EAGLE FINANCIAL CORP
--------------------
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets at March 31, 1994
and September 30, 1993................................. 2
Consolidated Statements of Income for the Three and
Six Months Ended March 31, 1994 and 1993............... 3
Consolidated Statements of Cash Flows for the Six
Months Ended March 31, 1994 and 1993................... 4-5
Notes to Consolidated Financial Statements............. 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8-12
PART II - OTHER INFORMATION 13
SIGNATURES 14
<TABLE>
<CAPTION> EAGLE FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
March 31, September 30,
ASSETS 1994 1993
------------------------------------- ---------- ----------
<S> <C> <C>
Cash and amounts due from depository institutions.................. $18,820 $12,462
Interest-bearing deposits.......................................... 16,909 9,496
-------- --------
CASH AND CASH EQUIVALENTS................................ 35,729 21,958
Securities available for sale (market value $21,744 at
March 31, 1994 and $15,601 at September 30, 1993)............... 21,744 15,599
Investment securities (market value $52,794 at March 31, 1994
and $47,954 at September 30, 1993).............................. 52,802 46,880
Mortgage-backed securities available for sale (market value
$7,135 at March 31, 1994)....................................... 7,135 0
Mortgage-backed securities (market value $20,116 at March 31,
1994 and $24,748 at September 30, 1993)......................... 19,753 25,953
Loans receivable, net of allowance for loan losses of $4,570
at March 31, 1994 and $5,005 at September 30, 1993.............. 669,783 656,344
Accrued interest receivable........................................ 4,214 4,380
Real estate acquired in settlement of loans
and in-substance repossessed real estate, net................... 4,226 5,471
Stock in Federal Home Loan Bank of Boston, at cost................. 6,535 5,949
Premises and equipment, net........................................ 6,066 6,029
Prepaid expenses and other assets.................................. 6,162 3,905
-------- --------
TOTAL ASSETS............................................. $834,149 $792,468
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
LIABILITIES
Deposits........................................................... $726,736 $706,214
Federal Home Loan Bank advances.................................... 33,150 15,500
Borrowed money..................................................... 752 752
Advance payments by borrowers for taxes and insurance.............. 3,973 3,577
Accrued expenses and other liabilities............................. 6,446 6,018
-------- --------
TOTAL LIABILITIES........................................ 771,057 732,061
SHAREHOLDERS' EQUITY
Serial preferred stock, $.01 par value 2,000,000 shares
authorized and unissued......................................... -- --
Common stock, $.01 par value
8,000,000 shares authorized; 3,141,717 and 3,097,547
shares issued at March 31, 1994 and September 30, 1993,
respectively, including 43,066 shares held in treasury.......... 31 31
Additional paid-in capital......................................... 34,053 33,562
Retained earnings.................................................. 30,207 27,928
Cost of common treasury stock...................................... (362) (362)
Employee Stock Ownership Plan stock................................ (752) (752)
Unrealized securities losses, net.................................. (85) 0
-------- --------
-2-
TOTAL SHAREHOLDERS' EQUITY............................... 63,092 60,407
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $834,149 $792,468
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION> EAGLE FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA, UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
------- ------- ------- -------
<S> <C> <C>
1994 1993 1994 1993
Interest Income: ------- ------- ------- -------
Interest and fees on loans.................. $12,045 $12,079 $24,294 $24,223
Interest on mortgage-backed securities...... 344 451 729 958
Interest on investment securities........... 675 1,018 1,366 2,172
Dividends on investment securities.......... 435 302 860 678
------ ------ ------ ------
Total interest income.................... 13,499 13,850 27,249 28,031
Interest Expense:
Interest on deposits........................ 6,157 7,192 12,628 14,512
Interest on Federal Home Loan Bank advances. 260 107 494 216
Interest on borrowed money.................. 1 2 2 7
------ ------ ------ ------
Total interest expense................... 6,418 7,301 13,124 14,735
------ ------ ------ ------
Net interest income...................... 7,081 6,549 14,125 13,296
------ ------ ------ ------
Provision for loan losses...................... 300 325 600 649
------ ------ ------ ------
Net interest income after provision for
loan losses........................... 6,781 6,224 13,525 12,647
------ ------ ------ ------
Other income:
Net gain on sale of investment securities... 0 (1) 0 (1)
Net gain on sale of loans................... 0 0 119 0
Customer service fee income................. 427 398 917 825
Other....................................... 216 186 398 363
------ ------ ------ ------
Total other income....................... 643 583 1,434 1,187
------ ------ ------ ------
7,424 6,807 14,959 13,834
Other expenses: ------ ------ ------ ------
Compensation, payroll taxes and benefits.... 2,192 1,876 4,297 3,623
Office occupancy............................ 536 473 994 899
Advertising................................. 149 225 287 291
Provision for losses on real estate
acquired in settlement of loans............ 102 10 355 108
Operation of real estate acquired in
settlement of loans........................ 155 182 438 374
Federal insurance premium................... 407 348 698 707
Data processing expenses.................... 280 282 552 545
Other....................................... 675 732 1,388 1,576
------ ------ ------ ------
Total other expenses..................... 4,496 4,128 9,009 8,123
------ ------ ------ ------
Income before income taxes and cumulative
effect of accounting changes............ 2,928 2,679 5,950 5,711
Income taxes................................... 1,224 1,175 2,470 2,617
------ ------ ------ ------
Income before cumulative effect of
accounting changes...................... 1,704 1,504 3,480 3,094
Cumulative effect of accounting changes........ 0 0 30 0
------ ------ ------ ------
Net Income............................... $1,704 $1,504 $3,450 $3,094
====== ====== ====== ======
Net income per share before cumulative effect
of accounting change......................... $0.53 $0.48 $1.08 $0.99
Cumulative effect of accounting change......... $0.00 $0.00 $0.01 $0.00
------ ------ ------ ------
Net Income per share........................... $0.53 $0.48 $1.07 $0.99
====== ====== ====== ======
Weighted average shares outstanding............3,219,262 3,152,771 3,210,845 3,124,543
Dividends per share............................ $0.19 $0.15 $0.38 $0.31
Note: All per share data and the number of outstanding common shares for all periods and dates
prior to September 30, 1993 have been adjusted retroactively to give effect to a 10% stock
dividend to common shareholders of record on August 16, 1993.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
-4-
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION> Six Months Ended
March 31,
----------------------
<S> 1994 1993
OPERATING ACTIVITIES: ------- -------
Net Income....................................................... $3,450 $3,094
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan los................................... 600 649
Provision for losses on real estate acquired in settlemen 355 108
Provision for depreciation and amortization.............. 278 88
Accretion of discounts and fees on loans................. (638) (84)
Amortization of premiums (accretion of discounts)
on mortgage-backed securities........................ (8) 2
Amortization of premiums (accretion of discounts) on inve 97 53
Amortization of core deposit intangibles................. 203 141
Realized investment security losses, net................ 0 1
Realized mortgage loan losses (gains), net............... (120) 0
Decrease (increase) in accrued interest recei............ 166 (10)
Decrease in accrued interest payable..................... (574) (553)
Loan origination fees.................................... 686 662
Other, net............................................... (547) 897
------- -------
Net Cash Provided by Operating Activities................ 3,948 5,048
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities................ 3,500 5,250
Proceeds from amortization of investment securities.............. 12,663 10,193
Purchases of securities availa................................... (9,030) 0
Purchases of investment securi................................... (22,182) (1,682)
Proceeds from sales of investment securities available for sale.. 2,800 1,999
Principal payments on mortgage-backed securities................. 6,173 1,658
Purchase of mortgage-backed securities........................... (7,100) 0
Principal payments on loans re................................... 78,028 46,692
Loan originations................................................ (104,376) (104,595)
Proceeds from sales of loans..................................... 10,800 388
Proceeds from sales of real estate acquired in settlement of loan 1,619 1,280
Purchases of premises and equi................................... (315) (137)
Increase in investment in Federal Home Loan Bank stock........... (586) 0
-------- --------
Net Cash Used by Investing Activities.................... (28,006) (38,954)
FINANCING ACTIVITIES:
Net increase in Passbook, NOW and Money Market accounts.......... 24,691 14,030
Net increase (decrease) in certificate accounts.................. (4,229) 14,797
Borrowings under Federal Home Loan Bank advances................. 18,650 0
Principal payments under Federal Home Loan Bank Advances......... (1,000) 0
Net decrease in borrowed money................................... 0 (80)
Net increase (decrease) in advance payments by borrowers
for taxes and insurance........................................ 396 (211)
Proceeds from exercise of stock options and dividends............ 492 435
Cash dividends................................................... (1,171) (927)
-------- --------
Net Cash Provided by Financing Activities................ 37,829 28,044
-------- --------
Increase (decrease) in cash and cash equivale............ 13,771 (5,862)
Cash and cash equivalents at beginning of period.................. 21,958 33,132
-------- --------
Cash and cash equivalents at end of period............... $35,729 $27,270
======== ========
-4-
NON-CASH INVESTING ACTIVITIES:
Transfers of loans to foreclosed real estate..................... $1,581 $1,941
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
EAGLE FINANCIAL CORP
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PART II
--------------------
Item 1 Legal Proceedings
--------------------------
Not applicable
Item 2 Changes in Securities
------------------------------
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
--------------------------
On January 25, 1994, the Board of Directors declared a quarterly
cash dividend of $0.19 per share payable on March 1, 1994 to
sharholders of record on February 15, 1994.
Item 6 Exhibits and Reports on Form 8-K
-----------------------------------------
A) Exhibits:
Not applicable
B) Reports on Form 8-K:
Not applicable
[TEXT]
EAGLE FINANCIAL CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
MARCH 31, 1994 AND 1993
(1) Basis of Presentation
---------------------
Eagle Financial Corp ("Eagle Financial") is a savings bank holding
company with a single subsidiary, Eagle Federal Savings Bank ("Eagle
Federal"). Eagle Federal serves customers from seventeen branch
offices located in Hartford, Litchfield and northern Fairfield counties.
The accompanying unaudited, consolidated financial statements in-
clude all adjustments of a normal, recurring nature which are, in
the opinion of management, necessary for a fair presentation. The
results of operations for the six-month periods ended March 31,
1994 and 1993 are not necessarily indicative of the results which
may be expected for the entire fiscal year. The accompanying finan-
cial statements should be read in conjunction with the financial
statements contained in the Company's 1993 annual report on Form 10-K.
(2) Accounting Pronouncements
--------------------------
In February, 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 109
"Accounting for Income Taxes." This SFAS requires a change from the
deferred method of accounting for income taxes to the asset and
liability method of accounting for income taxes. Under the asset
and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax
rate is recognized in income in the period that includes the enactment
date.
The Company adopted SFAS No. 109 as of October 1, 1993. The cumulative
effect of this change in accounting for income taxes of $1,273,000
as of October 1, 1993 is included in a separate line in the statement
of operations for the six months ended March 31, 1994. Prior periods'
financial statements have not been restated to apply the provisions
of SFAS No. 109.
At March 31, 1994, the Company has a net deferred tax asset of
approximately $2.6 million. In order to fully realize the net
deferred tax asset, the Company will need to either generate tax
losses to carryback to recover taxes previously paid or generate
future taxable income. Based upon the Company's historical and
current pre-tax earnings, management believes it is more likely
than not that the Company will realize the net deferred tax asset.
However, there can be no specific assurance that the Company will
generate any specific level of continuing earnings.
-5-
(2) Accounting Pronouncements
(Continued)
--------------------------
The Company had taxable income, pre-tax book income and taxes paid
for the periods presented as follows:
1993 1992 1991
-----------------------------------------
(In thousands)
Taxable income $11,358 $10,600 $ 7,834
Pre-tax book income 11,789 10,066 7,392
Federal taxes paid 3,934 3,614 2,671
The primary differences between taxable income and pre-tax book
income relate to the provisions for loan losses and charge-offs.
The Company would expect these differences to continue in the future.
For the six months ended March 31, 1994, income tax expense attributable
to income from continuing operations consists of:
Current Deferred Total
------------------------------------------
(In thousands)
Federal $1,810 $11 $1,821
State 648 1 649
----- --- -----
$2,458 $12 $2,470
===== === =====
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
March 31, 1994 and October 1, 1993 are presented below: (In thousands)
March 31, 1994 Oct. 1, 1993
Deferred tax assets: ----------------------------
Deferred loan fees $927 $907
Post-retirement benefits 927 891
Deferred compensation 204 190
Loans receivable, principally 1,956 2,046
due to allowance for loan losses
Other miscellaneous 76
----------------------------
Total gross deferred assets $4,014 $4,110
Less valuation allowance 0 0
----------------------------
Net deferred tax asset $4,014 $4,110
----------------------------
Deferred tax liabilities:
Premises and equipment, princi- ($782) ($772)
pally due to differences in depreciation
Tax discount on acquired loans (513) (714)
Other miscellaneous (106)
----------------------------
Total gross deferred tax
liabilities ($1,401) ($1,486)
----------------------------
Net deferred tax asset $2,613 $2,624
-6- ============================
(2) Accounting Pronouncements
(Continued)
-------------------------
The valuation allowance for deferred tax assets as of March 31, 1994
and October 1, 1993 was $-0-. There was no change in the valuation
allowance for the 6 months ended March 31, 1994.
The actual income tax expense for the six months ended March 31,
1994 and March 31, 1993 differs from the "expected" income tax
expense for the same periods (computed by applying the U.S.Federal
statutory corporate tax rate of 35% and 34%, respectively) as follows:
1994 1993
----------------------------
(In thousands)
Expected income tax on income before $2,083 $1,942
income taxes
State income taxes, net of Federal 422 492
income tax benefit
Other,net (35) 183
----------------------------
$2,470 $2,617
============================
Eagle Federal has not provided deferred income taxes for Eagle Federal's
tax return reserve for bad debts that arose in tax years beginning be-
fore December 31, 1987 because it is not expected that this difference
will reverse in the forseeable future. The cumulative net amount of
income tax temporary difference related to the reserve for bad debts for
which deferred taxes have not been provided was approximately $8.9
million at March 31, 1994. If Eagle Federal does not meet the income
tax requirements necessary to permit it to claim a percentage of taxable
income loan loss deduction in the future, the Bank, under certain
circumstances, could incur a tax liability for the previously deducted
tax return loan losses in the year in which such requirements are not
met. This potential liability for which no deferred income taxes have
been provided was approximately $3,700,000 as of March 31, 1994.
-7-
(2) Accounting Pronouncements
(Continued)
--------------------------
On October 1, 1993, the Company also adopted SFAS No. 106,
"Accounting for Post-retirement Benefits Other Than Pensions."
The accumulated post-retirement benefit obligation ("APBO")
existing at time of adoption was approximately $2,194,000 before
income taxes of $891,000. The $1,303,000 reduction in income net
of taxes was recognized as the cumulatulative effect of a change
in accounting method and is reported in a separate line in the
statement of operations for the quarter ended December 31, 1993.
The Company provides health benefits for future retirees within
certain limits and for current retirees. The Company does not have
any assets specifically segregated for the payment of health
benefits.
The following is a summary of the obligation to provide health benefits:
Accumulated post-retirement benefit obligation
related to active employees $1,594
Accumulated post-retirement benefit related
to retirees 600
--------
Total accumulated post-retirement benefit obligation
and amount recognized in statement of condition $2,194
=======
Net periodic post-retirement benefit cost for the year
ended September 30, 1994 will be approximately:
Service cost $89,000
Interest on APBO 135,000
Amortization of APBO (a) (28,000)
--------
Total cost $196,000
=======
(a) Amortization to reflect changes in Eagle Financial post-retirement
benefits plan made subsequent to October 1, 1993.
The Company has used a composite health care cost trend rate of seven
percent to measure the expected cost benefits. The weighted average
discount rate is also seven percent.
-9-
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL - Eagle Financial Corp. (the "Company") is a $834 million unitary
savings bank holding company and parent to Eagle Federal Savings Bank (the
"Bank"). The Bank is a federally chartered savings bank headquartered in
Bristol, Connecticut, which conducts business from 17 banking offices
located in Hartford, Litchfield, and northern Fairfield Counties. The
primary business of the Bank is to provide consumer banking services in
the communities in Connecticut that it serves. The Bank primarily invests
its funds in first mortgage loans on one-to-four family residential real
estate in Connecticut. The Bank's major source of funds is deposits from
the communities in which its banking offices are located.
LIQUIDITY - As a member of the Federal Home Loan Bank System, the Bank is
required to maintain liquid assets at 5% of its net withdrawable deposits
plus short-term borrowings. At March 31, 1994, Eagle Federal was in
compliance with the Federal Home Loan Bank liquidity requirements having a
liquidity ratio of 9.69% compared to 7.63% at September 30, 1993.
The Bank's principal sources of funds include deposits, loan payments
(including interest, amortization of principal and prepayments), earnings
and amortization on investments, maturing investments and Federal Home
Loan Bank advances. While the Bank historically has not been an active
seller of loans, it did sell approximately $10 million of fixed rate,
residential mortgage loans during the first quarter of fiscal 1994.
Proceeds from the loan sale were used to fund loan originations. Principal
uses of funds include loan originations and investment purchases, payments
of interest on deposits and payments to meet operating expenses. At
March 31, 1994, the Bank had approximately $39 million in loan commitments
outstanding, including $20.8 million in available home equity lines of
credit and $4.4 million in amounts due borrowers for construction loan
advances. It is expected that these and future loans will be funded by
deposits, loan repayments, investment maturities and amortization and
borrowings. The Bank has the capacity to borrow up to approximately $460
million in advances from the Federal Home Loan Bank of Boston and will
continue to consider this source of funds for lending. Federal Home Loan
Bank advances at March 31, 1994 were $33.1 million compared to $15.5
million at September 30, 1993.
Loan originations for the three months ended March 31, 1994 were $51.9
million compared to $43.7 million for the same period in 1993 and there
were no loans purchased in either period. Loans sold during the three
month period ended March 31, 1994 totaled $882,000 compared to $388,000
during the same period of 1993. Loan originations for the six months
ended March 31, 1994 and 1993 were $104.4 million and $104.6 million,
respectively. There were no loans purchased in the six months ended March
31, 1994 or March 31, 1993.
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
It is the Banks' general policy to purchase debt securities (including
mortgage-backed securities) with the intent and ability to hold to
maturity for purposes of earning interest income and meeting regulatory
liquidity requirements. Events which may be reasonably anticipated are
considered when determining the Company's intent to hold investment
securities to maturity. Such securities are classified as investment
securities and are stated at cost adjusted for amortization of premiums
and accretion of discounts. Debt securities are also classified as
"available for sale" when appropriate and accounted for at the lower of
cost or market. When a security available for sale is sold, the proceeds
are used to fund loans when deposit inflows are not adequate, the rates
offered on Federal Home Loan Bank advances are not favorable, and
liquidity ratios support such sales. The Bank also occasionally sells
securities available for sale to restructure an asset/liability mismatch.
There were $2.8 million of securities sold during the three month period
ended March 31, 1994 compared to $2.0 million sold during the same period
in 1993. There were no securities sold in the first quarter of either
fiscal 1994 or fiscal 1993.
REGULATORY CAPITAL REQUIREMENTS - The Bank is required by the Office of
Thrift Supervision ("OTS") to meet minimum capital requirements, which
include tangible capital, core capital and risk-based capital
requirements. The Bank's actual capital as reported to the OTS at March
31, 1994 exceeded the currently applicable tangible, core and risk-based
capital requirements as the following chart indicates (in thousands):
OTS Requirement Actual Excess
Tangible Capital $12,478 $61,069 $48,591
Core Capital 24,956 61,421 36,465
Risk-based Capital 33,659 64,094 30,435
ASSET/LIABILITY MANAGEMENT - The primary component of Eagle Financial's
earnings is net interest income. Eagle's asset/liability management
strategy is to maximize net interest income over time by reducing the
impact of fluctuating interest rates. This is accomplished by matching
the mix and maturities of its assets and liabilities. At the same time
Eagle's asset/liability strategies for managing interest rate risk must
also accommodate customer demands for particular types of deposit and loan
products. Eagle uses various asset/liability management techniques in an
attempt to maintain a profitable mix of financial assets and liabilities,
provide deposit and loan products that meet the needs of its market area,
and maintain control over interest rate risk resulting from changes in
interest rates.
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
Strategies employed by Eagle to manage the rate sensitivity of its assets
include origination of adjustable rate mortgage and consumer loans and
purchase of short-term and adjustable rate investments. Eagle Financial
also attempts to reduce the rate sensitivity of its liabilities by
emphasizing core deposits, which are less sensitive to changes in interest
rates, attracting longer term certificates of deposits when the market
permits, and using long term Federal Home Loan Bank advances. Management
will continue to monitor the impact of its borrowing and lending policies
on Eagle Financial's interest rate sensitivity.
NON-PERFORMING ASSETS - At March 31, 1994, Eagle Financial had total
non-performing assets in the amount of $9.3 million, or 1.11% of total
assets, including $5.1 million in non-performing loans and $4.2 million in
real estate owned and in-substance foreclosures. Loan loss reserves
totaled $4.6 million, or 90% of total non-performing loans. Most of the
real estate owned is in residential properties except for three local
pieces of commercial real estate valued at $589,000. At September 30,
1993, Eagle Financial had total non-performing assets in the amount of
$12.0 million, or 1.51% of total assets, including $6.5 million in
non-performing loans and $5.5 million in real estate owned and
in-substance foreclosures. Eagle Financial's loan delinquencies (greater
than 60 days) totaled $7.1 million, or 1.06% of total loans, at March 31,
1994 compared to $9.2 million, or 1.48% of total loans, at March 31, 1993.
The following table represents a breakdown of non-performing assets as of
March 31, 1994 (in thousands):
Foreclosed
Real Estate & Total
Non-performing In-substance Non-performing % of
Loans Foreclosures Assets Total
Mortgage Loans -
Residential $4,731 $3,397 $ 8,128 87.6%
Commercial R.E. 0 589 589 6.3%
Land Development 0 240 240 2.6%
Consumer loans 39 0 29 .3%
Home equity loans 298 0 298 3.2%
Total $5,058 $4,226 $ 9,284 100.0%
============== ============= ============== ======
-11-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
Management continued to add to the loan loss allowance during the quarter
ended March 31, 1994 based upon continued uncertainty in the local
economy. Provisions for loan losses totaled $300,000 for the quarter.
Management monitors the adequacy of the allowances for losses on loans and
real estate owned on an ongoing basis. While management uses available
information to recognize losses on loans and real estate owned, future
additions to the allowances may be necessary based on changes in economic
conditions, particularly in Connecticut. In connection with the
determination of the allowances for losses on loans and real estate owned,
management obtains independent appraisals for significant properties.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for losses
on loans and real estate owned. Such agencies may require the Bank to
recognize additions to the allowances based on their judgments of
information available to them at the time of the examination.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
GENERAL - Eagle Financial's net income for the three month period ended
March 31, 1994 was $1,704,000, or $.53 per share, a 13% increase over the
same period in 1993. Net interest income increased $532,000, or 8.1%, in
the 1994 period compared to the three months ended March 31, 1993.
Non-interest income increased $60,000, or 10.3%, in the three months ended
March 31, 1994. Other expenses increased $368,000, or 8.9% in the second
quarter of fiscal 1994.
INTREST INCOME - Interest income from loans and investments decreased
$351,000, or 2.5%, for the three months ended March 31, 1994 compared to
the same period in 1993. The decrease was attributable to a drop in the
average yield on loans and investments of 56 basis points which more than
offset a $39 million increase in average interest earning assets.
INTEREST EXPENSE - Interest expense on deposits and borrowed money
decreased $883,000, or 12.1%, for the three months ended March 31, 1994
compared to the same period in 1993. The $28 million increase in average
deposits and borrowed money between periods was more than offset by a 64
basis point decrease in the average cost of these funds.
NET INTEREST INCOME - Net interest income increased $532,000, or 8.1%, for
the second quarter of fiscal 1994 compared to the second quarter of fiscal
1993. The increase is attributable to growth in average loans and
ivestments in addition to an increase of 8 basis points in the average
interest rate spread.
-12-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
PROVISION FOR LOAN LOSSES - The provision for loan losses totaled $300,000
in the three month period ended March 31, 1994 compared to $325,000 in the
three month period ended March 31, 1993. Management monitors the adequacy
of the allowance for loan losses and periodically makes additions based
upon an ongoing assessment of the loan portfolio. These provisions are
based on an evaluation of the loan portfolio, past loan loss experience,
current economic conditions, volume, growth and composition of the loan
portfolio, and other relevant factors. The provisions are computed
quarterly based on a review of the loan portfolio. Management believes it
to be prudent to increase the loss allowance for loans in response to the
current market and economic environment. Eagle Financial's allowance for
loan losses is currently $4.6 million, which represents 90% of total
non-performing loans.
OTHER INCOME - Non-interest income increased $60,000, or 8.9%, for the
three months ended March 31, 1994 versus the same period in the prior
year. The increase is attributable to higher fees on deposit accounts.
OTHER EXPENSES - Non-interest expenses increased $368,000, or 8.9%, during
the three months ended March 31, 1994 compared to the three months ended
March 31, 1993. The largest contributing factor to the increase includes
higher real estate owned provisions and expenses and increased cost for
compensation and benefits.
COMPARISION OF THE SIX MONTHS ENDED MARCH 31, 1994 AND 1993
GENERAL - Eagle Financial had net income of $3,450,000, or $1.07 per
share, for the six months ended March 31, 1994, an increase of $356,000,
or 11.5%, compared to the same period of 1993. Net interest income
increased $829,000, or 6.2%, in the 1994 period. Other income increased
$247,000, or 20.8%, for the six months ended March 31, 1994 and other
expenses increased $886,000, or 10.9%.
INTEREST INCOME - Interest income increased $782,000, or 2.8%, in the six
months ended March 31, 1994. While average interest-earning assets
increased $40 million, the average yield on loans and investments was 59
basis points lower in the 1994 period.
INTEREST EXPENSE - Interest expense decreased $1,611,000, or 10.9%, in the
six month period ended March 31, 1994. Althougth average interest-bearing
liabilities increased $30 million, the cost of these funds was
substantially lower, from 4.21% for the six months ended March 31, 1993 to
3.60% for the six months ended March 31, 1994.
NET INTEREST INCOME - Net interest income increased $829,000, or 6.2%,
for the six months ended March 31, 1994 compared to the same period in
1993. The interest rate spread increased from 3.37% to 3.40%, while the
net interest margin increased from 3.60% to 3.63%.
PROVISION FOR LOAN LOSSES - Eagle Financial added $600,000 to the general
reserves during the six month period ended March 31, 1994. This compares
to $649,000 in general loan loss provisions for the six months ended
March 31, 1993.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
OTHER INCOME - Other income increased $247,000, or 20.8%, during the six
month period ended March 31, 1994 over the same period of 1993. The
increase is attributable to a $120,000 net gain on sale of mortgage loans
and to higher fee income on deposit accounts.
OTHER EXPENSES - Other expenses for the 1994 period increased $886,000, or
10.9%, compared to the six month period ended March 31, 1993. The largest
contributing factors to the increase include higher real estate owned
provisions and carrying costs and increased compensation and benefits.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - Eagle was required to adopt two
accounting pronouncements in the first quarter of fiscal 1994. The
cumulative effect of these accounting changes, net of related tax
benefits, was to reduce net income by approximately $30,000.
The adoption of SFAS No. 109, "Accounting for Income Taxes", resulted in a
tax benefit of approximately $1,273,000 in the quarter. SFAS No. 109 also
allows for a tax benefit to be recognized for certain real estate owned
and loan loss provisions that was not allowed under the prior accounting
rules. The adoption of SFAS No. 106 "Accounting for Postretirement
Benefits Other than Pensions", resulted in a one-time, cumulative catch-up
adjustment that, net of the related tax benefit, reduced net income in the
first quarter by approximately $1,303,000.
-14-
EAGLE FINANCIAL CORP.
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SIGNATURES
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Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Eagle Financial Corp.
(Registrant)
Date: May 16, 1994 By: /s/ Ralph T. Linsely
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President and Chief
Executive Officer
Date: May 16, 1994 By: /s/ Mark J. Blum
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Vice President and Chief
Financial Officer
