higher balances in
deposit accounts. Money market accounts and certificates of deposit accounted
for the largest gain in balances during the period from December 31, 2001 to
December 31, 2002. Average balances in money market accounts increased from
$21.55 million for the six months ended December 31, 2001 to $28.06 million for
the six months ended December 31, 2002. The average rate paid on money market
accounts decreased to 2.00% from 3.29%. Average balances in certificates of
deposit increased from $66.46 million to $72.54 million. The average rate paid
on certificates of deposit decreased to 3.86% from 5.07%. Average rates paid on
all interest-bearing deposits declined from 2001 to 2002, with the average rate
paid on all liabilities dropping by 101 basis points from the six month period
ended December 31, 2001 to the six month period ended December 31, 2002.
Interest paid on borrowings decreased to $294,000 for the six months ended
December 31, 2002 from $354,000 for the same period ended December 31, 2001. The
decrease in borrowing costs was due to a decrease in the average balance of
Federal Home Loan Bank advances.
-17-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)
PROVISION FOR LOAN LOSSES
Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered adequate by Eagle's subsidiary,
American Federal Savings Bank (the Bank), to provide for probable loan losses
based on prior loss experience, volume and type of lending conducted by the
Bank, available peer group information, and past due loans in the portfolio. The
Bank's policies require the review of assets on a quarterly basis. The Bank
classifies loans as well as other assets, if warranted. While the Bank believes
it uses the best information available to make a determination with respect to
the allowance for loan losses, it recognizes that future adjustments may be
necessary. No provision was made for loan losses for either of the six month
periods ended December 31, 2002 or December 31, 2001. This is a reflection of
the continued strong asset quality of the Bank's loan portfolio. Total
classified assets increased slightly to $1.82 million at December 31, 2002 from
$1.66 million at June 30, 2002. The Bank currently has no foreclosed property.
NONINTEREST INCOME
Total noninterest income increased to $1.46 million for the six months ended
December 31, 2002, from $1.11 million for the six months ended December 31,
2001, an increase of $346,000, or 31.17%. This was primarily due to an increase
in net gain on sale of loans of $234,000. Increased loan originations
contributed to the increase in income from the sale of loans. Low interest rates
over the past year have contributed to an unusually high level of refinancing
activity, which will likely decline over the remainder of the year, resulting in
lower loan originations and income from the sale of loans. Mortgage loan
servicing fees increased to $201,000 for the current six-month period compared
to $94,000 for the previous year's period. A provision was made to a valuation
allowance for mortgage servicing rights in 2001 for $58,000. A subsequent
valuation performed in May 2002 determined that the temporary decline had
decreased to $21,515 and the valuation allowance was adjusted accordingly.
Changes to the valuation allowance for mortgage servicing rights are charged
against mortgage loan servicing fees. Other categories of noninterest income
showed minor changes.
NONINTEREST EXPENSE
Noninterest expense increased by $200,000, or 7.43% to $2.89 million for the six
months ended December 31, 2002, from $2.69 million for the six months ended
December 31, 2001. This increase was primarily due to an increase in
amortization of mortgage servicing fees of $141,000 and in advertising expense
of $25,000. The increase in amortization of mortgage servicing fees was related
to increased prepayment activity on mortgage loans, while the increase in
advertising expense was due to increased promotion of home equity loan products.
These increases were partially offset by a decrease of $33,000 in furniture and
equipment depreciation expense. Its decrease was due to equipment becoming fully
depreciated. Other categories of noninterest expense showed modest increases.
-18-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(CONTINUED)
INCOME TAX EXPENSE
Eagle's income tax expense was $595,000 for the six months ended December 31,
2002, compared to $501,000 for the six months ended December 31, 2001. The
effective tax rate for the six months ended December 31, 2002 was 33.93% and was
35.55% for the six months ended December 31, 2001.
LIQUIDITY, INTEREST RATE SENSITIVITY AND CAPITAL RESOURCES
The Company's subsidiary, American Federal Savings Bank (the Bank), is required
to maintain minimum levels of liquid assets as defined by the Office of Thrift
Supervision (OTS) regulations. The OTS has eliminated the statutory requirement
based upon a percentage of deposits and short-term borrowings. The OTS states
that the liquidity requirement is retained for safety and soundness purposes,
and that appropriate levels of liquidity will depend upon the types of
activities in which the company engages. For internal reporting purposes, the
Bank uses the previous regulatory definitions of liquidity. The Bank's average
liquidity ratio was 27.76% and 23.47% for the months ended December 31, 2002 and
December 31, 2001, respectively. Liquidity increased due to growth in deposits
and the increased loan sale volume for the period ended December 31, 2002.
The Bank's primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments, funds provided from
operations, and advances from the Federal Home Loan Bank of Seattle. Scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are generally predictable. However, other sources of funds, such as
deposit flows and loan prepayments, can be greatly influenced by the general
level of interest rates, economic conditions and competition. The Bank uses
liquidity resources principally to fund existing and future loan commitments. It
also uses them to fund maturing certificates of deposit, demand deposit
withdrawals and to invest in other loans and investments, maintain liquidity,
and meet operating expenses.
Liquidity may be adversely affected by unexpected deposit outflows, higher
interest rates paid by competitors, and similar matters. Management monitors
projected liquidity needs and determines the level desirable, based in part on
commitments to make loans and management's assessment of the bank's ability to
generate funds.
At September 30, 2002 (the most recent report available), the Bank's measure of
sensitivity to interest rate movements, as measured by the OTS, improved from
the previous quarter. The Bank's capital ratio as measured by the OTS decreased
slightly during the same period. The Bank is well within the guidelines set
forth by the Board of Directors for interest rate risk sensitivity.
-19-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY, INTEREST RATE SENSITIVITY AND CAPITAL RESOURCES (CONTINUED)
As of December 31, 2002, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At December 31, 2002, the Bank's tangible,
core, and risk-based capital ratios amounted to 10.90%, 10.90%, and 20.42%,
respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
respectively. See the following table (amounts in thousands):
At December 31, 2002
---------------------------
For Capital
Adequacy
Dollar Purposes
Amount % of Assets
------------ -----------
Tangible capital:
Capital level $ 21,117 10.90%
Requirement 2,907 1.50
------------ -----------
Excess $ 18,210 9.40%
============ ===========
Core capital:
Capital level $ 21,117 10.90%
Requirement 5,813 3.00
------------ -----------
Excess $ 15,304 7.90%
============ ===========
Risk-based capital:
Capital level $ 21,790 20.42%
Requirement 8,535 8.00
------------ -----------
Excess $ 13,255 12.42%
============ ===========
IMPACT OF INFLATION AND CHANGING PRICES
Our financial statements and the accompanying notes have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to inflation. The impact of inflation is reflected in the
increased cost of our operations. Interest rates have a greater impact on our
performance than do the general levels of inflation. Interest rates do not
necessarily move in the same direction or to the same extent as the prices of
goods and services.
-20-
EAGLE BANCORP AND SUBSIDIARY
CONTROLS AND PROCEDURES
Based on their evaluation as of a date within 90 days of the filing of this Form
10-Q, the Company's Chief Executive Officer, Larry A. Dreyer, and Treasurer,
Peter J. Johnson, have concluded the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed in
the reports that the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls subsequent to the date of
their evaluation.
-21-
EAGLE BANCORP AND SUBSIDIARY
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company nor the Bank is involved in any pending legal
proceedings other than non-material legal proceedings occurring in the
ordinary course of business.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were voted on at the Annual Meeting of
Stockholders on October 17, 2002:
1. Election of directors for three-year terms expiring in 2005:
For: Against:
--- -------
Larry A. Dreyer 1,122,165 1,033
Teresa L. Hartzog 1,122,640 558
2. Ratification of appointment of Anderson ZurMuehlen & Co., P.C. as
auditors for the fiscal year ended June 30, 2003:
For: Against: Abstain:
--- ------- -------
1,122,083 775 340
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b.) Reports on Form 8-K
None.
-22-
EAGLE BANCORP AND SUBSIDIARY
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EAGLE BANCORP
Date: February 10, 2003 By: /s/ Larry A. Dreyer
-------------------
Larry A. Dreyer
President/CEO
Date: February 10, 2003 By: /s/ Peter J. Johnson
--------------------
Peter J. Johnson
Sr. VP/Treasurer
-23-
EAGLE BANCORP AND SUBSIDIARY
CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002
I, Larry A. Dreyer, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Eagle Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
-24-
EAGLE BANCORP AND SUBSIDIARY
CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 10, 2003
/s/ Larry A. Dreyer
-------------------------------
Larry A. Dreyer
President and Chief Executive Officer
-25-
EAGLE BANCORP AND SUBSIDIARY
CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002
I, Peter J. Johnson, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Eagle Bancorp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
-26-
EAGLE BANCORP AND SUBSIDIARY
CERTIFICATION PURSUANT TO
SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: February 10, 2003
/s/ Peter J. Johnson
----------------------------------
Peter J. Johnson
Sr. VP/Treasurer and Chief Financial
Officer
-27-