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 March 31, 2003
[ ] 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
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1400 Prospect Avenue, Helena, MT 59601
----------------------------------------
(Address of principal executive offices)
(406) 442-3080
----------------------------------------
(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 May 12, 2003
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
EAGLE BANCORP AND SUBSIDIARY
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PAGE
Consolidated Statements of Financial Condition as of
March 31, 2003 (unaudited) and June 30, 2002...........................1 and 2
Consolidated Statements of Income for the three and
nine months ended March 31, 2003 and 2002 (unaudited)..................3 and 4
Consolidated Statements of Stockholders' Equity for the
nine months ended March 31, 2003 (unaudited).................................5
Consolidated Statements of Cash Flows for the nine
months ended March 31, 2003 and 2002 (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
March 31, 2003 June 30, 2002
-------------- --------------
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 2,128,977 $ 2,836,853
Interest-bearing deposits with banks 10,303,424 7,786,136
-------------- --------------
Total cash and cash equivalents 12,432,401 10,622,989
Investment securities available-for-sale,
at market value 65,205,284 50,153,872
Investment securities held-to-maturity,
at amortized cost 2,952,631 3,875,124
Federal Home Loan Bank stock, at cost 1,664,600 1,586,200
Mortgage loans held-for-sale 3,664,387 1,352,121
Loans receivable, net of deferred loan fees
and allowance for loan losses 100,556,799 105,623,213
Accrued interest and dividends receivable 979,553 998,378
Mortgage servicing rights, net 2,015,492 1,588,318
Property and equipment, net 6,334,019 6,291,382
Cash surrender value of life insurance 2,321,586 2,244,453
Real estate acquired in settlement of loans,
net of allowance for losses - -
Other assets 503,058 245,417
-------------- --------------
Total assets $ 198,629,810 $ 184,581,467
============== ==============
See accompanying notes to consolidated financial statements.
-1-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Continued)
March 31, 2003 June 30, 2002
-------------- --------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit accounts:
Noninterest bearing $ 7,658,980 $ 6,835,235
Interest bearing 156,134,668 144,769,504
Advances from Federal Home Loan Bank 9,268,889 9,343,889
Accrued expenses and other liabilities 2,126,998 1,929,962
-------------- --------------
Total liabilities 175,189,535 162,878,590
-------------- --------------
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; 1,209,772 and 1,208,172 outstanding at
March 31, 2003 and June 30, 2002, respectively) 12,236 12,236
Additional paid-in capital 3,933,381 3,885,903
Unallocated common stock held by employee
stock ownership plan ("ESOP") (248,448) (276,048)
Treasury stock, at cost (13,800 and 15,400 shares
at March 31, 2003 and June 30, 2002, respectively) (188,715) (180,950)
Retained earnings 19,525,633 17,957,601
Accumulated other comprehensive income 406,188 304,135
-------------- --------------
Total stockholders' equity 23,440,275 21,702,877
-------------- --------------
Total liabilities and stockholders' equity $ 198,629,810 $ 184,581,467
============== ==============
See accompanying notes to consolidated financial statements.
-2-
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- --------------------------
2003 2002 2003 2002
-------------- ------------ ------------ -------------
(Unaudited) (Unaudited)
Interest and Dividend Income:
Interest and fees on loans $ 1,883,542 $ 2,165,050 $ 5,881,080 $ 6,905,858
Interest on deposits with banks 25,361 27,851 98,425 138,673
FHLB Stock dividends 27,253 22,787 78,635 75,733
Securities available-for-sale 575,233 430,175 1,773,345 1,080,061
Securities held-to-maturity 39,540 67,377 132,875 237,638
------------ ------------ ------------ ------------
Total interest and dividend income 2,550,929 2,713,240 7,964,360 8,437,963
------------ ------------ ------------ ------------
Interest Expense:
Deposits 875,780 1,044,883 2,800,103 3,419,933
FHLB Advances 143,070 144,716 436,812 498,806
------------ ------------ ------------ ------------
Total interest expense 1,018,850 1,189,599 3,236,915 3,918,739
------------ ------------ ------------ ------------
Net Interest Income 1,532,079 1,523,641 4,727,445 4,519,224
Loan loss provision - - - -
------------ ------------ ------------ ------------
Net interest income after loan loss provision 1,532,079 1,523,641 4,727,445 4,519,224
------------ ------------ ------------ ------------
Noninterest income:
Net gain on sale of loans 574,976 324,974 1,381,199 897,131
Demand deposit service charges 121,512 127,025 375,670 380,828
Mortgage loan servicing fees 110,834 83,542 311,757 177,705
Net gain (loss) on sale of available-for-sale securities 20,435 14,653 20,435 16,629
Other 97,173 102,647 290,329 289,125
------------ ------------ ------------ ------------
Total noninterest income 924,930 652,841 2,379,390 1,761,418
------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements.
-3-
EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(Continued)
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- -------------------------
2003 2002 2003 2002
-------------- ------------ ------------ ------------
(Unaudited) (Unaudited)
Noninterest expense:
Salaries and employee benefits 756,254 745,396 2,201,454 2,177,650
Occupancy expenses 125,943 120,654 373,573 356,191
Furniture and equipment depreciation 51,139 71,554 157,510 210,924
In-house computer expense 60,935 55,614 180,903 153,992
Advertising expense 34,676 20,439 117,453 78,354
Amortization of mtg servicing fees 173,306 76,820 487,835 250,612
Federal insurance premiums 6,514 6,221 19,149 18,435
Postage 34,016 34,752 90,910 86,524
Legal, accounting, and examination fees 40,372 33,769 107,164 105,938
Consulting fees 16,936 3,920 38,006 17,156
ATM processing 10,587 11,004 33,490 34,301
Other 199,402 182,819 597,154 567,585
------------ ------------ ------------ ------------
Total noninterest expense 1,510,080 1,362,962 4,404,601 4,057,662
------------ ------------ ------------ ------------
Income before provision for income taxes 946,929 813,520 2,702,234 2,222,980
------------ ------------ ------------ ------------
Provision for income taxes 320,560 270,040 916,110 771,147
------------ ------------ ------------ ------------
Net income $ 626,369 $ 543,480 $ 1,786,124 $ 1,451,833
============ ============ ============ ============
Basic earnings per share $ 0.53 $ 0.46 $ 1.52 $ 1.24
============ ============ ============ ============
Diluted earnings per share $ 0.53 $ 0.46 $ 1.50 $ 1.22
============ ============ ============ ============
Weighted average shares outstanding (basic eps) 1,176,940 1,171,683 1,174,177 1,167,517
========= ========= ========= =========
Weighted average shares outstanding (diluted eps) 1,191,762 1,187,952 1,190,610 1,186,273
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
-4-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2003
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 ($.39 per share) (unaudited) - - - -
Restricted stock plan shares allocated
(4,600 shares) - - - -
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 (3,450 shares)
(unaudited) - - 47,478 27,600
--------- ------------ ------------- ------------
Balance, March 31, 2003 (unaudited) $ - $ 12,236 $ 3,933,381 $ (248,448)
========= ============ ============= ============
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) - 1,786,124 - 1,786,124
Other comprehensive income (unaudited) - - 102,053 102,053
--------------
Total comprehensive income (unaudited) - - - 1,888,177
--------------
Dividends paid ($.39 per share) (unaudited) - (218,092) - (218,092)
--------------
Restricted stock plan shares allocated
(4,600 shares) 54,050 - - 54,050
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 (3,450 shares)
(unaudited) - - - 75,078
---------- ------------- ----------- --------------
Balance, March 31, 2003 (unaudited) $ (188,715) $ 19,525,633 $ 406,188 $ 23,440,275
========== ============= =========== ==============
See accompanying notes to consolidated financial statements.
-5-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 31,
2003 2002
(Unaudited)
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,786,124 $ 1,451,833
Adjustments to reconcile net income to net cash
from operating activities:
Provision for mortgage servicing rights valuation losses - 58,433
Depreciation 301,897 356,304
Net amortization of marketable securities premium
and discounts 583,845 99,564
Amortization of capitalized mortgage servicing rights 487,835 250,612
Gain on sale of loans (1,381,199) (897,131)
Net realized (gain) loss on sale of available-for-sale securities (20,435) (16,629)
FHLB & other dividends reinvested (173,699) (124,880)
Increase in cash surrender value of life insurance (77,133) (77,590)
Gain on sale of property & equipment - (950)
Change in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends receivable 18,825 (46,911)
Loans held-for-sale (894,219) 2,010,007
Other assets (257,641) (25,089)
Increase (decrease) in liabilities:
Accrued expenses and other liabilities (212,366) 148,737
Deferred compensation payable 38,049 18,232
Deferred income taxes payable 383,818 (82,736)
------------- -------------
Net cash provided by operating activities 583,701 3,121,806
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities:
Investment securities held-to-maturity - (278,708)
Investment securities available-for-sale (28,640,513) (28,371,953)
Proceeds from maturities, calls and principal payments:
Investment securities held-to-maturity 914,518 3,132,203
Investment securities available-for-sale 12,205,549 4,490,896
Proceeds from sales of investment securities available-for-sale 1,052,385 1,010,755
See accompanying notes to consolidated financial statements.
-6-
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Nine Months Ended
March 31,
2003 2002
(Unaudited)
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES (CONTINUED):
Net (increase) decrease in loan receivable, excludes transfers
to real estate acquired in settlement of loans 4,151,405 6,538,263
Purchase of property and equipment (344,534) (115,242)
Proceeds from sale of equipment - 950
------------- -------------
Net cash used in investing activities (10,661,190) (13,592,836)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in checking and savings accounts $ 12,188,908 $ 13,443,102
Payments on FHLB advances (75,000) (2,075,000)
Sale (Purchase) of Treasury Stock (8,915) 52,900
Dividends paid (218,093) (166,675)
------------- -------------
Net cash provided by financing activities 11,886,900 11,254,327
------------- -------------
Net increase in cash 1,809,411 783,297
CASH AND CASH EQUIVALENTS, beginning of period 10,622,990 8,352,038
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 12,432,401 $ 9,135,335
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest $ 3,252,539 $ 3,889,652
============= =============
Cash paid during the period for income taxes $ 1,000,104 $ 873,950
============= =============
NON-CASH INVESTING ACTIVITIES:
(Increase) decrease in market value of securities available-for-sale $ (137,660) $ 311,244
============= =============
Mortgage servicing rights capitalized $ 915,009 $ 485,311
============= =============
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 nine month periods ended March 31,
2003 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:
March 31, 2003 (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 $ 6,451,839 $ 161,913 $ 6,613,752 $ 6,963,730 $ 70,249 $ 7,033,979
Municipal obligations 4,299,765 95,283 4,395,048 4,301,732 (10,233) 4,291,499
Corporate obligations 7,052,795 194,202 7,246,997 8,548,317 177,158 8,725,475
Mortgage-backed
securities 20,875,870 121,749 20,997,619 6,505,009 64,995 6,570,004
Mutual Funds 4,670,678 (26) 4,670,652 4,575,378 10 4,575,388
Collateralized
mortgage obligations 19,200,130 110,702 19,310,832 16,829,068 183,960 17,013,028
Common stock 99,761 (4,814) 94,947 - - -
Corporate preferred
stock 1,950,052 (74,615) 1,875,437 1,955,215 (10,716) 1,944,499
------------ ----------- ------------ ------------ ---------- ------------
Total $ 64,600,890 $ 604,394 $ 65,205,284 $ 49,678,449 $ 475,423 $ 50,153,872
============ =========== ============ ============ ========== ============
HELD-TO-MATURITY:
Municipal obligation $ 1,352,326 $ 52,214 $ 1,404,540 $ 1,354,531 $ 37,458 $ 1,391,989
Mortgage-backed
securities 1,600,305 66,610 1,666,915 2,520,593 90,112 2,610,705
------------ ----------- ------------ ------------ ---------- ------------
Total $ 2,952,631 $ 118,824 $ 3,071,455 $ 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:
March 31, June 30,
2003 2002
(Unaudited) (Audited)
-------------- --------------
First mortgage loans:
Residential mortgage (1-4 family) $ 51,929,083 $ 66,958,637
Commercial real estate 19,046,659 9,454,674
Real estate construction 3,260,867 2,931,032
Other loans:
Home equity 14,527,593 14,235,907
Consumer 9,654,980 10,023,869
Commercial 2,822,419 2,842,782
-------------- --------------
Total 101,241,601 106,446,901
Less: Allowance for loan losses (673,354) (702,705)
Deferred loan fees (11,448) (120,983)
-------------- --------------
Total $ 100,556,799 $ 105,623,213
============== ==============
Loans net of related allowance for loan losses on which the accrual of interest
has been discontinued were $937,000 and $528,000 at March 31, 2003 and June 30,
2002, respectively. Classified assets, including real estate owned, totaled
$1.73 million and $1.66 million at March 31, 2003 and June 30, 2002,
respectively.
The following is a summary of changes in the allowance for loan losses:
Six Months Ended Year ended
March 31, June 30,
2003 2002
(Unaudited) (Audited)
-------------- --------------
Balance, beginning of period $ 702,705 $ 688,282
Transfer from interest reserve - 6,510
Provision charged to operations - -
Charge-offs (35,945) (27,390)
Recoveries 6,594 35,303
-------------- --------------
Balance, end of period $ 673,354 $ 702,705
============== ==============
-10-
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. DEPOSITS
------------------
Deposits are summarized as follows:
March 31, June 30,
2003 2002
(Unaudited) (Audited)
-------------- --------------
Noninterest checking $ 7,658,980 $ 6,835,235
Interest-bearing checking 26,072,337 24,908,989
Passbook 24,821,258 22,464,984
Money market 29,206,397 27,568,930
Time certificates of deposit 76,034,676 69,826,601
-------------- --------------
Total $ 163,793,648 $ 151,604,739
============== ==============
NOTE 5. EARNINGS PER SHARE
----------------------------
Earnings per share for the three months ended March 31, 2003 is computed using
1,176,940 weighted average shares outstanding. Earnings per share for the nine
months ended March 31, 2003 is computed using 1,174,177 weighted average shares
outstanding. Diluted earnings per share is computed using the treasury stock
method by adjusting the number of shares outstanding by the shares purchased to
fund the Company's restricted stock plan. The weighted average shares
outstanding for the diluted earnings per share calculations are 1,191,762 for
the three months ended March 31, 2003 and 1,190,610 for the nine months ended
March 31, 2003. Earnings per share for the three months ended March 31, 2002 is
computed using 1,171,683 weighted average shares outstanding. Earnings per share
for the nine months ended March 31, 2002 is computed using 1,167,517 weighted
average shares outstanding. The weighted average shares outstanding for the
diluted earnings per share calculations are 1,187,952 for the three months ended
March 31, 2002 and 1,186,273 for the nine months ended March 31, 2002.
NOTE 6. DIVIDENDS AND STOCK REPURCHASE PROGRAM
------------------------------------------------
This fiscal year Eagle has paid three dividends of $0.13 per share, on August
23, 2002, November 15, 2002, and February 14, 2003. Another dividend of $0.13
per share was declared on April 17, 2003, payable May 16, 2003 to stockholders
of record on May 2, 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. On January 18,
2002 and January 21, 2003, 4,600 shares of the restricted stock plan vested and
were distributed to the participants. By October 24, 2002, 23,000 shares had
been repurchased, completing the repurchase program.
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
March 31, June 30,
2003 2002
(Unaudited) (Audited)
-------------- --------------
Mortgage Servicing Rights
Beginning balance $ 1,609,833 $ 1,315,819
Servicing rights capitalized 915,009 618,085
Servicing rights amortized (487,835) (324,071)
-------------- --------------
Ending balance 2,037,007 1,609,833
-------------- --------------
Valuation Allowance
Beginning balance 21,515 -
Provision - 21,515
Adjustments - -
-------------- --------------
Ending balance 21,515 21,515
-------------- --------------
Net Mortgage Servicing Rights $ 2,015,492 $ 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 in this section are between March 31, 2003 and June 30, 2002.
Total assets increased by $14.05 million, or 7.61%, to $198.63 million at March
31, 2003, from $184.58 million at June 30, 2002. Total liabilities increased by
$12.31 million to $175.19 million at March 31, 2003, from $162.88 million at
June 30, 2002. Total equity increased $1.74 million to $23.44 million at March
31, 2003 from $21.70 million at June 30, 2002.
The growth in assets was primarily in the available-for-sale (AFS) investment
portfolio, which increased $15.06 million, or 30.03%, to $65.21 million at March
31, 2003 from $50.15 million at June 30, 2002. The investment category with the
largest increase was mortgage-backed securities, which increased $14.29 million.
The loan portfolio decreased $5.06 million, or 4.79%, to $100.56 million at
March 31, 2003 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 $51.93 million at March 31, 2003 from
$66.96 million at June 30, 2002. Commercial real estate loans increased $9.60
million, to $19.05 million from $9.45 million. The increase was primarily due to
the origination of a $9.35 million loan, which has a government guarantee of 90%
of the loan balance. Consumer loans and commercial loans declined slightly,
while all other loan categories showed moderate increases. Total loan
originations year-to-date were $127.24 million, with single family mortgages
(including $3.20 million of construction loans) accounting for $99.43 million of
the total. Commercial real estate originations totaled $10.37 million. Home
equity loan and consumer loan originations totaled $7.59 million and $6.31
million, respectively, for the same period. Loans held for sale increased to
$3.66 million at March 31, 2003 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 $12.18 million, or 8.03%,
to $163.79 million at March 31, 2003 from $151.61 million at June 30, 2002.
Certificates of deposit and savings accounts showed the largest dollar
increases, and all other deposit types had strong growth.
The growth in total equity was the result of earnings for the nine months of
$1.79 million and an increase in the unrealized gain on securities
available-for-sale of $102,000. This was partially offset by the payment of
three quarterly $0.13 per share regular cash dividends, totaling $218,000.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
NET INCOME. Eagle's net income was $626,000 and $543,000 for the three months
ended March 31, 2003, and 2002, respectively. The increase of $83,000, or
15.29%, was primarily due to an increase in noninterest income of $272,000 and
net interest income of $8,000, offset by an increase in noninterest expense of
$147,000. Eagle's tax provision was $50,000 higher in the current quarter. Basic
earnings per share were $0.53 for the current period, compared to $0.46 for the
previous year's period.
NET INTEREST INCOME. Net interest income increased $8,000 compared to the
previous year's quarter. Total interest and dividend income decreased $162,000,
which was offset by the decrease in interest expense of $170,000.
INTEREST AND DIVIDEND INCOME. Total interest and dividend income was $2.551
million for the quarter ended March 31, 2003, compared to $2.713 million for the
quarter ended March 31, 2002, representing a decrease of $162,000, or 5.97%.
Interest and fees on loans decreased to $1.88 million for the three months ended
March 31, 2003 from $2.16 million for the same period ended March 31, 2002. This
decrease of $280,000, or 12.96%, was due primarily to the decrease in the
average balances of loans receivable for the quarter ended March 31, 2003 and
the decline in the average interest rate earned on loans. Average balances for
loans receivable, net, for the quarter ended March 31, 2003 were $106.24
million, compared to $113.14 million for the previous year. This represents a
decrease of $6.90 million, or 6.10%. The average interest rate earned on loans
receivable decreased by 56 basis points, from 7.65% at March 31, 2002 to 7.09%
at March 31, 2003.
The historic low interest rates the country is currently experiencing has led to
unprecedented levels of refinancing of residential mortgage loans. The
refinancing activity, combined with management's decision to sell predominantly
all new residential mortgage loans has contributed to the decline in balances in
loans receivable. Management has elected to not retain mortgages with these low
interest rates as part of its asset and liability management strategy. To a
certain degree, earnings are sacrificed in the current period, as the Company
maintains higher levels of liquidity (which typically has shorter maturities and
lower interest rates compared to mortgage loans) to prevent the negative impact
of holding low yielding long term mortgages when interest rates increase in the
future. Other
-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 MARCH 31, 2003 AND 2002
(CONTINUED)
loan categories, with the exception of commercial real estate loans, have shown
slight changes from a year ago. A large commercial real estate loan was
originated during the current quarter. The portion of the loan which is
guaranteed by a government agency (90% or approximately $8 million) has a
commitment to be sold before February 2004. It is likely the Bank will wait
until the end of the commitment period before selling the guaranteed portion of
the loan.
Investment securities interest income increased significantly, as the Company
has increased its liquidity and holdings of investment securities while the loan
portfolio has decreased. This will allow the Company to redeploy these assets in
higher yielding loans when interest rates increase. The Company maintains a
diversified investment portfolio, attempting to maximize return while supplying
liquidity and maintaining credit quality. Average balances on investments
increased to $66.08 million for the quarter ended March 31, 2003, compared to
$41.87 million for the quarter ended March 31, 2002. The average interest rate
earned on investments dropped to 3.72% from 4.75%. Interest earned from deposits
held at other banks decreased $3,000 for the quarter ended March 31, 2003
compared to the previous year's quarter, due to the drop in short-term interest
rates.
INTEREST EXPENSE. Although the balances in deposit accounts continue to
increase, total deposit interest expense decreased to $876,000 for the quarter
ended March 31, 2003, from $1.045 million for the quarter ended March 31, 2002.
As average balances increased $16.20 million, or 11.77%, from one year ago,
deposit interest expense decreased 16.17%. The average rate paid on deposits
declined 76 basis points from the quarter ended March 31, 2002 to the quarter
ended March 31, 2003. This is the result of the repricing of deposits as
interest rates have declined. Management continues to look for additional
opportunities to decrease interest expense, as the bank's net interest margin is
squeezed due to the decline in interest income. The interest rate on savings
accounts will be lowered in June 2003, while the rates on other deposit account
types are closely monitored. 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 continued
poor performance of the stock market.
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 March 31, 2003 or the quarter ended March 31, 2002. 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 $1.73 million at March 31, 2003. 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 MARCH 31, 2003 AND 2002
(CONTINUED)
NONINTEREST INCOME. Total noninterest income increased to $925,000 for the
quarter ended March 31, 2003, from $653,000 for the quarter ended March 31,
2002, an increase of $272,000 or 41.65%. This was primarily the result of
increases in the net gain on sale of loans of $250,000. Unprecedented levels of
refinancing activity have driven increased loan origination volume, due to the
historically low interest rate environment.
NONINTEREST EXPENSE. Noninterest expense increased by $150,000 or 11.03% to
$1.51 million for the quarter ended March 31, 2003, from $1.36 million for the
quarter ended March 31, 2002. This increase was primarily due to an increase in
amortization of mortgage servicing fees of $96,000. The increase in amortization
of mortgage servicing fees was related to increased prepayment activity on
mortgage loans. Excluding the mortgage servicing fee amortization expense
produces an increase in expenses of 4.69%. Most expense categories showed minor
changes. Significant changes were as follows: a $20,000 decrease in furniture
and equipment depreciation expense due to equipment becoming fully depreciated;
a $14,000 increase in advertising expense due to promotion of the Bank's home
equity loan products; and a $13,000 increase in consulting fees due to the
Bank's installation of an upgraded internal data network.
INCOME TAX EXPENSE. Eagle's income tax expense was $320,000 for the quarter
ended March 31, 2003, compared to $270,000 for the quarter ended March 31, 2002.
The effective tax rate for the quarter ended March 31, 2003 was 33.85% and was
33.19% for the quarter ended March 31, 2002. Management expects Eagle's
effective tax rate to be approximately 35%.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2003 AND 2002
NET INCOME. Eagle's net income was $1.786 million and $1.452 million for the
nine months ended March 31, 2003 and 2002, respectively. The increase of
$334,000, or 23.00%, was primarily due to increases in noninterest income of
$618,000 and net interest income of $208,000, partially offset by an increase in
noninterest expense of $347,000. Eagle's tax provision was $145,000 higher in
the current period. Basic earnings per share for the period ended March 31, 2003
were $1.52, compared to $1.24 per share for the period ended March 31, 2002.
NET INTEREST INCOME. Net interest income increased to $4.727 million for the
nine months ended March 31, 2003 from $4.519 million for the nine months ended
March 31, 2002. This increase of $208,000 was the result of a significant
decrease in interest expense of $682,000, partially offset by a decrease in
interest and dividend income of $474,000.
-16-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2003 AND 2002
(CONTINUED)
INTEREST AND DIVIDEND INCOME. Total interest and dividend income was $7.964
million for the nine months ended March 31, 2003, compared to $8.438 million for
the same period ended March 31, 2002, representing a decrease of $474,000, or
5.62%. Interest and fees on loans decreased to $5.881 million for 2003 from
$6.906 million for 2002. This decrease of $1.025 million, or 14.84%, was due
primarily to a decrease in the average balances of loans receivable for the nine
months ended March 31, 2003. Average balances for loans receivable, net, for
this period were $105.49 million, compared to $117.22 million for the previous
year. This is a decrease of $11.73 million, or 10.01%. The average interest rate
earned on loans receivable decreased by 43 basis points, to 7.43% from 7.86%.
The historic low interest rates the country is currently experiencing has led to
unprecedented levels of refinancing of residential mortgage loans. The
refinancing activity, combined with management's decision to sell predominantly
all new residential mortgage loans has contributed to the decline in balances of
loans receivable. Management has elected to not retain mortgages with these low
interest rates as part of its asset and liability management strategy. To a
certain degree, earnings are sacrificed in the current period as the Company
maintains higher levels of liquidity (which typically has shorter maturities and
lower interest rates compared to mortgage loans) to prevent the negative impact
of holding low yielding long term mortgage loans when interest rates increase in
the future.
Average balances on investment securities increased to $62.54 million for the
nine months ended March 31, 2003 compared to $34.41 million for the same period
ended March 31, 2002. The average interest rate earned on investments declined
105 basis points, to 4.06% from 5.11%. Interest earned from deposits held at
other banks decreased to $98,000 for the nine months ended March 31, 2003 from
$139,000 for the nine months ended March 31, 2002 due primarily to the drop in
short-term interest rates.
INTEREST EXPENSE. Total interest expense decreased to $3.237 million for the
nine months ended March 31, 2003 from $3.919 million for the nine months ended
March 31, 2002, a decrease of $682,000, or 17.40%, primarily due to the decrease
in interest paid on deposits. Interest on deposits decreased to $2.800 million
for the nine months ended March 31, 2003 from $3.420 million for the nine months
ended March 31, 2002. This decrease of $620,000, or 18.13%, was the result of a
decrease in average rates paid on deposit accounts despite much higher balances
in deposit accounts. Money market accounts and certificates of deposit accounted
for the largest gain in balances during the period from March 31, 2002 to March
31, 2003. Average rates paid on all interest-bearing deposits declined from 2002
to 2003, with the average rate paid on deposits dropping by 93 basis points from
the nine month period ended March 31, 2002 to the nine month period ended March
31, 2003. Interest paid on borrowings decreased to $437,000 for the nine months
ended March 31, 2003 from $499,000 for the same period ended March 31, 2002. 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 NINE MONTHS ENDED MARCH 31, 2003 AND 2002
(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
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 nine month periods ended March 31, 2003 or March 31, 2002. This is a
reflection of the continued strong asset quality of the Bank's loan portfolio.
Total classified assets increased slightly to $1.73 million at March 31, 2003
from $1.66 million at June 30, 2002. The Bank currently has no foreclosed
property.
NONINTEREST INCOME. Total noninterest income increased to $2.379 million for the
nine months ended March 31, 2003, from $1.761 million for the nine months ended
March 31, 2002, an increase of $618,000, or 35.09%. This was primarily due to an
increase in net gain on sale of loans of $484,000. Unprecedented levels of
refinancing activity have driven increased loan origination volume, due to the
historically low interest rate environment. Loan originations are expected to
decline when interest rates rise. Mortgage loan servicing fees increased to
$312,000 for the current nine-month period compared to $178,000 for the previous
year's period. An independent valuation of the Bank's mortgage servicing
portfolio that was performed in September 2001 indicated a temporary decline in
the value of the servicing rights in the amount of $58,000. A provision was made
to a valuation allowance in that amount. A subsequent valuation performed in May
2002 determined that the temporary decline had decreased to $21,515, and the
valuation allowance was adjusted accordingly. In conjunction with our fiscal
year end, management will obtain an independent valuation of its mortgage
servicing rights (MSR's) as of June 30, 2003. Based on the current interest rate
environment, management expects to record a significant addition to the
valuation allowance for MSR's. The ultimate magnitude of the addition to the
allowance is not known at this time. 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 $347,000, or 8.55% to
$4.405 million for the nine months ended March 31, 2003, from $4.058 million for
the nine months ended March 31, 2002. This increase was primarily due to an
increase in amortization of mortgage servicing fees of $237,000 and in
advertising expense of $39,000. The increase in amortization of mortgage
servicing fees was related to increased prepayment activity on mortgage loans.
Excluding the mortgage servicing fee amortization expense, noninterest expenses
were up 2.88%. The increase in advertising expense was due to increased
promotion of home equity loan products. These increases were partially offset by
a decrease of $53,000 in furniture and equipment depreciation expense. Its
decrease was due to equipment becoming fully depreciated.
-18-
EAGLE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2003 AND 2002
(CONTINUED)
INCOME TAX EXPENSE. Eagle's income tax expense was $916,000 for the nine months
ended March 31, 2003, compared to $771,000 for the nine months ended March 31,
2002. The effective tax rate for the nine months ended March 31, 2003 was 33.90%
and was 34.69% for the nine months ended March 31, 2002.
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 28.03% and 20.82% for the months ended March 31, 2003 and
March 31, 2002, respectively. Liquidity increased due to growth in deposits and
the increased loan sale volume for the period ended March 31, 2003.
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 December 31, 2002 (the most recent report available), the Bank's measure of
sensitivity to interest rate movements, as measured by the OTS, worsened
slightly from the previous quarter but has improved significantly since one year
ago. 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 March 31, 2003, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31, 2003, the Bank's tangible,
core, and risk-based capital ratios amounted to 11.01%, 11.01%, and 18.83%,
respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
respectively. See the following table (amounts in thousands):
At March 31, 2003
-----------------------------------
For Capital
Adequacy
Dollar Purposes
Amount % of Assets
-------------- --------------
Tangible capital:
Capital level $ 21,679 11.01%
Requirement 2,954 1.50
-------------- --------------
Excess $ 18,725 9.51%
============== ==============
Core capital:
Capital level $ 21,679 11.01%
Requirement 5,907 3.00
-------------- --------------
Excess $ 15,772 8.01%
============== ==============
Risk-based capital:
Capital level $ 22,335 18.83%
Requirement 9,488 8.00
-------------- --------------
Excess $ 12,847 10.83%
============== ==============
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-QSB, 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
Not applicable
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: May 12, 2003 By: /s/ Larry A. Dreyer
-------------------
Larry A. Dreyer
President/CEO
Date: May 12, 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: May 12, 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: May 12, 2003
/s/ Peter J. Johnson
----------------------------------
Peter J. Johnson
Sr. VP/Treasurer and Chief Financial
Officer
-27-