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: March 31, 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 May 10, 1996
695,283
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
March 31, 1996 and December 31, 1995.................................7
Consolidated Statements of Income for
the Three Months Ended March 31, 1996 and 1995.......................8
Consolidated Statement of Changes in Stockholder's
Equity for the Three Months Ended March 31, 1996 and 1995............9
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1996 and 1995.................10 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Eagle Financial Services, Inc. had net income of $310,099 in the first three
months of 1996. The Company had net income in the first three months of 1995 of
$286,870. This is an increase of 8.1% or $23,229.
The results of operations for the three month periods ended March 31, 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 $29,695 or 2.3% comparing quarter end 1996
to 1995. Interest income and expense have both increased. Interest income has
increased $198,555 or 9.4% and interest expense has increased $168,860 or 20.2%.
Other income has improved because of increasing service fees last August. Other
income has increased $38,576 or 21.1%. The Limited Partnership entitled Johnson
Williams Limited Partnership has also begun to break even. The project lost
$1,306 during the first quarter as compared to a loss of $20,329 last year
during the first quarter. Other expenses have also increased from last year to
this year. They have increased $33,016 or 3.3% comparing last year's first
quarter to this year. Salaries and benefits have increased by $39,469 which have
been partially offset by the decrease in accruals for FDIC premiums. Those
accruals have decreased by $52,742.
The Company strives to have a balanced investment portfolio meeting both the
needs of liquidity and profit. The liquidity ratio is still a strong 25.02% on
March 31, 1996 as compared to 24.52% in December 31, 1995.
<PAGE>
The Company has a $269,388 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 $60,000 as
compared to $60,000 in 1995.
The Company had net charge-offs of $45,491 and $38,690 in the first three months
of 1996 and 1995, respectively. Net charge-offs to average loans was 0.05% in
1996 and 0.05% in 1995.
Total nonperforming assets, which consist of nonaccrual loans and foreclosed
properties, were $470,728 at March 31, 1996.
Other real estate owned decreased by $103,399 over the past two years, leaving
the Company with only one property left to sell. Proper reserves were accrued
for each property and only minimal immaterial losses have occurred on sales.
Loans past due 90 days and still accruing interest because they are both well
secured and in the process of collection amounted to $1,143,807 at March 31,
1996 and $1,694,502 at December 31, 1995. This decrease in loans past due
greater than ninety days is attributable to two loans secured by real estate
being classified as non accrual. Both loans are well collateralized and
guaranteed by Farm Service Agency (FSA). These loans are monitored closely and
management would not expect to incur any material losses should foreclosure
occur. The Allowance for Loan Losses as a percentage of nonperforming assets and
loans past due 90 days and still accruing interest was 52.2% at March 31, 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 March 31, 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.
The Company's total capital to asset ratio as of March 31, 1996 was 10.90% as
compared to 10.80% in 1995. Capital adequacy is reviewed monthly by the Board of
Directors. Risk based capital for both periods well exceeded the minimum limits
under the new guidelines.
Return on average assets for the first three months (annualized) of 1995 was
1.03% as compared to 1.04% in the first three months of 1995. Return on average
equity (annualized) for the same period was 9.34%, compared to 9.45% for 1995.
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Balance Sheets
As of March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C>
Assets
Cash and due from banks $4,560,486 $4,106,467
Securities held to maturity (fair value:
1996, $24,755,789; 1995, $23,332,317) 25,059,809 23,290,979
Securities available for sale, at fair value 2,472,354 3,327,169
Federal funds sold -- --
Loans (net of unearned income) 84,716,122 85,871,203
Less allowance for loan losses (842,612) (828,104)
-------------- ----------------
Net loans 83,873,510 85,043,099
Bank premises and equipment 4,284,644 3,493,722
Other real estate owned 46,605 46,605
Intangible assets 737,348 --
Other assets 2,269,452 2,184,812
-------------- ----------------
Total assets $123,304,208 $121,492,853
============== ================
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest bearing $12,482,283 $11,971,823
Interest bearing 95,494,626 93,640,739
-------------- ----------------
Total deposits $107,976,909 $105,612,562
Federal funds purchased 901,000 1,867,000
Other liabilities 992,205 892,872
-------------- ----------------
Total liabilities $109,870,114 $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, 695,283;
issued 1995, 695,285 shares 1,738,207 1,738,212
Surplus 1,782,115 1,782,186
Retained Earnings 9,922,726 9,612,627
Unrealized loss on securities
available for sale, net (8,954) (12,606)
-------------- ----------------
Total stockholders' equity $13,434,094 $13,120,419
-------------- ----------------
Total liabilities and stockholders' equity $123,304,208 $121,492,853
============== ================
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Three Months Ended March 31, 1996 and 1995
Three Months Ended
March 31,
1996 1995
---------- ----------
Interest Income
Interest and fees on loans $1,910,514 $1,794,133
Interest on securities held to maturity:
Taxable interest income 308,424 216,833
Interest income exempt from
federal income taxes 41,425 41,696
Interest and dividends on securities
available for sale 41,739 49,554
Interest on federal funds sold 3,507 4,838
---------- ----------
Total interest income $2,305,609 $2,107,054
---------- ----------
Interest Expense
Interest on deposits $957,938 $807,240
Interest on federal funds purchased 47,260 26,315
Interest on Federal Home Loan Bank
advances --- 2,783
---------- ----------
Total interest expense $1,005,198 $836,338
---------- ----------
Net interest income $1,300,411 $1,270,716
Provision For Loan Losses 60,000 60,000
---------- ----------
Net interest income after
provision for loan losses $1,240,411 $1,210,716
---------- ----------
Other Income
Trust Department income $48,353 $37,500
Service charges on deposits 118,396 79,486
Other service charges and fees 43,633 63,643
Loss on equity investment (1,306) (20,329)
Other operating income 12,677 22,877
---------- ----------
$221,753 $183,177
---------- ----------
Other Expenses
Salaries and wages $407,092 $359,827
Pension and other employee benefits 105,554 113,350
Occupancy expenses 76,341 57,605
Equipment expenses 60,969 85,492
FDIC assessment 1,000 53,742
Intangible amortization 2,199 ---
Other operating expenses 384,181 334,304
---------- ----------
$1,037,336 $1,004,320
---------- ----------
Income before income taxes $424,828 $389,573
Income Tax Expense 114,729 102,703
---------- ----------
Net Income $310,099 $286,870
========== ==========
Earnings Per Share $0.45 $0.42
========== ==========
<PAGE>
<TABLE>
<CAPTION>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Period Ended March 31, 1996 and 1995
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 286,870 286,870
Net change in unrealized (loss)
on securities available for sale 59,404 59,404
Retirement of common shares,
dividend investment plan (3) (48) (51)
---------- ---------- ---------- ---------- -----------
Balance, March 31, 1995 $1,726,682 $1,633,320 $9,019,289 ($63,694) $12,315,597
========== ========== ========== ========== ===========
Balance, December 31, 1995 $1,738,212 $1,782,186 $9,612,627 ($12,606) $13,120,419
Net income 310,099 310,099
Net change in unrealized (loss)
on securities available for sale 3,652 3,652
Retirement of common shares,
dividend investment plan (5) (71) (76)
---------- ---------- ---------- ---------- -----------
Balance, March 31, 1996 $1,738,207 $1,782,115 $9,922,726 ($8,954) $13,434,094
========== ========== ========== ========== ===========
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- ----------
<S> <C>
Cash Flows from Operating Activities
Net income $310,099 $286,870
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 77,243 62,975
Amortization of intangible assets 3,150 3,150
Loss on equity investment 1,306 20,329
Provision for loan losses 60,000 60,000
Increase in other assets (89,096) (32,179)
Increase in other liabilities 99,333 209,247
---------- ----------
Net cash provided by operating activities $462,035 $610,392
---------- ----------
Cash Flows from Investing Activities
Proceeds from maturities of securities held to maturity $793,045 $3,315,994
Purchases of securities held to maturity (2,561,875) (51,650)
Proceeds from maturities of securities available for sale 998,844 21,000
Purchases of securities available for sale (140,377) (54,100)
Purchase of bank premises and equipment (868,165) (204,600)
Acquisition of intangible assets (737,348) --
Net (increase) decrease in loans 1,109,589 (762,151)
---------- ----------
Net cash (used in) investing activities ($1,406,287) $2,264,493
---------- ----------
Cash Flows from Financing Activities
Net increase (decrease) in demand deposits, NOW
accounts, money market and savings accounts $2,538,395 ($2,988,136)
Net (decrease) in certificates of deposit (174,048) (764,637)
Net increase (decrease) in federal funds purchased (966,000) 2,407,000
Decrease of Federal Home Loan Bank advance -- (3,000,000)
Retirement of common stock (76) (51)
---------- ----------
Net Cash (used in) financing activities $1,398,271 ($4,345,824)
---------- ----------
(Decrease) in cash and cash equivalents $454,019 ($1,470,939)
Cash and Cash Equivalents
Beginning 4,106,467 5,813,599
---------- ----------
Ending $4,560,486 $4,342,660
========== ==========
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- --------
<S> <C>
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $1,019,297 $765,439
========== ========
Income taxes $6,480 $6,480
========== ========
Supplemental Schedule of Non-Cash Financing
Activities:
Unrealized gain (loss) on securities available for sale $3,652 $59,404
========== ========
</TABLE>
<PAGE>
EAGLE FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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: May 12, 1996 /s/ Lewis M. Ewing
---------------------
Lewis M. Ewing
President and CEO
Date: May 12, 1996 /s/ John R. Milleson
---------------------
John R. Milleson
Executive Vice President and
Treasurer
Date: May 12, 1996 /s/ James W. McCarty, Jr.
-------------------------
James W. McCarty, Jr.
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,560
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,472
<INVESTMENTS-CARRYING> 25,060
<INVESTMENTS-MARKET> 24,756
<LOANS> 84,716
<ALLOWANCE> 842
<TOTAL-ASSETS> 123,304
<DEPOSITS> 107,977
<SHORT-TERM> 901
<LIABILITIES-OTHER> 992
<LONG-TERM> 0
<COMMON> 3,520
0
0
<OTHER-SE> 9,914
<TOTAL-LIABILITIES-AND-EQUITY> 123,304
<INTEREST-LOAN> 1,910
<INTEREST-INVEST> 392
<INTEREST-OTHER> 4
<INTEREST-TOTAL> 2,306
<INTEREST-DEPOSIT> 958
<INTEREST-EXPENSE> 1,005
<INTEREST-INCOME-NET> 1,301
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,037
<INCOME-PRETAX> 425
<INCOME-PRE-EXTRAORDINARY> 425
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 310
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
<YIELD-ACTUAL> 4.72
<LOANS-NON> 424
<LOANS-PAST> 1,144
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 314
<ALLOWANCE-OPEN> 828
<CHARGE-OFFS> 55
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 843
<ALLOWANCE-DOMESTIC> 42
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 801
</TABLE>
