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, 1996
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 (or 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) 4,544,398
- --------------------------------------------------------------------------------
(Class) (Approximate No. of Shares
Outstanding at February 11, 1997
(Excluding Treasury Stock)
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
INDEX
PART 1 - FINANCIAL INFORMATION
Consolidated Balance Sheets at December 31, 1996
and September 30, 1996 2
Consolidated Statements of Income for the Three Months
Ended December 31, 1996 and 1995 3
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1996 and 1995 4-5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-14
PART II - OTHER INFORMATION 15
SIGNATURES 16
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
December 31, September 30,
Assets 1996 1996
- -------------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 22,351 $ 20,288
Interest-bearing deposits 27,300 27,989
------------- -------------
Cash and cash equivalents 49,651 48,277
Investment securities available for sale (amortized cost $8,148 at
December 31, 1996 and $13,458 at September 30, 1996) 8,175 13,453
Investment securities held to maturity (market value $1,065 at
December 31, 1996 and $1,036 at September 30, 1996) 988 987
Mortgage-backed securities available for sale (amortized cost $415,679
at December 31, 1996 and $375,010 at September 30, 1996) 417,530 372,018
Mortgage-backed securities held to maturity (market value $79,233 at
December 31, 1996 and $77,973 at September 30, 1996) 79,721 78,102
Loans held for sale 265 705
Loans receivable, net of allowance for loan losses of $8,435
at December 31, 1996 and $8,592 at September 30, 1996 828,594 814,488
Accrued interest receivable:
Loans 4,974 5,046
Investment securities 318 563
Mortgage-backed securities 3,347 3,280
Real estate owned, net 3,154 3,050
Stock in Federal Home Loan Bank of Boston, at cost 11,355 10,448
Premises and equipment, net 9,735 9,796
Prepaid expenses and other assets 40,243 42,596
------------- -------------
Total Assets $ 1,458,050 $ 1,402,809
============= =============
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Deposits $ 1,067,480 $ 1,059,355
Federal Home Loan Bank advances 226,534 207,008
Repurchase agreements and other borrowed money 14,670 14,670
Advance payments by borrowers for taxes and insurance 9,037 4,973
Accrued expenses and other liabilities 35,120 15,655
------------- -------------
Total Liabilities 1,352,841 1,301,661
------------- -------------
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; 4,590,771 shares issued at December 31,
1996 and 4,581,440 shares issued at September 30, 1996, including
47,373 shares held in treasury 46 46
Additional paid-in capital 60,781 60,635
Retained earnings 44,450 42,598
Cost of common treasury stock (362) (362)
Net unrealized gain (loss) on available for sale securities 294 (1,769)
------------- -------------
Total Shareholders' Equity 105,209 101,148
------------- -------------
Total Liabilities and Shareholders' Equity $ 1,458,050 $ 1,402,809
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for share data)
Three Months Ended
December 31,
------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 16,093 $ 14,489
Interest on mortgage-backed securities 8,030 6,021
Interest on investment securities 208 718
Dividends on investment securities 175 380
Interest on overnight investments 373 541
------------ -------------
Total interest income 24,879 22,149
------------ -------------
Interest expense:
Interest on deposits 11,099 10,264
Interest on Federal Home Loan Bank advances 3,121 1,203
Interest on repurchase agreements
and other borrowed money 209 1,281
------------ -------------
Total interest expense 14,429 12,748
------------ -------------
Net interest income 10,450 9,401
Provision for loan losses 525 225
------------ -------------
Net interest income after provision for loan losses 9,925 9,176
------------ -------------
Non-interest income:
Net gain (loss) on sale of securities - 631
Gain (loss) from mortgage banking activities 20 6
NOW account service fees 741 617
Other customer service fees 183 211
Other income 351 438
------------ -------------
Total non-interest income 1,295 1,903
------------ -------------
Non-interest expense:
Compensation, payroll taxes and benefits 2,783 2,721
Office occupancy 1,043 679
Advertising 282 267
Net cost of real estate owned operations 192 222
Federal deposit insurance premiums 252 436
Service bureau processing fees 383 405
Amortization of intangible assets 635 347
Other expense 780 905
------------ -------------
Total non-interest expense 6,350 5,982
------------ -------------
Income before income taxes 4,870 5,097
Income taxes 1,974 2,173
------------ -------------
Net Income $ 2,896 $ 2,924
============ =============
Net Income per share:
Primary $ 0.61 $ 0.63
============ =============
Fully Diluted $ 0.61 $ 0.62
============ =============
Average number of shares and equivalent shares:
Primary 4,742,496 4,670,281
Fully Diluted 4,764,111 4,686,883
Dividends per share $ 0.23 $ 0.23
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three Months Ended December 31,
-------------------------------
1996 1995
---------- -----------
<S> <C> <C>
Net Income: $ 2,896 $ 2,924
OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash provided (used)
by operating activities
Provision for loan losses 525 225
Provision for losses on real estate owned -- 53
Provision for depreciation and amortization 351 217
Amortization (accretion) of deferred fees on loans 26 (138)
Amortization of premiums (accretion of discounts) on investment
and mortgage-backed securities 319 79
Amortization of core deposit and other intangibles 635 347
Realized loss (gain) on sale of real estate owned, net 2 (53)
Realized gain on sale of securities, net -- (631)
Gain from mortgage banking activities (20) (6)
Origination of loans held for sale (2,178) (18,847)
Proceeds from sales of loans held for sale 2,638 3,245
Decrease (increase) in accrued interest receivable 250 (591)
Decrease (increase) in prepaid expenses and other assets 2,680 (2,373)
Net Loan origination fees (costs) (148) 406
Decrease in accrued expenses and other liabilities (4,587) (2,769)
--------- ---------
Net cash provided (used) by operating activities 3,389 (17,912)
--------- ---------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 5,000 3,500
Principal payments on investment securities available for sale 329 1,084
Purchases of investment securities available for sale -- (9,997)
Proceeds from sales of mortgage-backed securities available for sale -- 74,217
Principal payments on mortgage-backed securities available for sale 16,257 19,898
Principal payments on mortgage-backed securities held to maturity 1,223 4,726
Purchases of mortgage-backed securities available for sale (36,963) (105,037)
Purchases of mortgage-backed securities held to maturity (2,866) (18,975)
Principal payments on loans receivable 29,191 23,513
Loan originations (44,697) (35,727)
Decrease in real estate owned -- 66
Proceeds from sales of real estate owned 891 532
Purchases of premises and equipment (290) (419)
Increase in investment in Federal Home Loan Bank stock (907) --
--------- ---------
Net cash used by investing activities (32,832) (42,619)
--------- ---------
</TABLE>
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
FINANCING ACTIVITIES:
Net increase in Passbook, NOW and Money Market accounts 3,697 2,655
Net increase in certificate accounts 4,428 15,563
Borrowings under Federal Home Loan Bank advances 164,025 65,710
Repayment of Federal Home Loan Bank advances (144,499) (33,300)
Net increase (decrease) in borrowed money -- (11,905)
Net increase in advance payments by borrowers for taxes and insurance 4,064 5,703
Proceeds from exercise of stock options and dividends reinvested 146 283
Cash dividends (1,044) (1,027)
--------- ---------
Net cash provided by financing activities 30,817 43,682
--------- ---------
Increase (decrease) in cash and cash equivalents 1,374 (16,849)
Cash and cash equivalents at beginning of period 48,277 63,307
--------- ---------
Cash and cash equivalents at end of period $ 49,651 $ 46,458
========= =========
NON-CASH INVESTING ACTIVITIES:
Transfer of mortgage-backed securities held to maturity to
mortgage-backed securities available for sale $ -- $ 90,603
Securities purchased not yet settled 20,278 --
Transfer of loans to real estate owned 997 944
========= =========
SUPPLEMENTAL DISCLOSURES:
Income taxes paid $ 25 $ 1,500
Interest paid 14,714 13,351
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
Eagle Financial Corp. (the "Holding Company") is a unitary savings bank holding
company and parent of Eagle Federal Savings Bank (the "Bank") (collectively
known as the "Company"). The Bank is a federally chartered savings bank
headquartered in Bristol, Connecticut and conducts business from nineteen
traditional branch offices and four in-store supermarket branch offices located
in Hartford and eastern Litchfield 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, 1996 and 1995 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 1996 Annual Report on Form 10-K.
(2) Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of"
became effective October 1, 1996. SFAS No. 121 requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. No events or
circumstances have occurred which would require the Company to make adjustments
to the carrying value of any long-lived assets during the three months ended
December 31, 1996.
SFAS No. 122, "Accounting for Mortgage Servicing Rights" became effective
October 1, 1996. 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. During the three months ended December 31, 1996, the Company capitalized
approximately $20,000 of servicing rights related to the origination and sale of
mortgage loans.
SFAS No. 123 "Accounting for Stock-Based Compensation" became effective October
1, 1996. SFAS No. 123 establishes a fair value based method of accounting for
stock-based compensation plans. This statement also establishes fair value as
the measurement basis for transactions in which an entity acquires goods or
services from non-employees in exchange for equity instruments. The Company will
continue to follow the accounting requirements of APB Opinion No. 25 and will
provide the pro forma financial disclosure required by SFAS No. 123 in the 1997
Annual Report.
SFA No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities was issued in June 1996 and is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, except for those transfers relating to
secured borrowings, repurchase agreements and similar transactions which are
effective after December 31, 1997. Earlier application is not permitted. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities. Those standards
are based on consistent application of a financial components approach that
focuses on control. Under the approach, after a transfer of financial assets, an
entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. This statement
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. The Bank believes
that the adoption of SFAS No. 125 will not be material to its financial
statements. SFAS No. 125 amends SFAS No. 122.
<PAGE>
(3) 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,
1996 1995
---------- ----------
Balance, beginning of period $ 8,592 $ 7,457
Provisions charged to operations 525 225
Charge-offs (697) (459)
Recoveries 15 --
------------ ------------
Balance, end of period $ 8,435 $ 7,223
============ ============
(4) 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):
<TABLE>
<CAPTION>
Three months ended December 31,
1996 1995
---------- ----------
<S> <C> <C>
Net (gain) loss on sales of real estate owned $ 2 $ (53)
Provision for losses charged to operations - 53
Expenses of holding real estate owned,
net of rental income 190 222
------------ ------------
$ 192 $ 222
============ ============
</TABLE>
(5) Subsequent Event
On January 28, 1997, the Company announced the signing of a definitive merger
agreement with MidConn Bank. The transaction, which is expected to close in May
1997, would result in the acquisition of MidConn Bank through a stock-for-stock
tax free exchange. MidConn Bank common stock shareholders would receive .86
shares of the Holding Company's common stock for each share of MidConn Bank
common stock that they own. The closing price of the Holding Company common
stock on January 28, 1997 was $29.25. As a result, MidConn Bank will be merged
into the Bank with the transaction being accounted for as a
pooling-of-interests. At December 31, 1996, MidConn Bank had total assets of
$363.2 million, total loans of $278.1 million, total deposits of $311.8 million
and shareholders' equity of $35.4 million.
<PAGE>
EAGLE FINANCIAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL - The Bank conducts business from nineteen traditional banking offices
and four in-store supermarket branch offices located in Hartford and Litchfield
counties. 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, 1996, the Company had total assets of $1.46 billion compared to
$1.40 billion at September 30, 1996, an increase of $55 million, or 3.9%. Total
outstanding loans, which includes loans receivable, net, and loans held for
sale, increased $13.7 million to $828.9 million at December 31, 1996 from $815.2
million at September 30, 1996. Total securities, including mortgage-backed
securities, were $506.4 million at December 31, 1996 compared to $464.6 million
at September 30, 1996, an increase of $41.9 million or 9.0%. Total deposits
increased $8.1 million, from $1.06 billion at September 30, 1996 to $1.07
billion at December 31, 1996. Total borrowings were $241.2 million at December
31, 1996, an increase of $19.4 million, or 8.8%, from the September 30, 1996
total of $221.8 million. At December 31, 1996 shareholders' equity represented
7.22% of total assets compared to 7.21% at September 30, 1996.
LIQUIDITY - The Holding Company's liquidity and ability to pay dividends to its
shareholders is primarily derived from and dependent on the ability of its Bank
subsidiary to pay dividends to the Holding Company. Under current Office of
Thrift Supervision ("OTS") regulations, because the Bank meets the OTS capital
requirements, it may pay out the higher of 100% of net income to date over the
calendar year and 50% of surplus capital existing at the beginning of the
calendar year, or 75% of its net income over the most recent four-quarter
period, without regulatory supervisory approval. In general, the Bank pays
dividends to the Holding Company only to the extent that funds are needed to
cover operating expenses and dividends paid to shareholders. At December 31,
1996, the Bank had approximately $34 million in excess capital over the OTS
risk-based requirement, one half of which would be available for declaration of
dividends to the Holding Company. The OTS regulations permit the OTS to prohibit
capital distribution under certain circumstances.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
As a member of the Federal Home Loan Bank ("FHLB") system, the Bank is required
to maintain liquid assets at 5% of its net withdrawable deposits plus short-term
borrowings. At December 31, 1996, the Bank was in compliance with the applicable
liquidity requirements having an average liquidity ratio of 6.33% for the three
months ended December 31, 1996.
The Bank's principal sources of funds include deposits, loan payments (including
interest, amortization of principal and prepayments), interest and principal
amortization on investment and mortgage-backed securities, maturing investments,
Federal Home Loan Bank advances and other borrowings. Principal uses of funds
include loan originations, investment purchases, payments of interest on
deposits and borrowed money and payments to meet operating expenses. At December
31, 1996, the Bank had approximately $59.5 million in loan commitments
outstanding, including $31.2 million in available home equity lines of credit.
It is expected that these and future loans will be funded by deposits,
investment maturities and amortization, loan repayments and borrowings. The Bank
has the capacity to borrow an additional $454 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.
During the three months ended December 31, 1996 the Bank originated loans
totaling $46.9 million compared to $54.6 million for the same period in 1995.
Principal repayments on loans totaled $29.2 million and $23.5 million for the
three months ended December 31, 1996 and 1995, respectively. The Bank purchased
$39.8 million and $134.0 million of investment and mortgage-backed securities
during the quarters ended December 31, 1996 and 1995, respectively. The security
purchases were offset by sales, maturities and principal payments that in
aggregate totaled $22.4 million and $103.4 million for the three months ended
December 31, 1996 and 1995, respectively.
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 an available
for sale security 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 no securities sold during the three
months ended December 31, 1996 compared to $74.2 million for the same period in
1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The significant level of security sales during the three months ended December
31, 1995 can be primarily attributed to the sale of $58.8 million of fixed rate
mortgage-backed securities created from the securitization in August 1995 of
certain mortgage loans within the Bank's loan portfolio. The sales represented
the final step of a balance sheet restructuring which converted approximately
$150 million of fixed rate mortgage loans into adjustable rate mortgage-backed
securities. The sales resulted in a realized gain of $631,000.
REGULATORY CAPITAL REQUIREMENTS - The Bank is required by the 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, 1996 exceeded the currently applicable tangible, core and
risk-based capital requirements as the following chart indicates (dollars in
thousands):
<TABLE>
<CAPTION>
Required Actual Excess
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tangible Capital $ 21,444 1.50% $ 77,094 5.39% $ 55,650
Core Capital $ 42,887 3.00% $ 77,094 5.39% $ 34,207
Risk-based Capital $ 51,102 8.00% $ 85,125 13.33% $ 34,023
</TABLE>
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.
Strategies employed by Eagle to manage the rate sensitivity of its assets
include origination of adjustable rate mortgage and consumer loans and purchase
of adjustable rate and short average life fixed 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NON-PERFORMING ASSETS - At December 31, 1996, the Company had total
non-performing assets of $13.6 million, or 0.93% of total assets, including
$10.5 million in non-performing loans and $3.2 million in real estate owned. The
allowance for loan losses totaled $8.4 million, or 81% of total non-performing
loans, at December 31, 1996. Information regarding non-performing assets and
other asset quality data for December 31, 1996 and September 30, 1996 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1996
-------------------------- ---------------------------
<S> <C> <C>
Non-performing loans $ 10,473 $ 9,279
Real estate owned, net 3,154 3,050
-------------------------- ---------------------------
Non-performing assets $ 13,627 $ 12,329
========================== ===========================
Impaired loans:
Non-performing (1) $ 2,632 $ 1,984
Performing $ 4,465 $ 4,799
========================== =========================
Non-performing assets/total assets 0.93% 0.88%
Non-performing loans/gross loans receivable 1.25% 1.13%
Allowance for loan losses/non-performing loans 80.5% 92.6%
</TABLE>
(1) Non-performing impaired loans are included in total non-performing loans.
The Company's non-performing assets are predominately residential in nature.
Assets secured by residential property account for approximately 91% of the
non-performing assets at December 31, 1996. All non-performing assets and
restructured loans are reviewed quarterly as part of the internal review
process.
Of the total $7.1 million of impaired loans at December 31, 1996, $6.5 million
had an impairment reserve of $619,000 attributed to them and $561,000 million
had no impairment reserve attributed to them. The impairment reserve on impaired
loans represents an allocation from the existing allowance for loan losses.
The Bank's method of recognition of interest income on impaired loans is
consistent with its general policy to generally discontinue the accrual of
interest when a loan becomes 90 days past due as to principal or interest.
Interest income recognized on impaired loans totaled $78,764 and $23,649 for
the three months ended December 31, 1996 and 1995, respectively.
Loans delinquent between 30 and 90 days totaled $5.9 million at December 31,
1996 compared to $6.9 million at September 30, 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The following table represents a breakdown of non-performing assets as of
December 31, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
Non- Real Total non-
performing estate performing % of
loans owned, net assets Total
----------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage loans:
One to four family residential $ 6,393 2,814 9,207 67.5%
Multi-family residential 1,743 315 2,058 15.1%
Land - 25 25 0.2%
Commercial 978 - 978 7.2%
Non-mortgage loans:
Commercial 257 - 257 1.9%
Consumer 30 - 30 0.2%
Home Equity 1,072 - 1,072 7.9%
----------------------------------------------------------
Total $ 10,473 3,154 13,627 100%
==========================================================
</TABLE>
The allowance for loan losses decreased slightly to $8.4 million at December 31,
1996 from $8.6 million at September 30, 1995 due to net charge-offs totaling
$682,000 exceeding the loan loss provision for the period. The loan loss
provision of $525,000 for the three months ended December 31, 1996 increased
$300,000 when compared to the three months ended December 31, 1995. The increase
in the provision is in recognition of a trend of higher loan charge-offs.
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 changes in economic conditions,
particularly here in Connecticut. In connection with the determination of the
allowances for losses 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 borrower's 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
RESULTS OF OPERATIONS
Comparison of the Three Month Periods Ended December 31, 1996 and 1995.
GENERAL
Net income for the three months ended December 31, 1996 was $2.9 million, a
slight decline of $28,000 from the net income reported for the three months
ended December 31, 1995. Fully diluted earnings per share were $0.61 for the
quarter ended December 31, 1996 compared to $0.62 for the quarter ended December
31, 1995.
Net interest income increased $1.0 million to $10.4 million for the three months
ended December 31, 1996 versus $9.4 million a year earlier. The improvement in
net interest income was partly offset by a $300,000 increase in the provision
for loan losses and a $368,000 increase in non-interest expense when comparing
the December 31, 1996 and 1995 quarters. In addition, the quarter ended December
31, 1995 included a gain on the sales of securities of $631,000 compared to no
gains recorded from sales of securities in 1996.
NET INTEREST INCOME
Net interest income was $10.4 million for the three months ended December 31,
1996, an increase of $1.0 million, or 11%, from the prior years results.
Interest income increased $2.7 million to $24.9 million for the quarter ended
December 31, 1996 from $22.2 million. Interest expense increased $1.7 million to
$14.4 million for the three months ended December 31, 1996 versus $12.7 million
for the comparable period in 1995. The increases in both interest income and
interest expense were the result of significant increases of $164.4 million, or
14%, in the average balances of interest earning assets and $180.8 million, or
16%, in interest bearing liabilities. Loan growth accounted for $97.6 million of
the increase in interest earning assets and deposit growth accounted for $104.8
million of the increase in interest bearing liabilities. The impact from the
average balance growth was partially offset by declines in both the yield on
interest earning assets and the cost of interest bearing liabilities. The yield
on interest earning assets declined from 7.50% in 1995 to 7.40% in 1996. The
cost of interest bearing liabilities decreased to 4.41% for the quarter ended
December 31, 1996 from 4.56% for the comparable quarter in 1995. As a result,
the interest rate spread increased to 2.99% for the three months ended December
31, 1996 compared to 2.94% for the three months ended December 31, 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $525,000 for the three months ended December
31, 1996, an increase of $300,000 from the $225,000 reported during the three
months ended December 31, 1995. The increase is principally in recognition of
a trend of higher loan charge-offs.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NON-INTEREST INCOME
Non-interest income decreased $608,000 from $1.9 million for the quarter ended
December 31, 1995 to $1.3 million for the quarter ended December 31, 1996. The
decrease was principally the result of gains recorded from the sale of
securities in 1995 of $631,000 compared to no security gains recorded in 1996.
Customer service fees increased $96,000 from the quarter ended December 31, 1995
to the quarter ended December 31, 1996, reflective of the overall larger
customer base.
NON-INTEREST EXPENSE
Non-interest expense increased $368,000 to $6.4 million for the three months
ended December 31, 1996 from $6.0 million for the three months ended December
31, 1995. Increases in office occupancy of $364,000, due to the operation of the
branches acquired in January 1996 and the supermarket branches, and amortization
of intangible assets of $288,000, due to the goodwill created in the branch
acquisition, were principally responsible for the higher non-interest expense
total. Partially off-setting the previously noted increases was a $184,000
decline in Federal deposit insurance premium due to the recapitalization of the
Savings Association Insurance Fund in September 1996.
INCOME TAXES
Income tax expense was $2.0 million for the three months ended December 31, 1996
compared compared to $2.2 million for the three months ended December 31, 1995,
a decrease of $200,000. The decrease is due to lower pre-tax income and the
reduction of the corporate state tax rate from 11.25% during the quarter ended
December 31, 1995 to 10.5% during the quarter ended December 31, 1996.
<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 29, 1996, the Company filed a Current Report on Form 8-K which
reported under Item 5 - Other Events an announcement that the Company had
declared a dividend of one Right for each outstanding share of common stock
of the Company, pursuant to a Rights Agreement. The distribution would be
payable to stockholders of record as of the close of business on November 1,
1996. Each Right would entitle the holder thereof to purchase under certain
circumstances one one-thousandth of a share of a new Series A Participating
Preferred Stock, par value $.01 per share, at a purchase price of $100 per
share.
On December 19, 1996, the Company filed a Current 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, 1996 would be held at
11:00 a.m. on January 28, 1997.
<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, 1997 By: /s/ Mark J. Blum
-----------------------------------
Mark J. Blum
Vice President, Chief Financial Officer
Date: February 14, 1997 By: /s/ Barbara S. Mills
-----------------------------------
Barbara S. Mills
Vice President, Treasurer
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