UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to __________________.
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
--------------------------------------------------------------------------------
(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
---------------------------
(Issuer's telephone number)
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 1,206,072 shares outstanding
--------------------------------------------------------------------------------
As of January 31, 2001
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, 2000 (unaudited) and June 30, 2000.................1 and 2
Consolidated Statements of Income for the three and
six months ended December 31, 2000 and 1999 (unaudited).........3 and 4
Consolidated Statements of Stockholders' Equity for the
six months ended December 31, 2000 (unaudited).......................5
Consolidated Statements of Cash Flows for the six
months ended December 31, 2000 and 1999 (unaudited).............6 and 7
Notes to Consolidated Financial Statements .....................8 to 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...........................12 to 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................20
Item 2. Changes in Securities................................................20
Item 3. Defaults Upon Senior Securities......................................20
Item 4. Submission of Matters to a Vote of Security-Holders..................20
Item 5. Other Information....................................................20
Item 6. Exhibits and Reports on Form 8-K...............................20 to 23
Signatures
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, June 30,
2000 2000
---- ----
(Unaudited)
ASSETS
Cash and due from banks ........................ $ 2,905,053 $ 3,477,650
Interest-bearing deposits with banks ........... 2,750,000 --
------------ ------------
Total cash and cash equivalents ............ 5,655,053 3,477,650
Investment securities available for sale, ...... 19,059,756 18,414,219
at market value
Investment securities held-to-maturity, at
amortized cost ............................... 8,961,205 9,922,687
Federal Home Loan Bank stock, at cost .......... 1,438,800 1,393,000
Mortgage loans held-for-sale ................... 578,364 861,290
Loans receivable, net of deferred loan fee ..... 113,158,978 107,447,437
and allowance for loan losses
Accrued interest and dividends receivable ...... 914,109 832,204
Mortgage servicing rights ...................... 1,306,842 1,338,271
Property and equipment, net .................... 6,733,891 6,962,081
Cash surrender value of life insurance ......... 2,088,960 2,040,973
Real estate acquired in settlement of loans, ... -- 121,006
net of allowance for losses
Other assets ............................... 243,750 219,857
------------ ------------
Total assets ............................. $160,139,708 $153,030,675
============ ============
See accompanying notes to consolidated financial statements.
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Continued)
December 31, June 30,
2000 2000
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts:
Noninterest bearing ...................... $ 5,032,172 $ 5,732,528
Interest bearing ......................... 122,015,805 118,780,477
Advances from Federal Home Loan Bank ....... 12,174,444 8,682,778
Accrued expenses and other liabilities ..... 1,738,799 1,505,750
------------- -------------
Total liabilities .................... 140,961,220 134,701,533
------------- -------------
Stockholders' Equity:
Preferred stock (no par value, 1,000,000
shares authorized, none issued or
outstanding)
Common stock (par value $0.01per share;
10,000,000 shares authorized; 1,223,572
shares issued and outstanding ............ 12,236 12,236
Additional paid-in capital ................. 3,836,553 3,831,887
Unallocated common stock held by employee
stock ownership plan ("ESOP") ............ (331,248) (349,648)
Retained earnings .......................... 15,653,034 15,158,415
Accumulated other comprehensive gain (loss) 7,913 (323,748)
------------- -------------
Total equity ........................... 19,178,488 18,329,142
------------- -------------
Total liabilities and equity ........... $ 160,139,708 $ 153,030,675
============= =============
See accompanying notes to consolidated financial statements.
-2-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(unaudited) (unaudited)
Interest and dividend income:
Interest and fees on loans .... $ 2,301,293 $ 2,036,020 $ 4,554,478 $ 4,018,320
Interest on deposits with banks 22,454 16,253 27,599 57,719
FHLB stock dividends .......... 23,131 24,211 45,891 47,989
Securities available for sale . 285,677 258,223 572,916 503,833
Securities held to maturity ... 144,921 194,967 307,044 409,787
----------- ----------- ----------- -----------
Total interest and dividend
income ................... 2,777,476 2,529,674 5,507,928 5,037,648
----------- ----------- ----------- -----------
Interest expense:
Deposits ...................... 1,300,006 1,138,207 2,532,623 2,257,421
FHLB advances ................. 166,431 139,233 311,365 308,023
----------- ----------- ----------- -----------
Total interest expense .... 1,466,437 1,277,440 2,843,988 2,565,444
----------- ----------- ----------- -----------
Net interest income ........... 1,311,039 1,252,234 2,663,940 2,472,204
Loan loss provision ........... -- -- -- 15,000
----------- ----------- ----------- -----------
Net interest income after
loan loss provision ...... 1,311,039 1,252,234 2,663,940 2,457,204
----------- ----------- ----------- -----------
Noninterest income:
Net gain on sale of loans ..... 88,679 69,915 131,278 158,252
Demand deposit service charges 139,150 126,311 273,829 244,916
Mortgage loan servicing fees .. 72,767 76,471 145,361 150,579
Net gain (loss) on sale of
available for sale securities -- -- -- (30,355)
Other ......................... 100,782 84,923 194,213 166,601
----------- ----------- ----------- -----------
Total noninterest income .. 401,378 357,620 744,681 689,993
----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements.
-3-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
Three Months Ended Six Months Ended
December 31 December 31
------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(unaudited) (unaudited)
Noninterest expense:
Salaries and employee benefits ........ $ 693,695 $ 662,290 $1,362,255 $1,304,363
Occupancy expenses .................... 127,654 107,937 241,705 214,607
Furniture and equipment depreciation .. 83,430 79,763 165,246 159,229
In-house computer expense ............. 45,558 38,994 88,909 77,837
Advertising expense ................... 43,660 33,785 87,595 74,306
Amortization of mortgage servicing fees 25,095 25,015 56,102 61,776
Federal insurance premiums ............ 5,322 17,711 12,394 34,577
Postage ............................... 25,529 18,863 47,196 42,499
Legal,accounting, and examination fees 51,228 16,209 98,916 34,118
Consulting fees ....................... 8,601 2,805 16,476 19,425
ATM processing ........................ 16,222 18,267 30,518 37,941
Other ................................. 190,760 183,049 357,815 352,674
---------- ---------- ---------- ----------
Total noninterest expense ......... 1,316,754 1,204,688 2,565,127 2,413,352
---------- ---------- ---------- ----------
Income before provision for income taxes 395,663 405,166 843,494 733,845
Provision for income taxes .............. 124,084 110,017 268,364 230,134
---------- ---------- ---------- ----------
Net income .............................. $ 271,579 $ 295,149 $ 575,130 $ 503,711
========== ========== ========== ==========
Earnings per share ...................... $ 0.23 n/a $ 0.49 n/a
========== ========== ========== ==========
Weighted average shares outstanding ..... 1,181,412 n/a 1,180,835 n/a
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
-4-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ACCUMULATED
ADDITIONAL UNALLOCATED OTHER
PREFERRED COMMON PAID-IN ESOP RETAINED COMPREHENSIVE
STOCK STOCK CAPITAL SHARES EARNINGS INCOME TOTAL
----- ----- ------- ------ -------- ------ -----
Balance, June 30, 2000 ......... $-- $ 12,236 $ 3,831,887 $ (349,648) $ 15,158,415 $ (323,748) $ 18,329,142
Net income (unaudited) ....... -- -- -- -- 575,130 -- 575,130
Other comprehensive
income (unaudited) .......... -- -- -- -- -- 331,661 331,661
------------
Total comprehensive
income (unaudited) ........ -- -- -- -- -- -- 906,791
-------------
Dividends paid ($.14 per
share) (unaudited) .......... -- -- -- -- (80,511) -- (80,511)
-------------
ESOP shares allocated or
committed to be released
for allocation (1,150
shares) (unaudited) ......... -- -- 4,666 18,400 -- -- 23,066
--- ------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2000
(unaudited) ................... $-- $ 12,236 $ 3,836,553 $ (331,248) $ 15,653,034 $ 7,913 $ 19,178,488
=== ============ ============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
-5-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 31,
---------------------------
2000 1999
---- ----
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 575,130 $ 503,711
Adjustments to reconcile net income to
net cash from operating activities
Provision for loan losses .................. -- 15,000
Depreciation, accretion and
amortization expense ...................... 284,208 304,976
Deferred loan fees ......................... (5,958) (46,528)
Amortization of capitalized mortgage
servicing rights .......................... 56,101 61,775
Gain on sale of loans ...................... (131,278) (158,252)
Gain on sale of real estate owned .......... (8,951) --
Net realized (gain) loss on sale of
available-for-sale securities ............. -- 30,355
Dividends reinvested ....................... (45,800) (47,900)
Increase in cash surrender value
of life insurance ......................... (47,987) (45,813)
Change in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends
receivable ................................ (81,905) (69,355)
Loans held-for-sale ........................ 414,204 599,781
Other assets ............................... (827) (101,257)
Increase (decrease) in liabilities:
Accrued expenses and other liabilities ....... (56,576) 174,210
Deferred compensation payable ................ 12,231 4,850
Deferred income taxes payable ................ 114,894 (7,283)
----------- -----------
Net cash provided by operating
activities ............................ 1,077,486 1,218,270
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Investment securities held-to-maturity ....... (501,150) (449,936)
Investment securities available-for-sale ..... (1,173,415) (3,062,973)
Proceeds from maturities, calls and
principal payments:
Investment securities held-to-maturity ....... 1,474,445 4,017,137
Investment securities available-for-sale ..... 1,032,845 253,455
Proceeds from sales of investment securities
available-for-sale ......................... -- 1,715,580
See accompanying notes to consolidated financial statements.
-6-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Six Months Ended
December 31,
-----------------------------
2000 1999
---- ----
(unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES:
(CONTINUED)
Net (increase) decrease in loan
receivable, excludes transfers
to real estate acquired in settlement
of loans .................................. (5,730,253) (5,118,337)
Proceeds from the sale of real estate
aquired in the settlement of loans ........ 129,957 --
Purchase of property and equipment ......... (33,908) (267,183)
Proceeds from sale of equipment ............ -- 221,274
----------- -----------
Net cash used in investing
activities ........................ (4,801,479) (2,690,983)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking and savings
accounts .................................. 2,534,972 2,020,661
Net increase in advances to borrowers
for taxes and insurance ................... (44,731) (249,431)
Proceeds from FHLB advances ................ 3,625,000 --
Payment on FHLB advances ................... (133,334) (1,533,334)
Dividends paid ............................. (80,511) --
----------- -----------
Net cash provided by financing
activities ........................ 5,901,396 237,896
----------- -----------
Net increase (decrease) in cash .............. 2,177,403 (1,234,817)
CASH AND CASH EQUIVALENTS, beginning
of period ................................... 3,477,650 6,741,171
----------- -----------
CASH AND CASH EQUIVALENTS, end of period ..... $ 5,655,053 $ 5,506,354
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for
interest .................................. $ 2,603,029 $ 2,447,872
=========== ===========
Cash paid during the period for income
taxes ..................................... $ 152,000 $ 140,000
=========== ===========
NON-CASH INVESTING ACTIVITIES:
(Increase) decrease in market value of
securities available-for-sale ............... $ (331,661) $ 165,127
=========== ===========
Mortgage servicing rights capitalized ........ $ 24,672 $ 136,621
=========== ===========
See accompanying notes to consolidated financial statements.
-7-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED 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 notes required by generally accepted
accounting principles 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,
2000 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2001 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, 2000.
-8-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES
Investment securities are summarized as follows:
December 31, 2000 (Unaudited) June 30, 2000 (Audited)
----------------------------------------- ------------------------------------------
NET NET
AMORTIZED UNREALIZED FAIR AMORTIZED UNREALIZED FAIR
COST GAINS/(LOSSES) VALUE COST GAINS/(LOSSES) VALUE
---- -------------- ----- ---- -------------- -----
Available-for-sale:
U.S. government and agency
obligations ........................ $ 4,226,834 $ 20,353 $ 4,247,187 $ 4,250,803 $ (99,656) $ 4,151,147
Municipal obligations ................ 3,307,240 (73,873) 3,233,367 3,307,967 (251,657) 3,056,310
Corporate obligations ................ 6,210,227 42,330 6,252,557 6,184,453 (122,998) 6,061,455
Mortgage-backed securities ........... 4,781,144 25,935 4,807,079 4,623,260 (40,258) 4,583,002
Collateralized mortgage
obligations ........................ 320,056 (1,990) 318,066 372,372 (11,067) 361,305
Corporate preferred
stock ............................... 201,397 103 201,500 201,398 (398) 201,000
----------- ----------- ----------- ----------- ----------- -----------
Total ............................ $19,046,898 $ 12,858 $19,059,756 $18,940,253 $ (526,034) $18,414,219
=========== =========== =========== =========== =========== ===========
Held-to-maturity:
U.S. government and agency
obligations ........................ $ 2,891,224 $ 8,434 $ 2,899,658 $ 2,888,392 $ (29,659) $ 2,858,733
Municipal obligations ................ 940,629 (8,338) 932,291 1,069,806 (21,234) 1,048,572
Mortgage-backed
securities .......................... 5,129,352 (11,926) 5,117,426 5,964,489 (164,775) 5,799,714
----------- ----------- ----------- ----------- ----------- -----------
Total ............................ $ 8,961,205 $ (11,830) $ 8,949,375 $ 9,922,687 $ (215,668) $ 9,707,019
=========== =========== =========== =========== =========== ===========
-9-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. LOANS RECEIVABLE
Loans receivable consist of the following:
December 31, June 30,
2000 2000
(Unaudited) (Audited)
----------- ---------
First mortgage loans:
Residential mortgage (1-4 family) ...... $ 76,425,564 $ 74,336,712
Commercial real estate ................. 8,166,654 7,784,333
Real estate construction ............... 1,912,597 1,453,371
Other loans:
Home equity ............................ 15,913,614 13,654,250
Consumer ............................... 8,874,635 8,279,049
Commercial ............................. 2,659,284 2,757,708
------------- -------------
Total ................................ 113,952,348 108,265,423
Less:
Allowance for loan losses .............. (693,508) (712,165)
Deferred loan fees ..................... (99,862) (105,821)
------------- -------------
Total ................................ $ 113,158,978 $ 107,447,437
============= =============
Loans net of related allowance for loan losses on which the accrual of interest
has been discontinued were $590,000 and $504,000 at December 31, 2000 and June
30, 2000, respectively. Classified assets, including real estate owned, totaled
$1.47 million and $1.58 million at December 31, 2000 and June 30, 2000,
respectively.
The following is a summary of changes in the allowance for loan losses:
Six Months Ended Year Ended
December 31, June 30,
2000 2000
(Unaudited) (Audited)
----------- ---------
Balance, beginning of period ................. $ 712,165 $ 736,624
Reclassification to REO reserve ............ (13,725) (11,519)
Provision charged to operations ............ -- 15,000
Charge-offs ................................ (9,683) (30,623)
Recoveries ................................. 4,751 2,683
--------- ---------
Balance, end of period ................... $ 693,508 $ 712,165
========= =========
-10-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. DEPOSITS
Deposits are summarized as follows:
December 31, June 30,
2000 2000
(Unaudited) (Audited)
----------- ---------
Noninterest checking ..................... $ 5,032,172 $ 5,732,528
Interest-bearing checking ................ 24,064,889 22,849,549
Passbook ................................. 19,842,768 20,936,122
Money market ............................. 14,717,367 14,716,098
Time certificates of deposit ............. 63,390,781 60,278,708
------------ ------------
Total ................................ $127,047,977 $124,513,005
============ ============
NOTE 5. EARNINGS PER SHARE
Earnings per share for the three months ended December 31, 2000 is computed
using 1,181,412 weighted average shares outstanding. Earnings per share for the
six months ended December 31, 2000 is computed using 1,180,835 weighted average
shares outstanding. No earnings per share information is given for the three and
six month periods ending December 31, 1999 because shares of common stock were
not issued until April 4, 2000.
NOTE 6. DIVIDENDS AND STOCK REPURCHASE PROGRAM
Eagle paid its first dividend of $0.07 per share on August 25, 2000. A second
$0.07 dividend was paid November 17, 2000, and a third dividend of the same
amount was declared on January 19, 2001, payable February 16, 2001 to
stockholders of record on February 2, 2001. Eagle Financial MHC, Eagle's mutual
holding company, has waived the receipt of dividends on its 648,493 shares.
A stock repurchase program was announced on December 21, 2000, covering 4% of
the Company's outstanding common stock. Through January 31, 2001, 17,500 shares
had been repurchased. At the annual meeting held October 19, 2000, shareholders
approved stock option and restricted stock plans for the Company covering
aggregate grants for up to 80,511 and 23,003 shares, respectively. The
repurchase plan announced in December is intended to meet the needs of the
restricted stock plan.
-11-
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 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) compensation, 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
Total assets increased by $7.11 million, or 4.65%, from $153.03 million at June
30, 2000, to $160.14 million at December 31, 2000. Total liabilities increased
by $6.26 million from $134.70 million at June 30, 2000, to $140.96 million at
December 31, 2000. Total equity increased $850,000 from $18.33 million at June
30, 2000 to $19.18 million at December 31, 2000.
Growth in the loan portfolio of $5.71 million accounted for the majority of the
growth in total assets. The loan category with the largest increase was home
equity loans, which increased $2.26 million. This represented a 16.56% increase
over the balance at June 30, 2000 of $13.65 million. Total loan originations
were $33.52 million for the six months ended December 31, 2000, with single
family mortgages accounting for $19.94 million of the total. Consumer loan
originations totaled $7.83 million for the same period. Loans held for sale
decreased from $861,000 at June 30, 2000 to $578,000 at December 31, 2000.
-12-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition (continued)
Asset growth was funded by Federal Home Loan Bank advances and deposits.
Advances had grown to $12.17 million by December 31, 2000, an increase of $3.49
million, or 40.21%, from the balance of $8.68 million at June 30, 2000. Deposits
grew $2.54 million, or 2.04%, from $124.51 million at June 30, 2000 to $127.05
million at December 31, 2000. Strong competition from local banks continues to
limit deposit growth in all of our market areas. Other liabilities increased
from $1.51 million at June 30, 2000 to $1.74 million at December 31, 2000,
primarily due to an increase in the balance of deferred income taxes.
The growth in total equity was the result of earnings for the six months of
$575,000 and a decrease in the unrealized loss on securities available for sale
of $332,000, offset by the payment of two $0.07 per share regular cash dividends
during the period.
Results of Operations for the Three Months Ending December 31, 2000 and 1999
Net Income. Eagle's net income was $272,000 and $295,000 for the three months
ended December 31, 2000, and 1999, respectively. The decrease of $23,000, or
7.80%, was primarily due to an increase in non-interest expense of $112,000,
partially offset by increases in net interest income of $59,000 and noninterest
income of $44,000. Earnings per share were $0.23 for the current period. No
earnings per share are available for the period ended December 31, 1999 as
shares of common stock were not issued until April 4, 2000.
Net Interest Income. Net interest income increased from $1.25 million for the
quarter ended December 31, 1999 to $1.31 million for the quarter ended December
31, 2000. This increase of $59,000 was the result of an increase in interest and
dividend income of $248,000, partially offset by an increase in interest expense
of $189,000.
Interest and Dividend Income. Total interest and dividend income was $2.78
million for the quarter ended December 31, 2000, compared to $2.53 million for
the quarter ended December 31, 1999, representing an increase of $248,000, or
9.80%. Interest and fees on loans increased from $2.04 million for 1999 to $2.30
million for 2000. This increase of $260,000, or 12.75%, was due primarily to an
increase in the average balances of loans receivable for the quarter ended
December 31, 2000. Average balances for loans receivable, net, for the quarter
ended December 31, 2000 were $113.47 million, compared to $101.34 million for
the previous year. This represents an increase of $12.13 million, or 11.97%. All
loan categories had shown increases from the previous year. The average interest
rate earned on loans receivable also increased by 7 basis points, from 8.04% at
December 31, 1999 to 8.11% at December 31, 2000. Interest and
-13-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending December 31, 2000 and 1999
(continued)
dividends on investment securities available-for-sale (AFS) increased from
$258,000 for the quarter ended December 31, 1999 to $286,000 for the quarter
ended December 31, 2000, while interest on securities held to maturity (HTM)
decreased from $195,000 to $145,000. Interest earned from deposits held at other
banks increased from $16,000 for the quarter ended December 31, 1999 to $22,000
for the quarter ended December 31, 2000.
Interest Expense. Total interest expense increased from $1.28 million for the
quarter ended December 31, 1999, to $1.47 million for the quarter ended December
31, 2000, an increase of $189,000,or 14.76%, due primarily to an increase in
interest paid on deposits. Interest on deposits increased from $1.14 million for
the quarter ended December 31, 1999, to $1.30 million for the quarter ended
December 31, 2000. This increase of $160,000, or 14.04%, was the result of an
increase in average rates paid and higher balances on deposit accounts. Time
certificate of deposits (CD's) accounted for the largest gain in balances during
the period from December 31, 1999 to December 31, 2000. Special certificate of
deposit offerings contributed to the increase. Average balances in CD accounts
increased from $58.78 million for the quarter ended December 31, 1999 to $62.17
million for the quarter ended December 31, 2000. The average rate paid on CD
accounts also increased, from 5.10% to 5.93% for the period. Interest paid on
borrowings increased from $139,000 for the quarter ended December 31, 1999 to
$166,000 for the quarter ended December 31, 2000. The increase in borrowing
costs was due to an increase in the average balance of Federal Home Loan Bank
advances. Two factors will help to lower the cost of deposits in the coming
quarter. First, in mid-December, management lowered the interest rate on
checking accounts by 1/2%. Secondly, CD accounts opened in previous quarters
under special offerings will be maturing in the coming quarter. As market rates
have fallen, the Bank will be able to renew these certificates at lower rates.
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, to provide for probable loan
losses based on prior loss experience, volume and type of lending conducted by
American Federal, 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, 2000 or the quarter ended December 31, 1999. This
is a reflection of the continued strong asset quality of American Federal's loan
portfolio, as non-performing loan ratios continue to be below peer averages.
Total classified assets declined from
-14-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ending December 31, 2000 and 1999
(continued)
$1.58 million at June 30, 2000 to $1.47 million at December 31, 2000. Both real
estate owned (REO) properties that were previously on the Bank's books were sold
during the current quarter with no additional loss incurred. The Bank currently
has no foreclosed property.
Noninterest Income. Total noninterest income increased from $358,000 for the
quarter ended December 31, 1999, to $401,000 for the quarter ended December 31,
2000, an increase of $43,000 or 12.01%. This was the result of an increase in
other noninterest income items of $16,000, an increase in demand deposit service
charges of $13,000, and an increase in the net gain on sale of loans of $19,000.
The increase in other noninterest income was due to gains on the sale of REO
properties and increased rental income. Increased loan originations compared to
a year ago combined with management's decision late in the quarter to resume
selling mortgage loans with maturities of 15 years or less contributed to the
increase in income from sale of loans. Mortgage loan servicing fees declined
slightly from $76,000 in the quarter ended December 31, 1999 to $73,000 in the
quarter ended December 31, 2000.
Noninterest Expense. Noninterest expense increased by $112,000 or 9.26% from
$1.21 million for the quarter ended December 31, 1999, to $1.32 million for the
quarter ended December 31, 2000. This increase was primarily due to an increase
in legal and accounting fees of $35,000 and in salaries and benefits of $31,000.
The increase in legal and accounting fees were related to the costs of being a
public company, while the increase in salaries was due to merit raises.
Occupancy expense increased $20,000 due to higher property taxes and repairs.
Advertising expense increased $10,000 due to increased advertising for internet
banking and CD promotions. These increases were partially offset by a decrease
of $12,000 in federal deposit insurance premiums.
Income Tax Expense. Eagle's income tax expense was $110,000 for the quarter
ended December 30, 1999, compared to $124,000 for the quarter ended December 31,
2000. The effective tax rate for the quarter ended December 31, 1999 was 27.15%
and was 31.36% for the quarter ended December 31, 2000. The effective tax rate
is lower in the December 1999 quarter due to an adjustment made after the
completion of the tax return for calendar year 1999. Management expects Eagle's
effective tax rate to be approximately 32%.
-15-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ending December 31, 2000 and 1999
Net Income. Eagle's net income was $575,000 and $504,000 for the six months
ended December 31, 2000 and 1999, respectively. The increase of $71,000, or
14.09%, was primarily due to increases in net interest income of $192,000 and
noninterest income of $55,000, partially offset by an increase in non-interest
expense of $152,000. Earnings per share for the period ended December 31, 2000
were $0.49. No earnings per share were available for the period ended December
31, 1999 as shares of common stock were not issued until April 4, 2000.
Net Interest Income. Net interest income increased from $2.47 million for the
six months ended December 31, 1999 to $2.66 million for the six months ended
December 31, 2000. This increase of $192,000 was the result of an increase in
interest and dividend income of $470,000, partially offset by an increase in
interest expense of $278,000.
Interest and Dividend Income. Total interest and dividend income was $5.51
million for the six months ended December 31, 2000, compared to $5.04 million
for the same period ended December 31, 1999, representing an increase of
$470,000, or 9.33%. Interest and fees on loans increased from $4.02 million for
1999 to $4.56 million for 2000. This increase of $536,000, or 13.33%,was due
primarily to an increase in the average balances of loans receivable for the six
months ended December 31, 2000. Average balances for loans receivable, net, for
this period were $112.13 million, compared to $100.13 million for the previous
year. This is an increase of $12.00 million, or 11.98%. All loan categories had
shown increases from the previous year. The average interest rate earned on
loans receivable also increased by 9 basis points, from 8.03% to 8.12%. Interest
and dividends on investment securities available-for-sale (AFS) increased from
$504,000 for the six months ended December 31, 1999 to $573,000 for the same
period ended December 31, 2000, while interest on securities held to maturity
(HTM) decreased from $410,000 to $307,000. Interest earned from deposits held at
other banks decreased from $58,000 for the six months ended December 31, 1999 to
$28,000 for the six months ended December 31, 2000 due primarily to lower
average balances in these accounts from funding the increase in loans
receivable.
Interest Expense. Total interest expense increased from $2.57 million for the
six months ended December 31, 1999 to $2.84 million for the six months ended
December 31, 2000, an increase of $279,000, or 10.86%, due almost entirely to
the increase in interest paid on deposits. Interest on deposits increased from
$2.26 million for the six months ended December 31, 1999 to $2.53 million for
the six months ended December 31, 2000. This increase of $275,000, or 12.17%,
was the result of an increase in average rates paid on deposit accounts. Time
certificate of deposits (CD's) accounted for the largest gain in balances during
the period from December 31, 1999 to December 31, 2000. Special certificate of
deposit offerings contributed to the increase. Average
-16-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ending December 31, 2000 and 1999
(continued)
balances in CD accounts increased from $58.64 million at December 31, 1999 to
$61.02 million at December 31, 2000. The average rate paid on CD accounts also
increased, from 5.08% to 5.80%. Interest paid on borrowings increased from
$308,000 for the six months ended December 31, 1999 to $311,000 for the same
period ended December 31, 2000. The increase in borrowing costs was due to an
increase 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, to provide for probable loan
losses based on prior loss experience, volume and type of lending conducted by
American Federal, 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 the six
months ended December 31, 2000, compared to $15,000 for the same period ended
December 31, 1999. This is a reflection of the continued strong asset quality of
American Federal's loan portfolio, as non-performing loan ratios continue to be
below peer averages. Total classified assets declined from $1.58 million at June
30, 2000 to $1.47 million at December 31, 2000. During the current six month
period, a transfer of $14,000 was made from the loan loss reserve to the real
estate owned (REO) reserve. The transfer was made to write down the balances of
the two foreclosed properties in Butte, Montana to their net realizable value.
Both REO properties were sold during the current quarter with no additional loss
incurred. The Bank currently has no foreclosed property.
Noninterest Income. Total noninterest income increased from $690,000 for the six
months ended December 31, 1999, to $745,000 for the six months ended December
31, 2000, an increase of $55,000 or 7.97%. This was the result of an increase in
demand deposit service charges of $29,000, an increase in other noninterest
income items of $27,000, and a decrease in the loss on sale of available for
sale securities of $30,000. These increases to income were offset by a decrease
in gain on sale of loans of $27,000. Demand deposit related fees were raised in
late 1999, contributing to the increase in that category, while no securities
were sold in the six months ended December 31, 2000. Mortgage loan servicing
fees declined slightly from $150,000 in the six months ended December 31, 1999
to $145,000 in the six months ended December 31, 2000.
-17-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ending December 31, 2000 and 1999
(continued)
Noninterest Expense. Noninterest expense increased by $152,000 or 6.30% from
$2.41 million for the six months ended December 31, 1999, to $2.56 million for
the six months ended December 31, 2000. This increase was primarily due to an
increase in legal and accounting fees of $65,000 and in salaries and benefits of
$58,000. The increase in legal and accounting fees were related to the costs of
being a public company, while the increase in salaries was due to merit raises.
These increases were partially offset by decreases of $22,000 in federal deposit
insurance premiums and $7,000 in ATM processing fees. The decrease in deposit
insurance premiums was due to the FDIC lowering their assessment rate by 64%,
while lower costs passed on from the Bank's ATM processor led to lower
processing expense for ATMs and debit cards.
Income Tax Expense. Eagle's income tax expense was $230,000 for the six months
ended December 30, 1999, compared to $268,000 for the six months ended December
31, 2000. The effective tax rate for the six months ended December 31, 1999 was
31.36% and was 31.82% for the six months ended December 31, 2000.
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. This requirement, which varies from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of our deposits and short-term borrowings. The Bank's liquidity ratio average
was 15.03% and 17.92% at December 31, 2000 and December 31, 1999, respectively.
Liquidity declined due to an increase in loans receivable for the period ending
December 31, 2000.
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.
-18-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity, Interest Rate Sensitivity and Capital Resources (continued)
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, 2000 (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. This was due to management's strategy of retaining assets
with shorter maturities while emphasizing longer-term funding sources such as
transaction accounts and FHLB advances. The Bank is well within the guidelines
set forth by the Board of Directors for interest rate risk sensitivity.
As of December 31, 2000, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At December 31, 2000, the Bank's tangible,
core, and risk-based capital ratios amounted to 11.1%, 11.1%, and 19.1%,
respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
respectively. See the following table (amounts in thousands):
At December 31, 2000
-------------------------
% of
Amount Assets
------ ------
Tangible capital:
Capital level ........................... $17,693 11.13%
Requirement ............................. 2,384 1.50
------- -----
Excess .................................. $15,309 9.63%
======= =====
Core capital:
Capital level ........................... $17,693 11.13%
Requirement ............................. 4,768 3.00
------- -----
Excess .................................. $12,925 8.13%
======= =====
Risk-based capital:
Capital level ........................... $18,358 19.14%
Requirement ............................. 7,675 8.00
------- -----
Excess .................................. $10,683 11.14%
======= =====
-19-
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 Annual Meeting of Stockholders of the Company was held October 19,
2000 and the following matters were voted on:
1. Election of directors for three-year terms expiring in 2003:
For: Abstain:
---- --------
James A. Maierle 1,111,376 775
Thomas J. McCarvel 1,111,476 675
2. Ratification of appointment of Anderson ZurMuehlen & Co., P.C. as
auditors for the fiscal year ended June 30, 2001:
For: Against: Abstain:
---- -------- --------
1,108,701 2,725 725
3. Adoption of Eagle Bancorp 2000 Stock Incentive Plan:
For: Against: Abstain:
---- -------- --------
311,172 26,849 6,350
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 - Financial Data
-20-
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 9, 2001 By: /s/ Larry A. Dreyer
-----------------------
Larry A. Dreyer
President/CEO
Date: February 9, 2001 By: /s/ Peter J. Johnson
-----------------------
Peter J. Johnson
Sr. VP/Treasurer
-21-