SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
---------------------
For the quarterly period ended: September 30, 1996
EAGLE FINANCIAL SERVICES, INC
(Exact name of registrant as specified in its charter)
Virginia 54-1601306
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Post Office Box 391, Berryville, Virginia 22611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 540-955-2510
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities 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 of each of the Registrant's classes of
common stock as of the latest practicable date:
Class Outstanding at
Common Stock, $2.50 par value November 11, 1996
697,013
No Exhibits
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are provided at the page numbers
indicated.
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995.................... 5
Consolidated Statements of Income for
the Periods Ended September 30, 1996 and 1995............ 6 - 7
Consolidated Statement of Changes in Stockholder's Equity
for the Nine Months Ended September 30, 1996 and 1995....... 8
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1996 and 1995............. 9 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Eagle Financial Services, Inc. had net income of $1,006,256 for the first nine
months of 1996. The Company had net income in the first nine months of 1995 of
$951,185. This is an increase of 5.8% or $55,071.
The results of operations for the nine month periods ended September 30, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.
The Company's earnings have improved primarily through an increase in net
interest income which has increased $179,257 or 4.6% comparing September 1996 to
1995. Interest income and expense have both increased. Interest income has
increased $522,949 or 8.0% and interest expense has increased $343,692 or 13.1%.
Other income has improved because of increasing service fees. Other income has
increased $140,872 or 23.2%. The Limited Partnership entitled Johnson Williams
Limited Partnership is near break-even, losing $603 in the first nine months of
1996 compared to a loss of $22,697 in 1995. Other expenses have also increased
from last year to this year. They have increased $215,201 or 7.1% comparing last
year's first nine months to this year. Salaries and benefits have increased by
$178,035 which have been partially offset by the decrease in accruals for FDIC
premiums. Those accruals have decreased by $99,981.
<PAGE>
The Company strives to have a balanced investment portfolio meeting both the
needs of liquidity and profit. The liquidity ratio is still a strong 24.89% on
September 30, 1996 as compared to 24.52% in December 31, 1995.
The Company has a $270,091 investment in the Johnson Williams Limited
Partnership. This amounts to a 37.7% interest in the project. The limited
partnership refurbished an old school and converted it into forty apartment
units that provide much needed housing for the low to moderate income elderly.
The project had gotten off to a slow start and is now becoming fully occupied.
This investment should improve our community in accordance with the Community
Reinvestment Act and generate low income housing credits.
The allowance for loan losses is an estimate of an amount adequate to provide
for potential losses in the loan portfolio of the Company. The level of loan
losses is affected by general economic trends as well as conditions affecting
individual borrowers. As a result, management's judgment regarding the amount of
the allowance is necessarily approximated and imprecise. The allowance is also
subject to regulatory examinations and determinations as to adequacy, which may
take into account such factors as the methodology used to calculate the
allowance and the size of the allowance in comparison to peer companies
identified by regulatory agencies.
The provision for loan losses in the first nine months of 1996 was $185,000 as
compared to $180,000 in 1995.
The Company had net charge-offs of $130,274 and $103,593 in the first nine
months of 1996 and 1995, respectively. Net charge-offs to average loans was
0.15% in 1996 and 0.08% in 1995.
Total nonperforming assets which consist of nonaccrual loans and foreclosed
properties were $46,605 at September 30, 1996. This is a decrease of $430,124
since December 31, 1996 which is the result of two loans guaranteed by Farm
Service Agency (FSA) being removed from nonaccrual status.
Loans past due 90 days and still accruing interest because they are both well
secured and in the process of collection amounted to $1,592,890 at September 30,
1996 and $1,694,502 at December 31, 1995. A significant portion of the loans
past due greater than ninety days is attributable to three large real estate
loan customers and one agricultural loan customer. All four loans are well
secured and a loss is not foreseen by management, further they have been
properly considered during an assessment of the adequacy of the Allowance for
Loan Losses. The Allowance for Loan Losses as a percentage of nonperforming
assets and loans past due 90 days and still accruing interest was 54.0% at
September 30, 1996 and 47.6% at December 31, 1995.
Potential problem loans are included in the categories mentioned above. Loans
are viewed as potential problem loans when management questions the ability of
such borrowers to comply with current repayment terms. These loans are subject
to constant management attention, and their status is reviewed on a regular
basis. The potential problem loans identified at September 30, 1996 are well
secured with collateral values that exceed the principal balance.
<PAGE>
The Purchase and Assumption Agreement with First Union National Bank, dated
October 26, 1995, was finalized on March 15, 1996 with the opening of the
Stephens City branch. The branch is located in a market targeted by management
as a growing population center. Deposits in the branch on September 30, 1996
were $7.1 million compared to $5.1 million in deposits that were assumed on
March 15, 1996.
The Company's total capital to asset ratio as of September 30, 1996 was 11.26%
as compared to 10.80% on December 31, 1995. Capital adequacy is reviewed monthly
by the Board of Directors. Risk-based capital for both periods exceeded the
minimum limits under current regulatory guidelines.
Return on average assets for the first nine months (annualized) of 1996 was
1.08% as compared to 1.13% in the first nine months of 1995. Return on average
equity for the first nine months (annualized) of 1996 was 9.87%, compared to
10.18% for the first nine months of 1995.
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Balance Sheets
As of September 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C>
Assets
Cash and due from banks ............................. $ 4,582,487 $ 4,106,467
Securities held to maturity (fair value:
1996, $24,241,272; 1995, $23,332,317) ............. 24,712,606 23,290,979
Securities available for sale, at fair value ........ 1,685,275 3,327,169
Federal funds sold .................................. 412,000 --
Loans (net of unearned income) ...................... 86,676,823 85,871,203
Less allowance for loan losses ................... (859,670) (828,104)
Net loans ............................... 85,817,153 85,043,099
Premises and equipment .............................. 4,236,112 3,493,722
Other real estate owned ............................. 46,605 46,605
Intangible assets ................................... 669,479 --
Other assets ........................................ 2,491,220 2,184,812
Total assets ............................. $ 124,652,937 $ 121,492,853
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest bearing .......................... $ 13,772,368 $ 11,971,823
Interest bearing ............................. 95,917,052 93,640,739
Total deposits ............................ $ 109,689,420 $ 105,612,562
Federal funds purchased ......................... -- 1,867,000
Other liabilities ............................... 920,874 892,872
Total liabilities ........................ $ 110,610,294 $ 108,372,434
Stockholders' Equity
Preferred Stock, $10 par value; authorized
500,000 shares; no shares outstanding ....... $ -- $ --
Common Stock, $2.50 par value; authorized
1,500,000 shares; issued 1996, 697,013;
issued 1995, 695,285 shares ................ 1,742,533 1,738,212
Surplus ......................................... 1,841,885 1,782,186
Retained Earnings ............................... 10,465,921 9,612,627
Unrealized loss on securities
available for sale, net ..................... (7,696) (12,606)
Total stockholders' equity ............... $ 14,042,643 $ 13,120,419
Total liabilities and stockholders' equity $ 124,652,937 $ 121,492,853
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Periods Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C>
Interest Income
Interest and fees on loans ......... $ 1,925,600 $ 1,922,912 $ 5,783,949 $ 5,575,934
Interest on securities held to
maturity:
Taxable interest income ........ 340,284 200,579 976,603 626,993
Interest income exempt from
federal income taxes ......... 38,237 39,293 121,863 122,685
Interest and dividends on securities
available for sale, taxable .... 28,090 45,424 105,189 144,867
Interest on federal funds sold ..... 21,019 23,976 38,326 32,502
Total interest income .... $ 2,353,230 $ 2,232,184 $ 7,025,930 $ 6,502,981
Interest Expense
Interest on deposits ............... $ 987,229 $ 913,830 $ 2,921,454 $ 2,573,740
Interest on federal funds purchased 70 14 53,428 54,667
Interest on Federal Home Loan Bank
advances ....................... -- -- -- 2,783
Total interest expense ... $ 987,299 $ 913,844 $ 2,974,882 $ 2,631,190
Net interest income ...... $ 1,365,931 $ 1,318,340 $ 4,051,048 $ 3,871,791
Provision For Loan Losses .......... 65,000 60,000 185,000 180,000
Net interest income after
provision for loan losses $ 1,300,931 $ 1,258,340 $ 3,866,048 $ 3,691,791
Other Income
Trust Department income ............ $ 42,900 $ 35,930 $ 133,144 $ 110,930
Service charges on deposits ........ 119,033 98,061 384,283 269,349
Other service charges and fees ..... 71,463 43,696 161,425 145,097
Gain (loss) on equity investment ... (792) (1,042) (603) (22,697)
Other operating income ............. 51,926 60,555 71,137 105,835
$ 284,530 $ 237,200 $ 749,386 $ 608,514
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Periods Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C>
Other Expenses
Salaries and wages ................ $ 452,964 $ 387,393 $ 1,293,841 $ 1,115,806
Pension and other employee benefits 132,702 127,692 358,171 338,880
Occupancy expenses ................ 77,368 60,702 239,573 174,802
Equipment expenses ................ 141,407 107,852 344,823 284,934
FDIC assessment ................... 500 (5,504) 2,000 101,981
Intangible amortization ........... 21,732 -- 36,641 --
Other operating expenses .......... 268,199 376,352 965,278 1,008,723
$ 1,094,872 $ 1,054,487 $ 3,240,327 $ 3,025,126
Income before income taxes $ 490,589 $ 441,053 $ 1,375,107 $ 1,275,179
Income Tax Expense ................ 138,780 111,701 368,851 323,994
Net Income .............. $ 351,809 $ 329,352 $ 1,006,256 $ 951,185
Earnings Per Share ................ $ 0.50 $ 0.47 $ 1.44 $ 1.37
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Periods Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Securities
Available
Common Retained for Sale,
Stock Surplus Earnings Net Total
<S> <C>
Balance, December 31, 1994 .......... $ 1,726,685 $ 1,633,368 $ 8,732,419 ($123,098) $ 11,969,374
Net income ........................ 951,185 951,185
Net change in unrealized (loss)
on securities available for sale . 103,341 103,341
Issuance of common stock,
dividend investment plan ....... 4,513 57,224 61,737
Dividend declared - June - $0.21
per share ...................... (145,041) (145,041)
Retirement of common shares,
dividend investment plan ........ (8) (109) (117)
Balance, September 30, 1995 ......... $ 1,731,190 $ 1,690,483 $9,538,563 ($ 19,757) $ 12,940,479
Balance, December 31, 1995 .......... $ 1,738,212 $ 1,782,186 $ 9,612,627 ($ 12,606) $ 13,120,419
Net income ........................ 1,006,256 1,006,256
Net change in unrealized (loss)
on securities available for sale 4,910 4,910
Issuance of common stock,
dividend investment plan ....... 4,330 59,841 64,171
Dividend declared - June - $0.22
per share ...................... (152,962) (152,962)
Retirement of common shares,
dividend investment plan ....... (9) (142) (151)
Balance, September 30, 1996 ......... $ 1,742,533 $ 1,841,885 $ 10,465,921 ($ 7,696) $ 14,042,643
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Nine Months Ended
1996 1995
<S> <C>
Cash Flows from Operating Activities
Net income .............................................. $ 1,006,256 $ 951,185
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .......................................... 286,531 203,938
Provision for loan losses ............................. 185,000 180,000
Amortization of intangible assets ..................... 36,641 9,450
Net loss on equity investment ......................... 603 22,697
(Increase) in other assets ............................ (320,301) (245,092)
Increase in other liabilities ......................... 28,002 179,200
Net cash provided by operating activities ............... $ 1,222,732 $ 1,301,378
Cash Flows from Investing Activities
Proceeds from maturities of securities held to maturity . $ 3,381,707 $ 4,866,480
Purchases of securities held to maturity ................ (4,798,424) (50,955)
Proceeds from maturities of securities available for sale 1,746,394 271,000
Purchases of securities available for sale .............. (104,500) (101,929)
Purchase of bank premises and equipment ................. (1,028,921) (728,590)
Acquisition of intangible assets ........................ (692,830) --
Net (increase) in loans ................................. (959,054) (4,569,097)
Net cash (used in) investing activities ................. ($2,455,628) ($ 313,091)
Cash Flows from Financing Activities
Net increase in demand deposits, NOW accounts,
money market and savings accounts ................... $ 6,437,178 $ 748,476
Net increase (decrease) in certificates of deposit ...... (2,360,320) 792,667
Net (decrease) in federal funds purchased ............... (1,867,000) --
Net (decrease) in Federal Home Loan Bank advances ....... -- (3,000,000)
Cash dividends paid ..................................... (88,791) (83,304)
Retirement of common stock .............................. (151) (117)
Net cash provided by (used in) financing activities ..... $ 2,120,916 ($1,542,278)
Increase (decrease) in cash and cash equivalents ........ $ 888,020 ($ 553,991)
Cash and Cash Equivalents
Beginning ........................................... 4,106,467 5,813,599
Ending .............................................. $ 4,994,487 $ 5,259,608
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Nine Months Ended
1996 1995
<S> <C>
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest ............................................. $3,059,409 $2,577,853
Income taxes ......................................... $ 428,936 $ 408,974
Supplemental Schedule of Non-Cash Financing
Activities:
Issuance of common stock, dividend investment plan .... $ 64,171 $ 61,737
Unrealized gain (loss) on securities available for sale $ 4,910 $ 103,341
</TABLE>
<PAGE>
EAGLE FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(1) In the opinion of management, the accompanying unaudited
financial statements contain adjustments (consisting of only
normal recurring accruals) necessary to present fairly the
financial position and the results of operations for the periods
presented.
These statements should be read in conjunction with the financial
statements and accompanying notes included in the Annual Report on Form
10-K as of December 31, 1995.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant and its subsidiary are not the subject of legal
proceedings which, in the opinion of management, will have a
material effect on the financial position of the registrant or
its results of operations.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
<PAGE>
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 SERVICES, INC.
Date: November 11, 1996 /s/ LEWIS M. EWING
--------------------
Lewis M. Ewing
President and CEO
Date: November 11, 1996 /s/ JOHN R. MILLESON
---------------------
John R. Milleson
Executive Vice President and
Treasurer
Date: November 11, 1996 /s/ JAMES W. MCCARTY, JR.
--------------------------
James W. McCarty, Jr.
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,582
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 412
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,685
<INVESTMENTS-CARRYING> 24,713
<INVESTMENTS-MARKET> 24,241
<LOANS> 86,677
<ALLOWANCE> 860
<TOTAL-ASSETS> 124,653
<DEPOSITS> 109,689
<SHORT-TERM> 0
<LIABILITIES-OTHER> 921
<LONG-TERM> 0
0
0
<COMMON> 3,584
<OTHER-SE> 10,458
<TOTAL-LIABILITIES-AND-EQUITY> 124,653
<INTEREST-LOAN> 5,784
<INTEREST-INVEST> 1,204
<INTEREST-OTHER> 38
<INTEREST-TOTAL> 7,026
<INTEREST-DEPOSIT> 2,921
<INTEREST-EXPENSE> 2,975
<INTEREST-INCOME-NET> 4,051
<LOAN-LOSSES> 185
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,240
<INCOME-PRETAX> 1,375
<INCOME-PRE-EXTRAORDINARY> 1,375
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,006
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 4.78
<LOANS-NON> 0
<LOANS-PAST> 1,592
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 589
<ALLOWANCE-OPEN> 828
<CHARGE-OFFS> 209
<RECOVERIES> 56
<ALLOWANCE-CLOSE> 860
<ALLOWANCE-DOMESTIC> 76
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 784
</TABLE>
