<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
Eagle Financial Corp.
(Exact name of Registrant as specified in its charter)
Delaware 06-1194047
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
222 Main Street, Bristol, CT 06010
(Address of principal executive offices)
(860) 314-6400
(Registrant's telephone number, including area code)
Not applicable
(Former name, address and fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 12 months (of for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding for the issuer's classes of common
stock, as of the latest practicable date.
Common Stock (par value $0.01) 4,484,689
------------------------------ ----------------------------
(Class) (Approximate No. of Shares
Outstanding at February 1, 1996)
(Excluding Treasury Stock)
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
INDEX
PART 1 - FINANCIAL INFORMATION
Consolidated Balance Sheets at December 31, 1995
(unaudited) and September 30, 1995 2
Consolidated Statements of Income for the Three Months
Ended December 31, 1995 and 1994 (unaudited) 3
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1995 and 1994 (unaudited) 4-5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-14
PART II - OTHER INFORMATION 15
SIGNATURES 16
1
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
12/31/95 9/30/95
(Unaudited)
---------- -------
<S> <C> <C>
Assets
Cash and amounts due from depository institutions $ 29,184 $ 22,670
Interest-bearing deposits 17,274 40,637
---------- ----------
Cash and cash equivalents 46,458 63,307
Investment securities available for sale (amortized cost $51,317 at
December 31, 1995 and $54,386 at September 30, 1995) 51,020 53,816
Investment securities held to maturity (market value $1,000 at
December 31, 1995 and $2,543 at September 30, 1995) 978 2,476
Mortgage-backed securities available for sale (amortized cost $351,657
at December 31, 1995 and $231,145 at September 30, 1995) 354,162 232,160
Mortgage-backed securities held to maturity (market value $47,040 at
December 31, 1995 and $124,763 at September 30, 1995) 47,282 123,625
Loans held for sale 18,075 2,467
Loans receivable, net of allowance for loan losses of $7,223
at December 31, 1995 and $7,457 at September 30, 1995 724,633 713,856
Accrued interest receivable:
Loans 5,031 4,900
Investment securities 1,226 972
Mortgage-backed securities 2,814 2,608
Real estate owned, net 2,474 2,128
Stock in Federal Home Loan Bank of Boston, at cost 8,945 8,945
Premises and equipment, net 8,268 8,066
Prepaid expenses and other assets 19,304 17,960
---------- ----------
Total Assets $1,290,670 $1,237,286
========== ==========
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 969,969 $ 951,751
Federal Home Loan Bank advances 105,560 73,150
Reverse repurchase agreements and other borrowed money 70,412 82,317
Advance payments by borrowers for taxes and insurance 11,201 5,498
Accrued expenses and other liabilities 37,807 32,110
---------- ----------
Total Liabilities 1,194,949 1,144,826
---------- ----------
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; 4,526,064 shares issued at December
31, 1995 and 4,507,107 shares issued at September 30, 1995, including
47,373 shares held in treasury 45 45
Additional paid-in capital 59,797 59,514
Retained earnings 34,989 33,092
Cost of common treasury stock (362) (362)
Employee stock ownership plan stock (94) (94)
Net unrealized gain on available for sale securities 1,346 265
---------- ----------
Total Shareholders' Equity 95,721 92,460
---------- ----------
Total Liabilities and Shareholders' Equity $1,290,670 $1,237,286
========== ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
2
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for share data)
Three Months Ended December 31,
------------------------------
(unaudited)
1995 1994
---- ----
Interest income:
Interest and fees on loans $ 14,489 $ 15,368
Interest on mortgage-backed securities 6,021 1,997
Interest on investment securities 732 867
Dividends on investment securities 907 518
---------- ----------
Total interest income 22,149 18,750
---------- ----------
Interest expense:
Interest on deposits 10,264 8,261
Interest on Federal Home Loan Bank advances 1,203 478
Interest on reverse repurchase agreements and
other borrowed money 1,281 149
---------- ----------
Total interest expense 12,748 8,888
---------- ----------
Net interest income 9,401 9,862
Provision for loan losses 225 225
---------- ----------
Net interest income after provision for
loan losses 9,176 9,637
---------- ----------
Non-interest income:
Net gain (loss) on sale of securities 631 (104)
Net gain on sale of loans 6 -
NOW account service fees 617 517
Other customer service fees 211 142
Other income 438 422
---------- ----------
Total non-interest income 1,903 977
---------- ----------
11,079 10,614
---------- ----------
Non-interest expense:
Compensation, payroll taxes and benefits 2,721 2,675
Office occupancy 679 627
Advertising 267 232
Net cost of real estate owned operations 222 111
Federal deposit insurance premiums 436 491
Service bureau processing fees 405 391
Amortization of intangible assets 347 404
Other expense 905 763
---------- ----------
Total non-interest expense 5,982 5,694
---------- ----------
Income before income taxes 5,097 4,920
Income taxes 2,173 2,040
---------- ----------
Net Income $ 2,924 $ 2,880
========== ==========
Income per share:
Primary $ 0.63 $ 0.64
========== ==========
Fully Diluted $ 0.62 $ 0.63
========== ==========
Average number of shares and equivalent shares:
Primary 4,670,281 4,524,143
Fully Diluted 4,686,883 4,539,319
Dividends per share $ 0.23 $ 0.19
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three Months Ended December 31,
-------------------------------
(unaudited)
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,924 $ 2,880
Adjustments to reconcile net income to net cash provided (used)
by operating activities
Provision for loan losses 225 225
Provision for losses on real estate owned 53 (3)
Provision for depreciation and amortization 217 150
Accretion of fees on loans (138) 58
Amortization of premiums (accretion of discounts) on investment
and mortgage-backed securities 79 (178)
Amortization of core deposit and other intangibles 347 404
Realized (gain) loss on sale of real estate owned, net (53) 13
Realized (gain) loss on sale of securities, net (631) 104
Gain on sale of loans (6) -
Increase in loans held for sale (15,608) -
Increase in accrued interest receivable (591) (446)
Increase in prepaid expenses and other assets (2,373) (3,806)
Loan origination fees 406 80
Increase (decrease) in accrued expenses and other liabilities (2,769) 2,790
---------- ----------
Net cash provided (used) by operating activities (17,918) 2,271
---------- ----------
INVESTING ACTIVITIES:
Proceeds from sales of investment securities availiable for sale - 2,210
Proceeds from maturities of investment securities 3,500 1,300
Principal payments on investment securities availiable for sale 1,084 2,223
Principal payments on investment securities held to maturity - 1,521
Purchases of investment securities available for sale (9,997) -
Purchases of investment securities held to maturity - (1,400)
Proceeds from sales of mortgage-backed securities available
for sale 74,217 -
Principal payments on mortgage-backed securities available for sale 19,898 1,020
Principal payments on mortgage-backed securities held to maturity 4,726 2,066
Purchases of mortgage-backed securities available for sale (105,037) -
Purchases of mortgage-backed securities held to maturity (18,975) (28,810)
Principal payments on loans receivable 39,119 20,272
Loan originations (54,572) (37,752)
Proceeds from sales of loans 3,245 354
Decrease in real estate owned 66 314
Proceeds from sales of real estate owned 532 1,332
Purchases of premises and equipment (419) (607)
---------- ----------
Net cash used by investing activities (42,613) (35,957)
---------- ----------
FINANCING ACTIVITIES:
Net increase (decrease) in Passbook, NOW and Money Market accounts 2,655 (13,978)
Net increase (decrease) in certificate accounts 15,563 37
Borrowings under Federal Home Loan Bank advances 65,710 19,745
Principal payments under Federal Home Loan Bank advances 33,300 (8,975)
Net increase (decrease) in reverse repurchase agreements and other
borrowed money (11,905) 27,407
Net increase in advance payments by borrowers for taxes and
insurance 5,703 5,098
Proceeds from exercise of stock options and dividends reinvested 283 151
Proceeds from sale of common stock - 16,673
Cash dividends (1,027) (839)
---------- ----------
Net cash provided by financing activities 43,682 45,319
---------- ----------
Increase (decrease) in cash and cash equivalents (16,849) 11,633
Cash and cash equivalents at beginning of period 63,307 24,652
---------- ----------
Cash and cash equivalents at end of period $ 46,458 $ 36,285
=========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(dollars in thousands)
Three Months Ended December 31,
------------------------------
(unaudited)
1995 1994
---- ----
<S> <C> <C>
NON-CASH INVESTING ACTIVITIES:
Transfer of investment securities to investment securities
available for sale $ - $ 53,124
Transfer of mortgage-backed securities held to maturity to
mortgage-backed securities available for sale 90,603 18,529
Transfer of loans to real estate owned 944 367
======= =======
SUPPLEMENTAL DISCLOSURES:
Income taxes paid $ 1,500 $ 1,700
Interest paid 13,351 9,277
======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
5
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
Eagle Financial Corp. (the "Company") is the holding company and parent of Eagle
Federal Savings Bank (the "Bank"). The Bank serves customers from twenty-three
branch offices located in Hartford, Litchfield and northern Fairfield counties.
The accompanying unaudited, consolidated financial statements include 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
three month periods ended December 31, 1995 and 1994 are not necessarily
indicative of the results which may be expected for the entire fiscal year. The
accompanying unaudited, consolidated financial statements should be read in
conjunction with the consolidated financial statements contained in the
Company's 1995 annual report on Form 10-K.
Certain amounts as of September 30, 1995 and for the three months ended December
31, 1994 have been reclassified to conform to the December 31, 1995 presentation
for comparative purposes. Such reclassifications had no effect on net income.
(2) Accounting Pronouncements
Effective October 1, 1995, the Bank adopted Statements of Financial Accounting
Standards ("SFAS") No. 114 "Accounting by Creditors for Impairment of a Loan"
and No. 118 "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." SFAS No. 114 and SFAS No. 118 require that
creditors evaluate the collectability of both contractual interest and
contractual principal of all loans when identifying impaired loans. Impaired
loans shall have impairment measured based on the present value of the expected
future cash flows discounted at the loan's effective interest rate, the
observable market price of the loan, or the fair value of the collateral if the
loan is collateral-dependent. SFAS No. 114 and SFAS No. 118 allow the exclusion
of large groups of small-balance homogenous loans that are collectively
evaluated for impairment such as residential and consumer loans. As a result of
this allowable exclusion the requirements of these statements have been applied
to the following loan types within the loan portfolio; construction loans, land
loans, commercial mortgages, multi-family loans and commercial loans.
The adoption of these statements had no impact on the results of operations. At
December 31, 1995, the Bank had $2.6 million of impaired loans, of which $1.3
million had allowances for loan losses of $489,000 attributed to them. The
allowance for loan losses on impaired loans represents an allocation from the
existing allowance for loan losses.
The Bank's method of recognizing interest income is to generally discontinue the
accrual of interest when a loan becomes 90 days past due as to principal or
interest. Upon adoption of SFAS No. 114 and SFAS No. 118, the Bank's method for
recognition of interest income on impaired loans is consistent with the method
for recognition of interest income on all loans. Interest income recognized on
impaired loans totaled $23,649 for the three months ended December 31, 1995.
6
<PAGE>
SFAS No. 122, "Accounting for Mortgage Servicing Rights," was issued in May 1995
and is effective for fiscal years beginning after December 15, 1995. Earlier
application is permitted. SFAS No. 122 requires the capitalization of mortgage
servicing rights acquired through either purchase of mortgage loan servicing or
origination and sale or securitization of mortgage loans with retention of
servicing. SFAS No. 122 also requires the analysis of capitalized mortgage
servicing rights for potential impairment to be based on the fair value of the
rights. The Company has not decided whether SFAS No. 122 will be adopted prior
to the required effective date. The effect of adoption by the Company will vary
based on the extent of mortgage servicing rights existing upon adoption and
mortgage servicing rights acquired subsequent to adoption. At this time, the
adoption of SFAS No. 122 is not expected to have a material effect on the
Company's financial position or results of operations.
In November 1995, the Financial Accounting Standards Board ("FASB") issued a
Special Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities that provides additional
guidance relating to the application of SFAS No. 115. In connection with the
issuance of this Special Report the FASB allowed all organizations the ability
to review the current portfolio classification between held to maturity,
available for sale and trading and make a one-time reclassification of
securities between categories during the period from November 15, 1995 to
December 31, 1995.
Effective December 1, 1995, the Bank made a one-time reclassification of
securities from the held to maturity classification to the available for sale
classification in accordance with the Special Report. A total of $90.6 million
of mortgage-backed securities were reclassified.
(3) Branch Office Sale
On December 18, 1995 the Bank entered into a definitive agreement with Union
Savings Bank of Danbury to sell its seven branch offices in the greater Danbury
market area. The Bank will sell all real property related to the seven branch
offices and approximately $180 million in deposits. The transaction is expected
to be completed on March 1, 1996 with the Bank receiving the equivalent of a 9%
deposit premium, or $16 million before income taxes.
7
<PAGE>
(4) Allowance for Loan Losses
The following is a summary of the activity in the allowance for loan losses for
the periods indicated (dollars in thousands):
Three months ended December 31,
1995 1994
---- ----
Balance, beginning of period $ 7,457 $ 8,311
Provisions charged to operations 225 225
Charge-offs (459) (143)
Recoveries - -
------ ------
Balance, end of period $ 7,223 $ 8,393
====== ======
(5) Net Cost of Real Estate Owned Operations
The net cost of real estate owned operations is summarized as follows for the
periods indicated (dollars in thousands):
Three months ended December 31,
1995 1994
---- ----
Net (gain) loss on sales of real estate owned $ (53) $ 13
Provision for losses charged to operations 53 (3)
Expenses of holding real estate owned,
net of rental income 222 101
----- -----
$ 222 $ 111
===== =====
(6) Subsequent Event
On January 19, 1996 the Bank consummated the previously announced purchase of
certain loans and assumption of all deposits related to four former Shawmut Bank
Connecticut branch offices and one former Fleet Financial Group branch office.
As a result of the transaction the Bank assumed $253.1 million in deposits and
purchased $42.7 million in loans, of which $29.5 million were commercial loans.
8
<PAGE>
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 $1.29 billion 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 23 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 or, when loan demand is low,
mortgage-backed securities with similar characteristics. The Bank's major source
of funds is deposits from the communities in which its banking offices are
located.
The Bank's earnings depend largely on its net interest income, which is the
difference between interest earned on its loans and investments versus the
interest paid on its deposits and borrowed funds. Additional earnings are
derived from a variety of financial services provided to customers, mainly
deposit and loan products.
At December 31, 1995, the Company had total assets of $1.29 billion compared to
$1.24 billion at September 30, 1995, an increase of $53 million or 4.3%. Total
outstanding loans which includes loans receivable, net, and loans held for sale,
increased $26.7 million to $742.7 million at December 31, 1995 from $716.0
million at September 30, 1995. Total deposits increased 1.9%, or $18.2 million,
from $951.8 million at September 30, 1995 to $970.0 million at December 31,
1995. At December 31, 1995 shareholders' equity represented 7.42% of total
assets compared to 7.47% at September 30, 1995. Total securities, including
mortgage-backed securities, were $453.4 at December 31, 1995 compared to $412.1
million at September 30, 1995, an increase of $41.3 million or 10%.
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 December 31, 1995, the Bank was in compliance with the
Federal Home Loan Bank liquidity requirements having a liquidity ratio of 7.03%
compared to 7.55% at September 30, 1995.
The Bank's principal sources of funds include deposits, loan payments (including
interest, amortization of principal and prepayments), interest and principal
amortization on debt securities, maturing investments and Federal Home Loan Bank
advances and other borrowings. Principal uses of funds include loan originations
and investment purchases, payments of interest on deposits and payments to meet
operating expenses. At December 31, 1995, the Bank had approximately $54.0
million in loan commitments outstanding, including $23.4 million in available
home equity lines of credit and $9.7 million in amounts due borrowers for
construction loan advances. It is expected that these and future loans will be
funded by deposits, investment maturities and principal amortization, loan
repayments, and borrowings. The Bank has the capacity to borrow an additional
$559.1 million in advances from the Federal Home Loan Bank of Boston and will
continue to consider this source of funds for lending and investment purchases.
Federal Home Loan Bank advances at December 31, 1995 were $105.6 million
compared to $73.2 million at September 30, 1995, an increase of $32.4 million.
Other borrowed money decreased $11.9 million to $70.4 million at December 31,
1995 compared to $82.3 million at September 30, 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Loan origination's for the three months ended December 31, 1995 were $54.6
million compared to $37.8 million for the same period in 1994.
It has been the Company's general policy to purchase debt securities (including
mortgage-backed securities) for purposes of earning interest income and meeting
regulatory liquidity requirements. At date of purchase, a decision is made to
classify debt securities as either held to maturity or available for sale.
Various factors are considered when determining whether debt securities are
classified as either available for sale or held to maturity, including:
repricing characteristics, liquidity needs, expected security life, yield and
overall asset/liability strategies. Events which may be reasonably anticipated
are considered when determining the Company's ability to hold debt securities to
maturity. For those debt securities for which the Company has determined it has
both the intent and ability to hold to maturity, a classification of held to
maturity is made. Other debt securities are classified as available for sale.
When a security available for sale is sold, the proceeds are generally used to
fund loans when either deposit inflows have not been adequate, the rates offered
on Federal Home Loan Bank advances are not favorable, or liquidity ratios
support such sales. The Bank may also occasionally sell securities available for
sale to restructure an asset/liability mismatch. There were $74.2 million of
securities sold during the three months ended December 31, 1995 compared to $2.2
million for the same period in 1994. Of the total securities sold during the
three months ended December 31, 1995, $58.8 million, or 79%, represented the
sale of the remaining mortgage-backed securities created by the securitization
of fixed rate mortgage loans by the Bank in the fourth quarter of fiscal 1995.
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 December 31, 1995 exceeded the currently
applicable tangible, core and risk-based capital requirements as the following
chart indicates (dollars in thousands):
Required Actual Excess
----------------------------------------------
Tangible Capital $ 19,188 1.50% $ 84,116 6.58% $ 64,928
Core Capital 38,376 3.00% 84,116 6.58% 45,740
Risk-based Capital 45,746 8.00% 89,551 15.66% 43,805
ASSET/LIABILITY MANAGEMENT - The primary component of the Company's earnings is
net interest income. The Company'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 the Company's asset/liability
strategies for managing interest rate risk must also accommodate customer
demands for particular types of deposit and loan products. The Company 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
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
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 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 when such rates are competitive. Management will continue to monitor
the impact of its borrowings and lending policies on Eagle's sensitivity to
interest rate fluctuations.
NON-PERFORMING ASSETS - At December 31, 1995, the Company had total
non-performing assets of $13.4 million, or 1.04% of total assets, including
$10.9 million in non-performing loans and $2.5 million in real estate owned. The
allowance for loan losses totaled $7.2 million or 66% of total non-performing
loans at December 31, 1995. Information regarding non-performing assets and
other asset quality data for December 31, 1995 and September 30, 1995 is as
follows (dollars in thousands):
December 31, 1995 September 30, 1995
----------------- ------------------
Non-performing loans $ 10,966 $ 11,130
Real estate owned, net 2,474 2,439
--------- ----------
Non-performing assets $ 13,440 $ 13,569
========= ==========
Restructured loans $ 2,968 $ 2,653
========= ==========
Impaired loans $ 2,594
=========
Non-performing assets/total assets 1.04% 1.10%
Non-performing loans/loan receivable 1.46% 1.54%
Allowance for loan losses/non-performing loans 66% 67%
The Company's non-performing assets are almost exclusively residential in
nature. Assets secured by residential property account for approximately 88% of
the non-performing assets at December 31, 1995. Non-performing assets declined
by $129,000, or 1.0%, for the three months ended December 31, 1995 from
September 30, 1995.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The Company makes every effort to work with delinquent borrowers to negotiate an
affordable payment schedule. This strategy has been more prevalent in hardship
cases where rates have adjusted upward one or more times on adjustable rate
mortgages. The terms of the restructures were primarily reductions in interest
rates to a rate approximating the current rate on newly originated one year
adjustable rate mortgage loans. The rate reduction is generally in effect for a
period of six to twelve months and is then subject to review. Loans secured by
one to four family residential properties represents $2.7 million or 89% of
restructured loans of which $1.7 million are owner occupied primary residences.
All non-performing assets and restructured loans are reviewed quarterly as part
of the internal review process.
Loans delinquent between 30 and 90 days totaled $5.2 million at December 31,
1995 compared to $5.1 million at September 30, 1995.
The following table represents a breakdown of non-performing assets as of
December 31, 1995 (dollars in thousands):
Non- Real Total non-
performing estate performing % of
loans owned, net assets Total
---------------------------------------------
Residential mortgage loans
One to four family $ 9,360 $ 1,997 $ 11,357 84.50%
Multi-family - 435 435 3.24%
Land loans 123 42 165 1.23%
Commercial loans 277 - 277 2.06%
Consumer loans 10 - 10 0.07%
Home equity loans 1,196 - 1,196 8.90%
---------------------------------------------
Total $ 10,966 $ 2,474 $ 13,440 100.00%
=============================================
The allowance for loan losses declined to $7.2 million at December 31, 1995 from
$7.5 million at September 30, 1995 due principally to charge-offs of
approximately $459,000 for the three month period ended December 31, 1995. The
charge-offs in 1995 compare to charge-offs of $143,000 for the same period in
1994. Provisions for loan losses were $225,000 for the three months ended
December 31, 1995 compared to $225,000 for the three months ended December 31,
1994. Management monitors the adequacy of the allowances for loan and real
estate owned losses on a continual 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
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
changes in economic conditions, particularly here in Connecticut. In connection
with the determination of the allowances for losses on loans and real estate
owned, management reviews and grades all adversely classified loans as part of
its internal loan review process. Each loan is reviewed to determine loss
exposure and the borrowers ability to pay. 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 allowances 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.
RESULTS OF OPERATIONS
Comparison of The Three Month Periods Ended December 31, 1995 and 1994
GENERAL - Net income for the three months ended December 31, 1995 was $2.92
million versus $2.88 million for the three months ended December 31, 1994, an
increase of 15%. The increase in net income can be attributed to a $926,000
increase in non-interest income offset by a $461,000 decrease in net interest
income and a $288,000 increase in non-interest expense when comparing the three
months ended December 31, 1995 and 1994. Despite an increase in the dollar
amount of net income from 1994 to 1995, fully diluted earnings per share
declined from $0.63 in 1994 to $0.62 in 1995. This primarily resulted from the
additional shares issued from the secondary stock offering during the three
months ended December 31, 1994 being outstanding for the entire three month
period ended December 31, 1995.
NET INTEREST INCOME - Net interest income for the three months ended December
31, 1995 was $9.4 million, a decline of $461,000, or 4.7%, from $9.9 million in
the comparable period in 1994. The principal factors causing this decline was
the increase in the average cost of deposits during the respective three month
periods from 3.52% in 1994 to 4.30% in 1995 and an increase in the average
balance of FHLB advances and other borrowed money from $41.2 million during the
three months ended December 31, 1994 to $162.2 million during the three months
ended December 31, 1995. These factors resulted in the total cost on interest
bearing liabilities increasing to 4.56% in 1995 from 3.63% in 1994, a total of
93 basis points.
PROVISION FOR LOAN LOSSES - The provision for loan losses was $225,000 for the
three months ended December 31, 1995 and was equal to the amount recorded in the
comparable period ended December 31, 1994. The loan loss allowance totaled $7.2
million at December 31, 1995 and represented 0.97% of loans receivable and 66%
of non-performing loans.
NON-INTEREST INCOME - For the three months ended December 31, 1995 non-interest
income increased $926,000, or 95%, to $1.9 million from $977,000 during the
three months ended December 31, 1994. The increase was predominately the result
of a gain of $631,000 on sale of securities in 1995 versus a loss on sale of
securities of $104,000 in 1994. Other non-interest income increased $191,000, or
17.7%, when comparing the quarters ended December 31, 1995 and December 31,
1994.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NON-INTEREST EXPENSE - Non-interest expense was $6.0 million for the three
months ended December 31, 1995, an increase of $288,000 from the $5.7 million
recorded for the three months ended December 31, 1994. A 100% increase in the
net cost of real estate owned operations of $111,000 to $222,000 for the three
months ended December 31, 1995 represented the only significant fluctuation
between the comparable three month periods.
INCOME TAXES - Income taxes increased $133,000 to $2.2 million for the three
months ended December 31, 1995 compared to the three months ended December 31,
1994 principally due to higher pre-tax income. The effective tax rates for the
three months ended December 31, 1995 and 1994 were 42.6% and 41.5%,
respectively.
14
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
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 Matter to a Vote of Security Holders
Not applicable
Item 5 - Other Information
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
On October 13, 1995 Eagle filed a report on Form 8-K which reported under Item 5
- - Other Events, an announcement that Eagle had entered into definitive
agreements with Fleet Bank, National Association ("Fleet"), and Shawmut Bank
Connecticut, National Association ("Shawmut"), to purchase certain assets and
assume the deposit liabilities of one Fleet branch office and four Shawmut
branch offices.
On November 9, 1995 Eagle filed a report on Form 8-K which reported under Item 5
- - Other Events, an announcement that the Company's annual meeting for the fiscal
year ended September 30, 1995 would be held at 11:00 a.m. on January 23, 1996.
15
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EAGLE FINANCIAL CORP.
Date: February 14, 1996 By: /s/ Mark J. Blum
-------------------------------
Mark J. Blum
Vice President, Chief Financial Officer
Date: February 14, 1996 By: /s/ Barbara S. Mills
--------------------------------
Barbara S. Mills
Vice President, Treasurer
16
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000792369
<NAME> EAGLE FINANCIAL CORP
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1.00000
<CASH> 29,184
<INT-BEARING-DEPOSITS> 17,274
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 51,020
<INVESTMENTS-CARRYING> 978
<INVESTMENTS-MARKET> 1,000
<LOANS> 724,633
<ALLOWANCE> 7,223
<TOTAL-ASSETS> 1,290,670
<DEPOSITS> 969,969
<SHORT-TERM> 154,485
<LIABILITIES-OTHER> 49,008
<LONG-TERM> 21,487
<COMMON> 45
0
0
<OTHER-SE> 95,676
<TOTAL-LIABILITIES-AND-EQUITY> 1,290,670
<INTEREST-LOAN> 14,489
<INTEREST-INVEST> 7,660
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 22,149
<INTEREST-DEPOSIT> 10,264
<INTEREST-EXPENSE> 2,484
<INTEREST-INCOME-NET> 9,401
<LOAN-LOSSES> 6
<SECURITIES-GAINS> 631
<EXPENSE-OTHER> 5,982
<INCOME-PRETAX> 5,097
<INCOME-PRE-EXTRAORDINARY> 5,097
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,924
<EPS-PRIMARY> 0.630
<EPS-DILUTED> 0.620
<YIELD-ACTUAL> 7,500
<LOANS-NON> 10,966
<LOANS-PAST> 0
<LOANS-TROUBLED> 2,968
<LOANS-PROBLEM> 2,594
<ALLOWANCE-OPEN> 7,457
<CHARGE-OFFS> 459
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 7,223
<ALLOWANCE-DOMESTIC> 7,457
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
[/R]
</TABLE>
